Enhancing Input Use Efficiency in Agriculture

According to Dalwai Panel, to double farmers’ income, agriculture should be treated as an enterprise with focus on 3 aspects- Reducing Input costs, Enhancing Productivity and higher prices. Agricultural inputs need to be efficiently utilized to fulfill dual objectives-Increased income and Sustainable agriculture.

LAND

ISSUES: Net sown area is around 141 mha as against total geographical area of 328 mha. However, the small and marginal farmers accounting for 83% of farmers own 48% of agricultural land. The average size of landholding has consistently reduced to 1.15 ha in 2011. This highlights the high level of fragmentation in the landholdings leading to multiple problems as shown below:

TENANCY IN AGRICULTURAL LAND

Concept of Tenancy: Land Leasing enables the farmers to lease out their agricultural lands to other farmers, landless, sharecroppers, tenants leading to agricultural efficiency, equity, and power reduction. 

Background: The land leasing has been an integral part of Land reforms in India. The land Reforms after India's Independence focussed on (i) abolition of intermediaries, (ii) abolition or regulation of tenancy and (iii) imposition of ceilings on land holdings and redistribution of ceiling surplus land. However, the main objective to achieve high levels of efficiency and equity has been achieved only partially. 

Present Status: Most state governments have either legally banned or imposed restrictions on agricultural land leasing. Restrictive clauses in the tenancy laws of various states include period of lease, regulation of rent, conditions for termination of lease, conferment of ownership rights on tenants etc.

Case for Legalisation of Land Tenancy: Restrictive land leasing laws have proved to be anti-growth and anti-poor on account of following reasons:

• Informal and Oral Tenancy – Tenants do not have access to institutional credit, insurance etc. and are prone to exploitation. 
• Oral and informal tenancy discourages the tenants from making investment in land improvement.
• Reduced the occupational mobility of many landowners who have interest and ability to take up employment outside agriculture and yet are forced to stay in agriculture due to the fear of losing land if they lease out and migrate.
• Many landowners prefer to keep the land fallow due to the fear of losing land rights if they lease out. This leads to underutilisation of land. The lifting of ban or restrictions on leasing will result in better utilization of the available land and labour and increased farm output.
• Higher Equity and Economic justice as the land leasing enables the poor to have access to land and improve their income levels.

NITI Aayog has pointed out that “Lease farming is an economic necessity and not a symbol of feudalism, as it was thought before”. Earlier, Ban or restrictions on leasing were imposed to prevent exploitation of tenants. But now the situation has changed. The rural poor have become politically more powerful through panchayat raj institutions.  A formal tenancy relationship would not be exploitative, rather it would improve their bargaining power and enable them to get out of poverty trap.

WHAT MUST BE DONE?

• Incentivise states to adopt Model Agricultural Land Lease Act, 2016.
• Modernisation of land records to facilitate land leasing
• Promotion of Contract farming by organising tenant farmers into Farmer Producer Organisations (FPOs)
• Presently, Tenants are not covered under various Government schemes such as PM-KISAN. Hence, states should have a digital database of tenants that can be used to extend benefits under various schemes and programmes.
• Set up of Land Banks at Village level.

WATER

PRESENT STATUS: Agriculture accounts for more than 80% of water consumption, out of which share of groundwater is quite high (60%). 52% of area is rain-fed wherein yield is almost 3 times lower. 

NEED FOR ENHANCED WATER-USE EFFICIENCY IN AGRICULTURE: According to NITI Aayog's Composite Water Management Index (CMWI) report, India is facing worst water crisis in its history. By end of 2030, demand for drinking water will outstrip the supply. Almost 2.4 lakh people die every year due to lack of access to safe and clean drinking water. Water crisis could potentially lead to economic loss of around 6% of GDP.

PROBLEMS IN CURRENT WATER MANAGEMENT

• Substantial area under rainfed: About 72 million hectares (Mha) of net sown area (52%) is still completely dependent on rainfall. Rain-fed agriculture is 3 times less productive.
• Regional imbalance: Temporal and spatial variations in rainfall and water availability in the country.
• Sub-optimal utilization of created facilities: Wide gap between irrigation potential created (IPC) and irrigation potential utilized (IPU) due to- inadequate maintenance of canal system, lack of participatory management, changing land use pattern, deviation from the designated cropping pattern, soil degradation and delay in command area development.
• Improper crop and cropping system: High proportion of cultivated area under water guzzling crops like rice, sugarcane etc. India is net water exporting country as it exports more water intensive crops like rice, wheat etc. and it import less water intensive crops like pulses ( Eco Survey 2015-16)
• Imbalanced use of ground water: The Easement Act, 1882, provides every landowner with the right to collect and dispose all water under the land and on the surface. This means that the owner can dig wells and extract water based on his discretion. Additionally, landowners are not legally liable for any damage caused to water resources because of over-extraction.
• Free power available to farmers has also led to over-exploitation.
• Water logging and soil salinity due to over-use of surface water.

HOW TO ADDRESS THESE PROBLEMS?

• Enhancing water efficiency in Irrigated areas: Reduce the difference between IPC and IPU through Proper maintenance of canals, Formationof water user associations, Rationalization of water tariffs, Changes in cropping pattern, micro-irrigation
• Enhancing water efficiency in rain-fed areas: Rainwater harvesting- Check Dams, Convergence between MGNREGA and water conservation, Desilting of ponds and water bodies. Conservation agriculture- Artificial and Natural Mulching, Zero Tillage
• Optimum Utilization of Ground water: 
  • Adoption of Model Bill to Control and regulate the Extraction of Groundwater- Setting up of Groundwater Regulating Authority, Compulsory registration of bore well-owners, Compulsory permission for sinking a new borewell, Restrictions on the depth of borewells etc; 
  • Replication of Andhra Pradesh Farmer Managed Groundwater Systems (APFAMGS) - Joint Management of Aquifers, Induce behavioral change, Self-Regulation of groundwater extraction; 
  • Rationalization of power subsidies; Separation of feeder lines.
• Promotion of Micro-Irrigation techniques such as drip and sprinkler irrigation.

MICRO-IRRIGATION- INITIATIVES, CHALLENGES AND WAY FORWARD

Micro irrigation (MI) systems (sprinkler, drip) promote precision farming by making water available to root zone of crops. MI holds immense potential in addressing dual challenges - Sustainability and Declining Income Levels. MI has multi-faceted benefits- Efficient deployment of inputs such as water, electricity, fertilizers, labour, higher crop productivity, better quality of produce etc. resulting in increased income. According to Dalwai Panel, MI can lead to 40% Water Savings, 45% increase in productivity and 50% increase in income.

GOVERNMENT INITIATIVES

• Pradhan Mantri Krishi Sinchayee Yojana (PMKSY):
  • Har Khet Ko Paani: Providing end-to-end solutions in Irrigation supply chain.
  • Per Drop More Crop: Promotion of Drip Irrigation and Sprinkler Irrigation.
• Micro-Irrigation Fund (MIF):
  • Managed by NABARD with corpus of Rs 5000 crore.
  • States can avail the fund to in order to subsidise the farmers for adoption of micro-irrigation techniques

Micro Irrigation in India

SUBSIDIES VS. PUBLIC INVESTMENT

Public Investment in agriculture refers to long term investment in agriculture that benefits all farmers (inclusive), environmentally sustainable, address the structural problems of agriculture and enhances income of farmers. Examples include expansion of irrigation, investment in marketing infrastructure, Cold chain infrastructure, R&D for improved Seed varieties, technologies etc., financial support to SHGs, Promotion of mechanization etc.

Present Status: Firstly, the total Investment in Agriculture is only around 15% of agricultural GDP. This is much lower as compared to Gross Investment rate of 30% of India's GDP. Secondly, out of total investment of 15% of agricultural GDP, the share of Government Investment is only around 3%, the rest 12% investment comes from farmers and private sector.

Problems: The Government expenditure on agricultural subsidies such as MSP, water, power, fertilizers, loan waivers etc. is as high as 8.2% of Agri-GDP. These Subsidies are not inclusive (Mainly benefit rich farmers), not environmentally sustainable (Excessive water consumption, imbalanced fertilizer consumption, soil degradation etc.), create distortions ( Free power- Huge loss to DISCOMs; MSP- artificial scarcity of food grains, higher focus on cultivation of water-intensive crops, lack of diversification etc.) and do not address the structural problems of Indian agriculture.

What should be done? Rationalise the Agricultural subsidies; Targeting of subsidies through DBT;

AGRICULTURAL CREDIT

Importance: Meet the Credit needs of poor marginal farmers; Prevents Debt Trap; Improves access to agricultural inputs; Enhances Investment in agriculture; Enhances productivity through adoption of new technologies/ mechanisation etc.; Roughly every 1 per cent increase in agricultural credit produces 0.3 per cent increase in agricultural GDP.

INITIATIVES FOR THE PROMOTION OF AGRICULTURAL CREDIT

• Nationalisation of Banks, setting up of Regional Rural Banks and NABARD
• Priority sector lending requirements. 
• KISAN Credit card scheme
• Setting up of Rural Infrastructure development Fund (RIDF) with NABARD for funding of rural infrastructure projects
• Ground Level Credit (GLC) policy:  Under this policy, Government announces GLC targets for agriculture and allied sector in the Union budget every year which banks are required to achieve during the financial year. 
• interest subvention scheme (ISS) for short term crop loans
• On-lending wherein the banks can sanction loans to NBFCs and HFCs, who then would lend these loans to the sectors categorized as Priority sector.

Present Status: 20% growth rate in agriculture credit in the last decade; Percentage of farmer households indebted: 52%; Average loan amount: Rs 47,000; Share of Institutional Credit: 60%.

 PROBLEMS IN AGRICULTURAL CREDIT

• Lower Share of Long-term Credit: Long term Investment loans (35%) and short-term crop loans (65%). The higher share of crop loans is on account of two reasons- (a) interest subvention available only on short term crop loans (b) Inability of farmers to provide collateral for long term high value investment loans.
• Share of Small and Marginal Farmers: only 60% of the loans due to poor land records and fragmented land holdings.
• Regional imbalances: Higher share of southern region
• Rising NPAs of the Banks: Low Credit creation
• Coercive action for repayment leading to increase in farmer suicide cases.
• Problems with the Priority sector lending: Predominance of large value loans which highlights share benefit for richer farmers; concentration of agricultural loans in urban areas; March rush etc.

HOW TO ADDRESS THESE PROBLEMS?

• Set up Credit Guarantee fund trust on the lines of fund set up for MSMEs. This fund should guarantee repayment of the loans taken by farmers for long term Investment loans.
• Strict adherence to PSL guidelines: Out of 18% loans earmarked for agriculture, 10% of the loans should be given to small and marginal farmers according to RBI. A sub-limit for loans to tenant and landless farmers needs to be introduced.
• Digitization of land records to make it easier for farmers to access institutional credit.
• Saturation drives for KCC Scheme
• Mobilization of farmers into FPOs
• Special focus on unbanked regions to correct regional disparity
• Technology driven portal for the banks to facilitate ease of credit to the farmers on the lines of PSBLoansIn59 minutes to MSMEs.

CRITICAL ANALYSIS OF FERTILISER SUBSIDY REGIME

PRESENT STATUS OF FERTILISERS IN INDIA

India is the second largest consumer of Fertilisers. The total Fertiliser consumption has increased from 1.1 million tonnes in 1966-67 to 28 MT in 2019-20.

Import Dependence: 10 MT of Urea; 100% import in Potassic sector and 90% in Phosphatic sector in the form of either finished products or its raw material.

NEED FOR FERTILISER SUBSIDY

1. Limited scope for bringing more area under cultivation and hence productivity of existing land should increase should fertilisers.
2. Multi-Nutrition deficiencies.
3. Decline in yields of crops.
4. Lower income level of farmers.

PRESENT FERTILISER SUBSIDY

Government has been providing subsidised fertilisers to the farmers since 1970s. Over the period Govt has devised separate mechanisms for Urea(N) Subsidy and Non urea (P, K) fertiliser subsidy.

Subsidy mechanism for Urea: Cost-Plus method- Under this method, the MRP of urea is statutorily fixed by the Government and the difference between MRP and Cost of production is provided to the manufacturing company as subsidy. Different amounts are given to different manufacturers based on their Cost of production.

Subsidy mechanism for Non-urea (P,K) Fertilizers: Nutrient based subsidy-  Under the NBS Policy, the Government announces a fixed rate of subsidy (in Rs. per Kg basis), on each nutrient of subsidized P&K fertilizers, namely Nitrogen (N), Phosphate (P), Potash (K) and Sulphur (S). At present, 21 grades of P&K fertilisers such as DAP, MOP etc. are covered under the scheme.

For FY21, the union government fixed the rates at Rs 18 per kg for Nitrogen, Rs 14 per kg for Phosphorus, Rs 10 per kg for Potassium and Rs 2 per kg for Sulphur. Since one tonne of DAP contains 460 kg of Phosphorus and 180 kg of Nitrogen, the corresponding subsidy works out to be Rs 10,000 per tonne or Rs 500 per 50-kg bag.

Freight Subsidy: The government also provides transport subsidy to fertiliser companies. This is done through the Fertiliser (Movement) Control Order, 1973.

ONE NATION ONE FERTILISER SCHEME 

Under the new “One Nation One Fertiliser” scheme, companies are allowed to display their name, brand, logo and other relevant product information only on one-third space of their bags. On the remaining two-thirds space, the “Bharat” brand and Pradhanmantri Bharatiya Jan Urvarak Pariyojana logo will have to be shown. The single brand name for UREA, DAP, MOP and NPK etc. would be BHARAT UREA, BHARAT DAP, BHARAT MOP and BHARAT NPK etc. respectively for all Fertiliser Companies

RATIONALE BEHIND THE NEW SCHEME

Presently, the Government incurs huge expenditure on Fertilizer subsidy. However, the fertilizer companies continue to sell the fertilizers through their own brand names without giving any due credit to the Government. The new scheme will enable the Government to take credit for the fertilizer subsidy.

CRITICISMS AGAINST SCHEME

Quality of Fertilisers: As there is less scope for building unique brand identity, it may disincentivise fertilizer companies from ensuring good quality fertilisers or from undertaking marketing and brand promotion activities. Further, private players would also have little incentive to experiment with customised products or new nutrient combinations

Discourage private sector investment as they would be forced to sell the fertilisers under the common brand name.

Goes against the interest of farmers:

• Violates the right of the farmers to choose the products of their choice.
• Disincentives the fertiliser companies from undertaking extension related activities
• NANO FERTILISERS: POTENTIAL FOR INDIAN AGRICULTURE 

NANO FERTILISERS

Nano fertilizers are nutrients that are encapsulated or coated within nanomaterial in order to enable controlled release, and its subsequent slow diffusion into the soil. The Government has approved the use of Nano Urea and Nano DAP for usage in agriculture.

BENEFITS OF NANO FERTILISERS

1. Price Advantage - They cost less than the subsidized conventional fertilizers resulting into lower input cost for the farmers. 
2. Advantage in terms of Logistics and Warehousing as they are easy to carry and store. A 500 ml bottle of Nano Urea can replace one 45 Kg. bag of conventional urea and thus can curtail the requirement of the same by at least 50 per cent
3. Fiscal benefits: Savings of Rs 22,000 crores in terms of reduced subsidy bill.
4. Increased crop yield of 8 % which translates into Rs. 2000 to Rs. 5000 per hectare higher income to the farmers (ICAR).
5. Tool for doubling farmers' income due to reduced input costs and higher productivity.
6. Environmental benefits in terms of better soil health, air and water.

Way forward:

• Bring production of nano fertilizers under the Production Linked Incentive (PLI) scheme.
• Promote use of Nano Fertilizer through awareness camps, field demonstrations and films in regional languages etc.
• Set up Quality testing laboratories to ensure production and sale of quality nano fertilizers.
• Promote use of nano technology based P&K fertilizers including through joint ventures abroad in countries rich in P&K.
• Rationalize/ exempt the basic customs duty on P&K fertilizer raw materials so as to incentivize setting up of nano based production plants.
• Dedicated fund for promoting nanotechnology based research activities.

FERTIGATION: NEED AND BENEFITS

FERTIGATION

Fertigation is the technique to apply water soluble solids or liquid fertilizers through the drip irrigation so as to reach each and every plant regularly and uniformly. It is the most effective and convenient means of maintaining optimum fertility level and water supply.

BENEFITS OF FERTIGATION

Higher nutrient use efficiency under fertigation as compared to conventional application of fertilizers to the soil. 

Less water pollution: Intensification of agriculture led by the use of irrigation water and indiscriminate use of fertilizers has led to the pollution of surface and ground waters by chemical nutrients. Fertigation helps lessen pollution of water bodies through the leaching of nutrients such as N and potassium (K) out of agricultural fields.  

Higher resource conservation: Fertigation helps in saving of water, nutrients, energy, labor and time. 

Efficient delivery of micronutrients: Efficient use of compound and ready mix nutrient solutions containing small concentrations of micronutrients, which are otherwise very difficult to apply accurately to the soil when applied alone. 

Helps in effective weed management: Fertigation helps to reduce weed menace particularly between the crop rows. Use of plastic mulch along with fertigation through drip system allows effective weed control in widely spaced crops.

MECHANISATION OF INDIAN AGRICULTURE

Even though agriculture sector contributes only 16% of GVA, it accounts for almost 45.7% of India's workforce. This shows high level of disguised unemployment and inefficient utilisation of Indian workforce. This needs to be countered through skilling of rural youths and promotion of agricultural mechanisation.

NEED FOR AGRICULTURAL MECHANISATION

• The agricultural mechanization can reduce the increasing labour costs in the rural areas. It can enable the farmers to grow a greater number of crops in a single year due to reduction in the harvesting time.
• There has been feminization of Indian agriculture with women farmers accounting for almost 1/3 of the total farmers. Mechanization would help address the needs of women farmers.
• According to the Dalwai Committee, the adoption of agricultural mechanization would reduce the input costs by 25%, enhance the productivity by 20% and increase the incomes of the farmers by 25-30%. 

PRESENT STATUS OF MECHANISATION

• Farm Mechanization in India: 40-25%; Even though India is the largest producer of tractors, a significant share of production is exported.
• Farm Mechanization in other countries: USA (95%); Brazil (75%); China (57%).
• Regional Disparities: Northern India has higher levels of mechanization compared to other regions. (Rice and Wheat crops having the largest extent of mechanization)

CHALLENGES WITH ADOPTION OF AGRICULTURAL MECHANIZATION

Dominance of Fragmented landholdings: The average landholding size has reduced to 1.23 ha. 83% of the farmers in India are small and marginal and they own around 40% of the agricultural land. 

Capital Intensive: The agricultural machinery such as tractors, harvesters etc. are quite costly and hence unaffordable to the vast section of Indian society.

GOVERNMENT INITIATIVES

Sub-Mission on Agricultural Mechanization (2014): Assistance to the Farmers for procurement of agricultural machineries; Custom Hiring Centres; Demonstration of Newly Developed Agricultural/ Horticultural Equipment. 

Promotion of Agricultural Mechanisation for in-situ Management of Crop residue: Implemented in Punjab, Haryana, UP and NCT of Delhi; Setting of Custom hiring centres; Financial Assistance to the farmers for buying environment friendly agricultural machinery.

FARMS (Farms Machinery Solutions) Mobile App: Facilitates the farmers to hire agricultural machineries and tools.

YIELD GAPS AND TOTAL FACTOR PRODUCTIVITY IN AGRICULTURE

Present Status: There exists large scale yield gaps in the Indian Agriculture. This yield gap exists at two levels — Firstly, between the best scientific practices and the best field practices, and second, between the best field practices to the average farmer practices. These yield gaps exist in almost all crops such as Rice, Wheat, Pulses, Maize, Sugarcane etc. For example, only 2 per cent of paddy and wheat growers use hybrids. These yield gaps can be increased by enhancing Total factor productivity.

Concept of Total Factor Productivity: Total Factor Productivity (TFP) measures the efficiency with which inputs are utilised. An increase in TFP would mean that inputs are more efficiently utilised through innovations and improved management techniques. An increase in TFP is associated with higher efficiency in use of the available inputs, higher output and higher profits.

STEPS TO INCREASE TOTAL FACTOR PRODUCTIVITY

• Investment in R&D for the adoption of better technology
• Adoption of high yielding varieties of seeds
• Access to micro-Irrigation techniques
• Focus on extension activities to empower farmers through sharing information, technology, skills, farm management practices
• Balanced utilisation of fertilisers
• Thrust on Agricultural Mechanisation
• Organise farmers into Farmer Producer Organisations (FPOs) to take benefit of economies of scale.
• Improve post-harvesting infrastructure such as collection centres, warehouses, cold chain infrastructure etc.