Agriculture can be highly profitable, but the gains are not easy to sustain

Travelling across the country for the past five months to bring farmers’ voices to urban audiences through a programme called ‘Smart Agriculture’ - to be broadcast every Saturday and Sunday from 25 July on CNN-IBN - we have learnt that agriculture is not a low-profit activity. In fact, it returns more than double the amount of cash invested.

Sandipan Suman, a 47 year-old agricultural sciences graduate and maize grower in Bihar’s Samastipur district, finds “it is more profitable than any other activity.” A holder of five acres, he says “except for acts of God you will get assured return.”

His view is endorsed by Ismailbhai Rahimbhai Sheru, 61, of Banaskantha’s Amirgarh taluk. A commerce graduate, he turned a legacy of debt into a thriving agricultural business. “I take at least one lakh profit out of one acre minimum,” he said. Sheru advises youth to shun government jobs and adopt agriculture. A holder of five acres can earn Rs 40,000 a month, he says. “Why should he take directions from somebody else?”

According to the National Sample Survey, the all-India average monthly surplus over cost per household from agriculture was Rs 3,350. That was a return of 152 percent. The corresponding amount for Punjab was 16,340 a month, or 139 percent of the amount invested. On the basis of actual cost of cultivation of the kharif crop for the three years 2008-2011, a central government agency said cotton gave a surplus of 103 percent over paid out cost and imputed family labour, while that of paddy was 69 percent.

We came across a couple of banana growers in Jalgaon in Maharashtra making tens of millions of rupees in profit every year. They started out quite humble; one was a tea vendor, the other a thwarted school teacher. But the package of tissue culture, drip irrigation and fertigation (judicious application of dissolved fertiliser using drips) had changed their fortunes.

Scale matters. The size of income depends on the extent of land cultivated, the quality of soil, access to irrigation and distance from markets.

Agriculture may be profitable, but it is not paying when too many people in a household depend on it; there is not enough to go around.

The law of averages catches up because of erratic weather and price slumps.

Contract farming can take care of the market risk and enable farmers to earn more by devoting themselves to productivity and quality. The background note to the 2002 bill to amend the Agricultural Produce Marketing Act, which requires farmers to sell only in regulated mandis, recommends the same thing. An abundance of potatoes this March had sent prices crashing. We saw kilometre-long queues outside cold storages in the Hooghly and Bardhaman districts of West Bengal as small holders strove to prevent nature’s grace from turning into grief. In Deesa, a potato hub in Gujarat’s Banaskanta district, there are 145 cold storages – a density higher than in West Bengal, yet we saw tension outside as farmers fretted about getting their produce to safety. Those who had contracted to supply to food processors were spared the ordeal. They were getting Rs 8 a kg when open market prices had dived to less than Rs 2. We found that government actions are not thought through and have unintended consequences. West Bengal’s ban on the movement of potatoes outside the state to check prices a couple of years ago had deterred a multinational from engaging in contract farming in the state. It feared a repeat, which would have hit supplies to a processing plant it was setting up in Gujarat. At a mandi in Nurpur Bet village of Ludhiana district we found farmers camping in the summer sun, and even at night, some of them for over a week, waiting for government agencies to procure wheat damaged by off- season rains. The quality norms had been relaxed but farmers suspected they were being worn out so that they would sell cheaply to traders, who in turn would dump the wheat they had purchased on government agencies at higher support prices and split the difference. This ploy was also suspected by farmers we met in Mathura and Aligarh. They are unlikely to cheer a news report in the third week of June that the Uttar Pradesh government had procured 168 percent more wheat than the previous year. Certainly, it was not procured directly from them. Crop insurance can mitigate weather risks, but we found farmers treating the premium as the necessary cost of obtaining a crop loan. Being mandatory for borrowers, it was seen more as a protection for banks. India’s weather-based crop insurance scheme is the biggest in the world, with 13 lakh policyholders. But like the bikini, it leaves out more than it covers. The number of farmers covered, including those by two other programmes, does not exceed a third and the claims paid, though a multiple of the premium, hardly provides relief. Sugad Singh of Mathura got Rs 1,700 as claim for a rice crop lost last year. Farmers in Jabalpur said bank executives tired them out by requiring the village patwari to certify that at least half of their crop had been destroyed; he would not oblige. Universal and adequate state-funded insurance cover would make farm lives less uncertain and persuade agriculturists to take risks, but experts advise caution. Corruption and frauds that plagued the earlier yield insurance scheme would be difficult to control. Farmers might neglect their crops when assured of a fallback income. They think weather-based insurance can be improved with technology and mathematics. It should be used to pay initial relief, while yield insurance based on crop cutting samples can deliver the final compensation. Despite a large number of people being engaged in agriculture, wherever we went farmers spoke about high wages and unavailability of labour when needed. Like employers in general, farmers are unwilling to pay more, but they also cannot compete with the wages paid at construction projects and in factories. Labour shortage gets aggravated by the bunching of agricultural operations; there is usually a spike in demand during sowing and harvesting seasons. Farmers sought affordable machines; some wanted herbicide-tolerant crops to be approved so they would not have to spend a packet on manual weed removal. We found the government to be tall on talk, but missing in action. Farmers clamour for certified seeds but these are in short supply as state agencies do not produce enough. About two million tonnes of paddy seed are required annually but production is about seven lakh tonnes. Farmers do not mind paying for seed so long as productivity and good prices are assured. There is a high degree of maize hybridisation in Bihar, though seeds have to be purchased year after year. The seed replacement ratio is high in Punjab too. The Indian Agricultural Research Institute says in 2014 it had to initially limit to 108 the number of private seed producers of a new wheat variety it had introduced the previous year in 2013 because it ran out of breeder seeds to give them (for seed multiplication). Farmers are good at production; it is the marketing aspect they cannot get a grip on. We visited four farmer producer companies (FPCs) in Coimbatore. These had been made possible by an amendment in 2002 to the Companies Act. They were engaged in producing guavas, pomegranate, vegetables and coconuts. We saw the gains of banding together. A member-farmer with 2.5 acres said he felt as if he owned 10 times as much because the FPC had amplified his clout with workers and traders. But would the next Amul emerge from them? Though our entrepreneurial class is drawn from peasant castes like Patidars, Gounders, Kammas and Kapus, we wondered whether farmer companies could master the nuances of finance and marketing. There are pockets of vibrancy in the countryside and a desire to do better. But we also found the next generation not too keen. The thinning of numbers will improve the profitability of agriculture but is worrisome because we are losing useful skills. Government policies must be purposive and farmer-centric.