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What causes low farmland productivity in India?
Even after the finance minister passed the budget, which pardoned a large amount of their loans, the farmers are still not being able to increase their productivity. The reasons are numerous.
AFTER READING about Rs 60,000 crore budget proposal of Finance Minister (FM) for waiver of loans of marginal farmer, I have come to a conclusion that the root cause of distress is not the non-availability of credit to the farmers, but low productivity of farmlands.

Farmers are not able to achieve Return on Investment (RoI) with their labour and farms.

What could be reasons for that? Let us diagnose the farmland system:

1. Low cultivation area: Please note that, most of the farmers, who are beneficiaries of this proposal, have land holding of two to five acres. With this smallholding they cannot apply modern scientific technology to boost their productivity, such as tractors, drip irrigations etc. and the result is almost no increase of per acre yield or reduction of the same, year after year.

2. Price of farm products: Although government has a scheme of minimum support prices for farm products, but if you see it from the economic point of view, it does not make any sense. What happens is government announces minimum support prices only after some agitation and by the time it comes in to affect some of the farmers had already sold their products. Also government announces minimum support prices only for some products and not for all, so the farmers who have produced other products that year, will not have any fixed rates and are exploited by the middle man. And next year they will switch to other products, listed by the government.

3. Irrigation facilities: The main draw back of Indian farmers is their dependence on monsoon weather god can spoil their party as well as future. Although government has tried to reduce it, through providing free electricity, loans for digging tube-wells etc. it has limitations and side effects also.

4. Planning of coverage of cultivation: Since the first green revolution, there is almost no land added under cultivation. Moreover, due to minimum support price of last year, farmers had to switch to product in government list, which resulted in excess production of one item and less production of the other. Also an analysis of minimum support price lists shows that most of these items are commercial items and not food grains. These commercial items are supplied to industries. So when a sector is de-regulated [as per World Trade Organisation (WTO) agreement] support prices fall.
 
Possible remedies:
 
1. Instead of individual cultivation of small holding, farmers could switch to corporate farming. Men can pool their lands and form a group, where every farmer will put his effort, as well as resources. This will enable them to   employ new technology, with less cost and boost the total yield of farmland area. I will not suggest any structure of this association, as the farmers themselves has to decide it.


2. Price of farm products could be regulated through commodity exchanges, where the above said association can trade its product. We all know that even after government’s announcement of minimum support prices, the farmers does not always gets the same. Using the future trading commitments, farmers will know what to put in their farms, and what will they get in return even before the start of crop season.

3. Irrigation facilities are major draw back. Well I cannot suggest any remedy for this, as we all know that there are multiple plans. But I personally would like to do away with free electricity, due to a simple reason, i.e. what ever comes free, has no ROI and no proper utilization, and there is also negative impact of ground water tables.

4. Regarding the planning, if you club my first suggestion, which has remedy for this also. I would only like to add that, while we boost our commercial products, we should also increase our food grain output. For this the newly launched retail chains can hire farmer’s associations for specific products, with good RoI.
 
Well there could be other causes and solutions for this situation. I suggest that let's discuss it and if possible publish some white papers on the subject. Any ideas?
COMMENTS (5)
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Sundar
Today, a news clipping says "Yes Bank" will be investing in agri business as they see huge potential here. The suggestion, why not all the Banks in the country plan to enter into unchartered territory like entering Agri based business to boost up their income and profits. In my opinion Banks are advantageously placed to enter this business - some thoughts (1) Banks can become joint owners of the land owned by poor farmers - here farmers need to be assured, unlike private money lenders who often dictate terms and stipulate conditions which are highly favourable to them whenever a farmer defaults, banks will lay down norms ensuring safety and continuity of a farmer's business will be guaranteed (COME WHAT MAY!) (2) Banks will help in creating best of the markets for the farmers to sell their produce - profits to be shared by both the banks and the farmers (3) Banks will help the farmers in giving them the best of the seeds and other latest technology, including requisite education for the farmers so that they enjoy their profession more and come out with best results (4) Ensuring products are insured against calamities (5) Ensuring farmers are paid a reasonable wage (weekly, fortnightly or mothly) (6) Exploring possibilities of exporting farmers' produce for getting more rewards. Many more similar patterns could be evolved to make this idea doable and workable. Our ultimate aim is make the situation a win-win for all concerned. It will be good if a pilot project is undertaken by a public sector bank as suggested above.
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