Rising input prices keeping down net crop incomes in many states, observes new report

Rising input prices keeping down net crop incomes in many states, observes new report


For those who asked why the farmers of Madhya Pradesh, Maharashtra and other states hit the streets during June and July this year, the report prepared by the Committee on Doubling Farmers’ Income could be a ready reckoner.

Prepared under the chairpersonship of Ashok Dalwai, the report on Doubling Farmers’ Income after studying the trends in crop income and cost associated with 23 crops, reveals a mixed picture across the states where such crops are largely grown.

It has been found by the Volume-II of the report entitled Status of Farmers’ Income: Strategies for Accelerated Growth that the net income from cultivation of many crops has declined and turned out to be negative in many states. Please click here to access chapter-5 of Volume-II of the report.

For example, in case of paddy cultivation, it has been found that the net income (in Rs. per hectare) has dipped between the two periods i.e. 2004-05 to 2008-09 and 2009-10 to 2013-14 for the states of Andhra Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Karnataka, Odisha, Punjab, Uttarakhand and West Bengal. Net income for paddy cultivation went up between the two periods under consideration for the states of Gujarat, Haryana, Himachal Pradesh, Kerala, Madhya Pradesh, Maharashtra, Tamil Nadu and Uttar Pradesh. Net income for paddy cultivation turned out to be negative during both the periods under consideration for the states of Assam, Jharkhand, Maharashtra, Odisha and West Bengal.  

Similarly, in case of wheat cultivation, it has been found that the net income (in Rs. per hectare) has gone down between the above-mentioned two periods for the states of Chhattisgarh, Himachal Pradesh, Punjab, Rajasthan, Uttar Pradesh and West Bengal. Net income for wheat cultivation went up between the two periods under consideration for the states of Bihar, Gujarat, Haryana, Jharkhand, Madhya Pradesh and Uttarakhand. Net income for wheat cultivation turned out to be negative during both the periods under consideration for the states of Jharkhand and West Bengal.  

Thus, from the above mentioned examples one may say that falling net income (in Rs per hectare) from cultivating various crops is one of the prime reasons behind deepening of agrarian distress in many states of the country. Had the Committee on Doubling Farmers’ Income provided recent years' data on net income from cultivation of various crops in the states, it would have been easier for researchers and journalists to understand and compare the situation of farmers during the UPA and the NDA rules.    

In the report prepared by the Committee on Doubling Farmers’ Income, the net income for a crop (in Rs. per hectare) has been calculated by deducting ‘Cost C2’ from the ‘Gross Value of Output’ (GVO). According to the report, the Commission for Agricultural Costs and Prices (CACP) uses the total (full) cost given in the form of Cost C2 for fixing of the minimum support price. The Cost C2 includes the rental value of owned land and interest on fixed capital.

The Volume-II of the report from the Committee on Doubling Farmers’ Income shows that the terms of trade (TOT) index, as estimated by the Ministry of Agriculture, was unfavourable towards agriculture through the 1990s to the early 2000s. The TOT index, which indicates the ratio between sale and purchase by the agrarian sector, stood below 100 between 1981-82 and 2009-10, but went above 100 only after 2010-11 onwards.

The second volume of the report on Doubling Farmers’ Income, which has been prepared for the Ministry of Agriculture & Farmers’ Welfare, also shows that for most years since 1981-82, the growth rate in Consumer Price Index for Agricultural Labourers (CPIAL) exceeded that of the growth rate in Gross Value Added (GVA) originating from agriculture. Please check chart-1.

Chart-1: Annual Growth in Agricultural GVA and CPIAL (in %)
 
Chart 1 Growth rate in Agri GVA and CPIAL 
 
Source: Chapter 5: Analysis of Changes on Input Costs and Crop Income, in Volume II: “Status of Farmers’ Income: Strategies for Accelerated Growth”: Inter-linkages between Input Costs, Diversification, Capital Formation and Income, Report of Committee on Doubling Farmers’ Income, 12 August, 2017, please click here to access

If the CPIAL rises faster than the agricultural GVA, then it means that there will be a demand to increase agricultural wages by the agricultural labourers (so as to keep their real wages constant due to the inflation they face) despite lower agricultural growth.

The CPIAL measures the extent of change in retail prices of goods and services, which are consumed by the agricultural labourers as compared with the base year 1986-87. The GVA is the difference between Gross Domestic Product (GDP) and net indirect taxes.
 
 
References:

"Strategy for Doubling Farmers' Income by 2022”, prepared by the Committee headed by Ashok Dalwai, please click here to access 

Volume I: “March of Agriculture since Independence and Growth Trends”: Historical Analysis and Examination of Agricultural Production and Farmers’ Income, Report of Committee on Doubling Farmers’ Income, 12 August, 2017, please click here to access

Volume II: “Status of Farmers’ Income: Strategies for Accelerated Growth”: Inter-linkages between Input Costs, Diversification, Capital Formation and Income, Report of Committee on Doubling Farmers’ Income, 12 August, 2017, please click here to access

Volume III: “Post-production Agri-logistics: maximising gains for farmers”: Agricultural Logistics is the Backbone of Agri-Business Agricultural Marketing is the Brains behind Value Realisation, Report of Committee on Doubling Farmers’ Income, 12 August, 2017, please click here to access

Volume IV: “Post-production interventions: Agricultural Marketing”: Capturing Value from every Grain, every Ounce, every Drop of agricultural produce, Report of Committee on Doubling Farmers’ Income, 12 August,  2017, please click here to access

Doubling Farmers' Income: Rationale, Strategy, Prospects and Action Plan -Ramesh Chand, NITI Policy Paper No. 1/2017, National Institution for Transforming India, March, 2017, please click here to access
 
Centre to come out with draft model law on contract farming -Vishwa Mohan, The Times of India, 11 September, 2017, please click here to access
 
'Input prices have pulled down farm income' -TV Jayan, The Hindu Business Line, 23 August, 2017, please click here to access
 
What is the cost of doubling farmers' income by 2022? -Richard Mahapatra, Down to Earth, 22 August, 2017, please click here to access
 
Additional Rs 6,39,900 crore investment needed to double farmers' income, The Economic Times, 14 August, 2017, please click here to access

A new movement is born -Yogendra Yadav, The Tribune, 19 July, 2017, please click here to access

Government planning 'one nation, one market' in agriculture sector -Sayantan Bera, Livemint.com, 2 May, 2017, please click here to access
 
Panel on doubling farmers' income mulls major reforms, Livemint.com, 12 February, 2017, please click here to access

Govt sets up panel to lay out plan for doubling farm incomes -Sayantan Bera, Livemint.com, 22 April, 2016, please click here to access
 

Image Courtesy: Inclusive Media for Change/ Shambhu Ghatak



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