FINANCING SMALL FARMERS FOR INDIA’S FOOD SECURITY

According to the Global Hunger Report, India continues to be among nations where hunger is "alarming". It is most disappointing that despite high economic growth, the hunger index in India between 1996 and 2011 has insignificantly improved from 22.9 to 23.7. National Sample Survey Organization data revealed that the average per capita food expenditure per annum during the period from 1993 to 2010 increased only by 0.2 % annually in rural India and declined by 0.1% in the urban areas. At any given point of time, the cereal intake of the bottom 20% people in rural India which is engaged more in manual work continues to be at least 20% less than the cereal intake of the top decile of the population, despite their better access to fruit, vegetables and meat products. Endemic hunger continues to afflict a large proportion of the population. Agricultural Census [2010–11] revealed that out of 138.35 million operational holdings in India as high as 85% (which account for 44.6% of the total cultivated area) are small and marginal farmers [S&MFs] owning less than two hectares. This, therefore, characterises India’s agriculture a small-scale-farming. Average size of small-holding is only 0.61 hectare whereas overall average size of holdings declined from 1.33 ha in 2000–01 to 1.15 in 2010–11.The role of S&MFs in boosting food output and reduction of poverty is well recognized. Therefore, the future of sustainable agricultural growth, food security and poverty reduction in India depends on creating environment that enables huge number of S&MFs to easy, hassle-free and reliable access to institutional credit. Against this background, this article analyses the performance of Government–sponsored and Banks programs aimed at financing S&MFs and suggest enabling measures to achieve 8% target of credit to S&MFs within existing 18% credit to agriculture by 2017 as recently prescribed by the Reserve Bank of India [RBI].


INTRODUCTION
The Food and Agriculture Organization [FAO] of the United Nations report, " The State of Insecurity in the world 2008" revealed that the overwhelming majority of the hungry live in the developing world, 65% of them just in seven countries, namely India, China, the Democratic Republic of Congo, Bangladesh, Indonesia, Pakistan and Ethiopia. The worst affected are landless families. According to the Washington based International Food Policy Research Institute, India is home to the world's largest food insecure population with more than 200 million people facing hunger and it ranks 66 out of 88 countries. Malnutrition, as measured by underweight children below three years is estimated at 45.9% as per National Family Health Survey [2006]. Diets of about 80% of the rural population contain less than half of the normal requirement of vitamins.
According to the NSSO, at the national level, 1.9% households in India suffer from hunger. Dr. Manmohan Singh then Prime Minister of India announced in his nation's address on Independence Day in 2005 that "nobody will be allowed to go hungry". It may be recalled that FAO as back as in 1974 had declared that by 1984 "no child, woman or man should go to bed hungry and no human being's physical or mental potential should be stunted by malnutrition" and acknowledging the fact that "food is a requisite of human survival and well-being and a fundamental human right" the FAO in October 1979 agreed to designate October 16 [the date of FAO's Foundation] each year commencing from 1981as the "World Food Day". This amply points to the need now more than before for focused attention to boost agricultural growth rate in India when already a period of four decades has elapsed since the FAO has committed to wipe out hunger.

SIGNIFICANCE OF FOOD SECURITY
Per capita availability, leave alone actual consumption of food grains and other essential food products in India is below the world average and significantly lower than in developed countries. Acknowledging the fact that the food is unaffordable for a large number of the poor in India, the Union Government by an Act of Parliament in 2013 enacted the National Food Security [NFS] Act. The NFS Act mandates to provide each person, including the pregnant women, children and the poorest households, per month five kg of coarse cereals or wheat or rice at Rs.one, two and three a kg respectively. The NFS Program is expected to benefit estimated 810 to 840 million beneficiaries, the largest population in the world. Around 62 million tons of food grains are expected to be distributed annually under the NFS Program through country's massive network of about 500,000 ration shops under the existing Public Distribution System or where possible through Direct Benefit Transfer scheme. The food subsidy under the NFS Program is likely to cost the nation annually about Rs.1310 billion including Rs.80 billion for incidentals like setting up food commissions at the Central and State levels and in setting up grievance redress mechanisms. Under the NFS Act, the Expert Committee has estimated procurement and distribution of food not less than 63.98 million tons in 2013-14, rising to 73.98 million tons by 2016-17 against the envisaged procurement of 57.61 million tons in 2013-14.

NEED FOR AGRICULTURAL DEVELOPMENT
For India, agricultural development at 4% annual growth rate has been a sine qua non to provide livelihood to millions of small, marginal and tenant farmers, oral lessees, share croppers and agricultural laborers in particular; generate employment; alleviate poverty; guarantee food and nutritional security to the country's increasing population.
According to the World Development Report [2008] "the GDP growth arising from agriculture is almost four times as effective in reducing poverty as GDP originating outside the sector". India's ninth Five Year Plan [1997][1998][1999][2000][2001][2002] acknowledged that agricultural growth has the highest potential both for reduction in poverty and regional imbalances. A number of developed countries and developing countries like Australia, New Zealand, Malaysia and Taiwan and the State of Punjab in India have demonstrated that highly productive agriculture can lead to just as high standards of living as high levels of industrialization with more favorable impact on poverty. Growth of agriculture is an important factor in containing inflation and optimizing agricultural wages. Dr. Manmohan Singh, India's former Prime Minister once emphatically said " Inflation hurts the weakest section of the society the most and there can be no better anti-poverty program than developing agriculture, which has potential to arrest rising food prices and contain inflation".

INVOLVEMENT OF S&MFs
The FAO had declared the year 2014 as the "International Year of Family Farming" [IYFF] to create awareness among all stakeholders, review the current status of family farms, evolve policy and programs and strengthen institutional infrastructure, among others, that enable family farms to become food-secure and viable. According to the FAO's Director-General, Graziano da Silva, "a family farm is managed and operated by a family and predominantly reliant on family labor, including that of both women and men". In the Indian context, marginal farmers [owning less than one hectare] who share 67% in total number of holdings and 22% of cultivated area aptly fit in the definition of family farms. The small-holder families, who constitute about 50% of the national population, comprise almost 60% of nation's hungry and poor. Notwithstanding S&MFs best efforts to increase crop-productivity and incomes, most families that operate holdings below 1.0 hectare are net purchasers of almost all food items. This declaration of IYFF presented opportunities to the rural financial institutions of India to accelerate the flow of credit to S&MFs accompanied by improving the effectiveness of the central and State Government's role to make S& MFs financially viable and enable them to contribute to India's food-security by 2020. In view of the following facts, for India 4% annual agricultural growth rate and sustained development of agriculture acquires focused attention.

INDIA'S AGRICULTURAL SCENARIO
 According to the United Nations World Water Assessment Programme [2015], while globally by 2050 the agricultural sector needs to produce 60% more food, the developing countries including India will need to produce 100% more  Sustainable Development Goals adopted by the United Nations General Assembly in September 2015 stipulates developing countries, that include India, to develop agriculture and eliminate hunger by 2030  World Bank report 2008 revealed that globally GDP growth originating from agriculture is at least twice as effective in reducing poverty as that which originates outside agriculture  The role of S&MFs in boosting food output and reduction of poverty is well recognized.
Therefore, the future of sustainable agricultural growth, food security and poverty reduction in India depends on creating environment that enables huge number of S&MFs to easy, hassle-free & reliable institutional credit.

CREDIT POLICY & PROGRAMS
India has adopted multi-agency approach for dispensation of agricultural/rural credit which comprises cooperative credit institutions [short & long-term], scheduled commercial banks [public & private sector] and regional rural banks. These rural financial institutions have extensive network of banking and credit outlets in rural areas. The credit policy and programs specifically evolved to enable S&MFs to augment country's food output in general and ensure food security in particular are briefly highlighted as under.
Government of India appointed the All-India Rural Credit Survey Committee which made far reaching recommendations in 1954 to strengthen agricultural credit cooperatives and expand the role of the State Bank of India & its seven Associate Banks to finance agriculture. Government policy in early 1950s till mid-1960s was to increase food output in order to avoid substantial import of food. In this process, Government developed seed-fertilizer-irrigation technology which did usher in Green Revolution. Of course, this increased food output but did not benefit S&MFs. Government, therefore, conceptualized and implemented as pilot projects by establishing two development agencies, viz. Till October 1980, SFDA was the premiere organization to improve the productivity of small farms. The policy was to support them to exploit their production potential and improve income by adopting yield-enhancing technologies through Government and institutional intervention.
The program was to make small farms financially viable by adopting modern technology, easy access to credit & production inputs and using irrigation facilities wherever feasible. The SFDA provided capital subsidy for investment in agriculture and animal husbandry activities to the extent of 25% to small farmers and 33.33% to marginal farmers of the total cost of the asset acquired/created as a motivating factor to the beneficiary and margin required for institutional credit. While out of 1818 SFDAs in the country many made appreciable progress, the limiting factors inhibiting the targeted achievements included [i]ineffective inter-institutional coordination and lack of involvement/participation of beneficiaries for planning and implementing the program.

CREDIT DISPENSATION
Institutional credit: Credit is a sine qua non to augment working capital required for seasonal agricultural operations and more importantly for long-term investment on farms. According to the All India Rural Debt & Investment Surveys of the RBI, with the progressive institutionalization of rural credit delivery system, the share of outstanding agricultural credit from institutional sources increased modestly from 10.2% in 1950, to 20.9% in 1960, 32.0% in 1970 and significantly to 56.2% in 1980 and then marginally to 66.3% in 1990. But then it declined to 61.1% in 2000 and further to 56% in 2012. This has been attributed to the reappearance of professional moneylenders whose share increased from 19.6% to 28.2%. It did increase marginally to 64% in 2010 but never reached to the level of 66.3% which was attained 20 years ago in 1990. Thus, Institutional credit, to replace informal credit obtained by S&MFs at exorbitant rates of interest, progressively improved till 1990 but lost its momentum since then. Consequently, the non-institutional sources have reappeared on the scene at a time when S&MFs do need more & more credit to purchase costly production inputs & invest in creating farm assets.
Field experiences revealed that inability of S&MFs to access hassle-free institutional credit has benefitted farmers with larger holdings from the credit expansion policy and programs. According to NABARD, percentage of indebted agricultural households with farm size 1.01 to 2.00 hectares [S&MFs] marginally increased from 51.0 in 2003 to 55.7 in 2013 whereas those with 2.01 to 4.00 hectares significantly shot up from 58.2% to 66.5%, and those with 4.01 to 10 hectares from 65.1% to 76.3%. Disappointingly, those with less than 0.01 hectare declined from 45.3% to 41.9% whereas those with above 10 hectares substantially increased from 66.4% to 75.7% during the period. .

RECOVERY OF BANK LOANS
Credit flows easily only when the lender is assured and confident that the depositors' money lent will be repaid with interest on time. This requires putting in place effective default prevention mechanism. Since decade, overdue percentage to demand,

RISK IN AGRICULTURE
Agriculture in India has been exposed to specific types of risks which adversely affect particularly S&MFs in respect of their income, livelihood and financial sustainability of small- Http://www.granthaalayah.com ©International Journal of Research -GRANTHAALAYAH [196][197][198][199][200][201][202][203][204][205][206][207][208][209][210][211][212] scale farming that they pursue. The frequency and severity of these risks have increased over the past several years. S&MFs are unable to manage or mitigate following types of risks in particular since they lack in resources, technical & managerial skills and financial support. Inadequate public investment in agriculture and low priority in creating enabling environment to mitigate the adverse impact of these risks have been the important factors discouraging banks to lend to agriculture in general and S&MFs in particular.  1965,1966,1972,1974,1979,1982,1986,1987,1988,1999,2000,2002,2009  Losses covered: Apart from yield loss, the new scheme will cover post-harvest losses also. It will also provide farm level assessment for localized calamities including hailstorms, unseasonal rains, landslides and inundation.
[iv] Use of technology: The scheme proposes mandatory use of remote sensing, smart phones and drones for quick estimation of crop loss. This will speed up the claim process [v] Other features: The settlement of claims will be fastened for the full sum assured. About 25% of the likely claim will be settled directly on farmers account. There will not be a cap on the premium and reduction of the sum insured.
National Agricultural Market: An efficient marketing system with high levels of transparency can encourage healthy competition, active participation of genuine stakeholders, provide higher returns to the farming community, and a fair deal to consumers. The existing marketing of agricultural produce under the Agricultural Produce Market Committees Act has a number of deficiencies and limitations involving a long chain of intermediaries and cartelization at the physical market place which adds two major costs viz. the intermediaries' margin and multiple handling costs as a result producers get a very low value of the produce. The government has, therefore, created and launched in 2016 a unified National Agriculture Market [NAM] to exhibit transparency in the marketing system, leverage state of the art technology for a well-regulated market, enable full participation of all stakeholders and ensure maximum benefits of the entire agricultural value chain to farmers & consumers.
The NAM envisages creation of better equipped warehouses in the vicinity of major production clusters, real-time electronic auctioning of the commodities along with integrated assaying, weighing, storage and payment systems. It will issue a single license for trading across the country in order to promote increased participation of buyers. Assaying, weighing and payments will be integrated with auctioning in such a manner that the payments will be credited directly to the farmers' bank accounts. Details will be available on the electronic platform. It will provide a dual benefit to producers by averting the need to bring produce to the market physically and enabling them to avail funding against the commodities stored in the warehouses against warehouse receipt scheme, thus strengthening the price risk management for farmers.

INTEGRATED CREDIT SUPPORT TO MAKE S&MF VIABLE
S&MFs have 70%, 55% and 52% share in total production of vegetables, fruits and cereals respectively against their 44.46% share in area whereas they have lower share in pulses and oilseeds than that of large farmers. Their share is 69% in milk production. Thus, despite S&MFs have potential to contribute to diversification and food security, holding size of 0.61 hectare is not adequate to generate enough income for the subsistence of the family [particularly in the absence of additional livelihood opportunities]. This is because S&MFs have inherent disadvantages both in the input and output markets. According to NABARD, average monthly income from different sources, the total consumption expenditure and net income per agricultural household during the agricultural year July 2012-June 2013 for each size class of land possessed. The share of income from non-farm business in the average monthly income decreased with an increase in land size. Similarly, the net investment in productive assets per agricultural household increased with an increase in land size. Further, the net monthly income (farm and non-farm) in respect of size classes up to 1 ha was negative and it increased steadily with an increase in size classes. This demonstrates the need to significantly enhance their income through improving productivity of crops per hectare, diversification and providing additional sources of income which can make small-scale farming efficient and financially sustainable.

BRIDGING YIELD-GAP
India has the capacity to increase wheat production by 30 million tones or around 40% and double paddy production at current levels of technology. This can be achieved by bridging the existing gap between the actual crop yields at field level and the potential yields.

SEED REPLACEMENT & IMPROVEMENT
Due to the limited scope for increasing the area under cultivation, only an improvement in cropyield can result in long-term growth in output. However, both the average annual growth in production and yield of food grains has been stagnating. The low yield and growth of output in agriculture have been associated with relatively low levels of investment compared to other sectors of the economy. The hybrids/ high-yielding seeds contribute to 20%-25% increase in crop-productivity. Unfortunately, S&MFs have been using their own farm-grown & saved seeds for decades rather than replacing by high-yielding seeds. Hence, timely supply of quality hybrid seeds at affordable prices to S&MFs is necessary for achieving higher agricultural production and productivity.

VALUE CHAINS INVOLVING S&MFs
Review of literature reveals that where S&MFs have been able to integrate into supply chains, supermarkets have offered enhanced security and considerably higher margins than traditional clients, such as wholesalers in groceries. Therefore, linking S&MFs to integrated market systems can improve economic viability of small holdings. Further, field studies on value chains indicate that participation of S&MFs make chains more sustainable and more conducive to enhance their income. Thus, individual S&MFs facing problems to access credit and technology to enhance production and are unable to benefit from input and output markets, can be motivated to participate in an established value chain. Innovative business models viz. Amul, Nestlé, Safal, Namdhari, among others, have successfully demonstrated that S&MFs who account for 85% of agricultural households along with other resource-poor households pursuing allied activities (dairy, poultry, sheep, goat, fish farming] and non-farm activities, can be brought together to participate in an established value chain. The promotion of farmer producers' organizations (FPOs), particularly by organizing smallholder producers, has the potential to reduce the costs of marketing of inputs and outputs, and provide a forum for members to share information, coordinate activities and make collective decisions. The Small Farmers' Agribusiness Consortium has already mobilized 6.79 lakh farmers and promoted about 700 FPOs, of which 243 have already been registered and the rest are under process of registration. NABARD is also supporting producer organizations out of its Producers Organizations Development Fund, adopting a flexible approach to meet the needs of producers.

NATIONAL AGRICULTURAL MARKET
In order to ensure on time implementation of e-NAM & make it successful the pre-requisites are [i] The concerned APMCs need to implement the tenets of the envisaged NAM in a phased manner, including enabling infrastructure for integrating pre-and post-auctioning activities [ii] Extension agencies engaged in promoting agriculture can create awareness among producers on grading, standardization, quality, assaying and electronic auctioning systems. This should promote active participation of major stakeholders, enhance healthy competition and provide fair returns to farmers [iii] Existing spot exchanges should strive to create a national market for agricultural produce and bring the advantages of a transparent pan-India market to farmers and consumers alike. While exchanges can provide the knowhow and technology for creating a pan-India market, the Centre and the State governments should formulate a strong facilitating framework.

POSTING OF STAFF IN RURAL BRANCHES
With the introduction of financial sectors reforms banks, in their endeavors to comply with prudential norms, have accorded lowest priority to strengthen rural branches. To achieve RBI's

CONCLUSION
During 2016-17 the government, academics and media can create awareness among S&MFs about their potentials and their rights to demand implementation of policy and programs incorporated in the 12th FYP document. Success of S&MFs contributing to India's food security lies in the demonstration of political will of elected legislators, administrative skill, commitment and accountability of implementing agencies and timely delivery of services by the institutions viz. suppliers of production inputs, technology, credit, insurance and marketing. A road map indicating the timely completion of all activities by 2018-19 should be prepared accompanied by effective Monitoring &Management Information System and quarterly progress displayed on the website of the Union Ministry of Agriculture.