RK Nagar Writes; Doubling farmers income

Doubling farmers income by 2022; a change in perspective is needed

The stated objective is most laudable. Farming- dairying included, is the largest employment generator in Indian economy and therefore anything that boosts farm income is bound to have a cascading effect on the other sectors of economy by way of increased demand for goods and services.

Mr. Arun Jaitley, the Finance Minister while presenting the budget allocation for agriculture and animal husbandry mentioned that “We consider agriculture as an enterprise and want to help the farmer produce more from the same land parcel at lesser cost and simultaneously realize higher price for their produce”.

Clearly the government wants to double the income using a two pronged strategy- reduce cost of cultivation and increase production per unit of cultivated land, alongside a support price mechanism. Major allocations are geared towards this strategy.

Mr. Jaitley also announced the plan “Operation Greens” on the lines of “Operation Flood”-the program conceived in 1969 and implemented by the National Dairy Development Board of India, under the leadership and watchful eyes of Dr. V. Kurien, the father of white revolution. Operation Greens is intended to address “the challenges of price volatility for perishables crops like potato, tomato and onions”.

Now the issues: Former PM Dr. Manmohan Singh’s reaction on this part of the budget is worth noting. He felt that the objective is unrealistic and unachievable in the given time frame. It is a simple arithmetic-to double the income in 5 years means an average annual increase of 20%. How much of it can be achieved by way of support price mechanism is a matter of debate given the fact that, to attain this kind of increase across the board covering all the crops, we need a very robust implementation machinery.

Going by the past experience, schemes to increase productivity and incomes, however well-intentioned cannot and have not been successfully implemented by the government machinery. There are two glaring examples of these failures; one, Small Famers Development Agencies (SFDA) and Marginal Farmers and Landless Agriculture laborers agency (MFAL) both conceived and implemented in early ‘70s by the central government disappeared without a trace in just few years after the launch.

The second and more recent example is that of ‘Technology mission on edible oils’. This was one of the 7 technology missions launched by late PM Mr. Rajiv Gandhi in 1986. He was very concerned with ever growing imports bill of edible oils that was robbing resource poor oilseeds farmers of India of the potential to increase their income. In 1989, Market Intervention Operation (MIO) was added in the program and linked it with the NDDB’s on-going oilseeds growers’ cooperatives program to speedily take the country on the path of self-sufficiency. So concerned was Mr. Rajiv Gandhi that the project was directly monitored by PMO. NDDB was chosen to implement MIO because it had successfully implemented ‘Operation Flood’ and demonstrated that the principles of empowering the farmers, when implemented with right focus can bring about spectacular results in no time.

The desired results were achieved. By the end of the 5 year period of MIO, India did become self-sufficient in edible oils. The days of regular commercial imports to augment supplies were over. The success of MIO has been briefly noted by Mr. Rajiv Gandhi’s advisor on technology missions Sam Pitroda on his website (www.sampitroda.com) in following words; 

“India was importing one billion dollars of cooking oil each year, when large portions of Indian land are well suited to growing oil crops. Farmers did not grow these crops because they found other crops were more profitable. This was causing India costly economic situation.

Their goal was to make farmers see the benefits of planting oilseeds.

Kurien, who handled buffer stocks, described his plan as such: “We move into areas where there is gross exploitation and try to restructure the marketing system so that the small producer is not fleeced by middlemen or the oil kings.”

Once the intervention on oil was complete, India was exporting oil cake at the rate of 600 million per year.”

Now comes the catch. The Government of India did not extend the program (MIO) to consolidate on the nascent self-sufficiency in edible oils. It did not give another 5 years for the bond between the oilseeds growers’ cooperatives and NDDB (that was handling the marketing operation for the oil processed and packaged by the cooperatives) to strengthen. Political compulsions got better of the need to help and empower oilseeds farmers and the net results are for all of us to see. Today almost two-thirds of edible oil demand of India is met through cheap imports. Imagine the scale of lost income opportunity for the oilseeds farmers over the last 22 years. 

I therefore view with apprehension any initiative of the government that keeps the strings in its own hands. Even the best intentioned plans can get botched either in the absence of a proper institutional mechanism to implement (like SFDA/ MFAL) or due to political compulsions (MIO). Mr. Jaitley’s announcements therefore need to be viewed in light of these experiences and absence of a credible institutional structure to implement the plans.

Operation Flood: Mr. Jaitley announced that the GOI wants to implement the program to handle the price volatility in the ‘perishables’ (Potato, Tomato, Onions) on the lines of ‘Operation Flood’. Here it is important, for the benefit of the uninitiated, to recall a few important points about ‘Operation Flood’. If today India is world’s largest milk producer and if the dairy sector is the highest contributor to GDP above grains, it is due to these important reasons and this journey was by no means quick and easy.

1.     It was world’s single largest “empowerment program”. It empowered millions of small resource poor farmers by (I am quoting Dr. Kurien) “placing the instruments of development in their own hands”The success of Operation Flood (OF) was due to un-wavered focus over 30 years on empowering the farmers by creating institutions that are owned and managed by the farmers themselves.

2.     The focus was on transferring the benefit of value addition to the milk producers. Farmers own the entire value chain- from production to processing and marketing. They own both the infrastructure and the institution supported by well designed and implemented management systems.

3.     The program was not dependent on government funding and therefore, in a way remained immune to any political interference as also any possibility of derailment (like MIO).

4.     The first phase took a good 10 years to implement in 10 states against originally planned 7 years, as most states were unwilling even to try a development model that was successfully implemented in Gujarat and was already well known all over India as AMUL brand of dairy products, especially table butter.

The MIO, on the other hand took only 5 years purely because it had access to the institutions and infrastructure created over 10 years under NDDB’s “Oil project”.

Therefore, when we come to this laudable intend to double farmers’ income by 2022 through a slew of budgetary provisions, one has to ask “what is our state of preparedness to achieve the objective?” Who will implement the programs? Who will effectively deliver inputs for increased production? Are we prepared to address practical issues associated with handing perishables- fruit and vegetables? Do we know how to handle a heterogeneous mix of vegetables that the farmers grow? Who is going to invest in processing and marketing infrastructure? Will the farmers have a share in the processing infrastructure? If not, what is the guarantee that the benefits of value addition will percolate down to the producers? What is the guarantee that the farmers organizations, in the absence of any stake in processing, do not end up merely as just the basic link in the supply chain?

I am raising these concerns because even in the case of non-perishables like wheat, rice and pulses, where the price support system is well established, the benefit of value addition does not go to the producer. He has to contend with the price of the raw produce, more likely just the support price.

A beginning however is to be made somewhere somehow. This budget spells the intend of the government to make a beginning in the right direction. Let us hope that this time around the farmers do get the benefit of value addition and not just the support price.  

RK Nagar worked with the National Dairy Development Board of India from 1969 to 1998 as a part of the senior management team in project planning, project management and operations of commodity business. He is currently a free lance Management Consultant, Value Chain Design and Development Specialist in Agribusiness and Rural Development. He is based in Toronto.

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