The Hindu Business Line : Farming is unviable

The latest data from the Commission for Agricultural Costs and Prices confirm that farming in this country is unviable. The interesting analysis of the data published in this newspaper on Thursday of farm costs in the 2005-06 season paints a dark picture indeed: Even under the best irrigated conditions that will allow two seasonal crops or one sugarcane crop, a farmer can profit on the average by no more than Rs 2,000 a month per hectare. When one considers that even these measly returns are won at considerable risk — fractious weather conditions or pest attacks can decimate yields — it is clear that farming has become a not-for-profit enterprise, though definitely not by choice. Again, these are the terms of performance in the best-endowed farmlands; the fate of those trying to coax yields from lesser lands is distinctly worse. At the end of the season, incomes barely match expenditure on growing the crop. Such are the balance-sheets that haunt some 127 million farming families, driving many even to suicide, and it is sad to note that little progress is being made in changing the numbers on the ledger.

Much has been made in recent days of the high rates of interest on farm credit being responsible for the plight of farmers. Of course, farm lending is an unhappy story of mostly usurious interest rates, but it also a story of high risks, uncertain paybacks ending in eventual loan waivers. Cooperative loans are being written off by State governments, commercial banks are being goaded to make available more crop loans, some at even subsidised rates. But all these moves rest on the dubious premise that the business they are lending money to is viable. When it is not, and when the loan is a doubtful asset before it is sunk into the soil, the rate of interest does not matter. For the farmer, there will yet be negative return and for the lender, no certainty of repayment. Lending at low rates, which do not capture the risk, will happen only by fiat, not by market choice.

The remedy has to be found elsewhere, in shortening the risks and reducing with innovation and technology the costs of farming, and providing that basic input, water, in adequate measure. Irrigation to all farmlands has been a goal since Independence, but it is shameful that even today only 12 per cent of the area under coarse cereals such as bajra and jowar, the crops of the disadvantaged farmer, enjoys that luxury. For the majority of farmers whose lands are not lucky enough to be along rivers or canals, the government must invest in credible watershed development programmes. With assured water supply, not only will production risks be largely mitigated, but land-use intensity will also considerably improve and contribute to farm output expansion. The world's largest contingent of farmers after China's needs help. Desperately.

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