Wednesday, March 23, 2011

How to Achieve Food Security

By Ashok Gulati

Food inflation, hovering in the double digits, may play spoilsport to India’s ability to continue its rapid economic growth. It is truly troubling that food still consumes half of the expenditure of the average Indian household. No wonder a sharp spike in onion prices has the potential to upset the political calculus of social stability.

India’s biggest challenge still remains ensuring food and nutritional security to its masses. Notwithstanding the nation’s steady progress in alleviating poverty, India is home to the largest number of poor and malnourished people in the world. One of the reasons is the lackluster performance of its agriculture sector, with growth below 3% a year over the last two decades, and that too with high volatility.

India’s population of 1.2 billion is large, growing, and expected to touch 1.6 billion by 2030, surpassing China. With rising incomes in India, the demand on food is building.

In an effort to help the poor facing food inflation, India is likely to enact a so-called Right to Food bill this year, which will entitle a large mass of the population to buy rice and wheat at highly subsidized rates, almost one sixth of the market price. If enacted with universal coverage — one option under discussion — the government will be making a Herculean commitment to the people of India, requiring the government to handle more than 70 million tons of rice and wheat.

Given the government’s poor record with the administration of the existing Public Distribution System, in which more than half of the food grains meant to be sold to the poor at subsidized rates actually end up in the hands of the non-poor, India will almost certainly face a major challenge trying to get right this Right to Food.

Indeed, because of this, there is a big push to help the poor by switching over to conditional cash transfers, in line with best international practices. I am strongly in favor of making this switch, in which poor can be given smart cards or coupons to buy a selection of food commodities (including, but not restricted to, wheat and rice.) These cards or coupons can be given to the woman in the household, and even made conditional upon sending children (especially females) to school. These methods can help provide food security to the poor in a cost-effective manner, promote a more diverse diet and empower women through education. All this will have beneficial impact on nutrition.

It is important to note that while staples like rice and wheat still provide many of the calories for the poor, the exploding middle class is increasingly eating fruits and vegetables, milk, eggs, meat and fish — so-called high-value agriculture. This poses a twin challenge to agricultural policy makers: to increase the production of staples while also expanding high-value agriculture.

The states that fueled the Green Revolution–Punjab, Haryana and western Uttar Pradesh–cannot be relied on for ensuring grain security in the future as the water table in this region is falling at an alarming rate: by almost a foot a year. Eastern India, with its abundant water supply, offers the most promise for spurring a Second Green Revolution.

It is currently underdeveloped, with rice yield levels that are only about half of those in the former Green Revolution states. The government is moving in the direction of trying to promote a Second Green Revolution, having made its commitment public last year. But it is moving slowly and with very little resource-allocation.

Finance Minister Pranab Mukherjee made a special allocation for this initiative this year but so far the financial commitment of less than $200 million is far from the $8 billion to $10 billion required to build irrigation systems, buy and distribute seeds and provide incentives for farmers.

China had similar pressures on its food security as it started its economic reforms in late 1970s. China used hybrid rice to raise yields. More than 60% of the rice area in China is under hybrids. As a result, Chinese yields of rice are almost double those of India, which has less than 3% under hybrids. China produces almost 200 million tons of paddy from 29 million hectares (72 million acres), compared to India’s 150 million tons coming from 44 million hectares (109 million acres.)

India should make a priority of investing heavily in the eastern region by combining technology (say, hybrid rice) with effective incentives for farmers.

However, it must be noted that the current bout of food inflation in India is not being led by staples but by high value agriculture, especially in urban areas. Most of this is perishable in nature and requires very fast-moving infrastructure and well-integrated supply chains.

Given the economy’s weak infrastructure (especially in roads and power), Indian entrepreneurs struggle to build efficient supply lines. The government has just announced a program for peri-urban agriculture, encouraging vegetable production within a radius of 50 kilometers of big cities. But institutional constraints — such as the Agricultural Produce and Marketing Committee Act — which prohibit direct buying from farmers, act as a hindrance to building efficient supply chains from farms to forks.

Given the small landholding size in India (almost one hectare), government policy could encourage the formation of growers’ companies to aggregate farm produce (as was done for milk under Operation Flood in the 1970s) and then encourage large and organized retailers to buy directly from these farmer companies. This can help small farmers in rural areas find markets in prospering urban areas, and in doing so ensure food security.

* Ashok Gulati is chairman of the government’s Commission for Agricultural Costs and Prices and former director in Asia of the International Food Policy Research Institute. The views he expresses here are personal.

Thursday, March 17, 2011

Agricultural output to rise by 3.8% in FY12: CMIE

India's agriculture output is expected to rise by 3.8% in 2011-12 on assumption of favourable weather conditions, Centre for Monitoring Indian Economy (CMIE) said in its monthly review here. "We project that agricultural output will grow for the second consecutive year in 2011-12. It is expected to rise by 3.8%, over an estimated 6.5% growth in 2010-11," CMIE said.

Our projection is based on the assumption that weather conditions will be favourable during the fiscal. Production of major crops is projected to grow by 3.1% in 2011-12, while output of minor crops is projected to expand by 5%, it said.

Foodgrain production set to grow by 3.7% to 236.9 million tonnes in FY12. It will surpass the record level of 234.5 million tonnes achieved in 2008-09. Higher output of rice and wheat will power this growth. Rice holds a share of 40% and wheat 35% in total foodgrain output.

Wheat output has been growing consistently for the last seven years and this trend is expected to continue in 2011-12 fiscal. Wheat output is expected to touch record levels of 82.3 million tonnes in FY12. This increase will be largely driven by wider cultivation in the country's key wheat granaries-Uttar Pradesh, Madhya Pradesh, Punjab and Rajasthan.

In 2009-10, acreage of wheat was an impressive 286.8 lakh hectares. Coverage during the ongoing rabi season has been even more remarkable. By January 2011, it had crossed 290 lakh hectares. This, complemented by a prolonged cold wave in north and central India, is expected to boost production. In 2010-11, wheat production is expected to grow by 1.1 per cent.

Prospects for the rice crop are positive for 2010-11 and 2011-12. Output is expected to grow in both the years on account of increased acreage and yield. Pulses production is also expected to touch record levels in 2011-12.

High accruals from pulses will motivate farmers to enhance coverage in 2011-12 as well. Hence, we project that pulses production will expand by 19.3 per cent in 2011-12, CMIE said. Oilseeds production is expected to revive in 2011-12, after declining for two successive years.

The demand-supply gap in oilseeds has inflated prices considerably for the last three years. Conducive weather conditions alongwith incremental returns, has encouraged farmers to increase the acreage of oilseeds in 2010-11. Hence, output is projected to recover by 15 per cent in 2010-11. In 2011-12, it is projected to grow by 2.9 per cent as steady demand will lead to healthy coverage.

Recommendations of Working Group on Agriculture

The Working Group on Agricultural Production, comprising Chief Ministers of Haryana (Chairperson), Punjab, West Bengal and Bihar has recommended a number of measures for increasing agricultural production and productivity.

A summary of major recommendations of Working Group are as follows: -
1. Bridge the horizontal and vertical gaps in yield by ascertaining these through specific studies and address them through appropriate interventions like timely sowing, balanced use of fertilizers and soil ameliorants, improving water use efficiency etc.

2. Expansion of area under boro (winter) rice by increasing cropping intensity especially in the states of Assam, Bihar, Jharkhand, Orissa, and West Bengal. (Extending Green Revolution to Eastern India programme launched to address this)

3. Assam should also be included in the Extending Green Revolution to Eastern India programme. (Included)

4. As electric power is unlikely to be available to the extent required, it is necessary to assist farmers partly in meeting higher cost of diesel pumping sets for lifting water in eastern states. A scheme on the lines of Diesel Subsidy Scheme of Bihar should be launched in other States also.

5. Undertake an ambitious time bound programme of ground water use through bore-wells, shallow wells and lift irrigation schemes in eastern India.

6. Additional investments are required to maintain canals and to fund research on conjunctive use of brackish water with canal water.

7. Develop and upscale integrated farming systems including crops, horticulture, livestock etc. to generate both on-farm and off-farm employment for small and marginal farmers.

8. Include short duration summer mung-bean varieties under zero tillage in areas under irrigated cereal production systems of the country, and Reintroduce pulses in sugarcane production systems areas. In eastern India, relay cropping of zero till planting of winter legumes (lentil, chickpea etc) should be focussed in ‘rice-fallows’.

9. Promote production of hybrid seed aggressively and provide incentives to Private Sector.

10. Improve seed replacement rate of oilseed crops. Popularise Cyto-plasmic Male Sterility (CPM) based hybrids as they promise substantial productivity enhancement. Superior sunflower hybrids should be developed and promoted in northern India. In castor, special focus is required for the development of hybrids and varieties resistant to abiotic stresses such as drought and salinity.

11. State Seed Corporations should either be reformed/re-organized to make them vibrant organisations or should be closed to allow development of alternative mechanisms.

12. Fertiliser companies should produce right kind of mixtures of nutrients to suit the specific requirements of soils in all agro-climatic zones. Target to bring at least 10% area under bio-fertiliser application. Encourage use of liquid fertilisers.

13. There is need to create appropriate pesticide/ bio-pesticide quality control set up and to provide deterrent punishment for the sale of spurious pesticides.

14. New irrigation technologies like furrow irrigation, mulching, drip and sprinkler irrigation etc. need to be promoted as a national priority. Micro irrigation systems (i.e. drip and sprinkler) must be promoted as a matter of priority in both canal command and rainfed areas. In situ water conservation is the best solution for stability and sustainability of agriculture, and improving yields of crops in the rainfed areas.

15. Institutional development across States is a priority area for equitable flow of credit. Credit should be made available at not more than 4% per annum rate of interest.

16. Farm mechanisation is not only necessary for increasing productivity, but has become essential in view of emerging labour shortage and needs considerable support from Government. A Technology Mission on Farm Mechanisation should be started.

17. Encourage establishment of agri-business centres by Self Help Groups to purchase, maintain and provide farm machinery to farmers under custom hiring.

18. All types of tools, implements, machinery and equipment should be allowed to be freely imported without any import duty.

19. States may consider taking up segregation of feeders for dedicated availability of power to agriculture sector and making power available in un-served areas especially in eastern India.

20. Much needed emphasis to encourage use of solar, biomass and wind power in agriculture is required. It will be highly desirable to initiate a National programme on Harnessing Bio-energy in Agriculture.

21. A time bound programme to fill up existing vacancies in all KVKs and Extension Directorates should be prepared and implemented.

22. Train and Develop Technology Agents through vocational training at State Agricultural Universities for establishment of Agri-Clinics.

23. It is necessary to bring in private sector investments for developing marketing infrastructure to give better choices to farmers and for developing more efficient supply chain for better handling of agriculture produce.

24. System of Spot Electronic Trading, one of the biggest institutional reforms in agriculture marketing system, needs to be institutionalised.

25. Funds available under the Scheme ‘Gramin Bhandaran Yojana’ should be fully utilised to create a network of rural godowns in the country.

26. Methodology of calculating costs of cultivation of Commission for Agriculture Cost and Prices (CACP) must be reviewed in the context of need to provide economic and remunerative prices to the farmers. The Working Group supports acceptance of the National Commission on Farmers’ report suggesting 50% higher price over the actual cost of cultivation or adoption of Bureau of Industrial Cost and Prices (BICP) formula used for estimating industrial costs.

27. Minimum Support Price (MSP) for vegetables, especially Potato, Onion and Garlic, should also be fixed by GOI.

28. Market for agricultural produce must be immediately freed of all sorts of restrictions on movement, trading, stocking, finance, exports etc. No monopoly, including that of APMCs or corporate licensees, should be allowed.

29. Agriculture land ceiling for corporates could be fixed at 25 times the ceiling for individual farmers.

30. Proper policy should be put in place for land lease and contract farming. Guidelines need to be chalked out for contract farming/leasing, to ensure that the rights of both land owner and tenant are safeguarded.

31. Indian companies can be encouraged to buy lands in foreign countries for producing pulses and oilseeds under long term supply contracts to Indian canalising agencies.

32. A consolidation exercise should be taken up by the Planning Commission to convert existing CSSs into a few focussed schemes.

33. From the Twelfth Plan, it will be advisable to extend the NFSM to cover all the districts of wheat producing States. Crops such as maize and coarse cereals (sorghum and bajra) should be included in NFSM.

34. Entire statistical system needs to be revamped to cover all crops and to increase accuracy of data collection and elimination of higher or lower bias.

35. A national system of collecting and monitoring identified weather parameters should be developed and put in place using RKVY and other funds. Market information along with daily weather conditions should be provided to the farmers using modern ICT tools and techniques (SMS, Panchayat e-services, FM radio, AIR, TV etc.).

36. The States may consider setting up separate Universities of Veterinary and Animal Sciences. Union Government should also set up a Livestock Mission

37. Efforts to promote use of plastics in agricultural operations should be encouraged.

38. A coordination mechanism for Ministries of Agriculture, Rural Development, Food and Public Distribution, Irrigation, Fertilisers and Power in the Central/State Government is urgently needed. A Scientific Advisory Council on Agriculture should be created under the Chairmanship of Prime Minister.

39. States may consider bringing all agriculture and allied sector related production programmes under the Agriculture Production Commissioner, for coordinating with other allied departments.

40. A comprehensive policy for insurance coverage of all important food crops and live stock needs to be put in place on priority and the same should be implemented with additional funding support from the Centre, with village as a unit instead of the Block.

41. Norms of Calamity Relief Fund (CRF) should be revised and the compensation for the loss of crops due to natural calamities like flood/drought/frost should be enhanced to at least Rs. 25,000 per hectare.

42. A massive effort for building modern silos to arrest post harvest losses of foodgrains is needed at the national level through both public and private sector interventions as a national priority.

43. In addition to use of location-specific technology, suitable policy initiatives in terms of insurance, preferential credit, strengthening infrastructure and extension services are also needed for climate proofing rainfed agriculture.

Wednesday, March 16, 2011

Why India will never see a 2nd Green Revolution?

Forty years ago Monkombu Sambasivan Swaminathan helped rescue the world from growing famine and a deepening gloom over the future of food supplies. Today, public policy projects itself as pro-farmer but it does it half-heartedly, complains Swaminathan.

M S Swaminathan, member of the National Advisory Council and father of the Green Revolution says the government's allocation for agriculture is insignificant.

Doesn't the Union Budget reflect a new focus on agriculture?

I have got tired of this kind of lip service. In the last budget there was an announcement to encourage 60,000 villages to grow pulses. But the allocation was so small that each village would have barely got Rs 50,000. Revenue foregone in corporate taxes is Rs 3.75 lakh crore (Rs 3.75 trillion) and you give Rs 300 crore (Rs 3 billion) for a second green revolution. It is all lip service!

You were part of the Jawaharlal Nehru and Indira Gandhi establishments and were even appointed as the agriculture secretary. What is the difference between the governments then and now?

It was totally different then. The country was under pressure. We were importing 10 million tonnes of wheat and the population was only 450 million.

A number of books then said India would not survive and Indians would die like sheep going to slaughter houses. There was political support and determination to make the country self-sufficient. Now all that is gone.

The prime minister and the economic survey do vow to bring in a second green revolution. What is the problem then?

Their aim is to bring in foreign companies. They want to hand over the retail sector to Walmart and others. These companies have access to people in power, whether it is Montek Singh Ahluwalia or others.

They are not looking at how small-scale retail and small-scale farming are the largest self-employment sectors in the country.

If you destroy their livelihoods by corporate farming, then what are we talking about? Today, public policy projects itself as pro-farmer but it does it half-heartedly.

So, you don't believe there will ever be another Green Revolution?

Never! For another Green Revolution, you need four ingredients: Technology, which gives a quantum jump in yield; services, like electricity and water; marketing, through a public policy, and lastly, farmers' enthusiasm. The last is the most important input and it is totally absent.

So, there cannot be a second revolution in this country. The NSSO (National Sample Survey Organisation) survey says 45 per cent of the Indian farmers (if given the chance) would not want to continue farming. The Budget has nothing in it to re-instill enthusiasm by improving their incomes.

The National Farmers' Commission had suggested a Mahila Sashaktikaran Yojana and this Budget has omitted it.

Educated youth do not want to remain in villages and continue farming. Is there something wrong with education or agriculture?

There has to be avenues for non-farm income in villages and that alone can keep the youth from migrating to cities. The farm and non-farm sectors should hold each other up and keep the village prosperous.

The youth can set up agriculture transformation centres, which will deal with farm to plate services like storage, processing and so on.

If every village had these centres and bank loans were made available for them, why would educated youth leave villages?

China also brought industry into villages...

No, the original Chinese model in 1980 was about having farm productivity interlinked with non-farm income. The township village enterprises helped them do this.

The report you prepared for the National Farmers Commission has got nowhere. You are still part of the NAC. Do you feel frustrated and angry?

I feel frustrated all the time. So much can be done.

But what you see is the Adarsh and black money scams. Since, there is so much greed revolution in this country, there will be no green revolution.

Agricultural land is under attack all the time. There seems to be no law prohibiting acquisition or changing land use of agriculture land.

Land is a shrinking asset. It goes for housing, roads, everything. But prime farm land should be conserved.

When Morarji Desai was the deputy prime minister and finance minister in 1967, we were discussing building of storage areas for wheat.

He wanted a wheat revolution and wanted storage areas built everywhere. For, at that time, we had them only in ports. It was a port-to-mouth existence.

He called a meeting and said storage facilities should be built only on usar land, that is, unyielding land. He was so sensitive to the need to conserve agricultural land.

When he became the prime minister, he called me and said 'I want someone who knows agriculture to be the agriculture secretary'. And he asked me to be the first and last non-IAS agriculture secretary.

The new chairman of Commission for Agriculture Costs and Prices Ashok Gulati is a non-bureaucrat too. But his views contradict yours. He favours markets driving farmers' incomes, while you say farmers should be given a 50 per cent profit and cost of production as a minimum support price.

Gulati's appointment is as grave an error of judgement on the part of the government as the appointment of the CVC.

It does not bode well for agriculture and, more so, for farmers.

The pro-US interests have the upper hand in the government and the pity is that they don't understand the human aspect of agriculture.

What is your solution for the continuing agrarian distress?

The national policy for farmers calls for an income orientation to farming and the measurement of agricultural growth in terms of the growth rate in the real income of farm families.

It also calls for an integrated action plan involving higher farm productivity and larger income from non-farm activities like providing end-to-end services.

The government should reap a demographic dividend from the youth population in rural areas by facilitating growth of non-farm end-to-end service centres owned and operated by youths.

That can keep agriculture more remunerative and meaningful for farmers.

Why is the country plagued with malnutrition, despite the high economic growth?

High economic growth reflects neither in food intake nor in the prosperity of farmers. The GDP may be growing but the contribution of agriculture to GDP is going down.

People dependent on agriculture are, however, growing in number. So, people are getting poorer not because of poor productivity, but because plot sizes got reduced.

As for the food intake, the government has a list of programmes that don't seem to be reflected in outcomes of good nutrition. These have to be revisited and the matter has to be looked at holistically.

Farm revival and nutrition security

Indian agriculture desperately needs resurgence. Farm growth over the last ten years has been tardy,even as the country registered remarkable rates of economic growth , driven primarily by the manufacturing and services sector.

Rising incomes and demographic pressure generate expanding demand for food products; but output growth lags demand growth, leading to tightening supplies, rising prices and increasing dependence on imports (pulses and edible oil regularly; sugar and wheat occasionally).

India has all it takes to become a farm superpower — with about 270 days of sunshine, over 160 million hectares of arable land, 900 millimeters of annual rainfall, varied agro-climatic conditions and biodiversity, two cropping seasons, over 7,000 km of coastline, and of course, abundant supply of cheap labour.


A five-point action plan as detailed below can lead to agricultural resurgence.

Strengthen the input delivery system: The input market needs to be monitored, and if need be regulated , to ensure easy access of quality inputs (seeds, fertiliser, agro-chemicals) at affordable prices.

Rapidly expand irrigation facilities: Just about 40 per cent of land under cultivation is irrigated and the rest is rain-fed or dependent on vagaries of monsoon. Many irrigation projects have been languishing for long years, while enormous amounts spent on numerous schemes have not yielded desired results. Major field crops (rice, wheat, coarse cereals, pulses, oilseeds, cotton and sugarcane) show no marked increase in acreage under irrigated land over last ten years. Scientific management of water resources will help raise crop yields substantially from the current low levels as well as help raise land use intensity currently at 1.3.

Improve antiquated agronomic practices through revival of extension services; and by involving the private sector through appropriate policy support. adoption of scientific pre- and post-harvest practices as well as infusion of technology inputs such as genetically-modified seeds would help cut on-farm losses. (Bt. Cotton is a good example of success through tech infusion).

Invest in rural marketing infrastructure: Huge budgetary outlays are necessary for building scientific warehouses, primary grading and sorting facilities, revamping the agricultural marketing yards and laying roads to connect them with villages. Quality-related pricing of farm produce will enhance growers' incomes.

Use of information technology to deliver price and market information to growers: Timely delivery of price and market information will convert growers into savvy traders. If public investment in agriculture is stepped up, much-needed private investment will begin to flow into the farm sector.


India can learn from the OECD farm support programme. While developing countries generally attack the humungous farm support programme of OECD countries ($375 billion a year and counting), a look at the details of support would reveal that as much as $85-95 billion year are spent on what's described as ‘general services' to agriculture which include expenditure on research, infrastructure, inspection and control as also marketing and promotion. These are absent in India.

India should invest large sums in general services as described above and build capacity among farmers. Higher farm output through higher yields or productivity gains is the way forward. Agricultural resurgence in India will improve rural incomes and allow easier access to nutritious food as well as other essential goods and services. It will set-off a virtuous cycle.


India suffers from pervasive malnutrition and under-nutrition, especially among the poor in rural areas, and mainly among women and children. This follows skewed pattern of economic growth or ‘growth without equity'.

There are easy policy options to deliver calories and protein to the poor at affordable prices. The Public Distribution System (PDS) which reaches a large number of the poor delivers subsidised rice, wheat and sugar. It is critical that the government includes edible oil and pulses under PDS at subsidised rates.

Admittedly, PDS as it works at present has certain limitations. The government needs to plug leakages through close monitoring and use of innovative means such as ‘smart cards'.

Additionally, in agrarian economies such as India where hunger is turning chronic and shortages endemic, government policies should check rampant marketisation of agriculture and rabid financialisation of agricultural markets. Curbs on speculative capital that chases essential foods in short supply and creates avoidable price volatility are necessary.

Rising incomes and spread of information and communication technology (ICT) are changing people's food habits. Consumers have to be educated about eating healthy foods. A campaign to ‘make eating healthy food fashionable' is needed.


Under the Constitution of India, ‘agriculture', ‘health' and ‘education' are State subjects. Importance given to agriculture, health and education varies across States.

India needs a unified approach to agriculture which can help improve nutrition and health.

It is suggested that ‘agriculture' and ‘health' may be shifted to the Concurrent list so that the Central government can come up with legislation that can be implemented uniformly across the country. Finally, the government must demonstrate ‘political will' to implement progressive and growth-oriented policies. Accountability for outcomes is necessary.


Farming without funds

Is this year’s Budget pro-agriculture and farmer-friendly? The answer is both yes and no. It seems pro-agriculture because Finance Minister Pranab Mukherjee has diagnosed several weaknesses of the farm sector truthfully and has made all the right noises about them in his Budget speech. It seems farmer-friendly since it has proposed some measures that can benefit farmers, in theory.

The downside is that the action proposed in some of the areas identified by the finance minister has not been matched by the fiscal allocations required to produce positive results. So the net impact of the budgetary proposals on agriculture may not be noteworthy. The paucity of public investment in agriculture and allied sectors is also reflected in the total central plan outlay, which has been pitched at Rs 14,744 crore for 2011-12. This is just Rs 382 crore, or 2.65 per cent, higher than the revised estimates of 2010-11. If inflation is taken into account, the provision would work out lower than the last year’s actual spend.

The focus areas include extending the Green Revolution to the eastern region, integrating the development of 60,000 pulse villages in rainfed areas, promoting oil palm, developing vegetable clusters around urban centres, popularising the production and consumption of nutri-cereals (millet and coarse grain), accelerating fodder development, promoting sustainable agriculture and supplementing people’s diet with proteins through livestock development including dairy farming, piggery, goat rearing and fisheries.

Although these are well-conceived and need-based programmes, regrettably, the amount earmarked for at least six of them is a paltry Rs 300 crore each, which is nothing given the magnitude of the task. The scheme for developing 60,000 pulse villages is a case in point. Allocating Rs 300 crore means each village gets Rs 50,000 which may not even cover administrative expenses, let alone worthwhile measures to incentivise farmers to produce more pulses. No different is the case of the much- needed plan to revolutionise agriculture in the east the way it happened in the north-west in the late 1960s and 1970s. This is an idea whose time came long ago but it is still not too late to implement it. Compared to the north-west, the eastern region is agriculturally far better endowed since it has deep and fertile soils, plenty of sweet water and copious sunshine. However, only Rs 400 crore have been set aside to work the miracle of ushering in the Green Revolution in as many as seven states — Assam, West Bengal, Orissa, Bihar, Jharkhand, eastern Uttar Pradesh and Chhattisgarh. One can well imagine how much funding each state will get and what this can achieve.

Also, Mr Mukherjee did not forget to talk about sustainable agriculture to maintain land productivity. He also listed distorted pricing resulting in indiscriminate use of chemical fertilisers among the reasons for deteriorating soil health. Besides, he rightly prescribed the promotion of organic farming practices, such as biological control of pests and weeds and green manuring, to restore soil health. But he kept mum about allocating funds for this purpose.

This apart, the finance minister has, in a significant move, opted to raise the subsidy on interest charged by banks on agricultural loans to those farmers who repay their dues on time. This will reduce the effective rate of interest chargeable to such farmers to just 4 per cent — the level suggested by the National Commission on Farmers headed by noted agricultural expert Dr M S Swaminathan.

However, the worry is that this will prompt banks to lend more and more money to the same set of farmers who repay their loans regularly (generally large farmers). Small and marginal farmers, who actually deserve cheaper finance, may be left out since they are, at times, forced to default on repayment because of natural disasters and other factors beyond their control.

On agricultural marketing, the Budget speech has merely spelt out the weaknesses that denied the producers remunerative prices even when the consumers paid high prices. But it fell short of stipulating concrete action to remove these problems. This being the reality of Budget 2011-12, its impact on the vast agricultural sector is not too difficult to foresee.

Surinder Sud for Business Standard

Monday, March 7, 2011

What’s in Budget 2011 for Farm sector?

  • FM hints at inclusive growth, indicates double-digit growth in the near future

  • Food inflation declined in the last year but remains a concern

  • Rural economic growth helped India avoid the quagmire of a global meltdown

  • FM acknowledges that the implementation gaps in the PDS is a big challenge

  • GDP estimates grew at 8.6% in 2010; 9.6 % in services, 5.2 % in agriculture sector

  • Exports grew 29 percent, imports by 17.6 percent

  • Wholesale-retail price imbalance unacceptable. Need to improve the distribution system of food and agriculture

  • FDI policy liberalisation being looked into

  • 36.4% of total budget outlay to be allocated for social sector development

  • Cold storage to be recognised as an infrastructure sector

  • 150 lakh mT of storage capacity for food items being created under Rural Godown scheme

  • Proposals for 15 more food parks during 2011-12

  • Vegetable initiative to set in motion a virtual cycle of production and distribution. Allocation of Rs 300 crore for implementation of vegetable initiative to provide quality vegetable at competitive prices.

  • Oilseed production to go up in 2010-11 as against 2009-10; 100,000 hectares added to oilseed farming

  • National Mission for Sustainable Agriculture

Government to promote organic farming methods, combining modern technology with traditional farming practices.

  • Outlay of Rs 500 crore to increase agriculture productivity

  • Green revolution in eastern region to be given a fillip with additional allocation of Rs 400 cr to bolster paddy growth

  • FM announces Women's Self-help Group Development Fund of Rs 500 crore

  • India Micro-finance Equity Fund of Rs 100 crore proposed

  • FM proposes removal of bottlenecks in supply of essential food items

  • Capital infusion into PSU banks; Rs 20,000 crore proposed

  • Slew of bills to make the financial sector more open in 2011-12

  • FM allocates Rs 600 crore for various environmental schemes in 2011-12

  • Rs 2 lakh crore from National Clean Energy Fund allocated for Green India Mission
  • Food Security Bill to be introduced this year

  • Fertiliser companies to get investment-linked tax deductions

  • Nutrient Based Subsidy (NBS) has improved the availability of fertiliser; Govt. actively considering extension of the NBS regime to cover urea

  • Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from Rs 6,755 crore to Rs 7,860 crore.

  • Allocation of Rs 300 crore to promote 60,000 pulses villages in rainfed areas

  • Allocation of Rs 300 crore to bring 60,000 hectares under oil palm plantations. Initiative to yield about 3 lakh Metric tonnes of palm oil annually in five years.

  • Allocation of Rs 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties.

  • National Mission for Protein Supplement

Allocation of Rs 300 crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries.

  • Accelerated Fodder Development Programme

Allocation of Rs 300 crore for Accelerated Fodder Development Programme to benefit farmers in 25,000 villages.

  • National Mission for Sustainable Agriculture

Government to promote organic farming methods, combining modern technology with traditional farming practices.

  • Agriculture credit

1) Farm loan @ 4%

2) Agricultural credit to farmers to grow from Rs 3,75,000 cr to Rs 4,75,000 cr

3) Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for

4) providing short-term crop loans to farmers who repay their crop loan on time.

5) In view of enhanced target for flow of agriculture credit, capital base of NABARD

6) to be strengthened by Rs 3,000 crore in phased manner.

7) Rs 10,000 crore to be contributed to NABARD’s Short-term Rural Credit fund for 2011-12.

  • In view of recent episode of inflation, need for State Governments to review and enforce a reformed Agriculture Produce Marketing Act.

  • National Food Security Bill (NFSB) to be introduced in the Parliament during the course of this year.

  • Indirect Taxes exemptions

1) Scope of exemptions from Excise Duty enlarged to include equipments needed for storage and warehouse facilities on agricultural produce.

2) Basic Custom Duty reduced for specified agricultural machinery from 5 per cent to 2.5 per cent.

3) Basic Custom Duty reduced on micro-irrigation equipment from 7.5 per cent to 5 per cent.

4) De-oiled rice bran cake to be fully exempted from basic Custom Duty. Export Duty of 10 per cent to be levied on its export.