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No One Killed Agriculture

There is good news. And there’s bad news. The good news first. There’s been a bumper wheat crop and the granaries are overflowing. And the bad news? Where do we begin?

A lot of that grain will rot. Millions will still remain hungry. Heavily in debt and distressed, farmers are committing suicide. Food prices are soaring. There’s more…

Farmers don’t have money. Their land is too small and isn’t yielding much. Fertilisers and pesticides are not much help either. There is not enough water and rain is still God. The world has moved on and the average Indian farmer is still where he was. Poor, perhaps poorer. This is more than bad news. This is a catastrophe.

This isn’t solely the result of what this government has done, or not done. This has been 60 years in the making. Successive governments, political masters, generations of bureaucrats, technocrats, policy makers and responsible institutions have let the farmer down.

If this were the result of just five years of mismanagement, then the years before 2007 would have been the golden years of Indian agriculture. Decidedly, they were not. More importantly, it isn’t so much the centre that is always to blame for it. Agriculture is a state subject and state governments must do their utmost for the farmer. Most of them seem to have done the least.

Then, there are the mighty institutions with hundreds upon millions of rupees of annual budget allocations, targets and policies. They seem to have been more on paper than in any field anywhere in the country. Some of these institutions are virtual behemoths, like the National Bank for Agriculture and Rural Development (NABARD), the Food Corporation of India (FCI), the Central Warehousing Corporation (CWC), banks in general, and those that are said to bring the farmer seeds, fertilisers, water, pesticides, credit, security, insurance and technology.

It does not, However, Absolve the UPA Government of its Responsibility

If so much money, so many millions of words of policy, goal-fixing, allocation, implementation and monitoring have achieved only this much, then there is something seriously wrong with the way the nation thinks of agriculture and acts upon its thinking. Clearly, this is a tragic instance of too many good intentions and too little to show for them.

And where is the farmer now? The very institutions that should have reinforced his protective covering seem to have stripped him of it, dangerously exposing him to the elements.

Forlorn, forsaken and forgotten, the farmer is disillusioned. Disenchanted. Hopeless.

Swollen Silos, Empty Stomachs

In July last year, Hindustan Times Editor-at-Large Samar Harlankar and journalist Manpreet Randhawa filed a disturbing story on rotting foodgrains in India and the plight of the hungry.

Quoting a reliable source who warned of an “emergency situation,” they said, in India, nearly 18 million tonnes of wheat and rice are stored in the open, with just a sheet of tarpaulin to keep them from rain, pests and rot. As a result, in Punjab alone, nearly 50,000 tonnes of foodgrain was ready to be destroyed after spending three monsoons out in the open. “The wheat stocks have rotted,” said Punjab Food and Civil Supplies Principal Secretary S P Singh, referring to the 50,000 tonnes.

The government has directed banks to allocate 18 per cent of the net bank credit to agriculture and allied activities. And that should have meant more work in the rural branches of banks nationwide. However, banks’ rural branches are giving far less credit in this category than they did 20 years ago

The Food Corporation of India (FCI) stores nearly 63 million tonnes of grain across India—42 million tonnes in covered buildings and the rest out in the open, said Harlankar and Randhawa.

Hundreds of thousands of tonnes of food rots in government godowns, and almost half of the country’s children remain hungry, said a startling nationwide study early this year. Newspaper after newspaper published the findings of the HUNGaMA (Hunger and Malnutrition) Survey that said at least 42 per cent of children under the age of five are underweight and nearly 60 per cent have stunted growth. An NGO called the Naandi Foundation conducted the survey across 112 rural districts, covering nearly 20 per cent of India’s children.

In April, newspapers were again full of reports with a leaked FCI note that was meant for internal circulation but was obviously running hot on the wires. It said that the corporation might have to procure nearly 32 million tonnes of wheat this season—an all time high. It said that by the beginning of June, more than 5 million tonnes of grain would be in the granaries of FCI and state governments in Punjab, Madhya Pradesh and Haryana alone. “FCI and state agencies will neither have the storage capacity nor the manpower to manage such a substantial increase in stock in central pool,” the note warned. What the note essentially meant is that by June, when the rain beats down on the ground, more than 23 million tonnes of wheat will be lying out in the open, on slightly raised stands, and covered with flimsy tarpaulin, in what are called cover and plinth (CAP) storage facilities.

Grim Reaper

An average Indian still spends almost half of his total expenditure on food, while roughly half of India’s work force is still engaged in agriculture. According to the government’s own Economic Survey 2011-12, agriculture’s share of GDP has more than halved in just two decades since 1990-91—from nearly 30 per cent then, to less than 14 per cent in 2011-12.

In the “State of Indian Agriculture” report, the government said that in 2010-11, India produced nearly 245 million tonnes of foodgrains. It has crossed 250 million tonnes in 2011-12 owing to increase in the production of rice in some of the major rice-producing states, namely, Assam, Bihar, West Bengal, Jharkhand and Uttar Pradesh. The foodstock in the central pool in February was more than 55 million tonnes—nearly 32 million tonnes of rice and 23 million tonnes of wheat. Between 2005 and 2011, agricultural GDP growth was marginally short of 4 per cent. It quotes the Central Statistics Office’s (CSO) latest advance estimate of national income as saying that agriculture and allied sectors will grow at 2.5 per cent in 2011-12. And, in its approach paper to the Twelfth Plan, the Planning Commission says the 2010-11 agriculture GDP has been better and it is expecting a bumper crop this harvest season. As a result, agriculture GDP in the Eleventh Plan might inch up to 3.5 per cent, not far short of the targeted 4 per cent.

At a productivity seminar last year, K C Chakrabarty, Deputy Governor, RBI, said the policy of self-sufficiency in food which led to the Green Revolution had served the country well. “We have sufficient stocks of wheat and rice, above buffer stock norms and food security reserve requirements. However, in the medium to long term, concern over food security is likely to become more intense. This is because land is scarce and its supply is limited.” He was addressing the National Seminar on Productivity in Indian Agriculture at the College of Agricultural Banking in Pune, Maharashtra. “Food is an important component in the basket of commodities used for measuring consumer price indices. Therefore, it is necessary that food prices remain at reasonable levels to ensure food security. In fact, food security is emerging as an important policy concern, and the role of agriculture in ensuring equitable access to food has added a new perspective for policy makers,” he said.

Looking at agricultural output from the yield-per-unit-of-land perspective, he named a few factors responsible for the low yield: public investment in agriculture is low; the yield potential of new high yielding varieties of wheat and rice is diminishing; fertiliser use is unbalanced; the rate at which seeds are replaced is slow; incentives for farming are inadequate; and there isn’t much value addition to crops after harvest. He also listed these factors: poor irrigation; fragmented land holdings; and paucity of fertilisers and insecticides.

He said: “The Indian agricultural situation today, therefore, is a mix of declining yields, low productivity, inter and intra-state and regional disparities, skewed incentives and inappropriate food stock management in the backdrop of increasing concerns on food security and food price volatility.”

The government has directed banks to allocate 18 per cent of the net bank credit to agriculture and allied activities. And that should have meant more work in the rural branches of banks nationwide. However, banks’ rural branches are giving far less credit in this category than they did 20 years ago. The share of total agricultural credit supplied through rural branches of banks declined from more than 55 per cent in 1990 to 38.5 per cent in 2010. The contribution of urban and metropolitan branches to agricultural credit has more than doubled from 15 per cent to nearly 34 per cent during this period, indicating that credit disbursement is mainly through non-rural branches. “The available data raises questions about the segments to which the credit is actually flowing and whether it is reaching the intended beneficiaries,” he added.

India is a country of small farms—80 per cent of land holdings are less than two hectares in size. For comparison, most professional cricket pitches are 1.25 hectares, or more, in size. Unless factor productivity is increased, small farm agriculture will become un-remunerative

India is a country of small farms—80 per cent of land holdings are less than two hectares in size. For comparison, most professional cricket pitches are 1.25 hectares, or more, in size. Unless factor productivity is increased, small farm agriculture will become un-remunerative. However, the smaller the farm, the greater the need for marketable surplus to get cash income. Therefore, improving small farm productivity, as a single development strategy, can make the greatest contribution to the elimination of hunger and poverty. The wide differential in productivity across states and the fact that agriculture is a state subject, pose a challenge. Weak infrastructure and the resulting poor connectivity keep farmers from markets, information, opportunity, good prices, profitability and sustainability—the bottlenecks of productivity.

The “State of Indian Agriculture 2011-12” report said the fragmentation of operational holdings has widened the base of the agrarian pyramid in most states. But it also made an interesting observation: “Empirical studies have shown that agricultural productivity is size neutral. Factors that determine productivity favourably include easy and reliable access to modern inputs and suitable technology, and the presence of support infrastructure and innovative marketing systems to aggregate and market the output from such small holdings efficiently and effectively. In agricultural technology, the use of high yielding varieties as in the case of Bt cotton and maize, economy in input use, the availability of quality seeds and farming techniques such as system of rice intensification enabled finally by marketing links all have high potential to improve yield.”

Sarosh Bana, Executive Editor, Business India, and alumnus of America’s prestigious East-West Centre, wrote last year about how India produces so much, and yet so little is available to everyone. In an article called “India’s Farming Failure,” Bana said: “…while the country ranks first in world milk production, at 108.5 million tonnes, per capita availability of milk is but 258 grams per day, in contrast to the world average of 265. India is also the world’s largest producer of cashew nuts, coconut, tea, ginger, turmeric and black pepper; second largest producer of wheat, rice, sugar, groundnut and inland fish; and third largest producer of tobacco. It also has the largest cattle population, of 281 million, and accounts for a tenth of the world fruit production, while being the foremost producer of banana and sapota (chiku). The situation is thus a paradox of plenty across a landscape of debasing malnutrition. What is worrisome is that increasing yields over the past many years, barring sporadic declines, are not rendering food progressively affordable.”

Today, India ranks high in the production of various commodities such as milk, wheat, rice, fruits and vegetables. However, agriculture in India is at a crossroads with rising demand for food items and relatively slower supply response in many commodities, causing frequent spikes in food inflation. The technological breakthrough achieved in the 1960s is gradually waning. The need for a second green revolution is being felt more than ever before.

Bana says that in pursuit of the call for a “Second Green Revolution”, the government has a four-pronged strategy targeting 4 per cent growth by raising production, reducing wastage of produce, expanding credit support to farmers and boosting the food processing sector. It will invest Rs 7 billion on two things – Rs 4 billion on energising the relatively neglected farm sector in eastern India, and Rs 3 billion ($66.7 million ) for organising 60,000 “pulses and oilseed villages” in rainfed areas. This money will fund water harvesting, watershed management and soil health improvement for areas under dry land farming. To improve farm credit, it will raise prime sector lending targets of banks to Rs 4.75 trillion (US$ 105.6 billion) for 2011-12. The government will stimulate the food-processing sector by providing streamlined infrastructure, proposing 15 more mega food park projects in addition to the 15 already set up, and 131 cold storage projects with a combined capacity of 640,000 tonnes.

In an interview on the website of the renowned US-based environmental research organisation, The Worldwatch Institute, environmentalist Vandana Shiva cautioned against excessive reliance on chemicals. Speaking about the connections between sustainable agriculture, climate change and poverty alleviation, the author of the much discussed book Seeds of Suicide, said: “I believe there are three reasons why we need to go beyond the Green Revolution logic. Firstly, chemical fertilisers and pesticides don’t come free and are a major reason for indebtedness, which itself leads to loss of farms, land, and entitlement to food. Secondly, chemical, or industrial, agriculture is hugely water demanding, and we cannot afford it in terms of the water crisis we face. One can grow crops organically without that level of water wastage. The third, increasingly compelling reason now is the role of chemical agriculture — Green Revolution agriculture — in propagating climate change. The need of the hour is an authentic agro-ecological green revolution.” Seeds of Suicide is a book on the wretched lives of cash-strapped, debt-ridden cotton farmers driven to desperation and suicide after crop failures turn them bankrupt.

Propagating organic agriculture through the Navdanya Trust, an organisation she founded and directs, Shiva said: “We also need to strengthen the smallholder by guaranteeing a fair market, a fair price. Right now the share of public money (to agriculture) is going totally as subsidies to industries that are environmentally destructive and non-sustainable. Investments in agriculture have been totally slashed and those investments need to be brought back. Policymakers absolutely have a role in protecting the resource rights of rural producers and in providing a share in the pie of public money.”

Money No Show

In 2006, the government revived the Short-term Rural Cooperative Credit Structure and forked over
Rs 136 billion through NABARD. It covers almost all the PACS and Central Cooperative Banks (CCBs).

The government is implementing a rehabilitation package for 31 suicide-prone districts in Andhra Pradesh, Karnataka, Kerala and Maharashtra involving a financial outlay of nearly Rs 170 billion. There are special packages in Kerala for developing the Kuttanad wetland ecosystem and mitigating agrarian distress in Indukki district, with an outlay of Rs 18.4 billion and Rs 7.64 billion, respectively.

The Kisan Credit Card (KCC) came in 1998. By the end of 2010, nearly 100 million cards had been issued. There are reasonable components of consumption and investment credit for the cardholders.

In 2010, a task force, headed by Chairman, NABARD, submitted its report after studying in detail the role of private moneylenders in the country. There should be some action on it in the months to come.

On farm credit, the “State of Agriculture” tabled in Parliament calls for innovative ways to reach people still out of the umbrella of institutional credit. The report says that while the overall credit to agriculture has been growing phenomenally during the last few years, and the interest rates for farmers have also been reduced to 7 per cent (4 per cent after taking into account the 3 per cent interest subvention for timely repayment of crop loans), yet the biggest challenge remains in terms of increasing access to credit, particularly for the bottom 40 per cent. More innovative models are needed to reach this category as they rely largely on the informal sector for credit with high rates of interest.

Running For Cover

Four crop insurance schemes, namely the National Agricultural Insurance Scheme (NAIS), Pilot Modified NAIS (MNAIS), Pilot Weather Based Crop Insurance Scheme (WBCIS), and Pilot Coconut Palm Insurance Scheme (CPIS) are under implementation in the country.

Implemented by the Agriculture Insurance Company of India Limited, NAIS began in 1999-2000 to insure crops against natural calamities. Available to all farmers, the reasonably priced insurance covers food, oilseed and commercial crops if the farmer provides production data for the past few years. For food and oilseed crops, the premium ranges between 1.5 and 3.5 per cent; for commercial crops, market rates apply. The state and central governments share the cost of this scheme on a 50:50 basis.

But the NAIS has had its shortcomings. Therefore, the government tested an improved, more farmer-friendly version of the scheme in 50 districts in 2010-11. Among all its improvements, the most notable is perhaps that the liability for all claims lies with the insuring company. Also, the government has now brought in private sector insurers, such as ICICI-Lombard, IFFCO-Tokio and Cholamandalam-MS, to insure the farmers’ crops.

In 2007, the government started a pilot insurance scheme called WBCIS to broaden its crop insurance coverage, specifically when the weather fails. It settles claims quickly and premium is the same as in NAIS.

Gopal Naik, Professor of Economics and Social Sciences and Chairman of the Centre for Public Policy at the Indian Institute of Management, Bangalore (IIMB), says knowledge and infrastructure deficit are critical issues facing Indian agriculture. In an interview to IIMB’s online magazine Tejas, he said weak irrigation, market and transport infrastructure add significant cost to farmers’ operations. “You have droughts in one year and heavy rains in the next. In both cases, farmers lose out; hence they have to look for a normal period to make money. The government, therefore, has to support. This is true all over the world and there is hardly any country where government intervention is not present,” he said.

Before formulating the Eleventh Five Year Plan (2007-12), the Planning Commission set up a Working Group on Risk Management in Agriculture. Its report formed the basis of a lot of changes in government policy. In India, agriculture is at risk from climate change, natural disasters, uncertainties in yields and prices, weak rural infrastructure, imperfect markets and poor financial services, especially credit and insurance that help mitigate the risk. Rising temperatures, erratic rainfall pattern, increase in the severity of droughts, floods and cyclones cause huge losses. We need climate forecasting, climate information generation and dissemination, early warning systems, mapping of agricultural losses through remote sensing technology and pre-and post-climate change response systems. We also need a disaster insurance mechanism and bankruptcy legislation for farmers.

On agricultural insurance, the working group said currently the prime crop insurance scheme in the country is the credit-linked NAIS. It helps, but has problems such as it needs guaranteed yields which do not reflect farmer aspirations, low indemnity levels, delays in claim settlement, no coverage for horticultural crops, poor servicing and awareness levels, and inadequate loss coverage. On the other hand, large insurance unit sizes, high premium-to-claims ratios and high costs of distribution are among the difficulties insurers face. The government also subsidises both the premium and the claims, making the burden both large and difficult to budget. The working group made a series of structural and administrative recommendations in this regard, including raising the indemnity level, quick and easy settlement of claims and re-introducing government supported Farm Income Insurance with modifications. It said livestock related economic activities contribute 20 per cent to the agricultural GDP—the value of milk output is Rs 1.1 trillion, compared to paddy ( Rs 782 billion ) and wheat ( Rs 484.5 billion). However, only about 7 per cent of the insurable livestock is insured.

Agriculture forms the backbone of development itself, as more than half of India’s work force still earns its livelihood out of agriculture. The net sown area has remained around 141 million hectares over the last 40 years

The group also said that the government should raise the subsidy on insurance premium to 50 per cent, so that at least 30 per cent of the livestock is insured. There are assets such as agricultural implements, bullock carts, pump sets and health, which seriously impact farmers’ ability to earn an adequate income. What is needed is a single insurance policy covering all assets of the farmer under one contract. The Kisan Package Insurance Policy being sold by public sector insurance companies covers 15 items of insurance. What is needed is a more comprehensive policy—a one-stop shop for the needy farmer.

Stark View

In Parliament this spring, the government did something that no government has ever done before—it tabled a report on the sensitive and emotionally charged subject of the state of Indian agriculture. The in-depth report calls for wide-ranging reforms to help agriculture meet the growing demands and challenges from human and environmental factors. It calls for immediate attention and energy on the conservation of land, water and biological resources, development of rainfed agriculture and minor irrigation, and increasing flow of credit, particularly to small and marginal farmers.

The report says agriculture forms the backbone of development itself, as more than half of India’s work force still earns its livelihood out of agriculture.

The net sown area has remained around 141 million hectares over the last 40 years.

Some Things Are Working

Since agriculture is a state subject, the primary responsibility for increasing agricultural production rests with the state governments. The Centre supplements the states through a number of schemes.

The government launched the National Food Security Mission (NFSM) in 2007 to raise the production of rice by 10 million tonnes, wheat by 8 million tones, and pulses by 2 million tonnes by the end of the Eleventh Plan. It aims to increase production through area expansion and productivity and create employment opportunities.

States should invest in its growth. This hasn’t happened so vigorously. To encourage states to invest in the sector, the Centre started The Rashtriya Krishi Vikas Yojana (RKVY) in 2007-08 with an eye on achieving 4 per cent growth rate for agriculture. The scheme kicked off with an outlay of Rs 250 billion for the Eleventh Plan. Whatever a state spends on its agricultural development, the Centre adds 50 per cent of that amount through. RKVY. In effect, therefore, if a state spends Rs 100 the Centre gives it Rs 50 more thorugh RKVY, potentially taking the total spend on agriculture to Rs 150. it’s working, but slowly. In 2006-07, all states put together spent a little more than 5 per cent on agricultural development; in 2009-10, it was nearly 6.5 per cent.

Land To Till

In the last 10 years, there has been very little growth in land area and marginal growth in the yield of many crops. As a result, increasing agricultural production remains a challenge. It needs a holistic approach that works simultaneously on research, development and dissemination of technology, and makes agricultural inputs such as quality seed, fertilisers, pesticides and irrigation, available.

Indian farmers are vulnerable because of two primary factors. One relates to their small holdings that ties them in a low income trap, restraining any credible investment of their income or surplus in land productivity. Secondly, 60 per cent of agriculture is still dependent on the rains; if the rains fail or there are unfavourable variations in rain or other climatic factors, then crops suffer.

The report said growth in the production of agricultural crops depends upon acreage and yield. Given the limitations in the expansion of acreage, the main source of long-term output growth is improvement in yields. Quoting CSO, it said in the case of wheat, the growth in area and yield was marginal between 2001 and 2011, suggesting that the crop’s yield curve has flattened.

Sixty per cent of our net sown area is still rainfed. Various studies indicate that the potential of rainfed areas has not been fully utilised. A targeted development of rainfed areas should be prioritised.

Nearly 160 million hectares, or half, of India’s total land area can be tilled. In the US, this ratio is less than one-fifth, as also in China (18 per cent). Yet, China produces nearly twice as much paddy per hectare than India—6,422 kg, against India’s 3,300 kg. In wheat, however, India is shoulder to shoulder with the US—2,705 kg.

Unyielding Soil

In the middle of May, Agriculture Minister Sharad Pawar told the Lok Sabha that owing to excessive use of fertilisers in Punjab, Haryana and western Uttar Pradesh, paddy cannot be grown any longer. He also said that so much urea is being used by farmers that it is affecting productivity, and that his ministry was planning to redirect India’s fertiliser subsidy towards organic and balanced fertilisers.

Though irrigation is critical to sustaining food security, it has not fared too well. Only about 36 per cent of India’s cropland is irrigated, the rest relies on rain

The recent shift to the Nutrient-Based Subsidy (NBS) has made matters worse. It was supposed to repair the problems introduced by the erstwhile system of fertiliser subsidy, which focusses only on basic fertilisers containing nitrogen (N), phosphorus (P) and potassium (K), with a particularly strong pro-nitrogen (urea) bias, and ignored all micronutrients. According to a news report in a recent issue of The Economic Times, the government reckoned that NBS would give companies an incentive to produce more complex fertilisers fortified with micronutrients. While the government freed prices of fertilisers containing potassium and phosphorus, it did not touch urea prices—fearing blowback from farmers. So, urea prices stayed around Rs 500 and India’s farmers, most of whom are already economically marginalised, began using more urea instead, the report said. Pawar told the Lok Sabha that the government is planning to reduce fertiliser subsidy and divert funds to organic manures, bio-fertilisers, green manures and promotion of organic farming. He also said that financial assistance was being provided for setting up of mechanised compost plants from vegetable and fruit waste and bio-fertiliser production units to ensure increased availability of compost and bio-fertilisers.

The news has been welcomed cautiously by dryland agriculture experts. In a press statement, the Revitalising Rainfed Agriculture (RRA) network, which describes itself as comprising 175 civil society organisations, research institutions, etc, said if Pawar’s statement was implemented, it would “definitely address most concerns on soil health, provided it is accompanied by appropriate institutional reforms, research support, incentives and a community-driven implementation plan.”

The government subsidises urea, 21 grades of P and K fertilisers, and 15 grades of NPK (nitrogen, phosphorus, and potash) complex fertilisers. Farmers pay only 25 to 40 per cent of the actual cost and the rest is borne by the government. The overall consumption of fertiliser has more than doubled from 70 kg per ha in 1991 to 144 kg per ha in 2011. But there is an imbalance in the types of fertiliser used—N, P or K, especially in the agriculturally advanced states of northwestern India.

Rain is Still God

Interestingly, the government spends only about 20 per cent of the total money that’s invested in agriculture; a whopping 80 per cent comes from the private sector. Moreover, the private sector responds much better and faster to the incentive structures in agriculture. Hence, along with bringing in greater public investment in agriculture, there is need for bringing in reforms in the incentive structure.

Irrigation remains the most dominant component in the overall investment in agriculture. In 2010, the government launched the National Mission on Micro Irrigation (NMMI) to better manage scarce water through drip and sprinkler irrigation systems in all states. All farmers pay half the installation cost while small and marginal farmers pay 40 per cent.

Though irrigation is critical to sustaining food security, it has not fared too well. Only about 36 per cent of India’s cropland is irrigated, the rest relies on rain. The country spent Rs 9,000 billion (about US$ 20 billion) on irrigation under the tenth Plan ( 2002- 07). But it created only half the irrigation potential it had targeted – 8 million hectares, instead of 16 million hectares. In the simplest of terms, irrigation potential means area of land that now has water available for irrigation – it is potentially ready to be irrigated. The Eleventh Plan, too, targets to create 16 million hectares of irrigation potential, and has already spent nearly Rs 1.16 trillion (US$ 26 billion). It is not estimated to create more than 12 million hectares of irrigation potential.

Skewed Farm Mechanisation

All over India, tractors are as much on the roads, as in the fields. Their trailers carry sugarcane, wheat, bricks, cattle, people, water, hay and lumber to and from the fields. They haul generator sets, pump sets, huge farm equipment, and industrial, agricultural and domestic supplies through the length and breadth of India. They till, plough, broadcast seed, spray fertilisers and pesticides, and cut, stack and haul every kind of crop all over the country. Tractors are Indian farmers’ all-purpose vehicles and nothing can replace them in the villages.

Agriculture is just as power hungry as industry. We have grown up on the human face of agriculture—the farmer, his wife, bullocks, plough, spade, hoe and sickle. But those are just a few of the things he needs on his farm. Actually, a farmer can feel the need for a virtual cavalry of power equipment on his field. Of course the all-important and absolutely irreplaceable tractor, but there is need for a lot else. A power tiller, for instance, can prepare a small wet field for paddy plantation really quickly, far more easily and precisely than a pair of bullocks can. A power thresher separates dozens of scores of grain from stalks and husks in a day, far more than any mechanical effort. Then there are the valuable pump sets, winnowers, sprayers and sprinklers and the mother of all farm machines, the combine harvester.

There are great disparities even within the farming states of India as far as mechanisation goes. Take Punjab, for instance. It is far ahead of the other states when it comes to having and using power equipment. In Punjab, according to a recent UN study, in the 40 years between 1971 and 2011, the number of tractors, power tillers and the furrow-making disc harrow has gone up multiple number of times. From a little more than 10,000 tractors in 1971, the number has shot up to nearly half a million in 2011. There were fewer than 10,000 power tillers in 1971, and their number in the state rose to 3.5 million in 2011, said the study sponsored by the United Nations Asian and Pacific Centre for Agricultural Engineering and Machinery (UNAPCAEM). Called “Farm Mechanisation in Punjab: Social, Economic and Environmental Implications,” the study says Punjab, Haryana and Uttar Pradesh are far ahead of the north-eastern states in farm mechanisation. The UN body is a subsidiary institution of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). The report said Punjab had 16 per cent of all the tractors in India—what was once a symbol of the Punjab farmer’s prosperity, has now become a debt trap. When farmers use combine harvesters in the fields, they leave behind uncut straw and stubble. That added up to more than 20 million tonnes, the report said, adding that the stubble is often burnt to clear the fields, polluting the air and affecting soil fertility. Agriculture debt grew in Punjab from US$ 114 million in 1997 to more than US$ 607 million in 2008—a five-fold jump in a decade. Market research firm IDC released a research finding in 2009 which said that farmers in Punjab were spending increasing amounts of debt money on farm machinery and it rose from 15 per cent in 1997 to 53 per cent in 2008. Punjab also employs 700,000 labourers from adjoining states; half of them have regular jobs and the remaining find work during the main cropping season.

But mechanisation isn’t all that easy in India—land holdings are too small for using tractors, most farmers are too poor to buy machines like tractors or combine harvestors, since farming is seasonal, equipment lies idle for months on end, the after sales service network is too weak and fragmented, fuel isn’t cheap and electricity, where available, isn’t cheap either.

Laissez Faire? Or Unfair?

There are more than 7,100 regulated markets in the country and 21,000-plus rural periodical markets. Presently, wholesale prices of 300 commodities and about 2,000 varieties are being reported on the Agricultural Marketing Information Network (AGMARKNET) portal from more than 1,900 markets. But rural periodic markets in general and tribal markets in particular have remained outside the ambit of the APMC Act. Launched in 2000, AGMARKNET is the Ministry of Agriculture’s online information network for agricultural marketing. Sitting anywhere, a farmer or buyer can access details of any of the main or rural markets of India, check prices, availability and make business decisions. It connects more than 2,000 such markets nationwide; 1,200 of them regularly report prices of more than 300 commodities.

The government gives farming-related information in 22 languages through its toll-free Kisan Call Centres nationwide. From 6 in the morning to 10 at night, executives answer questions, seven days a week.

The government’s “State of Agriculture” report calls for wide-ranging reforms in agricultural marketing. Imperfect market conditions and restrictions on the movement of agricultural commodities are not letting farmers realise the true value of their produce, whereas it is causing the consumer to pay a much higher price than warranted. The linking of small and fragmented farms with large-scale processors and retailers remains a challenge in the high value sector. With this in view government has decided that assistance under the National Horticulture Mission and Development and Strengthening of Agricultural Marketing Infrastructure, Grading and Standardisation Scheme for development of market infrastructure projects to state agencies/APMCs would be subjected to waiving of market fees for perishable horticultural commodities. With a view to overcoming this shortcoming and to bringing in private sector investment and techno-managerial efficiencies, the government is promoting Public Private Partnerships (PPP) in infrastructure development through “viability gap funding” support, the report says.

In 2006, the Planning Commission’s Working Group on Risk Management in Agriculture recommended encouraging and allowing banks, cooperative institutions, state marketing federations and Self-help Groups (SHGs), aggregators on behalf of farmers in the futures market as they have the requisite knowledge and operational skills needed to participate in the futures market. It also said the government should permit the safer options trading in agricultural produce. Hedging through options is considered safer than futures—farmers gain if prices rise, but they are protected if prices fall.

Four National Commodity Spot Exchanges with electronic trading platforms were set up, namely the National Spot Exchange Limited (NSEL), NCDEX Spot Exchange (NSPOT), Reliance Spot Exchange, and National APMC. Of these, the NSEL, NCDEX Spot Exchange, and Reliance Spot Exchange are in operation. At present, the spot exchanges offer trading in more than 30 commodities having delivery locations spread over 15 states. Spot exchanges electronically connect large numbers of buyers and sellers geographically located at distant places to converge on a single platform to overcome problems of time, distance and information flow, and also provide guarantee for each trade market linkage among farmers, processors, exporters and users with a view to reducing the cost of intermediation and enhancing price realisation by farmers. They also provide the most efficient spot price inputs to futures exchanges. On the agricultural side, the exchanges will enable farmers to trade seamlessly on the platform by providing real-time access to price information and a simplified delivery process, thereby ensuring the best possible price. On the buy side, all users of the commodities in the commodity value chain would have simultaneous access to the exchanges and be able to procure at the best possible price. Therefore, the efficiency levels attained as a result of such seamless spot transactions would result in major benefits for both producers and consumers.

“The private sector responds much better and faster to incentive structures in farming because of which almost 80 per cent of the total investment in agriculture comes from the private sector,” it noted. The survey also called for improving marketing infrastructure in eastern India in view of surplus production in several states. For areas where the private sector has not shown much interest, the role of public research system would continue to be critical.

The government’s report card on the farm sector, which will be an annual affair henceforth, noted the need for major reforms in marketing and investment, along with new technologies, to improve the share of agriculture in the country’s GDP. It has halved to around 15 per cent in the last two decades. “Achieving an 8-9 per cent rate of growth in overall gross domestic product (GDP) may not deliver much in terms of poverty reduction unless agricultural growth accelerates,” the survey noted.

Increasing farm production and removing market imperfections would help in controlling prices of commodities. The “State of Indian Agriculture 2011-12” report said that the principal factors behind the higher levels of inflation in the recent period are constraints in production and distribution especially in high value items such as pulses, fruits and vegetables, egg and meat. Increase in prices can be attributed to both supply and demand factors, it said, adding that the per capita availability of some items such as cereals and pulses have been declining resulting in some pressure on their prices. “The enduring solution to price inflation lies in increasing productivity, production and decreasing market imperfections,” it said.

Market imperfections include lack of infrastructure facilities like efficient transport facilities, storage, processing, marketing and credit facilities. It said that there is also a need to improve the efficacy of minimum support price (MSP) to control prices. The main objective of MSP is to ensure remunerative prices to growers for their produce with a view to encouraging higher investment and production and evolving a balanced and integrated price structure in the context of overall needs of the economy while safeguarding the interest of consumers by making available supplies at reasonable prices.

Procurement: Badly Botched

The main objectives of food management are procurement of foodgrains from farmers at remunerative prices, distribution of foodgrains to consumers, particularly the vulnerable sections of society at affordable prices, and maintenance of food buffers for food security and price stability. The instruments used are minimum support price (MSP) and central issue price (CIP). The Food Corporation of India (FCI) is the nodal agency for buying, storing and distributing foodgrains through the targeted public distribution system (TPDS).

“One of the most effective instruments of risk management has been the minimum support price. It is the insurance that can make or break any farmer,” said IIMB’s Gopal Naik. “MSP has helped farmers by ensuring that the price they receive absorbs the risk shock. Insurance, as it is implemented, has its own problems, like delayed claims settlement, which takes away its benefits.”

To the FCI, the economic cost of foodgrains has three components: the minimum support price of the grain, and the costs of procuring and distributing it.

The food security system needs to provide affordable nutrition to the poor. This means subsidising foodgrains—buying them at higher prices and distributing them at lower prices. There is an economic price to pay for this subsidy.

Market research and ratings agency, CARE, recently released a report analysing India’s warehousing situation. It said India can store almost 91 million tonnes of foodgrains. The government’s FCI, Central Warehousing Corporation (CWC) and State Warehousing Corporation (SWC) own a little more than 37 million tonnes, or 41 per cent, of this capacity. The rest is distributed among private entrepreneurs, cooperative societies and farmers, among others.

Apart from this, there are few large national level players, which have emerged over the last decade owing to the available capital subsidy. These include National Bulk Handling Corporation Ltd, National Collateral Management Services Ltd, Adani Agri Logistics, Star Agriwarehousing & Collateral Mangement Ltd, Shree Shubham Logistics Ltd, Ruchi Infrastructure Ltd, Guru Warehousing Corporation, Paras Warehousing and LTC Commercial.

There are two categories of the economically backward that the TPDS targets: those below the poverty line (BPL) and those covered under the Antyodaya Anna Yojana (AAY).

On its website, the department of food and public distribution, cites a stark National Sample Survey Organisation (NSSO) survey. It says about 5 per cent Indians—nearly 62.5 million people—sleep without two square meals a day. It calls this section of the population “hungry.” It is for this hungry section that the government launched the Antyodaya Anna Yojana (AAY) 2000. It covers 25 million families categorised as ‘poorest of the poor,’ providing them highly subsidised wheat at Rs 2 per kg and rice at Rs 3 per kg. Each family gets 35 kg of foodgrains per month. The government also supplies the grains to a little more than 40 million other families below the poverty line.

The report says MGNREGS has helped water conservation and harvesting, drought proofing and tree plantation, flood control, micro and minor irrigation works and land development. But it has also raised rural wage bar, affecting the availability of labour for agricultural operations. It has increased the cost of cultivation.

The report called for more private participation to boost farm sector investments, rather than heavy doses of subsidies. “There is always a trade-off between allocating money through subsidies or by increasing investments. The investment option is much better than subsidies for sustaining long-term growth in agricultural production and also to reduce poverty faster,” said the report.

It’s been 65 years since Jawaharlal Nehru stood in Parliament on the midnight of 14-15 August 1947, and proclaimed: “Everything else can wait, but not agriculture.”

For 65 years, agriculture has been waiting.

Bumper Wheat Harvest

India’s food security depends to a great extent on the output of wheat and rice. These two crops together made up nearly 80 per cent of the total foodgrain production in 2009-10; coarse cereals constituted the remainder. The area under coarse cereals has steadily declined over the years even though their yield has improved. Coarse cereals have high nutritional value and there is every reason to promote their production and help them with better R&D.

Having achieved a record wheat crop of more than 12 million tonnes this season, Punjab farmers have become richer by more than Rs 141 billion (almost US$ 2.7 billion ). A Punjab government official said in Chandigarh that the government had mobilised the government machinery to ensure hassle – free procurement and pay the farmers within 48 hours of lifting their produce from the grain markets. The district of Sangrur in south – west Punjab led in wheat procurement, followed by Ludhiana and Patiala. Farmers in Sangrur have netted nearly Rs 15 billion for their wheat, the official said. Punjab’s projected wheat output of 15.6 million tonnes is now likely to cross 16 million tonnes in view of the heavy arrival of crop in the state’s grain markets. In fact, for the first time in decades, Punjab and Haryana have recorded the highest-ever procurement figures for wheat. Together, they have procured more than 20 million tonnes of wheat this season, following a bumper crop. The Reserve Bank of India (RBI) releases money to the state government for the procurement of wheat and paddy twice every year. The government procures wheat in April-May and rice in October-December each year. Well beyond already elevated estimates, India is expected to produce a record 91 million tonnes of wheat in 2012, Sharad Pawar, Minister for Agriculture, told newsmen late in April while releasing the ministry’s latest output estimates. India consumes about 76 million tonnes of wheat a year. It grows one wheat crop, which is planted in November-December and harvested in March-April. Helped by a record output in India, global wheat production is estimated to be the second highest ever at 690 million tonnes in 2012, United Nation’s Food and Agriculture Organisation (FAO) said in a recent report. According to FAO, wheat production in India is expected to exceed 88 million tonnes in 2012. In its advance estimate, the Ministry of Agriculture had pegged India’s 2011-12 wheat output at 88.3 million tonnes, compared with last year’s 87 million tonnes.

Problem of Plenty

In fact, the government may export 4-5 million tonnes of wheat lying in FCI godowns to cope with a storage crisis, a food ministry official said recently. A committee, headed by C Rangarajan, chairman of the prime minister’s economic advisory council (PMEAC), to examine the possibility of exporting wheat, has also recommended exporting that much wheat. By June, the government will have procured 75 million tonnes of wheat, but FCI can store only 63 million tonnes — 12 million tonnes of wheat and nowhere to keep it.

The Economic Times reported recently, quoting a Ministry of Food official: “We need to incentivise the movement of grain, if we are serious about the storage issue. The wheat stock with FCI is close to 20 million tonnes. By the end of this wheat procurement season, 33-34 million tonnes would be added while the total storage capacity is at 63 million tonnes. For moving wheat out, export incentives are a must.”

India was absent in the world wheat market for six years. After it lifted export restrictions in September last year, it has been able to export only 850,000 tonnes of wheat. State Trading Corporation (STC), a government-run trading company, recently invited bids from overseas wheat buyers to discover the market value of Indian wheat. Last week, Food Minister K V Thomas said India was exploring possibilities of exporting wheat from the central pool to countries such as Uganda, Afghanistan and Pakistan, which need wheat.

In the 2011-12 Economic Survey, the government cited increased minimum support price and a few other reasons for the higher levels of foodgrain procurement. As a result, there is adequate grain to meet the TPDS needs and buffer stocks stipulations.

In an unprecedented intervention last year, the Supreme Court had directed the government to release decaying wheat stocks for the hungry rather than have them rot completely. Contesting the ruling, Prime Minister Manmohan Singh contended that to implement it would hurt the interests of the farmers by denying them remuneration for their produce.

Seeds of Discontent

Seeds are a critical input for long-term sustained growth of agriculture. In India, more than four-fifths of farmers rely on farm-saved seeds leading to a low seed replacement rate.

Missouri, USA-based Monsanto Company is a Fortune 500 multinational agricultural biotechnology corporation and the world’s leading producer of herbicide glyphosate. The industrial giant is also the second largest producer of genetically engineered (GE) seed; selling half of all such seeds used in the US. It also pioneered the production of saccharin and aspartame and high-precision LEDs, but it was its manufacture of the pesticide DDT and the infamous Vietnam war defoliant Agent Orange that earned it bad press worldwide. In India, its genetically engineered cotton hybrid Bt Cotton resists insects and raises cotton output but has also got the company’s name embroiled in raging controversies of farm ruin and desperate suicides.

In a recent article in the authoritative journal, The Economic and Political Weekly, Ronald Herring, professor at Cornell University, USA, and Chandrasekhara Rao of Hyderabad’s Centre for Economic and Social Studies, have written extensively about Bt Cotton and its role in India’s agriculture. In the article called “On the Failure of Bt Cotton,” the economists have analysed a decade of experience with the genetically modified cotton. They say there are two issues with Bt Cotton: one agronomic, and the other one economic. The early seeds in India had a gene from a common soil bacterium, Bacillus thuringiensis—it made the plant resistant to insects and also gave the seed its first two letters—Bt. Its critics say the water-guzzling variety is much costlier than the unmodified cotton. Proponents say the seeds cost more, but pesticide costs decline. Its opponents say Bt technology lowers rather than raises on-farm yields and its adoption drives farmers into debt because of high seed prices and agronomic failure, often resulting in catastrophe.

Herring and Rao quoted a study sponsored by the US-based International Food Policy Research Institute (IFPRI) that buttresses Monsanto’s argument that its flagship hybrid cotton seed raises output. The study analysed 22 field studies, covering nearly 13,000 farming plots, and found that net returns from Bt Cotton farming increased by more than 53 per cent in comparison with non-Bt fields. The reasons: pesticide use went down by one-third, bringing pesticide cost down by 46 per cent. As a result, yields increased by nearly 40 per cent. Undoubtedly, the cost of cultivation went up by 15 per cent, but better yields brought in higher net incomes for farmers, said the article. The authors also said that there are regional differences in the distress reports—the most detailed often come from Andhra Pradesh. “No studies known to us reported failure in Gujarat, where the making of transgenic cotton hybrids became a rural cottage industry—albeit an illegal one,” said the authors. Bt Cotton technology has been available legally since 2002, and illegally since 1999; “if it is failing, would we not see massive dis-adoption—not of specific cultivars, but of Bt technology itself?” Even in Andhra Pradesh, as early as 2005, there was such a rush for Bt Cotton, armed police had to keep charged crowds of farmers from turning violent during sale events.

However, the district of Warangal in Andhra Pradesh and Maharashtra’s Vidarbha region figure prominently in the context of farmer suicides, particularly in the book Seeds of Suicide. In an article in the online news magazine The Huffington Post, Shiva had written in 2009: “Rapid increase in indebtedness is at the root of farmers taking their lives. Debt is a reflection of a negative economy. Two factors have transformed agriculture from a positive economy into a negative economy for peasants: the rising costs of production and the falling prices of farm commodities.”

Shiva does not mince her words in fixing responsibility: “In 1998, the World Bank’s structural adjustment policies forced India to open up its seed sector to global corporations like Cargill, Monsanto and Syngenta. The global corporations changed the input economy overnight. Farm saved seeds were replaced by corporate seeds, which need fertilisers and pesticides and cannot be saved… The district of Warangal in Andhra Pradesh used to grow diverse legumes, millets, and oilseeds. Now the imposition of cotton monocultures has led to the loss of the wealth of farmer’s breeding and nature’s evolution.”

The district of Warangal in Andhra Pradesh and Maharashtra’s Vidarbha region figure prominently in the context of farmer suicides

In a damning indictment of Monsanto’s meddling with India’s agriculture and farmers’ lives, Shiva said: “The region in India with the highest level of farmers suicides is the Vidharbha region in Maharashtra—4,000 suicides per year, 10 per day. This is also the region with the highest acreage of Monsanto’s Bt Cotton. The seeds create a suicide economy by transforming seed from a renewable resource to a non-renewable input, which must be bought every year at high prices. Cotton seed used to cost Rs 7 a kg. Bt Cotton seeds were sold at Rs 17,000 a kg. Indigenous cotton varieties can be intercropped with food crops. Bt Cotton can only be grown as a monoculture. Indigenous cotton is rain fed. Bt Cotton needs irrigation. Indigenous varieties are pest resistant. Bt Cotton, even though promoted as resistant to the boll worm, has created new pests, and to control these new pests, farmers are using 13 times more pesticides than they were using before. And finally, Monsanto sells its GMO seeds on fraudulent claims of yields of 1.5 tonnes per year when farmers harvest 300-400 kg per year, on an average. High costs and unreliable output make for a debt trap, and a suicide economy.”

Cash Crops Look Good

In milk, rubber, coffee and tea, the numbers are impressive. India is the world’s largest producer of milk—more than 112 million tonnes last year. Milk production has grown more than six times since independence. India is the world’s fourth largest producer of natural rubber (NR) with a share of nearly 9 per cent of the global total output. It is also the world’s second largest consumer of NR, overtaking even the United States—nearly one-tenth of all the NR produced in the world. In coffee, India ranks sixth in the world, after Brazil, Vietnam, Columbia, Indonesia, and Ethiopia. We produce both Arabica and Robusta varieties of the bean largely in the southern states of Karnataka, Kerala and Tamil Nadu, and export 70 per cent of the nearly 300,000 tonnes of the annual output. India is also the world’s largest producer and consumer of black tea. It grows in 16 states, but just the four states of Assam, West Bengal (especially Darjeeling), Tamil Nadu and Kerala produce 96 per cent of the annual total of nearly a billion kilograms of tea.

The Eleventh Five Year Plan targeted an overall growth of 6-7 per cent year for milk. The National Dairy Plan projects that we need to produce 180 million tonnes of milk by 2022 to meet the demand for milk at that time. India’s demand for milk is growing at about 6 million tonnes a year but production has increased by only 3.5 million tonnes a year over the last decade. So, our milk production must increase at 5.5 per cent annually for the next 12 years; otherwise, we will fall short. But the sector has other problems: our animals yield less milk, the marketing systems are outdated, the breeding programmes are ineffective, feed and fodder are not up to the mark, credit isn’t easily and widely available, our milk processing capacity is low and our cold chain and logistics mechanisms are inadequate.

Groundnut and cotton, however, have flourished. Monsanto’s Bt Cotton came in 2002 and changed everything. In less than 10 years, it has spread like foam across the Indian farm landscape. By 2011-12, almost 90 per cent of all cotton area is under Bt Cotton, yield-per-hectare has shot up by 70 per cent and obviously production has more than doubled, compared to 10 years ago. This has generated surplus raw cotton that stands to bring in annual revenue of Rs 100 billion in export revenue.

2006-07 was a good year for sugar—India produced 28.2 million tonnes of the sweet grain. It has been falling since then. At an estimated 24.5 million tonnes, 2010-11 is expected to be good, but still far below the output of six years ago. For sugarcane, the practice of “statutary minimum price” has been replaced with “fair and remunerative price” (FRP).

Estimates are that more than 31 million tonnes of oilseeds will yield almost 7.5 million tonnes of edible oils in 2010-11. That’s just half of all the edible oil India needs. An ICRA paper last year said the demand for edible oils in India has grown steadily at nearly 4.5 per cent annually, in the decade between 2001 and 2011. Called “Indian Edible Oils Industry: Key Trends and Credit Implications,” the paper said the growth has been driven by better incomes. In fact, the ICRA paper said the demand will cross 16 million tonnes in 2010-11. To cover the gap, the government has liberalised imports, slashing all duty on crude edible oils and reducing it to 7.5 per cent on refined edible oils. Exports are banned to keep supply and price under control.

Team Inclusion

INCLUSION is the first and only journal in the country that champions the cause of social, financial and digital inclusion. With a discernable and ever- increasing readership, the quarterly relentlessly pursues the three inclusions through its rich content comprising analysis, reportage, features, interviews, grassroots case studies and columns by domain experts. The magazine caters to top decision makers, academia, civil society, policy makers and industry captains across banking, financial services and insurance.
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