Five ways to double farmers’ income

The Prime Minister’s vision of doubling farmers income by 2022 is worth serious attention. This laudable objective could not only improve the well being of our farmers but can also be a trigger to boost agri-based manufacturing growth in rural India.

But it is also important to have a debate on how best to achieve this objective.

First we need to define our target. Doubling farmers’ income implies increasing income form crop cultivation.

At the current 3-per-cent growth rate it would take 25 years to double farmers’ income.

If a large number of agricultural households are connected to mass consumption markets — both domestic and global — the objective of doubling farm income doesn’t seem daunting.

The focus must shift from increasing per acre productivity to gainfully employing farm households in other farm-related activities.

The explosion of the services sector allowed that to happen in urban India. We need a similar catalyst for the lowest end of the income spectrum among rural households.

The goal should be to double incomes of rural, farm owning households in the bottom quartile income. A supplementary goal should be to use this effort to trigger a much needed boost to agriculture and to agri-related manufacturing.

An interesting experiment was taken up by the Gates Foundation in developing small-scale poultry farming around the villages of Itarsi. These poor households generated an annual supplementary income of around ₹50,000 per household. Solutions for doubling household income must centre around this “Itarsi Model”.

There is the need to involve the under-employed adults in rural households in low-skilled non-crop activities that integrate output from these activities into the existing or future markets. Central to this approach is creating a market-place that supports a rural enterprise which is partly agricultural and partly non-agricultural.

The following five activities could be developed across India for booting rural incomes.

The menstrual hygiene market:

Thirty years ago, the shampoo market in India exploded, mainly driven by a spike in consumption due to a rupee denominated sachet, locally assembled in small units spread across rural areas in Tamil Nadu. Similarly, localising the assembling of sanitary napkins in small units set up by enterprising women in villages can create a rural-based production system that generates employment and creates basic industrial skills.

Such enterprises can create supply chains and further employment generating economic activities. If 500,000 households in the poorest rural districts were brought into this production system, and each household produced up to 200 pads a day, realising ₹1 as conversion cost, that would lead to an incremental annual income of ₹60,000 per household.

Direct employment can be provided to 5 lakh women, and supporting employment from the household for another 2.5 lakh persons. The upstream employment generation potential for producing manual presses, the potential for repairs and maintenance of this equipment, additional employment for producing raw materials, storage and transportation of raw materials/finished goods and incremental income for the PDS network would be net incremental.

Goat rearing

On goat rearing, studies by various researchers point to the potential for net annual income of ₹1,200-1,300 per goat which can increase to ₹2,000 per goat through value addition to milk and leather processing. An average herd size of 10-15 goats can produce an annual income ₹12,000-19,000 per household which is also driven by the growing market for meat.

Collection of goat milk from above households and distribution through the milk co-operatives will create a large, broad-based collection, processing and storage infrastructure. Importantly goat rearing will integrate the most water-stressed regions into the milk grid. Including goat’s milk into the mid-day meal scheme across India can create a massive market for goat milk and creates opportunities for setting up goat dairying infrastructure. There are opportunities in goat cheese production which is in great demand in overseas markets.

Goat hide is another opportunity for creating home-based production systems that engage the womenfolk and young adults. Leather garments, footwear, bags and wallets could be produced and marketed through organised retail both within and outside country.

Honey production

The declining bee population is a cause of concern for agricultural scientists in India. Apart from helping in pollination of crops, apiaries can be a low-cost source of income for rural households. Each hive produces about 40 kg of honey. At ₹75 per kg, it has a revenue potential of ₹3,000 per hive. Each household can manage 10 to 15 hives to generate an annual income of ₹30,000-45,000 through this enterprise. A milk collection type system will ensure that the collected honey is processed, packaged and branded to international standards and made available to domestic retail outlets and for exports. Again, the mid-day meal scheme is an excellent outlet for providing this nutritional food to our children.

Value addition to crops

Some crops have great potential for value addition. Potato production in India has ranged between 45-48 million tonnes. Prices collapse when production touches the higher end of that range. If 5-7 mt were to be absorbed for use in the mid-day meals as processed potato flake-based products, a massive new food industrial segment would emerge.

Additionally, if the government were to mandate that all wheat flour sold in the country carries 5 per cent potato flour, the problem of glut in potato production can be overcome.

Kalahandi District, an under developed district, produces excellent quality turmeric. The curcumin content of that turmeric is of pharmaceutical grade. If pharma companies are incentivised to to set up solvent-based extraction facilities in this district, it will increase the farm gate price for tribal farmers as they move from selling to spice traders to a value-added use of the turmeric.

Bio-fuel market:

Biofuel crops like Jatropha should be permitted for genetic modification for increased oil yields. Oil companies should help village entrepreneurs to set up collection and processing units for absorbing every kg of seed produced and the output blended with hydrocarbon fuels as done in Brazil.

Turning farm waste into fuel instead of burning is another worthwhile project. These will bring low income rural households into a commercial farming and encourage small enterprises for collection, processing and extraction of bio-fuels.

The current MSP driven model to increase farm income is not sustainable and does not increase productivity. The government should leverage the petroleum distribution network, the Army supply chain, the milk grid, and the mid-day meal scheme to re-orient existing subsidies towards developing markets for rural manufactured produce. This creates industrial jobs in rural India and generates employment and non-farm income for rural households.

A sudden withdrawal of subsidies will hurt the farmers, but creating industrial units in rural areas will create jobs and wean away the weakest from a debilitating, non-value creating model of dependency.

Thomas is the CEO of CapAleph Advisors and Kaundinya is former CEO of Advanta Seeds

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