Will Indian farmers will gain from a market-driven economy? To answer this question, one has to begin from the fact that farming in India is individual driven and unorganised.
Also, individual land holdings size in India is very small and uneconomical. The average size of land holding in India was 1.23 ha in 2005-06 as compared to 3232.1ha in Australia, 45ha in France, 273.4 ha in Canada, 178.4 ha in the US and 582.4 ha in Argentina. Resource-poor-farmers with land holding of less than two hectares cultivate about 30% of the land. Economists hold a representative Indian farmer has to have at least 3.3 hectare agricultural landholding to stay above the poverty line.
So, individual farmers, having no marketable surplus to sell in the market, will have to pay market price for all farm inputs and other basic utilities and consumable items. Thus, market access under the WTO is not going to help majority of the Indian farmers. Any loan waiver will not solve the problem. There is, therefore, a need to organise Indian farmers on the model of a ?Corporate Farming?, a model that helps the leadership to addresses the issue of organising a vastly unorganised Indian agriculture as an organised corporate to overcome challenges from MNCs and help the farming community to gain from the market economy.
Corporate Farming
Unorganised agriculture sector has to transform into a legal entity, as corporate identity is a must to do businesses profitably in today?s market-driven, globalised world. Let us look at some models for this.
Village Corporation
Assume agriculture as an industry where every village is incorporated as a corporation. Every cultivator becomes an equity holder to the extent of land holding. Selling land is by transferring equity without a physical transfer and share of sale proceeds of crops will be proportionate to their equity holdings. This will check fragmentation of landholdings and provides economical farm size. To begin with, a corporation can be managed either by private investors on profit sharing basis, or by a consortium of experts including the local ones. Every alternate year, the government nominee should give way to a village representative, who should get at least six months training in farm practices and company affairs. At the end of 6 years, the village corporation management is free from government nominees.
Every equity holder will be entitled to work on payment of minimum wages. Men hours get divided amongst equity owners. Soft term-loans to adopt modern farming techniques should be made available. In fact all farm subsidies should be galvanised into one category and extended directly. This will decouple the subsidy from the individual farmers, prevent its misuse and improve its productivity, while being WTO compatible.
The government need not depend on fertilizer Industry for subsidy payments to farmers. For now it can be directly administered through village corporations. This may not pose administrative problems as national gains will far exceed individual losses, if any. Besides, it will provide enough room for market forces to fix input and output prices. On the supply side, village corporations can produce various crops as per market requirements and on the demand side, they can negotiate farm inputs prices. It will be easy to administer contract farming to meet the corporate requirements of the quality raw material and attract new investment in agriculture to improve its productivity as well capital formation in rural sector.
Taluk Corporation/Co
Conglomerate of village corporations with processing units that require large supplies of farm produces. Governed by village representatives, it should function as a hub for food processing a direct value addition to farm produce. This will increase self life of agro-products and create massive job opportunities in rural sector.
District Corporation/Co
District Corporations are to function as financial/technological service providers, keep vigil over market trends and disseminate timely information to guide village corporations.
To reform the Indian agriculture on the above model, the existing land and company laws may need amendment to permit corporatisation of the agriculture land holdings. However corporate farming should be optional, at least to begin with, and may be made compulsory if more than 50% land holders of any revenue village decide to go for the new system of farming. Once enough experience is gained and the required infrastructure is created, it should be obligatory for every village to adopt corporate farming to ensure overall welfare and equitable growth of the rural sector.
The extensive network of agricultural universities in India can support this model by creating awareness about the need of organising the vast unorganised agriculture sector to encourage capital investment, create economical farm size to have gainful farming.
The author is a senior civil servant. The views expressed are personal