Ensuring Income Security for Agriculture Households

RAMANJANEYULUKIRAN VISSA

Ensuring Income Securityfor Agricultural Households

Progress in agriculture should be measured by the growth rate in the net income of farm families... moving away from an attitude which measures progress only in millions of tonnes of food-grains and other farm commodities.

-National Policy for Farmers, approved by Government of India in 2007.

PEOPLE DEPENDING ON AGRICULTURE IN INDIA

69.999.6

78.2 92.5 110.7 127.31 118.7

27.3

31.5 47.5 55.5

74.6

106.1144.3

0

50

100

150

200

250

300

1951 1961 1971 1981 1991 2001 2011

Indian Census 1951-2011

Cultivators Agriculture labour

49.93%

19.5%

52.78%

16.69%

43.35%

26.33%

37.82%

22.69%

35.24%

23.75%

31.65%

26.38%

24.64%

29.96%69.43%

69.47% 69.68%60.51%

58.99%

58.03%

54.6%

• People depending on agriculture has come down from 69.43% to 54.6% in last 60yrs• For the first time the number of cultivators is lower than agriculture workers both in proportion and absolute

numbers• Between 2001-2011 about 86.10 lakh people have left farming in India which is about 2358/day• In 2011 main cultivators (depending on farm income for more than 6 months) are only 95.8 m which is

about 8% of Indian population)

(People in Million) (% of workers)

Source: Census of India 1951-2011 http://www.agrariancrisis.in

02000400060008000

100001200014000160001800020000

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

Farmers suicides in India

No. of suicides

Source: NCRB 1995-2012

Total 2,84,694 in 18 years

http://www.agrariancrisis.in

THE CRISIS

Increasing costs of cultivation Increasing living costs Decreasing subsidies Un remunerative prices

Income and Expenditure of farmers

Source: Arjun Sen Gupta Commission (NCEUS), 2007

Land holding (acre)

Category Total Income (Rs/month)

Expenditure(Rs/month)

Percent of farmers

<0.02 Landless 1380 2297 36 %

0.02 - 1.0 Sub marginal 1633 2390

1.0 - 2.5 Marginal 1809 2672 31 %

2.5 - 5.0 Small 2493 3148 17 %

5.0 - 10.0 Semi-medium 3589 3685 10 %

10.0 - 20.0 Medium 5681 4626 6 %

>20.0 Large 9667 6418

Total 2115 2770 All farmers

FARM INCOMES: CONTINUING PROBLEM

Incomes of farmers have stagnated or declined; while living costs have increased enormously

Disparity between agricultural incomes and other sectors has widened; Rs. 5511 per month for average farmer but Rs. 10,658 is starting salary of Class IV rural employee;

Incomes are precarious; Risk has increased

Variation of incomes based on landholding class is stark; therefore equity issues need to be addressed

Where do the farmers go? To other sectors?

WHERE DO THEY GO? From 2004-05 to 2009-10, only 2 million additional employment was generated but 55 million were added to working age population!

25.1 million people lost their self-employment

Increase in the number of casual workers by 21.9 million, while growth in the number of regular workers nearly halved between 2004-05 and 2009-10, compared with the previous 5 year period.

Sector 2004-05

2009-10 Difference

Agriculture 258.93

243.21 -15.71

Manufacturing 55.77 48.54 -7.23

Services 112.81

112.33 -0.48

Non-Manufacturing (construction)

29.96 56.10 26.14

TOTAL 457.46

460.18 2.72

Sector-wise employment (millions)

POOR EMPLOYMENT IN OTHER SECTORS

WHY FOCUS ON INCOME SECURITY? Large section of population derives its livelihood from

agriculture and will continue to, in foreseeable future. Non-agriculture employment generation has been poor.

With secure incomes, we will see better diversification of occupations, rather than distress migration.

Experience of other countries shows: unless growth model improves farm incomes, growth is not poverty-reducing.

Since Food Security is a national priority, a minimum Income Security for food producers should also be.

Precarious nature of farm incomes needs to be directly addressed; a measure of stability and security is needed

WHY FOCUS ON INCOME SECURITY?

National Policy for Farmers: “There is a need to focus more on the economic well-being of the farmers, rather than just on production... The aim of the Policy is, therefore, to stimulate attitudes and actions which should result in assessing agricultural progress in terms of improvement in the income of farm families, not only to meet their consumption requirements but also to enhance their capacity to invest in farm related activities.”

Let us look at it in the framework of “Peasants’ Rights”. Even the UN is talking about it now.

FARMER INCOMES FOCUS IN OTHER COUNTRIES

Across the world governments have adopted basket of measures to ensure income security to farmers with twin objectives

a.To ensure parity of incomes between agriculture sector/ farmers and other sectors/ non-farmers, and thereby ensure equality and justice in the societyb.To ensure food production and food self sufficiency

Some of the popular models are

1.Decoupled Income Support: Support for farmers that is not linked to (is decoupled from) prices or production. As WTO has brought in restrictions on trade distorting subsidies and Direct Income Support comes under the blue box subsidies. Some of the countries which have adopting this model are USA, China, Australia, Korea, Japan2.Payments for Ecosystem Services/conservation subsidies: Payments made to farmers for maintaining the ecosystem, conservation of natural landscapes, environmental friendly production etc. e.g. USA, Switzerland, Korea, Japan, Malaysia3.Payments for less favoured areas: like rainfed areas, hilly terrains etc. eg. Korea4.Productivity bonuses and Price Compensations: Support to farmers beyond the market price. E.g Malaysia, USA, Japan, Korea, EU, USA, Switzerland

OUTLINE OF INCOME SECURITY POLICY

Farmers Income Commission: Mandate is to ensure minimum living income to all agricultural families. Assesses real net incomes of farm families across India. Possibly develop a Farmers’ Income Index. Makes specific recommendations to achieve minimum income.

Synergy among farmer support systems: Recommendations cover many income-enhancing measures (prices, insurance, credit, low-cost agriculture etc). Instead of working separately, they will be geared to meet the common mandate of farmer incomes

Accountability: Places accountability on the government to ensure that all the thousands of crores spent in the name of farmers actually results in better incomes

Income Guarantee Payment: If income estimate falls below threshold, Commission determines Income Guarantee payment

INCOME SECURITY POLICY (CONTD.)

Real cultivators and workers: System covers real cultivators and agricultural workers – not absentee landlords. A differentiated approach may be needed to assess incomes of different sections.

Inbuilt Equity principle: Since per-family minimum income is assured, there is equity principle built into it. E.g. A 3-acre family might fall below income threshold but 10 acre farmer is not likely to. Most other support measures are proportional to acreage.

Not a single ‘silver bullet’ solution: Should not be seen as a silver bullet to address all problems. Land rights, land reforms, rights over seeds, ecologically sustainable agriculture form other dimensions that should all be pursued. Income Security system should be designed to go hand in hand with those.

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 agricultural families are assured a minimum income level

Based on shortfall over 3-year period, determines Farmers Income Guarantee payment to be paid to cultivators – possibly with slabs. This can be determined at aggregate level, based on an Income Index. This is periodically revised based on new data.

BASKET OF MEASURES FOR FARMER INCOMES

Pricing policy including MSPs should be strengthened. Price Guarantee system (or Deficiency Price Payments) should be used – applying to all 25 crops,independent of procurement

Reduce Cost of Cultivation – promote low-cost methods

Farmer collectives for production, marketing, processing – with farmers getting bigger share of value chain

Access to timely credit at low interest

Crop insurance & Disaster Compensation

Producer Bonus for ecological farmers & rainfed agriculture

Social Security system for all unorganized sector

Price Guarantee system• A crop-wise Minimum Target Price (MTP) is determined,

which is remunerative to the farmer• If average Farm Harvest Price is less than MTP, the

difference should be paid to the cultivator• This provision is for all food crops in the MSP regime• Payment is calculated based on district-level or taluk-

level averages of the FHP and yield• Should benefit actual cultivator, including tenants and

sharecroppers

Food Crops for which MSP is declaredWheat Chana/Bengal Gram Toria

Paddy Urad/Black Gram Copra

Jowar Masur/Lentil Nigerseed

Bajra Groundnut Sesame

Maize Sunflower Barley

Ragi Soyabean Safflower

Tur/Red Gram Rapeseed

Moong/Green Gram Mustard

QUESTIONS TO BE DISCUSSED

How to identify real cultivators including tenant farmers and sharecroppers

How the income is assessed. We have experience with situational assessment and different income studies.

What should be the minimum income level

Budgetary implications

How to ensure that it doesn’t lead to control of agriculture goes to corporate agriculture and large farmers

FURTHER DETAILS

http://www.csa-india.org

http://www.kisanswaraj.in

http://www.agrariancrisis.in

[email protected]

09000699702

040-27017735

Centre for Sustainable Agriculture

Alliance for Sustainable and Holistic Agriculture

http://www.csa-india.org/

http://www.kisanswaraj.in/

http://www.agrariancrisis.in/

mailto:[email protected]

BASKET OF MEASURES FOR FARM

IN COME SECURITYFarmers Income Security

COMPARISION OF COSTS AND MSP (A.P.)

Source: CACP Kharif Price Report,, 2012-13

Crop

Cost/quintal (AP govt est.)

Recommended MSP

Avg Market Price

Paddy 1341 1250 1300Jowar 1302 1500 1400Maize 1229 1175 1244Tur Dal 4044 4000 3826Groundnut

3695 3700 4678

Sunflower 3706 3700 3650Cotton 4239 3600 3884Urad Dal 3696 4300 4103





sharecroppers

REDUCE INPUT COSTS – PROMOTE LOW-COST MODELS

Sustainable models with low input costs should be promoted which make best use of locally resources for seed, soil fertility and pest management and reduce the dependence on high-cost inputs

These reduce the risk of losses for the farmer, especially suitable for small and marginal farmers to get out of debt and distress induced by high-input high-risk methods

Shift from high-input model should be promoted by comprehensive programmatic approach by government with incentives and support systems

Institutional & Infrastructure Support

• Farmer institutions for collectively negotiating the markets, planning and strengthening production systems

• Systematic measures strengthening farmers' holding capacity and negotiating power with markets:

• Godowns, cold storage at village and cluster-level

• Processing units at cluster-level

• Effective implementation of warehouse receipts

• Reliable institutional credit to cover 80% of farm loans

• Procurement directly from farmers at village level

• Integrated support systems for livestock, cropping, dairy

REDUCE INPUT COSTS - RECAST SUBSIDIES

Recast chemical fertilizer subsidy Recast fertilizer subsidy to include farmer-made organic inputs

Rs. 5000/ha as soil nutrient subsidy could be used for own inputs

Labour subsidy Subsidize Farm labor by for 50 days/ha at Rs. 120 per day (pegged to NREGS wages), for own or hired labour

This is in addition to the 100-day NREGS work guarantee

Completion of work to be certified by joint farmer-worker group

Payment to be made to workers using same NREGS mechanism

Workers can negotiate additional payment from farmer

Brings down costs of cultivation by Rs. 6000/ha

Seed subsidy to include farmer’s own seed

DISASTER RELIEF AND CROP INSURANCE• Loss of crop and livestock due to natural

disasters is a major cause for indebtedness and destitution

• Timely and adequate compensation for crop loss (Rs.10,000 per acre) and livestock loss

• Measures to protect crop and livestock during impending or ongoing disaster situation

• Effective crop insurance which should be available for all farmers for all crops

COMPREHENSIVE SOCIAL SECURITY

• A strong social security system should be in place to provide health-care, pensions and accident/life insurance for all agricultural workers and farmers

• Education system and other rural amenities should be strengthened so that it is attractive for future generations to remain in the rural areas

QUESTIONS TO BE DISCUSSED How to identify real cultivators including tenant

farmers and sharecroppers

How the income is assessed. We have experience with situational assessment and different income studies.

What should be the minimum income level

Budgetary implications

How to ensure that it doesn’t lead to control of agriculture goes to corporate agriculture and large farmers

PRICE GUARANTEE (OR “DEFICIENCY PRICE

PAYMENT”)

Farmers Income Security

LIMITATIONS OF MSP SYSTEM

Despite longstanding demands of farmer unions & Farmers Commission recommendations, MSPs remain inadequate

Paddy official C2 estimate in AP is Rs.1700. As per NFC , MSP should be Rs.2500 but is it realistic to expect?

Food inflation concerns dominate government decision; e.g. Mahendra Dev quotes analysis that higher MSPs adversely impacts poverty reduction (Parikh, 2003). (10% MSP increase leads to 0.33% GDP decline, 1.5% API increase, etc.)

MSP system mainly benefits farmers who sell major portion to the market and who can hold the stock

No accountability for govt to ensure market intervention





sharecroppers

Crop

Production (tons)

C2 (state govt estimate)

MSP (CACP)

Avg Market Price

Loss to farmers

(C2 +50% basis)

Loss to farmers (C2+10%

basis)

Loss to farmers

(C2 basis)

Paddy 199.25 1341 1,250 1,300 9,923 2,441 571

Jowar 3.41 1302 1,500 1,400 132 8

Bajra 0.62 1338 1,175 955 46 22

Maize 36.28 1229 1,175 1,244 1,522 273 17

Urad 3.47 3696 4,300 4,104 350 -

Groundnut 8.81 3695 3,700 4,678 533 -

Soya 1.87 2057 2,200 2,932 20

-

Total (11 food crops)

13,078 (Rs. Cr)

2,866 (Rs. Cr)

624 (Rs.Cr)

Price Compensation: Operational Details

• For each cultivator, record which crop and how much area, at start of season (cross-checked during season)

• Take Production and Yield numbers at district or Taluk level. (Already exists at district level)

• Take Weighted average Farm Harvest Prices FHP (already maintained for each market in each district)

• If FHP < MTP, calculate Price Compensation, PC = MTP - FHP for each crop for each district/taluk

• Per-acre compensation = PC x Ave. Yield• Paid directly to the actual cultivator

Advantages of the system• Introduces clear accountability with the government. For

example, if govt doesn’t effectively do market intervention, then they will have to pay the bill!

• There is also incentive for government to ensure reduction in cost of cultivation, etc.

• This will benefit farmer without directly impacting market price

• It will also benefit small farmers who might not sell much in the market

• In practice, in a given state in a given year, a few crops may get compensation, and it may vary from year to year

Price Compensation: Operational Issues

• Timely payment should be made for each season

• Target price need not have standard formula (C2+50%).

• System should be in place for recording tenants and sharecroppers (eg. Loan Eligibility Card in AP)

• Village level system for recording crop areas exists in principle. Needs improvements?

• For multi-crop system, we can only record main crop

• Area, Production, Yield data already maintained per district basis. Needs improvements?

• Mode of payment – direct to cultivator, through village panchayat or post-office like NREGS cardholders

Ensuring Income Security for Agriculture Households

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