Income Security to Farmers

RamanjaneyuluKiran Vissa

Alliance for Sustainable and Holistic Agriculture

Understanding the crisis

Ever increasing costs of cultivation due to externalization of inputs specially seeds and pesticides and increasing labor costs

Increasing tenancy and tenancy costs…Dependency on traders and dealers for creditIncreasing ecological costs due to high

chemical useDecreasing margins to farmers-reducing

incomes

Manifestation of the Crisis in Agriculture

• Farmers’ Suicides• Migration• Cultivated Fallows• Crop holiday

Crop holiday

• Total are in Konaseema-1.9 lakh acres• Current crop holiday-90,000 acres• Total mandals in WG konaseema 16• Crop holiday in completely in Allavaram,

Uppalaguptam, I.Polavaram, Katrenikona and partial in other mandals

Income and Expenditure of farmers

Land holding

Category Total Income (Rs/month)

Expenditure(Rs/month)

Percent of farmers

<0.01 Landless 1380 2297 36 %

0.01-0.4 Sub marginal 1633 2390

0.4-1.0 Marginal 1809 2672 31 %

1.0-2.0 Small 2493 3148 17 %

2.0-4.0 Semi-medium 3589 3685 10 %

4.0-10.0 Medium 5681 4626 6 %

>10.0 Large 9667 6418

Total 2115 2770 All farmers

Source: Report “On Conditions Of Work And Promotion Of Livelihoods In The Unorganised Sector” Arjun Sen Gupta Committee, 2007

Problems with pricing policy• The agriculture prices are not fixed taking into

livelihood needs of the farmers.• The rising inflation always had a double impact

on farmers with increasing costs of living and decreasing incomes due to reduction in agriculture prices as a result of price intervention mechanisms of the government.

• Minimum Support Prices are announced for 25 commodities and market intervention operations exist only for rice and wheat. So farmers growing other crops are left to the mercy of the markets.

Paddy pricing in APyear Cost of Production

(Rs./q)* MSP**

2004-05 578 560

2005-06 570 560

2006-07 580 570

2007-08 700 675 (incl. bonus of Rs. 25)

2008-09 1000 875 (incl. bonus of Rs. 25)

2009-10 1200 950 (plus of Rs. 50)

2010-11 1500 1030 (no bonus)

2011-12 1800 1080 (?)

*Cost of cultivation data from few states by DES http://dacnet.nic.in/eands/ up to 2010 the remaining two years data is collected from field.** MSP announced by Government of india http://www.dacnet.nic.in

Other factors influencing prices• In 2007-08 govt of AP has re-started Rice scheme at Rs. 2/- and

restricted open market fine rice price to Rs. 20/- Which has brought down farmers open market price

• 2009-10 warehouses full and Govt has not procured most of the paddy from farmers

• 2010-11 govt procured only 4.7 lakh tons (of 60 lakh tons remaining from 2009-10 and 100 lakh tons produced in kharif 2010) for want of space. The rabi produce of about 60 lakh tons is pending.

• Government of India announces MSP for 25 crops but procures only Rice (October-September) and Wheat (April-March). Procurement of millets happens only on a very small scale. In that also currently only 25.8% of of the net production of food grains are procured. Only 18.9% of the net available food grains are distributed through the PDS.

Procurement of various food grains by the Government(2004-05 to 2010-11)

Year Rice Wheat Coarse grains Total

Production

Procurement

Production

Procurement

Production

Procurement

production

Procurement

2004-05 885.3 246.85 721.5 167.95 276.0 8.27 1882.8 423.07

2005-06 831.3 276.56 686.4 147.87 334.6 11.51 1852.3 435.94

2006-07 917.9 251.06 693.5 92.26 340.6 0.00 1952.0 343.32

2007-08 933.5 287.36 758.1 111.28 339.2 2.03 2030.8 400.67

2008-09 966.9 336.85 785.7 226.89 407.6 13.75 2160.2 577.49

2009-10 991.8 301.34 806.8 253.82 400.3 4.08* 2198.9 555.08

2010-11 225.25*

Source: Koushik Basu (2010) Economics of Food grain management in India and Data from Directorate of Economics and Statistics and updated from Ministry of Food and Civil Supplies website.

Profitability in agricultureName of the Crop States where the C2 cost projection by CACP for 2005-06 were not covered by

MSP of 2004-05

Paddy A.P, Assam, Haryana, Karnataka, Kerala, M.P, Tamil Nadu & West Bengal

Jowar A.P, Karnataka, M.P, Maharashtra & Tamil Nadu

Bajra Gujarat, Haryana, U.P, Maharashtra

Maize A.P, H.P, Karnataka, M.P, Rajasthan & U.P

Ragi Karnataka, Tamil Nadu

Tur [Arhar] A.P, Gujarat, Karnataka & Orissa

Moong A.P, Maharashatra, Orissa & Rajasthan

Urd M.P, Maharashtra, Orissa, Rajasthan & Tamil Nadu

Gram Haryana, Rajasthan

Barley Rajasthan

Based on K. Ramasubba Reddy’s paper and compiled using data from Directorate of Economics and Statisticshttp://dacnet.nic.in/eands/costofcultivation.pdf

Procurement of rice during 2009-10 by FCI and State Agencies(In '000 tonnes)

State / U.T2009-10 *(OCTOBER to SEPTEMBER)FCI State agencies Total

Andhra Pradesh 6228 204 6432Assam 8 0 8Bihar 283 549 832Chandigarh 14 0 14Chhatisgarh 437 2705 3141Haryana 81 1737 1818Jharkhand 15 7 23Karnataka 72 10 83Kerala 0 261 261Madhya Pradesh 0 194 194Maharashtra 55 156 211Orissa 190 2277 2467Punjab 474 8801 9275Tamil Nadu 0 1143 1143Uttar Pradesh 374 2317 2691Uttaranchal 207 169 375West Bengal 252 914 1166Total  : 8690 21443 30134Neg. - below 500 tonnes                                *Position as on 30/07/2010.

Millers makes the profit

Coarse Rice Fine Rice

Kgs Price Rs/kg

Total (in Rs)

Kgs Price Rs/kg

Total (in Rs)

Rice 60 17 1020 62 20 1240

Broken rice 7 11 77 7 11 77Fine Broken rice 4 8 32 4 8 32

Bran 10 11 110 10 11 110

Husk 18 10 180 16 10 160

Total     1419     1619

Procurement of Paddy under MSP by SHG's (Rabi and Kharif) 2006 to 2010-11

No Year Season No. of Dists

No. of Mandals

No. of Procurement

Centers

Qty in Tonnes

Value in Rs in Crores

Earned Commission Rs in Crores

1 2006-07 Kharif 11 159 188 63954 40.79 0.61

2 2007-08 Rabi 13 198 316 330052 214 2.71

Kharif 12 133 257 75418 57.92 0.81

3 2008-09 Rabi 13 200 436 334441 259.1 3.38

Kharif 8 100 272 205630 189.7 2.69

4 2009-10 Rabi 13 233 541 584380 543.3 7.94

Kharif 7 40 61 18073.2 18.47 0.28

5 2010-11 Rabi 13 168 296 213663 218.7 5.2

Total       1825611 1542 23.63

Remunerative pricing policy• MSPs should take into account actual costs of cultivation and

living costs (corrected to inflation rise)• NFC’s recommendation (Cost C2+50 %) can be used as a guide

(Rs. 1800/q for 2010 paddy and wheat based on 2009 cost calculations)

• Price differential (MSP –actual realised/procurement price) should be paid directly to farmer

• Producers are consumers: Only 20-30 % is procured…what about more than 40 % produced-consumed

• Costs cannot be based only on COC as they could be low for crops like sorghum and where people use their own inputs

Recast input subsidies• Nutrient based subsidies to be extended to organic also

– Recast fertiliser subsidy to support farm made organic inputs– Rs. 5000/ha which as soil nutrient subsidy which can be used for organic

inputs• Labour subsidies

– Subsidise Farm labor by Rs. 100 per day (which is equivalent to unskilled work under NREGA) balance if any to be borne by farmer

– Labor subsidy (40 days/crop @ Rs. 100/day) which may cost about Rs. 76,000 cr/year

– For working in their own fields or hiring labor. Generates additional labor days

– Brings down costs of cultivation by Rs. 4000/ha• Seed and other input subsidies

– Rs. 1000/ha

Effective Procurement system

• Today only small part of the total production is procured by the govt.

• Government can use the women self groups, farmers cooperatives and other community based organisations for procurement of the paddy

• In states like Chhattisgarh state governments have established efficient systems of procurement and distribution.

• AP also should move into a system of procuring and going for custom milling rather than procuring through millers

Farmers’ income benefitIncome per ha• At farmers level it benefits to an extent of Rs. 10,000/ha (Rs.

5000 from fertiliser subsidy and Rs. 4000 as labor subsidy)• Benefit from price rice Rs. 13,000 (avg Rs. 600/q for 22 q of

cereal grains)

Income per family • Rs. 10,000 from NREGA (100 days @ Rs. 100)• Total benefit per family would be at least Rs. 25000/- in

addition to the income from farm produce bringing them out of poverty

Direct Income Support• If the income falls short of minimum income it needs to be

supported directly

Farmers income commission

• Farmers Income Commission as a statutory body which examines the real income of farmers every year across the states.– Make specific recommendations to ensure that farmer

families are assured a minimum income (to meet living costs per family based on current estimates it would be about Rs. 25,000)

– Consider actual costs of cultivation, prices realized, subsidies given and suggest mechanisms for compensating the differential as Direct Income Support