'Farmers need to be organised to achieve economies of scale'
Abhijit Sen, member, Planning Commission, spoke on policy models to increase profitability of farming and the implications of the impending global food crisis for India in an interview with ET. Excerpts:
By KG Narendranath, TNN |
Abhijit Sen, member, Planning Commission, spoke on policy models to increase profitability of farming and the implications of the impending global food crisis for India in an interview with ET. Excerpts:
The Economic Advisory Council to the Prime Minister has revised its estimate of the growth in agriculture sector this fiscal to 3.6% from 2.5% projected earlier. Do you share the council’s outlook?
I’m a bit less optimistic on this projection by the council. The growth could be above 3% but perhaps not as high as 3.6%. See, the winter rainfall in north India has been poor. The rabi oilseed output might have been badly affected by this. There could be a substantial shortfall, say 10%, of mustard and rapeseed output. Grams could witness a decline also. A marginal decline in wheat production could not be ruled out.
Although the monsoon in 2007 was okay, it wasn’t that great either. Concentration of rainfall created floods in certain areas, causing loss of areas (under cultivation) in states like Bihar and Tamil Nadu.
But still, if one takes the average of the last three years (2005-06, 06-07 and 07-08), the farm sector growth must have grown by more than 4%. My strong belief is that the growth of 2.8% reckoned for 06-07 would prove to be under-estimate. It might get revised to 3% or more. The growth was estimated at 5.5% for 05-06. Hence the average of over 4%.
As a very large section of India’s farm land is rain-fed, monsoon situation continues to be the single most important variant to determine to farm output growth. There continues to be a huge unpredictability about the growth trends. We have not had a great Monsoon, so to say, since 2003, except, perhaps, in 2005.
Aren’t the government’s efforts to augment public and private invest-ment in agriculture bearing fruit?
Public investment in agriculture had been on a constant decline from early eighties to 2003-04. The trend has since changed due to a deliberate policy shift. In the last three years, public investment in agriculture has gone up substantially. Plan expenditure in agriculture, which of course is not all investment, as it comprises the outlay for subsidies, various mission-mode projects (like the national horticul-ture mission), has more or less doubled since 2004.
Apart from the central government outlays routed through various central ministries, the states also spend roughly the same amount as the centre, especially for irrigation projects etc. These investments might have already contributed in some measure to the growth in output.
What do you attribute the recent year’s steep increase in cotton production, Bt cotton or cotton technology mission?
The increase in cotton output is more because of Bt cotton than the cotton technology mission. Cotton output has gone up substantially in the last three years, and area under cotton, to a lesser extent. The utility of farm sector missions sponsored by the government is mostly that of giving direction to the stakeholders.
The Planning Commission does not seem to have a clearly defined policy to address the dichotomy, remunerative prices to the farmers and essential goods at affordable prices.
There needs to be balancing act on this front. Ensuring both profitability of investment in agriculture and affordable prices to the consumers is an especially difficult question in the Indian context. Indian farmers are mostly poor. It is not sufficiently profitable to invest in agriculture. At the same time, the poorest people, the farm and casual labourers, can’t buy even at these prices which the farmers find non-remunerative. It is therefore a question of how we work the PDS (public distribution system) and all.
I’m a bit less optimistic on this projection by the council. The growth could be above 3% but perhaps not as high as 3.6%. See, the winter rainfall in north India has been poor. The rabi oilseed output might have been badly affected by this. There could be a substantial shortfall, say 10%, of mustard and rapeseed output. Grams could witness a decline also. A marginal decline in wheat production could not be ruled out.
Although the monsoon in 2007 was okay, it wasn’t that great either. Concentration of rainfall created floods in certain areas, causing loss of areas (under cultivation) in states like Bihar and Tamil Nadu.
But still, if one takes the average of the last three years (2005-06, 06-07 and 07-08), the farm sector growth must have grown by more than 4%. My strong belief is that the growth of 2.8% reckoned for 06-07 would prove to be under-estimate. It might get revised to 3% or more. The growth was estimated at 5.5% for 05-06. Hence the average of over 4%.
As a very large section of India’s farm land is rain-fed, monsoon situation continues to be the single most important variant to determine to farm output growth. There continues to be a huge unpredictability about the growth trends. We have not had a great Monsoon, so to say, since 2003, except, perhaps, in 2005.
Aren’t the government’s efforts to augment public and private invest-ment in agriculture bearing fruit?
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Public investment in agriculture had been on a constant decline from early eighties to 2003-04. The trend has since changed due to a deliberate policy shift. In the last three years, public investment in agriculture has gone up substantially. Plan expenditure in agriculture, which of course is not all investment, as it comprises the outlay for subsidies, various mission-mode projects (like the national horticul-ture mission), has more or less doubled since 2004.
Apart from the central government outlays routed through various central ministries, the states also spend roughly the same amount as the centre, especially for irrigation projects etc. These investments might have already contributed in some measure to the growth in output.
What do you attribute the recent year’s steep increase in cotton production, Bt cotton or cotton technology mission?
The increase in cotton output is more because of Bt cotton than the cotton technology mission. Cotton output has gone up substantially in the last three years, and area under cotton, to a lesser extent. The utility of farm sector missions sponsored by the government is mostly that of giving direction to the stakeholders.
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The Planning Commission does not seem to have a clearly defined policy to address the dichotomy, remunerative prices to the farmers and essential goods at affordable prices.
There needs to be balancing act on this front. Ensuring both profitability of investment in agriculture and affordable prices to the consumers is an especially difficult question in the Indian context. Indian farmers are mostly poor. It is not sufficiently profitable to invest in agriculture. At the same time, the poorest people, the farm and casual labourers, can’t buy even at these prices which the farmers find non-remunerative. It is therefore a question of how we work the PDS (public distribution system) and all.
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There are fairly large number of people who are not “poor” yet holding the BPL (below poverty line) cards.
True. At the same time, only about 30% of the poor have BPL cards. We haven’t yet got the identification right. In Bihar and Orissa, for instance, over 40% of the people are poor as per the Planning Commission’s own definition. Also, many states have defined poverty more inclusively. Clearly, a lot of people are left out (of the BPL status and hence the PDS).
According to the central government’s estimate, poverty in Andhra Pradesh is 11-12%. But the state government reckons 60% of the people are poor. There is a lot of disparity in PDS models existing inn various states. How the state government defines poverty is one thing; some states have a PDS culture while others don’t.
The surveys on the extent of usage of PDS by states often produce different results. One reason for the prevalence of relatively stronger PDS in southern states could be that they produce less food and are therefore more responsive to the threat of food deficit.
Agriculture processing zones, contract farming, value-added farm goods, are you in a position to say that these programmes would indeed make farming profitable enough?
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On private sector initiatives like contract farming, the results so far have been very mixed. For instance, relatively larger farmers must have benefitted in some cases, but not others. It is still early days to conclude either way.
Even as privatisation involving large players happens, a whole set of issues is being thrown up, many of them artificial. Even after the recent amendments to the APMC laws, there are complaints of en-trenched traders denying others entry. In agriculture sector, things do not happen overnight. The Planning Commission thinks that a lot of progress can be made in two areas, horticulture and animal husbandry.
Considering that average farm size in India is less than a hectare, there needs to a lot of organisation to achieve economies of scale. This is especially true for perishable goods. It is not that small farm holdings don't allow economies of scale. These scales can be achieved in the area of marketing and processing, if the corporate entities are able to inspire trust among farmers.
China’s average farm holding is just half a hectare, yet it is doing well in agriculture. We have the reasonably successful model of sugar industry for such coordination among farmers and the processors/marketers, but this is yet to be replicated in sectors like horticulture, despite the obvious potential. What is also important is to equip and empower farmers to shift to non-agri jobs. As more than half of Indian farmers are illiterate, this is a huge task at hand.
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How will the surge in global food prices impact India?
The global situation (of soaring food prices) is largely due to the creation of a huge alternative demand for foodgrain in the bio-fuel industry. This is bad news for the world’s poor as the farm subsidies doled out by the western governments would not now reach the poor in the world, as much as earlier, but the users of the fuel.
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For India, we will have to increasingly reduce the dependence on food imports. The food security mission might also help meet any eventuality, if it gets to work as desired. Anyway, producing enough (food) may not be enough. In the absence of export curbs, the availability of food could be affected, for instance. There should be a potent policy mix to address the issue.
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