Profit margins for farmers growing foodgrains declining

The cereals and pulses on your dining table are steadily costing more, but is the farmer making more profits out of growing them? The answer, experts say, is no. The grim truth is that profit margins for farmers growing foodgrains are declining in many parts of the country.

"The net returns out of growing foodgrains are shrinking in most of the major high-yield states like Punjab, Haryana and Andhra Pradesh. The trend is clear if you look at the farm costs and prices data," says Ramesh Chand, national professor at the National Centre for Agricultural Economic and Policy Research.

"Though growing grain is still profitable, the incomes are definitely coming down," he adds.

This is particularly true for the small farmers. As R S Seshadri of top food brand, Tilda Riceland, puts it, "Farming at today's prices is becoming unviable for the small and marginal grower. This calls for quick steps to ensure farmers remain interested in agriculture."

One immediate measure to redress the situation is obvious: raise the minimum support price for foodgrains. It's a step the government too seems keen to take. The Commission on Agricultural Costs and Prices has recommended a steep rise in MSP, ranging from 25% to 94%, for most farm produce. Though this raises fears of food inflation, Seshadri says it's about time the middle class pays more for its food. "The top 25% of the population has to subsidize the bottom 25% through differential pricing," he adds.

Declining profitability is one of the reasons for stagnation in domestic foodgrain production in the past decade or so. It's also linked up with increasing distress in the countryside. A look at the figures on indebtedness of farmers shows high debts in states where farming is developed — and where lower profitability is an issue.

The National Sample Survey data for farmer indebtedness shows that a shocking 82% of farming households in Andhra Pradesh was in debt in 2003. The high figure for AP was perhaps linked to uncertainties in cash crops like cotton, but indebtedness was high in foodgrain-producing granaries like Punjab and Haryana as well — 65.4% and 53.1% as compared with the national average of 48.6%.