DIVERSIFICATION OF INDIAN AGRICULTURE:

A HOUSEHOLD LEVEL ANALYSIS

Dissertation submitted to the Jawaharlal Nehru University

in partial fulfillment of the requirements
for the award of the degree of

Master of Philosophy

By

ARIJITA PAL

CENTRE FOR THE STUDY OF REGIONAL DEVELOPMENT

SCHOOL OF SOCIAL SCIENCES
JAWAHARLAL NEHRU UNIVERSITY
NEW DELHI—110067
INDIA

2008
 CERTIFICATE

I, Arijita Pal, certify that the dissertation entitled “DIVERSIFICATION

OF INDIAN AGRICULTURE: A HOUSEHOLD LEVEL ANALYSIS” for the
degree of Master of Philosophy is my bonafide work and may be
placed before the examiners for evaluation.

(ARIJITA PAL)

Forwarded by

PROF. R. K. SHARMA DR. SUCHARITA SEN

(CHAIRPERSON) (SUPERVISOR)
 Acknowledgements

This academic endeavor of mine would not have become reality without the co-
operation extended to me by a number of people at different stages of the work.

I owe a debt of gratitude to my supervisor Dr. Sucharita Sen for the guidance and
valuable suggestions that she offered to me from time to time. Despite her busy
schedule and other numerous and important duties, she spared her valuable time for
my research work. Without her scholarly guidance, lively discussion, constructive
criticism and encouragement throughout the period of my dissertation work, this
result would not have been accomplished. I also truly appreciate her patience and
tolerance during my numerous act of negligence.

I am also gratified to acknowledgements to the faculty members of the CSRD who have
helped me inculcate the habit for academic and research details during my course
work and encouraged me to complete dissertation in a challenging environment.

I am indebted to the staff members of different libraries, particularly JNU library and
CSRD documentation center for the generous help in finding the relevant materials.

This work would have remained in the embryo without continuous and consistent
motivation, help and appreciation of my friends, seniors and junior – Arnab, Sucheta,
Rajeev, Koushalya, Vinita, Swati, Paramita di, Subhasri di, Saraswati di, Monisha,
Chandrani, Ranjana and Soumyadeep to name a few. I extend my heartfelt gratitude to
all who directly and indirectly contributed in the execution of this dissertation.

I cannot but express appreciation for Maa, Baba, Didi and few relatives, whose
blessings and untarnished faith in me has brought me up here at this stage.

Arijita Pal
 LIST OF TABLES

Table No. Title Page

2.1: Percent Share of Various Crops in Total Output of All Crops in 21

Different Regions, India during 1960s, 1970s, 1980s & 1990s
2.2: Growth Rates of TCA: different states of India 23
2.3: Cropping Intensity across States of India 26
2.4: Herfindahl Index: different states of India 30
3.1: Average Percent Allocation of Land under All Diversified Crops 39
3.2a: Average Percent Allocation of Land under All Groups of Crops 40
(Relevant Cultivators)
3.2b: Average Percent Allocation of Land under All Groups of Crops 41
(All Cultivators)
3.3: T-Test of Mean Percent Land under Different Crops to GCA 44
among Different Farm-size Classes
3.4: Correlations between land under different crops, NSA and GCA 47
3.5: Average Cost of Production of Crops 49
3.6: Correlations between Average Cost of Production, Farm Size 50
and land under different crops
3.7: Comparison of Cost of Production of different groups of crops 51
3.8: Average Net Return under All Groups of Crops 54
3.9: Comparison of Net Return of Different Groups of Crops 55
3.10: Correlations between Average Net Return, Farm Size 57
and land under different crops
4.1: Social Groups and Adoption of Different Crops 60
4.2: Land Consolidation and Adoption of Different Crops 62
4.3: Food Sufficiency and Adoption of Different Crops 63
4.4: Awareness about MSP, PA, Bio-fertilizers & WTO 64
and Adoption of Different Crops
4.5: Membership of SHG & RFO and Adoption of Different Crops 68
4.6: Crop Insurance and Adoption of Different Crops 71
4.7: Barriers to Insurance and Adoption of Different Crops 72
4.8: Likeliness of Farming as a Profession and Adoption of Different Crops 73
4.9: Services from Cooperatives and Adoption of Different Crops 74
Table No. Title Page

4.10: Sources of Seeds and Adoption of Different Crops 74

4.11: Replacement of Seeds and Adoption of Different Crops 78
4.12: Adequacy of Irrigation and Adoption of Different Crops 80
4.13: Reasons for Irrigation Inadequacy and Adoption of Different Crops 81
4.14: Accessibility of Credit and Adoption of Different Crops 82
5.1: Logit Results: Model 1 88
5.2: Logit Results: Model 2 89
5.3: Model Summary: Model 3 90
5.4: OLS Results: Model 3 90
5.5: Model Summary: Model 4 91
5.6: OLS Results: Model 4 91

Appendices Tables:

A.2.I: Total Cropped Area of different states of India i

A.5.I: Model 1: Model Summary ii
A.5.II: Model 1: Classification Table ii
A.5.III: Model 2: Model Summary iii
A.5. IV: Model 2: Classification Table iii
A.5. V: Model 3: ANOVA iv
A.5. VI: Model 4: ANOVA v

LIST OF FIGURES

Figure No. Title Page

2.1: Average Cropping Intensity 25

2.2: Degree of Crop Diversification 29
 CONTENTS

List of Tables & List of Figures

Chapters Page No.

1Introduction 1–16
Concepts & Definitions
Literature Review
Objectives
Research Questions
Data Base
Methodology
Organization of the Study

1Trends & Patterns of Crop Diversification in India: A State Level Analysis

17-37 Crop Diversification in India
Cropping Pattern
Growth in TCA
Cropping Intensity
Degree of Diversification
Initiatives to Support Diversification
Private Sector
Conclusion

2Diversified Crops and Their Land Allocation, Cost of Production &

Profitability 38-58
Allocation of Land
Size Class Analysis
Association between Farm-size and Diversification
Cost of Production
Cost of Cultivation and Farm-size
Profitability of Diversified Crops
Net Returns and Farm-size
Conclusion

3Farmers’ Characteristics d Their Access to Information & Credit and

Adoption of High Value Crops 59-83
Social Characteristics
Consolidation of Landholdings & Food Sufficiency
Access to Knowledge & Information
Access to Crop Insurance & Barriers
Farming as a Profession & Services of Cooperatives
Sources of Seeds & Frequency of Seed Replacement
Adequacy of Irrigation
Access to Credit
Summary

4Determinants of High Value Crop Diversification 84-92

Introduction
The Models and Variables
Analysis
Factors Explaining Adoption/Non-Adoption of Diversified Crops
Factors Explaining Degree of Diversification
Summary

5Conclusion 93-96

Bibliography 97-102

Appendices i-v
 Chapter 1

Introduction

Agricultural diversification in India is slowly picking up momentum in favor of

high-value food commodities primarily to augment income rather than the traditional
concept of risk management. The nature of diversification differs across regions due to
existence of wide heterogeneity in agro-climatic and socio-economic environments. The
major reason behind crop-diversification is that farm employment, input use and
economic performances are intimately related to the underlying crop pattern.

Agricultural diversification in general and crop diversification in particular, is

stressed in the five-year plans of India because:

 It can reduce the loss of bio-diversity incurred by specialization mainly after

Green Revolution,
 It has a strong implication on income & employment in rural areas,
 It can increase inter-sectoral linkages,
 Trade is greatly affected by agricultural diversification,
 It can lead to self-sufficiency in essential agricultural commodities etc.

Flowers, fruits and vegetables are becoming some of the most important export-
items, contributing a large share of agricultural income. Normally risk-averse farmers do
not opt for diversification because there are lots of constraints and lacking (for e.g.
perishability of crop, lack of cold storage facility, lack of proper market etc.).

With increasing population and mainly urban nature of demand, high value crops
are being cultivated in India. Pune-Nasik belt is one such region.

1
 1.1: Concept and Definition:

The concept of diversification conveys different meaning to different people at

different levels. For example, with respect to the national economy, it generally conveys
a movement of resources, especially labor, usually out of agriculture to industry and
services, a sort of structural transformation. Many economists advocate diversification as
a tool of risk management. It is a strategy that involves doing more than one activity at
any given time. It involves in mitigating price risks and production risks of falling output.

Within agriculture, however, diversification is considered a shift of resources

from one crop (or livestock) to a larger mix of crops and livestock, keeping in view the
varying nature of risks and expected returns from each crop/livestock activity, and
adjusting it in such a way that it leads to optimum portfolio of income. This definition of
diversification needs to be distinguished from movement of resources from low value
commodity mix (crops and/or livestock) to a high value commodity mix (crops and/or
livestock), as it may often be reflected in an increasing degree of specialization (reducing
diversity) to high value activities, especially at the farm level. And it is precisely the
movement to high value agriculture that indicates yet another way to augment income,
besides the traditional ways of increasing yield, area or cropping intensity. Crop
diversification is a strategy for ensuring food and nutritional security, alleviation of
poverty, natural resource management for sustainable agricultural development and
proper agricultural planning for different regions with varied resource bases1.

Thus, based on these various definitions, the nature of diversification can be

broadly described as

(i) A shift of resources from farm to non-farm activities,

(ii) Use of resources in a larger mix of diverse and complementary activities
within agriculture, and
(iii) A movement of resources from low value agriculture (crops and livestock)
to high value agriculture.

1
Ghosh 2005

2
1.2: Previous Studies:

Economists, agronomists and other scholars have properly highlighted various

issues and factors related to diversification of agriculture in general, and crop sector in
particular. South Asian countries are gradually diversifying with some inter-country
variations in favor of high value commodities, namely fruits, vegetables, livestock and
fisheries. While in eastern and north-eastern regions of India are experiencing increasing
share of crops and livestock products sub-sector at the cost of fisheries and forestry, by
and large, Indian scenario reveals shifts from crop to livestock products during eighties
and nineties2.

Some scholars have identified the pattern of the diversification in different

regions. The cultivation of superior cereals is spreading across different agro-climatic
regions while the crops requiring very less water tend to concentrate in even narrowing
pockets in India (Ghosh 2005). Oilseeds are more diversified with an enhanced balance in
their area composition during the post-Green Revolution period. Cereals tend towards
specialization with an increasing imbalance in their area composition while pulses tend to
diversify with a decreasing one (Hazra 2001).

Regional variation in the pattern of agricultural diversification is an important

issue discussed in literature. Due to both improved yields and increases in area, wheat
and rice experienced the highest growth in output. Their production is spread over all
regions of Punjab with 80% of aggregate output. Undulating land, deep water table of
some districts made the crop system relatively less diverse (Singh & Sidhu 2004).

Agricultural diversification towards fruit and vegetable crops started flourishing

in Himachal Pradesh, especially in the districts of Shimla, Kullu, Solan and Lahaul &
Spiti (Sharma 2005). This started in late sixties, gathered pace in seventies and eighties,
has gained further momentum in the late nineties and is spreading to many new areas in
the low and mid-hill districts.

2
Joshi et al 2004

3
 In West Bengal, the areas under boro rice, potato and mustard have increased due
to expansion of area under cultivation as well as substitution of area under unsuccessful
crops like wheat, pulses etc. The traditional non-food crops are no longer remained as the
only commercial crops and there has been a movement towards commercial crops (De
2000). Relatively higher growth rates of acreage under tur, rapeseed-mustard, sugarcane,
maize and wheat were found in different agro-climatic sub-zones of Gujarat, whereas
negative compound growth rate of acreage under pearl millet, jowar and cotton were
noticed in most of the zones3.

As evidenced from the previous studies, there are different factors which
influence diversification in different agro-climatic regions. The existence of demand,
which is a common phenomenon in near-urban, far-urban and urban districts, is a
necessary condition for high value agriculture. Most of high value crops being perishable
require immediate transportation to markets or consumption centers, or storage or
transformation into less perishable forms through processing. Thus urbanization and
infrastructure, particularly transport, are pre-requisites for the growth of high value
agriculture (Rao et al 2006). Better connection between the urban demand centers and
near-urban districts through national highways facilitates production of high value crops.

The facilitating factors of crop diversification in a mountainous farming set-up

are:

a) Adoption of development strategies incorporating mountain specificities which

led to social opportunities,

b) A network of institutions to provide infrastructural facilities like roads, cold

storage, grading and packing facilities,

c) Emergence of relatively efficient marketing system to adopt and popularize

high value cash crops,

3
Pandya 1998

4
 d) Emergence of Self Help Groups like fruit growers’ cooperatives etc (Sharma
2005).

In West Bengal, the increasing diversification is related to industrial growth and

increase in per capita State Domestic Products. As an intimate relationship exists between
agriculture and industry of an economy through various demand-supply linkages, the
growth of agro-industry is an important factor for the extent of diversification of
agriculture (Sau 2007). Diversification of Indian diets from foodgrains to high value
products like vegetables, fruits etc have created greater opportunity for crop
diversification. With the increasing number of middle class the extent of diversification
in diet basket is expected to enhance further.

Several variables influence the agricultural diversification like infrastructure,

profitability, resource & information, demand aspects and climate4. The factors such as
demand for irrigation, size of the farms, availability of credits, natural resource
endowments etc also affect diversification to a great extent (Chadha et al 2004).

Also due to Global Environmental Changes, wheat-paddy system diversifies

towards high value commodities. It is believed that the future food situation worldwide
will be strongly dominated by the changes that occur in Asia because of its large
population, developing economies and changes in diet and associated demand for food
(Aggarwal 2004). South Asian countries are amongst the most prone areas of the world to
degradation of natural resources due to intensive human activities in the region. There is
already evidence of gradual deterioration in natural resources, particularly in areas that
benefited from the Green Revolution technologies.

In the existing studies the varying nature and types of constraints have also been
looked upon. Lack of infrastructure for the production of the non-cereals, like good roads
and cold storage chains etc affect diversification in a peri-urban village5. Rich farmers in
cooperation with the multinationals and corporate sector can raise their profit by such
diversion of crops but small and marginal farmers, who have small landholdings and that

4
Joshi et al 2004
5
Ponnusamy et al 2005

5
not too in the uplands suitable for vegetables and fruit growing, cannot gain (Mishra
2007). So size of the farm proves to be a major consideration while planning for
diversifying crop sector.

Accumulated capitals and educational achievement, risk-handling capacity, a

combination of the households, a desire to concentrate on farming and remoteness are the
impediments on the way to diversification in small-scale farms of Poland6.

Other major constraints can be identified as over dependency on rainfall, sub-

optimal and overuse of land and water resources, inadequate supply of seeds and plants,
fragmentation of land, poor basic infrastructure, poor quality of post-harvesting handling
of perishable products, weak agro-based industry, weak research-extension-farmers
linkages, illiteracy and lack of training, host of diseases and pests, poor database for
horticulture crops and decreased investments in agricultural sector (Hazra 2001).
Diversification out of rice is constrained by market availability and size, land suitability
and rights, irrigation infrastructure, and labour supply. Where output demand is relatively
elastic, the returns from investments in land, technology, and time spent in learning about
new crops are relatively higher (Pingali 2004).

Tradability and durability largely explain the variation in price risks associated
with different sets of agricultural produce. Prevailing soil conditions, flood depth levels,
rainfall and technology used for production, lack of well-developed infrastructure have
been identified as the non-market constraints of diversification (Zohir 1993). Trade
related barriers also influence the practices of diversification of agriculture. A significant
reduction in import duties, especially in the unilateral application of quotas and the
traditional non-tariff barriers, the technical standards, inclusive of the sanitary and
phytosanitary measures and the stress on compliance of the procedures to meet these
standards is becoming increasingly important yet an obstacle in the way of increased
export growth for the developing countries7.

6
Chaplin et al 2007
7
Chengappa et al 2005

6
 Besides the research on agricultural crops, facilitating policies for exports,
promotion of agro-industries, research on field channel design, large-scale investments on
flood control and drainage, continued support for canal re-excavation and more rational
planning for rural housing are some of the research implications of diversification
(Zohir1993).

Some scholars believe that agricultural diversification works properly only if the
current system of procurement based on Minimum Support Price is changed in favor of
new crops. It provides a powerful economic incentive to prolong the wheat paddy
rotation, user charges for power and irrigation. These are introduced when agricultural
diversification includes diversification of non-farm and allied activities8.

The government should ensure a sustainable cropping pattern within the

traditional choices supporting those farmers in difficult conditions and negotiating for
more reasonable terms in trade for taking care of the difficult regional environments9.
Some of the factors essential for fostering agricultural development and crop
diversification as experienced in Himachal Pradesh are:

a) Committed state interventions and adoption of developmental strategies

incorporating regional specificities is an essential pre-requisite,
b) The creation of basic infrastructural facilities, like transport, health,
education etc.
c) The market savvy farming communities, their initiatives to innovate,
experiment and to adopt new production techniques and to form Self Help Groups.
d) Economic viability and ecological sustainability of agricultural
diversification process requires continuous technical upgradation etc.

For facilitating a smooth transition to commercialisation the essential long-term

strategies include investment in rural markets, transportation and communication
infrastructure to facilitate integration of the rural economy, crop improvement research to
increase productivity, and crop management and extension to increase farmers’ flexibility

8
Singh 2004
9
Sharma 2005

7
and reduce possible environmental problems from high input use; and establishment of
secure rights to land and water to reduce risks to farmers and provide incentives for
investment in sustaining long-term productivity (Pingali).

Some scholars have discussed the issue of diversification, its nature, determinants,
constraints and benevolent impacts on the basis of experiences of different places within
and outside India. Here for the sake of the present study let us share some of the
experiences from India.

The villagers of a peri-urban village diversified from agricultural crops to

horticultural crops in a period of 10 years. Altering the cropping pattern on the one hand
helped the growers to improve their income and diffuses risk and on the other hand,
provided more alternatives of food items to the consumers. Engaging in diversified crop
cultivation ensured full time employment for all the family members in the village.
Diversification had stopped the migrational tendencies in addition to ensuring food and
nutritional security along with environmental enrichment10.

The pattern of crop farming in Rayalseema region of Andhra Pradesh has shown a
trend towards the cultivation of less number of crops. The tendency to specialize rather
than diversify the cropping pattern is clearly noticeable in such districts where
diversification decreased because of the replacement of inferior millet crops by
groundnut cultivation. This is an example of going virtually against the nature of
indigenous farming in dry areas11.

Crop diversification also generates employment opportunities and promotes

exports12. Diversified cropping patterns have been a traditional insurance in dry and
drought prone regions where weather vagaries and other uncertainties are translated to
painful income instability. Diversification as a policy continues its significance even in
the wake of trade liberalization. The trade liberalization in Indian agriculture has

10
Ponnusamy et al 2005
11
Madhuri et al 2007
12
Joshi et al 2004

8
expectedly promoted specialization in areas of advantage, namely the superior cereals
and gone against diversification towards oilseeds (Ghosh 2005).

The Tenth Five Year Plan calls for diversification in agriculture both
geographically and over time and emphatically urged for a thrust on diversification
towards high value more remunerative crops considering the agro-climatic conditions,
endowment of land and water resources and market demand within the country and
outside. Free trade and reduction of government effort exposes the inevitable fatality
against both oilseeds and the coarse cereals (Chengappa et al 2005).

Among the major crops, India has been exporting cereals both rice and wheat in
the recent decade and oilseeds turned out to be a cheaper importable. The trade
liberalization has not made things easy. The farmers often find the shift or continuance of
a diversified practice unviable under present market conditions prevailing in a globalized
world now that oilseeds cultivation is economically less remunerative than rice and
wheat.

Some of the WTO prescriptions that have an impact on the export prospects of the
developing countries are like commitments on market access or tariffication, withdrawal
of domestic support and export subsidies, the agreement on sanitary and phytosanitary
measures. The composition of exports appeared to have changed substantially within a
period of seven years, with the fresh fruits and vegetables and their processed products
surpassing the exported quantities of traditional export items such as tea and spices. As a
result of diversification, horticultural crops contribute to Indian economy through
increase in horticultural export and changed direction of trade.

In mountain agriculture the slow improvements of some crops, which experienced

a setback in the past, higher risks in terms of area, productivity and price as well as
marketing support, attracted the attention of many researchers. Highly depressing
international price structure also made these crops out of competition. The pure vegetable
farming found to be more risky and simultaneously remunerative (Kumar et al 2002).

9
 There are some related issues that have come up in the existing literature. Some
scholars think that the issue of diversification has been tackled in an undesirable manner
as there are some environmental problems arising from it. The intensification of
agriculture has led not only to monocultures but also to higher incidence of pests and
diseases which in turn led to the ecological problem of decline in water table, water-
logging, soil salinity, toxicity and micro-level deficiently. The contract-farming model of
agricultural change, a system initiated in Punjab for the production and supply of
agricultural products by growers under advance contracts, could not make sure that these
firms are the only beneficiaries of value addition surplus and do not share the extra
profits with the farmers13.

Contract farming was supposed to achieve diversification through: 1) existence of

a market providing sustained demand for the products, 2) a price structure that is
competitive vis-à-vis existing crops and 3) providing good quality seed and extension
technology to farmers in order to achieve a stable and high yield. But very slow progress
of different high value crops production indicates that crop diversification will remain a
far removed target in the years to come14.

Crop mixes or cropping patterns reflect technological and physical

constraints as well as the economic environment on the basis of which farmers’ decisions
for diversification are made. Crop choice, an important step to make diversification
methods a success, could be much influence by the comparative advantage of different
crops. Comparative advantage is affected by various factors such as: 1) parity prices of
inputs and products, 2) water charges, 3) environmental impacts & soil fertility, 4) labor
cost etc. Resource allocation efficiency also depends upon comparative advantage of
crops (Yao 1997). Commercial crops like fruits are prominent among large farms with
better and more reliable irrigation.

The existing literature also throws light upon the pattern of employment generation,
gender aspects, child labor and various issues of development regime. The entire
vegetable farming is more labor-intensive except for potato. Per hectare female
13
Singh 2000, 2004
14
Singh M.P. 2005

10
 employment generation in vegetable-growing is considerably higher than in paddy-
growing (Gill 2001). In cases of contract farming in seed and vegetable production in
Andhra Pradesh and Punjab, there is predominance of female and female child labor but
the work conditions are not gender sensitive though there is gendering of tasks in the
fields. This issue also connects to the need of monitoring labor practices in the
agricultural sector instead of banning child labor (Singh 2001). Diversification strategy
widens the demand for both labor and other inputs and thus contributes to rural
development15.

2.3: Objectives:

The major objectives of this study are as below—

 To analyse the changing nature of crop diversification at the state level,

 To understand the interrelationship between changes in extension of agricultural
area and degree of diversification over the states of India in the last few decades,
 To find out the relationship between farm-size and diversification on one hand
and farm-size and cost of production and net return of different high value crops,
on the other, at the all India level, as well as for the two states of Maharashtra and
Kerala.
 To look at the association between awareness of farmers and their tendency to
adopt high-value crops.
 To identify the factors affecting probability of farmers adopting cultivation of
diversified crops on the one hand and incidence of diversification, on the other.

2.4: Research Questions:

1. What kind of regional pattern emerges in terms of crop diversification? Have new regions
emerged in recent years in terms of diversification?
2. Do small farmers differ from medium and large ones in terms of their ability to adopt
high value agricultural crops? Of the ones that do cultivate high-value crops, is there a

15
Saleth 1999

11
 significant difference in terms of their cost of cultivation and net returns compared to that
of medium and small farmers? Does these relationships vary when we compare Kerala
(state that has adopted diversification for long) and Maharashtra (state that has diversified
to high value crops fairly recently).
3. How important is access to information and awareness for adoption of high value crops?
Other that this, what are the major factors affecting diversification?

2.5: Database:

Data source Variables Period of time Leve

l
NSSO 59th Round, Area under different 2003 Unit
33 Schedule crops, cost of
production, revenue
Various issues of Area under different 1962-65, 1972-75, State
Indian Agricultural crops 1982-85 & 1992-95
Statistics
Various issues of Total cropped area 1962-65, 1972-75, State
Statistical Abstract of 1982-85 & 1992-95
India

2.6: Methodology:

 The area under different crops has been used to calculate triennium average. The
years in consideration are 1962-65, 1972-75, 1982-85 & 1992-95.
 Herfindahl Index has been used to calculate the degree of diversification of
different states of India over four decades i.e. 1960s, 1970s, 1980s and 1990s.
 Data pertaining to the situation of the Indian peasant (NSSO 59th Round, 33rd
Schedule) has been used to do household level analysis. Extreme outliers have
been rejected from the analysis, particularly for the analysis of cost of cultivation
and net returns, where such problem is common.
 The behaviour of diversified high-value crops has been compared with that of
traditional food-grain crops as wheat and rice. Kerala and Maharashtra have been

12
 compared as a traditionally diversified state and a newly diversifying state
respectively.
 Logit analysis and Ordinary Least square analysis has been carried out to identify
factor affecting diversification.

2.7: Measuring Diversification:

There are quite a few methods, which explain either concentration (i.e.
specialization) or diversification of commodities or activities in a given time and space
by a single indicator. Important ones include:

(i) Index of maximum proportion,

(ii) Herfindahl Index: it is computed by taking the sum of squares of acreage
proportion of each crop to the total cropped area. Mathematically, the index is
as follows:

N
HI = Σ Pi2
i=1

Where N is the total number of crops and Pi2 represents square of proportion
of acreage under ith crop the total cropped area. The value of this index is
bounded by 0 (to represent perfect diversification) and 1 (to represent perfect
specialization). The value of HI approaches zero as N becomes larger and
takes one when there is only one crop is cultivated.

Value of the Transformed Herfindahl Index (1—HI) increases with increasing

diversification and assumes 0 value in case of perfect concentration.

(iii) Simpson Index: Simpson index provides a clear understanding the extent of
diversity in a geographical region. The index ranges between 0 and 1. If
complete specialization exists there, the index moves towards 0. The index is
easy to compute and interpret, as follows:

13
 SID = 1 - Σ Pi2
i=1

Where, SID is the Simpson Index of Diversity, and Pi is the proportionate area
(or value) of ith crop/livestock/fishery activity in the gross cropped area (or
total value) of output,

(iv) Ogive Index: it was first used to measure the industrial diversity by Tress
(1938). Here the deviation from the ideal or equal distribution of acreage is
used to compute the index. This index is specified as ,

n
OI = Σ {Pi –(1/N)}2 /(1/N)
i=1

Where N is the total number of crops cultivated in the regions. This index also
takes larger values with decreasing with decreasing diversification and its
value decreases with rising diversification.

The main limitation of this index is that it takes zero value both in cases of
perfect specialization and complete diversification.

(v) Entropy Index: The Entropy Index is considered “as an inverse measure of
concentration having logarithmic character” (1985). Also known as the
Theil’s Index, it ranges between “0” and “log n”. It has a direct relationship
with diversification and thus “0” represents complete specialization. It will be
used to obtain the degree of diversification with the area data of available
crops for different states. The value should vary from 0 to 1.

EI = Σ Pi log (1/Pi)

Where EI is the Entropy Index and, Pi is the proportion of area of each crop to
total area. The major limitation of this index is that it does not give standard
scale for assessing the degree of diversification.

14
 (vi) Modified Entropy Index: this index is used to overcome the limitation of
Entropy Index by using variable base of logarithm instead of fixed base of
logarithm. It can be computed as:

MEI = Σ Pi logN Pi

This index imparts uniformity and fixity to the scale used as norm to examine
the extent of diversification. It is, therefore, quite useful as compared to EI
which does not have a fixed upper value. However, its limitation is that it
measures the deviation from equal distribution among the existing activities.
The index measures diversification given the number of crops, and is not
sensitive to the change in the number of crops.

(vii) Composite Entropy Index: this index possesses all desirable properties of
MEI and is used to compare diversification across situations. 16 The formula of
calculating CEI is given by:

CEI = (Σ Pi logN Pi)*{1—(1/N)}

The CEI has two components, viz. distribution and number of crops, or
diversity. The value of composite entropy index increases with the decrease in
concentration and rises with the number of crops. Both the components are
bounded by zero and thus the value of CEI ranges between zero and one.

Each method has some limitation and/or superiority over the other.

2.8: Organization of the study

Chapter 1: Introduction (Concepts & Definitions, Literature Review/ Previous

Studies, Objectives, Research Questions, Database and Methodology)

Chapter 2: Trends & Patterns of Crop Diversification in India: A State Level Analysis

16
De Utpal K. (2000)

15
Chapter 3: Diversified Crops and Their Land Allocation, Cost of Production &
Profitability

Chapter 4: Farmers’ Characteristics and their Access to Information & Credit and
Adoption of High Value Crops

Chapter 5: Determinants of High Value Crop Diversification

Chapter 6: Summary of Findings and Conclusion

16
 CHAPTER 2:

Trends & Patterns of Crop Diversification in India:

A State-Level Analysis

India has a long history in agricultural development and domestication of crops. This
heritage of cultivated plants developed and utilized by the farmers is unique in the world.
India's vast territory, diversity of climates, as well as its varied physiography made great
contributions to the formation of a variety of agro-ecosystems. With a long period of
natural and artificial selection, the farmers in India have created various types of cropping
systems to match wide-ranging ecosystems exploiting abundant genetic resources of farm
crops.

Diversification of farm crops refers to the complex diversification patterns of

agricultural cropping systems found under the conditions of farming environments. In
short, diversification of crops firstly refers to the species diversification of cultivated
crops and secondly refers to the diversification of varieties and ecotypes of the same
variety to maximize outputs of primary products as well as value-added processed
products to enable farmers to enhance their incomes. As the pressure of population on
land has been increasing day by day the Indian farmers are compelled to diversify the
cropping systems in order to be self-reliant within the physical resources available to
them.

India is a developing country with a huge population. However, the development of

the economy has brought increasing pressure on its natural resources and environment.
The solution of the relationship between development and protection and the realization
of sustainable development of resources and environment and improvement of the
country's economy will be the challenge of the century that faces India in the future.
Since India's population is on the increase, though now at a reduced rate, accompanied
with a net outflow of cultivable land from the nineties, problems and contradictions

17
between strategies of increasing agricultural production of food on the one hand and
promoting high-value income enhancing diversified crops, on the other will need to be
resolved.

2.1. Crop Diversification in India

Though traditionally the phenomenon of crop diversification was adopted by the

farmers to minimize risk and promote stability of production, in recent years, particularly
after globalization is more a strategy of shifting from less profitable to more profitable
crops, increasing exports and competitiveness in both domestic and international markets,
other than the more minor purposes of protecting the environment, and making
conditions favorable for combining Agriculture-Fishery-Forestry-Livestock.

Agricultural diversification in India is slowly picking up momentum in favor of high-

value food commodities primarily to augment income rather than the traditional concept
of risk management. The nature of diversification differs across regions due to existence
of wide heterogeneity in agro-climatic and socio-economic environments. It was
considered interesting to delineate the key regions and sub-sectors of agriculture where
diversification was catching up fast. Nature of Agricultural Diversification Crops,
livestock, fisheries and forestry constitute the core sectors of agriculture. The fisheries
sector has a prominence in the coastal areas, and forestry dominates in the hilly regions.
The crop sector is the principal income-generating source in agriculture followed by the
livestock sector. A strong linkage exists between these two sectors, both being
complementary to each other.

In this study, India is divided into four regions, namely north-western, eastern, central
and southern. The north-western region includes Haryana, Himachal Pradesh, Punjab,
Jammu & Kashmir and Uttar Pradesh (1990s data for Uttaranchal had been added to
make UP data comparable over the decades). The eastern region comprises of Assam,
West Bengal, Orissa and Bihar (1990s data for Jharkhand had been added to make Bihar
data comparable over the decades). Central region is made up of the states of Gujarat,
Madhya Pradesh (1990s data for Chattishgarh had been added to make MP data

18
comparable over the decades), Maharashtra and Rajasthan. The southern region includes
Andhra Pradesh, Karnataka, Kerala and Tamil Nadu. Although this classification does
not fully capture within-region variations in agro-climatic attributes, the states in a
particular region tend to be homogeneous to a certain degree of approximation. Because
of the acknowledgement between-region variations it is important to control for a given
farmer’s agro-economic zone and geographical location in this analysis.

The major states in the north-western region have alluvial soils and good irrigation
facilities (72-96% of the gross cropped area is irrigated). The eastern states are broadly
similar in agro-climatic conditions, with a generally humid climate, normal rainfall over
1200 mm per year, and the amount of irrigated area as percentage to gross cropped area
ranging between 28% in Orissa and 48% in Bihar. The central and southern regions states
largely represent semi-arid climates (with the exception of some arid part of Rajasthan in
the central region) with less than 40% of the areas under irrigation.

In terms of food-crops, the north-western region has been called the cradle of the
green revolution, and is highly specialized in the production of rice and wheat. Sugarcane
and oilseeds are other important crops in this region, although the importance of oilseeds
in this region has declined over time, while the share of fruits and vegetables has
increased considerably since the early 1990s. Some states in this region suffer from acute
labor shortages, resulting in higher wage rates and discouraging the production of labor-
intensive high value crops.

The eastern region is most backward in terms of agricultural development. In the

south also, rice is the main staple crop. Its share, however, has declined considerably
since 1990s. Fruits and vegetables are everywhere in the region, except in Andhra
Pradesh, where fruits and vegetables accounted for less than 10% of agricultural output in
2002-03.

Agriculture in the central region is largely rain-fed and is quite diversified. Recent
years have seen rapid increases in high value crops production in this region, largely due
to various technological and institutional interventions. The robust growth in fruits and

19
vegetables in Maharashtra can be attributed to a strong network of cooperatives and
producers’ associations. Given the scarcity of water in Maharashtra, the government
made substantial investments in watersheds and technologies in an effort to enhance the
efficiency of water use (e.g. drip-fed irrigation and sprinklers). Moreover, in 1990 the
state government of Maharashtra linked horticultural production with Employment
Guarantee Scheme, which mandated that every beneficiary was supposed to put at least
0.2 hectare of land to horticultural crops, and provided government-subsidized inputs
(e.g. planting materials). This had a strong effect on horticultural production in the
region.

Smallholders’ participation in vegetable cultivation is highest in the north-eastern

(not considered in this study) while this rate in the north-western is similar to the national
average and that of southern region is below the national average. Participation rates also
vary across farm categories in different regions. In the north-western region, large
farmers participate in vegetable cultivation less than small and medium-sized farms. In
the east, the proportion of vegetable-growing households is the least among marginal
farmers followed by large farmers. In the south, the participation rate is higher among the
large farmers followed by marginal, medium and small farmers. 17

To summarize, small and large landholders appear to participate in high value

agriculture at similar levels, while smallholders participate significantly more in
vegetables. Most vegetables have a short production cycle, generate quick returns, require
less capital and are relatively labor-intensive, making them ideal for the cropping
schemes of smallholders.

2.2. Cropping Pattern

The crop sector is depicted as a steady diversification in India with replacement of

foodgrain crops with non-foodgrain crops. The share of non-foodgrain crops in terms of
output went up in India except for the north-western region. Interestingly, north-western
region shows a decline over the decades whereas southern region has a very high increase

17
Birthal et al (2007)

20
 in the overall share over this period. 18 North-western region had more than doubled the
share in wheat output and significantly increased in share of rice. The northern region in
India has more specialized in rice and wheat crops. The favorable government pricing
policies, assured procurement, high-yielding technologies, and irrigation development
have encouraged farmers to allocate more area in favor of these crops. Rice and wheat
have replaced coarse cereals and pulses in this region and it is diversifying only
marginally towards non-cereal commodities. All these can be related to the benevolence
of the Green Revolution techniques. The north-western region in turn had a sharp decline
in the share of pulses, oilseeds, sugarcane and coarse cereals.

Table: 2.1: Percent Share of Various Crops in Total Output of All Crops in Different
Regions, India during 1960s, 1970s, 1980s & 1990s

Region\ Whea Coars Non- Nine Fibr

Period Rice t e Pulses Food Food Oil e Jute Cotton S.Cane Others
Grai
Cereals Grains ns Seeds
North-West
0.0
1960s 12.88 15.42 11.02 23.21 62.53 37.47 11.07 4.87 9 4.66 18.22 3.31
0.0
1970s 12.82 28.05 10.97 15.38 67.23 32.77 9.77 4.35 4 4.25 15.07 3.58
0.0
1980s 19.60 34.68 6.47 8.55 69.30 30.70 6.93 4.25 2 4.19 14.49 5.04
0.0
1990s 23.63 37.09 4.79 5.66 71.16 28.84 5.93 4.59 0 4.58 13.63 4.69
Eastern
3.9
1960s 60.80 1.44 3.33 12.11 77.68 22.32 2.66 4.54 6 0.06 3.88 11.24
3.1
1970s 57.39 8.32 2.91 8.41 77.03 22.97 3.41 3.47 1 0.06 3.39 12.69
3.5
1980s 50.90 7.00 3.35 8.88 70.13 29.87 6.18 3.77 0 0.03 3.17 16.74
3.0
1990s 57.57 7.71 2.57 4.71 72.56 27.44 4.42 3.18 0 0.02 1.79 18.05
Central
11.8
1960s 13.79 7.79 20.41 16.39 58.37 41.63 18.11 9 0 11.78 4.16 7.46
10.7
1970s 13.71 11.14 18.31 17.75 60.90 39.10 16.28 2 0 10.63 4.42 7.68
1980s 12.82 12.40 18.10 15.49 58.81 41.19 17.42 9.36 0 9.30 6.72 7.70
1990s 11.41 12.57 13.78 14.25 52.01 47.99 26.41 8.40 0 8.38 5.79 7.39
Southern
1960s 31.01 0.21 12.14 3.34 46.70 53.30 15.11 3.70 0 3.51 5.99 28.50
18
See table 2.1

21
1970s 30.48 0.24 10.24 3.27 44.24 55.76 14.78 2.86 0 2.76 6.70 31.41
1980s 31.09 0.30 10.01 3.79 45.20 54.80 12.29 3.84 0 3.67 8.92 29.76
1990s 26.93 0.18 6.75 3.30 37.15 62.85 16.73 4.46 0 4.37 8.95 32.71

In the southern and eastern regions, the shares of other crops (including fruits and
vegetables etc.) have gone up from the 1960s level. Eastern region showed an increase in
the share of wheat and a sharp decline in the share of sugarcane. Central region shows an
increase in share of wheat and oilseeds, a sharp decline in share of coarse cereals and a
little decrease in pulses and fibre. With a sharp decline in the share of non foodgrains,
southern region shows a little increase in fibre and oilseeds and a sharp increase in the
share of sugarcane. Several non-foodgrain crops such as oilseeds, fruits, vegetables,
spices and sugarcane have substituted mainly coarse cereals in the farmers’ pursuit for
higher income.

2.3. Growth in TCA

TCA or total cropped area has been the basis for calculating Herfindahl Index or
diversification index used in this study. So the change in TCA of different states over the
last four decades has some major influence on the degree of diversification experienced
by each state. Due to increasing pressure on land and increasing demand of food, the
cropped area for every state had to be increased. The total geographical area being fixed,
the increase of TCA has primarily been the result of the increase in the number of crops
grown in the area.

These shifts in the land-use patterns were mainly in response to the increasing
demand for foodgrains & agricultural raw materials. The demand was partly met through
the extension of the area under cultivation & partly through intensive cultivation. During
the first & Second Plans, the increase in overall agricultural production resulted largely
from the extension of the area, whereas during the Third Plan & thereafter, the increase in
productivity contributed more to increased production. The available agricultural land in
the country is already being put to some agricultural use & in each region; a certain
pattern of land utilization has already been evolved. Keeping in view the increasing

22
demand for various agricultural, forestry & livestock products for internal consumption &
exports, it is very necessary that each piece of land is put to its best use.

During the last two decades, there have been some shifts in the areas from coarse
foodgrains to superior cereals, such as wheat, or from foodgrains to certain commercial
crops. The percentage area under pulses & foodgrains, to the total cropped area showed
marginal declines. On the other hand, the area under commercial crops such as oilseeds,
fruits, vegetables, cotton & jute showed some increase.

Table: 2.2: Growth Rates of TCA: different states of India

STATES GR 60-70 GR 70-80 GR 80-90 GR 60-90

North-Western Region
Haryana 11.98 7.03 10.20 32.07
Himachal Pradesh 4.37 8.93 -1.42 12.08
Jammu & Kashmir 6.53 12.71 4.66 25.67
Punjab 16.34 16.57 11.82 51.65
Uttar Pradesh 4.22 9.19 4.01 18.37
Eastern Region
Assam 7.82 20.87 7.07 39.54
Bihar 8.48 -4.25 -1.63 2.18
Orissa -1.76 19.95 -6.36 10.34
West Bengal 12.16 1.63 19.45 36.16
Central Region
Gujarat -0.57 1.32 7.18 7.98
Madhya Pradesh 15.68 5.63 13.46 38.64
Maharashtra 2.69 4.82 6.34 14.48
Rajasthan 19.47 -3.35 19.71 38.22
Southern Region
Andhra Pradesh 12.03 -7.75 9.81 13.49
Karnataka 4.07 7.03 5.80 17.85
Kerala 14.38 -4.17 5.08 15.18
Tamil Nadu 8.24 -7.32 -8.90 -8.62

TCA had increased in the states of Haryana, Punjab, UP, Maharashtra, WB, MP and
Rajasthan at a high rate while it had very fluctuating trend in the southern states of TN &
AP. Rest of the states had experienced a very slow rise in the TCA over these decades.
HP, Bihar and Orissa had followed the slow increasing trend before having a sudden
downfall in TCA in the 1990s.

23
 Orissa and Gujarat showed a negative growth of TCA in 1970s over 1960s. Gujarat
after having a negative growth in 1970s showed a low increasing trend over the last two
decades. After a positive growth in 1960s-70s TN showed negative growth in the
following two decades. AP and Maharashtra showed a low positive growth over these
three decades.

Kerala, AP, Rajasthan and WB show a very interesting trend. They had a positive
high growth in 70s over 60s in TCA, but they had a very sharp decline in the later decade.
Kerala, AP and Rajasthan had negative growth in 80s over 70s. But again in the 90s,
these four states called for a major growth in TCA. Assam, Jammu & Kashmir and UP
had exceptionally high positive growth in 1980s against very slow growth of TCA in
1970s and 1990s. 19

2.4. Cropping Intensity

Cropping Intensity is related to the number of times the agricultural land is being
used in a year and is fundamentally related to crop diversification. It affects the nature
and growth of agricultural practices. Cropping intensity can be measured as:

Cropping Intensity (CI) = (GCA/NSA)*100,

Where GCA=Gross Cropped Area and NSA=Net Sown

Area.

19
See table 2.4, Appendix table.2.I

24
Figure 2.1: Average Cropping Intensity

Average Cropping Intensity Across States: India

180.00

160.00
Cropping Intensity (%)

140.00

120.00

100.00

80.00

60.00
Jammu & Kashmir

Tamil Nadu
Himachal Pradesh

Madhya Pradesh
Uttar Pradesh
Haryana

Orissa

Maharashtra

Rajasthan
Gujarat
Punjab

Karnataka
West Bengal
Assam

Andhra Pradesh

Kerala
Bihar

States

In computing the aggregate net area sown, area sown more than once is counted only
once. However, while calculating the total cropped area, if different crops are raised in a
year on a given land, the same area is accounted more than once. So CI depicts the
intensity at which a piece of land is put to use. As mankind is dependent on land for the
food supply sometimes densely populated regions have higher intensity of cropping. But
other than the pressure on land, but there are other factors like types of land, climate etc
which influence the number of times a piece of land is put to farming in a particular
agricultural year.

25
 In this study, the GCA and NSA of different states pertaining to the decades
1960s, 1970s, 1980s and 1990s have been taken into consideration. Only data for Assam
in 1990s is not available.

Table: 2.3: Cropping Intensity across States of India

States 60s 70s 80s 90s

Haryana 131.21 140.28 107.81 160.55
Himachal Pradesh 160.51 165.90 166.24 168.80
Jammu & Kashmir 120.77 127.43 137.09 146.85
Punjab 129.72 141.91 163.50 177.51
Uttar Pradesh 128.16 133.47 143.14 147.19
Assam 117.93 124.67 126.51 NA
Bihar 129.29 129.49 132.54 134.18
Orissa 120.73 121.09 139.55 151.35
West Bengal 117.42 131.24 141.00 157.11
Gujarat 105.90 107.40 112.88 113.48
Madhya Pradesh 113.44 112.45 115.56 119.36
Maharashtra 105.50 106.04 109.32 117.34
Rajasthan 107.16 109.47 116.85 116.65
Andhra Pradesh 111.80 112.42 115.13 119.56
Karnataka 103.54 106.18 108.78 114.05
Kerala 121.76 135.41 132.17 134.69
Tamil Nadu 118.56 120.56 118.65 120.42

Himachal Pradesh has the highest cropping intensity while Karnataka, followed
by Maharashtra and Gujarat, has the lowest cropping intensity over the four decades
concerned in the analysis. Punjab has also experienced very high intensity of cropping.
Himachal Pradesh from north-western region, Kerala from southern region, West Bengal
from eastern region and Madhya Pradesh from central region possess the highest
cropping intensity among other states of the corresponding regions. But the value of
cropping intensity of West Bengal is higher than those of Kerala and Madhya Pradesh
(figure 2.1).

The central region that has overall very low cropping intensity has been experiencing
the highest crop diversification over the decades. The overall and average cropping
intensity is the highest in north-western region that has been placed second with a quite
high diversification of the crop sector. The eastern region with the least diversification
experience has shown quite high cropping intensity over time.

26
 Throughout the first three decades, Himachal Pradesh has been experiencing the
highest cropping intensity but in the last decade Punjab, which had quite high intensity of
cropping in 1980s and in 1970s as well, has overtaken this state. In 80s and 90s, these
two states had shown quite similar degrees of diversification.

Jammu & Kashmir and Uttar Pradesh have shown greater intensities of cropping only
in the 80s and 90s. But Haryana showed a fluctuation over the decades with peaks in
1970s and 1990s. In case of Kerala also, this trend has been evident, but with much lower
values. These two states have shown stability at quite high degrees of diversification over
these four decades. Orissa and West Bengal have shown a jump from lower to higher
20
cropping intensity after 1980s. Assam, which had shown not very high cropping
intensity in the 60s-80s, had experienced quite low diversification of the crop sector same
in the line of West Bengal in all these decades.

The lowest cropping intensity was experienced by Karnataka in 1960s and the
subsequent two decades while in 1990s Gujarat has been the state with lowest intensity.
Strikingly, these are the two states with very high degree of diversification.

Interestingly, in the 1980s, Haryana had shown a very low intensity of cropping
which is very striking between two very high values of CI. Madhya Pradesh, Andhra
Pradesh and Tamil Nadu had shown a trend of stability at a lower range of CI over the
decades. These three states had also shown medium stability in terms of degree of
diversification with quite lower values of Herfindahl Index.21

Bihar, a state with a highly medium cropping intensity over the decades, had
experienced a low diversification of crops with a slight tendency to diversify over time.

Gujarat & Rajasthan for the first two decades and Maharashtra & Karnataka for
the first three decades had shown very low intensity of cropping. These four states have
converged at a lower value of cropping intensity at the later decades. These are the states

20
See table 2.5
21
See table 2.2

27
having experiences of quite high diversity of crops for the entire period concerned in the
study.

2.5. Degree of Diversification

For this analysis Herfindahl Index (HI) has been adopted to calculate the degree of
diversification for all these states. The value of this index varies from 0 to 1. Perfect
specialization is represented by 1 whereas 0 represents perfect diversification.

These values of HI are largely determined by the proportionate area of each crop
to the total cropped area (TCA) of the concerned states. For a better understanding of the
effect of changes of TCA over diversification, a separate section on TCA has been
included in the study.

Regional patterns in crop diversification in India were quite stark. On an average, the
central region depicted maximum diversification followed by the north-western region. It
may be mentioned that these were the regions, which had accomplished higher
agricultural growth during the 1990s over the preceding decades. These regions moved
swiftly towards more non-cereal crops, which perhaps contributed to the acceleration of
agricultural growth. These regions were relatively less developed in irrigation and largely
relied on rainfall. Since pulses and oilseeds require less water, they had found niches in
these regions. Like pulses and oilseeds, these regions witnessed substantial increase in
area under fruits and vegetables also.

On an average, the eastern region had been the least diversified part of India in 1960s
while the regions of north-west and south were almost near the most diversified central
region.1970s also experienced the highest diversification in the central region while
north-western region could not keep its second place intact. In 1980s, crop sectors of
central region followed by southern states called for the highly diversified regions in the
Indian subcontinent. The scene continued also over the next decade in the favor of the
central region. But for the entire four decades eastern states comprised the least
diversified region with regards to crop sector (figure 2.2).

28
Figure 2.2: Degree of Crop Diversification

Degree of Diversification Across Regions, India

0.45

0.40

0.35

0.30
Herfindahl Index

North-w estern
0.25 Eastern
Central
0.20
Southern
0.15

0.10

0.05

0.00
1960s 1970s 1980s 1990s
Decades

In the 1960s, UP & Gujarat showed the highest diversification with a value of
0.11. UP could not keep pace with the increasing diversification as different regions of
India started diversifying due to spread of modern agricultural methods in later decades.
But in the 70s and 80s, Gujarat occupied the second place with a HI value of 0.11 and
0.10 respectively.22

The southern state of Karnataka held the first position for consecutive two
decades of 70s and 80s with the values like 0.09 and 0.07. But it lost the place to Gujarat,
which acquired 0.07 in 1990s. With this, central region became the most diversified

22
See table 2.2

29
agricultural part of India with the lowest (0.09) average value of HI. None of the eastern
states could achieve the place of most diversified state of India in the last four decades.

Table: 2.4: Herfindahl Index: different states of India

STATES HI (60s) HI (70s) HI (80s) HI (90s)

North-Western Region
Haryana 0.15 0.13 0.14 0.14
Himachal Pradesh 0.21 0.22 0.23 0.26
Jammu & Kashmir 0.20 0.20 0.18 0.20
Punjab 0.13 0.18 0.22 0.26
Uttar Pradesh 0.11 0.14 0.17 0.17
Eastern Region
Assam 0.45 0.43 0.39 0.41
Bihar 0.33 0.27 0.29 0.26
Orissa 0.36 0.40 0.26 0.32
West Bengal 0.48 0.46 0.46 0.41
Central Region
Gujarat 0.11 0.11 0.10 0.07
Madhya Pradesh 0.13 0.11 0.11 0.10
Maharashtra 0.15 0.12 0.15 0.11
Rajasthan 0.13 0.12 0.13 0.10
Southern Region
Andhra Pradesh 0.16 0.12 0.15 0.13
Karnataka 0.13 0.09 0.07 0.08
Kerala 0.15 0.16 0.15 0.14
Tamil Nadu 0.19 0.17 0.13 0.17

In 1990s, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra and Rajasthan

fall in the highly diversified group of states. In 1980, most of the states showed a bend
towards more specialization and less diversification of crops but Orissa, Kerala and
Tamil Nadu tried to keep pace with the diversifying trend of Indian agriculture.

Haryana and Uttar Pradesh showed the same degrees of diversification in 1990 as
the 1980 level. Uttar Pradesh had been experiencing diversification over the decades
concerned in the study but the degree of diversification got weakened 1980 onwards.

Andhra Pradesh showed a very fluctuating trend at a range of HI that corresponds to

quite high diversification. This phenomenon is also true for Bihar; only exception being

30
the range of value which is associated with lesser diversification than Andhra Pradesh.
Assam with a tendency to specialize has always been a state with higher values of HI like
West Bengal. Assam had experienced a little more diversified crop sector in 1980s while
in West Bengal; it came in 1990s but to a lesser extent.

Although Punjab experienced improvements after green revolution, which put it

on the top among states of India in terms of its level of agricultural development, but the
manifestation of this was a move towards a specialized cropping pattern of wheat and
paddy. Thus the HI in its case shows a continuous increase, indicating a move towards
specialization. Himachal Pradesh has also shown a very slow movement away from
diversification over these four decades. On an average, Himachal Pradesh can be
categorized under less diversified states along with Jammu & Kashmir and Punjab. In
contrast, the most diversified group of states includes Karnataka, Gujarat, Madhya
Pradesh, Rajasthan and Maharashtra. The least diversified group of states includes West
Bengal, Assam, Bihar and Orissa. The inability of eastern India to diversify away from
rice has been one of the constraints in terms of their agricultural progress. There emerges
an overlap of agro-climatic zones with the agriculturally developed regions of India to
have the country divided into different diversification zones as well.

Over the four decades, the average diversification index shows that Karnataka,
Gujarat, Madhya Pradesh, Rajasthan and Maharashtra remain among the most diversified
states. Punjab, Haryana, Andhra Pradesh and Kerala are among the other highly
diversified states in the four regional divisions of India. West Bengal, as explored in this
study, maintains its position as the least diversified state followed by Assam and Orissa.

Among the states that are clubbed as the central region, Gujarat has been the most
diversified state in all the four decades. The southern region comprising of the states of
Andhra Pradesh, Karnataka, Kerala and Tamil Nadu shows lesser diversity of crops than
central region and a greater diversification than northern and eastern region. In this
region as well as at the national level, Karnataka has been the most diversified state over
the decades while Kerala and Andhra Pradesh have also shown improvement in this
sector.

31
 The government-supported programs had promoted the cultivation of fruits and
vegetables. 23 Among others, watershed program had facilitated conservation of rainwater
and gave higher priority to the cultivation of fruits and vegetables. Among cereal crops,
maize was picking up fast in the southern region and to some extent in the western region
also, largely as poultry feed. Among the crops gaining in these regions, oilseeds were
under serious threat in the wake of import liberalization of edible oils, as the cost of
imported oils was much lower than their domestic price. To sustain oilseed production,
technical efficiencies in their production and processing will have to be innovated with
better management and technology options. With the availability of short-duration black
gram, green gram and pigeon pea, pulses had started regaining area in this region. Other
important crops of the region were sugarcane, vegetables and fruits.

It was reported that extensive cultivation of rice and sugarcane was causing
negative externalities related to soil and water resources. The soil fertility with respect to
macro- and micronutrients was declining, and the water resources were depleting. These
negative externalities have adversely affected the total factor productivity of rice-wheat
based cropping system in this region24. It has potential for cultivating a variety of fruits
and vegetables, but its exploitation depends on developing appropriate infrastructure with
suitable linkages between production and consumption.

The eastern region of India has not performed very well (except for West Bengal in
the 80s) in terms of per capita income, agricultural growth and infrastructure
development. The yield levels are low as the uncertain production environment and poor
adoption of improved varieties and technologies. Overall, the region was food-based
concentrating largely on rice, with little diversification. The humid atmosphere and high
rainfall make cultivation of rice more favorable in this region. In the limited non-rice
areas, however, there was high diversity. It is an important vegetable growing area with a
high percentage share in the total vegetable area in the country25. The cultivation of fruits
was also increasing gradually. It has emerged as an oilseeds-producing region too with
cultivation of crops like rapeseed-mustard, groundnut, sesame and soybean.
23
Joshi et al. 2000
24
Kumar et al. 1998
25
Government of India 2001

32
2.6. Initiatives to Support Diversification

During the post-green revolution period, fruits and vegetables performed impressively
in all the regions of India. It was due to the greater thrust to these commodities. To
encourage the horticulture sector through coordinating production and processing of
fruits and vegetables, National Horticultural Board was constituted in 1984 on the lines
of National Dairy Development Board (NDDB). To strengthen food processing and
promote their export, the Government of India, established the Agricultural and
Processed Food Products Export Development Agency (APEDA). The main aim was
to build links between Indian producers and the global markets. It yielded promising
results. The export of fruits and vegetables went-up during the 1990s due to the
development of infrastructural facilities like cold storage and cargo handling at the
international airports.

In contrast to the southern and western regions, the agricultural growth in the eastern
and northern regions has relied more on increase in prices of agricultural commodities.
Efforts, therefore, be directed towards gradually switching-over to commodities yielding
higher returns. This could be achieved by using advanced technologies. The eastern
region though has a sizable area under high-value commodities, is not able to exploit the
potential benefits because of its lower yield levels and poor road and market
infrastructure. The northern region seriously needs to diversify away from rice-wheat
system to high-value and resource-conserving commodities for stimulating growth in
agriculture.

Agriculture being a state subject in India some state governments too have taken
initiatives to facilitate/encourage entry of the private/corporate sector to agriculture, for
example, Tamil Nadu has come out with a policy document on contract farming.
Industries promoting cultivation of fruits and vegetables through value-addition have
been exempted from land ceiling act. In addition, provisions have been made to lease

33
degraded forestlands and wastelands to the private sector for cultivation of plantation
crops with state as a partner.

Punjab has also aggressively launched contract farming to replace the existing rice-
wheat system. In some other states, including Madhya Pradesh, Rajasthan and Uttar
Pradesh, incentives and other mechanisms to attract private investment in agriculture
through contract farming have been worked out. Market fee has been exempted in these
states for producers who sell their produce directly to the processors.

Consequently, some well known agro-processing players like Hindustan Lever

Limited, Nestle India Limited, Britannia Industries, Pepsi Co, Rallis India Limited,
Escorts, Mahindra & Mahindra, and Venkateshwara Hatcheries have started adopting
‘innovative institutional arrangements’ as a means of sourcing raw materials directly
from the farmers.

With the development of a market economy, the role of administrative intervention is

on the decline while the costs are on the increase. Therefore, under the present conditions
of India, diversification of crops must find a broad living space under the theoretical
guidance of coordination for sustainable development.

Policies, rules and regulations and other authoritative protections are necessary.
However, as the development of the national economy is still at a relatively low level and
the state finance is still insufficient, all social forces should be mobilized to participate in
the crop diversification process. In addition, various departments and the people at all
levels in the production areas in particular, must be mobilized for active participation and
various methods should be adopted to coordinate the problems of resource utilization and
environment protection. Special attention should be paid to encourage testing, adoption
and popularization of various developmental models that combine the overall interests of
crop diversification. Attention must also be paid to the adoption of suitable agro-
technology for improvement of crop diversification, so as to lower the loss of agro-
resources, enhance the sound management of agro-ecological systems, and guarantee the

34
sustainable development of an agricultural system based primarily on the concept of crop
diversification.

2.7. Private Sector

Private sector does not actively participate in the process of agricultural

diversification.26 The important constraints faced by the private sector involved in
linking production and marketing of high-value commodities are enumerated below:

• High-value food commodities require an infrastructure that is quite different from

that of cereals and pulses. Most of the high-value food commodities being perishable
in nature, which require refrigerated transportation and cold storages at every stage
of value addition. These are, however, woefully lacking and hence, there are
substantial post-harvest losses.
• One important requirement for successful coordination of value-addition and agro-
processing is a regular supply of good quality raw material from farm to firm. This
can be achieved through either self-production by the firm or contract farming. The
existing land ceiling act restricts the first option, while the latter is not possible
unless the government enacts appropriate legislation. As on date, none of the options
has a legal standing; which is a discouragement to contract farming. Apart from this,
no legislation exists for a breach of contract by any party (farmer or the firm).
• In many states, the by-laws of the market committee legislation restrict the sale
within a specified area. Market fee including commission charges are high; ranging
from 2 to 7 percent. Some states also impose developmental charges. Transfer of
goods outside the defined geographical boundaries attracts imposition of sales tax,
etc. Such restrictions distort the market, reduce its efficiency and discourage
formation of farm firm linkages through contract farming.

26
Pingali, 2004

35
 • Promotion of agro-processing industry may provide a stimulus to contract farming of
high-value food commodities.27

However, this sector is afflicted with various weaknesses like (i) scale of industry, (ii)
over bureaucratization and complicated legal wrangles, and (iii) high taxes. Scale of
industry and its operation affect the production efficiency of processing firms. Until
recently a number of food products were reserved for Small-Scale Industries (SSIs),
which often lack capital, use obsolete technology, are inefficient in production and weak
in marketing, and not having any incentive to develop effective farm-firm linkages for
reducing their transaction costs.

The Government of India has undertaken several steps to overcome some of the
constraints in agricultural marketing and agro-processing sector, particularly after the
regulatory and fiscal reforms have been introduced to attract private investment in food
industry28. Among others, a series of economic reforms program started in early 1990s.
These include:

(i) doing away with the industrial licensing requirement for most of the food
items,
(ii) automatic approval of investment up to 51 percent foreign equity or 100
percent for Non-Resident Indians,
(iii) relaxation in monopoly and foreign exchange acts,
(iv)free import and export of food items (except items on the negative list) and
capital goods, and,
(v) permission to financial institutions to finance contract farming schemes
strengthening backward linkages.

The fiscal incentives include:

(i) reduction in import and excise duty and corporate taxes, and repatriation of
benefits,

27
Chengappa et al. 2003
28
Government of India 2002

36
(ii) establishment of free trade, and export processing zones,
(iii) reduction in custom duty on imports of capital goods, and exemption from
corporate and minimum alternative taxes to the firms located in free trade and export
processing zones.

2.8. Conclusion

It may be concluded that the present policy environment and infrastructure

network are inadequate for promoting vertical coordination and encouraging agro-
processing sector. The scattered attempts made in this direction are showing promising
results and they need to be replicated in niche areas. It appears that the private sector is
keen to invest in the agriculture and agro-processing sector to harness the huge untapped
potential but the existing policies are discouraging it from venturing into these areas. It is
high time the private sector is encouraged to evolve new institutional arrangements to
take advantage of the opportunities emerging from trade liberalization. The government
should ensure that smallholders are not left behind in sharing the benefits of the emerging
opportunities.

37
 Chapter 3

Diversified Crops and Their Land Allocation, Cost of

Production & Profitability

Crop diversification in terms of land allocation among different crops is the

integral part of agricultural development of any region. The diversification in any region
is based on the social, economic, technological, geographic and institutional endowments
of a region. Specificity of requirements of different factors in case of different crops and
their availability on time as well as the system of agriculture (subsistence i.e., for self-
consumption or commercial i.e., for making money) are the key factors in determining
land allocation. In the post green revolution period, the area allocation moved in favor of
wheat and paddy in a large part of the country, but in the recent past, there has been some
evidence of moving towards high value crops as fruits, vegetables as well as flowers,
crops which are export oriented. However, this kind of diversification has been specific
to regions and some groups of farmers only. It is our endeavor to look at the nature of
diversification towards high-value export-oriented crops that has taken place in India in
the recent past based on an analysis of NSSO unit-level data.

3.1. Allocation of Land

The analysis is being carried out at the All-India level from the household level
data, and also for the two states of Kerala and Maharashtra. Kerala is a traditionally
diversified state, while Maharashtrian farmers are diversifying towards high-value crops
after globalization. We expect that the land-allocation behaviors in these two states of
different farm-size categories would different. The farmers of Kerala would have a
pattern of diversification time-tested while those of Maharashtra would be expected to go
through trial-and-error method in allocating land into different uses. For instance, state

38
government of Maharashtra mandated compulsory allocation for horticulture to promote
high value agriculture.

The first section of this chapter looks at the land allocation under diversified crops
and this has been compared to traditional crops like paddy and wheat. The percentages of
land allocated under various crops to the total land cultivated are calculated at household
level. Considering the great risk involved in crop diversification, it can be assumed that
the more risky is the crop, the less is the land devoted for farming that crop.

The diversified crops taken up in this study are aromatic & medicinal plants,
drugs & narcotics, flowers, fruits, spices, tanning & dyeing materials and vegetables.
These crops have been clubbed together under the title of ‘all diversified crops’ to get a
holistic picture. The land allocation, cost structure and profitability of these crops have
been compared to some important traditional crops like paddy, wheat and oilseeds.

At an aggregate level, farmers allocate nearly half of their landholding for the
production of different diversified crops. Farmers in Kerala, on an average, put slightly
more land under diversified crops while in Maharashtra the average allocation of land
resources is far less than the aforesaid figures. Interestingly, the absolute numbers of
diversifying farmers of Maharashtra is less than half of that of Kerala (table 3.1).

Table 3.1: Average Percent Allocation of Land under All Diversified Crops

India Kerala Maharashtra

Mean N Mean N Mean N
All Diversified Crops 49.8770 13504 50.0059 927 40.9589 413

There is a lot of variation between the mean percent allocation of land resources
of different diversified and traditional crops. At all India level, for the diversified farmers
(i.e. for farmers who cultivate the above-mentioned diversified crops), spices have the
lowest land allocation of 32 percent while tanning and dying material among all
diversified crops have the highest land allocation amounting to 61 percent. It should be
mentioned that the farmers cultivating tanning & dying material are smallest in number in

39
India. None of the farmers in Kerala and Maharashtra produce drugs & narcotics and
tanning & dying materials whereas a small number of farmers practice cultivation of
flowers in these two states.

Fruits have the lowest mean percent allocation of land among all diversified crops
in Kerala whereas spices are found to be the crops for which highest land allocation is
made among all diversified crops in Maharashtra. Vegetables have almost similar land
allocation averages for these two states. Flowers and fruits have higher land allocation in
Maharashtra while spices occupy more land in Kerala.

Paddy, one of the major food grains in India, has the highest allocation of land at
aggregate and in both the states. For paddy, wheat and oilseeds, the mean percent of land
allocation in Kerala and Maharashtra is lower than the national average. But in case of
other crops, the average percent allocation of land found to be the highest in Maharashtra,
followed by the all-India figure (table 3.2.a).

Table 3.2.a: Average Percent Allocation of Land under All Groups of Crops

India Kerala Maharashtra

Crop Groups Mean N Mean N Mean N
Aromatic Plants 39.9262 94 7.0658 3 2.5000 1
Drugs & Narcotics 52.9869 117
Flowers 45.5155 153 27.8590 4 37.2844 8
Fruits 34.9411 2222 25.8747 474 36.3819 119
Spices 31.0322 2780 27.9418 419 15.6956 80
Tanning Materials 61.4705 16
Vegetables 46.0552 10677 41.4350 537 41.9397 263
Paddy 87.0355 28102 63.6547 492 82.0660 908
Wheat 81.2544 13123 28.5714 1 64.4401 524
Oilseeds 51.9312 7253 46.3526 941 47.3742 622
Other Crops 64.4190 26221 52.8181 401 81.7525 2656
Note: Percentages calculated taking the cultivators of the relevant crops.

Considering all farmers irrespective of crops cultivated, the average percent

allocation of land for diversified crops becomes nominal. At the all-India level, the
highest allocation can be found in the case of paddy while oilseeds have been allocated
the highest share of land in Kerala and the group of other crops accounts for the largest
share of allotted land. All diversified crops together have been allotted the highest

40
average share of land in Kerala whereas corresponding figures for the all-India level and
Maharashtra are quite low. Among the diversified crops, fruits and spices acquire larger
share of land than the rest. More than 8 percent land is under cultivation of fruits and
spices in Kerala. Among all diversified crops fruits and spices both have higher allocation
of land under cultivation also at the aggregate level and in Maharashtra but with a much
lower share of land than Kerala (table 3.2.b).

Table 3.2.b: Average Percent Allocation of Land under All Groups of Crops

India Kerala Maharashtra

Crop Groups Mean N Mean N Mean N
All Diversified Crops 10.77 62515 32.53 1425 4.55 3718
Aromatic Plants 0.06 62515 0.01 1425 0.00 3718
Drugs & Narcotics 0.10 62515 0.00 1425 0.00 3718
Flowers 0.11 62515 0.08 1425 0.08 3718
Fruits 1.24 62515 8.61 1425 1.16 3718
Spices 1.38 62515 8.22 1425 0.34 3718
Tanning Materials 0.02 62515 0.00 1425 0.00 3718
Vegetables 7.87 62515 15.61 1425 2.97 3718
Paddy 39.12 62515 21.98 1425 20.04 3718
Wheat 17.06 62515 0.02 1425 9.08 3718
Oilseeds 6.03 62515 30.61 1425 7.93 3718
Other Crops 27.02 62515 14.86 1425 58.40 3718
Note: Percentages calculated taking all the cultivators.

Major underlying factors which are conceived to be of much importance in

determining the allocation of land resources among various crops are prices and yields of
different crops, level of irrigation, availability and variation of other agricultural inputs
(pattern of agricultural implements, varieties of seeds, synthetic fertilizers etc),
information about market of the crops and geographical perspective of the respective
region.29

High relative price and productivity of any crop at the existing state of
technology, given other conditions of agricultural production (high relative profitability)
may create an affinity of the farmers towards that crop. On the other hand, other factors
like rainfall, irrigation, improvement and availability of technology etc at relatively
cheaper cost which generates conditions congenial for the farmers to produce some crops

29
De, U.K (2005): Economics of Crop Diversification –An Analysis of Land Allocation towards Different
Crops

41
especially high value diversified crops which, without the aforesaid facilities could hardly
be feasible.

Attractive price structure and profitability of some crops relative to that of the
others may encourage the modification and innovation of technical implements needed to
remove the conditions hostile to the production of such crops. The shift of area from
traditional crops to non-traditional crops on new land has become practicable after the
modification and innovation of technology (application of increased number of tractors,
power tiller etc) and growth of suitable, highly resistant seeds.

In the short run, changing price may not lead to a significant change in allocation
of land. This is due to the particular biological nature of agricultural production. If price
changes in the post harvest season, it will have an impact on the next crop rotation.
Sometimes, due to sustainability in consumption a change in price of some crops may
influence the area under other crops that follow the former in the same crop rotation.
However, the market forces and risk-taking behavior of the farmers have the ultimate
bearing on the changing cropping pattern in a region endowed with full flow of
productive resources and a well-established market structure.

Dharm Narain (1965) in his pioneering work30 finds that rainfall, broadly weather,
to have a leading role in determining the area to be allocated for growing food-grains
whereas, the prices (market forces) are the prime determinants of area under commercial
crops. The relationship between rainfall and foodgrains, however, is no longer very valid
after the advent of green revolution, with paddy and rice spreading to non-traditional
areas with the help of irrigation.

Existence of alternative opportunities however, creates a conflict of allocation of

land resources to alternate crops when there is limited availability of land. In the
traditionally backward society, the farmers, specifically, small and marginal farmers
usually allot a major part of their land holding for the production of means for their self-
use. With the development of marketing system or growing commercialization, farmers

30
Dharm Narain (1965): Impact of Price Movements on Areas under Selected Crops in India: 1900-1939

42
increasingly switch over to crops which fetch good prices in the market and for which
profitability is high.

3.2. Size-Class Analysis

According to the size of the farm or the land possessed by each household, the
farmer households are divided into small, medium and large farmers. The major point of
investigation here is to look for which group is taking more risk by diversifying into high
value crops. The risk is associated with high cost of cultivation, perishability of most of
these crops as well as their fluctuating prices. As large farmers have a pretty large amount
of land and supposed to be well-off they are expected to diversify more than the farmers
with lower farm sizes.

Dharm Narain (1965) has also put forward the hypothesis that proportion of area
under commercial crops increases with the size of the land holding 31. This statement finds
support from the argument that the small farmers allocate major portion of their holdings
for the production of food crops to meet their own (family) consumption needs while the
large farmers could afford a large portion of their area for non-food crops.

Mean percent allocation of land for different crops have been calculated for all
India level and compared among different size-class of the farmers. The numbers of
small, medium and large groups of farmers cultivating any diversified crops (as
mentioned earlier) are 12434, 1032 and 38 respectively. The highest difference (38) in
mean percent land allocation is found between small and large farmers and this is highly
significant. The minimal difference (12) is found between medium and large farmers with
a lesser significance. It indicates that the small farmers are engaging more land under
diversified crops than medium farmers and far more than from the large farmers (table
3.3).

Table 3.3: T-Test of Mean Percent Land under Different Crops to GCA among Different
Farm-size Classes
31
Dharm Narain (1965): Impact of Price Movements on Areas under Selected Crops in India: 1900-1939

43
All Diversified Crops Mean N Std. Error Significance
difference
Small & Medium 26.0421 12434 1032 1.2397 0.9027 .000
Medium & Large 11.8975 1032 38 4.3538 2.1704 .006
Small & Large 37.9397 12434 38 6.3395 2.0351 .000
Aromatic & Medicinal Plants
Small & Medium 25.2987 71 23 6.0098 4.4583 .000
Medium & Large 20.8175 23 0
Small & Large 46.1163 71 0
Drugs & Narcotics
Small & Medium 0.9510 75 41 6.45752 6.4367 .883
Medium & Large 41.2834 41 1 33.3003 .222
Small & Large 42.2344 75 1 33.7954 .215
Flowers
Small & Medium 40.5665 140 13 10.7192 3.5121 .000
Medium & Large 13 0
Small & Large 140 0
Fruits
Small & Medium 12.5388 1986 225 2.0363 1.5684 .000
Medium & Large 6.3918 225 11 6.4739 3.6384 .325
Small & Large 18.9307 1986 11 8.9569 3.4155 .035
Spices
Small & Medium 11.5118 2491 280 1.9630 1.5746 .000
Medium & Large 11.7630 280 9 8.0516 2.6001 .145
Small & Large 23.2748 2491 9 10.6150 2.2572 .028
Tanning & Dying Materials
Small & Medium -9.58643 14 2 17.6637 30.6679 .596
Medium & Large 2 0
Small & Large 14 0
Vegetables
Small & Medium 28.3192 10006 651 1.5931 1.0137 .000
Medium & Large 7.0382 651 20 5.3373 3.0877 .188
Small & Large 35.3573 10006 20 8.9889 2.9714 .000

For aromatic & medicinal plants, small farmers have a higher (25 percent) land
allocation than their medium counterparts. Among small and medium farmers there is a
very little difference in mean percent land allocation for drugs & narcotics. But flowers
show a very significant difference in mean value of percent allocation of land between
small and medium farmers.

For fruits, the mean differences are less, particularly between medium & large and
small & medium farmers. The mean difference of percent land allocation for spices
between small & medium is almost equal to that of between medium & large farmers but
that between small & large farmers amounts to a value almost double of the former value
(table 3.3).

44
 Tanning & dying material is only produced by small and medium farmers. The
latter group engages almost 10 percent land more under this high value crop than the
small farmers. Among all the high value crops being discussed this is an exceptional case
that medium farmers are allocating more land under cultivation.

The common trend is similar to in case of vegetables as most of the other crops.
Due to the presence of factors like less risk attached to the cultivation, easy availability of
seeds and need to meet family requirements small farmers engage more land under
vegetables than medium farmers and far more than the large farmers. Medium and large
farmers have lesser difference in their mean percent land allocation under vegetables.

One of the main channels through which diversification towards high value crops
can reduce poverty and contribute to the self-sufficiency is via the participation of small
farmers. However, although smallholders have the benefits of proportionally larger labor
pool; this may be offset by constraints such as lack of access to credit. Thus, there is
continued debate as to whether smallholders can successfully diversify into the high
value sector.

The household level analysis points to differences within the category of all
diversified crops. The high capital intensity and greater gestation lags in fruits seem to be
deterrents for small farmers having a minimal capital base (physical and human) and a
low appetite for the riskier fruit market.

Given the high labor endowments in India and the preponderance of smallholders,
the share of resources allocated to high value agriculture continues to be relatively small,
although it is increasing over time. Conditional on supporting infrastructure and
institutions, smallholders have an advantage when adopting labor-intensive crops such as
vegetables. The bias towards vegetables rather than fruits clearly points to the role of
enabling factors in transforming the potential advantages of the smallholders (such a
larger families) into realized crop choices that favor high value products.

3.3. Association between Farm-size and Diversification

45
 The correlations of the percent land allocated under different crop groups with the
land possessed and gross cropped area (GCA) by each household and have been
calculated and mostly found to be negative. The more risk attached with the cultivation of
a particular crop, lesser is the correlation between these two variables.

Overall, high negative correlation has been found between percent land under
crop and NSA & GCA for flowers and aromatic & medicinal plants among all diversified
crops. NSA and percent land allocation for vegetables and wheat also is highly negatively
correlated at all-India level. It implies that as the NSA and GCA increase, the share of
land under the above mentioned crops decrease significantly for the above-mentioned
crops. But for all diversified crops taken together, the correlations between percent land
and NSA & GCA are less significant.

Correlation of land under vegetables, fruits and spices with NSA and GCA is
significant and negative in Maharashtra while lesser correlation between allocated land
and GCA could be found in Kerala. All diversified crops considered together
Maharashtra shows greater negative significant correlations between the variables. Paddy
and wheat also have higher negative correlations in Maharashtra than those of all-India
level and Kerala.

Percent land under oilseeds shows a stronger negative correlation with NSA &
GCA in Kerala and only with NSA in Maharashtra while at all-India level it is
insignificant. Other crops do not show any significant correlation between the variables
(table 3.4).

Table 3.4: Correlations between land under different crops, NSA and GCA

46
 Percent India Kerala Maharashtra
land under NSA GCA N NSA GCA N NSA GCA N
crop
Aromatic -0.418* -0.372* 94 0.973 0.945 3
Plants
Drugs & -0.035 -0.106 117
Narcotics
Flowers -0.495* -0.517* 153 -0.355 -0.275 4 -0.510 -0.549 8
Fruits -0.159* -0.094* 2222 -0.061 -0.222* 474 -0.327* -0.281* 119
Spices -0.139* -0.132* 2780 -0.132* -0.222* 419 -0.310* -0.319* 80
Tanning 0.015 0.017 16
Materials
Vegetables -0.307* -0.240* 10677 -0.110* -0.300* 537 -0.504* -0.490* 263
All -0.288* -0.226* 13504 -0.116* -0.285* 927 -0.445* -0.418* 413
Diversified
Crops
Paddy -0.188* -.0256* 28102 - -0.239* 492 -0.337* -0.348* 908
0.109**
Wheat -0.321* 0.002 13123 -0.388* -0.400* 524
Oilseeds -0.116* -0.020 7253 -0.238* -0.278* 941 -0.321* -0.061 622
Other -0.111* 0.002 26221 -0.145* -0.150* 401 -0.126* 0.011 2656
Crops

* = significant at 0.01 level, ** =significant at 0.05 level

3.4. Cost of Production:

In a country like India where agriculture continues to be the source of livelihood

for the majority of the population, contributing about a quarter of national income, the
economics of crop production is of obvious importance. Both cost of cultivation and
returns is required by farmers to decide on allocation of their available but limited
resources and in their choice of cropping patterns.

The cost of production for cultivation of different crops is the main focus of this
section. Risk-averse farmers are expected to spend less for the non-traditional crops.
Average cost of production has been calculated only for high value crops and some
traditional crops. It is calculated as below:

Average COP for diversified crops per hectare =

∑ (Expense for cultivating ith crop X Area under ith crop)/ Land under all diversifying
crops.

47
 At the all-India level, the highest average cost of production per hectare is
incurred in the cultivation of drugs & narcotics among diversifying crops. Among the
traditional crops in concern, wheat has the highest cost of cultivation per unit. Flower
cultivation entails the lowest cost per hectare preceded by vegetables and spices.

Again, cases of Kerala and Maharashtra have been taken into consideration except
for the crops which are not grown in these states. In Kerala, aromatic & medicinal plants
are the crops for which highest cost of production has been found. Average cost of
production of vegetables is much higher than those of fruits, spices and flowers. Among
traditional crops studied here, paddy incurs the highest cost of production in this state.

Paddy cultivation seems very expensive for farmers in Maharashtra. Fruit

cultivation incurs inexplicably high cost in this state. The reason is probably that
Maharashtra, which has been diversifying in favor of fruits after globalization, produces
fruits primarily for the export market. In fact, all high value crops that are produced in
this state show a relatively higher cost structure and the reason is as stated above.
Vegetables and fruits have the highest average cost of production in of Kerala and
Maharashtra respectively. Fruits cultivation entail extra-ordinary higher cost and at little
lower level of cost of production paddy and oilseeds among the traditional crops seem to
be most expensive in Maharashtra (table 3.5).

Other crops, as a group, show a lower cost of production in Kerala while in

Maharashtra it is surprisingly very high. When all crops considered together they show
lowest cost of cultivation in Kerala and highest in Maharashtra. Thus, it can be said that
for most of the crops, cost of production is higher in the state of Maharashtra which
started diversifying at a later stage than Kerala.

48
Table 3.5: Average Cost of Production of Crops

India Kerala Maharashtra

Mean Exp N Mean Exp N Mean Exp N
Aromatic Plants 10202.23 93
Drugs & Narcotics 11153.52 107
Flowers 1496.24 153
Fruits 6271.96 2220 1083.99 474 30094.13 118
Spices 2353.98 2777 590.00 419 6696.93 80
Tanning Materials 4858.99 16
Vegetables 2337.03 10675 2016.91 537 6835.61 263
Paddy 10331.19 28095 4219.39 492 15032.90 908
Wheat 12146.40 13115 5915.23 524
Oilseeds 7814.18 7250 467.89 941 8684.49 622
Other Crops 8999.43 26211 2462.78 401 22383.55 2653
Total crop 4734.08 62515 2810.30 1425 6856.73 3718

3.5. Cost of Cultivation and Farm-size

To see whether there is any relation between cost of production of each crop and
percent land under that crop and total land cultivated by each household correlations have
been obtained for each type of crop concerned in this study.

At all-India level, mean cost of production for tanning and dyeing materials has
the strongest positive correlation with land possessed and the percent land under that
particular crop. As the land cultivated by each household and the land allocated for the
concerned crop increases cultivation cost per hectare also increases almost at the same
rate. The cost of production of paddy follows the same pattern with a less strong
correlation. Other than aromatic & medicinal plants and wheat, per hectare production
cost have a strong positive relation with NSA and land under the crop. In case of
aromatic and medicinal plants, it decreases with increasing land under that particular crop
(table 3.6).

In Kerala, cost of production for paddy, vegetables and fruits increases

significantly with increase in farm-size. Whenever the number of cultivators is significant
enough to be considered in both these states of Kerala and Maharashtra, the cost of

49
cultivation for all the crops have significantly high correlation with percent land under
each crop separately.

Cost of cultivation of traditional crops share a stronger correlation with farm-size

in Maharashtra whereas fruits and flowers show very low positive correlations. Among
all the diversified crops, spices have the strongest correlation with the same variable
(table 3.6).

Other crops, as a group, show significant correlations with both the variables at state-
level as well as at aggregate level.

Table 3.6: Correlations between Average Cost of Production, Farm Size and land under
different crops

India Kerala Maharashtra

COP Farm % land N Farm % land N Farm % land N
size size size
Aromatic 0.045 -0.107 93 0.430 0.521 3 1
Plants
Drugs & 0.426** 0.694** 107
Narcotics
Flowers 0.139 0.537** 153 0.141 0.915 4 0.520 0.963** 8
Fruits 0.224** 0.597** 2220 0.494** 0.594** 474 0.157 0.490** 118
Spices 0.405** 0.606** 2777 0.158** 0.474** 419 0.383** 0.706** 80
Tanning 0.898** 0.884** 16
Materials
Vegetables 0.321** 0.427** 10675 0.423** 0.773** 537 0.192** 0.654** 263
Paddy 0.591** 0.652** 28095 0.753** 0.841** 492 0.484** 0.703** 908
Wheat 0.576** 0.271** 13115 1 0.483** 0.715** 524
Oilseeds 0.533** 0.767** 7250 0.358** 0.803** 941 0.562** 0.774** 622
Other Crops 0.493** 0.607** 26211 0.623** 0.739** 401 0.617** 0.629** 2653
** = significant at 0.01 level, * =significant at 0.05 level

Average cost of cultivation per hectare pertaining to three major traditional crops
namely paddy, wheat and oilseeds are compared to those of vegetables, fruits and spices.
Only the households which cultivate both the crops to be compared have been taken into
account for this part of analysis.

At all-India level, the highest difference in mean cost of production can be found
in case of comparison between fruits and traditional crops. Significantly very high
difference is found in cost of production between wheat and fruits. Though high value

50
crops incur higher costs traditional crops like paddy, wheat and oilseeds have shown
more cost of production in this household level analysis. Only spices are less cost-
incurring than paddy. The lowest difference is found when paddy and vegetables are
compared in terms of the cost of cultivation. Oilseeds also show quite higher cost of
production than those of vegetables and spices (table 3.7).

In Kerala, paddy cultivation entails a little higher cost than spices and fruits but
lesser than that of vegetables. The highest difference in average cost of cultivation is
found between wheat and vegetables, followed by oilseeds and vegetables. There is not
much difference in the costs of production of oilseeds and spices.

Table 3.7: Comparison of Cost of Production of different groups of crops

Mean diff N Std Error Significance

India
Paddy & Veg -24.65 10675 528.26 0.963
Wheat & Veg -715.10 10675 285.00 0.012
Oilseeds & Veg -1932.25 10675 206.48 0.000
Paddy & Fruits -2614.08 2220 1015.49 0.010
Wheat & Fruits -4233.56 2220 902.90 0.000
Oilseeds & Fruits -5158.19 2220 629.49 0.000
Paddy & Spice 602.09 2777 812.17 0.459
Wheat & Spice -390.51 2777 578.74 0.500
Oilseeds & Spice -1262.46 2777 266.69 0.000
Kerala
Paddy & Veg -694.63 537 1578.59 0.660
Wheat & Veg -2016.91 537 1427.40 0.158
Oilseeds & Veg -1794.82 537 1399.74 0.200
Paddy & Fruits 116.76 474 755.27 0.877
Wheat & Fruits -1083.98 474 436.65 0.013
Oilseeds & Fruits -641.94 474 406.78 0.115
Paddy & Spice 132.21 419 245.37 0.590
Wheat & Spice -590.00 419 190.28 0.002
Oilseeds & Spice -196.29 419 201.28 0.330
Maharashtra
Paddy & Veg -4532.83 263 2195.66 0.040
Wheat & Veg -2913.16 263 2496.34 0.244
Oilseeds & Veg -4161.02 263 2310.84 0.073
Paddy & Fruits -26350.2 118 7221.18 0.000
Wheat & Fruits -27985.5 118 6743.08 0.000
Oilseeds & Fruits -27750.1 118 6679.95 0.000
Paddy & Spice -4291.47 80 1974.14 0.033
Wheat & Spice -5831.89 80 1794.51 0.002
Oilseeds & Spice 7063.14 80 5119.67 0.172

51
 High value crops in Maharashtra have high costs of cultivation and when
compared to the traditional crops they show a stark difference. The highest difference can
be found between the cost component of fruits and other crops compared. Each of the
comparisons brought out very high difference between traditional and diversifying crops
in this state. Only oilseeds incur higher cost than that of spices among the high value
crops.

3.6. Profitability of Diversified Crops:

The well-being of farmers is linked closely to the level and trends in farm
incomes. Since farmers need to make payments on rent, interest and wages, what required
to be monitored to assess their welfare and viability is information on farm business
incomes. Detailed studies on actual cost incurred at the farm level, with suitable regional
coverage over different agro-climatic and crop-complex conditions, are therefore
indispensable for proper monitoring of farmer welfare and for assessment of their
economic position.

Profitability expressed in terms of net return per unit area depends on three factors
–yield, price and cost of cultivation. Growth of the income of the cultivators due to
diversification largely depends on upon the degree of profitability of the high value
agricultural crops relative to other competing crops.32

This section throws light upon the profit or net return (revenue — cost of
production) for different crops. Farmer households spending some money under certain
crops have been taken into consideration for this part of analysis. Risk-taking farmers
have more chances to get more net return from the non-traditional crops whereas for
traditional crops most of the times the net return can follow the general pattern. Average
net return for each household has been calculated only for the high value crops. It is
calculated as below:

32
Sen & Raju, 2006

52
Average Net Return per hectare=
∑ (Net Revenue from ith crop per unit area X Area under ith crop)/ Land under all
diversifying crops.
Where Net Revenue per unit area= [(total production of ith crop *price of ith crop)-
(total cost of production of ith crop)]/area under ith crop

As different size-classes of farmers have different cost pattern for various crops
they are expected to get differential profit. In absolute terms, large farmers receive higher
net return than farmers with lower farm size. Even if they go through crop failure, they
are not affected as badly as the farmers with smaller farm size. There is a general
impression that large farmers who have large marketable surpluses have better bargaining
capacity and hence, receive higher prices than those received by small and marginal
farmers.

Despite modern (biochemical) technology being neutral to scale, there are some
advantages like better accessibility to inputs that are enjoyed by the large farmers due to
their higher purchasing power. In addition, there are some economies of scale which
reduces the fixed cost like depreciation on farm machinery, implements and farm
buildings and interest on fixed capital per unit of area and production which affects the
overall costs and returns of crops and farms.

To search for any existing relation between profitability, land allocation under
each crop and farm-size, correlations have been calculated for each type of crop
concerned in this study. Interestingly fruits, spices and vegetables among the non-
traditional crops and only oilseeds among traditional ones have quite significant negative
correlations between net return per hectare for each crop and percent land under that
crop. Not for fruits and oilseeds, but for tanning-dying materials, aromatic-medicinal
plants and paddy, there are significant negative correlations between the other set of
variables. Net return from spices and vegetables are correlated significantly with both
variables related to land.

Net return for the farmers from Kerala and Maharashtra also have been found and
compared with the farmers of India at an aggregate level. At state specific scenario of net
return, there could be some significant patterns emerging.

53
 The strategy of high value diversification in agriculture has been adopted as one
of the ways by which farmers, particularly small farmers, can enhance their incomes.
With a large number of incentives being given to floriculture and horticulture in the
recent years, it is necessary to understand the dynamics of high value agriculture in the
contexts of the benefits percolating to the farmers.

Table 3.8: Average Net Return under All Groups of Crops

India Kerala Maharashtra

Mean N Mean N Mean Return N
Return Return
Aromatic Plants 2780.10 92
Drugs & Narcotics 18948.55 112
Flowers 972.54 152
Fruits 10902.71 2216 1105.44 474 25778.84 119
Spices 4105.34 2775 935.85 419 4162.35 80
Tanning Materials 4972.93 14
Vegetables 1520.35 10672 395.35 537 6063.50 263
Paddy 13256.30 28097 3184.03 492 13288.82 908
Wheat 15411.13 13113 8275.82 524
Oilseeds 9222.21 7251 1212.81 941 13371.66 622
Other Crops 10365.63 26214 4216.93 401 31121.97 2654
Total crop 6627.52 62515 3596.49 1425 8415.66 3718

At all-India level, average net return for drugs & narcotics is the highest among
all other crops. Paddy and wheat among traditional crops and fruits among diversifying
high-value crops also have very high return from production. These groups are succeeded
by fruits and group of other crops in receiving average net return. Followed by
vegetables, the average net return per hectare is the lowest for flowers.

In case of Kerala, paddy and other crop group have higher net return than all other
groups of crop. Vegetables have the lowest average net return succeeded by flowers and
spices.

In Maharashtra, the average net return for all groups of crops is quite high. Other
crop group has the highest net return followed by fruits, paddy and oilseeds. Lowest

54
return, which is above the range of medium return found in Kerala, is found in case of
flowers in Maharashtra (table 3.8).

All diversifying high value crops have the highest return in Maharashtra. Other
than wheat, every other crop group contributes to higher return in this state than those at
Kerala and aggregate level.

Table 3.9: Comparison of Net Return of Different Groups of Crops

Mean diff N Std Error Significance

India
Paddy & Veg 2751.46 10671 439.64 0.000
Wheat & Veg 184.97 10671 242.60 0.446
Oilseeds & Veg -1068.74 10671 178.43 0.000
Paddy & Fruits -7267.46 2215 1487.60 0.000
Wheat & Fruits -8902.13 2215 1541.69 0.000
Oilseeds & Fruits -8815.79 2215 1502.47 0.000
Paddy & Spice 1745.48 2774 1227.77 0.155
Wheat & Spice -1573.39 2774 978.82 0.108
Oilseeds & Spice -2314.38 2774 623.86 0.000
Kerala
Paddy & Veg 122.69 536 1061.13 0.908
Wheat & Veg -395.35 536 487.70 0.418
Oilseeds & Veg 195.27 536 543.26 0.719
Paddy & Fruits -1131.30 473 878.30 0.198
Wheat & Fruits -1105.45 473 600.84 0.066
Oilseeds & Fruits -6.33 473 593.99 0.991
Paddy & Spice -281.92 418 331.02 0.395
Wheat & Spice -935.85 418 269.63 0.001
Oilseeds & Spice 96.01 418 375.69 0.798
Maharashtra
Paddy & Veg -3613.78 262 1527.29 0.019
Wheat & Veg 1078.93 262 4383.17 0.806
Oilseeds & Veg -368.91 262 3263.02 0.910
Paddy & Fruits -22272.3 118 12860.83 0.086
Wheat & Fruits -22721.8 118 12561.02 0.073
Oilseeds & Fruits -23272.8 118 12783.85 0.071
Paddy & Spice -2917.26 80 1669.95 0.085
Wheat & Spice -2472.14 80 1916.18 0.201
Oilseeds & Spice 4929.12 80 4450.87 0.271

At all-India level, vegetables have lower return than paddy and wheat but higher
than that of oilseeds. Cultivation of spices receives net return much higher than wheat
and oilseeds but lesser than paddy. Whereas fruits have very high net return that is far
higher than any of the traditional crops compared in this analysis. Differences of net
return between fruit and traditional crops seem to be very much significant.

55
 Kerala shows a very different picture of net return differences when three each
from traditional and diversifying crops are compared. Vegetables have greater return than
wheat among the traditional crops but fruits reward the farmers with higher return than all
of three crops compared. Cultivation of spices receives higher return than paddy and
wheat and less than oilseeds. The difference in net return from fruits and oilseeds is very
negligible (table 3.9).

There are very stark differences in the net return received by the farmers of
Maharashtra. The comparison between net return of few traditional and diversifying
crops entails a huge difference in almost all cases other than that between vegetables and
oilseeds. The difference between the aforesaid crop groups is lowest and less significant.
Vegetables have higher return than paddy and oilseeds while wheat has much higher
return. In Maharashtra, fruits have a very high net return over all the traditional crops in
concern. Oilseeds override cultivation of spices in terms of farm income while paddy and
wheat lag behind.

3.8. Net Returns and Farm-size

It can be assumed that the average net return increases with the increase in farm
size and percent land under each crop. This increase would be more prominent in case of
increase in land allocation for the particular crop. At aggregate level, other than flowers
and aromatic & medicinal plants, average net return has a positive correlation with farm-
size for every other crop group while for tanning & dyeing materials it is negative but not
very significant.

There is a positive and significant correlation between net returns per hectare and
farm-size for most of the diversified crops and almost all the traditional crops. Also,
correlation between percent land under certain crop and the average per hectare net return
is significantly positive for all crop groups except for flowers and tanning & dyeing
materials. Thus, though land allocation for diversified crops was mostly negative and
significant, the net-returns are significantly favorable for the larger farmers. This implies

56
 that the larger farmers are able to manage the risks involved in these perishable and semi-
perishable crops better than the small farmers.

Table 3.10: Correlations between Average Net Return, Farm Size and land under
different crops

India Kerala Maharashtra

NR Farm % land N Farm % land N Farm % land N
Size Size Size
Aromatic 0.086 0.396** 92 -0.994 -1.000** 3
Plants

Drugs & 0.264** 0.317** 112

Narcotics
Flowers 0.095 0.144 152 -0.250 0.998** 4 0.382 0.926** 8
Fruits 0.176** 0.356** 2216 0.475** 0.516** 474 0.255** 0.120 119
Spices 0.168** 0.517** 2775 0.306** 0.551** 419 0.361** 0.347** 80
Tanning -0.184 -0.445 14
Materials
Vegetables 0.177** 0.407** 10672 -0.199** -0.284** 537 0.145* 0.618** 263
Paddy 0.534** 0.589** 28097 0.376** 0.404** 492 0.324** 0.487** 908
Wheat 0.564** 0.478** 13113 0.397** 0.595** 524
Oilseeds 0.348** 0.456** 7251 0.309** 0.527** 941 0.448** 0.668** 622
Other Crops 0.345** 0.343** 26214 0.274** 0.576** 401 0.543** 0.509** 2654

** = significant at 0.01 level, * =significant at 0.05 level

In Kerala, vegetables and aromatic & medicinal plants have negative and
significant correlation with both the variables while for all other crop groups the values of
correlation are significant and positive. For flowers, as the percent land increases the net
return per hectare increases almost at the same rate while for aromatic & medicinal plants
the return decreases at the same rate of increase in land allocation.

In Maharashtra, average net return of almost every crop group has a significant
positive correlation with both the variables except for fruits and flowers. Fruits show an
insignificant positive correlation with percent land while flowers show the same for
correlation with NSA. Vegetables among non-traditional crops and oilseeds among

57
traditional ones show quite high correlations between average return and percent land
(table 3.10).

3.9. Conclusion

Any rational farmer in a modern agricultural system always tries to maximize his
net agricultural income from his limited holding, irrespective of his cost of cultivation. If
the cultivator is purely commercial, it is the changing relationship between the prices or
in principle the comparative profits of different crops that are likely to provide the
stimulus to change in area under individual crops. Since the cost components of different
crops are different, the incidence of variations in constellation of factor prices on various
crops will be different.

From the above analysis, it can be said that, average net return per hectare for
most of the crops is very high in Maharashtra followed by those at the aggregate level.
With relatively lesser cost of production involved, Kerala shows a medium to low ranges
of average net return for both diversifying and traditional crops. Across different levels,
percent land under crop has a stronger correlation with average cost of production than
with average net return.

58
 Chapter 4:

Farmers’ Characteristics and their Access to Information &

Credit and Adoption of High Value Crops

The characteristics of the farmers producing different crops could be seen through
various aspects like social composition, access to information, food sufficiency,
incidence of barriers to different facilities, access to credit.

4.1. Social Characteristics

Social Groups:

The Central Government of India classifies its citizens based on their social and
economic condition as Forward Caste, Scheduled Caste, Scheduled Tribe and Other
Backward Class (OBC).

Scheduled Castes (SCs) and Scheduled Tribes (STs) are Indian communities that are
explicitly recognized by the Constitution of India as requiring special support to
overcome centuries of discrimination by mainstream Hindu society. SCs/STs together
comprise over 24% of India's population, with SC at over 16% and ST over 8% as per the
2001 Census. The Constitution provides a framework with a three-pronged strategy to
improve the situation of SCs and STs:

• Protective Arrangements - Such measures as are required to enforce equality, to

provide punitive measures for transgressions, to eliminate established practices
that perpetuate inequities, etc. A number of laws were enacted to operationalize
the provisions in the Constitution.
• Compensatory Discrimination - provide positive preferential treatment in
allotment of jobs and access to higher education, as a means to accelerate the

59
 integration of the SCs and STs with mainstream society. Compensatory
discrimination is also popularly referred to as Reservation.
• Development - Provide for resources and benefits to bridge the wide gap in social
and economic condition between the SCs/STs and other communities.

The OBC list presented by the commission is dynamic and will change from time to time
depending on Social, Educational and Economic factors. The Constitution of India
recognizes the need to extend positive discrimination to this section. For example, the
OBCs are entitled to 27% reservations in public sector employment and higher education.
In the constitution, OBCs are described as "socially and educationally backward classes",
and government is enjoined to ensure their social and educational development.

Since in India, social customs and agriculture is intrinsically related, the choice of
crops is often driven by the social group that a farmer belongs to. Though in the age of
globalization, such segmentations are likely to dissolve, it would be worthwhile to
analyse the relationship between social groups and choice of crops in India. Also, it has
been noted in literature that economic and social groups often overlap, thus the
relationship that exist in terms of farm-size and diversification is likely to get reflected in
an analysis of social groups and adoption of different crops as well (table 4.1).

Table 4.1: Social Groups and Adoption of Different Crops

Social Groups
Crop Groups
ST SC OBC Others N

Aromatic & medicinal plants 7.3 12.2 48.8 31.7 41

Drugs & narcotics 23.3 8.3 35 33.3 60
Flowers 11 16.4 41.8 30.8 146
Fruits 14.4 9.3 32.7 43.6 29663
Spices 35.8 5.6 27.1 31.5 2439
Tanning & dying material 8.3 0 83.3 8.3 12
Vegetables 25.1 10.1 32.6 32.1 5431
Oilseeds 10.9 10.5 48.3 30.3 5836
Paddy 19.3 15.3 35.5 29.9 26511
Wheat 13.4 12.4 33.4 40.7 290
All Crops 15.1 17.6 38.7 28.2 51689

60
 The social composition of farmers producing different diversified crops has been
compared with those cultivating paddy, wheat and oilseeds. The same also has been
sought for at the aggregate level. The share of ST population is higher in the case of
farmers producing spices followed by vegetables and drugs & narcotics. The lowest
could be found in case of aromatic & medicinal plants cultivators preceded by producers
of tanning & dyeing materials. SCs have a larger share among the farmers at aggregate
level while flower and paddy cultivators also have a large share of them. Tanning &
dyeing material producers have the largest OBC share which accounts to more than 83
percent. Spice cultivators have the lowest OBC share. Shares of ST and SC among
farmers are greater than the actual shares in the population as per the 2001 Census.

4.2. Consolidation of Landholdings & Food Sufficiency

Land holdings in most parts of the country are small and fragmented. It is difficult
to introduce improved farm practices on such holdings with no scope for levelling of
land, expansion in irrigation, development of independent approach roads and
mechanization of operations etc. Wherever land holdings have been consolidated, such as
in Punjab, Haryana, Western UP, it helped the farmers to get canal irrigation, install
individual tube-wells and pump sets, mechanize operations, introduce high-yielding
varieties and adopt improved practices. Land consolidation serves as a base for
modernization, and states that have not consolidated land holdings have very low
productivity and are deficit even in food grain.

For instance, the Gangetic plain has some 20 million hectares of highly
productive land floating over sweet water, which has productivity potential as high as
Punjab. But, fragmented small-sized holdings with no independent approach roads and no
separate source of irrigation are handicapped in adopting improved production
technologies and hence suffer from very low productivity. Thus, consolidation of land
holdings is a pre-requisite for agricultural growth and development.

While the percent land consolidated is about 27 at the aggregate level, 46 percent
of aromatic & medicinal plant and 42 percent wheat is grown in land which is

61
consolidated. Of about 25 percent of farmers producing paddy and around 20 percent of
fruits and oilseeds cultivators land have been consolidated. Cultivators of spices have
experienced the lowest percentage of land consolidation (table 4.2).

Table 4.2: Land Consolidation and Adoption of Different Crops

Crop Groups Consolidated Not consolidated N

Aromatic & medicinal plants 46.3 53.7 41

Drugs & narcotics 16.7 83.3 60
Flowers 17.8 82.2 146
Fruits 20.4 79.6 29615
Spices 15.3 84.7 2420
Tanning & dying material 16.7 83.3 12
Vegetables 18.6 81.6 5406
Oilseeds 19.9 80.1 5833
Paddy 24.6 75.4 26319
Wheat 42.3 57.7 291
All Crops 26.9 73.1 51273

By Food Sufficiency:

With the increasing population, every nation looks forward to be self-reliant in

production of food items. As the farmers’ share in India’s population is quite large it is
important to find whether they find themselves food sufficient or not. At household level
analysis it is found that on an average 98.6 percent farmers are well fed. It is expected
that with absolute food sufficiency farmers engage themselves in the production of
diversified high value crops like aromatic & medicinal plants, flowers and tanning &
dyeing materials.

The cultivators of paddy among the major food grains and drugs & narcotics
among the high value crops are somewhat less sufficient in terms of diet (table 4.3). As
the nation is diversifying its crop sector it is going to bring changes in the food basket
also. So there is a need to enquire further into the consumption pattern, calorie intake and
composition of the diet.

62
Table 4.3: Food Sufficiency and Adoption of Different Crops

Crop Groups Yes, every Yes, some No, no N

month months month

Aromatic & medicinal plants 100 0 0 41

Drugs & narcotics 98.3 1.7 0 60
Flowers 100 0 0 146
Fruits 99 0.9 0.1 29695
Spices 99.3 0.7 0 2438
Tanning & dying material 100 0 0 12
Vegetables 98.9 1 0.1 5442
Oilseeds 99.6 0.3 0 5837
Paddy 98.2 1.5 0.3 26544
Wheat 99.3 0.7 0 291
All Crops 98.6 1.1 0.3 51718

4.3. Access to Knowledge & Information

Knowledge about policies and technologies may not be directly related to

adoption of high value crops, but it is important in the context that a farmer growing
these crops has to have access to a market network system as well as new cultivation
techniques. A farmer who is aware of his opportunities in terms of Government policies
and latest technologies is more likely to try out new crops.

Minimum Support Price:

In recognition of the importance of assuring reasonable produce prices to the

farmers, motivating them to adopt improved technology and to promote investment by
them in farm enterprises, the Agricultural Prices Commission (Currently known as the
Commission for Agricultural Costs and Prices) was established in 1965 for advising the
Government on agricultural prices policy on a continuing basis. The thrust of the policy
in 1965 was to evolve a balanced and integrated structure to meet the overall needs of the
economy and with due regard to the interests of the producers and the consumers.

The minimum support prices are announced by the Govt. of India with a view to
ensuring remunerative prices to the farmers for their produce on the basis of the
Commission for Agricultural Costs and Prices (CACP) recommendations. The minimum
support prices are perceived by the farmers as a guarantee price for their produce from

63
the Government. These prices are announced by the Government at the commencement
of the season to enable them to pursue their efforts with the assurance that the prices
would not be allowed to fall below the level fixed by the Govt. Such minimum support
prices are fixed at incentive level, so as to induce the farmers to make capital investment
for the improvement of their farm and to motivate them to adopt improved crop
production technologies to step up their production and thereby their net income.

Cultivators of fruits are most aware among others followed by cultivators of

oilseeds. High awareness about MSP can also be observed among cultivators of aromatic
& medicinal plants, flowers and wheat. Farmers producing rice are the group having
lowest awareness about MSP while producers of vegetables among diversified crops
show very low level of knowledge and information about the same (table 4.4.). Thus
diversification of crops does not seem to be dependent upon the knowledge or awareness
about MSP.

Table 4.4: Awareness about MSP, PA, Bio-fertilizers & WTO and Adoption of Different
Crops
Crop Groups MSP N PA N Bio- N WTO N
fertilizer

Aromatic & medicinal plants 39 41 70.6 17 22 41 4.9 41

Drugs & narcotics 30.5 59 73.7 19 22 59 15.3 59
Flowers 36.3 146 61.4 57 26.7 146 15.1 146
Fruits 46.1 29663 69.2 13984 42.2 29663 28.2 29679
Spices 31.3 2437 63.1 822 35.4 2438 21.6 2439
Tanning & dying material 33.3 12 0 4 8.3 12 16.7 12
Vegetables 28.8 5437 56.6 1675 28.8 5439 14.3 5439
Oilseeds 45 5833 69.5 2661 32.2 5834 19.8 5836
Paddy 28.1 26523 59.1 8027 20.9 26514 9.9 264515
Wheat 34.4 291 52.7 110 14.8 291 9.6 291
All Crops 29.1 51152 61.1 15983 20.7 51069 9.7 51498
Note:
MSP: Minimum Support Price
PA: Procurement Agency
WTO: World Trade Organization

Knowledge and information about procurement agencies are somewhat higher

among farmers of the diversified crops in comparison to the traditional crops. Producers
of vegetables, however, show a low level of awareness while oilseeds among other
traditional crops show high awareness.

64
About Bio-fertilizer:

After the introduction of chemical fertilizers in the last century, farmers were
getting increased yield in agriculture in the beginning. But slowly chemical fertilizers
started displaying their ill-effects such as leaching out, and polluting water basins,
destroying micro-organisms and friendly insects, making the crop more susceptible to the
attack of diseases, reducing the soil fertility and thus causing irreparable damage to the
overall system. A number of intellectuals throughout the world started working on the
alternatives and found that bio-fertilizers can help in increasing the yield without causing
the damage associated with chemical fertilizers.

The cultivators of fruits, spices among diversified crops and oilseeds among
traditional crops have higher level of knowledge about bio-fertilizers. Wheat and paddy
cultivators have lower levels of awareness about bio-fertilizers (table 4.4).

The name bio-fertilizer itself is self explanatory. The fertilizers are used to
improve the fertility of the land using biological wastes, hence the term bio-fertilizers,
and biological wastes do not contain any chemicals which are detrimental to human
health and quality of soil. They are extremely beneficial in enriching the soil with micro-
organisms, which produce organic nutrients for the soil and help combat diseases. The
farm produce does not contain traces of hazardous and poisonous materials. Thus those
products are accepted across the world as Organic ones. Hence for organic farming the
use of bio-fertilizers is mandatory.

Galaxy of Bio-fertilizers:

Phospho: It releases insoluble phosphorus in soil and fix this phosphorus in clay minerals
which is of great significance in agriculture.

Rhizo: Rhizo Bacterial plays a very important role in agriculture by inducing nitrogen
fixings nodules on the root of legumes such as peas,beans clove and alfalfa.

65
Azotobactor: Atmosphere contains 78% nitrogen which is a very important nutrient for
plant growth. Azotobactor fixes the atmospheric nitrogen in the soil and make it available
to the plants. It protects the roots from other pathogens present in the soil

Trichoderma: It is a non- pathogenic and eco-friendly product. The product is

antagonistic hyper parasitic against different pathogens in the field and economically well
established biocontrol agent.

Composter: (Decomposing Culture): Composter breaks down any organic matter such as
dead plants farm yard waste, cattle waste etc. thereby increasing the soil productivity.

Tricho-Card: Trichogramma is an efficient destroyer of eggs of many leaf and flower

eaters, stems, fruit, shoot borers etc. It can be used in a variety of crops as well as in
horticultural and other plants, such as sugarcane, cotton, brinjal, tomato, corn, jowar,
vegetables, citrus, paddy apple etc.

Vermi Compost: It is 100% pure eco-friendly organic fertilizer. This organic fertilizer has
nitrogen phosphorus, potassium, organic carbon, sulphur, hormones, vitamins, enzymes
and antibiotics which helps to improve the quality and quantity of yield. It is observed
that due to continuous misuse of chemical fertilizer soil losses its fertility and gets salty
day by day. To overcome such problems natural farming is the only remedy and Vermi
compost is the best solution.

Biocompost: It is eco-friendly organic fertilizer which is prepared from the sugar industry
waste material which is decomposed and enriched of with various plants and human
friendly bacteria and fungi. Biocompost consists of nitrogen, phosphate solubilizing
bacteria and various useful fungi like decomposing fungi, trichoderma viridea which
protects the plants from various soil-borne diseases and also help to increase soil fertility
which results to a good quality product to the farmers.

About World Trade Organization:

66
 World Trade Organization (WTO) is an International body which deals with trade
relations between different countries and three aspects of international trade: volume,
composition and direction.

Farmers in India have low awareness about this regulatory body due to lack of
literacy and improper dissemination of information. When compared to the cultivators of
traditional crops, diversifying farmers seem to be more aware about WTO. But at the
aggregate level, it is as low as 10 percent. Cultivators of oilseeds are more aware than
other traditional crops like wheat and paddy. Producers of fruits and spices acquire
comparatively more knowledge about WTO and its importance in agriculture (table 4.4).

Membership of Self Help Groups:

Self Help Group (SHG) is a group formed by the community women, which has
small group of members. This kind of institution gives access to credit to the
marginalized of the society without much formality.

Objectives of SHGs are geared to particularly help women:

• To sensitize women of target area for the need of SHG and its relevance in their
empowerment process.
• To create group feeling among women.
• To enhance the confidence and capabilities of women.
• To develop collective decision making among women.
• To encourage habit of saving among women and facilitate the accumulation of
their own capital resource base.
• To motivate women taking up social responsibilities particularly related to women
development.

Membership of such a group enables the farmers to borrow for cultivation in proper
time. Other than cultivators of vegetables and aromatic & medicinal plants, other
diversifying farmer households in a large proportion have taken membership of some
SGHs. Some of the paddy and wheat cultivating households have been members of SGHs

67
but at a smaller proportion than those cultivating oilseeds. Lowest membership could be
found among wheat producers while highest membership amounted among cultivators of
drugs and narcotics (table 4.5).

Table 4.5: Membership of SHG & RFO and Adoption of Different Crops

Crop Groups SHG N RFO N

Aromatic & medicinal plants 2.4 41 0 41

Drugs & narcotics 25.4 59 6.8 59
Flowers 11 146 2.1 146
Fruits 12.9 29679 7 29663
Spices 11.9 2439 6 2438
Tanning & dying material 16.7 12 8.3 12
Vegetables 6.6 5440 3.4 5439
Oilseeds 9.4 5836 5 5831
Paddy 5.2 26514 2.6 26507
Wheat 2.1 291 1.7 291
All Crops 5.5 51521 2.4 51380
Note:
SHG: Self Help Group
RFO: Registered Farmers’ Organization

Registered Farmers’ Organization (RFO): "Agro-based co-operative society"

means any co-operative society which, upon the coming into operation of this Act, is
registered under the Cooperative Societies Act 1993 (Act 502) and whose principal
objects or main functions concern agricultural production, agricultural credit, marketing
or processing or any such commercial and trading ventures:

Provided that where there is a dispute as to whether any co-operative society is an

agro-based co-operative society, such dispute shall be referred to the Farmers'
Organization Authority whose decision shall be final and shall not be called in question
in any court;

Objects of Farmers' Organizations:

1) A Farmers' Organization may be formed with the objects of promoting the economic
and social interests or wellbeing of its members or member-units and shall have the

68
power to do all things necessary to achieve the objects and in particular, but without
prejudice to the generality of the foregoing, it shall have the power -

(a) to provide extension services and training facilities to farmers so as to equip

them with technology essential for the advancement of agriculture, horticulture, animal
husbandry, home-economics, agri-business and other commercial enterprises;

(b) to expand agricultural production amongst farmers and smallholders so as to

promote greater diversification and commercialization of agriculture and to expand and
promote agri-business;

(c) to make available farm supplies and daily necessities including other facilities
required for progressive farming and better rural living;

(d) to provide farm mechanization facilities and services necessary in

modernizing farming operations;

(e) to provide credit facilities and services and to promote greater investment in
agricultural and economic pursuits;

(f) to promote, encourage, facilitate and offer services for rural savings;

(g) to provide marketing services, storage, drying complexes, warehousing and

other facilities;

(h) to operate and provide transportation facilities to enhance agricultural

marketing and related operations;

(i) to establish and operate processing plants and milling complexes necessary for
processing of agricultural products;

(j) to facilitate capital formation and investment among members or member-units

through the establishment of companies or equity participation in trading and business
ventures;

69
 (k) to assist members in acquiring land and to undertake land development
projects for the benefit of members;

(l) to promote and stimulate group action through various community projects and
facilitate leadership development;

(m) to provide social services, educational and recreational facilities to enhance

the social advancement and wellbeing of farm families.

2) Notwithstanding the powers conferred by subsection (1), a Farmers' Organization shall

not establish any company or participate in the equity of any trading or business ventures
without the prior written approval of the Registrar, and the Registrar may, in giving such
approval, impose any condition he deems fit.

3) Without prejudice to the powers conferred upon the Registrar in subsection (2), the
Registrar may, by order in writing, limit, impose conditions on or regulate the powers of
any Farmers' Organization to ensure efficiency in, and to avoid duplication of, the
functions of such Farmers' Organization.

4) Any person who is dissatisfied with any order of the Registrar under subsection (2) or
(3) may appeal to the Minister within thirty days of such order and the Minister may
confirm, vary or revoke such order; and the decision of the Minister shall be final and
shall not be called in question in any Court.

In spite of well-structured formative rules very few farmers become members of

RFO in India. Producers of fruits, spices, tanning & dyeing materials and drugs &
narcotics have higher membership than other diversified and traditional crops though the
percentages are not more than 9 percent (table 4.5).

4.4. Access to Crop Insurance & Barriers

Crop insurance is purchased by agricultural producers, including farmers, ranchers,

and others to protect themselves against either the loss of their crops due to natural
disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the

70
prices of agricultural commodities. The two general categories of crop insurance are
called crop-yield insurance and crop-revenue insurance.

Table 4.6: Crop Insurance and Adoption of Different Crops

Crop Groups Yes N

Aromatic & medicinal plants 0 41

Drugs & narcotics 1.7 59
Flowers 7.5 146
Fruits 7.5 29647
Spices 5.7 2439
Tanning & dying material 0 12
Vegetables 3.7 5440
Oilseeds 8.2 5833
Paddy 3.2 26523
Wheat 5.8 291
All Crops 3.8 50615

• Crop-yield insurance: There are two main classes of crop-yield insurance:

1. Crop-hail insurance is generally available from private insurers (in

countries with private sectors) because hail is a narrow peril that occurs in
a limited place and its accumulated losses tend not to overwhelm the
capital reserves of private insurers. The earliest crop-hail programs were
begun by farmers’ cooperatives in France and Germany in the 1820s.
2. Multi-peril crop insurance (MPCI): covers the broad perils of drought,
flood, insects, disease, etc., which may affect many insured at the same
time and present the insurer with excessive losses. To make this class of
insurance, the perils are often bundled together in a single policy, called a
multi-peril crop insurance (MPCI) policy. MPCI coverage is usually
offered by a government insurer and premiums are usually partially
subsidized by the government. The earliest MPCI program was first
implemented by the Federal Crop Insurance Corporation (FCIC), an
agency of the U.S. Department of Agriculture, in 1938. The FCIC
program has been managed by the Risk Management Agency (RMA), also
a U.S. Department of Agriculture agency, since 1996.

71
 • Crop-revenue insurance: is a combination of crop-yield insurance and price
insurance. For example, RMA establishes crop-revenue insurance guarantees on
corn by multiplying each farmer's corn-yield guarantee, which is based on the
farmer's own production history, times the harvest-time futures price discovered
at a commodity exchange before the policy is sold and the crop planted. There is a
single guarantee for a certain number of dollars. The policy pays an indemnity if
the combination of the actual yield and the cash settlement price in the futures
market is less than the guarantee.

Crop-revenue insurance covers the decline in price that occurs during the crop's
growing season. It does not cover declines that may occur from one growing season to
another. That would be called "price support," and would raise a series of complex
agricultural-policy and international-trade issues.

Though greater risk is associated with high value agriculture very few farmers
insure their crops. Among diversified crops only 7.5 percent farmers insured fruits and
flowers while among producers of traditional crops 8.2 percent insured oilseeds. At all-
India level, insured crops amount to less than 4 percent (table 4.6).

Table 4.7: Barriers to Insurance and Adoption of Different Crops

Crop Groups Lack of Lack of Lack of Lack of resources N

awarenes interests insurance for premium
s facility payment
Aromatic & medicinal 41.5 19.5 39 0 41
plants
Drugs & narcotics 46.6 24.1 29.3 0 58
Flowers 60.2 18.8 20.3 0.8 133
Fruits 40.1 29.5 27.3 3 27296
Spices 40.1 23.5 33.3 3.1 2293
Tanning & dying material 0 0 100 0 12
Vegetables 48.2 16.8 33.6 1.4 5208
Oilseeds 46.3 31.9 17.1 4.8 5346
Paddy 55 13.9 28.9 2.1 25433
Wheat 58.6 18.3 20.1 2.9 273
All Crops 54.1 17.8 25.2 2.9 48223

72
 There are some important reasons for not insuring crops by the farmers. Among
these, the most important one is lack of awareness. In compels more than one out of two
farmers engaged in production of flowers, paddy, wheat and vegetables not to enjoy the
benefits of crop insurance. Lack of insurance facility is the major constraints to get the
crop insured for the cultivators of tanning & dyeing materials, vegetables and spices. One
in three cultivators of fruits and oilseeds lack the interest to get their crops insured while
as high as 5 percent oilseed cultivators lack the resources for premium payment (table
4.7).

It is expected that if farmers like farming as a profession and stays in it due

choice, then they are more likely to adopt cultivation of diversified crops.

4.5. Farming as a Profession & Services of Cooperative

Farming is a mainstay of majority of population in India. At aggregate level, less than

sixty percent of the farmers like this profession while most of the cultivators of
diversified crops like farming as an option for livelihood. Number of producers of paddy
and wheat who likes farming as a profession is somewhat less than that the percentage for
diversified crops. However, lower percentage of farmers engaged in the cultivation of
fruits and spices like this profession than the share for other high value crops (table 4.8).

Table 4.8: Likeliness of Farming as a Profession and Adoption of Different Crops

Crop Groups Yes N

Aromatic & medicinal plants 85.4 41

Drugs & narcotics 81.4 59
Flowers 71.2 146
Fruits 67.9 29679
Spices 63.6 2439
Tanning & dying material 75 12
Vegetables 60.9 5434
Oilseeds 66.2 5834
Paddy 58.7 26505
Wheat 60.8 291
All Crops 59 51415

73
Table 4.9: Services from Cooperatives and Adoption of Different Crops

NA for Mem Agricul Ma N

non- ber Seeds tural rke Cons
membersh but Credi /fertil implem tin Input umer
ip NA t izers ents g s goods
Aromatic & 56.1 22 4.9 12.2 0 4.9 0 0 41
medicinal plants
Drugs & narcotics 55.9 15.3 10.2 16.9 0 0 0 1.7 59
Flowers 64.8 7.6 11.7 9 2.8 0 0 4.1 145
Fruits 53.4 14.1 14.3 10.9 0.3 0.3 0.3 6.2 29663
Spices 59.8 10.8 13.6 7.9 0.6 0.4 0.2 6.7 2413
Tanning & dying 33.3 0 8.3 0 0 0 0 58.3 12
material
Vegetables 68.4 8.6 7.7 8.7 0.2 0.2 0.1 6.1 5405
Oilseeds 51.6 15.1 17.2 12.9 0.4 0.5 0.1 2.3 5834
Paddy 74.2 9 6.6 7.8 0.3 0.3 0 2 26428
Wheat 59.4 16.3 8 13.2 0 0 0 3.1 288
All Crops 71.1 9.8 8.4 8.1 0.2 0.2 0.1 2.1 51096

Cooperatives play a major role in different stages of agricultural pursuit. Starting

from inputs to marketing people collaborate and form cooperatives. Some of these may
specialize in different aspects of agriculture. At the all-India level, 71 percent farmers do
not avail due to membership of any cooperatives which amounts to be highest in case of
cultivators of paddy. More than 15 percent of the cultivators of oilseeds, drugs &
narcotics and wheat do not avail the membership while this amounts to less than 10
percent cultivators at aggregate level. As a whole, only 8.4 percent farmers avail credit
facilities through cooperatives. As high as 17 percent of oilseed cultivators and more than
one-tenth of fruits, spices, flowers and drugs & narcotics producers access credit facility
through these formations. Very few producers of paddy among the traditional crops and
vegetables among diversified crops need the credit accessibility through cooperatives
(table 4.9).

4.6. Sources of Seeds & Frequency of Seed Replacement

Requirements of seeds and fertilizers of more than one-tenth producers of fruits,

drugs & narcotics, aromatic & medicinal plants among diversified crops and oilseeds and
wheat among traditional crops are met through these cooperatives while at aggregate

74
level only 8 percent avail this facility. Facility of agricultural implements with the help of
cooperatives is availed by very few farmers producing flowers whereas negligible portion
of other farmers avails this service. Almost 5 percent of aromatic & medicinal plants
producers market their products through the cooperatives while most of other
diversifying farmers do not. Other inputs are not accessed mainly through this channel. A
little more than 6 percent producers of fruits, spices and vegetables depend on these
cooperatives for consumer goods but six out of ten farmers producing tanning & dyeing
materials do the same.

Usual source of seeds:

Seed is the one of most important inputs particularly for determining the variety
of flowers or fruits. It is essential to ensure quality seeds of improved genotypes in
adequate quantity. India created seed corporations in the states as well as the Seed
Corporation of India at the Centre. The job of the agricultural universities and research
institutes was to produce enough quantities of foundation seeds of the recommended
varieties. The seed corporations got these seeds multiplied in the fields under the
supervision of Seed Testing Authorities of the states to maintain the purity of the seeds
produced. This ensured the availability of pure, certified seeds of recommended varieties
in adequate quantity.

Seeds are obtained from various sources such as farm saved, exchanged and
purchased. Farm saved seeds are obtained at high level by the producers of spices,
vegetables, fruits among diversified crops and paddy among traditional crops in concern.
As high as one-sixth of producers of tanning & dyeing use exchanged seeds. Around 5
percent of flower, paddy and wheat cultivators exchange their seeds. Rest of the farmers
purchases the seeds they require. The highest percentage purchasing seed for cultivation
pertains to producers of aromatic & medicinal plants followed by those producing
tanning & dyeing materials while producers of spices require purchased seeds the least
(table 4.10).

75
Table 4.10: Sources of Seeds and Adoption of Different Crops

Crop Groups Farm Exchanged Purchased N

saved

Aromatic & medicinal plants 17.5 0 82.5 40

Drugs & narcotics 44.1 1.7 54.2 59
Flowers 39 4.1 56.8 146
Fruits 55.2 3.7 41.1 29119
Spices 68.5 2.9 28.6 2420
Tanning & dying material 8.3 16.7 75 12
Vegetables 61.9 3.2 34.9 5424
Oilseeds 43.4 3 53.6 5755
Paddy 59.5 4.8 35.7 26494
Wheat 41.2 4.8 54 291
All Crops 48.1 5 46.9 48689

In some progressive states, the foundation seed was distributed in small quantities
directly to the farmers at fairs also so that they could multiply their own seed for the next
crop. This system, while ensuring adequate supplies, reduced the time gap between
research and its adoption by farmers, and enhanced the seed replacement rate.
Unfortunately, the system has lapsed into performing routine functions especially at a
time when production patterns need to be diversified for higher incomes and efficiency of
resource use. Seed policy, therefore, needs to be streamlined so that the varietal
development effort of the universities and research institutes bear fruit on the fields. The
private sector is entering the seed business at a very fast pace. Yet, in the absence of
definitive seed policy, the farmers are being exploited without any accountability on the
part of the seed companies. This is a major challenge before policy-makers, who need to
regulate the production and supply of seeds for a minimum level of productivity under
specified conditions and practices.

Frequency of Seed Variety Replacement:

In Indian agriculture the emphasis on seed production was given mostly on food,
oilseeds and fibre crops so far. The vegetable and flower seed production did not receive

76
the attention it deserved. Advancement of seed technology, particularly the tissue culture
techniques, coupled with investment friendly environment have created opportunities for
entrepreneur to produce disease free and true to type saplings/ seeds in a big way. The
technology has obvious benefits for the farmers. As a result fifteen tissue-culture units
have become operational in producing disease free saplings of Banana, Sugarcane,
Strawberry, Gerbera, Carnations, Roses etc. A true potato seed production unit has also
become functional in the State. The quality planting material produced with these
techniques will have to be made available to the farmers to the largest possible extent.

The crop research in vegetables and forage crops both in public and private sector
has assumed greater significance. A number of new hybrids and varieties are becoming
available. The systematic efforts would be needed to strengthen the production chain in
order to reach the varieties to the farmers in shortest possible time. New crops
particularly Sunflower and Soyabean have been introduced and established in the state in
the last two decades. In spite of impressive growth in production there is a considerable
gap that remains to be bridged between the actual yield obtained by the farmer and the
potential yield. The area under soyabean and sunflower would go up substantially,
requiring certified seed in greater magnitudes.

To meet the food requirement of increasing population it is necessary to increase

the foodgrains, oilseeds and agricultural production. As the potential for area expansion is
limited, development and use of new varieties of seed and ensuring their availability to
farmers are of crucial importance to increase production. The seed replacement rates of
all crops will have to be stepped up. Special care will have to be taken to see that certified
seed use spreads in remotely accessible areas too.

Maharashtra has a rich tradition of taking lead in introduction of hybrids in

different crops. This has led to the development of strong seed industry. Following
opportunities could be availed by the Maharashtra Seed Industry that would help attain
distinction for the State as a major seed producing State in the country.

77
 Within the range of 32 to 44 percent of farmers producing aromatic & medicinal
plants, drugs & narcotics, flowers, tanning & dyeing materials among diversified crops
and oilseeds among concerned traditional crops replace their seeds every agricultural
year. At aggregate level around 31 percent farmers each replace the seeds every year and
alternative year. 34 to 41 percent farmers engaged in production of paddy, aromatic &
medicinal plants and drugs & narcotics while 17 percent producers of spices change the
seeds after the same period of time. Quite high percentage of tanning & dyeing materials
producers replace seeds after 3 years while lot of farmers producing fruits, spices and
oilseeds producers change their seeds after 4 years or more time (table 4.11).

Table 4.11: Replacement of Seeds and Adoption of Different Crops

Crop Groups Every Alternative After 3 years After 4 years N

year year or more

Aromatic & medicinal plants 43.9 34.1 14.6 7.3 41

Drugs & narcotics 39 40.7 6.8 13.6 59
Flowers 37 21.2 19.2 22.6 146
Fruits 26 26.2 12.6 35.2 29087
Spices 24.9 16.7 18.7 39.7 2416
Tanning & dying material 33.3 25 41.7 0 12
Vegetables 29.2 27.5 21.1 22.2 5421
Oilseeds 32.7 23.1 12.4 31.9 5732
Paddy 25 33.5 23.9 17.6 26472
Wheat 29.6 26.8 19.9 23.7 291
All Crops 30.5 30.9 19.5 19 48594

The dwarf varieties of crops such as wheat and rice cannot be grown profitably
without irrigation, fertilizers and pesticides. High yielders both plants and animals require
higher inputs as well as pest control. Subsidized supply of fertilizers to farmers, though at
a huge cost to the exchequer, enabled even the small farmer to use fertilizers. In some
parts of the country, such as the states of Punjab and Haryana and western UP where
assured irrigation was available, along with high-yielding seeds, improved production
technology and effective extension service, fertilizer use increased tremendously, and
production as well as productivity touched new heights. Yet, all this did not happen
without negative results either. Today, the groundwater in these areas is highly polluted
with fertilizer and pesticide residues rendering it unfit for drinking. The situation
demands a policy stance that encourages the farmer to use these chemicals selectively

78
and at optimum levels which leave minimum residues in the soil and water. India needs
to design policy options that encourage the contractual participation of chemical-
producing and distribution companies in integrated pest management, which would lower
the cost and health risks for the farmers; and, at the same time eliminate excessive and
wrong use of pesticides and minimize environmental degradation.

4.7: Adequacy of Irrigation

Water is the second most important input after seeds. Yet, it is the most scarce
social asset; harvested, usable water is becoming scarcer by the day. It was estimated that
yield of foodgrains under irrigated conditions were two to six times higher than the yield
under rainfed conditions. Similarly, the instability in yields of irrigated crops was less
than half of un-irrigated crops. For optimum results, irrigation has to be under the control
of the farmer so that he can supply water to the crops as required in time. Expansion of
canal supply undoubtedly helps farmers grow the crops better, but alongside it is the
tube-well irrigation that gives the farmer independent control on water for his crops.
Assured irrigation is the major factor that allows large-scale adoption of improved
varieties and increased intensity of cropping. A one per cent increase in irrigated sown
area raised the cropping intensity by an average 0.16 per cent in the country from 1965 to
1980. Thus, it is not the availability of irrigation water per se that determines
productivity; more important is assured irrigation under the farmer’s control.

Here a word of caution is necessary. With such independent, free access to the
underground water through private tube-wells, there is every possibility that farmers
would overdraw subsoil water thereby, upsetting the balance between withdrawal and
recharge of water. This is what happened in Punjab, Haryana, Gujarat and several other
parts of India. In a democratic set-up, electoral compulsions play a major role. The
groundwater table in several states, especially in Punjab and Haryana, is receding at an
alarming rate. It is a suicidal approach to supply electricity (for farm operations) and
irrigation water free of cost or at excessively low rates. Flat-rate charges are as harmful as
free supply, because after paying these charges, the farmer entertains no urge to save on
power or water.

79
 The system plays havoc on underground water resources, so much so that farmers
and urban centres are now installing submersible pumps to lift water for irrigation and
drinking purposes. There is, therefore, no scope for laxity in this respect. Sustainability of
production and environmental conservation demand that, regardless of electoral
compulsions the balance between withdrawal and recharge of water should never be
upset; and water should be treated as a social asset and not allowed to be irrationally
exploited by individuals. This demands the inclusion of social costs in production
estimates of commodities, both in terms of the resources used and environmental
externalities. Therefore, a definitive policy — incorporating the harvesting of water, its
utilization, right pricing, ecological considerations and sustainability of water as a social
resource — must be put in place to avoid the disastrous consequences of unchecked over-
exploitation.

Table 4.12: Adequacy of Irrigation and Adoption of Different Crops

Crop Groups Yes No Not required N

Aromatic & medicinal plants 73.6 21.8 4.5 110

Drugs & narcotics 57.7 30.6 11.7 111
Flowers 60.9 31.2 7.9 202
Fruits 54.9 25.9 19.2 2200
Spices 42.2 21.9 35.9 2831
Tanning & dying material 83.3 16.7 0 12
Vegetables 58.1 20.2 21.8 9770
Oilseeds 45.2 28 26.7 7761
Paddy 61.1 29.1 9.7 20978
Wheat 79.5 17.9 2.7 13269
All Crops 58.6 24.7 16.7 74552

For about eight out of ten farmers producing tanning & dyeing materials and
wheat extent of irrigation is adequate while as low as 42 percent of spice cultivators can
irrigate their holding to the required extent. Around 30 percent producers of paddy,
flowers and drugs & narcotics found the extent of irrigation adequate. About 36 percent
of spice cultivators do not require irrigation facility (table 4.12).

80
 Reasons for inadequacy of irrigation can be due to shortage of water, fund, power,
device and reasons other than the ones mentioned. While shortage of water is the reason
for inadequate irrigation for all of the tanning & dyeing material cultivators and for more
than 80 percent of flower, fruit, spice and oilseeds cultivators. Lack of funds is the main
reason for inadequate irrigation more to wheat and aromatic & medicinal plants while
power is the main problem for diversified crops and wheat producers. Lack of device
poses problem in irrigation adequacy more for producers of vegetables, paddy, spices and
aromatic & medicinal plants (table 4.13).

Table 4.13: Reasons for Irrigation Inadequacy and Adoption of Different Crops

Crop Groups Shortag Fund Power Device Others Total

e of
water
Aromatic & medicinal plants 56.5 17.4 21.7 4.3 0 23
Drugs & narcotics 79.4 2.9 17.6 0 0 34
Flowers 88.9 3.2 3.2 0 4.8 63
Fruits 84.1 2.1 7.6 1.2 4.9 566
Spices 81.5 1.8 6.7 4.7 5.4 615
Tanning & dying material 100 0 0 0 0 12
Vegetables 70.2 9.2 5.7 5.6 9.3 1956
Oilseeds 85.5 4 7.7 1.2 1.6 2168
Paddy 75 9.3 6.3 4.7 4.8 6044
Wheat 73.5 10.4 9.3 3.2 3.6 2348
All Crops 77.2 7.2 7.6 3.1 4.9 18257

4.8. Access to Credit

More farmers producing flowers and spices among diversified crops have taken
loan while higher percentages of producers of paddy and oilseeds among traditional crops
have accessed credit from available sources.

Only 5 percent cultivators of fruits and less than one percent cultivating wheat
have taken loan. At aggregate level, the portion of farmers taking loan is very low.
Among those who have utilized credit facilities, about 7 to 9 percent of farmers
cultivating spices, vegetables, paddy and wheat have taken loan in kind while rest of the
farmers got credit in terms of cash (table 4.14)

81
Table 4.14: Accessibility of Credit and Adoption of Different Crops

Crop Groups N Taken loan Nature of loan

As % to N
Cash Kind
Aromatic & medicinal plants 23 19 100 0
Drugs & narcotics 29 21.2 100 0
Flowers 90 37.3 98.9 1.1
Fruits 1529 5.1 94.5 5.5
Spices 1095 24.6 92.1 7.9
Tanning & dying material 3 9.7 100 0
Vegetables 2025 15.2 91.1 8.9
Oilseeds 3669 32.3 96.1 3.9
Paddy 10769 34.5 92.3 7.7
Wheat 118 0.8 91.5 8.5
All Crops 34855 4 92.4 7.6

Agriculture production, being a biological process, has a long periodicity in

harvests. The farmers, especially the resource-poor small farmers, do not have the
financial capacity to invest on costly inputs and wait for returns. Credit support at
affordable cost (interest) is, therefore, essential. It improves farmers’ access to purchase
inputs. Credit, if properly used for the sanctioned purpose, brings future opportunities to
the present; if diverted to unproductive purposes, it can lead to bankruptcy. The amount
of credit, its timeliness, interest rate, prior evaluation of proposals and continuous
monitoring are essential inputs to make credit a positive determinant.

Unfortunately, we have remained overly concerned with the supply side of the
credit. The situation is that financial institutions with the mandate to advance a minimum
of 18 per cent of their credit to the agriculture sector have a high level of liquidity, but are
not finding viable avenues of investment. There is, therefore, a need for enhancing the
capacity of the recipients in the farm sector through creating complementarities of
technology dissemination, market clearance and appropriate priced credit support.

82
4.9: Summary

In this chapter we have attempted to look at socio-economic characteristics of

farmers, their access to knowledge, technology and credit, among a few other things, for
farmers cultivating high value crops as well as traditional crops. By and large, with a
number of aspects, we have seen that farmers of non-traditional crops have/require access
to greater degree of information and technology compared to traditional crops. In other
words, farmers who adopt high value crops are also the ones who are more progressive in
terms of knowledge relevant for their means of livelihood.

83
 Chapter 5

Determinants of High Value Crop Diversification

5.1 Introduction

Though the last chapter dealt with some of the factors that are important for
cultivating high-value crops for diversification, it would be worthwhile to analyse factors
that promote adoption of high value crops, on the one hand, and incidence of
diversification, on the other.

A lot of existing literature has attempted similar analysis from where this analysis
in this particular study draws from. G. K. Chadha et al in their study on land use
diversification used regression analysis to address the determinants of crop diversification
(Chadha et. al. 2004). They have taken consideration of the variables like ratio of net
returns between the main crop & the competing crop, average farm-size of each state,
irrigation intensity and availability of agricultural credit. Generalized Least Square
technique had been applied by P. K. Joshi et al in the study of diversification in South
Asia to examine how different forces have influenced crop and livestock diversification
in India (Joshi et. al 2004). The factors included technology, infrastructure, profitability,
resources & information, demand and climate.

5.2 The Models and Variables

For representing adoption of high value crops, the farmers have been categorized
into diversifying and non-diversifying farmers. The farmers cultivating any of the high
value crops concerned in this study are known as diversifying farmers. The high value
crops considered in this study include aromatic & medicinal plants, drugs & narcotics,
flowers, fruits, spices, tanning & dyeing material and vegetables. A logit model has been
applied for this particular analysis as the dependent variable is binary in nature.

84
 Our interest here is to predict the conditional probability, Pi that Yi equals 1 for
given value of the explanatory variables. We assume that the logit, Li, is a linear function
of the explanatory variables

Li= β 1+β 2X2i+……β kXki. and

Pi = 1/(1+1/eLi)

which shows that the conditional probability is a non-linear function of the explanatory
variables. Our interest is to estimate the unknown co-efficient, β i (i=1…..m), of the
probability model. The predicted logit model is based on maximum likelihood rather than
least squares. The interpretation of the coefficients estimated can be worked out by
working out the odds or the odds ratio. The anti-logarithm of each slope-coefficient in a
logit analysis is an odds ratio at two different values, one unit apart, of the corresponding
explanatory variable.

Two equations have been run for the logit model, one including and the other
excluding vegetable farmers. The reason for this is that many farmers grow vegetables in
their kitchen garden or allot very small plots for the purpose of self consumption. The
factors explaining adoption of cultivation for the purpose of self-consumption are likely
to be different from that of market oriented high value cultivation.

The dependent variables for explaining the adoption (non-adoption) of diversified crops
are as follows:

• Model 1: Diversifying farmers cultivating at least one of the high value crops.
• Model 2: Diversifying farmers cultivating at least one of the high value crops
other than vegetables.

The set of independent variables considered for the diversification analysis are as
follows:

Membership of Self Help Group (MSHG): This depicts the membership status of Self-
help Group of any of the members of every household. This variable takes the value of 1
if the farmer is a member and 0 if he is not.

85
Awareness about World Trade Organization (AWTO): It talks about the awareness
about World Trade Organization of each household (1 if aware, 0 if otherwise.)

Access to loan (SLOAN): Accessibility to and availability of agricultural credit would

be an important factor inducing diversification of agriculture towards high value crops as
the input requirements (for e.g. seeds, fertilizers etc) for these crops are quite high. Since
the value of loan is not available in the NSSO database, the variable that has been taken
whether the farmer has taken loan or not. (takes the value of 1 if the farmer has access to
loan, 0 if otherwise).

Training in agricultural programmes (TRAIN): Formal training in agriculture is

expected to have an impact on the degree and incidence of diversification of agriculture
towards high value crops (takes the value of 1 if the farmer had a formal training, 0 if
otherwise).

Primary source of income (PSINC): Primary source of income would be helpful in

determining the nature of diversification as existence of sources of income other than
agriculture would be encouraging farmers to bear the risk associated with high value crop
diversification (takes the value of 1 if primary source of income is agriculture, 0 if
otherwise).

Status of tenancy (TENANCY): Percentage of leased-in land to total land is expected to

act as a deterrent for adoption of high value crop as a tenant farmer is likely to take less
risk compared to an owner cultivator.

Food sufficiency (ALLFD): Food sufficiency of the farmer household is expected to

affect adoption of high value crops positively. In other words, if a farmer is food
sufficient, he will not be constrained to allocate all his land to food-grains and is likely to
venture in cultivation of high value crops.

Adequacy of irrigation (IRRIAD): Adequacy of irrigation would also be another

important factor for diversification of agriculture towards high value crops as these
varieties require assured irrigation. The limitation of this variable is that most of the high

86
values of crops are likely to be dependent on quality of irrigation, like its assuredness and
control of water supply rather than its adequacy (takes the value of 1 if adequate and 0 if
otherwise).

Size class of landholding (SIZECLASS): Size of the farm is likely to determine the
tendency to diversify into high value agriculture. Literature throws up both relationships,
positive and negative. Here our interest is to test the same for the large unit level data set
that we have access to.

Average level of general education (GEDUM): Higher the level of education, higher is
likely to be the awareness of the farmer, and higher is likely to be the probability to adopt
high value diversification. This variable is measured by calculating the average years of
formal education of all the adults in the household.

6.3 Analysis

6.3.a Factors Explaining Adoption/Non-Adoption of Diversified Crops

The logit analysis shows that the probability of a farmer being a diversifying
farmer gets significantly affected by variables mentioned above (table 5.1). The
households which have taken membership of any SHG are 55 percent more likely to
diversify. The ones who have awareness about WTO are also significantly more likely to
diversify. Those who are not aware about WTO are 65 percent less likely to diversify
towards high value crops. Unexpectedly, availability of agricultural credit has a negative
relationship with the probability of diversification and this may mean that farmers who
do not have to take credit, i.e., are better off, are only the ones that can take the risk of
cultivating perishable crops. Farmers with formal agricultural training have a 60 percent
greater chance of diversifying compared to the ones that are not. The tenancy status does
not affect the probability status of diversification.

Contrary to our expectation, the farmers having the primary source of income as
agriculture are more likely to go for high value agriculture compared to those who have a
more diversified income profile. Also, our hypotheses about food self sufficiency does

87
not get validated. As per the expectation, the farmers having adequacy of irrigation are
far more prone to diversify than those who face lack of irrigation facility. As the farm
size increases the likelihood of an agricultural household to diversify decreases
significantly.

However, compared to the marginal farmers, small farmers have less likelihood to
undertake high value crop diversification. But compared to the small & marginal size
classes of farms, medium and large farmers have far lesser likelihood to diversify into
high value crop diversification. As expected, the likelihood of diversify increases as the
average education per farmer household increases.

Table 5.1

Logit Results: Model 1

B S.E. Wald df Sig. Exp(B)

Step MSHG(1)
.439 .056 60.973 1 .000 1.552
1(a)
AWTO(1) .500 .045 125.723 1 .000 1.649
SNLOAN(1) -.208 .029 52.299 1 .000 .812
TRAIN(1) .474 .105 20.286 1 .000 1.606
PSINC(1) .295 .030 94.303 1 .000 1.343
TENANCY -.001 .000 6.513 1 .011 .999
ALLFD(1) -1.295 .040 1032.764 1 .000 .274
IRRIAD(1) .234 .020 130.745 1 .000 1.263
SIZECLASS 217.127 3 .000
SIZECLASS (1) -.246 .029 72.748 1 .000 .782
SIZECLASS (2) -.444 .039 127.300 1 .000 .641
SIZECLASS (3) -.636 .085 55.425 1 .000 .530
GEDUM .143 .008 323.022 1 .000 1.154
Constant -1.095 .067 263.276 1 .000 .335
Dependent variable: adoption of diversified crop (including vegetables) and takes the value of 1 if
cultivating any one of the six specified crop groups and takes the value of 0 if otherwise.
Refer to Table A.5. I: Model 1: Model Summary & Table A.5. II: Model 1: Classification Table

88
 Table 5.2

Logit Results: Model 2

B S.E. Wald df Sig. Exp(B)

Step MSHG(1)
.659 .069 90.003 1 .000 1.933
1(a)
AWTO(1) .586 .058 103.588 1 .000 1.796
SNLOAN(1) -.046 .040 1.309 1 .253 .955
TRAIN(1) .489 .132 13.754 1 .000 1.631
PSINC(1) .500 .045 122.900 1 .000 1.649
TENANCY -.001 .001 2.963 1 .085 .999
ALLFD(1) -1.078 .061 312.344 1 .000 .340
IRRIAD(1) .030 .031 .975 1 .324 1.031
SIZECLASS 5.813 3 .121
SIZECLASS (1) -.098 .043 5.238 1 .022 .907
SIZECLASS (2) -.035 .053 .428 1 .513 .966
SIZECLASS (3) -.100 .107 .869 1 .351 .905
GEDUM .160 .011 214.414 1 .000 1.174
Constant -1.907 .085 498.803 1 .000 .149

Refer to Table A.5. III: Model 2: Model Summary & Table A.5. VI: Model 2: Classification Table

The results excluding vegetable farmers in the dependent variable (Table 5.2) is
nearly the same as model one except for the fact that irrigation adequacy and farm-size
become insignificant variables which was not the case in model 1.

6.3.b Factors Explaining Degree of Diversification

Ordinary Least Square (OLS) multivariate regression analysis has been carried out for
understanding the factors explaining degree of diversification. While the independent
variables remain the same as logit analysis the dependent variables are as given below.

• Model 3: Land under all diversified crops as percentage to total arable land
(GCA)
• Model 4: Land under all diversified crops other than vegetables as percentage to
total arable land (GCA)

It needs to be noted here that only the farmers who have some land under diversified
crops have been included in this analysis.

89
Table 5.3: Model Summary: Model 3

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .297(a) .088 .088 37.13548
2 .377(b) .142 .142 36.02723
3 .387(c) .150 .150 35.85477
4 .397(d) .158 .157 35.69452
5 .403(e) .162 .162 35.59420
6 .405(f) .164 .164 35.56135
7 .407(g) .165 .165 35.53789

a Predictors: (Constant), psinc

b Predictors: (Constant), psinc, NSA
c Predictors: (Constant), psinc, NSA, irriad
d Predictors: (Constant), psinc, NSA, irriad, allfd
e Predictors: (Constant), psinc, NSA, irriad, allfd, snloan
f Predictors: (Constant), psinc, NSA, irriad, allfd, snloan, tenancy
g Predictors: (Constant), psinc, NSA, irriad, allfd, snloan, tenancy, gedum

Table 5.4: OLS Results: Model 3

Unstandardized Standardized
Model Coefficients Coefficients t Sig.
B Std. Error Beta B Std. Error
Step 7 (Constant) 68.841 .607 113.375 .000
PSINC -13.892 .989 -.165 -14.053 .000
FARMSIZE -.008 .000 -.243 -29.874 .000
IRRIAD -8.264 .629 -.105 -13.131 .000
ALLFD -9.470 1.355 -.121 -6.987 .000
SNLOAN 8.039 .928 .080 8.659 .000
TENANCY .060 .012 .039 4.924 .000
GEDUM -1.073 .247 -.060 -4.339 .000
Note:
1. Percentage of all diversified crops as defined earlier has been included as the dependent variable.
2.Results of only the optimum regression equation has been presented.
Refer to Table A.5. V: Model 3: ANOVA

Table 5.5: Model Summary: Model 4

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .196(a) .038 .038 31.44916
2 .245(b) .060 .060 31.09867

90
 3 .258(c) .067 .066 30.99144
4 .272(d) .074 .073 30.87406
5 .274(e) .075 .074 30.85607
6 .276(f) .076 .075 30.84151
7 .277(g) .077 .076 30.83165

a Predictors: (Constant), psinc

b Predictors: (Constant), psinc, NSA
c Predictors: (Constant), psinc, NSA, irriad
d Predictors: (Constant), psinc, NSA, irriad, gedum
e Predictors: (Constant), psinc, NSA, irriad, gedum, snloan
f Predictors: (Constant), psinc, NSA, irriad, gedum, snloan, allfd
g Predictors: (Constant), psinc, NSA, irriad, gedum, snloan, allfd, tenancy

Table 5.6: OLS Results: Model 4

Unstandardized Standardized
Model Coefficients Coefficients t Sig.
B Std. Error Beta B Std. Error
7 (Constant) 50.168 .906 55.380 .000
PSINC -6.578 1.368 -.101 -4.808 .000
FARMSIZE -.003 .000 -.153 -10.805 .000
IRRIAD -5.841 .897 -.091 -6.509 .000
GEDUM -1.000 .337 -.072 -2.972 .003
SNLOAN 3.514 1.194 .048 2.943 .003
ALLFD -5.000 2.045 -.077 -2.445 .015
TENANCY .037 .018 .028 2.026 .043
Note:
1. Vegetable share excluded as the dependent variable.
2. Results of only the optimum regression equation have been presented.
Refer to Table A.5. VI: Model 4: ANOVA

The results of the OLS analysis show somewhat similar results as the Logit
analysis. This means that to a large extent, similar factors are responsible for farmers
adopting diversified crops, and then if they are adopters, for their degree of adoption.

There are however, some differences, too. The optimum regression equation
(ORE) shows that mean years of education of the household adults have a negative
relationship with the degree of diversification. Though the negative result cannot be

91
explained, what it at least means is that though education has a role in initiating a farmer
into adoption (Logit result), it does not hold the same relationship when it comes to
explaining the share of farmers’ land allocated to diversified crops. Access to loan
positively affects the share under diversified crops. Also, tenant farmers, once adopters,
allocate greater share of their land to high value crops.

5.4 Summing Up

In sum, our analysis show that knowledge and awareness has a great role in
explaining both the adoption and share of land allotted for the relatively new perishable
crops of fruits, flowers, vegetables etc. Secondly, our result conclusively show that food
security status of the farmers have very little to do with the decision of diversification.
Thirdly, contrary to the much of the existing literature, our results indicate that farmers
earning primarily from agriculture are keener to diversify to non-traditional crop and take
greater risks to enhance their incomes from their profession. The ones that do not depend
on agriculture as the primary source of income are both less likely to adopt cultivation of
any of the high value crops and also allocate significantly lower share of their land to
these crops, once they are adopters. Thus income diversification does not necessarily
promote crop diversification. One of the limitations of this analysis is that we have not
been able to include quality of water supply as an explanatory variable.

92
 Chapter 6

Conclusion

High value diversification in agriculture have been promoted by the Government

for the past three five year plans, not only to counter the negative externality effects of
specialization, but also to enhance farmers’ earnings by linking them to the global
market in the era of globalization. It has been noted by existing studies that there are
constraints in adopting high value crops due to their perishable nature, high cost of
cultivation and weak market linkages. It is in this context that this study was undertaken
to understand the pattern, incidence and factors promoting diversification

So far as the regional pattern of diversification in concerned, central region of

India, comprising the states of Gujarat, Madhya Pradesh, Maharashtra and Rajasthan, is
the most diversified part followed by the north-western region which includes Himachal
Pradesh, Jammu & Kashmir, Punjab, Haryana and Uttar Pradesh. These regions have also
accomplished high agricultural growth in 1990s over the preceding decades due to
gradual shift towards more food crops. Over the last few decades, Karnataka has been the
most diversified state followed by Gujarat, Madhya Pradesh, Rajasthan and Maharashtra.
However, it is observed that in developed states like Punjab and Haryana, there is a
decline and then stagnation of the diversifications index.

We started with the contention that farmers with access to different sizes of land
will have differential allocation of land. For a clearer picture about the process of
globalisation and high value diversification, the two states of Kerala and Maharashtra
were selected as the former is a traditionally diversifying state while the latter is a newly
diversifying state, particularly with respect to fruits, in response to globalization.

From the experiences of Kerala and Maharashtra as revealed in the household

level study it can be said that the process of diversification is not a homogenous one.
Kerala has a much higher allocation of land for the high value diversified crops than the
cultivators practicing high value agriculture in the state of Maharashtra. With a long

93
history of practicing diversification Kerala shows a very different picture of diversifying
farmers who have to spend lesser and receive much lower net return than the
Maharashtrian farmers who have adopted diversification at a later stage. Paddy has been
a more rewarding crop than diversified ones in Kerala while high value diversified crops
have been much more profitable than the traditional ones in the most other states. The
farmers of Maharashtra are taking the risks at a high rate. The risks associated with
cultivation of high value crops incurring very high cost of production can at times cause
distress in the farming community.

Small farmers engage more land for the cultivation of high value diversified crops
than their medium and large counterparts. The difference of share of land allotted under
high value agriculture between small and large farm size is the maximum. After
vegetables, spices in Kerala and fruits in Maharashtra have been allocated maximum land
on an average.

By and large, with a number of aspects, it has been observed that farmers of non-
traditional crops have/require access to greater degree of information and technology
compared to traditional crops. In other words, farmers who adopt high value crops are
also the ones who are more progressive in terms of knowledge relevant for their means of
livelihood.

Our analysis show that knowledge and awareness has a great role in explaining
both the adoption and share of land allotted for the relatively new perishable crops, fruits,
flowers, vegetables etc. Higher education level encourages farmers to adopt high value
diversification but do not influence incidence of diversification significantly.

Food security status of the farmers have very little to do with the decision of
diversification. Contrary to much of the existing literature, our results indicate that
farmers earning primarily from agriculture are less eager to diversify to non-traditional
crop and take greater risks to enhance their income from their profession. The ones who
do not depend on agriculture as the primary source of income are both less likely to adopt
cultivation of any of the high value crops and also allocate significantly lower share of

94
their land to these crops, once they are adopters. Thus diversification of income has a
negative and significant relationship with adoption of crop diversification.

Policy Implications:

High value agriculture generates better returns. The findings imply that high value
agriculture is likely to emerge as an important source of agricultural growth, which has
started showing signs of fatigue mainly due to the deceleration in yield growth of food-
grains. High value agriculture led growth is expected to be more equitable as
smallholders have a greater tendency to diversify.

Nevertheless, high value agriculture may come under stress for want of adequate
technology, infrastructure and policy support. High value agriculture has greater
production and market risks, and there is clearly a need to provide a cushion to producers
against these risks. Mitigating production risks would require improved technologies,
quality inputs and formal insurance mechanisms, which hitherto have a thin spread and
are not easily accessible to producers, especially smallholders. High value agriculture is
capital-intensive, while the producers, especially smallholders, have limited resources of
their own to invest. This implies increasing participation of financial institutions in high
value agriculture to sustain the growth momentum.

High value agriculture in India calls for additional protection for the farmers as
adoption of diversification entails great risks. Promotion of seed and fertilizer assistance
would be a useful way of shielding the cultivators from unnecessary hassle of meeting the
input requirement. The success of such assistance and protection measures lies in the
reaching out to the target areas and to the target groups of farmers.

Availability of agricultural credit with less formality should also be promoted

especially for the diversifying farmers. The accessibility of credit through Self-help
groups has been proved to be a good option for the adopters of crop diversification. This
could be the easiest possible route to ensure financial protection to the farmers.
Otherwise, the agrarian crisis can culminate among the farmers practicing high value
agriculture like the recent distress faced by cotton cultivators.

95
 It has been observed that small farmers are adopting high value crop
diversification more compared to medium and large farmers. The small farmers are more
affected by crop failures and fluctuations of net return. They are also more vulnerable to
distress as they do not have enough financial support. The resource-constrained farmers
are averse to diversifying, particularly if the high value crop in question is perishable in
nature, risky and whose price is subject to high degree of fluctuations (Sen & Raju,
2006). From this perspective it can be suggested that small farm-holders should form
associations to get easy accessibility to market and information. These formations could
be proved very helpful in accessing cold-storage facility, marketing and other
infrastructural provisions especially for the perishable agricultural products.

As NSS data pertains to one point of time we have not been in a position to
analyse the change over time, with respect to farmers’ behaviour in context of
diversification. But studies33 have shown that the small farmers have a lower mean years
in high value agriculture compared to with the other farm-size categories. Thus
promoting protective measures would definitely encourage them to stay longer in this
field and enhance their income by continuing the practice.

33
Sen & Raju (2006)

96
 Bibliography

1. Aggarwal P. K. (2004), “Adapting Food – System of the Indo-Gangetic Plains to

Global Environmental Change: Key Information Needs to Improve Policy
Formulation”, Environmental Science and Policy, 7 (6): 487-498.

2. Bhal, S. K. (1997), “Diversification of Indian Agriculture: Issues and Perspectives”,

Indian Journal of Economics, 78 (308): 101-111.

3. Bhalla and Singh (1997), “Recent Development in Indian Agriculture: A State Level
Analysis”, Economic and Political Weekly, March 29: A.8-A.12.

4. Bhalla G. S. and Gurmail Singh (2001), Indian Agriculture: Four Decades of

Development, New Delhi: Sage Publications.

5. Birthal, P. S. et al. (2007), Diversification in Indian Agriculture towards High – Value

Crops: The Role of Smallholders, IFPRI Discussion Paper 00727, USA: International
Food Policy Research Institute.

6. Chadha, G. K. et al. (2004), “State of the Indian farmer: a millennium study”, vol 2:
Land Resources, Ministry of Agriculture: Dept. of Agriculture and Cooperation, New
Delhi: Academic Foundation.

7. Chaplin, Hannah et al. (2007), “Impediments to the Diversification of Rural

Economics in Central and Eastern Europe: Evidence from Small – Scale Farms in
Poland”, Regional Studies, 41 (3): 361-376.

8. Chand R. (1996), “Diversification through High Value Crops in Western Himalayan

Region: Evidence from Himachal Pradesh”, Seminar Paper, Indian Society of
Agricultural Economics, Oct.-Dec: 652-63.

9. Chengappa, P. A. and Sudha Mysore (2005), “Changing Pattern of Comparative

Advantage of Horticultural Crops in India under Post WTO Regime”, SARC Seminar
Paper.

97
10. De, Utpal K. (2000), “Diversification of Crop in West Bengal: A Spatio-Temporal
Analysis”, Artha Vijnana, XLII (2): 170-182.

11. De, Utpal K. (2005), “Economics of Crop Diversification - An Analysis of land

Allocation towards Different Crops”, Assam Economic Review, 8: 9-29.

12. Ellis, Frank (1998), “Household Strategies and Rural Livelihood Diversification”,
Journal of Development Studies, 35 (1): 1-38.

13. Emani, Ashok (1997), “Economic and ecological aspects of land and water use
diversification : a case study of the agriculture - aquaculture interface in two coastal
villages of Andhra Pradesh”, Centre for Development Studies.

14. Escobal, Javier (2001), “Determinants of Nonfarm Income Diversification in Rural

Peru”, World Development, 29 (3): 497-458.

15. Gellynck, Xavier (2002), “Market-Orientated Positioning of On-Farm Processed

Foods as a Condition for Successful Farm Diversification”, Journal of Agricultural
Economics, 53 (3): 531-548.

16. Ghosh, Nilabja (2005), “Trade Liberalization and Diversification in Indian

Agriculture”, Foreign Trade Review, 40 (2): 3-23.

17. Gill, Kanwaijit Kaur (2001), “Diversification of Agriculture and Women

Employment in Punjab”, The Indian Journal of Labour Economics, 44 (2): 259-267.

18. Goswami, S. N. et al. (2006), “Crop Concentration and Diversification in India – A

Spatio – Temporal Analysis”, Geographical Review of India, 66 (1): 50-61.

19. Government of India (2005), “Situation Assessment Survey of Farmers: Some

Aspects of Farming”, NSS 59th Round (Jan.-Dec., 2003), Report No. 496 (59/33/3),
Ministry of Statistics and Programme Implementation, New Delhi.

20. Government of India: Area and Production of Principal crops in India (Various
Issues), Ministry of Agriculture, New Delhi.

98
21. Hazra, C. R. (2001), “Crop Diversification in Indian”, FAO Paper, Ministry of
Agriculture and Co-Operation, New Delhi

22. Ilbery, Brian (1996), “Agricultural adjustment and business diversification by farm
households”, Geography, 81(353): 301-10.

23. Jha, Dayanatha (1997), “Diversification of agriculture and food security in the
context of new economic policy”, Indian Journal of Agricultural Economics, 52 (1):
52-58.

24. Joshi, P K et al. (2004), “Agriculture Diversification in South Asia: Patterns,

Determinants and Policy Implications”, Economic & Political Weekly, 39 (24): 2457-
2467.

25. Kumar, Ashok et al. (2002), “Profitability, Risk and Diversification in Mountain
Agriculture: Some Policy Issues for Slow Growth Crops”, Indian Journal of
Agricultural Economics, 57 (3): 356-365.

26. Kaur Bhupinder (2005). Title Growth and variability in Punjab agricultural
production (1961-2003): a case for diversification through contract farming.
Jawaharlal Nehru University, New Delhi.

27. Khan, Jamal (1996), “Agricultural diversification project”, Journal of Rural

Development and Administration, 28 (2): 21-38.

28. Kijima, Yoko (2005), “Economic Diversification and Poverty in Rural India”, Indian
Journal of Labour Economics, 48 (2): 349-74.

29. Le Coq, Jean-Francois (2005), “Impact of Economic Liberalization on Rice

Intensification, Agricultural Diversification and Rural Livelihoods in the Mekong
Delta, Vietnam”, Southeast Asian Studies, 42 (4): 519-47.

30. Madhuri, S. and Ramanaiah, Y. V. (2007), “Land Use Intensification and

Diversification for Sustainable Agriculture – A Case Study of Rayalseema Region,
Andhra Pradesh, India”,Indian Journal of Regional Science, XXXIX (1): 134-139.

99
31. Mishra, Chaturanan (2007), “Diversion of crops and small farmers”, Mainstream, 45
(22): 3-4.

32. Miyata, Sachiko et al. (2007), “Impact of Contact Farming on Income”, IFPRI
Discussion Paper 00742, USA: International Food Policy Research Institute.

33. Narain Dharm (1965), “Impact of Price Movements on Areas under Selected Crops in
India: 1900-1939”, Cambridge University Press.

34. Pandya, H. R. (1998), “Diversification of Agriculture in Gujarat: A Spatio-Temporal

Analysis”, Indian Journal of Agricultural Economics, 53 (4): 627-39.

35. Pingali, Prabhu (2004), “Agricultural Diversification in Asia: Opportunities and

Constraints”, ROME: FAO Rice Conference.

36. Pokam, Jacques (2002), “Economic Crisis and Forest Cover Change in Cameroon:
The Roles of Migration, Crop Diversification, and Gender Division of Labour”,
Economic Development and Cultural Change, 50 (3): 581-600.

37. Ponnusamy, K. and Gupta, Jancy (2005), “Village Development Through Crop
Diversification in a Peri Urban Setting”, IASSI Quarterly, 23 (4): 58-65.

38. Rao, Parthasarthy P. (2006), “Diversification towards high value agriculture: role of
urbanisation and infrastructure”, Economic and Political Weekly, 41 (26): 2747-53.

39. Sah, D.C. (2006), “Shocks, livelihood and debt-trap: credit and indebtedness in
Southwestern tribal Madhya Pradesh”, Madhya Pradesh Journal of Social Sciences,
11 (2): 52-70.

40. Saleth, R. Maria (1997), “Diversification Strategy for Small Farmers and Landless:
Some Evidence from Tamil Nadu”, Indian Journal of Agricultural Economics, 52 (1):
73-85.

100
41. Sau, Sachinandan and Pathak, Sarat (2007), “Diversification of Agriculture –
Rationale and Determinants – A Study with Special Reference to West Bengal”,
Indian Journal of Regional Science, XXXIX (1): 140-149.

42. Sen, Abhijit and Bhatia, M. S. (2004), “State of the Indian farmer: a millennium
study”, vol 14: Cost of Cultivation and Farm Income, Ministry of Agriculture: Dept.
of Agriculture and Cooperation, New Delhi: Academic Foundation.

43. Sen, Sucharita and Raju Saraswati (2006), “Globalisation and Expanding Markets For
Cut-Flowers: Who Benefits?” 41 (26), Economic and Political Weekly, 2725-2730.

44. Sharma, H. R. (2005), “Agricultural Development and Crop Diversification in

Himachal Pradesh: Understanding the Patterns, Process, Determinants and Lessons”,
Indian Journal of Agricultural Economics, 60 (1): 71-93.

45. Sidhu, R S (2004), “Factors in declining crop diversification: Case study of Punjab”,
Economic & Political Weekly, 39 (52): 5607-10.

46. Singh, Mahesh Pratap (2005), “Shiffting Pattren of Agriculture Space: Evolution of
Contract Farming in Punjab”, Social Change, 35 (4): 32-55.

47. Singh, Sikhpal (2004), “Crisis and diversification in Punjab agriculture: Role of state
and agribusiness”, Economic & Political Weekly, 39 (52): 5583-90.

48. Singh, Sukhpal (2001), “Labour under contract farming in India: Issues of gender
and child labour”, Indian Journal of Labour Economics, 44 (4): 843-52.

49. Singh, Sukhpal (2000), “Contract farming for agricultural diversification in the Indian
Punjab: A study of performance and problems”, Indian Journal of Agricultural
Economics, 55 (3): 283-94.

50. Slater, Richard (1991), From farm to firm: Rural Diversification in the Asian
countryside, Aldershot, Avebury.

101
51. Unni, Jeemol (1996), “Diversification of economic activities and non-agricultural
employment in rural Gujarat”, Economic and Political Weekly, 31 (33): 2243-51.

52. Vyas V. S. (1996), “ Diversification in Agriculture: Concept, Rationale and

Approaches”, Indian Journal of Agricultural Economics, 51 (4): 636-643

53. Walsh R. M. (1944), “ Response to Price in Production of Cotton and Cottonseed”,

Journal of Farm Economics, 26: 359-72

54. Yao, Shujie (1997), “Comparative advantages and crop diversification: A policy
analysis matrix for Thai agriculture”, Journal of Agricultural Economics, 48 (2): 211-
22.

55. Zohir, Sajjad (1993), “Problems and Prospects of Crop Diversification in

Bangladesh”, Bangladesh Development Studies, XXI (3): 73-81.

102
 Table: A.2.I: Total Cropped Area of different states of India

STATES TCA (60s) TCA (70s) TCA (80s) TCA (90s)

North-Western Region
Haryana 4599 5150 5512 6074
Himachal Pradesh 869 907 988 974
Jammu & Kashmir 857 913 1029 1077
Punjab 5171 6016 7013 7842
Uttar Pradesh 22074 23006 25121 26129
Eastern Region
Assam 2853 3076 3718 3981
Bihar 9925 10767 10309 10141
Orissa 7446 7315 8774 8216
West Bengal 6653 7462 7584 9059
Central Region
Gujarat 10188 10130 10264 11001
Madhya Pradesh 18336 21212 22406 25421
Maharashtra 18975 19486 20426 21722
Rajasthan 14971 17886 17286 20693
Southern Region
Andhra Pradesh 11816 13238 12212 13410
Karnataka 10467 10893 11659 12335
Kerala 2622 2999 2874 3020
Tamil Nadu 7066 7648 7088 6457

Note: TCA figures are in '000 hectares

i
 Table A.5.I: Model 1: Model Summary

Step -2 Log likelihood Cox & Snell R Square Nagelkerke R Square

1 62735.375(a) .039 .060

a Estimation terminated at iteration number 5 because parameter estimates changed by

less than .001.

Table A.5.II: Model 1: Classification Table

Observed Predicted
Percentage
dependent 1 Correct
non-
non-diversifying diversifying diversifying
farmers farmers farmers
Step dependent non-diversifying
48948 50 99.9
1 variable farmers
diversifying
13471 32 .2
farmer
Overall Percentage 78.4

a The cut value is .500

ii
 Table A.5.III: Model 2: Model Summary

Step -2 Log likelihood Cox & Snell R Square Nagelkerke R Square

1 33407.119(a) .012 .028

a Estimation terminated at iteration number 6 because parameter estimates changed by

less than .001.

Table A.5. IV: Model 2: Classification Table

Observed Predicted
Percentage
rec_div_no_veg Correct
non- diversifying non-
diversifying farmers other diversifying
farmers than veg farmers
Step dependent non-diversifying
57643 0 100.0
1 variable farmers
diversifying
farmers other than 4858 0 .0
veg
Overall Percentage 92.2

a The cut value is .500

iii
 Table A.5. V: Model 3: ANOVA

l Mode Sum of Squares df Mean Square F Sig.

1 Regression 1799163.662 1 1799163.662 1304.645 .000(a)
Residual 18618475.396 13501 1379.044
Total 20417639.058 13502
2 Regression 2895158.570 2 1447579.285 1115.271 .000(b)
Residual 17522480.488 13500 1297.962
Total 20417639.058 13502
3 Regression 3063803.994 3 1021267.998 794.412 .000(c)
Residual 17353835.064 13499 1285.564
Total 20417639.058 13502
4 Regression 3219856.812 4 804964.203 631.791 .000(d)
Residual 17197782.245 13498 1274.099
Total 20417639.058 13502
5 Regression 3317651.299 5 663530.260 523.724 .000(e)
Residual 17099987.758 13497 1266.947
Total 20417639.058 13502
6 Regression 3350470.783 6 558411.797 441.569 .000(f)
Residual 17067168.275 13496 1264.609
Total 20417639.058 13502
7 Regression 3374243.918 7 482034.845 381.676 .000(g)
Residual 17043395.140 13495 1262.941
Total 20417639.058 13502

a Predictors: (Constant), psinc

b Predictors: (Constant), psinc, NSA
c Predictors: (Constant), psinc, NSA, irriad
d Predictors: (Constant), psinc, NSA, irriad, allfd
e Predictors: (Constant), psinc, NSA, irriad, allfd, snloan
f Predictors: (Constant), psinc, NSA, irriad, allfd, snloan, tenancy_new
g Predictors: (Constant), psinc, NSA, irriad, allfd, snloan, tenancy_new, gedu_mean_1
h Dependent Variable: dependent 2

iv
 Table A.5. VI: Model 4: ANOVA

l Mode Sum of Squares df Mean Square F Sig.

1 Regression 191969.268 1 191969.268 194.095 .000(a)
Residual 4802824.087 4856 989.049
Total 4994793.355 4857
2 Regression 299391.935 2 149695.968 154.784 .000(b)
Residual 4695401.419 4855 967.127
Total 4994793.355 4857
3 Regression 332674.870 3 110891.623 115.456 .000(c)
Residual 4662118.485 4854 960.469
Total 4994793.355 4857
4 Regression 368878.225 4 92219.556 96.747 .000(d)
Residual 4625915.130 4853 953.207
Total 4994793.355 4857
5 Regression 375217.220 5 75043.444 78.819 .000(e)
Residual 4619576.135 4852 952.097
Total 4994793.355 4857
6 Regression 380528.027 6 63421.338 66.675 .000(f)
Residual 4614265.328 4851 951.199
Total 4994793.355 4857
7 Regression 384429.288 7 54918.470 57.773 .000(g)
Residual 4610364.067 4850 950.591
Total 4994793.355 4857

a Predictors: (Constant), psinc

b Predictors: (Constant), psinc, NSA
c Predictors: (Constant), psinc, NSA, irriad
d Predictors: (Constant), psinc, NSA, irriad, gedu_mean_1
e Predictors: (Constant), psinc, NSA, irriad, gedu_mean_1, snloan
f Predictors: (Constant), psinc, NSA, irriad, gedu_mean_1, snloan, allfd
g Predictors: (Constant), psinc, NSA, irriad, gedu_mean_1, snloan, allfd, tenancy_new
h Dependent Variable: div_no_veg