- The agriculture sector employs nearly half of the workforce in the country. However, it contributes to 17.5% of the GDP (at current prices in 2015-16).
- Over the past few decades, the manufacturing and services sectors have increasingly contributed to the growth of the economy, while the agriculture sector’s contribution has decreased from more than 50% of GDP in the 1950s to 15.4% in 2015-16 (at constant prices).
- India’s production of food grains has been increasing every year, and India is among the top producers of several crops such as wheat, rice, pulses, sugarcane and cotton. It is the highest producer of milk and second highest producer of fruits and vegetables.
- However, the agricultural yield (quantity of a crop produced per unit of land) is found to be lower in the case of most crops, as compared to other top producing countries such as China, Brazil and the United States.
- Although India ranks third in the production of rice, its yield is lower than Brazil, China and the United States. The same trend is observed for pulses, where it is the second highest producer.
Key issues affecting agricultural productivity include
- the decreasing sizes of agricultural land holdings,
- continued dependence on the monsoon,
- inadequate access to irrigation,
- imbalanced use of soil nutrients resulting in loss of fertility of soil,
- uneven access to modern technology in different parts of the country,
- lack of access to formal agricultural credit,
- limited procurement of food grains by government agencies, and
- failure to provide remunerative prices to farmers.
Some of the recommendations made by committees and expert bodies over the years include
- bringing in agricultural land leasing laws,
- shifting to micro-irrigation techniques to improve efficiency of water use,
- improving access to quality seeds by engaging with the private sector, and
- introducing a national agricultural market to allow the trading of agricultural produce online.
Agricultural production and yield
- Despite high levels of production, agricultural yield in India is lower than other large producing
countries. Agricultural yield is the quantity of a crop produced on one unit of land.
- India’s yield is low when compared to countries such as China, Brazil and the USA.
- Although India is the second highest producer of paddy (rice) in the world (as of 2013), its yield is lower than China, Brazil and the USA. It is also the leading producer of pulses, but its yield is the lowest.
Food security and nutrition
- The Food and Agricultural Organisation (FAO) of the United Nations defines food security as a situation where all people have, at all times, physical and economic access to sufficient, safe and nutritious food that meets the dietary needs and food preferences for a healthy and active life.
- India enacted the National Food Security Act in 2013. The 2013 Act aims to provide food and nutritional security to people by ensuring access to adequate amount of quality food at affordable prices.
- Under the 2013 Act, persons belonging to certain categories are provided with food grains (wheat, rice and coarse cereals) at subsidised prices.
- Major commodities imported to India are pulses, edible oils, fresh fruits and cashew nuts.
- Major commodities exported by India are rice, spices, cotton, meat and its preparations, sugar, etc.
- India’s trade policy is affected by factors such as domestic availability of commodities, cost of
production as well as global price levels.
- However, frequent changes in trade policy, such as reducing the import duty on a commodity in response to a shortage in supply, or decreasing minimum export price of a commodity to facilitate its exports, may have an adverse effect on the development of the agro-processing sector.
Factors affecting agricultural productivity
Increase in small land holdings
- Marginal and small land holdings face a number of issues, such as problems with using mechanisation and
E-Bhoomi project in Karnataka
- The E-Bhoomi project was started by the Government of Karnataka in the early 2000s. The project aims to computerize existing land records and create a transparent system for changing land records and dividing or merging plots of land.
- Under the system, farmers can collect land record information for their plot at the Tehsil level, called Pahani. These records would contain information such as the survey number of the land, land owner’s details, the classification of the soil, and details regarding irrigation and crops grown, among others.
- The Pahani would enable the farmer to (i) know whether the plot he wants to purchase is genuine, (ii) raise farm credit from banks, (iii) use the land records for official or legal purposes. E-Bhoomi also allows farmers to
approach the government to address grievances.
- Currently, laws of tenancy of agricultural land vary across different states.21 States such as Kerala,
Jammu and Kashmir and Manipur completely prohibit the leasing of agricultural land.
- Others such as Bihar, Karnataka, Uttar Pradesh, Telangana and Odisha allow land leasing only by certain categories of land owners.
- On the other hand, states such as Gujarat, Maharashtra, and Assam do not explicitly prohibit leasing, and allow the tenant to purchase the land from the owner after a specified period of tenancy.
- In Andhra Pradesh, Tamil Nadu and West Bengal, there is no legal ban on leasing land.
- Different states also have different ceilings on the area of land which may be leased.
- The NITI Aayog has proposed a Model Land Leasing Law to provide for the legalisation of land
leasing. This would ensure that land owners have the security of ownership rights, and land tenants
are secure in their tenancy.
- Legalisation of land tenancy would also ensure that farmers get access to formal credit, insurance, and inputs such as fertilizers.
- Only Madhya Pradesh has adopted the Model land leasing law so far .
Bargadar system in West Bengal
- The West Bengal Land Reforms Act, 1955 provides certain rights to Bargadars or land tenants.
- Bargadars are persons lawfully cultivating any land belonging to another person (who is not a family member).
- Under the Act, produce from the farm is divided between the tenant and owner in a 50:50 proportion if the cattle, manure and seeds are provided by the landowner, and 75:25 in all other cases.
- Illegal eviction of tenants is a cognizable offence punishable with imprisonment or fine, under the Act.
- However, it does not provide any ownership rights to the tenant.
Short term and long term credit
- Short term credit is generally taken for pre-harvest and post-harvest activities such as weeding, harvesting, sorting and transporting.
- Long term credit is generally taken in order to invest in agricultural machinery and equipment, irrigation and other developmental activities, etc.
Inadequate access to crop insurance
- As of 2011, about 10% of Indian farmers were covered under a crop insurance scheme. Some persistent issues with the crop insurance system include (i) unawareness about insurance schemes, (ii) inadequate coverage of insurance schemes, (iii) assessment of the extent of damages in case of crop losses, and (iv) timely settlement of claims.
Pradhan Mantri Fasal Bima Yojana
- The Pradhan Mantri Fasal Bima Yojana was launched by the central government in January 2016.
- The scheme aims to provide insurance coverage to farmers for crop failure, stabilise farmers’ income, and encourage farmers to adopt modern agricultural practices, among others.
- There will be a uniform premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5%. The premium rates to be paid by farmers are very low and balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss on account of natural calamities.
- There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government.
- Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction.
- The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments.
- PMFBY is a replacement scheme of NAIS / MNAIS, there will be exemption from Service Tax liability of all the services involved in the implementation of the scheme.
- It is estimated that the new scheme will ensure about 75-80 per cent of subsidy for the farmers in insurance premium.
Availability of water
Currently, about 51% of the agricultural area cultivating food grains is covered by irrigation. The rest of the area is dependent on rainfall (rain-fed agriculture). Sources of irrigation include ground water (wells, tube-wells) and surface water (canals, tanks).
There is a need to improve the efficiency of water use, especially in agriculture. Irrigation currently consumes about 84% of the total available water in the country.
Nearly 65% of the irrigated land holdings use ground water sources such as tube wells and wells for irrigation.
Soil and fertilizers
Quality of soil
- Soil is one of the most important factors in the productivity of agriculture. Indian soil consists of primary nutrients such as nitrogen, phosphorous and potassium, secondary nutrients such as sulphur, calcium and magnesium, and micro-nutrients such as zinc, iron, and manganese.
- Imbalance in the use of fertilizers in soil may also result in a loss of fertility. If farmers are unaware about the kind of fertilizer which is required for the soil in which they sow their crops, the productivity of the soil will be subsequently affected.
- The Soil Health Card scheme was launched by the central government in 2015. Under the scheme, all farmers are issued soil health cards, once every three years.
- The soil health cards contain information such as the nutrient status of the soil, and the recommended dose of nutrients to be provided to the soil to improve its fertility.
Imbalance in use of fertilizers
- The manufacture, sale, and distribution of fertilizers in the country is regulated by the Ministry of
Chemicals and Fertilizers, under the Essential Commodities Act, 1955.
- There are three major types of nutrients used as fertilizers: Nitrogen (N), Phosphatic (P), and Potassic (K).
- Of these, the pricing of urea (containing N fertilizer) is controlled by the government, while P and K fertilizers were decontrolled in 1992, on the recommendation of a Joint Parliamentary Committee.
- It has been observed that urea is used more than other fertilizers.
- An imbalanced use of urea may lead to a loss of fertility in the soil over a period of time, affecting productivity.
- Urea (N) is the most produced (86%), consumed (74%) and imported (52%) fertilizer in the country.
Nutrient based subsidy policy
- The central government launched the nutrient based subsidy policy (NBS) in 2010 for P and K fertilizers.
- The policy was formulated with the objective of promoting a balanced use of N, P and K fertilizers.
- The policy allowed the manufacturers of P and K fertilizers to fix their maximum retail prices (MRPs) at reasonable levels.
- The subsidy provided would be based on per kilogram of the nutrient.
- The policy also provided for an additional subsidy to be paid to indigenous manufacturers of fertilizers.
To promote the use of fertilizers by farmers, the central government provides a fertilizer subsidy to the producers of fertilizers.
Use of pesticides
- The consumption of chemical pesticides in the country has increased over the past few years.
- Issues with regard to the use of pesticides include use of low-quality pesticides, and a lack of awareness about pesticide use. The Economic Survey 2015-16 noted that the use of pesticides without proper guidelines has led to an increase in pesticide residue being found in food products in India.
- While the production of pesticides is monitored by the Ministry of Chemicals and Fertilizers, their usage is administered by the Ministry of Agriculture.
- There is a need to review the Insecticide Act, 1968, to provide for a regulatory framework for the pesticides sector.
Access to quality seeds:
- Quality seeds is another input necessary for agricultural productivity, and good quality seeds account
for 20%-25% of increased crop productivity.
- Seeds are regulated by the Seeds Act, 1966. The Act regulates the quality, production, and sale of seeds.
- The Seeds Control Order, 1983 regulates the licenses to sell, export and import seeds.
- Three varieties of seeds commonly used are (i) farm-saved seeds, which account for 65%-70% of the total seeds consumption, (ii) commercially produced seeds of the breeder, foundation and certified varieties, and (iii) genetically modified and hybrid seeds.
- Some of the challenges identified in the development and distribution of quality seeds are (i) access to quality seeds, and (ii) inadequate research support.
Genetically modified seed varieties
- Genetically modified (GM) seeds are those where certain genes are modified to develop traits such as a resistance to pests and herbicide, and increased productivity.
- Bt cotton is currently the only approved GM technology seed in India.
- It was adopted in India in 2002 and as of 2014, 92% of the area covered by cotton uses Bt cotton.
- After releasing Bt cotton in the country, the crop’s yield increased from 190 kg/ha in 2000-01 to 461 kg/ha in 2014-15.
- Over the years, various GM crops such as Bt brinjal have been developed, but they have not received the regulatory approval to be released in Indian markets.
- Under the existing regulatory process, the Genetic Engineering Appraisal Committee (GEAC) under the Ministry of Environment, Forest and
Climate Change, approves proposals for the commercial use of GM seeds.59 In September 2016, the GEAC invited public comments on a report authorising the environmental release of GE mustard.
- The Ministry of Environment is yet to provide the final approval for GE mustard to be released commercially.
- Mechanization is another aspect with a significant impact on agricultural productivity.
- The use of agricultural machinery in agriculture enables agricultural labour to be used in other activities.
- It makes activities such as tilling, spreading of seeds and fertilizers and harvesting more efficient, so that
the cost of inputs is offset.
- It can also make the use of labour in agriculture more cost-effective.
- Some challenges faced by farm mechanisation include different soil and climatic zones which require
customised farm machinery, and small land holdings with lack of access to resources.
- Mechanisation should aim to increase agricultural efficiency by reducing the time and labour requirement,
minimising wastage and reducing costs of labour.
- After agricultural produce is harvested, it requires a robust storage infrastructure in order to minimise
any losses due to adverse weather conditions or in the process of transportation.
- The quantity of food which is wasted during the harvest and post-harvest processes in the country has increased past the years.
- Food wastage occurs at all levels of farming- the farmer, transporter, wholesaler and retailer. Some of the reasons for this wastage are crop damage, improper harvesting techniques, poor packaging and transportation, and poor storage. Some of the issues with the state of storage facilities in the country are inadequate capacity and poor conditions of storage.
- In cases where the storage capacity is found to be sufficient, the conditions of the godown are unfit, either because of the damp condition of the storage or because of its remote location.
- Food grains from the central pool are stored in warehouses managed by the Central Warehousing Corporation (CWC), under the Department of Food and Public Distribution.
- Another system for the storage of agricultural commodities is the negotiable warehousing system, regulated by the Warehousing Regulatory and Development Authority.
- Under this system, farmers who store their produce are issued a receipt with details of the location of the warehouse, and the quality and quantity of the produce being stored. This receipt acts a collateral in case the farmer wants to access agricultural credit.
- Since foodstuffs such as certain fruits and vegetables deteriorate faster and lead to wastage, they are stored at cold temperatures to reduce their perishability.
- Cold storage facilities in the country were set up by the Cold Storage Order, 1964 under the Essential Commodities Act, 1955.
- Some challenges identified in the development of cold storage in the country are delays in the process of changing land use from agriculture to industrial use, lack of tax exemptions accrued to cold storage for agricultural commodities, availability of power, and accessibility to farmers.
Mega Food Parks
- The Mega Food Parks scheme was launched by the Ministry of Food Processing Industries in 2008.
- The scheme aims to create a mechanism of linking agricultural production to the markets, by involving farmers, processors and retailers together in a cluster-based approach.
- Expected outcomes of the scheme would be a higher price for farmers from their produce, creation of high quality food processing infrastructure, reduction in food wastage, and creation of an efficient food supply chain, among others.
- The scheme is being implemented through a Special Purpose Vehicle set up under the Companies Act, 2013.
- Procurement of agricultural commodities is the purchase of food grains by the central or state governments.
- The Food Corporation of India is responsible for the purchase, storage, movement, distribution and sale of agricultural produce.
- Minimum Support Prices are the prices at which the government purchases food grains from farmers.
- The largest procurement at MSPs is for rice and wheat. About a third of the wheat and rice produced in the country is procured by the central government.
Minimum Support Prices (MSPs)
- MSPs are the prices at which the central government purchases food grains from farmers.
- MSPs are fixed by the central government in order to ensure remunerative prices to farmers.
- Factors taken into consideration in determining MSPs include costs of cultivation and production, productivity of crops, and market prices.
- High MSPs of crops provide incentives to farmers to adopt modern technologies and farming practices, to increase the overall productivity of their crops.
- The government announces MSPs for 22 crops (and a fair and remunerative price for sugarcane), but the Public Distribution System, for which grains are procured, primarily distributes wheat and rice to its beneficiaries.
- Since procurement is mainly carried out for wheat and rice, farmers have focused on the cultivation of these crops over other crops such as pulses and oilseeds.
Effectiveness of MSPs
- Although MSPs are declared for various crops, procurement at these prices mainly happens for wheat, rice, sugarcane and cotton, in a few states.
- MSPs are declared prior to each sowing season (in June and October) so that farmers are aware of the minimum price the government will offer for their produce. This is meant to encourage them to increase their
investment in the production of crops.
- In a report to measure the efficacy of MSPs, the NITI Aayog found that a low proportion of farmers (10%) was aware of MSPs before the sowing season. 62% of the farmers were informed of MSPs after sowing their crops. The pricing policy of MSPs would be effective only if farmers are aware of it at the time of deciding what crops to grow.
- The NITI Aayog recommended that the awareness level of farmers regarding MSPs must be increased and the mediums of dissemination of this information must be strengthened.
- Other issues with the implementation of the MSP regime include long distances to the procurement centres, increasing cost of transportation for farmers, irregular hours of the procurement centres, lack of coverage storage godowns and inadequate storage capacity, and delays in the payment of MSPs to farmers.
- The NITI Aayog notes that the agricultural pricing policy needs to be reviewed to ensure that farmers are receiving remunerative prices for their produce.
- One of the measures it recommends is a price deficiency system. Under such a system, farmers would be compensated for certain commodities if their prices fall under a specified threshold. This would reduce stock-holding by farmers who store commodities until prices increase, and also incentivise farmers to produce different crops. Farmers would be paid by using the direct benefit transfer system, through bank accounts linked to the their Aadhaar numbers.
- The production, supply and distribution of certain commodities comes under the purview of the Essential Commodities Act, 1955.
- These commodities include food grains, oilseeds, cotton and woollen textiles, jute, and coal, among others.
- Under the Act, the central government may control the price at which any essential commodity is traded.
- It may also regulate licenses for its storage, transport, distribution, disposal or consumption.
Agricultural Produce Marketing Committee
- Agricultural markets in the country are regulated by state Agricultural Produce Marketing Committee (APMC) laws.
- Under these state Acts, farmers are required to sell their produce at state-owned mandis.
- Over the years, several issues have been highlighted in this system. For instance, APMC mandis currently levy a market fee on farmers who wish to sell their produce in the mandis. This makes it expensive for farmers to sell at APMC mandis.
- In addition, farmers have to arrange for their produce to be transported from their farms to the nearest mandi, which brings in costs such as transport and fuel. In transporting the produce from the farm to the store, several intermediaries are involved. These intermediaries are all paid a certain proportion of the price, as commissions. Thus the market price which the farmer receives for his produce is significantly lower than the price at which his produce is sold to the retailer.
- The central government had released a Model APMC Act in 2003, to be enacted by states.
- The Model Act (i) provides for the direct selling of produce through contract farming, (ii) permits private persons, farmers and consumers to establish agricultural markets, (iii) levies a single market fee on the sale of the commodity, and (iv) replaces licences with registration of market agencies so that they can operate in more than one market, among other things. However, only 18 states and union territories have implemented the reforms laid out in the Model Act.78 Four states are yet to initiate the reforms, and the remaining states are at various stages of implementing them.