No. 13 SMALL FARMER SERVICES IN INDIA A study of two Blocks in Orissa State John Howell Agricultural Administration Unit (GDI) ODI Working Papers present in preliminary form work resulting from research undertaken under the auspices of the Institute. The research for this report was financed by the Oversea,s Development Administration. The views expressed in the report are those of the author and do not necessarily represent the views of the ODA or ODI. o 85003 090 0 March 198'j SMALL FARMER SI;RVICES IN INDIA A Study of Two Blocks in Ori-ssa State, India Summary of a Report prepared under an ESCOR grant by Dr John Howell of the Overseas novelopmcnt Institute The level and quality of services available to farmers - particularly small farmers - in Idcs is generally held to be a major constraint on agricultural development; but there is less agreement on the implications of shortcomings in services such as extension and research, credit provision and the supply of production requirements such as fertilizer, pesticides and seed. One view is that there has been insufficient investment in agricul• tural services, particularly in research and extension, and insufficient concern with efficiency in the delivery of services. But a contrary view is that there has already been too much investment in the public provision of agricultural services and that the poor returns to such investment point to the need for a new approach, in which ultimately services are requested and paid for on a conmercial basis, with the private sector undertaking Che major role in input supply and also providing technical advice to its customers and appointed agents. The nature of this debate is clouded by the poor empirical base of the issue of agricultural service provision. This study is designed to identify and clarify some of the commonly held assumptions on the performance of publicly provided agricultural services and examine these against the evidence of two small areas in Orissa. The study uses the term 'public provision to include both co-operatives and private dealers when operating in collaboration with government controlled subsidy and credit schemes. The particular emphasis in this study is upon small and marginal farmers primarily cultivating food staples with family labour, using mainly traditional technologies and having limited irrigation facilities. Orissa itself is a state with lower levels of per hectare yields and fertilizer use than any state in India; and the study examines the supply of services and farmer demand for services in two of its Blocks: one in the poorly serviced plateau region (with a significant tribal population) and another in the more intensively cultivated central plain. Both Blocks - Rairangpur and Nimapara - are currently subject to efforts to improve agricultural services and thereby increase production and incomes. - il - As part of a State-wide Orissa Agricultural Development Project, extension services have been strengthened by an increase and re-deployment of agri• cultural village level staff, a programme of research and training to establish new varieties and practices and to improve the relevance of crop recommendations and support available to selected farmers. As part of the Indo-British Fertilizer Education Project, a special effort is also being made by the Hindustan Fertilizer Corporation to demonstrate improved use of inputs and, similarly, to assist farmers in gaining access to services. In addition, over the past decade Orissa has had substantial investment in rural banking facilities and irrigation and plans to establish a larger public warehouse system to improve availability of fertilizer in particular. Against this background of relative agricultural backwardness and new levels of public investment, the study examines four main issues. First, it examines the performance and impact of extension services and in particular the view that such services are frequently inappropriate to the needs of the majority of farmers and wastefully concentrate scarce resources on a small group of already successful cultivators. Second, it examines the organisation of seasonal production credit to investigate in particular the view that difficulties of access and indirect cost to borrowers inhibit higher levels of credit use among smaller farmers. Third, it examines the evidence on inadequacies in the supply of production requirements as a factor in low rates of adoption of improved inputs. Finally, the study examines the extent to which the public supply of all three of these services - extension, credit and inputs - is biased against the smaller farmer. These issues are examined from two perspectives: from farmer interviews it examines the level of effective demand, and difficulties in access to services; and from the public sector evidence it examines the different ways that services are provided and considers whether these represent the most efficient use of resources. Extension Compared to evidence from states elsewhere in India, the level of demand for extension services in Orissa is high, with over 50% of farmers interviewed indicating a familiarity with and interest in the work of the VAW. However, this interest is less in the provision of technical advice per se than in the inducements to improve practices. In particular, there is demand for seed - Hi - minikits, seedlings and plant protection materials which are obtainable through the VAW. The accessibility of such services has improved under the Training and Visit system, but the adaptations of T and V in Orissa (particularly the use of village demonstration plots rather than 'contact farmers' and the fusion of input supply duties with technical advice) has tended to concentrate support upon the 'adopters' in the farming coitmunity. In practice this is similar to the approach adopted under IBFEP which further concentrates its support by selecting villages with relatively assured irrigation; although the scale of the IBFEP plots means that marginal fanners and sharecroppers are less under-represented than normally occurs with demonstration approaches. The survey work of this study suggests that at least half of the farmers in Orissa do not receive useful advice or other extension support, do not apply for credit and do not use fertilizer or improved seed. In large part, this category of 'non-adopters' consists of marginal fanners. Many marginal farmers are primarily engaged in paid labouring work and are not available for extension services, but the recommendations and inducements of the extension service (both Department of Agriculture and IBFEP) are often uneconomic to farmers with poor land quality and high susceptibility to crop failure. In these circumstances, it is an efficient use of extension staff to concentrate upon adopters and also upon the provision of inputs and advice in the use of inputs. But given the generally well-organised system of training days for VAWs, there is scope for improvement in the research-extension links so that more attention can be paid to the non-adopters. At present, problems identified at the field level are largely technical in nature; reasons for non-acceptance of recommendations are not fully investigated and reported by VAWs. The study argues, against current thinking on extension, that extension and input supply should continue to be linked. The Department of Agriculture (at present levels of private sector services) must take major responsibility for supplies and to use an entirely separate field 'service' for a function so closely linked to extension would represent an unjustifiable cost burden. Current extension worker to farmer ratios in Orissa are in the region of 1:600 but the coverage is better than in most Idcs because visits are regularly undertaken. In the IBFEP, the present agronomist to farmer ratio appears to be unnecessarily high (roughly 1:60) for the level of technical understanding of most farmers who often remain unconvinced of the economic viability of improvements but are not entirely unaware of the practices them• selves. The technical weaknesses of farmers appear to be on timing and precise quantities of fertilizer and pesticide applications, not on the general - Iv - principles of use. Credit The effective demand for fonnal crop season credit in the tvo Blocks examined is not particularly high: 38Z of farmers indicated their involve• ment. The remaining 62% consisted of direct buyers of inputs, defaulters, and 42Z of farmers not using improved inputs anyway. The supply of production credit in both Rainrangpur and Nimapara has declined substantially in volume (number of accounts) and value over the past three to four years. This is partly a consequence of conmercial bank policy at branch level. There was an expansion of aggregate seasonal lending activities in both Blocks following the opening of new branches in the mid-1970s, but there have been high levels of default and a general reluctance to seek new business while problems of repayment and rephasing of loans has preoccupied bank staff. But the decline is also due to the rapid expansion of medium-term lending under IRDP. The high administrative requirements involved in such lending operations have seriously curtailed the activities of agricultural loans staff. In the case of a few banks, seasonal production credit lending has stopped altogether as loans officers have ceased the practice of visiting villages to arrange loans. This may also indicate a very low level of demand for credit as very few farmers appear willing to visit the banks in order to open loan accounts. The practice has been for such accounts to be arranged at farm level since the borrower knows that he eventually needs the endorse• ment of an agricultural loans officer, VAW (or HFC Agronomist). It is for this reason that the distribution of seasonal credit is very patchy; certain villages may have as many as a quarter of farmers holding accounts, others have none whatsoever. The study investigated organisational and management factors which are widely held to inhibit small farm borrowing: cumbersome procedures, delays in loan sanctioning and covert payments which increase the real cost of borrowing.