Thursday, February 21, 2008

Making agriculture attractive

Making agriculture attractive

With the 2003-4 budget giving agriculture the go-by, Devinder Sharma outlines five criteria that nation's finance minister must keep in mind while crafting budgetary policy for agriculture.

March 2003 - Successive Finance Ministers have spared no effort in eulogizing agriculture. Presenting the Budget 2003-2004, Finance Minister Jaswant Singh had remarked that agriculture is the life blood of our economy. A year earlier, his predecessor, Yashwant Sinha had romanticized agriculture, saying that his Budget was aimed at ensuring freedom of the farmer -- "kisan ki azadi".

It all began with the former Finance Minister Mr Manmohan Singh, the chief architect of the new economic policy. In his famous 1992-93 Budget speech, Singh had said "Agriculture is the foundation of national prosperity and no strategy of economic development can succeed in our country if it does not ensure rapid growth of production and employment in agriculture. Nor can we hope to provide sufficient jobs for our growing rural labour force unless we can transform the economy of our rural areas." And yet, he concluded by saying that agriculture being in the concurrent list, he was expecting the States to accord top priority to the farm sector.

Successive Finance Ministers have spared no effort in eulogizing agriculture.
This unfailing lip service glorifying farmers continues unabated. And in the bargain, Indian agriculture has been pushed into an era of unforeseen crisis - increasing suicides among farmers, mounting rural indebtedness, unmanageable glut at the time of harvest, swelling rural to urban migration - clear pointers of the gathering storm clouds over the farm sector. In fact, ever since liberalisation became the economic mantra, and the impetus shifted to business and industry, the persistent neglect of agriculture has cast an ominous shadow.

Since the dawn of economic liberalization in June 1991, the annual Budget has become a political instrument to provide sops and tax holidays to the corporate sector, trade and industry. In essence, Budget 2003-2004 too is targeted at India - the urban centers. What happens to the masses - comprising the Bharat where more than 80 per cent population lives - has never been the concern of the successive Finance Ministers. It never was.

For a country, where nearly 85-90 per cent of the 110 million farming families, somehow eke out a living from less than 2 hectares of land holdings, Jaswant Singh's misplaced emphasis is on encouraging 'precision farming' to bring in hi-tech horticulture. Interestingly, he says precision farming technology is aimed at judicious utilization of natural resources like land, water as well as time. "Demonstration of these technologies will also be part of this scheme," he added, little realizing that precision farming is a highly sophisticated and expensive model which collapsed even in United States at the height of the worst drought (in 2002) the country faced in recent memory.

With the World Trade Organisation (WTO) and structural adjustment programme finally beginning to bare its fangs, the long-term viability of agriculture and the survival of the farming community itself is at stake. More so, at a time when Indian agricultural is faced with a sustainability crisis - declining productivity, falling commodity prices and sluggish exports. The resulting political cost of continuing with the benign neglect of agriculture and the farming sector has finally begun to surface.

Ressurecting agriculture should, therefore, be the obvious challenge for any Finance Minister. Successive budgets show emphasis, through the use of cliches like strengthening marketing infrastructure, scientific management of scarce water resources, empowering farmers to take informed decisions and so on. A growing volume of evidence now clearly suggests that such jugglery in presentation has not helped. What is needed is a fresh approach that takes the ground realities into consideration before embarking upon any policy imperatives.

In the rest of this article, I have made an attempt to present a collection of five important rational decisions that would certainly initiate the revival of Indian agriculture. All budgetary allocation for agriculture should be made keeping these criteria for sustainable growth in mind:

Sustainable farming
Indian agriculture faces an unprecedented crisis in sustainability. Foodgrain productivity in the food bowl, comprising Punjab, Haryana, and western Uttar Pradesh, is on the decline. The green revolution areas are encountering serious bottlenecks to growth and productivity. Excessive mining of soil nutrients and groundwater have already brought in soil sickness. Introducing new Centrally Sponsored Schemes to improve production in these areas is going to be counter-productive. Banking upon genetically engineered crops to take care of the second-generation environmental impacts is sure to worsen the existing crisis. Monocultures breed pests and waste resources.

Jaswant Singh should have made provision that encourages sustainable and traditional farming practices. He must discourage investments and increased outlays for agricultural research that is based on external chemical inputs like fertiliser and pesticides (glad that he raised the prices of fertilizers, though under pressure from World Bank). Instead, financial allocation should be made for reviving low-input agriculture, which uses cheap and locally available technology and in turn improves production and protects environment. This has been amply demonstrated in several parts of the world. Outlays earmarked for genetic engineering in agriculture also need to be diverted to sustainable agricultural practices.

Farm incomes
Growing indebtedness in agriculture is forcing an increasing numbers of farmers to end their lives. This unsavory phenomenon is a manifestation of the declining farm incomes and lack of farm credit. Institutional finance and credit has almost disappeared over the years. Banks are no longer treating agriculture for priority sector lending. Rural Banks and cooperatives are deep in the red, with a majority of them eating into their own reserves.

Bank loans for cars are available at a much cheaper rate of interest than tractors. The more the poverty level, the more is the rate of interest. Some tribals in Kalahandi in Orissa who pay 460 per cent interest to moneylenders. In neighbouring parts of Madhya Pradesh, the rate of interest is a little lower at 360 per cent. And in Jharkand State, tribals pay something around 160 per cent rate of interest. Even in the frontline agricultural States of Punjab and Haryana, 50-60 per cent rate of interest by private moneylenders is not very uncommon.

Agriculture credit has to be revived. Finance Minister must spell out schemes that encourage banks to provide easy credit facilities to farmers. Cosmetic innovations like Kisan Cards and the likes are not much helpful unless banks have the willingness to provide support to the agrarian sector. Asking private banks to go rural is merely an approach that may satisfy the galleries. Similarly, budget allocation must be made for assured food procurement at remunerative prices. In addition, procurement needs to be extended to coarse cereals, pulses and oilseeds to provide farmers an incentive to produce more.

In short, agriculture has to be made attractive. Finance Minister must ensure that the Budget allocations are made in such a way that it helps bring back the shine on the golden grain.

Drought proofing
Recurring drought continues to engulf vast tracts of central and north western India. The importance of drought proofing should have been obvious considering that foodgrain output had slumped by over 13 per cent in 2002-03 as a result of the severe drought that swept through the almost the entire country. Rajasthan, for instance, faces the fourth drought year in a row. The increased emphasis on water harvesting notwithstanding, the reduced availability of water is emerging as a major social and economic crisis. This is because much of the investment is going into a faulty technology of rain water harvesting, called the "Ridge to valley" system, a technology imported from the United States.

Much of the investment in water harvesting going into a faulty technology called the "Ridge to valley" system, as opposed to revival of ponds and tanks.
Investments in rain water harvesting needs to be immediately shifted to the revival of the traditional forms of water conservation - ponds and tanks. Subsidies for drip irrigation and sprinkler irrigation needs to be discontinued as it helps only the rich farmers and corporates. Fodder cultivation, crop planning according to the water needs and availability and the emphasis on the local breed of cattle (and improving its productivity, rather than importing exotic breeds) need to be encouraged.

Farmers in the rainfed areas also need to be insured against drought. This can be ensured by making it mandatory for the foreign insurance companies to invest at least 40 per cent of their funds for farm insurance.

Sugar mills
The unprecedented addition of new sugar mills by successive governments has created a major crisis on the agriculture front. Requiring good fertile and irrigated land for cultivation, its growth is at the cost of staple foods like wheat and rice. With the per hectare productivity of foodgrains on the decline in the frontline agricultural states, diversion of good fertile land to sugarcane is not without accompanying hiccups. What makes the switchover to sugarcane a pernicious trend is its enormous water requirement. Sugarcane, in fact, is the biggest threat to India's food security.

Since there is no shortage of sugar in the country, and with a large number of mills actually being rendered unviable over the past two decades, an immediate ban needs to be imposed on setting up any new sugar mill. All budgetary support to the sugar industry needs to be withdrawn as it has led to a serious environmental crisis.

Sugarcane is the biggest threat to India's food security.
Sugarcane farmers need to be encouraged to divert to other crops. But before diversification becomes the new mantra, it is important to first lay out the structures that would help in taking the produce to the consumers.

Providing an assured and remunerative market for agricultural producers cannot be left to the market forces. The food policy imperatives of public distribution system and announcing the procurement prices before the crop season have to be further strengthened. Agri-processing too needs to be strengthened, but not at the cost of the domestic producers. The Finance Minister must ensure that food-processing sector uses the abundant raw material available within the country. The 'rainbow' revolution that everyone talks about is actually aimed at helping the industry to exploit the farm sector. Already a number of manufacturing units, for instance, have begun to source the agricultural raw material, including oranges, grapes, popcorn, peas etc, from America and Europe.

Although, India is following the WTO dictates of doing away with the food procurement system, any tinkering with what is generally regarded as the "famine-avoidance" strategy, can be catastrophic. The Finance Minister needs to take corrective measures to reduce inefficiency in the system while at the same time making it broad-based and widespread. PDS also needs to be extended to upcoming agricultural areas in Bihar, Orissa, West Bengal and the northeast.

What is desperately need is an annual Budget that helps bring back the smile on the face of farmers rather than the industrialists who have already milked the public exchequer dry.

Devinder Sharma
March 2003

Devinder Sharma is a food and trade policy analyst. He also chairs the New Delhi-based Forum for Biotechnology & Food Security. Among his recent works include two books GATT to WTO: Seeds of Despair and In the Famine Trap