Agriculture

India’s Farmers Will Continue to Face Price Crash Nightmares Until Export Markets Are Created 

Even if Indian agriculture managed to match global levels of productivity, farmers would face a glut and low prices.

The Indian farmer today faces a peculiar challenge. 

If his crop is bad, due to any natural calamity or spurious seed or pesticide, there may be a rise in prices. Since this results in food inflation and attracts the attention of the media, the government comes in with a heavy hand in the form of action under Essential Commodities Act. This then depresses the prices and the farmer bears the brunt. This was the case of onion in November and December 2019.

If nature is benevolent and the crop is good, production may turn out to be more than what domestic demand requires. In this case also, the farmer suffers because prices crash and  sometimes the farmer cannot recover even his cost of cultivation. An example is the case of onion in Kharif 2017 when the prices in Madhya Pradesh crashed to Rs 200 per quintal.

Also read: Onion Crisis Reveals How Little the Government Can Do When the Chips Are Down

Similar situations arise for several commodities year after year even though India’s productivity of most crops is much below the global average. For paddy, the yield in 2016 was 3.7 tonnes/hectare while global average was 4.5 tonnes/ha. China produces 6.8 tonnes/ha. 

Indian yield of maize was just 2.6 tonnes/ha while global average was 5.6 tonnes/ha. USA produced 10.96 tonnes/ha of maize. Thanks to new cane varieties developed by Dr Baskhi Ram of ICAR, Indian yields match the global average.

So, if the productivity of crops goes up substantially, the domestic market may not be able to absorb the same and the prices will fall steeply. 

With current levels of malnutrition, it is possible to increase domestic consumption of various food items but that will require high growth of income for poorer sections. A leaked survey conducted by the National Statistical Office (NSO) between July 2017 and June 2018, showed that  rural spending was only Rs 580 per capita per month in 2017-18, about 10% less than Rs 643 in 2011-12 (both in real terms). 

Indian agriculture has to find global markets to enable farmers to produce more. Photo: Reuters

Urban spending on food was Rs 946 per capita per month in 2017-18, only marginally higher than Rs 943 in 2011-12. Though the survey has been withdrawn by the government and there are some genuine discrepancies in the survey data, the level of malnutrition in India should not leave anyone in doubt that the purchasing power of Indian masses has not been increasing fast enough to absorb even current level of production of most food items.

If Indian farmers match global levels of productivity, they will face glut and low prices.  

So, Indian agriculture has to find global markets to enable farmers to produce more and still do not face a crash in prices. For this, the farmers need water for irrigation and timely access to high quality inputs as well as new seeds, mechanisation and modern post-harvest infrastructure.

Indian exports of agricultural commodities was $39 billion in 2018-19. While basmati rice contributed $4.7 billion, non basmati rice earned $3.03 billion. Sooner rather than later, the ecological damage to water table in Punjab, Haryana and western Uttar Pradesh will be realised by the governments and the export of non-basmati rice will go down. So, the farmers will have to be provided alternative crops which have a market in India and abroad. 

Also read: India’s Intense Agri Drive After 1947 Didn’t Stop Crop Diversification: Study

Maize is one such crop. It takes less water and has a large domestic and global market. But there are no facilities for drying maize in mandis and the farmers do not get a fair price due to that. Investment in dryers and silos and cheaper hybrid seeds can provide farmers with a ready market. Presently, farmers have to buy expensive seeds sold by private companies. National and State Seed Corporations have to come forward and supply cheaper hybrids to farmers.

India’s export of fruits and vegetables was only $1.7 billion in 2018-19. There is huge demand for fresh fruits and vegetables, especially the organic ones. Maharashtra has shown that farmers can be trained to adopt modern practices of farming (for grapes) and it can meet the stringent standards of developed countries regarding traceability and pesticide residues. In 2018-19, India exported 2.46 lakh tonnes of fresh grapes and earned $330 million. 

In December 2018, the Government announced Agriculture Export Policy with the target to double the exports to 60 billion dollars by 2022 and reach $100 billion in the next few years. It will take much more than only the intent to reach this level of exports. 

The government has to look 20 years ahead and plan for ecological sustainability of agriculture coupled with higher productivity which demands that Indian agriculture is made export competitive. 

Siraj Hussain is a former Union Agriculture Secretary. Currently, he is Visiting Senior Fellow, ICRIER.