The Year that went by…..

This last year’s journey forward for India was rife with hopes and speculations as the general elections were round the corner. When many parties paid the price and leaders got grounded in the elections for ignoring agriculture, the Congress could harvest the rewards for its pro agriculture stance, esp. with the loan waiver scheme.

The union budget which was presented right after the election results on July 6, 2009 by the Finance Minister, Mr. Pranab Mukherjee, also attached great significance to agriculture. Proposing direct transfer of fertilizer subsidy to farmers, nutrient based subsidy regime for fertilisers and National Food Security Act (NFSA) were some of the highlights of the budget. FM also proposed of increasing agricultural credit flow for the year 2009-10 to Rs 3,25,000 crore, the payment of an additional subvention of 1% to farmers who repay their short term loans on schedule, and special attention to farmers who had taken loans from private money lenders and who have not been covered by the earlier loan waiver scheme. An allocation of Rs 39,100 crore was provided in the budget for NREGS, a whopping increase of 144%. The budgetary allocations were increased by 75% over the last year for Accelerated Irrigation Benefit Programme (AIBP).

The drought and floods that rocked the Indian coasts during 2009, also deeply impacted the crop fields. The government pegged the rice output at 71.65 mt for 2009-10 kharif season, a steep reduction from the 2008-09 kharif season’s 84.5 million tonnes. The decline in farm output pushed the prices of essential food items north. The index of primary articles showed food reaching a 10-year high of 19.95 per cent during the first week of December.

Another significant event that took place last year was the GEAC’s approval to introduction of Bt Brinjal. Though the actual introduction may take some time, it is higly unlikely that it will miss the boat. When approved, Bt Brinjal will become the first GM food crop to be cultivated in India and also the first GM brinjal to be approved anywhere else in the world. This will open the gates for many other GM food crops that are in various stages of trials.

Last year also witnessed the collective strength of farmers and their clout in policy decisions. The Center’s FRP of Rs 129.84 per quintal measured much lower than the SAP announced by the UP government which amounted to Rs 160-170 a quintal. It was not a surprise when the farmers united by the opposition took to Rallies and Dharnas. So a clarification soon ensued when the Parliament passed a Bill that introduces the new sugarcane price regime, after the government allayed concerns of the Opposition that states would not be required to pay the difference between Central and State Advised Price to farmers.

Next in line to follow was the signing of FTA with ASEAN countries. The tariff reduction of certain farm products can be deleterious to the farming community. So the new year will be crucial as to see how the treaty will affect India’s farming community.

As the economic recession stormed the entire world, India and to more extent India’s rural lands were unscathed in this flurry of economic inactivity. So did the industry on which the rural folks dependent the most. The agri input industry thrived exceedingly well when compared to the exigencies that the Indian agri scene went by.

Climate change is not a possibilty but a real threat, the signs of which are apparent from the untimely rains, drought, flood and declining crop productivity. The Copenhagen Climate Conference 2009 therefore was critical. Although no legally binding commitments for reducing CO2 emissions were made in the Copenhagen Accord, atleast the document recognized that climate change is one of the greatest challenges of the present and that actions should be taken to keep any temperature increases to below 2°C.

The last year in many ways was an eye opener to our policy makers. The fact that we are not prepared enough to face food crunch and the absence of a permanent disaster management strategy has been quite evident. Our persistent ineptness to cope with the sudden changes in the farming situations and the archaic policies that we fervently follow has started to affect our country. So the year 2010 may be a year when we can see many policy changes that will be designed to quell our fears or atleast to create an illusion of security.

The Unstoppable Food Price Rise

India is the country, where governments both at the Centre and in at least one state have been voted out over soaring food prices. While the government reviews the pricing of cereals, pulses, fruits and vegetables in the light of food inflation crossing 20 per cent fuelling overall inflation the statistics on wholesale prices present a grim picture. But for hundreds of millions of Indians across the country, the steep climb in food expenditure has been a harsh daily experience for some months now. According to official data, the prices of rice and wheat have increased by 11.75 per cent and 12.6 per cent, respectively, on a year-on-on year basis.

Spurred by the soaring prices of essential food items like pulses, potato and other vegetables, the annual rate of increase in the prices of food items soared to 19.95 per cent the highest in more than a decade as supply shortages hit hard. Food inflation stood at 19.05 per cent at the end of November. There are food items where the government has no such intervening role; and their price trends tell a more compelling story. Thus the price of bajra has gone up by 27 per cent, and that of dals by 60-70 per cent. The story applies to vegetables as well. There is also the strange case of sugar, which is sold at regulated prices by the government in open markets as well as through the PDS. Over the past year, its price has gone up by 125 per cent in wholesale markets across the country. The same story applies to the diets of non-vegetarian Indians. Mutton price has risen by 33 per cent this year. In the poultry sector, the price of chicken has gone up by 29 per cent, while egg price has doubled. The price of fresh water fish is up by 76 per cent.

But Mr Sharad Pawar is in no mood to accept the neglect from Govt’s side and laments that the soaring price is a global phenomenon, the government is making determined efforts to contain the prices of food grains and essential commodities, unprecedented rise in prices of essential commodities have created a serious difficulty for people. He also added that one of the reasons for rising prices can be attributed to this year's climatic conditions, but added we are confident that the policies of the government will ensure that rise in certain essential food commodities will definitely be brought under control, which warrants more intervention by the state governments in the market.

Some in the government view the current price rise as seasonal, mostly affecting fruits and vegetables, and feel that when the new crop arrives in January and February, rates will ease up. Others are less sanguine. They argue that while drought was undoubtedly a factor, ineffective action against hoarders remains a major stumbling block. Food prices are not going to come down anytime soon as the government expects the supply-side constraints to continue in the short-term due to a drop in summer farm output on account of poor monsoon and floods in some parts of the country, the finance ministry said in its mid-term review but hoped to stem spiralling prices through imports.

A parliamentary committee has pulled up the finance ministry for its failure to intervene timely and squarely to address price rise with due seriousness. The committee recommended that a comprehensive food pricing management policy be formulated not only to provide the much needed relief to consumers but also an antidote for the growing economic imbalance in the country. In its analysis of the causes behind the price rise, the committee noted wide variation between wholesale and retail prices in commodities like rice, pulses, potato and onion suggesting artificial shortage and spiking of prices by intermediaries.

Economists feel that in the face of soaring food prices the immediate objective of the RBI will be to curb inflationary expectations by adopting tight monetary policy. RBI Governor D Subarao recently said “If food price inflation persists for long, they can fuel inflationary expectations and the monetary policy will have to take a view on this.” The government has already asked states to ensure that the nation-wide public distribution system delivers foodgrain at controlled rates to the poor. It may follow this up with open market sales at lower prices for the middle class.

Rise in prices of primary articles of consumption of the common man that has been occurring in the recent times is indeed a cause of concern, and this needs to be attended to on an urgent basis. The government can augment supply through imports, it expressed doubt that this option may not be available for certain commodities such as pulses, available only in limited quantities in the international market.

Intensity and Impact of Drought- Looking Forward

With over 250 out of 533 meteorological districts declared as drought-hit and rice production alone expected to decline above 10 million tons, the situation in the country on food front is grim. The cascading effect of drought on many sectors is discernible, necessitating strategies on priority. The prolonged monsoon failure is likely to affect stored moisture dependant rabi season for early sowing of crops. Depleted water in reservoirs would aggravate the situation unless drastic steps are taken.

South west monsoon is crucial for agriculture production with kharif crops comprising cereals, pulses, oil seeds and vegetables. Livestock and fisheries sectors also thrive well with copious rainfall. In normal rainfall years the productivity showed upward trend, while any deviation in rainfall tended to lower productivity curve depending the deficit levels. The cumulative rainfall during the season is a major parameter to define either excess or deficient rainfall. If the shortfall is between 20% and 59% of the normal rainfall, it is defined as ‘deficient’, while shortfall above 60% in the cumulative rainfall is considered ‘scanty’. The country experienced both in different States.

Intensity of drought: From the very beginning of monsoon there was erratic rainfall in some States. By early August the deficiency in cumulative rainfall was 25%, but within ten days increased to 29%. By mid August the Meteorological department placed 115 districts under ‘scanty’ rainfall category, with ‘deficient’ category enhanced to 262 districts. The normal or excess rainfall occurred only in 149 districts. When computed on the basis of normal average rainfall over five years this year’s failure is much higher in ten States. The announcement of daily and weekly fluctuations resulted in statements like ‘monsoon will recover’, ‘grim monsoon’, ‘do not panic’ which reflected on lack of adequate preparations to face the crisis. By the time the realization on the intensity of drought dawned it was too late for many initiatives. The infrastructure, expertise and funds in plenty did not help in time as people expected. Even to declare the States and country as ‘drought-hit’ was debated for long.

State scenario: The Western Uttar Pradesh was the worst hit with 68% shortfall, followed by Delhi-Haryana-Chandigarh belt with 66%; Eastern Uttar Pradesh was better with 53%. All the three regions of Andhra Pradesh recorded deficiencies as high as 59% in Telangana, 51% in Rayalaseema, but little less in coastal regions with 46%. The situation was no better in Himachal Pradesh (51%), Jharkhand (49%) Marathwada (47%) and Uttarakhand (42%). Although there was slight improvement in Punjab and Bihar due to mid season showers, the deficiency increased later to 35% and 40% respectively. In the North East region the shortfall ranged from 33% (Arunachal Pradesh) to 37% (Assam and other States). Although the deficiency was less in mid July in Tamil Nadu and Puduchery (16%) and Northern Karnataka (17%), the cumulative rainfall declined to 22% in these regions by the first week of August. Similar deficiency was recorded in Gujarat (from 22% to 31%), West Madhya Pradesh ( from 21% to 28%) and East Madhya Pradesh (from 35% to 39%). Thus, monsoon played havoc in major parts of ‘food baskets’ of India.

Ground realities: The immediate impact of the drought was that majority of kharif crops could not be raised and even those raised with initial good rainfall suffered later due to water stress. It is estimated that the deficit in rainfall in Uttar Pradesh, Bihar and Jharkhand took a heavy toll of 57.10 lakh hectares of paddy fields. The area under groundnut fell short by 11.28 lakh hectares, sugarcane by 1.29 lakh hectares and coarse cereals by 1.17 lakh hectares. In Andhra Pradesh both paddy and maize were affected in Warangal district. In Khammam paddy was taken up only under 9000 ha as against 1.15 lakh ha. Only 1.15 lakh ha could be taken up against 8.21 lakh ha under groundnut in Ananthapur due to acute water shortage. Many Kharif vegetables were lost to the tune of lakhs of tons caused by drought stress. In many States, fodder grass suffered with poor growth and barren land, which affected livestock. One of the States reported marked decline in milk production, due to water and fodder starved cows. With drying up of small ponds and lakes even fishes died causing hardship to low income communities in rural India

Decline in agriculture productivity: As a consequence of much lowered cultivable land for food crops, including nutritionally rich vegetables, the country is poised for a near food crisis, notwithstanding buffer stocks. As the vegetables constitute ‘current consumption’ category of food the people in the adversely affected areas would have gone without normal intake of vegetables which would lead to malnutrition. As admitted by the Union Agriculture Minister 57.10 lakh ha of paddy land could not be cultivated, which amounts to a loss of roughly 13.7 million tons ( at the rate of 2.4 tons per ha). This is a huge kahrif deficit of staple food. Even coarse cereals consumed mostly by rural low income population would show a decline of nearly 0.60 million tons due to 1.17 lakh ha rendered uncultivable. A deficit in groundnut production to approximately 3.28 million tons is anticipated with lowered area of 11.28 lakh ha. Likewise, sugarcane yield is likely to decrease nearly by 30 to 35%. Although estimates are not available, fodder grass production would also be lowered significantly with impact on animals. Reliable estimates are awaited on the shortage of milk production caused by fodder starved animals. Thus the contribution of kharif food production in 2009 to the overall production with rabi by 2009-10 is expected to be much lower than the average food production of last five to ten years. The drought-induced decline in the food production in 2009-10 is likely to be much higher than the other drought years.

Excess or normal rainfall: Fortunately, some of the States in South and East India received fairly good rainfall, some even accounting for excess. So the crops in such situations fared well giving hopes for good yield. The crops included paddy, pulses and oil seeds with vegetables with normal production, though some areas did report decline due to floods. Whether increasing the level of cultivation in these areas would help in solving or compensating the loss suffered due to deficit rainfall in major States? It would not have been possible to increase the potential of the areas without adequate preparations both land wise and input like seed materials. Neither the Central nor the State Governments anticipated the problem, though such contingency plan should be ready in future.

Looking forward: Generally, with the cessation of SW monsoon in September with normal rainfall, ensuring storage of soil moisture used to help greatly rabi crop sowing operations. With North East monsoon supporting the early crop growth, as also irrigation at required stages, crops like wheat and pulses used to perform well with good harvest in April. But, the current year is different with calamitous monsoon with acute water shortage resulting in dried soil and poor to nil conservation. This is going to cause problems for rabi as well, even if the North East monsoon is normal. The shortage of ground water in many places would pose problem to irrigate crops at critical stages. According to the Central Water Commission the water level in the country’s reservoirs is around 38% of total capacity by mid August. A normal SW monsoon would have enhanced the levels in reservoirs but that was not to be this year. This clearly indicates that the dwindling water resources would hamper irrigation for rabi crops. If NE monsoon is also erratic the situation would worsen with difficulties for redemption. The only hope, therefore, is normal NE monsoon rainfall to cope up with the rabi production to sustain the trend in production, though it would not compensate the heavy shortage of kharif. How to tackle the situation to save at least the rabi production? The answer lies in large scale water harvesting structures in buildings to trap rainfall, field moisture conservation strategies, planting of proven stress resistant/tolerant varieties of crops with distribution to farmers in adequate quantities well in time and enhance the efficiency of irrigation channels to be ready to supply water to crops at right time. At the social/ community level, judicious rationing of water for industrial and real estate purposes, strict restriction of water supply for domestic consumption uniformly to all areas including VIPs, heavy penalty for wastage of water and theft are all appropriate measures the Government has to implement with strong political will to save the citizens from impending food crisis.

To sum up, the apparent unpreparedness on the part of the authorities, both Central and State Governments until drought situation worsened in August might serve to learn the unlearnt lessons, despite drought being an age old problem, well researched for decades, with many committee recommendations. The problem is most difficult but not impossible to solve with coordinated strategies with time bound implementation of decisions.

- Dr. Rajagopal V., Ex – Director, CPCRI, Kasargod-

INDIA, DROUGHT & PRICE RISE

India is reeling through a crisis seen after a long time. Continuous good monsoon had brought a sense of well being among the Indian policymakers about our food security. However failing rains across the country has busted quite a few myths. The entire country barring the Saurashtra peninsula of Gujarat has received inadequate rainfall till the week ending 5^th August. Parts of western UP and Haryana have received up to 64%-61% less rainfall from average. Nearly 60 percent of India’s farm sector is dependent on monsoon rains between June and September. This year has witnessed one of the driest spells in eight decades, as according to IMD. While the debate rages whether Global Warming is the prima facie culprit for this situation, the effects are far ranging and for the 214 million Indians below the poverty line who are denied access to two square meals a day, the implications are disastrous.

The spectre of drought looms large over as many as 161 out of 626 districts in India due to deficient monsoon, Finance Minister Pranab Mukherjee said in New Delhi recently, but asked citizens not to panic. “One hundred and sixty one districts have been declared drought-prone. As far as sowing is concerned, 20 percent would be down,” Mukherjee told reporters on the margins of an annual conference. “Monsoon situation is still erratic,” he warned, but added: “But there is no point of pressing the panic button. You all will go and start chanting drought, drought, drought and it will have an adverse impact.” Mukherjee said Punjab and Haryana, two most important states for food output, were fortunate since they use groundwater extensively, even as Bihar and Uttar Pradesh were facing shortage of water.

Rice has been the worst hit, with the area declining by 6mha. Sugar follows closely. While Uttar Pradesh, the second-largest sugar producer, has declared drought in 47 districts, Maharashtra has cut its sugar output forecast to 4.6mt from 5mt predicted in June. Global sugar prices have jumped to their highest in more than 25 years as India, the world’s largest consumer, has had to tap the global market to offset the impact of the poor monsoon on the country’s sugarcane crop. Prices in India are, however, still lower than the cost of imported sugar.

Crisil Economist, Dharmakirti Joshi said any shortage on food can push up the consumer price index much faster this time as the index is very high in comparison to previous drought situations in 2002-03. “If the monsoon revives from now on, the damage to crops may be limited. But the damage done to crops such as paddy can’t be undone now,” he said. Tushar Poddar, vice-president and chief economist at investment bank Goldman Sachs India, said that the weak rainfall could reduce agricultural growth to -2 per cent year-on-year, down from an earlier estimate of 1.4 per cent. And UBS has warned that if rainfalls failed to improve, real growth in GDP could be 1 to 2 per cent lower this year than its forecast of 7 per cent. A Citigroup study said the damage on the price front had taken place. Despite the mitigating factors like the possibility of a better winter crop and higher food stocks, primary product prices have begun to spiral. Commodities hit include pulses, rice, fruit and vegetables and cereals with tur dal, a lentil native to India and part of the staple diet, costing over Rs.100 a kilogram in several states.

Prime Minister Manmohan Singh indicated that the government is ready to undertake open market intervention to prevent the rise in grain prices caused by deficient and delayed monsoon rains. “We should not hesitate to take strong measures and intervene in the market if the need were to arise,” Singh said at a meeting of state chief secretaries in New Delhi recently.

A contingency blueprint being drawn up by officials proposes higher sugar and pulses imports, a ban on edible oil exports and curbs on futures trading in commodities whose prices are rising fast. India may have to import 3-4mt sugar — international prices have begun rising in anticipation of higher demand from India. India needs 18mt of pulses a year but its production fell short by 3.4mt last year because of water shortage in central India. This year, fears of more water scarcity have shrunk the acreage by 10%.

So far, 58 districts in UP, 26 in Bihar, 24 in Jharkhand, 12 in Himachal Pradesh and 9 in Manipur have been declared drought affected while 27 in Assam, 11 in Nagaland and 10 in Maharashtra are facing drought like conditions. Asking the Union power ministry to provide additional electricity to states like Punjab, Haryana, UP, Jharkhand and Bihar, who have suffered crop loss, the agriculture minister said the government will bear the cost of the diesel subsidy (50% of the cost usually borne by the state government).

Ajay Loganadan, Head-Investment Advisory Group, HSBC Private Banking said a 2% output reduction in agriculture, actually impacts our GDP by only 1%. "Given the fiscal stimulus policies and the policy measures that have been announced, which are largely geared towards the rural sector, we believe that should really offset the negative impact of monsoons."

The rise in prices of food items in June and July this year has been up to 32% as compared to 18% in the corresponding period in 2008. The retail price of tur, ruling at Rs 62 a kg in June, rose to Rs 82 a kg by the end of July. At present, tur has skyrocketed to about Rs 90 a kg in many places across the country. Chana dal (split chick peas), which was going at Rs 47 a kg in June in Kerala, now cost Rs 56 a kg by July-end. A 19% year-on-year jump in the price of pulses, a 15.5% leap in the cost of rice and similar rises for fruits and vegetables has been noticed recently.

"The lower the income category, the more of their total income they spend on food and the more food prices rise, the more it hurts the 'common man, said Crisil's Dharmakirti Joshi”. The already high prices of food items may skyrocket further, and deficit agriculture production was likely to push up prices of essential commodities in the near future. Experts have been warning that the food situation in the country is going to be "dangerous" from September. Already, prices of oil and pulses have zoomed in the last couple of months, making them out of reach for the poor.

The harvest of pulses during kharif 2008 had suffered a serious setback, and the prospect is none-too-good in the current season, due to the erratic monsoon. Imports, which have been a regular feature to beef up supplies, have run into rough weather due to depleted inventories in our traditional markets and international prices too are bullish. To add to the woes, delays in port clearances are also reported as well as some hoarding in the hope that a further upswing in pulses may be in the offing.

But, now, not enough pulses are available abroad while the prices are also on the high side. Unlike cereals, where official stocks are sizeable and adequate to take in stride a harvest setback, the story is different in regard to pulses.

In a larger sense, pulses have been a victim of neglect. Relegated to marginal lands, and varietal breakthrough elusive, with minimal inputs and poor irrigation cover, production has languished in the face of rising demand.

To augment the pulses, shortages being faced in India, members of the Pulses Importers Association will be importing 4 lakh tonne over the next three months. India produced 14.66mt of pulses in the 2008-09 season against the annual requirement of over 18 million tonne. The gap is bridged through imports. Supply constraints pushed prices of pulses like arhar to Rs 90-100 a kg from Rs 60 two months ago. The sugar and pulses supply is causing main concern for the govt., as hoarding is widely prevalent even after the stringent open warnings of Mr. Sharad Pawar and Manmohan Singh. The edible oil scenario is also not much bright and it is decided to import 42% of total oil needs this year. But it is upto the state governments to ensure the deliveries of stocked foodgrains and other edible items at the prices affordable to the last common man. The hoarders have to be sternly dealt with by developing a fool proof mechanism. Its very tough time for the UPA govt., as they are facing challenges on all fronts of drought/ monsoon failure, food scarcity and swine flu. Mr. Manmohan Singh and his cabinet have to show their guts and come victorious, without letting down the common man.

- Abid Hussain-