Author: Rushikesh Ajay Nyati

Topic: Land Reforms

Acknowledgment
 Tables Of Content
Sr. No Particulars Page No.
1
 Preface

India is an agrarian economy, 42% of the people are employed in the agricultural sector. But
surprisingly agricultural sector contributes only 20% of the total GDP of India. This is because of lack
of technological up-gradation, problems of irrigation, disguised unemployment, division of land into
little fragments, dependence on rainwater, lack of supportive infrastructure, lack of research and
development in the agricultural sector, degradation of agricultural land, etc. These problems are
plaguing the agricultural sector in India.

I see an amalgamation of fragmented agricultural land into bigger land (say there is twenty 1 acre
land of 20 people so we merge them into one ) as a solution to above mention problem. If the land is
bigger the farmer can employ modern technology, he can invest in the development of land which
will, in turn, improve the productivity of the whole agricultural sector. This will not only help the
agricultural sector but allied sectors also, development in the agricultural sector will lead to the
development of a village.

The people who will be unemployed after selling their land will be given assured jobs in the same
village or neighboring village. This will promote the social and economical interests of an individual
and state.
Prevailing Situation of Agriculture in India:

 The agriculture sector employs nearly half of the workforce in the

country. However, it contributes to 17.5% of the GDP (at current
prices in 2015-16).

 Over the past few decades, the manufacturing and services sectors
have increasingly contributed to the growth of the economy, while
the agriculture sector’s contribution has decreased from more than
50% of GDP in the 1950s to 15.4% in 2015-16 (at constant prices).

 India’s production of food grains has been increasing every year,

and India is among the top producers of several crops such as
wheat, rice, pulses, sugarcane, and cotton. It is the highest producer
of milk and the second highest producer of fruits and vegetables. In
2013, India contributed 25% to the world’s pulses production, the
highest for any one country, 22% to rice production, and 13% to
wheat production. It also accounted for about 25% of the total
quantity of cotton produced, besides being the second-highest
exporter of cotton for the past several years.

 However, the agricultural

yield (quantity of a crop
produced per unit of land) is
found to be lower in the case of
most crops, as compared to
Figure 1: Yield in different countries other top producing countries
(tonne/ha) such as China, Brazil, and the
United States.

 Although India ranks third in

Sources: Food and Agriculture
the production of rice, its yield is
Organization of the United Nations;
lower than Brazil, China ,and the
PRS.
United States. The same trend
is observed for pulses, where it
is the second-highest
producer.
  Agricultural growth has been
fairly volatile over the past
decade, ranging from 5.8% in
Figure 2: Agricultural growth (in %) 2005-06 to 0.4% in 2009-10 and
-0.2% in 2014-15.

 Such a variance in agricultural

Sources: Agricultural Statistics at a
growth has an impact on farm
Glance, 2015; PRS.
incomes as well as farmers’
ability to take credit for
investing in their landholdings.

 Key issues affecting agricultural productivity include the decreasing

sizes of agricultural landholdings, continued dependence on the
monsoon, inadequate access to irrigation, imbalanced use of soil
nutrients resulting in loss of fertility of the soil, uneven access to
modern technology in different parts of the country, lack of access
to formal agricultural credit, limited procurement of food grains by
government agencies, and failure to provide remunerative prices to
farmers.

State of Agriculture of India

Agricultural productivity depends on several factors. These include the

availability and quality of agricultural inputs such as land, water,
seeds ,and fertilizers, access to agricultural credit and crop insurance,
assurance of remunerative prices for agricultural produce, and storage
and marketing infrastructure, among others. This report provides an
overview of the state of agriculture in India. It discusses factors related to
the production and post-harvest activities in agriculture.

As of 2009-10, more than half of the total workforce (53%) of the country,
i.e. 243 million persons were employed in agriculture.[1] The share of the
population depending on agriculture for its livelihood consists of
landowners, tenant farmers who cultivate a piece of land, and agricultural
labourers who are employed on these farms. Agricultural output has been
volatile over the past 10 years, with annual growth ranging from 8.6% in
2010-11, to -0.2% in 2014-15 ,and 0.8% in 2015-16.[2] Figure 3 shows the
trend in the growth of the agricultural sector over the past 10 years.

Figure 3: Growth in agriculture sector

Figure 4: Contribution to GDP of sectors
(%)
(%)

Sources: Agricultural Statistics at a

Sources: Ministry of Statistics and
Glance 2015, Ministry of
Programme Implementation; PRS.
Agriculture; PRS.

As seen in Figure 4, the agriculture sector’s contribution to the Gross

Domestic Product (GDP) decreased from 54% in 1950-51 to 15.4% in
2015-16, while that of the services sector increased from 30% to 53%.
[3],2 While the agriculture sector’s contribution to GDP has decreased over
the past few decades, the contribution of sectors such as manufacturing
(employing 10.5% of the population) and services (employing 24.4% of
the population) has increased.1

Agricultural production and yield

Figure 5 shows the production of crops over the past few decades. The
production of major crops over the past few decades is shown in Table 7
in the Annexure.

Figure 5: Agricultural production (million  Total production of food grains

tonnes) increased from 51 million tonnes in
1950-51 to 252 million tonnes in 2015-
16.[4] According to the second advance
Sources: Ministry of Agriculture; PRS. estimate by the Ministry of Agriculture,
food grains production is estimated to be
272 million tonnes in 2016-17.[5]

 The production of wheat and rice

took off after the green revolution in the
 1960s, and as of 2015-16, wheat and rice
accounted for 78% of the food grains
production in the country.

The country’s requirement for food grains in order to provide for its
population is projected to be 300 million tonnes by 2025.[6] The estimate
of food grains production in 2015-16 is 252 million. This implies that the
crop output needs to grow at an annual average of 2%, which is close to
the current growth trend.

Despite high levels of production, agricultural yield in India is lower than

other large producing countries. Agricultural yield is the quantity of a crop
produced on one unit of land. Agricultural yield of food grains has
increased by more than four times since 1950-51, and was 2,070
kg/hectare in 2014-15.[7] However, as seen in Figure 6, India’s yield is low
when compared to countries such as China, Brazil ,and the USA.

 Although India is the second-highest

producer of paddy (rice) in the world (as
of 2013), its yield is lower than China,
Figure 6: Yield in different countries in Brazil and the USA. It is also the leading
2014-15 (in tonne/ha) producer of pulses, but its yield is the
lowest.[8],[9]

 India’s productivity has also grown at a

Sources: Food and Agriculture slower rate as compared to others. For
Organization of the United instance, while Brazil’s yield for rice
Nations; PRS. increased from 1.3 tonne/ha in 1981 to 4.9
tonne/ha in 2011, India’s increased from
2.0 to 3.6. China’s productivity in rice
also grew from 4.3 to 6.7 in this period.

Food security and nutrition

Besides providing for the livelihood of farmers and labourers, the
agricultural sector also addresses food security for the nation. The Food
and Agricultural Organisation (FAO) of the United Nations defines food
security as a situation where all people have, at all times, physical and
economic access to sufficient, safe and nutritious food that meets the
dietary needs and food preferences for a healthy and active life.[10]
Despite high levels of production in the country, 15% of the population
continues to be under-nourished, as per 2014 estimates.[11],[12]

India enacted the National Food Security Act in 2013. The 2013 Act aims
to provide food and nutritional security to people by ensuring access to
adequate amount of quality food at affordable prices.[13] Under the 2013
Act, persons belonging to certain categories are provided with food grains
(wheat, rice and coarse cereals) at subsidised prices. As of 2015, 68% of
the population, i.e. 81 crore persons (of which 77% are in rural areas and
23% in urban areas) are covered under the Act.[14]

Over the past few decades, with increasing per capita income and access
to a variety of food groups, the consumption pattern of food in the country
has been changing. Dependence on cereals for nutrition has decreased
and the consumption of protein has increased.[15] Sources of protein
include pulses, meat, seafood, and eggs, among others. According to a
Finance Ministry report on incentivising the production of pulses in the
country, poor levels of nutrition suggest that increasing the consumption
of proteins should be the policy priority for the government.[16] The
report estimates that the cost of pulses as a source of protein is lower
than other sources. Under the current domestic scenario, India is facing a
shortage of pulses which is being plugged by imports.

Factors affecting agricultural productivity

Increase in small land holdings

140 million hectare of land is used as agricultural area, as of 2012-13.[19]

Over the years, this area has been fragmented into smaller pieces of
land. As seen in Table 3, the number of marginal land holdings (less than
one hectare) increased from 36 million in 1971 to 93 million in 2011.[20]
Marginal and small land holdings face a number of issues, such as
problems with using mechanisation and irrigation techniques.

Since smaller land holdin

Table 3: Agricultural
fragments of larger hold
holdings (millions)
have been passed on wi
family or have been info
by a large holder, farme
1 1 1 2 2
cultivate these holdings
9 9 9 0 0
have a formal lease agre
7 8 9 0 1
Hol absence of such land rec
0 0 0 0 0
din not allow these farmers
g formal credit or be eligib
- - - - -
7 8 9 0 1 government benefits suc
1 1 1 1 1 subsidies or crop insuran
schemes.

Ma
3 5 6 7 9
rgi
6 0 3 5 3
nal

Sm 1 1 2 2 2
all 3 6 0 3 5

Me
1 2 2 2 2
diu
9 1 2 1 0
m

Lar
3 2 2 1 1
ge
 All 1 1 1
7 8
siz 0 2 3
1 9
es 7 0 8

Note: Marginal: up to 1
hectare, Small: 1-2 hectares,
Medium: 2-10 hectares,
Large: over 10 hectares.

Sources: Agriculture Census

2011; PRS.

Land records and informal leasing

Of the total agricultural area under operation, 10% of land has been given
out on agricultural leases, with the percentage of leased out land varying
across states.[21] 34% of the land in Andhra Pradesh, 25% in Punjab, 21%
in Bihar and 18% in Sikkim has been leased out. In the past, states such
as Karnataka and West Bengal have attempted to provide legal rights to
tenant farmers by forming electronic records of land holdings and giving
tenant farmers the right to their produce.[22],[23]

E-Bhoomi project in Karnataka

The E-Bhoomi project was started by the Government of Karnataka in the early 2000s
project aims to computerize existing land records and create a transparent system fo
land records and dividing or merging plots of land. Under the system, farmers can co
record information for their plot at the Tehsil level, called Pahani. These records wou
information such as the survey number of the land, land owner’s details, the classific
soil, and details regarding irrigation and crops grown, among others. The Pahani wou
the farmer to (i) know whether the plot he wants to purchase is genuine, (ii) raise farm
banks, (iii) use the land records for official or legal purposes. E-Bhoomi also allows fa
 approach the government to address grievances.

Currently, laws of tenancy of agricultural land vary across different

states.21 States such as Kerala, Jammu and Kashmir and Manipur
completely prohibit the leasing of agricultural land. Others such as Bihar,
Karnataka, Uttar Pradesh, Telangana and Odisha allow land leasing only
by certain categories of land owners. On the other hand, states such as
Gujarat, Maharashtra, and Assam do not explicitly prohibit leasing, and
allow the tenant to purchase the land from the owner after a specified
period of tenancy. In Andhra Pradesh, Tamil Nadu and West Bengal, there
is no legal ban on leasing land. Different states also have different
ceilings on the area of land which may be leased. 21

Bargadar system in West Bengal

The West Bengal Land Reforms Act, 1955 provides certain rights to Bargadars or land
tenants. Bargadars are persons lawfully cultivating any land belonging to another pe
not a family member). Under the Act, produce from the farm is divided between the
owner in a 50:50 proportion if the cattle, manure and seeds are provided by the lando
75:25 in all other cases. Illegal eviction of tenants is a cognizable offence punishable
imprisonment or fine, under the Act. However, it does not provide any ownership righ
tenant.

The NITI Aayog has proposed a Model Land Leasing Law to provide for the
legalisation of land leasing.21 This would ensure that land owners have the
security of ownership rights, and land tenants are secure in their tenancy.
Legalisation of land tenancy would also ensure that farmers get access to
formal credit, insurance, and inputs such as fertilizers. Table 16 in the
Annexure provides details regarding land leasing restriction and the
extent to which the Model land leasing law has been adopted in states.
[24] Only Madhya Pradesh has adopted the Model land leasing law so far.

Access to agricultural credit and insurance

Access to agricultural credit is linked to the holding of land titles. As a
result, small and marginal farmers, who account for more than half of the
total land holdings, and may not hold formal land titles, are unable to
access institutionalized credit.[25] Farmers may require credit for short
term uses such as purchasing inputs, weeding, harvesting, sorting and
transporting, or long term uses such as investing in agricultural machinery
and equipment, or irrigation. Table 4 shows the distribution of agricultural
loans according to sources, as of 2013.

Table 4: Land holdings and sources of agricultural credit (as of 2013)

Size of land Co-operative Money Shopkeeper/ Relatives/

Bank
(hectare) society lender trader friends

0-1 10% 27% 41% 4% 14%

1-2 15% 48% 23% 2% 8%

2-4 16% 50% 24% 1% 6%

4-10 18% 50% 19% 1% 7%

10+ 14% 64% 16% 1% 4%

Sources: Table 3.2, Report of the Committee on Medium-term Path on

Financial Inclusion, Reserve Bank of India; PRS.

Farmers with land holdings of less than a hectare primarily borrow from
informal sources of credit such as moneylenders (41%), whereas those
with land holdings of two or more hectares primarily borrow from banks
(50% or more). Other major sources of agricultural credit include
shopkeepers, relatives or friends, and co-operative societies. Key issues
relating to agricultural credit are lack of access to formal credit owing to
unclear land records, skewed ratio between short term and long term
agricultural credit, and inadequate access to crop insurance. These are
summarized below.25

Short term and long term credit

Short term credit is generally taken for pre-harvest and post-harvest

activities such as weeding, harvesting, sorting and transporting. Long
term credit is generally taken in order to invest in agricultural machinery
and equipment, irrigation and other developmental activities, etc. Over
the past few decades, the trend of short term and long term agricultural
credit in the country has reversed. In 1990-91, a majority of crop loans
taken was long term credit, whereas short term credit accounted for only
about a quarter of all agricultural loans.[26] As of 2011-12, 61% of crop
credit was short term, whereas long term credit had a share of 39%.[27]

In addition, small and marginal farmers, who account for about 86% of
total land holdings, take more short term loans than farmers with medium
or large land holdings. This group of farmers also has the highest share of
borrowings from informal sources of credit such as moneylenders, family
and friends.

Inadequate access to crop insurance

As of 2011, about 10% of Indian farmers were covered under a crop

insurance scheme.[28] Some persistent issues with the crop insurance
system include (i) unawareness about insurance schemes, (ii) inadequate
coverage of insurance schemes, (iii) assessment of the extent of damages
in case of crop losses, and (iv) timely settlement of claims.[29]

The Standing Committee on Finance has recommended that assessment

of crop damage should be completed and compensation should be
deposited directly into farmers’ accounts in a timely manner. 29 In addition,
to reduce the seeking of unproductive credit, the government should
create awareness about what crops should be grown based on the quality
of soil and incidence of rainfall, etc. in different regions. 29

Pradhan Mantri Fasal Bima Yojana

The Pradhan Mantri Fasal Bima Yojana was launched by the central government in Ja
[30] The scheme aims to provide insurance coverage to farmers for crop failure, stab
income, and encourage farmers to adopt modern agricultural practices, among othe
scheme has been allocated Rs 9,000 crore in the Union Budget 2017-18, compared
crore in 2016-17.[31],[32] The scheme covers all farmers, including tenant farmers and
sharecroppers, who are growing notified crops in notified areas. It covers crops suc
pulses, oilseeds, vegetables, and spices. As of December 2016, the scheme has cov
farmers for a sum of Rs 1,41,625 crore in the Kharif season of 2016, as compared to
farmers and a sum of Rs 69,307 crore in the Kharif season of 2015.[33],[34],[35]

A Committee on Financial Inclusion under the Reserve Bank of India had

recommended that credit eligibility certificates, which would act as
tenancy/lease certificates should be issued to tenant farmers. 25 These
certificates would enable also landless cultivators to obtain agricultural
credit. It recommended that the Reserve Bank of India should issue
guidelines to banks, to give loans to farmers against these certificates.

Availability of water

Currently, about 51% of the agricultural area cultivating food grains is

covered by irrigation.[36] The rest of the area is dependent on rainfall
(rain-fed agriculture). Sources of irrigation include ground water (wells,
tube-wells) and surface water (canals, tanks). Table 5 shows the various
sources of irrigation used in agriculture.

Table 5: Sources of irrigation (as of 2010-11)

 There is a need to improve the

Source % share Number
efficiency of water use, especially
in agriculture. Irrigation
 of of of
Irrigation holdings holdings

Tube
44.2% 31,722
wells

currently consumes about 84% of

Canals 25.7% 18,414 the total available water in the
country.[37]

 Nearly 65% of the irrigated

Wells 19.7% 14,101
land holdings use ground water
sources such as tube wells and
Other wells for irrigation.
8.4% 6,046
sources

Tanks 5.8% 4,180

Sources: Agriculture Census

2011; PRS.

The past few decades has led to an overuse of ground water sources in
states, especially those growing water intensive crops such as rice. For
instance, in Haryana and Rajasthan, 40%-75% of the ground water units
are over-exploited, and the situation is worse in Punjab, where 75%-90%
of ground water units have been over-exploited.[38] Details of ground
water development across states may be found in Table 15 in the
Annexure.

The Commission for Agricultural Costs and Prices has recommended that
quantitative ceilings should be fixed on the per hectare use of water.[39]
In addition, farmers using lesser water than the ceiling fixed should
receive money equivalent to remaining units of water at the current
domestic costs. This would incentivize them to ration their use of water.

In 2011 and 2013, the government released Model Bills for Ground Water
Management, based on which states could formulate their own laws.[40] It
also launched a Policy in 2012 relating to water demand management,
efficiency of water usage, and pricing.[41] The Model Bills were based on
the doctrine of public trust, under which resources meant for public use
cannot be converted into private ownership. More recently, the Ministry
of Water Resources circulated a Model Bill for Groundwater, 2016, which
may be adopted by states.[42] The Bill provides an institutional framework
for the protection and management of groundwater. It states that
groundwater is a common resource of all persons, and ownership of the
land over a groundwater resource should not deprive others from
accessing it. It also states that industrial or bulk usage of groundwater
will be priced.

Micro-irrigation techniques

The Economic Survey 2015-16 observed that India largely uses the
technique of flood irrigation, where water is allowed flow in the field and
seep into the soil.[43] This results in the wastage of water since excess
water seeps into the soil or flows off the surface without being utilised. It
has been recommended that farmers should move from flood irrigation to
the drip or sprinkler irrigation systems (micro irrigation).[44] This would
help in conserving water as well as save on the cost of irrigation. Using
micro-irrigation systems (such as drip or sprinkler irrigation) has also been
linked to an increase in the yield of crops.

Note that India uses 2-3 times as much water to produce one tonne of
grain as countries such as China, Brazil and the United States. 43 If India
also increases its efficiency of water use, it will be able to cover a wider
area for irrigation. Table 14 in the Annexure provides a state-wise
coverage of micro-irrigation in the country.

Soil and fertilizers

Quality of soil
Soil is one of the most important factors in the productivity of agriculture.
Indian soil consists of primary nutrients such as nitrogen, phosphorous
and potassium, secondary nutrients such as sulphur, calcium and
magnesium, and micro-nutrients such as zinc, iron, and manganese.[45]
While the levels of food production have increased over the past few
decades, it has also led to issues such as an imbalance of nutrients in the
soil, decline in the water table as well as the quality of water, and overall
depletion of soil health. The Ministry of Agriculture has noted that the
quality of Indian soil is deteriorating.[46] About 5.3 billion tonnes of soil
gets eroded annually, at a rate of about 16.4 tonne/hectare.

Imbalance in the use of fertilizers in soil may also result in a loss of

fertility. If farmers are unaware about the kind of fertilizer which is
required for the soil in which they sow their crops, the productivity of the
soil will be subsequently affected. The Soil Health Card scheme was
launched by the central government in 2015. Under the scheme, all
farmers are issued soil health cards, once every three years. The soil
health cards contain information such as the nutrient status of the soil,
and the recommended dose of nutrients to be provided to the soil to
improve its fertility. As of February 2017, 2.9 crore farmers have been
covered under this scheme.[47] 2.5 crore soil samples have been
collected, and 1.8 crore samples have been tested.[48] The Ministry had
set a target of 2.53 crore samples to be collected by March 2017.

Imbalance in use of fertilizers

The manufacture, sale, and distribution of fertilizers in the country is

regulated by the Ministry of Chemicals and Fertilizers, under the Essential
Commodities Act, 1955. There are three major types of nutrients used as
fertilizers: Nitrogen (N), Phosphatic (P), and Potassic (K). Of these, the
pricing of urea (containing N fertilizer) is controlled by the government,
while P and K fertilizers were decontrolled in 1992, on the
recommendation of a Joint Parliamentary Committee. It has been
observed that urea is used more than other fertilizers. While the
recommended ratio of use of the NPK fertilizers is 4:2:1, this ratio in India
is currently at 6.7:2.4:1.6 Overuse of urea is especially observed in the
states of Punjab, Haryana and Uttar Pradesh.6 Figure 7 shows the trend in
the consumption of fertilizers over the past decade.

Figure 7: Consumption of fertilizers (lakh tonnes)

Sources: Agricultural Statistics at a Glance 2015; PRS.

An imbalanced use of urea may lead to a loss of fertility in the soil over a
period of time, affecting productivity. Urea (N) is the most produced
(86%), consumed (74%) and imported (52%) fertilizer in the country.[49]
The government determines the quantity of fertilizers to be imported
based on their domestic availability.

However, the process of fixing the quantity to be imported and actually

receiving the imports takes about 60-70 days, since only three companies
are allowed to import urea into the country. Thus shortages are often
caused in the urea market. Since farmers have to ensure that urea is
applied to their crops on time, it leads to the growth of black markets
selling urea, often at prices above the maximum retail prices. 49

The level of fertilizer required for a crop depends upon the soil type, level
of yield, and water availability, in addition to the type of crop. 6 Certain
crops such as rice, wheat, maize, cotton and sugarcane require larger
quantities of nitrogen as compared to pulses, fruits and vegetables.
Although the ratio of N, P, and K fertilizer usage across crops has
increased, the quantity of fertilizers used by India is still lower as
compared to other countries. The average consumption of fertilizers
increased from 106 kg per ha in 2005-06 to 128 kg per ha in 2012-13. In
comparison, Pakistan consumes 205 kg per ha and China consumes 396
kg per ha.

Nutrient based subsidy policy

 The central government launched the nutrient based subsidy policy (NBS) in 2010 fo
fertilizers. The policy was formulated with the objective of promoting a balanced us
fertilizers. The policy allowed the manufacturers of P and K fertilizers to fix their ma
prices (MRPs) at reasonable levels. The subsidy provided would be based on per kilo
nutrient. The policy also provided for an additional subsidy to be paid to indigenous
manufacturers of fertilizers. The Comptroller and Auditor General of India, in its rep
performance of the NBS policy stated that in the five years since its implementation
had not succeeded in bringing about a balanced use of fertilizers.[50] The fertilizer u
urea increased from 4.3 in 2009-10 to 8.2 in 2012-13.

To meet the production target of 300 million tonnes of food grains by

2025 which was mentioned earlier, 45 million tonne of fertilizers would be
required. Of this, 6-7 million tonnes may be met from organic fertilizers,
but the rest would be met by chemical fertilizers (containing N, P and K).
The domestic production of fertilizers would have to be increased to meet
this demand.6

Fertilizer Subsidy

Figure 8: Fertilizer subsidy (in Rs crore)  To promote

fertilizers by
central
provides a fer
to the pr
fertilizers. In
Note: Subsidy figure for 2016-17 is a revised estimate, and 70,000 crore
for 2017-18 is a budgeted estimate. allocated fo
subsidy, wh
Sources: Expenditure Budget, Union Budgets 2000-01 to second bigges
on subsidy
2017-18; PRS. subsidy.32

 Allocations
subsidy h
increasing at
rate of 11.4
2000 and 20
subsidy alloca
18, Rs 49,76
been allocate
 on urea. Fig
the trend in
subsidy 2000-

Currently the amount of subsidy to be given is determined based on the

cost of production of the fertilizer company. 49 Companies with a higher
cost of production receive greater subsidies. This reduces the companies’
incentive to reduce their cost of production. Although the consumption of
urea has been increasing over the past decade, no new domestic
production capacity has been added in the past 15 years. 49

A Committee that examined the role of Food Corporation of India

recommended that cash transfers should be made to farmers to replace
the current fertilizer subsidy regime.[51] This would allow farmers to
choose fertilizers in the combination best suited to their needs, and help
them to fix the fertilizer imbalance in soil. In the Union Budget 2016-17, it
was announced that a direct benefit transfer program for fertilizers would
be launched on a pilot basis in a few districts across the country.[52] In
July 2016, the government announced that it would be conducting pilot
studies of direct benefit transfers in 16 districts in 2016-17.[53]

Use of pesticides

The consumption of chemical pesticides in the country has increased over

the past few years, from 55,540 tonne in 2010-11 to 57,353 tonne in
2014-15.[54] Over this time period, the imports of pesticides also
increased from 53,996 tonne to 77,376 tonne. Issues with regard to the
use of pesticides include use of low-quality pesticides, and a lack of
awareness about pesticide use. The Economic Survey 2015-16 noted that
the use of pesticides without proper guidelines has led to an increase in
pesticide residue being found in food products in India. 18

While the production of pesticides is monitored by the Ministry of

Chemicals and Fertilizers, their usage is administered by the Ministry of
Agriculture. There is a need to review the Insecticide Act, 1968, to
provide for a regulatory framework for the pesticides sector. 6 The
Standing Committee on Agriculture has also recommended that a
Pesticides Development and Regulation Authority be created to regulate
the manufacturing, import and sale of pesticides in the country. 6 Other
recommendations include developing an integrated pest-management
system, which includes a mix of the mechanical and biological methods of
pest control, and encourages the use of bio-pesticides. 18

Access to quality seeds

Quality seeds is another input necessary for agricultural productivity, and

good quality seeds account for 20%-25% of increased crop productivity.
[55] Seeds are regulated by the Seeds Act, 1966. The Act regulates the
quality, production, and sale of seeds. The Seeds Control Order, 1983
regulates the licenses to sell, export and import seeds. Three varieties of
seeds commonly used are (i) farm-saved seeds, which account for 65%-
70% of the total seeds consumption, (ii) commercially produced seeds of
the breeder, foundation and certified varieties, and (iii) genetically
modified and hybrid seeds.

Agricultural seeds are produced by various agencies such as Indian

Council of Agricultural Research and its research institutions, state
agricultural universities, and national and state seeds corporations. The
private sector has also started playing a role in supplying some seeds
such as hybrid maize, bajra, cotton and sunflower. Some of the
challenges identified in the development and distribution of quality seeds
are (i) access to quality seeds, and (ii) inadequate research support.[56]

About 30%-35% of the total seeds available are produced by private and
public sector companies, and farm bred seeds account for the remaining
seeds.18 While farmers can develop certain varieties of seeds from the
crops harvested on their land, high-yielding varieties of seeds have to be
purchased from the market. The cost of these varieties is too high for
marginal and small farmers to afford, thus disincentivising them from
purchasing these varieties.43 The Economic Survey 2015-16 has
recommended bringing in more players into the production of seeds, to
improve their availability in the market and also reduce their prices.
 Genetically modified seed varieties

Genetically modified (GM) seeds are those where certain genes are
modified to develop traits such as a resistance to pests and herbicide,
and increased productivity. Bt cotton is currently the only approved GM
technology seed in India. It was adopted in India in 2002 and as of
2014, 92% of the area covered by cotton uses Bt cotton.[57] After
releasing Bt cotton in the country, the crop’s yield increased from 190
kg/ha in 2000-01 to 461 kg/ha in 2014-15.[58]

Over the years, various GM crops such as Bt brinjal have been

developed, but they have not received the regulatory approval to be
released in Indian markets. Under the existing regulatory process, the
Genetic Engineering Appraisal Committee (GEAC) under the Ministry of
Environment, Forest and Climate Change, approves proposals for the
commercial use of GM seeds.[59] In September 2016, the GEAC invited
public comments on a report authorising the environmental release of
GE mustard.[60],[61] The Ministry of Environment is yet to provide the final
approval for GE mustard to be released commercially.

Agricultural machinery

Mechanization is another aspect with a significant impact on agricultural

productivity. The use of agricultural machinery in agriculture enables
agricultural labour to be used in other activities. It makes activities such
as tilling, spreading of seeds and fertilizers and harvesting more efficient,
so that the cost of inputs is offset. It can also make the use of labour in
agriculture more cost-effective.

The status of mechanisation in agriculture varies for different activities,

although the overall level of mechanisation is still less than 50%, as
compared to 90% in developed countries.[62] The highest level of
mechanisation (60%-70%) is observed in harvesting and threshing
activities and irrigation (37%). The lowest level of mechanisation is found
in seeding and planting. To increase productivity, farm equipment which
is durable, light-weight and low cost, and also specific to different crops
and regions should be made available for small and marginal farmers. 62

Some challenges faced by farm mechanisation include different soil and

climatic zones which require customised farm machinery, and small land
holdings with lack of access to resources. Mechanisation should aim to
increase agricultural efficiency by reducing the time and labour
requirement, minimising wastage and reducing costs of labour.[63]

Post-harvest activities

Storage facilities

After agricultural produce is harvested, it requires a robust storage

infrastructure in order to minimise any losses due to adverse weather
conditions or in the process of transportation. The quantity of food which
is wasted during the harvest and post-harvest processes in the country
has increased over the past five years.18 The highest losses are observed
in the case of fruits and vegetables (4.6%-15.9% of production in 2015),
pulses (6.4%-8.4%) and oilseeds (5.3%-9.9%).

Food wastage occurs at all levels of farming- the farmer, transporter,

wholesaler and retailer. Some of the reasons for this wastage are crop
damage, improper harvesting techniques, poor packaging and
transportation, and poor storage. Some of the issues with the state of
storage facilities in the country are inadequate capacity and poor
conditions of storage.[64] In cases where the storage capacity is found to
be sufficient, the conditions of the godown are unfit, either because of the
damp condition of the storage or because of its remote location.

Food grains from the central pool are stored in warehouses managed by
the Central Warehousing Corporation (CWC), under the Department of
Food and Public Distribution. As of December 2016, the CWC was
operating 438 warehouses with a total capacity of 9.7 million tonnes.
State Warehousing Corporations manage storage facilities at the state
level. As of December 2016, 19 such SWCs were operating 1,757
warehouses with a total capacity of 26 million tonnes.[65]
Another system for the storage of agricultural commodities is the negotiable warehousing
system, regulated by the Warehousing Regulatory and Development Authority. Under this
system, farmers who store their produce are issued a receipt with details of the location of the
warehouse, and the quality and quantity of the produce being stored. This receipt acts a
collateral in case the farmer wants to access agricultural credit.[66] As of 2015, a storage
capacity of 118 million tonnes was with warehouses registered with the WRDA. Of this, 19
million tonne was with the private sector, 15 million tonne with the co-operative sector, and
the remaining with government storage.[67]

Since foodstuffs such as certain fruits and vegetables deteriorate faster

and lead to wastage, they are stored at cold temperatures to reduce their
perishability.[68] Cold storage facilities in the country were set up by the
Cold Storage Order, 1964 under the Essential Commodities Act, 1955.
Some challenges identified in the development of cold storage in the
country are delays in the process of changing land use from agriculture to
industrial use, lack of tax exemptions accrued to cold storage for
agricultural commodities, availability of power, and accessibility to
farmers.[69]

Mega Food Parks

The Mega Food Parks scheme was launched by the Ministry of Food Processing Indu
[70] The scheme aims to create a mechanism of linking agricultural production to th
involving farmers, processors and retailers together in a cluster-based approach. Ex
outcomes of the scheme would be a higher price for farmers from their produce, cre
quality food processing infrastructure, reduction in food wastage, and creation of an
supply chain, among others. The scheme is being implemented through a Special P
set up under the Companies Act, 2013. As of July 2016, 42 mega food parks were sa
the Ministry, of which 38 have been approved for implementation and 8 are operatio

Agricultural Pricing

Procurement of agricultural commodities is the purchase of food grains by

the central or state governments. The Food Corporation of India is
responsible for the purchase, storage, movement, distribution and sale of
agricultural produce.[72] Minimum Support Prices are the prices at which
the government purchases food grains from farmers.
The largest procurement at MSPs is for rice and wheat. About a third of
the wheat and rice produced in the country is procured by the central
government. In 2015-16, 33% of the wheat and 30% of the rice produced
in the country was procured by the central government. Note that India is
a big exporter of wheat; in 2014-15, of the 90.8 million tonnes of wheat
produced in the country, 28 million tonnes was procured for the central
pool, and 29 million tonnes was exported.

Minimum Support Prices (MSPs)

MSPs are the prices at which the central government purchases food
grains from farmers. MSPs are fixed by the central government in order to
ensure remunerative prices to farmers. Factors taken into consideration
in determining MSPs include costs of cultivation and production,
productivity of crops, and market prices.[73] High MSPs of crops provide
incentives to farmers to adopt modern technologies and farming
practices, to increase the overall productivity of their crops. The
government announces MSPs for 22 crops (and a fair and remunerative
price for sugarcane), but the Public Distribution System, for which grains
are procured, primarily distributes wheat and rice to its beneficiaries.
Since procurement is mainly carried out for wheat and rice, farmers have
focused on the cultivation of these crops over other crops such as pulses
and oilseeds.37 Table 17 in the Annexure shows the MSPs for crops from
2005-06 to 2015-16.

Effectiveness of MSPs

Although MSPs are declared for various crops, procurement at these

prices mainly happens for wheat, rice, sugarcane and cotton, in a few
states. [74] As a result, in procuring states, farmers focus on cultivating
these crops over other crops such as pulses, oilseeds, and coarse grains.
MSPs are declared prior to each sowing season (in June and October) so
that farmers are aware of the minimum price the government will offer for
their produce. This is meant to encourage them to increase their
investment in the production of crops.74 In a report to measure the
efficacy of MSPs, the NITI Aayog found that a low proportion of farmers
(10%) was aware of MSPs before the sowing season. 62% of the farmers
were informed of MSPs after sowing their crops. The pricing policy of
MSPs would be effective only if farmers are aware of it at the time of
deciding what crops to grow. The NITI Aayog recommended that the
awareness level of farmers regarding MSPs must be increased and the
mediums of dissemination of this information must be strengthened. 74

Other issues with the implementation of the MSP regime include long
distances to the procurement centres, increasing cost of transportation for
farmers, irregular hours of the procurement centres, lack of coverage
storage godowns and inadequate storage capacity, and delays in the
payment of MSPs to farmers.74 The NITI Aayog notes that the agricultural
pricing policy needs to be reviewed to ensure that farmers are receiving
remunerative prices for their produce. One of the measures it
recommends is a price deficiency system. Under such a system, farmers
would be compensated for certain commodities if their prices fall under a
specified threshold. This would reduce stock-holding by farmers who
store commodities until prices increase, and also incentivise farmers to
produce different crops. Farmers would be paid by using the direct
benefit transfer system, through bank accounts linked to the their
Aadhaar numbers.

Agricultural markets

The production, supply and distribution of certain commodities comes

under the purview of the Essential Commodities Act, 1955.[75] These
commodities include food grains, oilseeds, cotton and woollen textiles,
jute, and coal, among others. Under the Act, the central government may
control the price at which any essential commodity is traded. It may also
regulate licenses for its storage, transport, distribution, disposal or
consumption.

Agricultural markets in the country are regulated by state Agricultural

Produce Marketing Committee (APMC) laws.[76] Under these state Acts,
farmers are required to sell their produce at state-owned mandis. Over
the years, several issues have been highlighted in this system. For
instance, APMC mandis currently levy a market fee on farmers who wish
to sell their produce in the mandis. This makes it expensive for farmers to
sell at APMC mandis. In addition, farmers have to arrange for their
produce to be transported from their farms to the nearest mandi, which
brings in costs such as transport and fuel. In transporting the produce
from the farm to the store, several intermediaries are involved. These
intermediaries are all paid a certain proportion of the price, as
commissions. Thus the market price which the farmer receives for his
produce is significantly lower than the price at which his produce is sold to
the retailer.

The central government had released a Model APMC Act in 2003, to be

enacted by states.[77] The Model Act (i) provides for the direct selling of
produce through contract farming, (ii) permits private persons, farmers
and consumers to establish agricultural markets, (iii) levies a single
market fee on the sale of the commodity, and (iv) replaces licences with
registration of market agencies so that they can operate in more than one
market, among other things. However, only 18 states and union
territories have implemented the reforms laid out in the Model Act.[78]
Four states are yet to initiate the reforms, and the remaining states are at
various stages of implementing them.

The Economic Survey 2014-15 recommended that a National Agricultural Market (NAM) be
created to provide for a national electronic platform on which farmers may sell their produce.
[79] Such a market would enable farmers to receive a corresponding price for their produce
and also allow them to sell their produce anywhere in the country. In April 2016, the central
government launched the National Agricultural Market in 8 states districts, and integrated
wholesale mandis in these areas to create a common platform.[80] Information regarding
states’ progress towards APMC reforms may be found in Table 18 of the Annexure.

Draft Provisions to address above issues: (First to be implemented

in a small village)
1.