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Business News/ Industry / Small farmers struggle for survival in Punjab

Patiala/Sangrur/New Delhi: A farmer selling his farm equipment is a telltale sign of distress. But Maghar Singh doesn’t regret doing it. Six years ago, he sold his tractor, harvester and other equipment, and rented out his 8 acres (3.2 hectares) of land in Patiala in south-eastern Punjab where he used to grow a variety of crops. The income from rent is modest— 4 lakh a year—but he believes he is better off than his neighbour who is still toiling on his 6 acres of farm.

This is a trend that is fast catching up among farmers in Punjab, a state that is considered the granary of India. The situation is a far cry from the heyday of the Green Revolution in the late 1960s. After years of intensive farming, agriculture now is looking at zero to negative growth rates. It is state where the potential of irrigation and multi-cropping has been fully realized.

Now, prices of key crops such as rice, wheat and cotton and volatile prices of cash crops like potato, barley and basmati rice are lower than before—for a variety of domestic and international reasons—affecting farm incomes.

Yet, Punjab is witnessing a trend unlike anywhere else in the country. Across the country, small holders say farming is no longer a viable occupation, but land holdings are becoming increasingly fragmented due to growing family sizes, showing that farms continue to be occupied in spite of their shrinking sizes.

However, Punjab has been witnessing a trend in the opposite direction—more and more land is becoming consolidated.

Increasingly, marginal, small and medium land holders, owning less than 4 hectares of land, are either selling out or (mostly) renting their farms to large farmers who can afford the cost of capital-intensive agriculture, including costly machines, and are better placed to handle price and weather shocks.

Across India, in the two decades between 1990-91 and 2010-11, the number of marginal and small land holdings (less than 2 hectares of land) grew from 83.5 million to 117.6 million. In Punjab, however, the number of marginal and small holdings fell, from half a million to 0.36 million during the same period. At the same time, the number of semi-medium (2-4 hectares), medium (4-10 hectares) and large (over 10 hectares) land holdings increased from 0.62 million to 0.69 million during the same period.

Even these numbers underestimate the extent of land consolidation underway in Punjab, because even though most small and medium farmers are leasing out their land to big farmers, such tenancies are informal and go unrecorded.

This is what academics call “reverse tenancy"—closely linked to the trend of increased mechanization, which enables large farmers to reap the benefits of economies of scale.

Leasing their small farms out is a strategy of survival.

“Farming is a sure way to death for a small farmer in Punjab. He cannot handle the increasing costs, fluctuating prices and weather or the debts due to buying machinery. I am glad my son works in a rice mill with an assured salary," says Maghar Singh, 58.

But in Punjab, where owning farmland is also a status symbol, farmers are reluctant to sell it all off. “Land is a matter of pride. Without it, I could not have got my son married. A person without land is nobody in the village," says Singh.

As a result, an informal rent market is fast building up in the state where the land ceiling per person is 6.8 hectares. The decline in small land holdings in Punjab shows that they are non-viable under modern capital-intensive farming, says a 2014 paper Depeasantization in Punjab: Status of Farmers Who Left Farming published in Current Science journal by Sukhpal Singh and Shruti Bhogal.

“Farmers with even up to 4 hectares in Punjab find it increasingly difficult to maintain their living from farming activity alone and given an opportunity will also leave farming," the study notes.

“Small farmers in Punjab are in crisis as farming is unviable for them due to rising input costs, stagnant productivity, falling profitability and increasing cost of living," says Sukhpal Singh, who teaches at Punjab Agricultural University, Ludhiana, and studies farm distress.

One such sign of distress is the growing incidence of suicide by small and marginal farmers in Punjab.

Singh’s field research (published in Economic and Political Weekly in June 2014) shows that of the 3,507 farmers in Punjab who committed suicide between 2000 and 2011, nearly 80% were marginal and small farmers.

The average level of debt among those marginal and small farmers (with less than 2 hectares of land) who committed suicide was nearly eight times their annual income, the study found, compared to 2.7 times for medium and large farmers.

Leasing out their farms is a matter of survival for small farmers. “It’s a survival strategy forced upon them by market forces. Till 2000, they were still able to earn some profits but now it’s wiser to rent out and do something else," says S.S. Gill, South Asia professor at the Centre for Research in Rural and Industrial Development, Chandigarh.

Small farmers find it difficult even to hire sowing and harvesting equipment, while big farmers can buy the machinery due to their ability to access credit, says Gill.

“The entire system is biased towards large farmers who sometimes also happen to be commission agents and dealers in farm inputs. Large tracts of land, of between 500 and 1,000 acres, are now leased out to potato seed cultivators in northern Punjab while small farmers and their families are being pushed into petty occupations," says Gill.

Baljeet Kaur from Balad Kalan village in Sangrur district is one such person. After her husband killed himself in 2013 by consuming pesticide, Kaur learned weaving to support the family and pay her children’s school fees. The 2 acres of farmland the family owns has been rented out.

She says that while her brothers-in-law exited farming long ago—one of them is a truck driver and the other a daily-wage earner in Uttar Pradesh—her husband stuck to farming, ending up with a debt of 6 lakh.

“The Punjab experience shows that we cannot address the issue of low farm incomes with small parcels of land. In India, average land holdings are a little over 1 hectare and they are not viable," says Ramesh Chand, director of the National Institute of Agricultural Economics and Policy Research, Delhi, and a member of the newly constituted national task force on agriculture under NITI Aayog. “We need to liberalize the land lease market and allow for large holdings."

Too many tractors

An acute labour shortage caused by a variety of reasons such as rising rural wages in other states and the need for a shorter turnaround time initially fuelled investment in mechanization. Multi-cropping means farmers have to harvest the crop, pack the foodgrains off to the wholesale market, and clear the fields for the next crop. In addition, owning a tractor in the farming state has become something of a symbol of prosperity, even though it is put to use no more than 50 days a year.

“Tractorization has led to indebtedness, and it’s time the government stops incentivizing such purchases," says Ajay Vir Jakhar, a farmer and chairman of Bharat Krishak Samaj, a farmers’ body. “Instead of owning farm machinery, we need to promote leasing services."

Punjab is home to nearly 550,000 tractors, double the number it needs. There is one tractor for every 8.7 hectare of cultivated land, compared with the national average of one per 62 hectares. Average use of tractors is just 450 hours in a year, less than half of the 1,000 hours required for it to be economically viable. Underutilization of farm machinery is leading to higher costs of production and lower net income to farmers, making it economically unviable, says a 2015 note prepared by the state ENVIS (Environmental Information System) centre in Chandigarh.

Between 2002 and 2012, the number of harvester combines in Punjab nearly quadrupled to 10,363, according to the state planning department. A harvester costs upwards of 17 lakh, and Punjab has so many of them today that the gigantic machines travel all the way to Chhattisgarh, Madhya Pradesh and Bihar in search of work.

Deepening debt

Sinking money into buying machines, from which returns are only possible in large farm holdings, has increased the debt of farmers. The vagaries of Maghar Singh’s neighbour Singara Singh from Fatehpur in Patiala district is a case in point.

Singara Singh and his two brothers farm on 30 acres of land and took an additional 6 acres on rent. They grow rice during the monsoon season followed by potato, barley and wheat as the winter (rabi) crop. This year’s unseasonal rains damaged one-quarter of his wheat crop. A bigger blow was falling potato prices, which tumbled to less than 2 a kg at the farm gate compared with 8 a kg last year. Barley prices, too, are down from 1,450 a quintal (100kg) two years ago to 1,150 this year.

Still, Singara Singh has been able to withstand these price and weather shocks by putting his potato crop in cold storage and stocking barley (which is supplied to breweries) inside a newly built warehouse in his courtyard, hoping for better prices.

But over the years, Singh has made heavy capital investments—two tractors, a harvester combine, reapers, threshers, seeders, rotavators and a handful of bore wells to water his crop, in addition to the warehouse. On the face of it, Singh embodies the very image of a prosperous Punjabi farmer: there’s a palatial house, with plenty of livestock, breeder dogs and cars. But he is battling a nerve disease and the accumulated debt of the family is 75 lakh.

Farm households in Punjab are among the most heavily indebted in India, reveals a situation assessment survey released by the National Sample Survey Organisation in December last year. The average debt of Punjab is 1,19,500—that’s more than 2.5 times the national average of 47,000. The average debt of large farmers owning more than 10 hectares of land is 9.3 lakh, over three times the national average of 2.9 lakh.

Jagmohan Singh, state secretary of Bharti Kisan Union Ekta, a farmers’ organization, says the one thing that has hurt the Punjab farmer the most is the low hike in minimum support prices. “They are spending more on inputs like pesticides and fertilizers. The water table is falling. Those who were wise to put their (revenue) surpluses from the Green Revolution years into other businesses can still hold on. But it is the end of the day for small and marginal farmers."

So despite doing well, Gurmeet Singh, who farms on his 15-acre land in Sangrur district and has taken another 10 acres on rent, did not go for an expensive harvester. This time, he planted a mix of crops—paddy, potato, corn and wheat—in a bid to deal with any price shocks. He sold his potato harvest ahead of others in January, much before the glut set up, to a nearby PepsiCo India unit, after meeting stringent specifications. They fetched 17 a kg, eight times the current market price.

But this little success has not changed his view on farming. His younger son works on the field, but 10 years ago Gurmeet Singh set up an electrical shop for his elder son. “Both of them cannot depend on the same land. Here, one farmer is enough to manage 50 acres," he says.

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Updated: 11 May 2015, 09:07 AM IST
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