Wednesday, October 24, 2007

Can Agriculture Be Made Profitable?

The answer to the above question isnt easy. There will always be naysayers especially in India. Since this is one profession which is heavily climate dependant and other ecological factors, there is a major chance of crop failure. The investments may not always guarantee tangible results. The inference people draw from this is agriculture is not profitable and it cannot be made profitable.

If we take the 2004 CII reported figure, the 10 year average growth rate for agriculture is only 2%. Contrast this with high growth rates in industry and services sector and we can see the chasm. Although more people depend either directly or indirectly on agriculture or agro-related work in India, this is one neglected sector. There are many reasons for this.

Being primarily rain-fed, most farmlands in India are left unseeded for months. Barring monsoon, for 8 months of the year viz. Oct. to May; a large proportion of farmers and cultivators dont make optimum use of their land. In some areas overuse of irrigation facilities leads to depletion of the water-table.

In foreign countries e.g. the U.S. or Europe there is mechanised farming. From planting of seedlings to pest control to harvesting and post-harvesting practices, everything can be managed efficiently by use of machines. In India however as in many developing parts of Asia, Africa and South America; the same ageold farming techniques are still in use. These lead to a lot of wastage and a host of problems. Preparation of the ground by tilling is done using bulls and seedlings are planted unsystematically. This leads to overuse of fertilizers and pesticides. The inert matter in the fertilizers and chemicals leads to leaching. Consequently the productive lands have over a period of years become barren and unproductive. A big deterrent to mechanisation of farming in India is the nature of land holdings which are fragmented. On average there are more small land owners here. This is a very important and much overlooked factor. Any farming can be reasonably profitable if the land area holding is 1 hector. But since holdings are less than even an acre, the farmers employ only subsistence farming methods. These are enough to feed their family the year round. A very important crop in India i.e. rice is planted in this manner. In Raigad district of Maharashtra, this author has seen rice plantations in small or medium-sized holdings which feed the farmer but cannot entail much profit commercially.
Poor productivity due to adverse climate conditions, seed failure, pestilence is common. Production is affected because there isn't enough optimization of crops. Since farmers are reluctant to change their old practices, they do not make use of modern planting methods. There is a tendency to think that more crops/trees you plant, more your profit margins will increase. In the author's own native place near Alibaug, there are coconut, betelnut (areca nut) and jackfruit plantations. Since spices grow well under these climatic conditions; pepper, nutmeg, mace production is also undertaken in these plantations. But the trees are planted so randomly, it leads to growth of fungi, rhinocerous beetles and such other pests which decrease production. But since the mentality is more trees equals more profits, they hardly understand how much loss is occuring. Quality takes a big hit, with fruitfall, fruits of small size. A lot of money is also wasted on spraying of bordeaux mixture for the arecanuts. Termite infestation is rampant and widespread. Small land holdings coupled with unplanned and non-mechanised farming methods leads to all this.

Unplanned coconut plantation

N.B. Image may not be used without permission

Planned Growth

N.B. Image used for representation only. All rights with original owner.

One more observation the author has made is people are afraid of technology. No one there (native place of author) uses modern equipment. Still axes are used to chop fallen trees. No one has even heard of chainsaws. Till the old coconut palms fall over naturally, they arent hacked, even though they have reached "pencil-point". Instead they are watered even though their overall nut production is abysimal. Fertilizer means only cowdung. No one uses micronutrients. Soil testing is unheardof. Inspite of arecanut being carcinogenic, it is thought of as more profitable than coconut. Coir can be made into mattresses or ropes as in Southern Indian states of Kerala or Karnataka, instead people use it for fuel. Coconut has many uses, but lack of knowledge has lead to the same old money making practices. Packaged coconut water is much sought after, but here there are no industries for the same. Disk-harrowing, weed management and tilling of land in the plantations can be done by making use of power tillers but due to lack of awareness or funds, they arent used. Instead manpower is used which is both time consuming and inexact. Credit being expensive, the modern tools are beyond the reach of many farmers in India.

Poor infrastructure here is a big problem. Commodity prices are spread mainly by word of mouth. Information kiosks would be of great use but they arent set up in every district of every state. There isnt connectivity by road or rail to every village of India. Consequently farm produce cannot be taken to the biggest markets. The modern Supply chain is virtually absent in some regions. Presence of intermediaries known locally as dalals is a big deterent. From farmer/producer to consumers is one big chain of dalals who eat into the farmer's profit margins.


This is the shorter and better route but in India it is more like this:


This model is both time and resource consuming and needless to say also expensive for the consumers. Besides hoarding of grains and commodities in godowns by larger dalals leads to artificial inflation in prices especially around festival seasons. Onions, sugar are some perishable goods which give a lot of trouble and play havoc with consumer's budgets. The market structure is distorted in India and lack of organisation leads to increase in transportation and storage costs. Controlled prices by govt. agencies is much resented by dalals since it caps their vested interests. Some experts and advocates of free market economy are against it too. But it cannot be gotten rid of just yet. In the West, the markets may be free but they are also better organised. In our unorganised farm sector, lack of central control would lead to instant chaos and spiraling food prices.

One more chink in the armour is lack or absence of cold storage facilities. Food, grains and other agricultural products by their very definition are perishable. They have a limited shelf life. To increase it and maintaining their quality till they reach the consumers, proper storage is very important. Most products like potatoes or onions or even tomatoes are still packed in gunny bags in which the items get crushed. Plastic crates aren't used by all. Grains stored in large godowns in gunny bags rot or get moth and rat infested. Unless the methods of storage and means of transportation get a drastic makeover, the losses during transit will continue.

Many people also cry foul over lack of research. But this isn't entirely true. There are enough research facilities with qualified people across India for every kind of farm produce like vegetables, fruits, animal products or even flowers. Its the dissemination of information where we take a beating. The author had visited the Dr. Balasaheb Kokan Agricultural Research Centre (regional) in Karjat recently. It primarily deals in rice research. The author spoke to Prof. Dr. Ramesh Kunkerkar who had loads of information to share about rice cultivation but since the author has just stepped into this field, it was overwhelming. But what the author did observe was people actually didn't come to get information. Apart from us there wasn't a single outsider. Only the staff, researchers and officer were present in the complex. The author may be wrong but upon questioning farmers in her own native place, not many were aware of the presence of the centre. Soil testing, water management, hybrid seeds, better tilling, sowing and practices for rice were not followed. Needless to say the state of many farmers across India is the same.

Post harvest handling and processing of food leads to a lot of value addition. But many industries for processing food are absent in India. As stated earlier coconut processing is virtually absent in the Konkan region. Commercial gains cannot be enhanced for lack of this. Instead raw goods are sold here. Why only coconut but many other products like fruit jams, pickles, chips, soups, noodles, sauces etc. can be made using the many fruits/vegetables available. Maharashtra is called the "Fruit Basket of India". But there are no investments in processing of fruits. Right from strawberries, oranges to coconut, jackfruits ; all can be made into various products. Retailing of these processed products are in much demand by consumers both locally and internationally. Instead of importing these products, they can be locally made which will be cheaper and fresher. Ethnic Indian food is in much demand internationally both by NRIs and foreigners. India can become a big agricultural product exporter. But they demand international standards. This is where we again fail. Our product isn't upto the mark, standard sized, standard coloured, better marketed or packaged. Hence there is a higher chance of rejection because of stringent norms abroad.

All the above demand investment in the agricultural sector both by the state and privately. Our laws unfortunately prevent or scuttle investment. And the govt. isn't too keen or lack of funds leads to under investment in this sector. Industry and services get many perks. So does farming in the annual budget but it is underutilised or misdirected or wasted. Specific areas aren't targeted for growth. India cannot just depend on industry or services since we are still agrarian. Besides this could lead to many problems like farmer suicides and credit crunches for farmers. (an ongoing problem already). It may come to the stage where we may need to again depend on foreign countries for our food supply. The farmers themselves can help a lot if there isn't tax evasion by the unorganised sector. Agricultural tax reform is necessary.

Agriculture can be made profitable by proper planning, systematic and targeted investments. If input costs can be brought down or controlled better by the farmers, it will lead to better profit margins. In order to make the small land holdings commercially viable; farm extension, technology transfer, mechanisation and finance are all necessary. Scientific methods of plantation, pest control, better water & fertilization management, multi-cropping system to gain both immediate and long term commercial goals is the need of the hour. There must be a fixed, targeted and sustained agricultural agenda by the government. Establishment of Special Agricultural Zones (SAZs) along the lines of SEZs will also help. Contract farming must be made risk-free and encouraged. Small land owners can come together and practice "collective farming of single crop" (many lands-one crop) in order to find markets and gain better rates for their produce. This will enable them to form credit societies for themselves to buy machinery like tillers, tractors, threshers etc. This will help the farmers themselves to create marketing platforms without the need for middlemen. Educated people must step in reform, reorganise the farming sector with new ideas. MBAs can work in agro marketing, Risk Managers can help better plan investments and keep the profit-loss ratio favourable for the farmers so that farmer suicide so rampant now-a-days can be avoided. Wasteland management and re-energising unproductive land by means of organic farming techniques will ensure betterment of farm sector. The above analysis shows there are many obstacles which are holding us back. But all of this can be changed by will and determination. Surely making agriculture profitable isn't a distant dream.

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