Economic Highlights

New Delhi, 21 November 2007

Rethinking Agriculture

STATES NEED COMMON FOCUS  

By Dr. Vinod Mehta

(Former Director, Research, ICSSR)

The development of the agricultural sector has become critical for sustaining an overall growth rate of about 9 per cent. While discussing the Draft Eleventh Plan the Prime Minister underlined the need for a central focus on agriculture given the importance of rural population and the need for food security in the coming decades.

There is an urgent need to reinvigorate a sector on which two-thirds of the billion-plus population depends, but which is growing at less than one third of the pace of the overall economy. Assuming a 7-8 per cent GDP growth rate, by 2020 we would require 340 million tonnes of food-grains.

According to the World Bank, India's agricultural growth rate in the past decade (1995/96-2004/05) slowed down to less than 2 per cent per year, compared to about 3.5 per cent per annum in the preceding decade.  It further notes that in the poorest states, such as Madhya Pradesh, Orissa, and Rajasthan, growth in the last decade was below one per cent per year. 

It has also been observed that the yields of major crops (food grains, oilseeds, other cash crops) in India are lower than in many other countries. For example, rice yields in India are one-third of China’s and about half of those in Vietnam and Indonesia.

Last year, a poor wheat crop led to 5.5 million tonnes of expensive grain imports, the first in six years, pushing up food prices and adding to inflationary pressures. With international wheat prices very high import of wheat has become a political issue.  It would be economically suicidal for any government to import grain or for that matter any agricultural commodity like pulses, edible oil at the ruling higher international prices and sell it at subsidised prices in the domestic market for a considerable period of time. 

It is in this context that the development of the agricultural sector becomes critical not only from the point of view of overall growth but also from the point of view of feeding the billion plus population.

The Eleventh Plan aims to raise the agricultural growth rate to four per cent per year. Importantly, to achieve this, the Plan aims to: (a) accelerate the expansion of irrigated area and improve water management in rain-fed areas, (b) bridge the knowledge gap through effective research and extension, (c) foster diversification to higher value horticulture, fisheries, and animal husbandry, (d) increase food grain productivity for food security, (e) facilitate farmers' access to credit at affordable rates and (f) improve farmer access to markets.

Besides, numerous researches on the agricultural sector in the past five decades have made these points, the important point, however, is to implement them in letter and spirit.  Take for instance point (b) relating to research and extension; may one ask what our agricultural research institutes have been doing for the past 50 years? 

Why are the foreign private seed firms able to offer high quality seeds than our agricultural research institutes? Why has the role of extension workers in helping the farmers to adopt new seeds and technologies been reduced over the years? What is credit to farmers at affordable rates? 

Astonishingly, instead of codifying and implementing the recommendations of various reports/studies on tackling these issues we have been paying only lip service to them all these years. Otherwise the agricultural sector would not have come to such a pass.

True, the provision of irrigation water, timely credit at affordable rates etc., are all very important measures, but the time has also come to think of institutional and organizational changes in the agricultural sector.  If the organizational structures in the past have not been able to deliver shouldn’t we change them to make them more effective?

The economists are talking about contract farming.  Are our farmers ready for contract farming?  Do they stand to gain from contract farming? How does one ensure that the companies entering into contract with farmers will not take them for a ride for the reason that these contracts are cleverly drawn in a language which the farmers may not understand. 

No doubt a few farmers in certain states have gone in for contract farming and many others are willing to go for it. However, the idea is to put more money in the hands of the farmers through this mechanism. Therefore, to safeguard the interests of the farmers the Government must first have a policy on contract farming and then model contracts in a language which the farmers understand.

Take our archaic agricultural marketing laws. Everyone is talking about putting more money in the hands of the farmers.  But in reality the farmer is forced to sell at lower prices because of our archaic agricultural marketing laws. The farmers are supposed to bring their perishable produce of fruit and vegetables to the designated mandis where the middlemen would help find a buyer for their produce.

Look at the absurdity. First the farmer has to spend money on transporting his produce to the mandi, then wait for a suitable “buyer” for a day or two. In the meantime the middleman pockets his commission and ultimately the farmer gets less than what he should have. 

Recall, when some of the business houses in the organised sector tried to venture into the retail of fruit and vegetables by directly procuring their supplies from the farmers, the middlemen and vendors were up in arms. Thus, forcing the State Governments either to shut down the organised outlets or seek refuge under the marketing act. 

There is no gainsaying that the ultimate loser has been the farmer. The farmer will always be the loser in such an institutional set up. Therefore, the Government will have to rethink the institutional changes in the marketing of fruit and vegetables.

Then there is the problem of wastage of farm produce, both grain and fruit and vegetable, either on the farm itself, or in transit from one place to another or in the godowns.  It is estimated that around 20 to 30 per cent of the farm produce is wasted in this manner which ultimately reduces their availability to the nation. We have done nothing to check this wastage but can we afford such wastage now?

Further, like the management of scarce water, the management of scarce grain and fruit and vegetables are equally important.  Perhaps the farmers are helped to process a part of the fruit and vegetables on the farm itself?  How do we ensure that pests don’t eat the stored grain? 

Significantly, agriculture is a State subject.  But the time has come for the States to come together to think over the common problems facing the agricultural sector and to the extent possible develop a common response to marketing of agricultural produce, contract farming, water sharing, checking of wastage and institutional and organizational changes so as to help the farmers get their legitimate dues as well as assure the nation adequate supply of food grain and other agricultural produce like pulses, oilseeds, fruit and vegetables, milk, poultry, meat and fisheries.

Our aim should be to be self sufficient in the agricultural sector with surplus for export.  We are heavily dependent on imported fuel spending almost half of our export earnings on it.  This kind of situation we should avoid as far as agricultural produce is concerned.  Hopefully the Eleventh plan will help change the face of the agricultural sector. --- INFA

(Copyright, India News & Feature Alliance)