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Wanted: Greater private sector investment in agriculture

Last updated on: January 04, 2018 17:28 IST

'Indian agriculture requires the active involvement of the private sector right from extension and seed to post harvest value addition, to move it to the next stage of development,' says Ramesh Chand.

Photograph: Lisa Davis/Wikimedia Commons

IMAGE: Small-scale agricultural holdings, Thirukkazhukundram, Tamil Nadu. Photograph: Lisa Davis/Wikimedia Commons.

The agriculture sector is facing formidable challenges while it is targeted to double farmers’ income in the next six years.

A vendor sits amidst heaps of radishes as he waits for customers at a wholesale vegetable market in Chandigarh, India, November 16, 2016. Photo: Ajay Verma/Reuters

IMAGE: Wholesale vegetable market, Chandigarh. Photograph: Ajay Verma/Reuters.

A road map prepared by NITI Aayog titled 'Doubling Farmers' Income' envisages a 16.7 per cent increase each in productivity, efficiency in use of farm input and operations, and area shift in favour of higher value crops and improvement in price realisation in real terms by farmers by 9 per cent by 2022-2023 over the base year of 2015-16.

Farmers burn paddy waste stubble in a field on the outskirts of Ahmedabad, India November 15, 2017. Photograph: Amit Dave/Reuters

IMAGE: Burning paddy stubble, Gujarat. Photograph: Amit Dave/Reuters.

Three most important challenges to achieve Doubling Farmers' Income are: Poor state of science and technology in agriculture, inefficient and exploitative markets for farm produce, and viability of low-scale small holders.

A farmer stands on her paddy field before cutting the crops at Bamuni village in Nagaon district in the northeastern state of Assam, India, November 19, 2016. Photograph: Anuwar Hazarika/Reuters

IMAGE: Paddy farmer, Bamuni village, Nagaon district, Assam. Photograph: Anuwar Hazarika/Reuters.

Our agricultural production systems are decades behind many other sectors in adopting technology innovation. Low yielding varieties and traditional practices still dominate the sector.


Age-old methods of farming such as flood irrigation, broadcasting fertiliser, indiscriminate use of agro-chemicals dominate the agriculture scene, leading to low efficiency, high cost and low quality produce, besides adverse implications for sustainability.

A farmer standing on a plastic drum winnows wheat in a field on the outskirts of Ahmedabad, India March 29, 2016. Photograph: Amit Dave/Reuters

IMAGE: Wheat winnowing, Gujarat. Photograph: Amit Dave/Reuters.

Second, the marketing scene is characterised by large price spreads with depressed prices during harvest periods and high prices in lean period. In a short period, a price crash for the same commodity is followed by a price spike. Despite progress in transport and communication network, markets for farm produce show poor integration. With the rise in commercialisation of agriculture, incidents of farmers forced to sell at throwaway prices and consumers forced to pay abnormal prices are becoming frequent.

A farmer harvests sugarcane in his field at Motisir village in the desert state of Rajasthan, India October 27, 2016. Photograph: Himanshu Sharma/Reuters

IMAGE: Sugarcane harvest, Motisir village, Rajasthan. Photograph: Himanshu Sharma/Reuters.

Third, more than two-thirds of farmers cultivate less than one hectare of land, with an average land holding of less than one acre. In big states such as Uttar Pradesh, West Bengal and Bihar, 80 to 92 per cent land holdings are of marginal category. Scale disadvantage and low bargaining power of such tiny land holders make them unviable despite their much higher productivity per unit of land compared to medium and large farmers.

Tashi Phutit, 81, a wheat farmer and housewife poses for a photograph in the village of Stok, 15 km from Leh

IMAGE: Wheat farmer from Stok, Ladakh. Photograph: Cathal McNaughton/Reuters.

The private sector can play a significant role in addressing all these challenges. They need to look at agriculture beyond market for their inputs and link innovation with supply of inputs. In a few cases where corporates are taking innovation to farmers with inputs, wonderful results have been achieved.

Farmers sprinkle fertilizers on a paddy field on the outskirts of Ahmedabad, India, February 1, 2017. Photograph: Amit Dave/Reuters

IMAGE: Fertiliser for paddy near Ahmedabad, Gujarat. Photograph: Amit Dave/Reuters.

One such case is the banana revolution in Jalgaon district of Maharashtra where farmers are using tissue-cultured banana saplings supplied by a private tissue culture lab for disease-free banana cultivation and getting much higher yield and better quality fruit. The lab is now expanding the same technology to other states and fruits. If such experience is replicated in other fruits and vegetables, India can become a global hub for horticulture production.

Skyline of Chinawal village, Chinawal-Savkheda road, Chinawal, Maharashtra, India. Photograph: Rsika/Wikimedia Commons

IMAGE: Banana trees at Chinawal village, Jalgaon, Maharashtra. Photograph: Rsika/Wikimedia Commons.

Similarly, the supply of seeds with seed treatment with suitable inoculum and rhizobium can protect seed and plant against diseases and result in better growth. Many private enterprises are now promoting protected agriculture and precision farming which are multiplying the incomes of farmers.

People load their harvested crop onto a buffalo cart in a flooded paddy field at Mayong village in Morigaon district, in the northeastern state of Assam, India June 6, 2017. Photograph: Anuwar Hazarika/Reuters

IMAGE: Harvest at Mayong village, Morigaon district, Assam. Photograph: Anuwar Hazarika/Reuters.

The second major challenge in agriculture relates to inefficient, fragmented, traditional and often unfair system of marketing thriving under the protection of regulation. Market regulation such as  Agricultural Produce Market Committee and Essential Commodities Act favour small-sized, traditional traders and middle men and inhibits entry of modern capital into the system which can bring innovative method, competition, e-commerce, investments and integration of value chain.

Customers shop at an open air evening vegetable and fruit market in Ahmedabad, India July 28, 2016. Photograph: Amit Dave/Reuters

IMAGE: Vegetable market Ahmedabad, Gujarat. Photograph: Amit Dave/Reuters.

A few cases where corporate players have entered into marketing, farmers received huge benefits such as procurement of apple in Himachal Pradesh and corn in north Bihar.

Farmers transport their produce to a market in Nandigram village, about 170 km southwest of the eastern Indian city of Kolkata in this November 21, 2007

IMAGE: Nandigram, West Bengal. Photograph: Parth Sanyal/Reuters/Reuters.

The private sector can improve viability and income of small holders in many ways:

A farmer works on a sugarcane farm in Junnar, 165 km southeast of Mumbai, August 18, 2009

IMAGE: Sugarcane farmer, Junnar, 165 km southeast of Mumbai. Photograph: Punit Paranjpe/Reuters.

One, through supply of services, as owning machines and equipment are uneconomical and also beyond the capacity of small holders. Last few years have seen some growth in number of private sector service providers, particularly for farm machinery rental services. Besides reducing costs, modern and sophisticated machines improve efficiency. Some service providers have even started using mobile apps. A large number of farmers are now using laser-guided land levelling technology on rental basis, which brings large benefit in terms of saving in irrigation water, reduction in irrigation cost and time and increase in yield.

Indian farmers of the village of Surajpur in the northern Indian State of Bihar carry fodder for sale in the market August 9. Farmers walk about 11km carrying fodder as they are unable to bear the transport charges which is more than what they earn after selling one bundle of fodder. Photograph: PBEAHUMWDDA/Reuters

IMAGE: Fodder heads to the market in Surajpur, Bihar. Photograph: PBEAHUMWDDA/Reuters.

Second, the private sector has a huge scope to raise the income of small holders through contract farming. Small holders have great advantage in terms of labour and supervision, much needed for quality, specific traits, and timely supply of farm produce. If private firms -- modern retailers, processors, or traders, etc -- provide quality seed and plant material, technical advice, financial support and assured price it can lead to a win-win situation for all. There are success stories of contract farming in almost all the regions of the county but coverage and penetration remains small.

Kashmiri farmers winnow paddy during harvesting season in Srinagar October 13, 2014. Photograph: Danish Ismail/Reuters

IMAGE: Winnowing paddy outside Srinagar, Kashmir. Photograph: Danish Ismail/Reuters.

During the recent years, start-ups have shown a lot of interest in agriculture and they are riding on state-of-the-art technology and modern value chains. Some of these start-ups are led by highly motivated well-qualified entrepreneurs who aspire to change the face of agriculture. This is also putting pressure on traditional agri-business corporates to rethink their strategy of sale of input to partner with farmers. Promising start-ups in agriculture should be given required policy support.

A labourer works inside an apple store at Chatla village in the northern Indian state of Himachal Pradesh September 23, 2009. The Indian government has raised farm subsidies to mitigate the impact of drought and is looking to early sowing of winter crops to offset the loss of summer crops. Photograph: Anil Dayal/Reuters

IMAGE: Sorting apples, Chatla village, Himachal Pradesh. Photograph: Anil Dayal/Reuters.

Central Statistics Office data for 2015-2016 shows that the private corporate sector constitutes only 2 per cent of annual investments in the agriculture sector. The public sector constitutes 18.6 per cent and farmers (termed as private sector in CSO parlance) constitute the remaining 79.4 per cent share.

A worker carries bananas to stack them after weighing them at a wholesale market in Kochi, India, November 13, 2017. Photograph: Sivaram V/Reuters

IMAGE: Banana wholesale market, Kochi, Kerala. Photograph: Sivaram V/Reuters.

Of their total investments in Indian economy, the private corporate sector invested 0.43 per cent in agriculture and allied sectors. These figures show awfully low investments by private corporations in the agriculture sector. This should be at least doubled to help achieve the goal of doubling farmers’ income.

A woman farmer works in a paddy field in the eastern Indian state of Orissa July 25, 2012. Rice is the main summer-sown crop in the country. Sowing is over in 14.46 million hectares compared to 16.13 million hectares a year earlier. Poor rainfall has affected sowing in West Bengal, Orissa and the northern states of Uttar Pradesh and Punjab. Photograph: Stringer/Reuters

IMAGE: Orissa paddy field. Photograph: Stringer/Reuters.

Indian agriculture requires the active involvement of the private sector right from extension and seed to post harvest value addition, to move it to the next stage of development. Therefore both, states as well as the Centre need to attract and facilitate the private sector involvement in agriculture.

Ramesh Chand is a member, NITI Aayog and the 15th Finance Commission. He has a PhD in Agricultural Economics from Indian Agricultural Research Institute, New Delhi. Views expressed are personal.

Ramesh Chand
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