Redesigning Institutions for Betterment of Farmers

The success of the Green Revolution is attributed to policy, infrastructure, inputs and institutions. Of these, policy and  inputs are currently under scrutiny through the ‘sustainability lens’. Infrastructure continues to be a priority for investment.  Institutions have escaped close scrutiny, largely on account of their past success. The key institutions that helped farmers get to the high productivity curve are ICAR, Coop Credit Institutions, Irrigation Department, fertiliser companies( PSUs, COOPs and private) and the Food Corporation of India (FCI). These institutions worked together to address the acute problem of  “food shortage” with singular focus. Their mandate  was clear: produce more food so that Indians do not have to depend on imports. They did achieve this goal and India today exports  food.  

Times have changed, so have climate, ecology  and markets. Concerns about farming as an ecologically sustainable and economically viable activity have highlighted the need for immediate and long-term solutions. While policy  options are being discussed across national and global platforms, institutional rebuilding appears  to be in the back burner.
This paper attempts to point out a few key issues. The issue of institutional rebuilding requires a more comprehensive treatment and this article is intended only to provoke thinking and not to answer all the questions.

An important aspect to be remembered is that the word ‘institution’ does not necessarily mean ‘government institutions’ only. It includes all institutions, cooperatives, farmer organisations, NGOs, and private institutions. With this caveat, let me list a few issues.

First, take the most important one, ICAR: It has to its credit the huge contribution it made to  achieving food self-sufficiency.  It has  also contributed significantly to the growth of horticulture, livestock and fisheries. ICAR’s efforts were focused primarily on increasing production and productivity and not so much either on farmers’ incomes or long-term sustainability. One has heard many arguments on how an increase in productivity will automatically lead to increase in farmers’ incomes. While productivity does contribute to increased incomes, the presumption that this is the only path to be followed is problematic. Also, R&D has remained largely focused on productivity gains, that too primarily of rice and wheat. While ICAR was focused, and rightly so, on R&D, technologies got developed in the private sector and these were readily available at a cost to companies and farmers. Most of the high-yielding or pest-resistant seeds in horticulture and oilseeds came from the private sector. Seeing the yield benefits, farmers lapped up the new technologies. 

ICAR continued its work on traditional lines, while private sector made larger inroads. Nothing wrong there. But ICAR, as the largest public-funded research programme for agriculture in the country,  has to take the new challenges onboard and focus on the following: (1) Increasing farmers’ incomes not only by increasing productivity but also by finding ways to reduce costs and increase value, (2) conduct  research and education on natural farming methods and scientifically validate the processes for adoption by farmers, (3) conduct  research on sustainable farming and climate resilience, and (4) restructure Krishi Vigyan Kendras as ‘local problem solvers’.  The list can be longer, but this is the minimum.

Second, agricultural extension systems: These have continued to focus on rice and wheat based on  Green Revolution methods. Climate change, growth in demand for fruits and vegetables, egg and poultry, and dairy products demand a diverse and more knowledgeable extension system. Neither reach nor technical competence has been expanded to cover these new demands. Private companies and their agents have occupied this space. Of late, startups have also entered the market. Farmers have shown an inclination to pay for good quality service provided it helps them earn more. Start-ups have realised this  and have entered areas like  weather forecasting at the micro-climate level, nutrient evaluation of plants, market and financial information, to help farmers navigate the space better. 

Third, credit institutions: Well- established cooperative credit system collapsed thanks mainly to mismanagement and defaults. The burden of providing agricultural credit got shifted to commercial banks, which had by then established a large network of rural branches. With this,  whatever remained of the cooperative credit system also collapsed. An attempt to revive the system is on its way. In spite of the shrinking of cooperative credit, total short-term credit availability is on the rise. However, the norms and the financial instruments have remained in the rigid rice–wheat format, thereby ignoring the demands of the faster growing sectors like horticulture, poultry, etc.  A few innovative private financial institutions have designed  better financial instruments with flexible schedules of disbursements and scientific monitoring parameters. The credit system, largely based on public sector banks, calls for a major innovation. 

Fourth, farmers’ organisations: The failure of the conventional cooperative structure in the rural economy, primarily due to elite and political  capture, mismanagement, non-participation of farmer members and interference by the governments led to fresh thinking on redesigning farmer organisations. The idea of farmer producer companies (FPCs), as an entity registered under the Companies Act was conceived and given effect to. This structure allowed members to get out of the stranglehold of the state governments and establish private companies of their own. A major plan to register such 10,000 FPCs was also rolled out. Reports indicate the existence of more than 40,000 FPCs. How many of them will survive after the ‘subsidy period’ is over remains to be seen. While FPCs were being encouraged, the 97th Constitutional Amendment provided more operational freedom to cooperatives as well. The government created three national-level cooperatives recently  for organic agriculture, exports and seeds. Their performances are yet to be ascertained. Since these three are not ‘ground up’ institutions like Amul, their efficacy in bringing real value to the farmers remains to be seen. Lessons should have been learnt from the Amul model and the self-help group model, both built from the ground up and supported by a federation or Rural Livelihood Missions at the top. Building effective farmer organisations as business organisations in an enabling policy environment is key to any attempt at increasing  the income of farmers. One important aspect of creating farmers’ institutions is providing flexibility  to connect with the market either through private channels or through their own federations and not stick to any prescribed format. This would lead to market reforms which will benefit farmers in the long run.

Fifth, an ecosystem for start-ups in agriculture: A few start-ups in ag-tech, fintech and food-tech have shown promising results.  There exist a few hurdles in the regulatory and policy environments which need to be addressed. The government needs to consider start-ups as their partners in delivering services effectively to farmers, without being obstructionist. 

Sixth, markets and institutions: The first institution that comes to mind is the APMC. While I believe that regulated markets are important, APMCs have deviated significantly from their original purpose and design. They should be reformed to become enablers than ‘strangulating market institutions’ and they should be freed from the clutches of traders and middlemen to  become farmer-owned and -controlled organisations. FCI is another large institution which is responsible for procurement of food grains. Considering the size and complexity of its operations in procurement and distribution across the country, it has done a good job, but not without logistical problems. Nimble institutions, rooted in local geographies, are ideally suited for a country like India. However, ‘regionalising’ and decentralising FCI is no ordinary task. The planning for such a transformation has to be meticulous and aligned to the overall objectives. Many states have their own marketing federations which are mostly ineffective. These require  a ‘creative destruction’ to allow  setting up of new market-savvy institutions. In this context, NAFED will also have to reinvent itself and be more market savvy and not restrict itself to MSP purchases.

Seventh, private institutions: There are a number of private ‘institutions’ which impact agriculture and farmers. There are the conventional seed and fertiliser associations which are well organised to take care of the business interests of their members. It will do them a lot of good if they realize that farmers are their main clients and their survival depends on the decisions farmers make. Their ‘connect’ with farmers needs to be built on ‘trust’.  Probably the fault lies with farmers’ organisations as well since they have not engaged in continuous and meaningful dialogues with them. There are charitable organisations, NGOs, and academic institutions, which work on farmer issues. They work in small silos depending on their interest and funding. The work of these institutions needs to be collated and made available to farmers. The list is long.

My short point is  that new challenges require a new ecosystem. Governments should create such an ecosystem where stakeholders can work together with mutual trust and provide better services to farmers. We need to get the  institutional architecture right!

(The writer is former Secretary, Agriculture and Food, Government of India)