India’s Small-Scale Farmers Plagued by Too Many Dilemmas

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If Tata Motors had to sell the Nano at Rs.10 lakhs one month and Rs.10 thousand in the subsequent month, what would Mr. Ratan Tata do?  He would likely close down production of the Nano. Unfortunately, the Indian farmer does not have the luxury of stopping cultivation when wholesale prices for the crop that he brings to the market collapse to less than the transport cost from the farm to the market. That is because by the time the crop is harvested it is too late.  And, if he does not sow for the next harvest, he will have no income and his family will starve.

There’s a need to improve storage facilities, invest in transportation, and promote value-added products for Indian farmers. 

Time and again, the Indian famer has been plagued by this dilemma: “damned if he sows and damned if he doesn’t”.  He rides a roller coaster ride of pricing, with no controls over the coaster. At least the grain farmer has some sort of cushion in the Minimum Support Price offered by the government. For farmers of perishable produce – fruits and vegetables – it is a story of either making a killing or being financially killed. Some months ago onions were fetching the prices of silver; now they are bringing tears to the eyes of the grower. Yesterday tomatoes were ruling at Rs.30 per kilo in Karnataka; today farmers are dumping them on the roadside at the mandis (markets).

Unlike in industry, where the factors of production can be controlled, agriculture is a different ball game where variables like atmospheric moisture, temperature, intensity and duration of sunshine etc. are totally out of the farmer’s control. He has to sow and reap as per seasonal dictates.  Sure, the farmer can create his own micro-climate using greenhouses but the cost is prohibitive and in a price-sensitive market like ours, he will find it almost impossible to recover his costs. We want more agricultural production to meet the rising demands of an increasingly better – off humongous population. But how will agriculture be able to attract the necessary additional investment if the returns on investment are so uncertain and volatile?

With respect to agriculture, while our planners and researchers have done a lot of work on improving productivity, little attention has been paid to stabilizing and enhancing returns. This has kept the small farmers, who form the majority of agriculturists in India, on the fringe of poverty. Industrialists club together to form informal cartels, the so-called “associations,” to control aggregate output commensurate with demand and thus prevent steep price dips. The farming community, because of its widespread and disaggregated nature, cannot do likewise.   This is particularly true of the “fruit and vegetable” farmers, whose produce is rapidly perishable and cannot be withheld for long from the market.

There are three fundamental ways to address this issue:  storage, transportation and conversion. The investment in this country to store agricultural produce, in relation to the amount produced, has been pitiably low.  While there is a lot of fuss being made about grains being stored in the open, the facilities for storing perishables like fruits and vegetables, which require air-conditioning , are almost non-existent, particularly in the APMC (Agriculture Produce Marketing Committee) yards, where most of the crops arrive from the farms. If the farmer gets low-cost  storage space at these yards during times of glut, at least he has a chance of keeping the price steady.

The need for much more transport infrastructure has a similarly strong case.    India is a large country with many climatic zones favoring the cultivation of different crops. Therefore, what could be a glut of a particular vegetable in one region could be almost total non-availability in another. It stands to reason that if adequate transport is available, the inter-regional supply imbalance and therefore the prices, could be evened out to the benefit of both the farmer and the consumer.

Conversion is the ultimate solution to save perishable products and here, industry and agriculture are on the same platform. India is way behind in this sphere. It is the world’s second largest producer of fruits and vegetables but converts only a small fraction of the produce into value-added, longer lasting forms. Part of the reason for the low investment in the processed food industry in the past has been the lack of a perceived market. With the growth of a substantive middle class in the past two decades and a shift in consumption patterns, this market has now materialized.

The other reason is the obsolete shibboleth of protecting the “innocent” agriculturist from rapacious industry, which has led to all sorts of restrictions direct procurement of produce from the farmers, contract farming, FDI in food processing etc.  If these are ironed out and the farmer – processing industry symbiosis is properly effected, we should see the Indian farmer weathering the ups and downs of output in a financially more healthy manner.

Nourishing the Planet reader N.N.Sachitanand recently wrote this article about the challenges of falling wholesale prices for Indian farmers.  (Photo credit: Bernard Pollack)


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