In our previous post, we discussed how upgrading India’s farms and the agricultural sector with the latest technology will improve overall efficiency and output. The Government’s intervention in policy and technology development gave the tractor industry the necessary boost it needed to become the largest manufacturer of tractors in the world. However, challenges in this sector, like most states being under-mechanized, expanding area under micro irrigation, and making credit available to farmers for the purpose of mechanizing their farms, still remain unmet. In fact, since 2010-11 there has been a significant drop in credit disbursement.
All states in India (except for Punjab) have a low mechanization rate of .5 – 1 KW/Ha, far below the world average of 4 KW/Ha. The government’s effort to increase farm power availability to 2 KW/Ha came in the form of the Sub-Mission on Agricultural Mechanization (SMAM).
Large states like Maharashtra, Uttar Pradesh, and Rajasthan received 30% of the total Rs 150 crores allotted under this programme. Morever, the overall utilization of these funds was very low in 2014. This could be one possible reason for the sharp decline in allocation in 2015-16.
Along with these funds, the SMAM offers a 50% subsidy on the purchase of all agricultural equipment. Even with this subsidy, farm equipment requires significant investment, which remains difficult for small and marginal farmers. These farmers become burdened by debt if farm output is lost, as they cannot truly own the equipment until the crop output pays off.
More economical are farm machinery banks introduced in the 12th plan. These banks offer farm equipment for hire to small and marginal farmers and also in areas where farm labour is scarce. State governments supply these farm machinery banks with equipment purchased from the private sector. This is a good solution for farmers and the government should aggressively promote farm machinery banks.
Allocating Funds Per Land Holding Size
The rise in fragmentation of land holdings over the last 30 years has given us more small and marginal farms and lesser large farms than before. The average size of land holdings has reduced by half from 2.28 Ha in 1970-71 to 1.16 Ha in 2010-11.
Currently, the amount of funds the government allocates to farmers for mechanization is irrespective of farm size. As mechanization tools are often expensive, the same subsidy that may sufficiently meet the needs of a large farmer is likely insufficient for a marginal farmer looking to mechanize. The government should allocate funds as per a farmer’s land holding size. This will make mechanization for marginal farmers more viable.
The percentage of areas under irrigation has seen no significant growth for the last decade despite increasing farm stress from drought. Credit disbursed for micro-irrigation has been cut from Rs 8000 crores in 2006-07 to Rs 1,147 crores in 2014-15 despite the fact that more than half of the agricultural land in the country is not irrigated.
India’s ultimate irrigation potential stands at 81.4 million hectares yet only 26% of minor irrigation potential created in the 11th plan, was utilized. There are numerous under-utilized irrigation projects across the country. Modernization and rehabilitation of these existing projects should be a priority for the government. Additionally, adequate and equal attention should be given to ensure trained personnel operate the equipment.
Government priorities seem to have changed and it looks as if farm mechanization has been placed on the back burner. Credit disbursement levels have fallen at a time of farm distress. The government could have and still can minimize rural distress if swift action is taken on farm mechanization.