The Hindu Business Line : Sowing a new farm strategy

There is a realisation that the farm sector must gear up to face the challenges and seize the opportunities offered by the WTO regime as also by the advent of new technology. Sharad Joshi looks at what it will take to bring about this kind of metamorphosis in Indian agriculture.

THE World Trade Organisation's Ministerial at Cancun ended without anybody knowing who lost and who won. Some think that the fact that there was no declaration at the end of the conference was bad for multilateral trade negotiations. Others feel it was better to have no declaration rather than have a bad one.

Those from the developing countries, no doubt, returned with the realisation that hard bargaining and postures have their place in negotiations but that it is time they started preparing to raise their agricultural sectors to world-class levels. The rich countries have taken the jolt of facing a unified G-21 opposition in their stride but would be all for resumption of negotiations. The sooner the better.

In New Delhi, there is a clearer realisation about what is necessary for preparing the Indian farm sector to face the challenges and seize the opportunities offered by the WTO regime as also by the advent of new technology.

Minimise the role of the government in agricultural production and marketing, make India a single commodity market governed by the law of `comparative advantage', create countrywide networks of information technology so that farmers are well informed about the market and price situation the world over, try and meet the sanitary and phyto-sanitary hurdles by providing farmers easy access to a scientific laboratory network, replace the outdated APMC (Agricultural Produce Market Committee) structures dominated by middlemen and bring in a more modern network of retail outlets, create a ready market for land to facilitate both exit from and entry into farm sector, stop coercive recoveries and, finally, increase both credit and public investment. This is the prescription.

So far so good. The next question is what will be the organisational structure for bringing about this kind of metamorphosis of Indian agriculture? Many proposals have been made and some are being even tried in the field.

There is a general consensus among the knowledgeable people that the role of the State will, at best, be limited to that of an animator and that the State agencies would not be adequate to meet the challenges of market-led economy.

The cooperatives as a form of business organisation for improvement of post-harvest operations in agriculture have enjoyed massive support of the farmers as well as the economists for over half a century.

"There can be no uplift of farmers without cooperation" — goes one slogan. "Cooperatives have failed; the cooperatives must succeed" was the dictum given by the Rural Credit Survey Committee as early as in 1955. There is an increasing realisation that finding an appropriate instrument for agricultural advancement is not a matter of sloganeering.

The cooperative movement, as it is understood in other parts of the world, especially in Europe, and particularly the Scandinavian countries, never really came to India. Cooperative societies here are largely state-funded, state-supported and state-controlled and, consequently, thoroughly politicised.

Except where led by exceptionally gifted and enterprising individuals, the societies are all in decline. The cooperatives are unlikely to be able to successfully face competition for the same reasons that make public sector institutions incongruous in this age.

The Ministry of Agriculture is working out various possibilities of bringing in the private sector. Some State governments have also been encouraging the private sector to get into agriculture and bring in more funds, technology and greater efficiencies.

To woo the private sector, States are offering fast land acquisition, relaxing all ceilings on land holdings. All other kinds of restrictions on entry into agriculture are also being rapidly relaxed. You don't need to be born farmer; you don't need to be economically poor to become a farmer.

The farmers have been agitating for years to get these restrictions annulled but have been thwarted by the state machinery. The private sector is being encouraged to enter agriculture with the kind of enthusiasm that is shown towards Foreign Direct Investment in the economy.

It appears that even those who ought to know better think that encouragement of the private sector in agriculture means facilitating entry of the corporate sector that is well established in industry and commerce.

Yet another form of inducing the private sector to play a decisive role is system that is popularly called `contract farming'.

Under this system, an organisation enters into a written contract with a group of farmers, and offers inputs, particularly seeds, credit and extension services.

In return, the farmers are obliged to sell their produce at a price to be calculated on the basis of a formula usually laid down in the contract. Most contracts stipulate a fixed price, others promise a stipulated portion of the price realised by the contracting organisation.

While in most cases the purchaser is a private organisation of modest size, in Punjab a quasi-government body is rapidly expanding its contract farming activities to all kinds of crops and regions. This format has worked well for some time but not for long. If the open market prices fall below the contract rate, purchasers would be obviously reluctant to meet their commitments.

On the other hand, if the situation reverses, the farmers would become reluctant to hand over their produce at the contracted prices.

Records show that there are only a few cases where the contracting organisations have filed suits against the farmers for failure to perform.

However, the number of farmers filing suits against the contracting organisations is much larger. A number of chambers of commerce and industry, NGOs, and even Krishi Bhavan have woken up to the fact that the farmers need some protection under `contract farming'.

The Ministry of Agriculture itself recently prepared a draft contract format, hoping that it would give farmers an increased sense of security. But with courts all clogged up with pending cases, can a litigant farmer get any kind of an order, favourable or unfavourable, even if the contract is foolproof?

Legal obligations do not lead to lively and throbbing economic structures. What is needed is a sense of trust and dependence. Each side must realise that its well-being is inextricably linked with that of the other side.

Government organisations have failed to create this sense of belonging and loyalty in the hearts of the peasantry. So have the cooperative societies. Expecting the two parties to develop a sustained, profitable relationship with clauses and contract is a mere pipedream.

True, the new instrument of agricultural development will be in the private sector; that need not necessarily mean a corporate body from outside.

For, farmers are themselves the largest segment of the private sector. The ingenuity of the authorities will be put to severe test in improvising an organisation where both sides of the farm contract come from the farming community and share an interest in the prosperity of agriculture and agriculturists.

The good news is that the Krishi Bhavan might soon start working on encouraging farmers' corporations — as recommended by the Task Force on Agriculture — that aim to bring about an operative consolidation of land by converting farmers' holdings and labour into equity.

The corporate farm, with the help of technicians and management, will provide the necessary inputs as also post-harvest services. Since under this model the parties on both sides of the farm contract will, in fact, be same natural persons, the idea has a good chance of succeeding and making Indian agriculture world class.

(The author is Founder, Shetkari Sanghatana, and can be contacted at sharad@mah.nic.in)

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