5 OPTIMAL PLAN FOR SMALL AND MARGINAL FARMS

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1 5 OPTIMAL PLAN FOR SMALL AND MARGINAL FARMS A large body of farm management studies show that, given the present level of technology, available resources and the prices of inputs and outputs, it is possible to appreciably increase income and employment opportunities on the farm by an optimal allocation of the scarce resources among alternative uses. Therefore, the scope for increasing income and employment in the short-run on the marginal and the small farms by developing optimal plans consistent with, among other things, the available resources, has been explored. Besides, the impact of an increased supply of working capital, an input to which the small and marginal farms have a limited access, on the income and employment generated by the optimal plan, has also been examined. Four farm sizes viz.(i) average size of marginal farm (0.40 ha); (ii) maximum size of marginal farm (1.0 ha); (iii) average size of small farm (1.40 ha) arid (iv) maximum size of small farm (2.0 ha), are included in this optimisation exercise employing the standard linear programming (L.P) technique. The L.P. model considered in this study is presented below. Maximise Z = Σc j X j Subject to Σa ij x j b i for all i and > x j 0 where x j is the level of jth activity/process (i.e. area under the jth crop, number of dairy cow, etc.) c j is the net return per unit of jth activity/process and b j is the level of ith resource available. Two to three activities/ processes have been defined and included in the optimisation model for each of the principal crops grown in West Bengal. In addition, dairy (cross-bred milch cow) and poultry activities have also been included in the model to make it relatively more holistic. As the dairy activity has not normally appeared in the optimal vector it has been 'forced' in one of the models and its impact on income and employment has been analysed. Since there is hardly any saving to be used as working capital on the small and marginal farms the entire requirement of working capital for implementing the optimal plan has been assumed to be met through borrowing which has been included as a decision variable in the optimisation model. Besides, hiring of human labour and purchase of nitrogenous, phosphatic and potassic fertilisers have been considered as decision variables. The decision period used in the model is a month and the planning horizon is a year. An upper bound of labour available for hiring on various sizes of small and marginal farms based on the maximum number actually hired during the peak months has been placed in the monthly labour constraints. Each farm family in the small and marginal categories irrespective of their holding sizes is assumed to have two adult members to work on the farm. Besides, the upper bounds on the availability of working capital used in the respective optimal plan are given in the parentheses of Column 3 in Table 4 against the existing levels of capital shown in the parentheses in Column 4 on these farms. Table 4 gives the farm size-wise annual optimal and existing returns, the optimal plan and the employment of family as well as hired labour. For example, a marginal farm with its maximum area of 1.0 ha can yield, without dairy, a return of Rs.9056 with an operating cost of Rs.3000 per year if it follows the optimal plan. This return is more than three times the existing return of Rs.2830 which, however, is associated with the currently available working capital of only Rs.710. The optimal income thus obtainable can at best keep the marginal farmer a little above the poverty line at prices and therefore, cannot sustain an average family at the reasonable level of living. Out of a total employment of 510 labour days generated by the optimal plan, only nine labour days have to be hired. Similarly, the optimal return for a (two hectare) small farm is around Rs which is associated with a working capital requirement of about Rs The inclusion of dairy in the model has resulted in lower return on marginal farms primarily because of more profitability of crops than dairying on these farms. The optimal returns on small farms with dairy activity are slightly more than those without the activity.

2 Table 4: Results of optimal use of available resources on small and marginal farms in West Bengal Farm Size (ha) With or without Dairy Return Over Operating Costs (Rs.) Optimal Existing Optimal Plan Labour Use (labour days) Family Hired Total Without Dairy KVL.38, RVL.38 POL (1664) (312) (3000) 2830 (710) LKR.2, HKR.16, KVL.64, 501 MUS.32, RVL.68, (3415) (3583) 0.40 With Dairy 4166 (2100) (3000) (4000) (4521) Note: POL (1035) LKR.24, HKR.42, KVL.74, MUS.93, RVL.17, POL (1375 NA LKR.62, HKR.92, KVL MUS.l.0, RRI.78, RVL.22 LKR.17, HKR.01, FOD.20 MUS.21, POL 15 DAI 1 LKR.22, HKR.58, FOD.20 MUS.78, RVL.18, RRI.04 DAI 1, POL 15 LKR.37, HKR.50, KVL.33, FOD.20, MUS.88, PUL.15 RRI.19, POL 15, DAI 1 LKRI.05,HKR.63, KVL.12, FOD.20, MUS.48, RRI.89, RVL.11,POL 15, DAI Operating costs include expenditures on purchased seeds, hired labour, irrigation, plant protection, fertilizers & manures, repayment of borrowed working capital with interest and hiring charges of equipment etc., and hence the optimal returns shown under Col.3 roughly represent farm business income. 2. The existing returns are not truly comparable with the corresponding optimal returns because of significant difference in the availability of working capital under the existing situation and the optimal plan. 3. Area under crop activities is in hectare, poultry and dairy are in number of birds and cross bred milch cow respectively. LKR = Local kharif rice RRI = Rabi rice MUS = Mustard KVL = Kharif vegetables DAI = Dairy FOD = Fodder HKR = High yielding kharif rice POL = Poultry RVL = Rabi vegetables Figures in the parentheses in Cols.3 and 4 are the amount of working capital/operating costs associated with the returns. N.A. = Not Applicable as such situation was not present in the sample farms.

3 Since land and family labour are virtually fixed in the short run and as the lack of working capital is often found to be one of the most serious constraints to higher production and hence income on the small and the marginal farms, we have assumed a much higher, availability of this critical input in the optimisation model to see if income can be increased on these farms. The results show that even though the optimal income of an average marginal farm of 0.40 ha is more than three times the existing income, it is still not adequate to keep the farmers above the level of poverty. The situation is slightly better in case of a marginal farm with the maximum land area of 1.0 ha. Although the position of the small farms is still better, it does not, however, present a case for optimism in respect of economic sustainability even with unconstrained supply of working capital. Employment for nearly one-third of the available family labour on an average marginal farm has been generated by the optimal plan which increases with the farm size. It is worth noting here that there has been no need for hired labour to execute the optimal plan on a marginal farm of 0.40 ha as all the labour required for carrying out the activities has been supplied by the farm family. Similarly, family labour has accounted for more than 90 per cent of total labour required on the small farms. The question as to whether a small or a marginal farm can economically sustain a family of average size has also been examined on the basis of results of two-crop and three-crop rotation using data from National Demonstrations on irrigated lands in West Bengal for It is needless to mention that the primary objectives of the National Demonstration Project (NDP) are to demonstrate to the farmers the genetic production potentialities of major crops per unit area and unit time and also to determine income and employment generation potential of the crops under the most modern technology and crop-rotation best suited to the specific agro-climatic zone. Table 5 shows gross returns, operating costs and returns over operating costs for various two-crop and three-crop rotations in both the districts of Hooghly and 24-Parganas (North) in Among the two-crop rotations the average return over operating costs per hectare ranged from Rs.5833 in jute-mustard rotation to Rs in paddy- paddy- rotation with corresponding operating costs of Rs.6729 and Rs.9149, respectively. The three-crop rotations of paddy-mustard-paddy was found to yield a return of Rs per hectare over the operating costs. (Figure 1) Figure 1: Result of National Demonstration with Two-Crop and Three-Crop Rotation on Irrigated Lands in West Bengal (Average Value for the two districts Hoogly and 24-Parganas) The requirement of operating costs per ha to follow the technical recommendations (package of practices) of the two-crop and the three-crop rotations is very high and out of reach of the resourcepoor farmers with small and marginal holdings. This implies that the potential returns will most likely be unrealised for want of adequate resources, particularly, working capital. Further, the gross returns and operating costs and consequently the returns over operating costs in Hooghly and 24-Parganas are at great variance for the same rotations (Table 5) even though the soil and other agro-climatic conditions and socio-economic situation are more or less similar in these two districts.

4 Table 5 : Results of National Demonstration with two-crop and three-crop rotations on irrigated lands in West Bengal. Cropping-Pattern Gross Return Operating Cost Returns over costs Paddy-Paddy Hoogly Parganas Average Paddy-Mustard Hoogly Parganas Average Jute-Mustard Hoogly Parganas Average Paddy-Mustard-Paddy Hoogly Parganas Average Source: Annual Report on National Demonstration Project, , Indian Council of Agricultural Research, New Delhi. Implicit in the National Demonstrations involving two-crop and three-crop rotation is an intensive cultivation using higher dose of fertilisers, plant protection chemicals and more irrigation which, in the long run, may lead to degradation of non-renewable resources, especially soil and water with consequent imbalance in ecology and environment. Furthermore, there is a great risk inherent in three-crop rotation involving paddy-mustard-paddy in West Bengal. Specifically, the entire crop of summer paddy may get damaged at the time of harvesting by the early monsoon / pre-monsoon rains, thunderstorm and other natural calamities if its' transplantation is delayed due to late harvest of the mustard crop. Marginal and small farmers are economically too vulnerable to bear such a risk in a three-crop rotation. Besides, intensive cropping with the help of 'chemical' technology may result in undesirable ecological consequences and make the production system unsustainable. Marginalisation of agricultural holdings could be prevented by reducing the pressure of population on agriculture through generation of employment in non-farm sector at a rate sufficient to absorb the excess labour force in agriculture. The facts, however, reveal a completely disappointing picture. As Table 6 indicates, the percentage of working population in India has marginally increased from in 1971 to in In West Bengal the percentage of working population increased from 28.0 to 28.2 during this period. The percentage, of cultivators for the country as a whole has however marginally declined from per cent in 1971 to per cent in 1981, although, in absolute terms, the number has increased from 75.1 million to 92.5 million during the same period. Similarly, in

5 West Bengal, the percentage of cultivators declined from 9.0 to 8.42, though their number increased from 4.0 million to 4.6 million. It is also depressing to note that the rate of expansion of employment in sectors other than agriculture has been extremely slow which, in effect, compels rural people to remain tied to agricultural activities. Therefore, under the existing circumstances there seems to be little scope for a higher rate of labour absorption in non-agricultural sectors in absence of a conscious intervention and policy thrust by the Government in that direction. If the present trend of declining farm size and swelling in the rank of marginal and small farmers continues, the country may reach a situation where individual farms may become more 'efficient' in terms of yield per hectare, but the farmers would not be able to survive the economic hardship what to speak of surplus generation. These farms will be operating below the subsistence level even under modern technology, unless there is scope for diversified economic growth, enabling the small fanners to participate in various farm and non-farm activities in symbiotic and synergistic manners. Table 6 : Distribution of Workforce in West Bengal and India during 1971 and 1981 (Number : million) Population All workers Cultivators Agricultural Labourers Other Allied activities Other West Bengal (28.0) 15.4 (28.2) 4.0 (9.0) 4.6 (8.42) 3.3 (7.45) 3.9 (7.14) NA 0.5 (0.91) 5.1 (11.51) 6.5 (11.90) All India (31.81) (32.47) 75.1 (13.70) 92.5 (13.50) 47.0 (8.57) 55.5 (8.10) NA 4.8 (0.7) 52.3 (9.54) 69.5 (10.14) Note : The figures in the parentheses denote percentages of the respective categories to population. Source: 1. Agricultural Statistical Compendium by P.C. Bansil pp , Census of India, 1981, Series I India Part H B (i)

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