Thursday, January 25, 2018

Agriculture land consolidation in India

In agriculture there are two types of cost; fix cost and variable cost. Variable cost vary with size of land but fix cost is per unit cost involved in running individual agriculture farm unit. At this time most of agriculture finance, provided to small marginal farmers is going to fix cost, but agriculture finance is given to cover variable cost. This is basic loophole in agriculture policy making process where polices are talking about variable cost, but actual result depends on fix cost in the case of small and marginal farms. Here I would like to mention in simple way that fix cost are related to run “Farm”/ “Farmer” and variable cost are related to do “Agriculture”.

Govt of India has taken one step closer to understand actual problem by renaming agriculture ministry as Ministry of Agriculture and Farmer welfare. Agriculture land consolidation can help agriculture in many ways and it can make Indian agriculture profitable and productive venture.

Profitable farm size: When land size is small then per unit fix cost increases and after a certain limit it overlaps the variable cost. After that limit, farm can’t be profitable even production from that unit is very high. Farm size should not be below profitable size.

Agriculture FinanceAgriculture finance in India is collateral land based. If one farmer is having one acre land near to Delhi or in NCR he will get more finance from bank in comparison to farmer who is having same type of land located 400 km far from Delhi. Agriculture finance should be crop based on recommendation of local agriculture department. Expenses for wheat cultivation and gram cultivation will be different. In small land holding farmer take loan up to his maximum credit limit but he cultivates low investment crop, and major part of agriculture finance goes to living expenses of farmer, after production that farmer will become defaulter. If farm size will be bigger than most part of agriculture finance will go to variable cost and it will be more productive.

Maximum land utilization: Small farms make small - small individual units. Every unit requires some operational space, space for path, space for farm activities, irrigation facilities. In bigger unit there will be fully utilization of complete land and operation land requirement will low. Bigger farm unit will be more productive with same inputs and production of small farm units.

Crop cultivation planning: Crop cultivation planning becomes easy in larger land size. There can be better planning of crop selection, mix cropping, period of crops. There will different options for long term and short-term crops. In small land holdings farmers don’t have many options, he has to follow what his neighbor is doing.

Better utilization of farm resources: In small farms there are lot of seepage in resources. Water get destroyed, fertilizers get destroyed, labours don’t have full day work. With bigger farm size  there will be complete utilization of available resources.

Employment generation: When land holding will be big then task related to primary agro processing will be completed at farm itself and it will be profitable for farm. Local villagers will get employments through these activities. Now a day’s farm produce goes to city or some urban location and primary agro processing related to jobs are transferred to those cities.

Cheaper Farm inputs : With bigger farm size there will requirement of large quantity farm-inputs, Farms can attract more companies for supply of quality farm inputs. There will be more competition. and farms will have more negotiation power. Agri input companies will cut the margin of middle chain and farms will get farm inputs at cheaper price. 

Low cost of cultivation : When fix cost will come down then cost of cultivation for per unit land will come down, seepage will come down, utilization of resources will increase, farm inputs will be available at cheaper price. With same conditions per unit cost of cultivation will come down and profit will increase.

Better price of farm produce : Farms will be in condition of negotiation for better price for their farm produce. Bigger farms can attract industrial buyers. Unnecessary middle men will be eradicated from supply chain. Seller will get better prices and buyer will get farm produce at cheaper price.

In agriculture land consolidation bigger question will be ownership of land and management. Farms can be converted into Private limited companies and these companies will issue shares to current owner with respect to their current land ownership. Ownership will be transferred to that farm production company.  Existing farmers will be shareholders in company and current farmers will be actual owner. Exiting farmers can be covered under social security scheme of Govt and they can be employed for farm job. Farmers and Agriculture will be separate. Govt can make separate policies for each of them.  Productivity of existing agriculture land will increase, cost of crop cultivation will come down, revenue will increase and ultimately profit share of existing farmers will increase. 

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