Ensuring Income Security to Farming Households

Progress in agriculture should be measured by the growth rate in the net income of farm families… moving away from an attitude which measures progress only in millions of tonnes of food-grains and other farm commodities.

– National Policy for Farmers, approved by

Government of India in 2007.

The continuing agrarian crisis since the 1990’s is one of the most serious problems facing the nation. The deep dis- tress in the farming community has resulted in the situation where almost 16,000 farmers continue to commit suicide every year – which a civilized humanist society cannot accept. The increasing impoverishment of farming has a cas- cading effect resulting in rural poverty, lower incomes to agri- culture workers, food and nutritional insecurity, and distress migration to join the ranks of urban poor. The governments have typically addressed these problems through supple- mental measures such as supply of low-cost food through PDS and additional wage  employment  through  MGNREGS.  However, these

measures will remain patchwork solutions unless the economic viability of agriculture is directly addressed.

For many decades since 1960’s, the focus of agricultur- al policy has been to increase the production. The incentives and support systems were geared towards higher productivi- ty by intensive use of chemicals, water and responsive vari- eties in a few targeted crops. Farmers were told that by pro- ducing more, they would get better incomes. To their eternal credit, farmers have used ingenuity, innovation and stupen- dous hard work to make the nation self-sufficient in most commodities. However, in the past two decades, it has been seen that even in years of good production, farmers are at the losing end.

The growing costs of cultivation along with weakened support systems, lack of remunerative prices and public investment has meant that farming has become high-risk occupation, especially for small farmers and tenant farmers. Simultaneously, there is an unaddressed ecological crisis in agriculture in many parts of the country in the form of soil deterioration, falling groundwater levels, increased chemical use in agriculture impacting on environment and human health.

As per the Arjun Sengupta Commission report (2007), real incomes of farmers are really low, with the average being Rs.2115 per family per month. However the average family expense is Rs.2770 per month. Even at such below-poverty- level consumption, the average family still spends more than it earns, thus getting into debt. Meanwhile, the creation of employment in other sectors has been dismal. Even in the high- growth period of 2004-2009, only 2 million net new jobs were created but the working-age population has increased by 55 million.

On the other hand, the government spends thousands of crores every year in the name of farmers Rs.76,000 crores as loan waiver in 2008, Rs.25,000 crores for Rashtriya Krishi Vikas Yojana in 2007-12 (more than doubled in the next 5- year period), and so on. But there is no accountability to ensure that these expenditures result in higher net incomes for farmers.

The National Policy for Farmers 2007, in its very first chapter “Need for Policy Reorientation”, says, “There is a need to focus more on the economic well-being of the farm- ers, rather than just on production… The aim of the Policy is, therefore, to stimulate attitudes and actions which should result in assessing agricultural progress in terms of improve- ment in the income of farm families, not only to meet their consumption requirements but also to enhance their capaci- ty to invest in farm related activities.

The time has come for the reorientation of policy and paradigm shift making the government directly accountable for improving the net incomes of farming households. The government’s performance should be measured in terms of its impact on net household income, not just on the production or the amount of funds spent. When the farming community of India are ensured a dignified liveli- hood from agriculture, they will be at the forefront of raising production levels and rejuvenating the rural economy.

A framework to ensure Income Security for Farming Households

The term “Farming households” is used in the broad sense as specified in “Definition of Farmer” in the National Policy for Farmers which includes all cultivators, sharecrop- pers, tenants, agricultural workers and livestock rearers.

It is clear that there are several measures that go towards providing income security for farming households, including pricing policy, procurement and marketing support, credit, agricultural insurance, disaster compensation and support for sustainable agriculture. However, what is missing is an assessment and accountability mechanism to ensure minimum living incomes. This calls for establishing a Farmers Income Commission.

Farmers Income Commission: A statutory permanent Farmers Income Commission should be established with the mandate of ensuring a minimum living income level for all farming households including tenants, sharecroppers and agricultural workers.

The Farmers Income Commission should make an Income Assessment of farming households every year. This could be done through a Household Income Survey every five years, updated by a thin survey every year. The Commission can also develop a Farming Household Income Index to track the incomes and their trends. The Commission also sets the benchmark minimum living income for farming households which covers basic living costs.

The Commission is required to come up with specific recommendations to ensure that the net incomes meet the benchmark of minimum living income. Apart from recom- mending a basket of measures to improve future incomes, the Commission also determines the shortfall between the real income and the benchmark minimum income, and accordingly specifies a direct income payment to small farmers.

Basket of Measures: The basket of measures would include MSPs, procurement, market intervention, Price Guarantee, marketing and credit support, agricultural insurance, disaster

compensation, payments for ecosystem services, support for rainfed and ecological farmers, and so on. If these measures are indeed implemented well enough to reach the minimum income level, the government would not need to make any direct income payment in the future.

Direct Income Support: Despite these recommen dations, if the assessment shows that the real incomes are below the minimum income level, Direct Income Support to make up the shortfall. To begin with, the Direct Income Support will be implemented for small & marginal farmers and agricultural labour. The job of the Farmers Income Commission would be to identify such needy class of people during its periodic assessment (3-5 yrs) and fix the amount of Direct Income Support for the next period. This can be paid directly to the people as direct cash transfer.

The point of the Income Security system is not to make higher and higher direct income payments, but to ensure that the basket of policy measures really delivers minimum income levels to all farming households, removing the need for direct income payment. This will make the farming both economically and ecologically sustainable.

Fortunately, in the past few years, Indian Government is moving towards a rights approach in relation to the major needs of the citizen. For example, we already have Acts for conferring the Right to Information, Rural Employment and Education. Also we have an Act providing Lands Rights to scheduled tribes and forest dwellers. Parliament has just passed an Act which will confer the Right to Food on all the needy citizens. Similarly, Farmers Income Security can be shaped through appropriate legislation.

The need for an income-focused approach and Farmers Income Commission has been articulated by sever- al emi- nent people including Dr. M.S. Swaminathan. In fact, the Karnataka state government announced it in its budget for 2013-14 but the government went out of power soon after. This system, if implemented, would have far-reaching posi- tive consequences to strengthen the rural economy, increase the purchasing power of the rural population, and achieve better rural-urban parity and inter-sectoral parity.

It is high time that the Farmers Income Commission and Income Security system is clearly formulated through a law and implemented. This is a demand that all farmer organ- izations across the country can rally around and build politi- cal pressure in the upcoming elections.

Net Income and Expenditure of farming families in India

Land holding (acres)CategoryTotal Income (Rs/Month)Expenditure (Rs/Month)Percent of Total farmers
0.01-1.0Sub marginal1633239036
 Total21152770All farmers

Source: Source: Report “On Conditions of Work and Promotion of Livelihoods in the Unorganised Sector” Arjun Sen Gupta Commission, 2007

Farmers Income Security across the world

Across the world governments have adopted basket of meas- ures to ensure income security to farmers with twin objectives

  1. To ensure parity of incomes between agriculture sector/ farmers and other sectors/ non-farmers, and thereby ensure equality and justice in the society
Sector-wise Employment Trend During High Growth Period (2004-05 to 2009-10)
SectorTotal employment (millions) 2004-05Total employment (millions) 2009-10Growth in employment (millions) 5 year period
Manufacturing Industry55.7748.54-7.23
Non-Manufacturing Industry (mostly construction)    29.96    56.10    26.14

Source: NSSO data for 2004-05 and 2009-10

  • To ensure food production and food self sufficiency
Some of the popular models are
  1. Decoupled Income Support: Support for farmers that is not linked to (is decoupled from) prices or production. As WTO has brought in restrictions on trade distorting subsi- dies and Direct Income Support comes under the blue box subsidies. Some of the countries which have adopting this model are USA, China, Australia, Korea, Japan
  2. Payments for Ecosystem Services/conservation subsidies: Payments made to farmers for maintaining the ecosystem, conservation of natural landscapes, environmental friendly production etc. e.g. USA, Switzerland, Korea, Japan, Malaysia.
  3. Payments for less favoured areas: like rainfed areas, hilly terrains etc. eg. Korea
  4. Productivity bonuses and Price Compensations: Support to farmers beyond the market price. E.g Malaysia, USA, Japan, Korea, EU, USA, Switzerland