Private sector is yet to harness the business potential of agriculture and allied sectors in India. The dilemma arises in the absence of enough policy enablers to ensure private participation despite the promising potential. Land fragmentation has resulted in poor yields and productivity, making the sector unviable for small farmers. Solving this crisis and reforming the sector will involve re-organisation of key factors of farm production — land, labour, capital and technology.
What makes such a comprehensive relook at agriculture imperative is the fact that 49 per cent of the national workforce and 64 per cent of the rural work force still depend on the sector for a living, even though the share of the sector in the overall GDP has shrunk massively from around 45 per cent in the 1950s to about 16 per cent today.
What needs to be done The way forward can be carved on what I call the ‘Four Aces of Agricultural Reform’. Let’s take a look at them.
Ace: 1-Long-term leasing laws: The primary challenge is low productivity due to fragmented land holdings. Today, about 85 per cent of all land holdings belong to small and marginal farm categories of less than 2 hectares. This has hindered infusion of technology (use of hybrid varieties and farming techniques) and discouraged capital investment (in irrigation and mechanisation).
The only way to overcome this challenge is by facilitating a legal framework to consolidate these holdings in to larger operational units through “long term leasing of farmland without alienating the land ownership — as has been introduced by Rajasthan, Haryana, Madhya Pradesh and Punjab. This policy reform can be a game changer as also suggested by Niti Aayog in the Model Land Leasing Act — no change in ownership and no tenancy rights, land reverts back upon expiry of lease.
Long-term leasing can facilitate the entry of the private sector into agriculture to infuse much needed energy in the form of crop diversification, introduction of high-value crops, increased mechanisation and introduction of new farming techniques and technologies.
These partnerships may not just impact productivity but have a substantial influence on farmer income as well. Industry also stands to gain by getting access to assured supply of commodities for their processing and marketing operations.
Also, private sector involvement can also result in sustained investment in post-harvest management and processing, which can create incremental employment opportunities in the countryside to take care of the ‘hidden unemployment’ in rural areas.
Another case in point for land aggregation is a study undertaken by CII on forming a pool of farmers to aggregate land. Such land (say 100-250 acres) can be leased to the private sector, which will give the lease rental to farmer at current rates, which is ₹40,000 per acre (assuming two acres per farmer, total lease rental is ₹80,000 a year per farmer).
The same farmers will be employed on their land at minimum wages ₹8,500 per month per person (assuming two members being employed per family, the total income will be over ₹2 lakh a year per farmer.)
Currently, farmers earn ₹1,80,000 to ₹2,00,000 from two acres of farmland. The proposed income will be ₹2,84,000 per farmer. That’s an increase of over 40 per cent in income, which is without any interest burden or risk of a failed crop. Additionally, thousands of farmers in one area can become partners, grow high-value crops, use innovative farming techniques, which will result in higher incomes.
Ace 2: Linking farmers to markets: The other big reform that can potentially impact farmer income substantially is linking farmers to marketplace. The long chain of intermediaries between the farm gate and the final consumer have for long been impacting farmer income negatively. There is a need to de-list fruits, vegetables and other perishables like fisheries from the ambit of APMC. Giving farmers the freedom to sell directly to retailers, food processing companies and aggregators is critical.
Small farmers often find it difficult to access markets on their own. Aggregating farmers into Farmer Producer Organizations (FPOs) will not just help overcome the small holder issue but enable improved market access and better bargaining capacity for them.
To protect the farmers from the vagaries of distress sale in times of bumper harvests, commodity options in agricultural products could be introduced. This will make visible post-harvest prices at the time of planting. Implementation of e-NAM across States and bringing perishables under e-trading will help better price discovery for farmers. There is a need to mechanise and create ‘Agro Clusters’ in key production zones to ensure aggregation of produce.
Ace 3: Improving supply chain and processing capacities: Massive post-harvest losses due to lack of adequate cold chain and storage infrastructure and processing capacity impact farmer income adversely.
The private sector must be allowed to procure, store and distribute grains, can start with the Public Distribution System. This will bring down the cost for the Government by 25 per cent and result in storage capacities being set up in consuming States.
In the case of perishables, increased processing capacity can ensure price stability and protect farmer interests. Introduction of new technologies can help in extending the shelf life of fruits and vegetables. 100-per cent FDI in food retailing including e-commerce, introduced last year, will help strengthen investment in front-end retail, which ultimately works in favour of farmers.
Ace 4: Agri startups: There is a need to introduce modern entrepreneurship to Indian agriculture. Promoting agricultural services under the Start-up India Scheme will help bring modern technology and inputs to farmers.
To conclude, the Government’s intent is progressive when it talks about programmes such as ‘More Crop per Drop’, ‘Pradhan Mantra Fasal Bima Yojna’, ‘Direct benefit transfer to farmers. Yet, to double farmers’ income, we will have to make agriculture a viable business opportunity and governments should focus more on enablers rather than hand-outs and retrospective incentives.
These four Aces will help to serve as policy enablers for the government to augment its dream into a reality so that the Indian agriculture sector contribute optimally to the economic growth of the country and eventually the well-being and prosperity of the farming community.
The writer is Vice-Chairman, Bharti Enterprises and president-designate, CII