Module – 2 : The Agricultural Sector

1) Institutional Structure & land reforms in India

2) Technological change

3) Agricultural finance

4) Agricultural Marketing

5) Agricultural Pricing

6) National Agricultural Policy, 2000

INSTITUTIONAL STRUCTURE & LAND REFORMS

Institutional constraints

Land Reforms:

Objectives

Reforms

Critical evaluation

MODULE 2: CHP 1

Institutional constrains

Defective agrarian structure small & fragmented land

Zamindari mahalwari ryotwari

In 1947, 173 million acresOut of 324 million acresWere with intermediaries

Low incomeLow productivityNo incentiveUncertaintyExploitationPovertyinequality

Agricultural statistics 2004In 1994-95,Avg.size of land holding 1.42 hec61.6% total land holdings uneconomical.

Reasons : population pressure, law of inheritance, Nuclear family, decline of handicraft industry, debts

Effects : non mechanization, low productivity, poverty, further debts

Land reforms

Objectives

1) Equal distribution of land2) Removal of exploitation3) Land to tiller4) Equality of status & opportunities5) Economic size of land holding6) Create healthy work culture7) Increase productivity8) Generate rural unemployment9) Optimum use of land10)Developing co-operative spirit11)Regulating rent

LAND REFORM MEASURES

1) Abolition of intermediaries zamindari abolition by paying compensation , 20 million cutivators brought into direct contact with state

It led to…… End of absentee land-lordism Ownership of land to actual cultivator Reduction of exploitation Incentive to work hard

2) Tenancy Reforms regulation of rent 1/4th or 1/5th.

Security of tenure land for personal cultivation

Ownership rights for tenants

3) Reorganization ofAgricultureceiling on land holding undistributed, 10 lakh acerIn litigation, unsuitable forCultivation,records manipulation Consolidation of land holdingFertile land to rich, failed voluntary consolidationLand recordsCo-operative farmingLack of motivation,Corrupt administration,Few coop.s by poor farmers,Lack of team spirit,Lack of trust on co-ops.,Emotional attachment to land,Political interference

. Limitations: land for personal useOwnership rights to intermediariesHuge compensation

Occupancy tenantsTenants at willSub tenants

Limitations:Rent not knownNo records of tenancy

LIMITATIONS: zamindari abolition only on paper farmers not aware about rent limit fixed Lack of recordsdominance of landlordsvoluntary surrender of landLow grade landilligal transactions

QUESTIONS:1)Write a note on ‘land reforms (april 2009) (april 2008)2)Describe the reasons for poor implementation of land reforms in Indian( nov 05)

Chp. 2 Technological Change in AgricultureThe New Agricultural Strategy ( Green Revolution) 1966: New Technology was introduced which was a package of measures offered to Indian FarmersTo increase production and productivity and make India self sufficient and self reliant in food grain production

Intensive Agricultural District Programme (IADP) in 1960-61 in 7 districts

Extension in 1966 –Measures undertaken under IADP are 1) use of HYV seeds 2) better water management 3) use of fertilisers & pesticides 4) educating farmers 5) providing better credit & marketing 6) better irrigation 7) better mechnisation

Impact of Green RevolutionAchievements

1) Foodgrain production

Wheat: 11 to 76 M. T.(60-61 to 99-00)Rice: 35 to 90 M.T.(60-61 to 99-00)Foodgrains: 212 to 217.3 million T. during 01-02 to 06-07

2) More productivityFoodgrains: 783 to 1626 kgs per hectare (67-68 to 00-01) 3) Changes in Agricultural Practices4)Employment Generation

5) Linkage with Industry6) Changes in attitude of farmers

LimitationsLIMITED COVERAGEINSIGNIFICANT INCREASE IN PRODUCTION & PRODUCTIVITYCAPITALIST FARMINGINCREAED INEQUALITYUNEMPLOYMENT

TECHNOLOGICAL CHANGES IN AGRICULTURE

BASIC INPUTS:

Cultivation – Japanese method of rice cultivation.

Seeds – HYV Seeds. Institutional framework has been developed to generate Quality seeds through central & state Government participation. Indian Council of Agricultural Research (ICAR) State Agricultural Universities National Seed Corporation (NSC) 15 State Seeds Corporations (SSCs) State Farms Corporation of India (SFCI) & seed companies

Irrigation – major & minor dams, borewells, pumpsets, drip irrigation.

In India about 60% of foodgrains production comes from 39% of irrigated area and 40% of remaining production comes from 61% of rainfed area.

During 50 years of independence, the Government had spent about 231,400/- crores( at 1996-97) prices) on major ,medium and minor irrigation works, leading to growth in The country’s irrigation potential from 23 million hectare (1950-51) to 89 million heatare (1996-97)

Pest Control – pest control methods have been developed to Integrated Pest Management (IPM). Efffective IPM packages are designed & developed for rice, cotton, sugarcane, pulses, oilseeds etc.

FERTILIZERS AND MANURES

YEAR PRODUCTION 000 TONNES

IMPORTS 000 TONNES

CONSUMPTION000 TONNES

CONSUMPTION PER HECTARE OF CROPPED AREA (KG)

1951-52 39 52 70 0.5

1990-91 11,860 2,760 12,550 76.8

2000 -01 14,750 5,253 16,700 90.1

2006-07 16,096 6,058 21,651 112.2

Production, imports & consumption of chemical fertilizers in India

Economic survey 2008-09

Agricultural Engineering - Indian Council of Agriculture Research (ICAR) has designed a variety of marketable implements & machines for field operations

Technology Mission on Oilseeds, pulses & maize - launched by the Central Government in 1986 and was extended to pulses, oil palm & maize in 1991, 1992 & 1996 Various schemes were implemented. Oilseeds Production Programme (OPP) National Pulses Development Project (NPDP) Accelerated Maize Development Programme (AMDP) Oil Palm Development Programme ( OPDP)Extension Services – for farmers trainingKisan Call Centre – introduced in 2004. 144 Call Centre Agents use 21 local dialects toll free number 1551 & 1800-180-1551 from 6am to 10 pm for 7 days Department of Agriculture & Cooperation has developed a data structure Kisan Knowledge Management System (KKMS) to help KCC provide correct answersI.T. use of IT for information & also to update land ownership records

QUESTIONS:WRITE A NOTE ON GREEN REVOLUTION EXPLAIN THE NEW AGRARIAN TECHNOLOGY

AGRICULTURAL PRICINGNeed for agricultural price policy…..???To provide remunerative pricesTo provide incentivesTo promote capital formationTo have better terms of trade between agri & non-agri sector.To reduce income inequalityTo prevent inbuilt fluctuations

ADMINISTERED PRICES: YEARLY BASIS

Recommendation of Jha committee1964-65Agricultural Price Commission – 1965 recently called as –COMMISSION FOR AGRICULTURAL COSTS & PRICES ( CACP)

FACTORS CONSIDERED WHILE DETERMINING PRICES BY CACP: cost of production Risk factorsEffect on industrial costEffect on cost of livingEffect on general price levelInternational price situationChanges in agricultural input pricesMarket pricesDemand & supplyTrends in the past price levels

Floor price/24 crops Jute & sugarcane

ANNOUNCEMENT OF ADMINISTERED PRICES

Generally Lower thanMarket price& higher thanM.S.P.

Lower thanProcurement Prices.

( in 2009-10, issue price per quintal for wheat was 610)- & for rice,795/- for APL for BPL, 415/- for wheat & 565/- for rice; for AAY, it was 300/- per quintal)

M.S.P.: ANNOUNCED EACH YEAR BY CACP.CONSIDERS MANY FACTORS WITH SPECIAL EMPHASIS ON COST FACTOR; IMPORTANT COST CONCEPTS USED ARE C2 & C3 costs:

C2 = all actual expenses in cash and kind incurred in production by actual owner + rent paid for leased land + imputed value of family labor + interest on value of owned capital assets + rental value of owned land ( net of land revenue).

C3 = C2 + 10% of cost to account for managerial remuneration to the farmer.

ADMINISTERED PRICES

1. MINIMUM SUPPORT PRICES (M.S.P.)

MINIMUM SUPPORT PRICES 2010-11 Rs. PER QUINTAL

COMMODITY M.S.P. 2010 -11CROP YEAR

COMMODITY M.S..P. 2010-11CROP YEEAR

KHARIF CROP RABI CROP

paddy (common) 1,080 Wheat 1,285

Paddy ( grade A) 1,110 Masur 2,800

Cotton ( F-414/H-777/J-34)

2,800 Other crop

Groundnut in shell 2,700 safflower 2,500

Source: Department of Agriculture & Cooperation

IMPLEMENTATION OF ADMINISTERED PRICES

FOOD CORPORATION OF INDIA (FCI) FOR FOODGRAINSNATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION (NAFED) FOR, CEREALS, PULSES & OILSEEDSCOTTON & JUTE CORPORATIONS, TOBACCO BOARD ETC.

1) AGENCIES:

2) NATIONAL CROP FORECASTING CENTRE ( NCFC): IN JAN 1999, TO WATCH PRICES ON PRIMARY GOODS &PUT AN ADVANCED WARNING SIGNAL

3) HIGH POWEREDPRICE MONITORING BOARD: 1999, MONITORING ESSENTIAL COMMODITY PRICES & ANTICIPATING THE NEED FOR GOVERNMENT INTERVENTION

4) TARGETTED PUBLIC DISTRIBUTION SYSTEM: 5 LAKH FPS

5) BUFFER STOCKS: BY FCI & NAFED OF ESSENTIAL COMMODITIES.

6) WAREHOUSING

7) REGULATED MARKETS

8) CREDIT FACILITY

LIMITATIONSDIFFICULTY IN DECIDING ‘FAIR’ PRICES

NO INTEGRATION BETWEEN DIFFERENT CRITERIA

BENEFIT TO LARGE FARMERS

MOUNTING DEFICIT

EXCESSIVE BUFFER STOCKS

SEASONAL & SHARP RISE IN VEGETABLE PRICES

FLAWS IN PDS

CONTRIBUTION TO INFLATIONARY TREND

NOT ALL COMMODITIES COVERED

Agricultural FinanceIntroduction

Constraints

Structure

NABARD

CREDIT NEEDS OF FARMERS

ON THE BASIS OF TIME ON THE BASIS OF PURPOSE

SHORT TERM- (less than 15 months) seeds, fertilizers, pesticides, marketing, wage payment, consumption, productive purpose

MEDIUM TERM – (15months – 5yrs.) cattle, small implements, repair & construction of wells

LONG TERM – (more than 5 yrs) permanent land improvement, buying land, repayment of old debts

PRODUCTIVE – agro productionCONSUMPTION – for the period between Marketing & harvestingUNPRODUCTIVE – customs, traditions, rituals

ON THE BASIS OF SOURCES

•INSTITUTIONAL•NON-INSTITUTIONAL

NON-INSTITUTIONAL FINANCE IN INDIAN AGRICULTURE

Money Lenders, Chit Funds, relatives, friendsMain source of Agricultural Finance at the beginning of the planning period Share: 92% in 1951( money lenders – 69.7%) to 20% current aaprox.

MERITS DEMERITSEASY TO OBTAINSIMPLE PROCEDURESEASY ACCESSNO RESTRICTIONSCONSUMPTION LOANS

EXORBITANT RATES OF INTERESTINDEBTEDNESSLOSS OF LANDMALPRACTICESEXPLOITATIONBONDED LABOUR

INSTITUTIONAL CREDIT IN INDIAN AGRICULTURE

STRUCTURE OF INSTITUTIONAL CREDIT

FLOW OF INSTITUTIONAL CREDIT TO AGRICULTURE

AGENCY 1970s 1980s 2OOO-O1 2010-11

COOPERATIVES 77.0 55.9 39.0 16

COMMERCIAL BANKS 21.O 38.9 53.0 74

REGINAL RURAL BANKS 2.0 5.3 8.0 10

PERCENTAGE SHARE

Source: RBI bulletin, NOV 2004 & economic survey 2011-12

COOPERATIVES: RURAL CREDIT AT LOWER COSTCoverage: by 2005, 97% villages with almost 900 lakh members

STRUCTURESHORT & MEDIUM TERM LONG TERM

IN 1971, LARGE SIZED ADIVASI MULTI PURPOSE COOPERATIVE SOC. LAMPS

PROBLEMS: 1) LOW PROFITABILITY 2) POOR RECOVERY 3) LACK OF PROFESSIONAL MANAGEMENT

COMMERCIAL BANKSGROWTH IN RURAL CREDIT AFTER NATIONALIZATION. 18% net bank credit is for priority Sector

Short term financeMedium & long term financeDirect finance: for expenditure of land development 10%Indirect Finance: finance to coop.s,to FCI (4%)

Lead Bank Scheme: individual commercial bank responsible for development of Individual district

LIMITATIONS:LOW QUALITY OF LENDING

TIME CONSUMING AND COSTLY OPERATION DUE TO SMALL SIZE OF LOANS

LOW LEVEL RECOVERY

MORE BRANCHES WITH LESS GROWTH POTENTIAL

REGIONAL IMBALANCE

LACK OF COORDINATION

REGIONAL RURAL BANKSWERE ESTABLISHED IN 1975 ON THE RECOMMENDATIONS OF M.NARSIMHA COMMITTEE regionally based, rurally oriented and generally sposored by scheduled commercial banks and in some cases by private and state cooperative banks.

MAIN OBJECTIVE IS TO SUPPLY CREDIT TO THE AREAS IN WHICH OTHER FINANCIAL INSTITUTES ARE NOT ACTIVE.

LIMITATIONS: POLITICAL INTERFERENCE, LOW RECOVERY

CHAITANYA GODAVARI GR BK ANDHRA BANK

SAPTAGIRI GRAMEENA BANK INDIAN BANK

DECCAN GRAMEENA BANK STATE BANK OF HYDERABAD

ANDHRA PRADESH GR.VIKAS BANK STATE BANK OF INDIA

ANDHRA PRAGATHI GRAMEENA BANK SYNDICATE BANK

NAME OF RRB SPONSORED BY:

NABARD 1982

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

APEX BANK FOR RURAL CREDIT AND DEVELOPMENT.

SHARE CAPITAL CONTRIBUTED BY GOI & RBIHEAD OFFICE AT MUMBAI, 16 REGIONAL OFFICES

FUNCTIONSAPEX BODY FOR RURAL CREDIT

SUPERVISING CO-OPS

SHORT TERM CREDIT TO STATE CO-OPS

MEDIUM & LONG TERM TO STATE CO-OPS AND RRB

SUGGESTIONS TO GOVT.

R & D

CONTRIBUTION OF NABARD TO AGRICULTURAL FINANCE2003-04 7626 schemes sanctioned of 7605/-

Refinance to state government & co-op. banks Development of Rural Infrastructure Development Fund Promotion of Micro-finance Bulk Lending Support to NGOs Tribal Development Project in Gujarat (wadi project) Kisan Credit Card Scheme (KCC) 1998-99 To facilitate access of credit from commercial banks, cooperative banks& RRBs. Farmers eligible for production credit of 5,000/- are eligible for KCC provision for revolving cash credit with any number of withdrawals& repayments within the limit (withdrawal within 12 months)Valid for 3 years with annual review, conversion & rescheduling of loan is possible.Credit limit can be enhanced for good performance. Security, margin, interest as per RBI normsImplementation through 27 commercial banks, 378 central & state cooperatives, 196 RRBs31st October 2011 – 1,078.36 lakh KCCs issued. Gender Development through Credit: Assistance to Rural Women in Non-Farm Activities (ARWIND) Refinance under Swarnajayanti Gram Swarojgar Yojna Supervising body Farm Income Insurance Scheme ( FIIS) 2003-04 Differntial Rate of Interest (DRI) 1972Advances to SC-ST borrowers

AGRICULTURAL MARKETING

PROBLEMS

REMEDIAL MEASURES

Refers to all activities involved in the transfer of agricultural products from the producer to the final consumer, like storage, transport, grading and sale

PROBLEMS OF AGRICULTURAL MARKETING

ESSENTIALS OF A GOOD MARKET INCLUDES: good holding capacity, storage, transport, direct access, good communication.

PROBLEMS

1)Inadequate Storage2)Lack of Grading & Standardization3)Inadequate Transport Facilities4)Middlemen5)Malpractices in unregulated markets6)Inadequate Market Information7)Inadequate Credit Facilities8)Lack of Organization9)Seasonal Price Fluctuations10) Forced or distressed sale

REMEDIAL MEASURES

COOPERATIVE MARKETING

REGULATED MARKET

STATE TRADING

EXPANSION AND MODERNISATION OF MARKET NETWORK

COOPERATIVE MARKETINGFarmers join together and sale goods directly – 4000 primary soc.

Three tier structurePrimary marketing societies – villageCentral Societies – district levelState Marketing Societies - state

FUNCTIONINGMembers agree to sell surplus to soc.Members get advance from the soc.Soc. Collects produce fm mem & non-memSoc. Process produce & gradesMembers get balanced money

PROBLEMS: improper functioning,Poor linkage in diff. levels, unhealthyCompetition, dominance of rich farmers, regional imbalance.

REGULATED MARKETS

ESTABLISHED UNDER STATUTORY REGULATION Aims at protecting farmers from unhealthy practices, is administered by a market committee consisting of representatives of state government,Legal bodies like district boards, traders, commission agents and farmers.

March 31st 2010, there were 7,157 regulated markets

Elimination of wrong practices like, incorrect weights, absence of grading, delay in Payments etc. Fixing mkt. charges like commission of agents, storage charges etc. Remunerative prices for farmers. Redressing grievances Information about prices by collecting relevant data. Help in securing storage facilities Elimination of unnecessary commission

COMMITTEE ENSURES:

STATE TRADINGTo overcome wide fluctuations in prices. It was introduced by Central Govt. & some State Govt.Food Corporation of India, The Maharashtra State Monopoly Procurement Scheme

Govt. procures food grains from farmers at fixed prices & maintains buffer stocks

Expansion & modernization of market network

IMPROVEMENT IN TRANSPORTMORE THAN 7000 REGULATED MARKETSMARKET SURVEYS TO FINDOUT PROBLEMS & SOLUTIONSPROVIDING INFO THROUGH MASS MEDIAINCREASE IN WAREHOUSING FACILITIESGROWTH IN INSTITUTIONAL FINANCESPECIAL BOARDS FOR MARKETING AGRO COMMODITIESGRADING & STANDARDIZATION: Agricultural Produce (Grading & Marketing) Act 1937 Standardised commodities are sealed with AGMARK. To test the quality and brand – Central Quality Control Laboratory At Nagpur, & eight regional labs. CONSTRUCTION OF RURAL GODOWN – 2003- 04, 4851 storage projects were sanctionedFUTURES TRADING 2003-04: Mumbai, Ahmedabad. Jute, rubber, soya oil, pepper, termeric

LIMITATIONS

MALPRACTICES ARE NOT ABOLISHED COMPLETELY

LACK OF AUTONOMY

LACK MODERNISATION

TO ESTABLISH AN APPROPRIATE

& CONDUCIVE ENVIRONMENT

TO ACHIEVE A HIGHER GROWTH RATE OF

AGRICULTURE

28thJuly 2000

OBJECTIVES : Growth rate more than 4% per annum.

To introduce required structural changes

To bring in necessary reforms

To make efficient use of resources

To sustain higher growth with necessary supporting services

To make agri. More market oriented

To achieve equity

FEATURES OF NAP 2000Encouragement to private participation: contract farming, capital inflows, tech. transfer

Competitiveness: through liberalization, dismantling of Quantitative Restrictions

Tax Reforms: tax concessions rather than subsidies

Encourage Futures for hedging the risk

Protection from multinationals’ patent rights

Infrastructure facilities

Plans to evolve, ’National Livestock Breeding Strategy’.

Improvement in Credit facilities

Wider coverage of Insurance

Transform agriculture into modern, dynamic, productive sector (2002 policy)

EVALUATIONGrowth Rate: 2001-06 – 3%, 2005-09 – 3.8%

Small & Marginal farmers are neglected

Private investment (82.4% in 2008-09) may lead to exploitation

Non institutional credit is still persistent

Poor rural infrastructure

National Commission on Farmers: Dr. M.S. Swaminathan, chairman : aims at improving agricultural assets of the farmers & the supporting services to enable them to earn more. Reports in 2005-06