Friday, December 17, 2010

India urgently needs a new Green Revolution

Agriculture has an importance in India out of all proportion to its 15 percent contribution to Gross Domestic Product, which nevertheless absorbs at least 40 percent of the workforce (not to mention the centuries of rural tradition lying behind it). Everybody talks about the role of globalization and software in opening up the Indian economy in the last two decades but would economic takeoff have been possible without the Green Revolution?

But the Green Revolution has since run out of steam with India losing its self-sufficiency in food (apart from rice and wheat) since 2005 (India was a net food exporter until then). If nearly half the population is needed for less than a fifth of output, a second Green Revolution to snap India out of primitive subsistence agriculture would seem to be urgent. Or is it — might it not be that India deliberately tolerates the inefficiencies of an overmanned agriculture in order to keep them down on the farm as a lesser evil to swamping already overcrowded cities?

Last month the Herald put these questions to the Agriculture Ministry’s Mukesh Khullar in his office in Krishi Bhavan (the Ministry building) in the heart of New Delhi.

Khullar did not hesitate in replying that a new Green Revolution cannot be postponed despite any possible social disruption — with food security a global issue, India owed it to both itself and the world to realize its full economic potential and dramatically raise productivity. Everything else was simply growing too fast — the economy, the population (which could reach 1.5 billion people within the next generation) and demand for more and better food from that population. Even a totally successful second Green Revolution could not avert the need to increase food imports from countries like Argentina because of the explosive growth of demand at every level. In particular, an agriculture based on a vegetarian culture is not used to producing proteins and here Argentina could come in very handy (this year’s intensified imports of soy oil from here has been joined by an incipient interest in lentils).

Yet even without a new Green Revolution or economies of scale, Indian agriculture is not to be despised. Its total grain harvest of 260 million tons almost trebles Argentina’s on only around 25 percent more land while its cattle population of 282 million head vastly outnumbers ours (not in quality though) — India is the world’s third-largest producer of agricultural commodities (number one in rice, tea and milk). This does not necessarily establish Indian agriculture as more efficient but rather goes to show that with ample sun and monsoon rain, India is naturally far more fertile than even the fabled pampas — apart from the structural bottlenecks, the main barrier to India being the world’s food basket is that it already houses a sixth of the world. India and Argentina are very different in agricultural as well as other aspects but the two countries could learn much from each other, says the Foreign Ministry’s Dammu Ravi (Joint Secretary Latam & Caribbean Division).

Even without maximizing agricultural potential with a new Green Revolution, only two percent of the food being produced now is processed and that is the key to improving efficiency while keeping them down on the farm in Kullar’s view — bring in food-processing companies (whether multinationals or local agri-businesses) to produce at source, offering them free land and tax holidays in areas of high rural unemployment with the short-term aim of creating 10 million jobs.

Some experts think that the potential for food processing is so huge that agriculture could return to being a third of the economy despite such rapid growth in the two other sectors (especially services) — agri-business has clocked 20 percent growth per annum in recent years and there are hopes of trebling its volume by 2015. Even riddled with poverty, inefficiency and substandard yields, Indian agriculture could still be a vibrant player in globalization. Because of the immense cultural and political importance of the rural world, agri-business is a priority for the government and perhaps more deregulation work awaits here than in the rest of the economy.

Khullar does not only look to food-processing industries and agri-business to integrate rural communities into a globalized world — various services could be extended to villages with investment in education, human resources and new skills. There is an enthusiasm for introducing professional management into farming like the rest of the economy, turning farmers into shareholders — this actually seems to appeal more to the peasant mentality than co-operatives. Khullar feels that the ancient traditions can be overcome far more rapidly with modern communications — television and telephones make a huge difference. The new communications technology will also make it easier to educate people in villages, instead of forcing them to urbanize.

Credit and infrastructure are also crucial — India has already been successful in providing electricity generation and Indian ingenuity is starting to come up with new ways of making agriculture more water-efficient, such as micro-irrigation and techniques of harvesting rice without the traditional flooding. All these policies need to be implemented in not only an intelligent but also region-specific way with regard to the available technologies.

Yet in these days of worldwide concern about climate change, India cannot simply let rip with agricultural development — some very strange things have been happening in Indian weather recently such as droughts in lushly green Bihar and Assam and downpours in arid Rajasthan. Thus the concept of sustainable agriculture was at the heart of the Biennial Agro Technology & Business Fair held last week in Chandigarh, ensuring that agro-chemicals and fertilizers are placed under ecological stewardship.

The net result of all these changes would not be to shrink rural population or overcrowd the cities but to reduce pure farmers to around 10 percent of the population with the rest in related activities — those with skills would continue to migrate but there should be no need to force anybody to leave. This transformation would require 20-25 years in Khullar’s opinion.

Is it possible for an economic transformation which owes so much to the private sector to modernize agriculture without affecting property rights, the Herald asked? This was a tricky question, Khullar agreed — this involved not only questioning the efficiency of smallholder production but also the quantity of land left idle by rich landlords in states like Bihar. But one thing is clear in Khullar’s mind — change is both urgent and possible but he draws the line at modernization at the cost of social disruption.

Perhaps agriculture is as good an example as any of India’s knack for turning its problems into opportunities.

Horticulture : A Key to All Round Growth of Agriculture

Horticulture is perhaps the most profitable venture of all farming activities as it provides ample employment opportunities and scope to raise the income of the farming community. It also has tremendous potential to push the overall agriculture growth to more than the targetted 4 per cent.

The climatic conditions prevailing in our country are favourable for a large number of horticulture crops such as fruits, vegetables, roots and tuber crops, ornamental, medicinal and aromatic plants. Production of horticultural crops has witnessed a significant improvement over the years, of the 11 per cent of the total cropped area, horticulture accounts for about 28 per cent of agriculture GDP in India.

India ranks second in the global production of fruits and vegetables next to China. It’s share in the World fruit and vegetable production is about 9.2 per cent and 9.24 per cent respectively. India is the largest producer of mango, banana, sapota and acid lime and has the highest productivity of grapes per unit area in the World. Despite this, India’s share in fruits and vegetables trade in the World is very low.

The Government has taken many initiatives to boost horticulture sector in the country. These include National Horticulture Mission (NHM), National Horticulture Board, Technology Mission for Integrated Development of Horticulture in North-East and Himalayan States and financial assistance to private sector and Government agencies to set up post-harvest infrastructure such as warehouses and cold storages etc.

At present, 371 districts in 18 States and 3 Union Territories are covered under the National Horticulture Mission. Apart from States and Union Territories, 13 National Level Agencies have been included for providing support to the developmental efforts which require inputs at the national level.

The total approved outlay for the National Horticulture Mission for the 11th Plan is Rs. 8809 crore. Out of this, an amount of Rs. 3200 crore has been spent during first 3 years of the Plan. NHM is a centrally sponsored scheme in which the Centre’s contribution is 85 per cent and the remaining 15 per cent is met by State Governments. Production of planting material, vegetable seed, seed infrastructure in public and private sector, establishment of new gardens in farmers’ land, rejuvenation/replacement of senile plantation, technology dissemination through front line demonstrations, post-harvest management etc., are covered under the scheme.

From 2010-11 the National Horticulture Mission guidelines have been revised to accommodate new interventions such as High Density Plantations, mushroom cultivation, horticulture mechanisation, and certification of good agricultural practices. Cost norms of some of the activities like setting up of nurseries, area expansion and protected cultivation have been enhanced to provide better incentives to the farmers adopting improved technologies. The cost norms and assistance for post-harvest management have been enhanced and new components introduced to encourage private sector participation in creating NHM infrastructure.

States have also been advised to ensure holistic development of horticulture sector by convergence of schemes implemented by other Government Departments. At the national level, efforts are being made to ensure convergence by dovetailing the resources of the concerned Departments viz. ICAR for research, Ministry of Food Processing Industries for coordinated development of Agri Export Zone (AEZ) for horticultural crops and Department of Rural Development with Mahatma Gandhi National Rural Employment Guarantee scheme and also for providing road connectivity to the crop clusters in the NHM districts. At the level of the Ministry of Agriculture, convergence is ensured with the scheme on micro-irrigation, Rashtriya Krishi Vikas Yojna (RKVY) and Watershed Development Programmes.

During 2005-09, 2192 new nurseries have been set up. Additional area of about 16.57 lakh hectares was brought under new gardens of various horticultural crops. 2.78 lakh hectare of old and senile orchards was rejuvenated to enhance productivity. An area of 1.37 lakh hectare was covered under organic farming. Integrated Nutrient Management (INM) and Integrated Pest Management (IPM) were adopted in 7.48 lakh hectare apart from setting up of 66 disease forecasting units, 78 bio-control laboratories, 98 plant health clinics and 67 leaf/tissue analysis laboratories.

Funds have been provided for setting up of 1093 pack houses, 285 cold storage units, 14 refrigerated vans and 264 mobile/primary processing units, under post harvest management. Nine wholesale markets and 163 rural markets have been set up to ensure proper handling and marketing of agricultural produce. Apart from this, 7.74 lakh farmers have been trained under various horticultural activities.

As per mid-term evaluation study conducted by the National Productivity Council during 2007-08, area under horticultural crops increased by 12.4 per cent. According to the study, availability of planting material has also improved substantially in almost all the States. In addition, 190 million man days employment opportunities have been generated and organic farming has been gaining popularity.

Under the new component of Terminal Market Complex (TMC), which envisages a hub and spoke model for the development of markets under PPP, one TMC has been approved for Patna in Bihar during the current financial year with NHM subsidy of Rs. 33 crore. Three such TMCs have also been approved in Maharashtra, Orissa and Tamil Nadu.

The projected production of horticultural crops during 2009-10 has gone up to 226.87 million tonnes. It includes 73.53 million tonne of fruits and 136.19 million tonne of vegetables from an area of about 21 million hectares. The growth rate in horticulture production between 2004-05 and 2008-09 has been to the tune of 7.2 per cent.

Cultivation of horticultural crops is now increasingly becoming an option to improve livelihood security, enhance employment generation, to attain food and nutritional security, and increase income through value addition. Cost of horticulture products being less than half of those in other parts of the World due to relatively cheap and skilled manpower, Indian farmers are in an advantageous position to exploit the untapped potential.

Thursday, December 9, 2010

US promises not so (ever) green revolution

Mr Obama’s stupendous Indian visit during Diwali had caught the limelight of the whole world for almost a month. But here, the issue is: what does US President Barack Obama's visit connote for agriculture in India? US President expressed that US and India can accelerate cooperation in agriculture and it is the US to learn lessons from India in irrigation systems and low-cost farm machinery. He also interacted through video conferencing with a group of farmers and villagers of Kanpura village of Ajmer in Rajasthan, at the agriculture and food security expo organized by CII. Mr Obama appreciated ICAR, the apex public organization looking after the affairs of agriculture in the country and its work for the farming community.

The Obama regime has maintained continuity with the preceding Bush regime in the basic thrust of USA’s relations with India in agriculture. And keeping this in mind well in advance of the Obama visit, a meeting of the “U.S.-India Agriculture Dialogue Steering Committee” took place in New Delhi with high level experts from both the sides. The Committee reportedly met to identify areas of cooperation for working groups on “Strategic Cooperation” in agriculture and food security; food processing; farm-to-market linkages and agricultural extension; and crop and weather forecasting. The present set of negotiations are only aimed at operationalising the India-US MOU for Cooperation in Agriculture and Food Security, which was signed shrouded in the veil of secrecy well in advance of the Obama visit.

It is only to take forward the vision that brought into existence the India-US Knowledge Initiatives in Agriculture (KIA). But have such initiatives ever led to anything worthwhile? We have already witnessed the debacle of KIA, which had come to an end on 31 March 2010, and all set to get a three-year extension as the Agriculture Ministry had taken up the issue with the US authorities after the five-year-old initiative ended in March. This is despite the Parliament Standing Committee on Agriculture asking the Agriculture Ministry to review the implementation and achievements of the initiative. Very little came out of that agreement and President Obama is likely to re-energise the Indo-US Knowledge Initiative in Agriculture. Since the agreement is facing un-surmountable hurdles because of the inability of the Indian Council for Agricultural Research (ICAR) to pay for staff travels and technologies being imported, it is likely that the U.S. would push through more collaboration in agricultural scientific research through the US-India Strategic Dialogue.

The joint statement from the Prime Minister Manmohan Singh and the Us President Obama suggests that the agenda is far-reaching and open-ended. The collaboration will, it is claimed,

(i) develop, test, and replicate transformative technologies to extend food security as part of an Evergreen Revolution,

(ii) be in the areas of weather and crop forecasting system, improvement in the food processing and crop productivity, and optimum uses of natural resources like water and

(iii) enhance the agricultural value chain and strengthen market institutions to reduce post-harvest crop losses.

While collaboration in farm research will pave the way for the entry of US agribusiness multinationals, especially companies like Monsanto and Du Pont, the thrust of the US talks is going to be an opening of the food retail and insurance sector. A few weeks back, President Obama had expressed hope that India would allow FDI in big retail. Agriculture Minister, Sharad Pawar, too, has been pushing for FDI in a big way and Ministry for Commerce had even set up a small committee to prepare the ground for its entry.

But if the supermarkets were so efficient and provided dynamism, then why is the US providing a massive subsidy for agriculture? After all, the world’s biggest retail giant Wal-Mart is based in America and it should have helped American farmers to become economically viable. But it did not happen. American farmers have instead been bailed out by the government, providing a subsidy of Rs. 12.50 lakh crore between 1995 and 2009, and this includes direct income support. India is, therefore, importing a failed economic model, which would only help the economic recovery of America, and not serve any cause of the beleaguered Indian farmers and the agricultural situation.

Food Management in India

Alien models won't work

- Neehar Ranjan Pandey

In a recently released paper titled "The Economics of Foodgrain Management in India" the chief economic adviser in ministry of finance, Prof Kaushik Basu, has made certain interesting observations. He has been particularly harsh, and rightly so, on the procurement and delivery aspect of the government's foodgrain policy.

It has been pointed out that during the past one year or so, in spite of our food stock continuing to be massive, food prices have been high, meaning thereby that our foodgrain procurement and distribution policy is flawed and has failed to serve farmers and consumers both.

Over dependence on agriculture

Prof Basu underscores the fact that 15% of the notional income comes from agriculture, while close to 60% of India's labour force lives off agriculture, to claim that we have created special incentives which hold back large segments of the population in agriculture, instead of allowing them to move out to industry and manufacturing. However, this line of reasoning is an over-simplification. People in rural areas are stuck in the agriculture sector, not because the government has provided them with spectacular incentives, but simply for lack of any worthwhile options to do something else. There is little opportunity in villages and small towns due to almost non-existent industrialisation. Given the fact that our cities are also teeming with migrant population, the best possible way to reduce excess dependence of the population on agriculture is to somehow explore possibilities of creating sufficient opportunities in rural and semi-urban areas.

Possibilities of establishing new industries in small towns and villages can only be brightened up, if we are able to provide proper infrastructure, including enough power, to sustain industrial activity. Towards this end, the recently launched National Solar Mission could turn out to be a game changer, provided the proposed 5MW solar power projects are evenly distributed across the country. In this context, in the larger interest of the country, we must shed our preference for a tariff-discount-based regime while sanctioning these projects, and instead, strive to cover the entire rural landscape to provide power all across the country.

Release of foodgrain to poor

While criticism of the government's existing policy to hold and release foodgrain is understandable to an extent, it seems that the true import of the recent popular demand (subsequently endorsed by the Supreme Court) to release the grain, rather than letting it rot, to the poor has not been appreciated. The apprehension that the demand might have an important design aspect to it, a part of this food might be resold to the government through the procurement window at a profit, is largely misplaced. No one is asking the government to supply foodgrain to whosoever comes to collect it. Instead, the demand is to distribute foodgrain to the poorest of poor, even at a nominal cost, which otherwise is rotting in godowns.

Prof Basu is right when he lists "maintenance of buffer to hold down prices during food shortages" and "making sure that the poor and vulnerable have access to food at all times" as the two features of his ideal foodgrain policy. However, if it is so, how can the government of a welfare state be a silent spectator when the poor do not get enough food at affordable rates, while FCI storage facilities are overflowing? Further, it must be kept in mind that the two stated objectives are exclusive to each other: release to hold down prices and feeding the poor must be seen and tackled as two different problems, requiring separate solutions.

It is a fact that while we have steadily procured foodgrain, releasing it when the need arises has left a lot to be desired. Prof Basu recommends buying more when prices are low and selling more when prices are high. While the point is well taken, we have also to remember that the government fixes an MSP not only for the purposes of buying to shore up its buffer, but also to provide protection to an ordinary farmer. If the market rates of foodgrain start falling below a certain level, the farmer can always turn to the government and sell his produce at MSP. Therefore, the food procurement mechanism serves a useful welfare purpose as well. Keeping in view all this, we have to take into account a delicate balance of necessity to create a buffer, protecting farmers' interests and objective to keep prices down to an acceptable level, while formulating a market intervention policy.

In this context, the suggestion offered that a ready set of rules of how and when to release foodgrain, a kind of standard operating procedure (SOP) must be in place needs to be pursued with vigour. If prices are rising, there has to be a rule about automatic release of food, that too in small batches, preferably to each district of the targeted area, rather than rushing to seek approval of cabinet committees. Further, in this context, more private participation should be encouraged, with government's role limited to ensure affordability only.

Release mechanism

However, it is in his views on release mechanism of the foodgrain to poor, one can sense that the chief economic adviser has not appreciated the peculiarity of our country in proper perspective. Prof Basu is of the opinion that the food subsidy should be handed over directly to the poor by way of food coupons to be used as money to buy food from any store. The store owner can take the coupon to any bank and change it back to cash. Since buyers will have right to go to any store they will go to stores that charge the most competitive prices and assured quality. It is also suggested that the government can go one step further and usher in direct cash transfer to the poor.

While the suggested model might work in urban areas, it certainly is unworkable in villages, at least in the current scenario. Well, for starters, where are multiple food stores in rural India which will facilitate choices to rural folk? Further, the question still remains that whether the government can restrict its role in providing food security to the poor and vulnerable by simply handing them over money; or does it also need to ensure availability of food in those areas? Taking the proposal of the chief economist forward, can tomorrow the government say that since it has provided the rural population with medical allowances, it does not have any stakes towards ensuring adequate health care facilities in the villages, and let the market forces take care of their needs?

The pitfall in applying internationally successful schemes in India, without proper adaptation, is that one tends to forget complete absence of the so-called market forces in areas inhabited by very large number of deprived people. The government, at the present level of development, cannot disassociate itself from its commitment to ensure food for all by leaving everything to the market.

Instead, the key lies in revamping our delivery mechanism. Let us accept that our public distribution system has not lived up to expectations due to variety of reasons. Not only is there a need to revamp it, but we should also explore other possibilities to reach food to the poor. One possible way could be through NREGS: some part of daily wages in respect of BPL population may be given in the form of foodgrain. After all, if the scheme can be trusted to successfully deliver cash to the poor, it can surely be used to deliver foodgrain as well.

Besides, that would also insure at least part of the wages against inflation. For people above poverty line, the need of the hour is a major overhaul of PDS network utilising the coming UID numbers, coupled with enhanced participation of private traders and gradual withdrawal of the government.

Finally, while there can be no denial that there is a need to have more liberalised policy in place, we must remember to adjust theories of economics to explain life, rather than somehow trying to fit real life in to the theory. After all, for about two decades now, the poor are still waiting for that promised fruit of economic prosperity that was supposed to trickle down, to reach them.

(The author is a deputy secretary in the finance ministry. The views are his own.)

Courtesy: TOI, Dated Nov 26, 2010