Module 2 : The Agricultural Sector

1) Institutional Structure
& land reforms in India
2) Technological change
3) Agricultural finance
4) Agricultural Marketing
5) Agricultural Pricing
6) National Agricultural
Policy, 2000

MODULE 2: CHP 1

INSTITUTIONAL STRUCTURE & LAND REFORMS

Institutional constraints

Land Reforms:
Objectives

Reforms
Critical evaluation

Institutional constrains

Defective agrarian structure

Zamindari

mahalwari ryotwari

In 1947, 173 million acres

Out of 324 million acres
Were with intermediaries

small & fragmented land

Agricultural statistics 2004

In 1994-95,
Avg.size of land holding 1.42 hec
61.6% total land holdings uneconomical.

Reasons : population pressure, law of inheritance,

Nuclear family, decline of handicraft industry, debts
Low income
Low productivity
No incentive
Uncertainty
Exploitation
Poverty
inequality

Effects : non mechanization, low productivity, poverty,

further debts

Land reforms
Objectives
1) Equal distribution of land
2) Removal of exploitation
3) Land to tiller
4) Equality of status & opportunities
5) Economic size of land holding
6) Create healthy work culture
7) Increase productivity
8) Generate rural unemployment
9) Optimum use of land
10)Developing co-operative spirit
11)Regulating rent

LAND REFORM MEASURES

1) Abolition of intermediaries 2) Tenancy Reforms 3) Reorganization of
zamindari abolition by paying
regulation of rent
Agriculture
compensation ,
20 million cutivators brought
into direct contact with state
It led to
End of absentee land-lordism
Ownership of land to actual
cultivator
Reduction of exploitation
Incentive to work hard
Limitations:
land
. for personal use
Ownership rights to intermediaries
Huge compensation

1/4th or 1/5th.

Security of tenure
land for personal
cultivation

Ownership rights
for tenants

ceiling on land holding

undistributed, 10 lakh acer
In litigation, unsuitable for
Cultivation,records
manipulation

Consolidation of land
holding
Fertile land to rich, failed
voluntary consolidation
Land records

Occupancy tenants
Co-operative farming
Tenants at will
Lack of motivation,
Sub tenants
Corrupt administration,
Limitations:
Rent not known
No records of tenancy

Few coop.s by poor farmers,

Lack of team spirit,
Lack of trust on co-ops.,
Emotional attachment to land,
Political interference

LIMITATIONS:
zamindari abolition only on paper
farmers not aware about rent limit fixed
Lack of records
dominance of landlords
voluntary surrender of land
Low grade land
illigal transactions
QUESTIONS:
1) Write a note on land reforms (april 2009) (april 2008)
2) Describe the reasons for poor implementation of land reforms in Indian( nov
05)

Chp. 2 Technological Change in Agriculture

The New Agricultural Strategy ( Green Revolution) 1966: New Technology
was introduced which was a package of measures offered to Indian Farmers
To increase production and productivity and make India self sufficient and
self reliant in food grain production
Intensive Agricultural District Programme
(IADP) in 1960-61 in 7 districts
Extension in 1966
Measures undertaken under IADP are
1) use of HYV seeds
2) better water management
3) use of fertilisers & pesticides
4) educating farmers
5) providing better credit & marketing
6) better irrigation
7) better mechnisation

Impact of Green Revolution

Achievements
1) Foodgrain production
Wheat: 11 to 76 M. T.(60-61 to 99-00)
Rice: 35 to 90 M.T.(60-61 to 99-00)
Foodgrains: 212 to 217.3 million T.
during 01-02 to 06-07

2) More productivity
Foodgrains: 783 to 1626 kgs
per hectare (67-68 to 00-01)
3) Changes in Agricultural Practices
4)Employment Generation
5) Linkage with Industry
6) Changes in attitude of farmers

Limitations
LIMITED COVERAGE
INSIGNIFICANT INCREASE IN PRODUCTION & PRODUCTIVITY
CAPITALIST FARMING
INCREAED INEQUALITY
UNEMPLOYMENT

TECHNOLOGICAL CHANGES IN AGRICULTURE

BASIC INPUTS:
Cultivation Japanese method of rice cultivation.
Seeds HYV Seeds. Institutional framework has been developed to generate
Quality seeds through central & state Government participation.

Indian Council of Agricultural Research (ICAR)

State Agricultural Universities

National Seed Corporation (NSC)

15 State Seeds Corporations (SSCs)

State Farms Corporation of India (SFCI) & seed companies

Irrigation major & minor dams, borewells, pumpsets, drip irrigation.

During 50 years of independence, the Government had spent about 231,400/- crores
( at 1996-97) prices) on major ,medium and minor irrigation works, leading to growth
in
The countrys irrigation potential from 23 million hectare (1950-51) to
89 million heatare (1996-97)
In India about 60% of foodgrains production comes from 39% of irrigated area and
40% of remaining production comes from 61% of rainfed area.

Pest Control pest control methods have been developed to Integrated Pest
Management (IPM). Efffective IPM packages are designed &
developed for rice, cotton, sugarcane, pulses, oilseeds etc.

FERTILIZERS AND MANURES

Production, imports & consumption of chemical fertilizers in India
YEAR

PRODUCTION
000 TONNES

IMPORTS
000 TONNES

CONSUMPTION CONSUMPTION
000 TONNES
PER HECTARE
OF CROPPED
AREA (KG)

1951-52

39

52

1990-91

11,860

2,760

12,550

76.8

2000 -01

14,750

5,253

16,700

90.1

2006-07

16,096

6,058

21,651

112.2

Economic survey 2008-09

70

0.5

Agricultural Engineering - Indian Council of Agriculture Research (ICAR) has

designed a variety of marketable implements &
machines for field operations
Technology Mission on Oilseeds, pulses & maize - launched by the
Central Government in 1986 and was extended to pulses, oil palm & maize
in 1991, 1992 & 1996
Various schemes were implemented.

Oilseeds Production Programme (OPP)

National Pulses Development Project (NPDP)

Accelerated Maize Development Programme (AMDP)

Oil Palm Development Programme ( OPDP)

Extension Services for farmers training
Kisan Call Centre introduced in 2004. 144 Call Centre Agents use 21 local dialects
toll free number 1551 & 1800-180-1551 from 6am to 10 pm for 7 days
Department of Agriculture & Cooperation has developed a
data structure Kisan Knowledge Management System (KKMS) to
help KCC provide correct answers
I.T. use of IT for information & also to update land ownership records

QUESTIONS:
WRITE A NOTE ON GREEN REVOLUTION
EXPLAIN THE NEW AGRARIAN TECHNOLOGY

AGRICULTURAL PRICING
Need for agricultural price policy..???
To provide remunerative prices
To provide incentives
To promote capital formation
To have better terms of trade between
agri & non-agri sector.
To reduce income inequality
To prevent inbuilt fluctuations
ADMINISTERED PRICES: YEARLY BASIS
Recommendation of Jha committee
1964-65
Agricultural Price Commission 1965
recently called as
COMMISSION FOR AGRICULTURAL
COSTS & PRICES ( CACP)

FACTORS CONSIDERED WHILE DETERMINING PRICES BY CACP:

cost of production
Risk factors
Effect on industrial cost
Effect on cost of living
Effect on general price level
International price situation
Changes in agricultural input prices

Market prices
Demand & supply
Trends in the past price levels

ANNOUNCEMENT OF ADMINISTERED PRICES

TYPES OF ADMINISTERED PRICES

MINIMUM
SUPPORT
PRICES

Floor price/24 crops

PROCUREMENT
PRICES

Generally
Lower than
Market price
& higher than
M.S.P.

STATUTORY
MINIMUM
SUPPORT
PRICES
Jute & sugarcane

ISSUE PRICES

Lower than
Procurement
Prices.

( in 2009-10, issue price per quintal for wheat was 610)- & for rice,795/- for APL
for BPL, 415/- for wheat & 565/- for rice; for AAY, it was 300/- per quintal)

ADMINISTERED PRICES
1. MINIMUM SUPPORT PRICES (M.S.P.)
M.S.P.: ANNOUNCED EACH YEAR BY CACP.
CONSIDERS MANY FACTORS WITH SPECIAL EMPHASIS ON COST FACTOR;
IMPORTANT COST CONCEPTS USED ARE C2 & C3 costs:

C2 = all actual expenses in cash and kind incurred in production by actual owner +
rent paid for leased land + imputed value of family labor + interest on value
of owned capital assets + rental value of owned land ( net of land revenue).
C3 = C2 + 10% of cost to account for managerial remuneration to the farmer.

MINIMUM SUPPORT PRICES 2010-11

Rs. PER QUINTAL
COMMODITY

M.S.P. 2010 -11

CROP YEAR

KHARIF CROP
paddy (common)

COMMODITY

M.S..P. 2010-11
CROP YEEAR

RABI CROP
1,080

Wheat

1,285

Paddy ( grade A)

1,110

Masur

2,800

Cotton ( F-414/H777/J-34)

2,800

Other crop

Groundnut in shell

2,700

safflower

Source: Department of Agriculture & Cooperation

2,500

IMPLEMENTATION OF ADMINISTERED PRICES

1) AGENCIES:
FOOD CORPORATION OF INDIA (FCI) FOR FOODGRAINS
NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION (NAFED) FOR,
CEREALS, PULSES & OILSEEDS
COTTON & JUTE CORPORATIONS, TOBACCO BOARD ETC.

2) NATIONAL CROP FORECASTING CENTRE ( NCFC): IN JAN 1999,

TO WATCH PRICES ON PRIMARY GOODS &PUT AN ADVANCED WARNING SIGNAL

3) HIGH POWEREDPRICE MONITORING BOARD: 1999, MONITORING ESSENTIAL

COMMODITY PRICES & ANTICIPATING THE NEED FOR GOVERNMENT INTERVENTION

4) TARGETTED PUBLIC DISTRIBUTION SYSTEM: 5 LAKH FPS

5) BUFFER STOCKS: BY FCI & NAFED OF ESSENTIAL COMMODITIES.

6) WAREHOUSING
7) REGULATED MARKETS
8) CREDIT FACILITY

LIMITATIONS
DIFFICULTY IN DECIDING FAIR PRICES
NO INTEGRATION BETWEEN DIFFERENT CRITERIA
BENEFIT TO LARGE FARMERS
MOUNTING DEFICIT
EXCESSIVE BUFFER STOCKS
SEASONAL & SHARP RISE IN VEGETABLE PRICES
FLAWS IN PDS
CONTRIBUTION TO INFLATIONARY TREND
NOT ALL COMMODITIES COVERED

Agricultural Finance
Introduction

Constraints

Structure

NABARD

CREDIT NEEDS OF FARMERS

ON THE BASIS OF TIME
SHORT TERM-

(less than 15 months)

seeds, fertilizers,
pesticides, marketing, wage payment,
consumption, productive purpose

MEDIUM TERM (15months 5yrs.)

cattle, small implements,
repair & construction of wells

LONG TERM (more than 5 yrs)

permanent land improvement,
buying land,
repayment of old debts

ON THE BASIS OF SOURCES

INSTITUTIONAL
NON-INSTITUTIONAL

ON THE BASIS OF PURPOSE

PRODUCTIVE agro production
CONSUMPTION for the period between
Marketing & harvesting
UNPRODUCTIVE customs, traditions,
rituals

NON-INSTITUTIONAL FINANCE IN INDIAN AGRICULTURE

Money Lenders, Chit Funds, relatives, friends
Main source of Agricultural Finance at the beginning of the planning period
Share: 92% in 1951( money lenders 69.7%) to 20% current aaprox.

MERITS
EASY TO OBTAIN
SIMPLE PROCEDURES
EASY ACCESS
NO RESTRICTIONS
CONSUMPTION LOANS

DEMERITS
EXORBITANT RATES OF INTEREST
INDEBTEDNESS
LOSS OF LAND
MALPRACTICES
EXPLOITATION
BONDED LABOUR

INSTITUTIONAL CREDIT IN INDIAN AGRICULTURE

STRUCTURE OF INSTITUTIONAL CREDIT

GOI & RBI

NABARD

COMMERCIAL
BANKS

CO-OP.CREDIT
SOC.

RRBS

FLOW OF INSTITUTIONAL CREDIT TO AGRICULTURE

PERCENTAGE SHARE
AGENCY

1970s

1980s

2OOO-O1

2010-11

COOPERATIVES

77.0

55.9

39.0

16

COMMERCIAL BANKS

21.O

38.9

53.0

74

REGINAL RURAL BANKS

2.0

5.3

8.0

10

Source: RBI bulletin, NOV 2004 & economic survey 2011-12

COOPERATIVES: RURAL CREDIT AT LOWER COST

Coverage: by 2005, 97% villages with almost 900 lakh members

STRUCTURE
SHORT & MEDIUM TERM

State co-op banks (

state level) 29

LONG TERM

State Land
Development
Bank ( State Level)

Central co-op banks (

district level) 367
Primary Agricultural
Credit Soc.s 98,000
(village Level)

Primary Lend
Development
Banks (village
Level)

IN 1971, LARGE SIZED ADIVASI MULTI PURPOSE COOPERATIVE SOC. LAMPS

PROBLEMS: 1) LOW PROFITABILITY
2) POOR RECOVERY
3) LACK OF PROFESSIONAL MANAGEMENT

COMMERCIAL BANKS
GROWTH IN RURAL CREDIT AFTER NATIONALIZATION.
18% net bank credit is for priority Sector
Short term finance
Medium & long term finance
Direct finance: for expenditure of land development
10%
Indirect Finance: finance to coop.s,to FCI (4%)
Lead Bank Scheme: individual commercial bank responsible for development of
Individual district

LIMITATIONS:
LOW QUALITY OF LENDING

TIME CONSUMING AND COSTLY OPERATION DUE TO SMALL SIZE OF LOANS

LOW LEVEL RECOVERY
MORE BRANCHES WITH LESS GROWTH POTENTIAL
REGIONAL IMBALANCE
LACK OF COORDINATION

REGIONAL RURAL BANKS

WERE ESTABLISHED IN 1975 ON THE RECOMMENDATIONS OF
M.NARSIMHA COMMITTEE
regionally based, rurally oriented and generally sposored by scheduled
commercial banks and in some cases by private and state cooperative
banks.
MAIN OBJECTIVE IS TO SUPPLY CREDIT TO THE AREAS IN WHICH
OTHER FINANCIAL INSTITUTES ARE NOT ACTIVE.

LIMITATIONS: POLITICAL INTERFERENCE, LOW RECOVERY

NAME OF RRB

SPONSORED BY:

CHAITANYA GODAVARI GR BK

ANDHRA BANK

SAPTAGIRI GRAMEENA BANK

DECCAN GRAMEENA BANK

INDIAN BANK

STATE BANK OF HYDERABAD

ANDHRA PRADESH GR.VIKAS BANK

ANDHRA PRAGATHI GRAMEENA BANK

STATE BANK OF INDIA

SYNDICATE BANK

NABARD
1982
NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

APEX BANK FOR RURAL CREDIT AND DEVELOPMENT.

SHARE CAPITAL CONTRIBUTED BY GOI & RBI
HEAD OFFICE AT MUMBAI, 16 REGIONAL OFFICES

FUNCTIONS
APEX BODY FOR RURAL CREDIT
SUPERVISING CO-OPS
SHORT TERM CREDIT TO STATE CO-OPS
MEDIUM & LONG TERM TO STATE CO-OPS AND RRB
SUGGESTIONS TO GOVT.

R & D

CONTRIBUTION OF NABARD TO AGRICULTURAL FINANCE

2003-04 7626 schemes sanctioned of 7605/ Refinance to state government & co-op. banks

Development of Rural Infrastructure Development Fund

Promotion of Micro-finance
Bulk Lending Support to NGOs
Tribal Development Project in Gujarat (wadi project)
Kisan Credit Card Scheme (KCC) 1998-99

To facilitate access of credit from commercial banks, cooperative banks

& RRBs. Farmers eligible for production credit of 5,000/- are eligible for KCC
provision for revolving cash credit with any number of withdrawals& repayments
within the limit (withdrawal within 12 months)
Valid for 3 years with annual review, conversion & rescheduling of loan is possible.
Credit limit can be enhanced for good performance. Security, margin, interest as per RBI norms
Implementation through 27 commercial banks, 378 central & state cooperatives, 196 RRBs
31st October 2011 1,078.36 lakh KCCs issued.

Gender Development through Credit: Assistance to Rural Women

in Non-Farm Activities (ARWIND)
Refinance under Swarnajayanti Gram Swarojgar Yojna
Supervising body
Farm Income Insurance Scheme ( FIIS) 2003-04
Differntial Rate of Interest (DRI) 1972
Advances to SC-ST borrowers

AGRICULTURAL MARKETING
Refers to all activities involved in the transfer of agricultural products from
the producer to the final consumer, like storage, transport, grading and sale

PROBLEMS

REMEDIAL
MEASURES

PROBLEMS OF AGRICULTURAL MARKETING

ESSENTIALS OF A GOOD MARKET INCLUDES:
good holding capacity, storage, transport, direct access, good communication.

PROBLEMS
1) Inadequate Storage
2) Lack of Grading & Standardization
3) Inadequate Transport Facilities
4) Middlemen
5) Malpractices in unregulated markets
6) Inadequate Market Information
7) Inadequate Credit Facilities
8) Lack of Organization
9) Seasonal Price Fluctuations
10) Forced or distressed sale

REMEDIAL MEASURES
COOPERATIVE MARKETING
REGULATED MARKET
STATE TRADING
EXPANSION AND
MODERNISATION OF
MARKET NETWORK

COOPERATIVE MARKETING
Farmers join together and sale goods directly 4000 primary soc.

Three tier structure

Primary marketing societies village
Central Societies district level
State Marketing Societies - state

FUNCTIONING
Members agree to sell surplus to soc.
Members get advance from the soc.
Soc. Collects produce fm mem & non-mem
Soc. Process produce & grades
Members get balanced money

PROBLEMS: improper functioning,

Poor linkage in diff. levels, unhealthy
Competition, dominance of rich
farmers, regional imbalance.

REGULATED MARKETS
March 31st 2010, there were 7,157 regulated markets
ESTABLISHED UNDER STATUTORY REGULATION
Aims at protecting farmers from unhealthy practices, is administered by
a market committee consisting of representatives of state government,
Legal bodies like district boards, traders, commission agents and farmers.

COMMITTEE ENSURES:

Elimination of wrong practices like, incorrect weights, absence of grading,

delay in Payments etc.
Fixing mkt. charges like commission of agents, storage charges etc.
Remunerative prices for farmers.
Redressing grievances
Information about prices by collecting relevant data.
Help in securing storage facilities
Elimination of unnecessary commission

STATE TRADING
To overcome wide fluctuations in prices. It was introduced by
Central Govt. & some State Govt.
Food Corporation of India, The Maharashtra State Monopoly
Procurement Scheme

Govt. procures food grains from

farmers at fixed prices & maintains
buffer stocks

Expansion & modernization of market network

IMPROVEMENT IN TRANSPORT
MORE THAN 7000 REGULATED MARKETS
MARKET SURVEYS TO FINDOUT PROBLEMS & SOLUTIONS
PROVIDING INFO THROUGH MASS MEDIA
INCREASE IN WAREHOUSING FACILITIES
GROWTH IN INSTITUTIONAL FINANCE
SPECIAL BOARDS FOR MARKETING AGRO COMMODITIES
GRADING & STANDARDIZATION: Agricultural Produce (Grading & Marketing) Act 1937
Standardised commodities are sealed with AGMARK. To test the quality and brand
Central Quality Control Laboratory At Nagpur, & eight regional labs.

CONSTRUCTION OF RURAL GODOWN 2003- 04, 4851 storage projects were sanctioned
FUTURES TRADING 2003-04: Mumbai, Ahmedabad. Jute, rubber, soya oil, pepper, termeric

LIMITATIONS
MALPRACTICES ARE NOT ABOLISHED COMPLETELY

LACK OF AUTONOMY

LACK MODERNISATION

TO ESTABLISH AN APPROPRIATE

& CONDUCIVE ENVIRONMENT

TO ACHIEVE A HIGHER
GROWTH RATE OF
AGRICULTURE

28thJuly 2000

OBJECTIVES :

Growth rate more than 4% per annum.

To introduce required structural changes

To bring in necessary reforms

To make efficient use of resources

To sustain higher growth with necessary supporting services

To make agri. More market oriented

To achieve equity

FEATURES OF NAP 2000

Encouragement to private participation: contract farming, capital inflows, tech. transfer
Competitiveness: through liberalization, dismantling of Quantitative Restrictions
Tax Reforms: tax concessions rather than subsidies

Encourage Futures for hedging the risk

Protection from multinationals patent rights
Infrastructure facilities

Plans to evolve, National Livestock Breeding Strategy.

Improvement in Credit facilities

Wider coverage of Insurance

Transform agriculture into modern, dynamic, productive sector (2002 policy)

EVALUATION
Growth Rate: 2001-06 3%, 2005-09 3.8%
Small & Marginal farmers are neglected

Private investment (82.4% in 2008-09) may lead to exploitation

Non institutional credit is still persistent
Poor rural infrastructure

National Commission on Farmers: Dr. M.S. Swaminathan, chairman :

aims at improving agricultural assets of the farmers &
the supporting services to enable them to earn more. Reports in 2005-06