Agri-culture to agri-business: It’s time we made that switch

Agriculture and rural development are subjects for eternal discussions. Right from the first Five-Year Plan (1952-57), the sector had been receiving priority. Food production nosedived to a crisis point during 1965-66 due to two successive droughts. For two years, the country had to resort to massive imports of 10 million tonnes of food grains a year to tide over the severe food shortage. Thanks to the then Agriculture Minister, C Subramaniam, assisted by a brilliant team of scientists and bureaucrats, India triggered the Green Revolution. In just four years, food production zoomed to 108 million tonnes registering a 50 per cent growth and never looked back. With annual production now in the region of 280 million tonnes, food stocks overflow godowns. Exports of rice, fruits and vegetables earned close to $10 billion last year.

More politics, less economics

But the sector is beset with serious structural problems. Despite frequent increases in minimum support prices, the lot of the farmers hasn’t improved much. Remember the prolonged agitation by the farmers of Tamil Nadu in Delhi, the blockade of Delhi by farmers of surrounding states and the long march of farmers of Maharashtra to Mumbai last year, all demanding huge increases in support prices and a slew of concessions.

With large numbers dependant on agriculture, the sector is politically invaluable. Annual budget speeches of the Centre and the states devote considerable space for agriculture and rural development allocations. The Centre has been providing for increased volume of credit in successive budgets, with the recent one allotting Rs 11 lakh crore.

Even with all this support, the sector is in deep distress. Eighty-five per cent of the farmers are small and marginal. The number of large farmers is just around four per cent. With the inexorable migration from villages to urban centres, agriculture employs predominantly women. Mathew Morell, Director General, International Rice Research Institute, Manila, referred to the increasing age of men workers in rice fields across the globe. In India, the age of male agri labourers is mostly 50 plus with poor literacy.

The archaic Agricultural Produce Market Committee (APMC) Act has been imposing severe restrictions, especially on movement of agri products. The small size of the farms and low levels of literacy of farmers deny reaping the fruits of massive advances in science, technology and management practices that have helped spectacular increase in productivity.

For instance, corn output in mid-west USA is around 10,000 kg/acre. China gets around 5,000 kg/acre. The average in India is around 800 kg/acre. Tomato yields in Israel are 200 tonnes per acre. In Davis California, it is around 80 tonnes per acre. In India, it averages 5 tonnes per acre.

A major impediment is the uneconomic, small size of farms. In Tamil Nadu, the average size is two acres. In villages around the steel belt of Jamshedpur, I found most farmers owning half an acre or less. Look at the fragmentation through four generations of my family – from 100 acres, it got dwindled to less than two acres per head of the fourth generation (mine). Even this is not in one piece, but scattered over three or four locations. There is the attachment to the traditional crops, mostly rice. With such small fragmented sizes, farming is unsustainable for livelihoods with inevitable migration from villages. Either these lands are appropriated by local dadas or left fallow. Even the large land owners are content with leaving large parts of the holdings fallow, thanks to unviable returns, but sure of the appreciation in land values and bide for time.

Low returns from farm land

Farm income, despite periodical revision of minimum support prices, continues to be low. For most crops, including paddy, the annual income per acre net of expenses could be in the region of Rs 40,000 or around Rs 3500 per month. Thus, a small land owner is unable to spend on testing and nourishing the soil, expanding irrigation and accessing science and technology for achieving higher yields. Most villages have little use for the thousands of agriculture graduates due to the small sized land holdings and low incomes.

Consequently, the share of agriculture in the country has fallen to around 14 per cent of GDP; in Tamil Nadu, it is less than 8 per cent of SGDP. The only sections of agriculture that are profitable are large farms. These have the financial strength and capabilities to make use of the vast information available for scientific practices. There is no dearth of such information from the internet and our large number of agricultural universities and colleges. More importantly, with such size they could mechanise and employ qualified managers. This is seen in the prosperity of farmers in select pockets spread across the states. The fundamental reason is the large size.

Agglomerating land through cooperatives failed in most parts of the country. Farmer Producer Organisations (FAO) attempt to address this issue, but this reform is extremely slow to catch up. Where there is need for several lakhs of such FAOs, we have hardly a few hundred. It takes time to make an impact.

Permit 15-year lease, don’t alienate ownership

I suggest amending the APMC Act (there is welcome news on the Centre realising the archaic nature of this Act and suggesting its abolition); permit leasing of land over 15 years and more without alienating ownership. This will attract a large number of entrepreneurs and massive investments to help nurture a prosperous agri business. These will change the present profile of aged, poorly equipped, resource-starved farmers involved in traditional agriculture and attract young, well-educated classes with entrepreneurial skills. The sizing up of holdings to 25, 50, 100 acres and more would lend for mechanisation and application of the best of science, technology and management practices. The transformation will be from agri-culture to agri-business. Such a transformation will take care of the vital marketing aspects — warehousing, cold storages and supply chains. It will also lead to a focus on value addition through processing the raw products.

Miracle of science, tech and management

The Pepsi experiment in Punjab is a fine example: 30 years ago, Punjab produced very little of tomatoes; its production of potatoes was also modest. Today, the State is a large producer of both. There are hundreds of cold storages set up by prosperous farmers to store their produce and wait for better prices. The State has also developed a lot of facilities for processing surplus products. And look at the value addition: potatoes procured around Rs 3/kg are converted into ruffles/chips and marketed at Rs 200/kg!

Heinz, the condiments behemoth, funded scientists at the Purdue University in the US to increase the pulp content in tomatoes produced by genetic modifications or in increasing the shelf- life of tomatoes. Such research efforts can be triggered by prosperous agri-businesses.

With agriculture mostly a seasonal product, processing food would help realise higher prices round the year. Mangoes converted into pickles or pulped is an example. Such value addition has helped several South-East Asian countries to thrive on exports. Neighbouring Malaysia researched and developed over 180 products processing palm oil and emerged a leader of this product in quick time.

The owners of small land holdings could get wage employment in such expanded activities – in farms, in warehouses, in workshops to maintain machines, in marketing, supply chain, etc. More importantly, such change would provide full employment to those working in farms against the present seasonal employment. This will address the issue of migration: educated, qualified youth of villages would have better prospects for full employment around their own homes. With the expansion of the agri business and industrialisation, there will be an even greater opportunity for employment in numerous services – hotels, retail trade, schools, banks, transportation, and so on.

Band-Aid solution for ills demanding surgery

This has the potential to revolutionise rural India, but calls for a structural change. For 70 odd years, we have been hearing the same suggestions that point to Band-Aid solutions for a malaise that calls for a major surgery. The familiar demand of steep rise in support price falls under this category. Look for instance at the increase in the price of sugarcane from around Rs 80 to around Rs 2,800 per tonne over four decades and with sections demanding Rs 5,000 per tonne. Unless the focus is on productivity and getting more output from less land, such demands will be unrealistic. We had seen the impact of this in a number of crops in Punjab and other states in regard to potato and tomato, and also in vegetables in Krishnagiri and Theni in Tamil Nadu.

A large number of graduates passing out from agricultural universities do not find remunerative employment in farming. Over 80 per cent of the students who graduate from Tamil Nadu Agricultural University (TNAU) are women and seek a government, corporate, banking or academic job with little interest in soiling their hands in a rural farm. The same is also true of male, qualified agri graduates who, like doctors, are not eager to work in villages which do not offer even subsistence salaries. Surely you cannot raise farms in Chennai city or crowded Coimbatore. The immediate need, therefore, is to agglomerate land holdings permitting lease over a long term.

— S Viswanathan is the Editor and Publisher of Industrial Economist, and Managing Trustee, Agriculture Consultancy Management Foundation