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Injustice Invisible - 62

Injustice Invisible - 62

The Union Finance Minister, Shri Arun Jaitley while presenting the General Budget on 29th Feb 2016, said that his Government intends to go beyond Food Security and give back a sense of Income Security to our farmers. In this regard, his Government intends to double the farmers’ income by 2022.  He allotted Rs. 35,984 crore for ‘Agriculture and Farmers’ Welfare’. He said that his government intends to address issues of optimal utilization of water resources, create new infrastructure for irrigation, conserve soil fertility with balanced use of fertilizer and provide connectivity from farm to market and so on so forth.

Prime Minister Narendra Modi repeated the same in most of his speeches in different parts of the country for the last three years. Mark the words “Doubling the Income by 2022 and Income Security to Farmers”. The first question any ordinary person should ask is “what type of income: net income or gross income? There is a lot of difference between these two concepts at the ground level. Neither the Finance minister nor the Prime Minister seems to make any distinction between these two key concepts of incomes: net and gross.

According to the Agriculture Census of 2010, (Table 1) the total number of operational  holdings  in India numbered 138.35 million with an average size of 1.15 hectares. Of the total holdings, 85 per cent are in  marginal  and  small  farm categories of less than 2 hectares covering 44.5 per cent of the cultivated area. But if we combine the semi-medium holdings (2-4 hectares) with the small and marginal holdings 95 per cent of the holdings would be under the first three categories covering 68 per cent of the land area cultivated. The rest of the holdings belonging to medium and large farmers form only 5 per cent of holdings covering 32 per cent of the cultivated area.

  Table 1 Agriculture Land holding pattern in India 2010 Census

Sl.

No

Size-Group

Percentage of number of operational holdings to total

Percentage of area operated to total

1

Marginal (below 1.00 ha.)

67.10

22.50

2

Small (1.00 - 2.00 ha.)

17.91

22.08

3

Semi-medium (2.00 - 4.00 ha.)

10.04

23.63

4

Medium (4.00 - 10.00 ha.)

4.25

21.20

5

Large (10.00 ha. & above)

0.70

10.59

     It is but natural to conclude that by the middle of 2017 the percentage of small and marginal holdings may have gone up from 85 to 90 per cent. Hence any one, whether Prime Minister or Finance Minister, talking about farmers in India refers primarily to the 95 per cent of the holdings covering 68-70 per cent of the cultivated area in the country. Almost all of them have to cultivate their land as well as meet all their household expenditures consisting of food and nonfood items: totally three major heads of expenses.

Now let us analyze the applied economical sense of gross income and net income dynamics with reference to the small, marginal and semi-medium farmers. Gross Income in short means the total market value of all the salable products a farmer has produced in his operational area during a particular year. Net Income means the total market value of all the saleable products he has produced minus the total recurring expenditure he has incurred in producing the same and maintaining his family with food and nonfood requirements.

For the farmers net Income is most crucial whereas for those who are in the agri-business and processing (procurement of farm products, transport, grading, processing and marketing of farm products) gross income may be more important. The scope of the write up allows me only to explain only the net income aspect of the farmer and in a second write up I shall explain the dynamics of the gross income at the agri-business and national. A third write up also will be there to highlight the huge investment the government is making to the food processing sector quadrupling their income. A fourth write up will be on the law of diminishing return in the farm sector as opposed to the increasing return in agri-business and food processing.

In farming there is a long duration of gestation period between the investment and return; whereas in agri-business the return is faster. The farmer plants the paddy the return comes to him only after six months; in the case of sugarcane and banana the return comes only after one year; whereas in the case of fruit and plantation crops the return will came only after 5-10 years; only in the case of vegetables the return can be expected after two to three months. The problem is: how will the farmer and his family survive for six to twelve months? Whereas the one who buys same paddy crop can get the return on the money he spends in buying on the same day or the next day by selling the whole or part of it. Some just buy and sell everything online. The duration of time between investment and return in agriculture is unbearably long as well as uncertain. Hence for the farmer it is necessary to get a net income sufficient enough to maintain himself and his family at least for one year and also to invest in the subsequent crop. He also needs enough surplus to make saving for the future.

Now let us see how much net income is needed for a farming family of five to six members. Let us look at it in a yearly basis. A farmer needs net income first of all for his daily maintenance of his family which includes expenses on food and nonfood items. I had already explained in an article in Indian Currents dated 22-28 June 2015 how families maintain generally a constant ratio of 1:5 between food and non-food expenses and the total amount annually required for both will be around 8,00,000 per year for a decent human living and to educate the children up to graduation or professional college level. Hence out of eight lakhs about 1,60,000 will be required for food expenses as per ICMR (Indian Council Medical Research) recommended diet (bare minimum). The rest 6,40,000 rupees are needed for meeting all the normal yearly non-food expenses for same family. Hence a family of five to six require on an average 438 (1,60,000/365) rupees per day per family for the ICMR recommended food alone. The nonfood expenditures are spread across the whole year but we can estimate the average requirement as Rs. 53,333 (6,40,000/12) per month for a decent human living.

Besides the household expenses he needs to spend on several farm operations like ploughing, weeding, irrigating, feeding of animals, repair of implements, payment to workers employed, seeds, fertilizers, agro-chemicals etc. every time he sows a crop. According to the research findings at Tamil Nadu Agricultural University (TNAU) and Indian Agricultural Statistical Research Institute (IASRI), New Delhi, the average expenditure on most of the common crops of six month duration cultivated in India amounts to 67,686 rupees per hectare generating only 6060 rupees as net income. Hence for cultivating two crops a year the same farmer will require to spend 1,35,372 rupees per hectare. Hence a farmer with one hectare of cultivated land will require on an average 9,35,372 (800000+135372) rupees per year for his household and farming expenditure; whereas according to TNAU and IASRI the expected net income from two crops like paddy and wheat a year amounts to 12,120 rupees only. The net profit is only 1.3 per cent of the total expenditure: a farmer with one hectare of cultivated land incurs 98.7% of his expenditure as loss per year.

This is the pattern of total expenditure and net income for 85% of the farmers in India. Even if Modi or Jaitley doubles the net income of the small and marginal farmers in our country it will come only up to 2.6 (1.3x2) per cent of their total household requirement leaving them with 97.4% deficit every year. They are always in need of money and they borrow from private and public money lenders including banks which they are unable to pay back. Frustrated as they are, the only way out for them is to commit suicide. So far about 3,00,000 farmers have committed suicide. Therefore the readers of this short analysis should protest against Modi-Jaitley utterances like “doubling the income of the farmers” and also to realize that they are eating the flesh and drinking the blood of the millions of farmers who form around 65% of the population: Invisible Injustices Galore. It is a blasphemous statement. In India a farmer is born in debt, live in debt and die in debt.

(The writer is Retired Professor, Agriculture Economics at XIM, Bhubaneswar.  Email: ktchandysj@gmail.com)

(Published on 24th July 2017, Volume XXIX, Issue 30)