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Paying Farmers for Ecosystem Services, Not Just Crops

Doubling India’s Farm Incomes

The Government of India aims to double farm incomes by 2022. A mechanism of payment for ecosystem services, which would compensate farmers for the value of the non-market agroecosystem services they produce, would address the issues of farm income and the deep ecological crisis in agriculture. This strategy would be within the fiscal ability of the government and would only use the existing allocation for agriculture. The institutional framework required to implement PES already exists. If properly implemented, PES could persuade Indian farmers to adopt ecologically sensitive agricultural practices which, in turn, could double farm income.

India’s agricultural sector has played a vital role in generating rural income and providing food security to the growing population of the country. The bulging buffer stock of food hides the perilous state of farmers, and it is reflected in the unending stream of farmers’ suicides in recent years. Data from the National Crime Records Bureau (NCRB) reveal that farmers constitute the most distressed group in the country; their suicide rate, higher than that of all others, is increasing. The NCRB data, made available since 1995, show that around 3,00,000 farmers had died by committing suicide by 2016, but the actual number of suicides could be more than double this figure (Sainath 2015). Economic distress leads the overwhelming majority of farmers to suicide (Reddy and Mishra 2009). Farm income has been dwindling over the past many years, and farmer debt has been increasing (Lerche 2011). The ensuing agrarian crisis has been severe; the recent farmers’ protests in several states have brought back the
nation’s attention to it (Gandhi 2017). To mitigate the crisis, the Government of India (GoI) plans to double farmers’ income (DFI) by 2022. Finance Minister Arun Jaitley presented this vision in his budget speech to Parliament in 2017. Prime Minister Narendra Modi reiterated the government’s commitment to the DFI agenda at a large national consultation in Delhi titled “Agriculture 2022: Doubling Farmers’ Incomes” in February 2018.

Historically, public policy has relied on multiple strategies to overcome agrarian crises, but it has focused on asset redistribution through land reforms; technology improvement and infrastructure enhancement to raise productivity and farm incomes; and the price mechanism, by providing fair market prices at policy-determined minimum support prices (MSPs).1 Land reforms remain a desired policy, but its implementation varies by state (Deininger et al 2009; Ghatak and Roy 2007; GoI 2013), and its future looks bleak (Srivastava et al 2007). Land redistribution is unlikely to resolve the current agrarian crisis. Technological solutions to traditional productivity enhancement by way of seed modification have reached a threshold. Technology or infrastructure is unlikely to boost farm incomes. The MSP cannot solve the agrarian crisis. It has lagged behind rising production costs and led net incomes to decline (Rao and Dev 2010). Many crops lack an MSP. Even the government has found that less than 5.8% of farm households are beneficiaries of the MSPs (GoI 2015a). In 2016–17, most agri-commodities—oilseeds, pulses, rice, wheat, and most kharif crops except, perhaps, cotton and black gram—traded below their MSPs. In some cases, prices fell below the production cost (Singh 2018).

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