Dwindling farm profitability in Punjab: Issues and concerns

The present study was undertaken to study the functioning of output markets and their effect on the erosion of farm profitability in Punjab. Majority of the farmers cultivated paddy (227 farmers) and wheat crops (300 farmers). Farmers did not consider the adoption of alternative crops as profitable due to non-existent public procurement of crops other than wheat and paddy. It was revealed that crop diversification cannot take place unless there is an alternate MSP- based procurement system in place. Punjab has achieved very high levels of productivity of crops especially paddy and wheat with intensive use of different inputs Agricultural production process in the state has become cost-intensive and farmers had to borrow credit at a high rate of interest to meet the farm expenses. Capital investments were required for the purchase of productive assets, deepening of tube wells, and replacement of centrifugal to submersible pumps. Besides, hefty amounts are required for the repair of machinery and equipment, thus squeezing the profitability of agriculture. Majority (97%)of the farmers reported that the income from farming was not adequate. Various coping strategies were undertaken by the households in the wake of economic risks faced viz. reduce household consumption expenditure, deferred social and family functions, borrowed money from input dealers at a higher rate of interest. A mere increase of MSP for crops alone would not guarantee better income to the farmers. Along with price incentives, concerted efforts are required to be taken to strengthen the non-price incentives such as the procurement system and market infrastructure for crops other than paddy and wheat which fits well in the diversification plan of the Government of Punjab. Further, educating the farmers about subsidiary occupations, providing loans at low rates of interest, creating sufficient non-farm employment opportunities, assured purchase of agricultural produce with effective minimum support prices of alternative crops and further subsidizing agricultural inputs can help in minimizing some of the existing problems of the farmers and thus increase their incomes.