State of Agriculture in India

[vc_section][vc_row][vc_column][vc_column_text]1. Insight

  • 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 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 the rice production and 13% to the 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.  
Figure 1: Yield in different countries (tonne/ha)


Sources: Food and Agriculture Organization of the United Nations; PRS. 

·   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 other top producing countries such as China, Brazil and the United States.

·   Although India ranks third in the production of rice, its yield is lower than Brazil, China and the United States.  The same trend is observed for pulses, where it is the second highest producer.    


Figure 2: Agricultural growth (in %)


Sources: Agricultural Statistics at a Glance, 2015; PRS.

·   Agricultural growth has been fairly volatile over the past decade, ranging from 5.8% in 2005-06 to 0.4% in 2009-10 and -0.2% in 2014-15. 

·   Such a variance in agricultural growth has an impact on farm incomes as well as farmers’ ability to take credit for investing in their land holdings. 

  • Key issues affecting agricultural productivity include the decreasing sizes of agricultural land holdings, continued dependence on the monsoon, inadequate access to irrigation, imbalanced use of soil nutrients resulting in loss of fertility of 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.
  • Some of the recommendations made by committees and expert bodies over the years include bringing in agricultural land leasing laws, shifting to micro-irrigation techniques to improve efficiency of water use, improving access to quality seeds by engaging with the private sector, and introducing a national agricultural market to allow the trading of agricultural products online.

2. 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. 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. Figure 3 shows the trend in the growth of agricultural sector over the past 10 years.


Figure 3: Growth in the agriculture sector (%)


Sources: Agricultural Statistics at a Glance 2015, Ministry of Agriculture; PRS.

Figure 4: Contribution to GDP of sectors (%)


Sources: Ministry of Statistics and Programme Implementation; 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%. 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.

2.1. Agricultural production and yield

Figure 5 shows the production of crops over the past few decades. 

Figure 5: Agricultural production (million tonnes)


Sources: Ministry of Agriculture; PRS. 

·   Total production of food grains increased from 51 million tonnes in 1950-51 to 252 million tonnes in 2015-16.  According to the second advance estimate by the Ministry of Agriculture, food grains production is estimated to be 272 million tonnes in 2016-17.

·   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. 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. However, as seen in Figure 6, India’s yield is low when compared to countries such as China, Brazil and the USA. 

Figure 6: Yield in different countries in 2014-15 (in tonne/ha)


Sources: Food and Agriculture Organization of the United Nations; PRS. 

·   Although India is the second highest producer of paddy (rice) in the world (as of 2013), its yield is lower than China, Brazil and the USA.  It is also the leading producer of pulses, but its yield is the lowest.

·   India’s productivity has also grown at a slower rate as compared to others.  For instance, while Brazil’s yield for rice 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. 

2.1.1. 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. Despite high levels of production in the country, 15% of the population continues to be under-nourished, as per 2014 estimates.

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. 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.

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.  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. 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. 

2.1.2. Agricultural trade

Major commodities imported to India are pulses, edible oils, fresh fruits and cashew nuts.  Major commodities exported by India are rice, spices, cotton, meat and its preparations, sugar, etc.  Over the past few decades, the share of agricultural imports in total imports has increased from 2.8% in 1990-91 to 4.2% in 2014-15, whereas the share of agricultural exports has reduced from 18.5% to 12.7%. 

India’s trade policy is affected by factors such as domestic availability of commodities, cost of production as well as global price levels.  However, frequent changes in trade policy, such as reducing the import duty on a commodity in response to a shortage in supply, or decreasing minimum export price of a commodity to facilitate its exports, may have an adverse effect on the development of the agro-processing sector.

2.2. Factors affecting agricultural productivity

2.2.1. Increase in small land holdings

140 million hectare of land is used as agricultural area, as of 2012-13. 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. Marginal and small land holdings face a number of issues, such as problems with using mechanisation and irrigation techniques. 

Table 3: Agricultural holdings (millions)
Holding 1970










Marginal 36 50 63 75 93
Small 13 16 20 23 25
Medium 19 21 22 21 20
Large 3 2 2 1 1
All sizes 71 89 107 120 138
Note: Marginal: up to 1 hectare, Small: 1-2 hectares, Medium: 2-10 hectares, Large: over 10 hectares. 

Sources: Agriculture Census 2011; PRS.

Since smaller land holdings are either fragments of larger holdings which have been passed on within the family or have been informally leased by a large holder, farmers who cultivate these holdings often do not have a formal lease agreement.  The absence of such land records does not allow these farmers to access formal credit or be eligible for government benefits such input subsidies or crop insurance schemes. 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.  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.

E-Bhoomi project in Karnataka

The E-Bhoomi project was started by the Government of Karnataka in the early 2000s.  The project aims to computerize existing land records and create a transparent system for changing land records and dividing or merging plots of land.  Under the system, farmers can collect land record information for their plot at the Tehsil level, called Pahani.  These records would contain information such as the survey number of the land, land owner’s details, the classification of the soil, and details regarding irrigation and crops grown, among others.  The Pahani would enable the farmer to

(i). know whether the plot he wants to purchase is genuine,

(ii). raise farm credit from banks,

(iii). use the land records for official or legal purposes. 

E-Bhoomi also allows farmers to approach the government to address grievances. 

Currently, laws of tenancy of agricultural land vary across different states.  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.

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 person (who is not a family member).  Under the Act, produce from the farm is divided between the tenant and owner in a 50:50 proportion if the cattle, manure and seeds are provided by the landowner, and 75:25 in all other cases.  Illegal eviction of tenants is a cognizable offence punishable with imprisonment or fine, under the Act.  However, it does not provide any ownership rights to the tenant. 

The NITI Aayog has proposed a Model Land Leasing Law to provide for the legalisation of land leasing.  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. 

2.2.2. 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.  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. 

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. 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.  As of 2011-12, 61% of crop credit was short term, whereas long term credit had a share of 39%.

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. Some persistent issues with the crop insurance system include

  • unawareness about insurance schemes,
  • inadequate coverage of insurance schemes,
  • assessment of the extent of damages in case of crop losses, and
  • timely settlement of claims.

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. 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.

Pradhan Mantri Fasal Bima Yojana

The Pradhan Mantri Fasal Bima Yojana was launched by the central government in January 2016. The scheme aims to provide insurance coverage to farmers for crop failure, stabilise farmers’ income, and encourage farmers to adopt modern agricultural practices, among others.  The scheme has been allocated Rs 9,000 crore in the Union Budget 2017-18, compared to Rs 5,501 crore in 2016-17. The scheme covers all farmers, including tenant farmers and sharecroppers, who are growing notified crops in notified areas.  It covers crops such as cereals, pulses, oilseeds, vegetables, and spices.  As of December 2016, the scheme has covered 367 lakh farmers for a sum of Rs 1,41,625 crore in the Kharif season of 2016, as compared to 309 lakh farmers and a sum of Rs 69,307 crore in the Kharif season of 2015.

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. 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.

2.2.3. Availability of water

Currently, about 51% of the agricultural area cultivating food grains is covered by irrigation. 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)

Source of Irrigation % share of holdings Number of holdings
Tube wells 44.2% 31,722
Canals 25.7% 18,414
Wells 19.7% 14,101
Other sources 8.4% 6,046
Tanks 5.8% 4,180

Sources: Agriculture Census 2011; PRS. 

·   There is a need to improve the efficiency of water use, especially in agriculture.  Irrigation currently consumes about 84% of the total available water in the country.

·   Nearly 65% of the irrigated land holdings use ground water sources such as tube wells and wells for irrigation. 

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. 

The Commission for Agricultural Costs and Prices has recommended that quantitative ceilings should be fixed on the per hectare use of water. 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. It also launched a Policy in 2012 relating to water demand management, efficiency of water usage, and pricing. 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. 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.  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). 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. If India also increases its efficiency of water use, it will be able to cover a wider area for irrigation. 

2.2.4. 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.  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. 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.  2.5 crore soil samples have been collected, and 1.8 crore samples have been tested. 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.  Overuse of urea is especially observed in the states of Punjab, Haryana and Uttar Pradesh.  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.  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.

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.  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 for P and K fertilizers.  The policy was formulated with the objective of promoting a balanced use of N, P and K fertilizers.  The policy allowed the manufacturers of P and K fertilizers to fix their maximum retail prices (MRPs) at reasonable levels.  The subsidy provided would be based on per kilogram of the 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 report on the performance of the NBS policy stated that in the five years since its implementation, the policy had not succeeded in bringing about a balanced use of fertilizers. The fertilizer usage ratio of 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 tonnes 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. Fertilizer Subsidy

Figure 8: Fertilizer subsidy (in Rs crore)

Note: Subsidy figure for 2016-17 is a revised estimate, and for 2017-18 is a budgeted estimate.

Sources: Expenditure Budget, Union Budgets 2000-01 to 2017-18; PRS.


  • To promote the use of fertilizers by farmers, the central government provides a fertilizer subsidy to the producers of fertilizers.  In 2017-18, Rs 70,000 crore has been allocated for fertilizer subsidy, which is the second biggest expenditure on subsidy after food subsidy.32 
  • Allocations for fertilizer subsidy have been increasing at an annual rate of 11.4% between 2000 and 2016.  Of the subsidy allocated for 2017-18, Rs 49,768 crore has been allocated for subsidy on urea.  Figure 8 shows the trend in the fertilizer subsidy 2000-01 onwards.

Currently the amount of subsidy to be given is determined based on the cost of production of the fertilizer company.  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.

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.  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.  In July 2016, the government announced that it would be conducting pilot studies of direct benefit transfers in 16 districts in 2016-17.       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.  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.

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.

2.2.5        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.  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

  • farm-saved seeds, which account for 65%-70% of the total seeds consumption,
  • commercially produced seeds of the breeder, foundation and certified varieties, and
  • 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

  • access to quality seeds, and
  • inadequate research support. 

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.  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. 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.  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.

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

2.2.6. 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. 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.

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.

2.3. Post-harvest activities

2.3.1. 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.  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.  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.

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.  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.

Since foodstuffs such as certain fruits and vegetables deteriorate faster and lead to wastage, they are stored at cold temperatures to reduce their perishability.  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.

Mega Food Parks

The Mega Food Parks scheme was launched by the Ministry of Food Processing Industries in 2008.  The scheme aims to create a mechanism of linking agricultural production to the markets, by involving farmers, processors and retailers together in a cluster-based approach.  Expected outcomes of the scheme would be a higher price for farmers from their produce, creation of high quality food processing infrastructure, reduction in food wastage, and creation of an efficient food supply chain, among others.  The scheme is being implemented through a Special Purpose Vehicle set up under the Companies Act, 2013.  As of July 2016, 42 mega food parks were sanctioned by the Ministry, of which 38 have been approved for implementation and 8 are operational.

2.3.2. 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.  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. 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. 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.  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.  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.

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.  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. 

2.3.3. Agricultural markets

The production, supply and distribution of certain commodities comes under the purview of the Essential Commodities Act, 1955.  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.  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.  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.  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.  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. 

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*Source: PRS Legislative Research[/vc_column_text][/vc_column][/vc_row][/vc_section]

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