Whither Indian agriculture?

Media stories of grains rotting in unkempt godowns gives an impression that our country has become the land of plenty and the problem is limited to managing and distributing available food stock.

To an extent this is true when one looks at the increase in foodgrains production over the past 60 years, producing nearly 245 million tonnes of food grains annually from a level of a mere 50 mt after Independence.

The production comes from a land base of around 195 million hectares (mha) of gross cropped area with net cropped area of about 140 mha, which have remained almost static in the last few years.

Nearly half of the arable land will have to depend on the monsoons even if all irrigation sources are fully developed.

Further increased production will have to, therefore, come from improved productivity/hectare.

India is one of the largest producers of many crops and agricultural products, but when we look at productivity/hectare, we rank approximately 10th in wheat and groundnut, 14th in cotton, 17th in rice, and 98th in pulses.

In many cases, our productivity/hectare is lower than of our neighbours - China, Pakistan or Bangladesh.

Productivity can be improved by ensuring better irrigation - through public or privately-owned modes, better use of farm equipments, and timely availability and use of better seeds, fertilisers (bio or chemical) and other inputs.

Availability and use of all these would depend a lot on availability of timely agricultural credit and also extension services.

And it is here that a huge problem is staring before us in the immediate future - a very silent structural change that is taking place in Indian agriculture and which has now acquired an alarming proportion - and on which, unfortunately, no one seems to be paying any attention.

The 141 mha in 1971 was operated by 70 million farmers, and by 2012, the same area is estimated to be operated by 140 million farmers.

In 1971, we had only 36 million marginal farmers and 10 million small farmers with an average operating area of 0.41 ha and 1.44 ha and by 2006, we had 84 million and 24 million marginal farmers and small farmers with an average operating area of 0.38 ha and 1.38 ha respectively.

At the same time, the 2.8 million large farms (> 10 ha) operating 50 mha decreased to one million farms operating only 18 mha.

The sub-division of land continues unabated, and we are now adding almost 10 million small and marginal farms every five years to our agricultural system.

This fragmentation of land has serious consequences in terms of owning and using modern technology and farm equipments, and also in provision of inputs including agricultural credit and extension.

The consequences are high transaction cost for farmers, banks and service providers, inability to own or finance farm equipment because of fluctuating incomes of tiny farmers and viability considerations, smaller volumes of produce reducing ability to negotiate at market place etc.

Higher cost of cultivation and lower incomes are a serious disincentive for farmers to continue farming.

No wonder that the NSSO 2003 data indicate that 40 per cent of farmers do not wish to continue cultivation.

Despite this wish to quit farming, farmers would not sell off their land as that is the last piece of insurance they have for times of acute distress.

So they continue farming, albeit inefficiently, so far as their production economics is concerned.

As farmers become more and more inefficient, agricultural production will always be at stress.

So, what is the solution?

The answer is rather simple: Enable aggregation.

We need to find ways that enable these small ownership holdings aggregate to minimum viable size of operating farms without the individual landowners losing their ownership rights.

Cooperative farming, collective farming, producers organisations, joint liability groups (JLGs), leasing out land, or contract farming are some possible ways of aggregation.

While the first three solutions are fraught with capital and managerial issues, and JLGs offer perhaps a temporary and an intermediate solution, a long-term solution can be seen only in leasing out land to individuals and in contract farming where the contract is evenly balanced.

Unfortunately, the present land laws in most states are based on land reforms carried out in the sixties and seventies, and were based on the maxim ‘land to the tiller’.

Leasing out agricultural land is not permitted in most of the major agricultural states such as Bihar, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Odisha, Uttar Pradesh, Telangana area of Andhra Pradesh, Himachal Pradesh, Jammu and Kashmir, etc. except by Defence personnel, minors, disabled persons and the like.

In Rajasthan, owners can lease out land for a period of five years and must have a two-year break before leasing out again to the same tenant.

In West Bengal, land could be leased out only on share cropping basis with a fixed rent of 25 per cent of produce if the sharecropper purchases inputs and 50 per cent if the landowner purchases inputs.

Agricultural land can be leased out legally on a long-term basis in Punjab, Haryana, Assam, Maharashtra, Tamil Nadu and Andhra Pradesh, but only in Punjab, Haryana and Assam, the landowner has a continuing right of resumption and tenants do not acquire any rights on land whatsoever.

Despite the legal provision, over 80 per cent of agriculture is carried out on the basis of oral tenancy and not legally registered tenancy.

But, what is urgently required in every single State is a reform of the existing land reforms. Land leasing on a long-term basis needs to be made legal with an unequivocal undertaking that the tenant would acquire no right on land.

The tenants in such cases need to be individual cultivators and a ceiling of 5-10 ha on the aggregate land leased in could be perhaps be provided. The process of registration and documentation of the land lease needs to be simple and standardised, and it should be possible to register the land lease online.

This single step would catalyse minimum farm sizes where productivity enhancing investments become possible, and result in a volume of produce amenable to efficient storing, processing or marketing. Unless land leasing laws are modified urgently that allow leasing out land on long-term basis, even the benefits of commodity exchanges and market reforms will not reach the farmers.

We need to act before the production crisis hits us.

(The author is the Chairman, Nabard. His mail id is chairman@nabard.org)