Farmers grapple with rising costs, falling incomes
The recent protests by the Marathas might have roots in the declining returns from farming across Maharashtra between 2006-07 and 2014-15
Falling farm incomes in rural Maharashtra might be an important factor fuelling the current spate of protests by the Marathas, who are demanding reservation in educational institutions and government jobs. The net returns from farming, or wholesale prices minus costs of production, declined for most of the major crops in the state between 2006-07 and 2014-15, reveals analysis of data available from official sources. Returns from the state’s six leading crops by area sown, including cotton, gram, jowar, paddy, soybean and wheat, were either falling or very volatile during the period (see Chart 1).
The average annual increase in costs for all six crops exceeded the rise in prices, especially in jowar and soybean (see Chart 2).
Cost of production refers to the “C2” cost, as provided by the ministry of agriculture and farmers’ welfare. “C2” includes the rental value of owned land and is a more comprehensive estimate than the “A2+FL” cost, which is used by the government to set minimum support prices (MSPs). “A2+FL” includes cash paid out plus the imputed value of family labour. Nevertheless, it is possible that the derived estimates of ‘returns’—wholesale price minus C2—might still be inflating the actual returns to farmers. This is because most farmers are unable to realize the wholesale prices as they sell to local middlemen. Also, those who take their produce to the mandi have to incur additional transportation costs, which are not included in the C2 estimate.
Apart from the pressures of rising costs and declining margins, farmers also have to grapple with the declining size of their land holdings owing to fragmentation. Even if returns or margins are high in a particular year, a small farmer might not gain much.
To illustrate, consider the example of a small farmer growing soybean on two hectares. In 2012, the returns from soybean were an impressive 37%, which translated into ₹869 per quintal. However, the small farmer would have been able to grow and sell only 34 quintals, given the average yield of 17 quintals per hectare. This would translate into a net return of only ₹29,546 for a season of four months.
While Marathas tend to have relatively larger land holdings compared with Dalits and other backward classes (OBCs), majority of their holdings are either small (between 1 and 2 hectares) or marginal (below 1 hectare). About 13.4% of Marathas are landless, 23% own less than 1 hectare and 29.9% own 1-2 hectares, according to a 2016 Economic and Political Weekly (EPW) paper co-authored by Siwan Anderson from the University of British Columbia and others (bit.ly/2vpiek7).
Thus, the prevalence of small and marginal land holdings, coupled with falling returns from farming, have created a fertile ground for discontent and protests.
The issue is not confined to Maharashtra alone.
Extending the analysis to nine crops across various states, covering four broad categories—foodgrain, pulses, oilseeds and other cash crops—reveals a similar pattern of declining and/or volatile returns.
The net return for groundnut, the major oilseed in India, is negative for the three leading producer states: Gujarat, Andhra Pradesh and Tamil Nadu.
Elsewhere, net returns on gram cultivation, the pulse with the highest production share, are falling (see Charts 3A & 3B).
On the other hand, returns have been relatively higher and stable for paddy and wheat, the two crops, which enjoy substantial procurement by the government, often exceeding 30% of the annual production, in recent years. MSP, instead of wholesale prices, are considered to compute returns for paddy and wheat.
Between 2006-07 and 2014-15, the average annual return on paddy was 10-29% in Punjab, Andhra Pradesh and Chhattisgarh, the top three contributor-states to the public distribution system (PDS). Similarly, the average annual return on wheat was 24-29% in the said period, for Punjab, Haryana and Madhya Pradesh.
However, for crops other than paddy and wheat, government support via MSP is plagued by negligible procurement due to a weak implementation set-up. Despite increased procurement of pulses in 2017-18, it mopped up only 18% of production, leading many farmers to sell below the MSP.
While India’s agricultural output has steadily diversified away from these two cereals, government support continues to be largely limited to paddy and wheat. Lack of support for other crops has meant a squeeze in farmers’ incomes across India. Inflation-adjusted income of farmers were stagnant between 2011-12 and 2015-16, growing at just 0.44% annually, according to a recent paper by Himanshu, associate professor at Jawaharlal Nehru University. (goo.gl/ScigYF)
Not surprisingly, India might witness even more farmers’ protests in the near future (goo.gl/x82Raa).
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