Intensifying Peasant Struggles and the Demand for Remunerative Prices in Contemporary India

The analysis of profitability over cost C2 shows decreasing returns to cultivation for all the states during the period of 2000-01 to 2004-05, especially for Bihar and Madhya Pradesh wh[r]

Intensifying Peasant Struggles and the Demand for Remunerative Prices in Contemporary India

Kunal Munjal National Law School of India University, Bengaluru

India

2019

Working Paper to be presented and discussed at YSI Asia Convening, Hanoi

12-14th August, 2019

List of Abbreviations

AIKCC All India Kisan Coordination Committee

APMC Agricultural Produce Marketing Committee

CACP Commission for Agricultural Costs and Prices

CCPC Comprehensive Scheme for the Calculation of Cost of Cultivation for

Principal Crops CoC/CoP Cost of Cultivation/Cost of Production

CSO Central Statistical Organization

DES (GoI) Department of Economics and Statistics, Government of India

FAO (UN) Food and Agricultural Organization, United Nations

GATT General Agreement on Tariff and Trade

NSSO National Sample Survey Organization

PARI Project on Agrarian Relations in India

SAS Situational Assessment Surveys

Introduction

More than seven decades have passed since independence, while the Indian agriculture has gained a great deal from the successive technological advancements over these years, the vagaries of the monsoon and the consequent droughts, crop failures and floods that affect vast section of farmers and agricultural laborers in India are still a recurrent phenomenon In fact, the crisis has only deepened With inadequate agrarian policies to confront systemic structural issues, rural India continues to suffer The past three years have seen a range of protests over the prevailing conditions

of the farmers The major ones include the farmers from Tamil Nadu protesting in the capital for over a month in April last year demanding a loan waiver for the loan taken from the nationalized banks from the central government, holding dead snakes and rats in their mouths (as that is all that

is available in their fields to curb hunger), and skulls of their kin who died due to destitution

Further ahead, which included 35,000 farmers who marched from Nashik to Mumbai in March,

2018 demanding loan waivers as well as the implementation of the Forest Rights Act (FRA) and worker-farmer protest in Delhi in September offers a testimony to the current plight of the farmers And the resistance is not solely from the left, but even the right wing farmer organizations (who had been in alliance with the ruling regime) held a march of protest in October, 2019 The alliance of more than 200 farmer organizations, along with political solidarity, coming together to address the question of agrarian distress in front of the Parliament of India is an indication of the gravity of situation created due to a policy fatigue The distress expressed by the farmers and their leaders is evident, as is the anger, which was held widely responsible for the recent decision by the government to fulfill their long standing promise of fixing the structural issues of public policy directed towards agrarian change

The on-going trend of protests at the ground level with workers and farmers being the major participants of these protests against various aspects of the government’s current agrarian policy regime, has common undercurrent to it that the central community to be substantially affected across the multitudinous implications that the policies has been the rural poor Due to such wide-spread policy implications, the after-effects are not merely on the farmer community, the impact digress into various consequential happenings such as change in the political climate; economically speaking, the poor farmer is impacted severely leading, inflation causes the price of commodities to rise; psychologically, the rural farmer thereafter is subject to extreme distress, and the trend of farmer suicides in the past two decades has been a grim reminder of the failings of the policy ecosystem

Deconstructing Costs and Prices

Agricultural crops and its pricing policy have been in debate quite recently given the rising agrarian distress in India Though the comprehensive cost structure values the costs to determine prices, the other factors affecting prices in the market are also required to be focused upon Various studies have discussed about the changes in the cost components of inputs (which is reflective of input prices, labor or capital intensive production etc.) and its adverse effect on farm income of the farmers with small landholdings The changing cropping pattern with respect to shifts in the prices

of the agricultural products also affects the inter-crop price parity, which is another factor considered for analyzing the price policy The domestic and the international prices of agricultural commodities reciprocally affect each other, as many other theses on agricultural prices argue

The millennium study titled ‘State of the Indian Farmer’ conducted during early 2000s was the first one to comprehensively attend the concern of cost of cultivation and agricultural price policy The analysis of trends in structures of costs and returns from cultivation of different crops across the country till 2001-02 was done by (Sen and Bhatia 2004) Detailed year wise analysis of cost structure including A2 & C2 costs, GVO, components of cost of cultivation – purchased inputs, human and machine labor use, irrigation and tenancy for principal crops – rice, wheat, sugarcane, cotton, jute etc They not only specifically focused on the size-class and productivity debate but extended the economies of scale further to study the profitability w.r.t the former The results provided the picture that though the input cost were comparatively controlled for the small and marginal farmers, the farm business income (GVO-Cost A2) and the net income (GVO-Cost C2) received from cultivation was at a falling levels The reason for the same was noted upon as availability of better price information to large farmers as they have better access (Sen and Bhatia 2004)

Ramesh Chand has been conducting study of global distortions in food and price policy using data from various large scale surveys Using NSSO surveys, he estimated and evaluated the farm income

in India for a long 30 years span (Chand, Saxena and Rana 2015) But the authenticity of NSSO surveys and data for accurate cost accounting has been debated over time by development economists Later in 2017, he presented a study that examined the economics of crop production at the aggregate level over the past 25 years, identified sources of cost escalation and evaluated the effects of factor prices, technological and substitution effect on production cost using CACP data

By means of econometric techniques, he presented the results showing rise in production cost and the trends it followed for the past few years due to rise in input prices (Srivastava, Chand and Singh 2017)

Other research works that were directed towards the similar arguments had been put forth by

I Narayanamoorthy noticed the profitability across states for principal crops and documented the decline in farm profitability of even the major grown and sol crops across the country i.e wheat, paddy, sugarcane etc The dire condition of droughts, floods and other natural calamities allow destruction of livelihood but there can be price and non-price policy measures to support and boost farm income (A Narayanamoorthy 2013)

II To detect the causes of peasant suicides, (Kannan 2015) present study that uses data from the National Accounts Statistics and Cost of Cultivation Surveys to analyze the changes in

real income and discusses the underlying reasons The study reveals that the purchasing power of farmers has remained low and has worsened over recent years

III Spatial variations in real prices of agricultural commodities in India are large The policy paper by (Chatterjee and Kapur 2016) first describes the evolution of agricultural commodity markets in India and provides some descriptive statistics Next it documents the spatial variation in wholesale prices of the principal cereal crops (rice and wheat) in all APMC mandis across India and within each state The difficulties faced by farmers and sellers in terms of prices in mandis and at APMC areas, needs to be further studied upon

Price Policy Considerations

The key politics is to increase or control MSP in the policy of price scissors If the MSP is increased, the market prices of food grain commodities shall rise Food grains being essential wage goods, the rise in prices of them shall affect the interests of consumers in general, but urban consumers specifically Also, the industrial costs shall also be increased if the MSP of cotton, jute, oilseeds etc

is raised This increase in MSP has certain growth conditions, and shall lead to inflation for a term period Now, the agriculture-industry backward-forward linkages play their role If the industrialists chooses to maintain their margins and extends the burden on to the consumer of industrial goods, the demand shall be affected (negatively) If the industry maintains the costs instead, and as a result decreases their profit, their growth shall be affected In order to protect the industry, the government might provide with a subsidy This will affect the fiscal and monetary concerns in the economy (Raghavan 2011)

short-If the MSP is not increased as relative to inflation in costs, the profitability shall remain low in agriculture The market prices (FHP and Prices Realized) shall remain low as a result The limited or negative incomes earned shall affect the capacity of agricultural growth and lead to decline in the private investments in land and capital The agrarian crisis will simply exponentially rise if the MSP faces a downward adjustment The terms of reference, considering price policy decisions, must consider these points critically before making recommendations

This dual policy mechanism was effectively controlled by state, till 1990s, but post structural reforms period the relations between the producer and the consumer changed drastically in Indian economy The structural reforms adopted by the government fabricated the integrated price structure that was formulated to address the overall needs of the economy The methodological considerations were adopted with a multi-factor criterion to derive on the MSP The government moved away with the procurement prices and provided the scope for bonus before harvesting season Thus, the weightage

of government’s intervention was enhanced and the scope of CACP got limited to a certain extent,

as the final MSP could be anything above the number recommended by CACP Further ahead, the number of factors that affect price policy decisions increased and as a result, the economic orientation of the price policy was swayed into neo-liberal market considerations The WTO rules

on agreement on agriculture and the trade policies associated with it affected the direction of price policy, which my focus of analysis shall not focus much into

The entry of major input producing companies in the market directly affected the costs of production, as the hybrid and GM seeds were compelled to transform the production conditions and the supply of insecticides, pesticides and fertilizers is also controlled by the same multi-national corporations During recent times, the mergers and acquisitions amongst these corporate giants and the IPR complications in developing economies are major happenings that needs to be addressed in policy measures by the government The international market and global price competition affects the rural economy as the local producers have now to compete with prices changes prevailing in the international commodity markets There have been quite a number of advocates of enabling future trading of commodities, including food grains, to be traded online by farmers The risk levels will remain low and price volatility can be studied and controlled

As discussed about political compulsions, a lot many times, the recommendations made by CACP are not accepted by the government due to fiscal and monetary measure, as stated by the government’s economists But in recent times, the demands of raising MSP have been quite constant across many states over past one decade in India

Research Design and Methodological Considerations

• To understand which sections of the peasantry participated in recent peasant mobilizations and their role of class differentiation in these mobilizations

• To assess the government’s response towards the agrarian economy, especially during the times of distress? (focused through price policy aspect)

Methodology

This project is a quantitative research based on secondary data and literature sources to examine the role played by price policy intervention in the agricultural domain by the government The research project used the crop-specific state-wise data released by the CACP for the section of analyzing the trends in components of cost of cultivation for rice and wheat using statistical and econometric techniques The data on MSP and the Farm Harvest Prices is used, as released by the Department of Economics and Statistics under the Ministry of Agriculture These states are used for analysis as these comprise the largest sown area for the respective crops, covering more than 85% of the net sown area combined The rationale for choosing these two crops is that these are the largest grown crops in India, in terms of both sown area as well as number of cultivators Moreover, these two crops are the most protected ones by state in terms of production, pricing and distributional policies Therefore, it is justifiable to study the same in order to assess the structure of production conditions, relative impact of states’ policies and recommend effective state policy measures For Paddy, five major states are chosen for analysis – Bihar, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal For Wheat, six major states are chosen for analysis – Bihar, Haryana, Madhya Pradesh, Punjab, Rajasthan and Uttar Pradesh The analysis shall be done using per unit area i.e per hectare as the division of usage and cost of major input across specific crops shall not reflect the actual The costs (A2 & C2), prices realized, FHP and incomes over cultivation (FBI and NI) are deflated using the Wholesale Price Index (WPI – primary articles) to 2015-16 prices in order to adjust for inflation

The primary data collected by Foundation for Agrarian Studies is used to build a village level analysis

of production conditions across peasantry The class analysis is borrowed as done in the villages for respective publications, and largely described in (Ramachandran 2011) The villages, crops and the reference year of survey for the villages used for analysis are detailed below:

Semi-structured interviews were conducted with the leaders of mass organizations who have spearheaded the recent protests Further, policy analysis to connect the demands of the protesting farmers (discontent amongst rural poor towards state policies) and results from the findings of study

is done in order to recommend possible policy recommendations

Data and Limitations

The CACP provides with continuous and representative data on cost structure of crops (operational holding wise) which is primarily collected for price policy recommendations to the government The government announces the MSP which is based on the CACP recommendations on a method of cost accounting of A1, A2, B1, B2, C1, C2 and C3 costs Though the government collects data till the C component of cost which includes all the imputed costs, the MSP is usually decided upon adding the A2 i.e the operational cost along with the imputed value of family labor The CACP recommends MSPs of 23 commodities, which comprise 7 cereals, 5 pulses, 7 oilseeds and 4 commercial crops

Certain limitations exasperatedly bound the scope of the CACP data as it does not take account of inter-cropping and mixed-cropping which is widely prevalent among small and marginal agricultural households as a sustenance strategy Also, there is underestimation of tenancy and unaccounted/under accounted value of rental land in official statistics On the other hand, while the Situational Assessment Surveys (2003 and 2013) consider an agricultural household as the unit of analysis, they do not collect data on crop-specific cost of cultivation and returns and are not based

on a consistent method of cost accounting

The comprehensive census type village surveys conducted under the Project on Agrarian Relations

in India (PARI) by Foundation for Agrarian Studies (FAS) provides an alternative to such methodology PARI develops and improves upon the methodological concerns of farm accounting

by providing empirical data of production systems at the household level It also provides data on total incomes of farm households and provides share of crop incomes within total incomes at household level This dataset for respective states shall be used in order to understand the real situation offering empirical evidence at the village level

Spatial Variations in Cost of Cultivation and Farm Profitability

Returns from Cultivation and Farm Profitability

The importance of accurate and timely estimates of farm income statistics has been well discussed in the literature review in the previous section The different cost measures provide with different estimates of farm income While the income over paid-out cost (GVO – Cost A2) reflect the actual income from farm business as would be gained by the farmer, the net income from cultivation show the direction towards the appropriate measure for income calculation should be done to realize actual returns of the farmers by imputing the value of hidden costs Figure – 1 shows the trends in Farm Business Income for major states where the state of Punjab is a positive outlier in terms of gaining extremely high from farm business, while the other states show a fluctuating curve over the period The graph shows that FBI had remained low for all states but Punjab till mid-2000s i.e around the years 2004-06 After this period, the farm income has increased a bit towards the positive side, even witnessed its all-time high of the 20 years, though it also shows more fluctuations post

2006 period For the last two years, i.e 2014-2016, the FBI had been declining for Paddy

The income curve from the figure - 2 depicts the actual intensity and magnitude of the income crises from agricultural crop production For Paddy, one of the most cultivated, sold and the foremost state protected crop, the cultivators are gaining negligible, in fact negative returns from cultivation, over the total cost The graph shows that from 1996-97 to 2004-05, the negative incomes was a constant pattern, though the second decade showed some years with increased net income from cultivation The curve of net income post 2005 shows considerable fluctuations, with also hitting all times highest returns from cultivation during the same period It also depicts that while the incomes were increasing in a brief period in between during 2007-10, the past few years has seen the lowest

of all for major states cultivating Paddy Punjab is a relative exception to all of it, as though the income line in the graph portrays a similar trend but without less magnitude of crisis Here again, the profitability curve shows a declining trend for all the states except Punjab since 2014 This decline in profitability over the recent period can be associated with the increasing distress and the intensifying demand for remunerative prices

The farm profitability from wheat cultivation over A2 cost measure has shown significant pattern to

be noted for policy implications While there has been a bump increase in income during the period 1998-99 to 2000-01 followed by a decline during 2000-01 to 2004-05, the patterns followed in the first 10 years of analysis mark a period of 3 years for the trend to change However, the same is not the case in the second decade where the level of fluctuations in farm income is relatively higher Key point to be noted from figure – 3 is the sudden increase in growth rate of farm business income during the period 2006-07 to 2011-12 A direct factor for the same can be pointed out to the decline

in A2 cost during the same period, apart from other reasons The agriculturally advanced states of Haryana, Punjab and Rajasthan gain relatively more benefits over cost A2 than other states A key reason for the same can be pointed to the high level of yields in the region

The analysis of profitability over cost C2 shows decreasing returns to cultivation for all the states during the period of 2000-01 to 2004-05, especially for Bihar and Madhya Pradesh where income

from crop production went negative With increased fluctuations, the level of net income from cultivation for wheat has remained positive and increasing during the decade of 2004-05 to 2014-15

as shown in figure – 4 The recent times (last three years) have seen a fall in the same with the incomes going as low as negative for some states such as Uttar Pradesh

A better picture of returns from cultivation can be figured out from Tables 1 & 2 The ratio of GVO

to total cost reflects that, for Paddy, the return from cultivation does not even cover the costs in the states of Bihar and West Bengal for most of the twenty years The farmers are receiving negative returns from cultivation in the respective states Although, the states of Tamil Nadu and UP do get relatively better returns from cultivation, their proportion also does not touch the commonly accepted 50% returns from cultivation argument It is only in the state of Punjab that crop production is a remunerative activity These statistics have serious repercussions for the price policy

as Paddy is one of the most state protected crop and the levels of profitability are quite low in it also

In the case of Wheat, though the costs are getting covered, the returns are not enough to motivate/convince farmers to earn their living from farming or continue crop production to be the major source of work (Table 2) The returns from cultivation are not providing for more than 50% cost over the cost of cultivation One of the key factors behind the same is that various components comprise for respective socio-economic classes differently and the changes in the same directly affects the conditions and situation of them, with the vulnerable and poor sections being affected relatively more The regional variations can be identified here also, where the states of Punjab, Rajasthan and Haryana gain more from cultivation For the first 10 years till 2006, Bihar, Madhya Pradesh and Uttar Pradesh were just gaining enough to cover the cost, in fact not even that in many years But since 2007, there is an observable increase in returns from cultivation in the respective states The last two years show a sharp decline in incomes, as also mentioned earlier

As discussed in the methodological considerations, the operational cost commonly known as out or A2 cost is the mainstream cost measure used to analyze cost and profitability from farm business While it is essential that the cash cost components in the cost of cultivation shall be assessed using the paid-out costs, we also need to account for the economic costs which are imputed and are not directly paid for Such costs include imputed value of family labor, owned land and interest on fixed capital The intricacies of the relative capacities of production and the costs associated with it are visible through village data studies and reflect the magnitude of relevance of some components of cost (say family labor) which if excluded shall not reflect true account of comprehensive cost of production for certain category of farmers The same shall be discussed in the next section focusing on class differentiation

paid-From looking at the data on incomes from crop production, it is clearly visible that the crisis of falling incomes is a real concern In fact, the losses that the farmers are making, needs further enquiry into the key reasons and identification of category of farmers who are facing the extreme losses in crop production The periodization fits perfectly for both the crops over the 20-year analysis, with the first 10 years till 2004-05 showing relatively lower returns from cultivation, and a sudden increase in the levels of incomes after this period The second period from 2005 to 2014 showed improved results in incomes, though the extent of fluctuations in incomes is a concern of

analysis that shall be looked into to explore the reasons for the same The third period, which though not enough to be demarked as a specific time period, post 2014 can be looked into specifically for further enquiry as the incomes were falling steeply in this period and the distress across countryside also gained momentum during this period only

Table 1 - Returns from cultivation (GVO/Cost C2) for Paddy, major states, 1996-97 to 2015-16

Table 2 - Returns from cultivation (GVO/Cost C2) for Wheat, major states, 1996-97 to 2015-16

Figure 1 - Farm Business Income (GVO - Cost A2) for Paddy, major states, Rs per hectare, 1996-97 to 2015-16

Figure 2 - Net income from cultivation (GVO-Cost C2) for Paddy, major states, Rs per hectare, 1996-97 to 2015-16

Figure 3 - Farm Business Income (GVO - Cost A2) for Wheat, major states, Rs Per Hectare, 1996-97 to 2015-16

Figure 4 - Net income from cultivation (GVO-Cost C2) for Wheat, major states, Rs per hectare, 1996-97 to 2015-16

Prices Realized

The price realized by the farmers for the respective crops is one of the key indicators to assess returns from cultivation The CACP provides with the GVO and yield derived from cultivation for respective states The implicit price (per quintal), also known as the price realized by the farmers, can

be calculated by dividing the GVO of main product (per hectare) and the derived yield (per hectare)

As the Situational Assessment Survey (2013) indicated, most of the farmers (around 62%) do not avail the benefits of MSP or are even aware of the same With the differing capacity to produce and sell leading to the marketable surplus debate, the fact that most of the farmers are dependent on local markets to sell their produce is commonly accepted and as a result arises the need to study the prices received by the farmers

The prices realized, expressed in real terms, shows a fluctuating trend changing every 3 years in the case of Paddy (see Figure – 5) While during the initial years, all the states relatively received similar prices per quintal but the trend of the same declined for the states of Bihar, UP and West Bengal It

is important to highlight that the price curve of the states like Bihar, UP and West Bengal is relatively lower than that of Punjab and Tamil Nadu The prices realized witnessed a sharp decline especially after the year 2008-09 in all the states Though, the price curve does show an increasing trend after that for 2012-14 periods, the curve has again been declining since 2015 for all the states except for Bihar

In the case of Wheat, the prices received do not show much spatial variations over the period across states as depicted in Figure 6 In the initial first 5 years, the implicit price was fluctuating with slight decrease visible in price fluctuation relatively from 2001-05 The prices witnessed a sudden rise in the year 2005-06 that continued for 3 years Since 2008-09, the prices have shown a declining trend

in all the states though relatively controlled in the recent years The declining price does have direct impact on the profitability in the states with increasing costs As discussed above, for Wheat, the increasing fluctuations in the post 2005 period in farm profitability can arguably be because of prices remaining low

Figure 5 - Prices Realized (Implicit Price) for Paddy, Rs per quintal, major states, 1996-97 to 2015-16

Figure 6 - Prices Realized (Implicit Price) for Wheat, Rs per quintal, major states, 1996-97 to 2015-16

Trends in Cost of Cultivation

This section shall analyze the operational as well as comprehensive cost of cultivation for major states over the two decades of analysis The locus of analysis is regional variations in the cost of cultivation

Paddy Figure - 7 depicts the spatial variations in the A2 cost of cultivation for Paddy across major states For the states of Uttar Pradesh and Bihar, the A2 cost curve has remained comparatively lower than other states and has shown somewhat similar trend While the period of 1999-2005 noticed an increase in cost, the second period of 2006-2011 witnessed a decline in the cost for these states In contrast, Tamil Nadu’s per hectare cost has remained almost double of UP and Bihar over the period Moreover, the graph shows a declining trend in the cost for Tamil Nadu during the first decade (2000 - 2011) The rise in cost for Punjab has remained controlled except for the period of 2002-2006 where we can observe a sudden jump The A2 cost curve for Punjab requires detailed enquiry into the shifts in the components of operational cost to locate the causes for certain bumps in the cost curve An important observation to mark is that while the operational cost shows a common trend across states with a rise in the cost during the 2000-2005 period and relative decline in the growth of cost during 2007-2011 period, the cost curve for all the states has been increasing since 2012 except for Punjab where price as well as non-price measures are provided

by the government are relatively better

In order to identify the actual costs, we shall look at figure – 8 which provides the structure of C2 cost of cultivation for Paddy across major states for past two decades While the C2 cost curve follows the trajectory of the A2 cost curve for initial period of 10 years in the states of Bihar and Uttar Pradesh respectively, the increase in C2 cost after 2007-08 is not synthesized with the A2 cost curve for Uttar Pradesh This implies that there has been a shift in the relative capacities of holding means of production amongst the farmers over the period in Uttar Pradesh, as a result increasing family labor charges or the imputed charges on fixed assets are resulting in the rise in the C2 cost of cultivation In West Bengal, the cost was relatively controlled during the initial half of the period, but shows a sudden increase reaching up to the level of Tamil Nadu and Punjab, who incur high per hectare costs of cultivation during the last few years

Wheat Figure 9 describes the trend in the operational cost of cultivation for Wheat across major producing states The period of 1998-2003 shows the costs to be increasing for all the states, with a decrease in the growth of the cost during the years of 2003-2009 The 2010-2011 witnessed a sharp fall in the cost curve, but since then the costs have been increasing for all the states To be specific, the states with relatively low per hectare costs of Bihar, Uttar Pradesh and Madhya Pradesh move in a synchronized manner as mentioned above The states with relatively higher per hectare costs like Punjab, Haryana and Rajasthan, who also happen to be relatively more mechanized and agriculturally advanced states, witness controlled movements in the cost curve (mostly declining), though cost are increasing even for them since 2011-12 period as the graph depicts

Another important observation to be marked is that, unlike Paddy, there is minimum level of spatial variation in cost structure across the period for Wheat A similar trend can be noted in the C2 cost curve also as shown in figure - 10 The increasing gaps in the cost curve of various states remained visible till 2011, the post 2011-12 period requires further enquiry as to changes in which component

of the respective state led to decreased spatial variations in the comprehensive cost across states For both Paddy and Wheat, the A2 and C2 costs were controlled in the period of 1996-97 to 2004-

05 While the cost was increasing in the first five years, it does not increase much and gets back to normal rate in the early 2000s Post 2005, a decline in costs was clearly visible which would’ve helped the farmers earn remunerative incomes, this stability in cost control mechanism did not stay for long After the 2011-12 period, the costs have been increasing, especially during the last 3 years that the growth rate in costs has escalated and led to a sudden increase in both the measure of cost

of production

Figure 7 – State wise Real A2 Cost of Cultivation for Paddy, Rs per hectare, 1996-97 to 2015-16

Figure 8 – State wise Real C2 Cost of Cultivation for Paddy, Rs per hectare, 1996-97 to 2015-16

Figure 9 – State wise Real A2 Cost of Cultivation for Wheat, Rs per hectare, 1996-97 to 2015-16

Figure 10 – State wise Real C2 Cost of Cultivation for Wheat, Rs per hectare, 1996-97 to 2015-16

Regional Variations in components of cost

The component of purchased inputs, that comprise of seeds, fertilizers and insecticides together comprise for around 20% to 25% in all the states for both Paddy and Wheat The share of purchased inputs has remained to be a significant component for cultivators with the fertilizers being the major component within the same Irrigation costs have been consistently increasing (though highly fluctuating), amounting to changes in the operational cost of cultivation

The machine labor charges have been increasing at a high rate, and the share of machine labor has also been increasing Except for Haryana and Punjab, all states witnessed the share of hired to owned machinery in all the states to be around 90% for both the crops The animal labor costs have gone negligible for both crops across states The share of hired labor has been increasing for Paddy and Wheat with an exception of Punjab The family labor is increasing more in labor intensive economies of West Bengal, Bihar and Uttar Pradesh for Paddy For Wheat, the family labor cost share was high in all the states amounting to more than 1/5th of the A2+FL cost over the period The wheat crop has maintained the requirement of machine use to be a major component and resulted in relative decline (than Paddy) of human and animal labor use in wheat production in India

The regional variations are high in cost components with a significant differences and variations between the agriculturally advanced (read mechanized) economies (Haryana, Punjab, Rajasthan) and the labor intensive economies (West Bengal, Bihar, Uttar Pradesh) The agriculturally advanced states of Haryana, Punjab and Rajasthan showed more proportional share of purchased inputs in cost of cultivation than other states Haryana and Punjab have less share of irrigation costs In states like Bihar, Tamil Nadu, UP and West Bengal, the machine labor cost share has increased to one-fourth of the operational cost of cultivation Punjab, Haryana, Madhya Pradesh and Rajasthan show

a further extending increase in their proportional share for machine labor from 1/5th and 1/4th

(18-25 percent) in the beginning to 1/3rd (33 percent) of the A2+FL cost during the recent years The states of Bihar, Uttar Pradesh and West Bengal show high usage of family labor to avoid real wage costs by hiring labor, with their share in the operational cost has been varying between 30% to 48% across the two decades for Paddy

Class Differentiation and Economics of Farming

This study uses the data archive built using the village studies’ methodology as developed by the Foundation for Agrarian Studies (FAS) along with network of scholars, activists and policymakers Various scholars have already worked in the cost of production aspect of the question but it is essential to understand the economics of farm production systems through an income perspective (Bakshi 2008) The differentiation of income across regions and the causes behind these is required

to be enquired through an empirical study in the agricultural sector

Defining Socio-Economic Classes in the Study Villages

The class analysis is a major component in the village surveys conducted by FAS For Panahar, the book on agrarian relations in Bengal is under preparation Though, a paper by (Sarkar 2017) discusses the key considerations in defining classes in Panahar and I have used it as a reference point for class analysis in Panahar

A larger analysis of classification of socio-economic classes across the Indian countryside is discussed in (Ramachandran 2011) and the following descriptive analysis in this section is based from the same The major factors that define the characteristics and features of socio-economic conditions in rural India, as used in PARI data and borrowed for this analysis, can be broadly classified as –

● Socio-economic and historical classification based on regional context

● The ownership and control by households on assets, means and forces of production (especially, though not exclusively, land)

● Relative usage of family and hired labor (especially in the agricultural production process)

● Surplus that the household is able to generate in a year

● Rent exploitation, that is, rent received or paid by the household

● Net income of the household, making separate note of the gross value of output from agriculture and the investment in agriculture per hectare

● The sources of income of the household

The major socio-economic classes that are defined in the Indian countryside using PARI village studies’ methodology are:

Landlords and Capitalist Farmers

Rich (Upper) Peasants

Middle Peasant

Poor (Lower) Peasants

Manual Labour: With or without operational holding of land

For the convenience of analysis and further reference in the text, the landlord/capitalist farmer households across villages shall be considered as a common category to refer to The rich peasant shall refer to the upper classes of peasant differentiation in the respective villages The poor/small peasant shall refer to the lower classes of categorization in the villages The manual worker shall

refer mostly in the case of manual worker household with operational holding of land The categorisation of middle classes of peasantry is intentionally discounted and be classified with closest class of rich or poor peasant

The classification of other classes that exist in the village like those whose major earnings are derived from artisanal and traditional caste based work, from salaries, from rents/remittances/pensions/moneylending, from business/self-employment are not considered for the analysis The rationale behind the same is that the objectives and the scope of the study is directed to farming households

Panahar, Bankura, West Bengal

Panahar is a village in the Bankura district of West Bengal The village lies in the Old Vindhyan Alluvial region of West Bengal and the reference year for survey is 2009-10 Panahar is an important village to gain insights on developments in the village economy as it was surveyed 5 times since

1995 During the survey year, the total number of households was 248 with a total population of

1083 people The irrigation facilities were primarily maintained through tubewells in the village and the share of irrigated land in the gross cropped area is 90 percent While the major Kharif crops were aman and aus rice, in the rabi season - potato, mustard and wheat were major crops cultivated The average crop yield in the village was much higher than the state and all-India average with a cropping intensity of 2.05

The class categorization as discussed in the study by (Sarkar 2017) in the village shows that the landlord class had two category of households One was that of descendants of Muslim Jotedar family who had been traditionally landlords, and the others were Goala families, who initially had small holdings but gained control over land over time Peasant households in Panahar were classified into ‘upper’ or ‘lower’ peasantry based on labor ratio criterion The upper peasantry owned better means of production, while the lower peasantry barely had any access to means of production The manual worker households were mainly tenant cultivators and the land cultivated by them accounted for less than one percent of the gross cropped area Their major source of income was hired labor

on others’ land and work outside agricultural production

The caste-class composition of households as depicted in the table shows some reflections on the social hierarchies in the village Most of the households belonging to the lower peasantry of manual workers and semi-proletarians belong to the scheduled caste background; with their percentage count within class being 81% and 73% respectively (see Table 3) Majority of the upper peasantry belonged to the upper caste Hindu background with a significant proportion of Muslim capitalist farmers (42%) The households with relatively stable class relations with major income sources from rents/remittances, salaries and business belonged primarily to the upper caste Hindu background Households with income from other sources like artisans and traditional caste based calling belonged mostly to schedule caste background The stark variations in socio-economic classes and caste composition of households clearly reflect the prevalence of deep caste relations within the village economy

Looking at table-4, we can say that the household incomes decline clearly across class groups from upper to lower peasantry One the one hand, the per capita income of big/capitalist landlord amounts to Rs 78629, the other peasants derive very low incomes between Rs 6000 to Rs 14000 per annum Most of the villages in Bengal reflect relatively better equity in class relations with most

of them owning limited amount of land and therefore, belonging to peasant category The development of capitalist landlordism in Panahar, as discussed by (Sarkar 2017) shows that four households with small landholdings purchased land over time and three muslim families inherited through descendants of Jotedar family

Table 3 - Caste-Class Composition of Households, Panahar, 2010

Table 4 – Incomes, across classes, Panahar, 2010

Major income from business

Major income from other sources

Major income from remittances/rent

Caste composition of different classes of households

Average household income across classes

Table 5 - Share of Components of A2+FL Cost of Cultivation, in percentage, across classes, for Paddy, Panahar, 2010

The structure of cost for Paddy production in Panahar shows variations across socio-economic classes The capitalist farmer and rich peasant incurred major portion of the cost in hiring casual labor, 39% and 36% respectively, as the proportion of machine labor remains low across farming households For the lower peasantry, family labor amounts to the largest proportion of cost with 37% and 47% for small peasant and manual workers respectively (see Table-5) This shows the levels of exploitation of own labor by the lower peasantry to control the cash costs, a phenomenon visible in across the country Though, the intensity of mechanization is low in means of production, the usage of advanced inputs associated with the costs of seeds, fertilizers and plant protection comprises of another major component in capitalist farmer The magnitude of usage of purchased inputs is lower for the peasantry primarily because of the high costs associated with these inputs The tenancy relations in the village are quite an important aspect to focus upon It is expected in a labor surplus economy for land market to be inactive, but interestingly the land transactions in the village have shown significant results over past thirty years Apart from that, the leasing in and out of land is also a major phenomenon The lower peasantry lease in land to cultivate and as a result, the rent component amounts to a major proportion in their cost structure, depicting 18% and 12% for small peasant and manual workers respectively

The analysis of various cost measures and profitability over the same show an intriguing picture to focus on Given that the production systems in the village is dominated by labor intensive process of cultivation, the productivity levels per acre and per quintal depict higher values for lower peasantry The paid-out costs (Cost A2) incurred by the manual workers and small peasants were relatively lower than the upper peasant and capitalist farmer The cost C2 amounts to a larger proportional increase for the lower peasantry as they clearly happen to exploit their own labor, which is not accounted for in the cash costs The component of Cost C2 is relatively less for rich households primarily because of limited ownership of mechanized means of production to gain interest on and relatively limited size of landholdings due to the intervention of land reforms in the region

Class Capitalist landlord/farmer Peasant Small peasant/ semi-proletarian Manual worker Total

A clearer picture of incomes from crop production can be assessed through Table 6 & 7 Given the fact that the productivity was higher for lower peasantry, it did not help much in attaining incomes,

as probably the prices received also would’ve played major part in the same The farm business income is more for the lower peasantry However, in reality, it is the net income component that shows the true picture of incomes over crop production given all the major costs included, especially that of family labor The levels of profitability depict moderate net income for the capitalist farmers For the lower peasantry, the incomes are negative with the magnitude reaching down to losses of Rs

213 and Rs 80 per quintal for manual workers and small peasants respectively The veracity of situation needs to be addressed while studying the economics of crop farming

(Sarkar 2017) also reviewed the crop incomes across classes, at the household level i.e for all major crops, for Panahar and derived some findings useful in this context i.e that with extreme inequalities

of income from crop production across peasantry Firstly, the magnitude of inequalities in incomes from crop production was high both over cost A2 and cost C2 Secondly, 65 per cent of households incurred loss in crop production over cost C2 and 28% over cost A2 Thirdly, the income from crop production earned by lower peasant households was less than 1 per cent of that of capitalist households One of the reason for low overall profitability is the price crash in the potato market during the survey year

Further, looking at market relations in the village, a key aspect is the prices received by the farmers Due to the paucity of significant entries on prices received by manual workers, this class is not included in this particular analysis For other agricultural households, the prices receive show a favorable situation as we move from lower to upper peasantry The differentiation in the average prices received by the farmers depends on a majority of factors, though two key of them are discussed in the analysis in Table-27

The amount of marketable surplus with the farmers helps negotiate for the prices to be received, and small and marginal farmers cultivating mostly for subsistence purposes do not receive any considerable position to bargain the same (less than 25%) On the other hand, the rich peasant and capitalist farmer, cultivating mainly for the market, happens to negotiate better due to major quantities to trade and often, relatively better quality of produce (more than 55-60%)) Moreover, the phenomenon of holding the stocks of crop produce is possible only for the capitalist farmer due

to better information base and economic competence to do so As a result, they sell the produce when the market supply is low, to gain increased surplus This can be captured loosely in the fact that no farming class was involved in the process of multiple sales except the capitalist/landlord farmer with 26% of sales transactions being done later for Paddy

Table 6 - GVO, Costs and Incomes from Crop Production, per acre, across classes, for Paddy, Panahar, 2010

Table 7 - GVO, Costs and Incomes from Crop Production, per quintal, across classes, for Paddy, Panahar, 2010

Nayanagar, Samastipur, Bihar

Nayanagar is located in Samastipur district, in the north-west alluvial Gangetic region After a houselisting survey that covered 1205 households, we conducted an intensive socio-economic survey

of 352 sample households in the village The major landowning caste in the village was Bhumihar The Bhumihars from the village were more upwardly mobile than any other caste group Many Bhumihar households in the village had at least one member of their family employed in either the government sector or in private companies at middle and higher positions The Dalits from this village were landless and performed the bulk of the labour in agricultural and non-agricultural operations Rice, maize, and litchi were cultivated in Nayanagar while a large amount of land was not

cultivated in kharifseason due to floods The reference year for the survey is 2011-12

This para on class dynamics is reflected using the presentations on class relations as discussed in the workshop on ‘Consultations on Village Surveys from Two Villages in Bihar’, conducted by the Foundation for Agrarian Studies in December, 2018 The village is dominated by Bhumihars This village can be identified as a village with absolute socio-economic and political control of one household Majority of Dalits do not own any land Apart from the four major criterion of classifying peasantry (operational holding, ownership holding, labour ratio, crop income proportion)

as discussed in (Ramachandran 2011), the asset ownership was the important variable The big landlord owns more than 40 acres of land The cultivator 1 owns 20 to 40 acres, along with assets more than 1 crore For the remaining 3 cultivator classes, the asset ownership limits are less than 25 lakhs, 25 to 50 lakhs and 50 lakhs to 1 crore The manual worker households are 733 out of 1206 in the village There are a significant number of households with operational holdings, and therefore the need to further classify two category of households in the manual worker class only

Table 8 shows the caste and class composition of the households in the Nayanagar village In this village also, the scheduled caste community, though diverged across classes, mostly belong to the class of manual workers The big landlord and upper peasants (cultivator 1-3) belong to the upper caste Hindu category The household level incomes are presented in Table 9 The levels of household incomes crisis affects the lower peasantry while understanding from the class perspective Table 9 shows how the per capita incomes and crop income decreases across the classes The 5 big landlord households earns around 5 lakhs per annum per person on average and in the similar village, more than 57% of the households belonging to lower peasantry (cultivator 4 and manual workers) earn around Rs 10,000 per annum per capita The differences are even wider in crop incomes

Table 8 - Caste-Class Composition of Households, Nayanagar, 2012