1. Manthan Topic: SOWING PROSPERITY Boosting agricultural productivity Team Details: Abhishek Gupta Nikhil Bansal Prakhar Gupta Rahul Dev Rahul Jain IIT DELHI Revitalizing National Roots

2. The present situation faces numerous problems - for the overall picture to change, we need a holistic and sustainable approach Some causes for poor productivity in India are; 1. The average size of land holdings is small(< 2 hectares). Such small holdings are over- manned, resulting in disguised unemployment and low labour productivity. 2. Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings. 3. According to the World Bank, Indian Branch: Priorities for Agriculture and Rural Development", India's large agricultural subsidies are hampering productivity- enhancing investment. 4. The irrigation infrastructure is poor (only 52.6% of the land was irrigated in 2003 04). The overuse of water by over pumping aquifers is unsustainable. 5. 40% of all fruits and vegetables produced in India perish due to shortage of storage facilities. 3. Snapshot of the Solution Proposed THE IDEA: An integrated approach to agricultural sector that brings together regional farmers under a common company, which acts as their employer. The driving force behind it is to use the profit maximization motive of private sector in a mutually beneficial way. The governments role shifts from direct intervention to that of a facilitator and regulator working in the public interest. There shall be independent regulators and grievance redressal bodies to prevent corporatization of agriculture. A key change is that farmers are not separate from the corporates the two are now united. ADVANTAGES OVER THE PRESENT SYSTEM: Enhanced productivity as the company will try to make most of limited resources; less wastage of produce. Farmers get a secured salary; dont have to worry about selling their produce, natural calamities, credit availability, newer techniques. Rational and economic use of chemicals, water, electricity, etc. Generation of more jobs. Will Legal Framework Companies (farmers=employees) Independent Regulator + Grievance Redressal 4. THE KEY STAKEHOLDERS Government and Regulator Companies (farmers as its part) Consumers; the economy 5. The State government shall frame detailed rules to attract companies in agriculture production and management Government sets up the governing framework Company formation and operation Operation and its effects The government needs to attract the private sector by making agriculture a profitable venture despite all the debilitating factors like lack of infrastructure, seasonal characteristics of business, etc. This shall be done by providing conditional grants/cheap loans like- for setting up firms in poorly supported areas; for establishing cold storages and transport services; for developing irrigation facilities(in previously non-irrigated areas) for rain water harvesting and other sustainable practices; natural calamities etc. Providing secure employment rules for farmers, so as to prevent companies from acting unfairly against them. It will be monitored by the grievance redressal commission. An expert team(of the regulator) to survey the leased area to see if the crops proposed are suitable to the local geography, and that the company is not planning to grow cash crops unnecessarily. Laying down progressive taxation rules. Tax shall be applicable only during the harvesting season when farmers get their main income(in cases where salary is uniform given, tax will be accordingly levied). It shall be collected directly from the company where farmers are employed. Ensuring that companies get land to employ landless farmers on it. Large holdings in the name of a few shall be compulsorily leased to companies through after the regulator and gram panchayats approval. The owners shall be assured of adequate returns by the company. The company will employ landless farmers on the leased fields. 6. Government sets up the governing framework Company formation and operation Operation and its effects The company will employ farmers- both landless and willing land owners. The latter will be a priority if they have leased their land to the company. The landless farmers shall be picked up from a list approved by gram panchayat. The number of employable farmers will be based on a per hectare basis. The salary of the farmers shall be according to the season-i.e. they shall get less income during sowing days, and a higher(fixed) income + productivity bonus(upto 15% of fixed) in the harvest season; OR the company can distribute the same amount as above in equal monthly installments. The salary shall be according to companys discretion, but approved by the state government(to make sure the companies do not give too less). The company will maintain proper attendance of the farmers to make sure they dont misuse this security. Attendance(and attendance registers) shall be monitored by eminent local persons(or a depudationist from the regulator wholl in the company). The work timings shall be as per agricultural requirements-and not the regular 8- 5pm ones. The land owners shall get an assured return from the leasee company. The company will be mandated to record such transactions(along with the exact amount of land leased) with the regulator. The company will have the responsibility to ensure good agricultural productivity by providing the necessary inputs-seeds, fertilizers, pesticides, water, etc. Since the company is spending directly on these inputs, it will try to economize their use, thus avoiding the side effects of excessive chemicals, increased water conservation and less wastage etc. It can take loans from the banks for these purposes. Government shall subsidize the companies for developing sustainable agriculture practices, rain water harvesting- but only after such works have become operational. No subsidies shall be given for fertilizers, seeds, pesticides, electricity. The company shall be incentivized to set up a R&D centre for sustainable agriculture. It can also new innovations to other companies, thus sharing advancements in agriculture. Companies to adopt farm-to-fork approach 7. Government sets up the governing framework Company formation and operation Operation and its effects Companies will start working after they get the land from landowners and the expert committees approval to grow the proposed crop. It will set up its team of managers, researchers, specific departments(like irrigation, seeds, fertilizers, etc). The structure can be variable. The success of this model requires an active and independent regulator and grievance redressal commission to prevent corporatocracy. The regulator shall have all powers to enforce its decisions and can even cancel a companys license. The grievance redressal commission will look into complaints of all the farmers and shall have technological support from the state government to expedite the complaint redressal process. This system will lead to increased productivity and with better storage and transport facilities, the government can look to further promote exports of agriculture products. Dedicated freight corridor, PMGSY can be of immense help in this regard. The government will now not be required to operate its innumerous inefficient and leaky schemes. It will result in decline of poverty as farmers(>50% of Indian workforce) get an assured income. It will also result in slowing down of migration from rural to urban areas. Governments shall make sure that the companies do not hike the final output prices too much. If the financial aspects mandate an increase in prices, the government shall provide subsidies for the initial period, and ask companies to economize their production. The government can also promote PSUs in the same segment to provide competition to private sector. Monitored operation to ensure public welfare along with private profitability 8. Why is this model NOT old wine in a new bottle Not Contract Farming The system of companies buying from farmers is done away with. Farmers will not be at the mercy of companies and are paid irrespective of the produce. They are regular employees of the company and cannot be expelled whimsically. The grievance redressal commission shall take care of that. Their incomes shall be approved by the state government so that the companies do not exploit them. Also, the companies will not be allowed to grow cash crops as per their wish-the regulators expert committee shall first approve crops to be grown and take random checks to ensure this. Land Rights not grabbed Land will be leased and the documents provided to regulator beforehand. The exact area leased shall also be noted to minimize scope of litigation later. Company to work for increased productivity Since the company invests so much in production, it will make sure to make most of limited resources. If it finds farmers not working, it can report to the grievance redressal commission and ask for his removal. It will adopt practices that improve productivity, since that is linked to its profits. Prejudiced opposition to private sector is unhealthy. This model incorporates the positives of corporate sector and carefully balances it with the public concerns through various provisions. It is unlike other faulty attempts to involve private sector in agriculture (eg. Farmer Produce Company, where the roles of farmers and companies is still that of buyer and seller.) 9. FINANCIAL ASPECTS The main source of funds shall be the private sector which shall establish companies to grow crops through its salaried employees(read farmers) and then sell it at a higher price to obtain profit. Considering the not-so-profitable nature of this sector, the government will need to provide support in terms of loans, grants(which can be provided from the money saved from its numerous leaky schemes; and also from taxation of agriculture income). As can be seen from the above, it is difficult to quantify the amount of funding that the government needs to provide to the companies, as it is not the case of just one company, but many such companies all over India whose number is uncertain. It would also depend upon the type of crops grown, in which area, taxes generated, subsidizing the cost of final produce, etc. A High Level Committee with the requisite experience in this field shall be the best judge. The same goes for the quantification of investment required by a company. The very nature of private sector implies that it is free to invest as much money as it can access, according to its discretion. Nevertheless a qualitative view of the financial aspect has been presented here: 1. Taxation of agricultural income 2. Savings-as it wont invest directly in agricultural schemes( this money goes in (a) of government outflows) a. Subsidies/loans to companies for cold storages, good transport, developing means of irrigation in poorly irrigated areas, developing sustainable and new production techniques, natural calamities, under recoveries. 1. Selling the agricultural produce to the market. 2. Grants from government(see govt cash flow-(a)) 3. Selling R&D advancements(if any) to other companies. a. Salaries to farmers and other employees b. Returns to land owners(for land leased) c. Interest on loans taken d. Technological advancements/ buying new techniques from other companies GOVERNMENT CASH FLOW COMPANY CASH FLOW 10. IMPACT This idea has the potential of a very wide ranging impact. Itll affect farmers and private investors directly, while the whole nation stands to be affected by virtue of enhanced productivity and increased prices. 1. Impact on Farmers -from a macro perspective, it has the potential to impact virtually every farmer once it is scaled up. On a personal level, farmers will have stable incomes, no tension of debts or a failed monsoon and thus less suicides. Scalability: This system can be extended to all over India, but it should be done in an incremental manner. Depending upon the impact of a few non-cash crops in different regions, more private companies can be then be allowed after the regulator and grievance commissions scale up their network. States enactment of a legal framework is an obvious precondition. Existing companies can also expand and start with more crops. More the number of companies, more farmers will be employed. It depends on how Sustainability: This model has been framed for longer time scale. With government support provided to companies, the danger of natural forces is eliminated-but this cannot be taken for granted. The company should have had used preventive techniques(like providing for irrigation, rain water harvesting) to avail this contingency fund. Criteria to measure impact: Visible impact should be measured by a combination of factors- profits of companies, production, government spending as compared to previous years, farmers salary, usage of chemicals, water and other inputs vis--vis productivity, prices of outputs 2. Impact on Government -It can not be said with certainty whether government spending will decrease or increase, as there are factors on both sides. But it will surely decrease the role of inefficient government schemes. 3. Impact on Consumers(or nation as a whole)- Increased productivity will lead to matching demand-supply in the long run, and thus stable prices. Also, the vast population can atleast be assured of availability of food(but not necessarily equitable)-infact we can even become net exporters-thanks to our vast land resource. 11. CHALLENGES Social, economic, political challenges: 1. Opposition to private companies working in agriculture 2. Increase in food prices 3. Farmers(unaware, illiterate) may be exploited despite protective measures 4. Difficult for government to tax agricultural income 5. Release of grants/subsidies by government may be delayed 6. Slow settlement of disputes by grievance redressal commission Technological and environmental challenges: 1. Every company may not be able to set up an R&D centre 2. Natural risks like drought, excessive rains Mitigation by following steps: I. implement it in an incremental manner; publicize and discuss the concept with the public before implementing II. Government may cap prices if hike is too much; autonomous PSUs can be opened to compete with private sector III. Spread awareness through gram panchayats, and other innovative measures IV. Generate consensus by openly discussing the protective measures V. Administrative reforms VI. Administrative reforms-use of IT, change in legal processes I. Buying/selling of new innovations; tie-ups with agricultural universities II. Governmental assistance; incentive to use preventive measures 12. REFERENCES 1. This is an original idea. 2. Manthan reference document 3. Frontline (July 26, 2013, Business of Agriculture) 4. CII and McKinsey&Company report- Food and Agriculture Integrated Development Action 3 (FAIDA 2013) 5. Agriculture in India - Wikipedia, the free encyclopedia