Tuesday, December 12, 2006

By Gyan Pathak

“Agriculture as a whole is in crisis,” says the Prime Minister of India. Is this a realization of the ground realities or a preparation of the background for yet another “economic adventurism”? The question is important more so because we had put the rein of this country when we had already achieved self-sufficiency in food security at the national level and we have lost it under his rule. We expected him to guarantee food security at the household level, but amidst the euphoria of new economic policy and reform with “human face” thousands of farmers had to commit suicides. He pursued his own path despite warnings of sabotaging the agriculture sector of this country under GATT and WTO regime. He has been al along following the dictations of the IMF, World Bank and ADB who, in the name of helping India, are trying to get this country governed by their policies.

The latest example is of Asian Development Bank (ADB) which wants two things in this country. First, water should be priced, even underground water. Second, there should be agriculture reform in the line they want to be, especially creation of “private farming sector”. Our government is trying to do both. National level efforts are being made to devise a mechanism to price underground water, and within three days of the announcement of Dr Manmohan Singh in the National Development Council meeting about the agricultural crisis and “difficult policy changes needed”, ADB announced a package of one billion dollar loan to India for giving loans to farmers in five states - Andhra Pradesh, Madhya Pradesh, Maharashtra, Rajasthan and one of the two states Gujarat or Orissa. Our government is already working for creation of a mechanism to enable the governments to acquire lands from the people and giving them to big companies for agriculture.

This is precisely the reason that the very definition of “private sector” is being slowly changed. Agriculture is certainly not private sector, however, in the approach paper of the Eleventh Five Year Plan (2007 - 12). It says, “The private sector, including farming, small scale enterprises and the corporate sector, has a critical role to play in achieving the objective of faster and more inclusive growth. This sector accounts for 70% of the total investment in the economy and our policies must aim at creating an environment in which entrepreneurship can flourish.”

The Prime Minister is the chairman of the Planning Commission, and therefore, the statements are a serious matter. It reveals the direction in which the government is trying to proceed, especially in the backdrop of the crisis in agriculture that is unquestionably the biggest worry of our economy which grew just by 1.7 per cent compared to four per cent a year ago. If we see agriculture in the context of overall growth of over nine per cent in the GDP, we have to painfully accept the fact that the share of agriculture has been dramatically on the decline.

The Eleventh Plan (2007 - 12) envisages 9 per cent growth rate. It has been calculated on the basis of various assumptions including the agriculture growth targets explicitly derived from the demand side assuming virtually zero growth in agricultural imports and a step up in the rate of growth of agricultural exports by 10 per cent per annum. It is misleading in the backdrop of the agricultural crisis in which India needed to import lakhs of tonnes of foodgrains for the last two years.

If this country is to achieve 9 per cent growth rate in the Eleventh Plan, it needs 4.1 per cent growth rate in agriculture. “It is not an easy task,” even the approach paper says.

Actual growth of agricultural GDP, including forestry and fishing, was only one per cent per annum in the first three years of the 10th Plan and even the most rosy projections for 2005-06 and 2006-07 would limit this below two per cent for the full five year period. The challenge posed is to more than double the growth rate achieved in the 10th Plan.

What to do in this scenario? The Planning Commission intends to handle this by taking actions on both the demand and the supply side.

On the demand side, the approach paper accepts that farmers face adverse demand conditions. Not only has agricultural growth been low in the last decade, the prices received for agricultural products have also failed to keep pace with the costs or the general price level and, as a consequence, profitability has declined.

Thinking in the Commission is that we have to anyhow increase the demand for agricultural produce, which it thinks is possible by increasing rural sector activities including rural roads, employment guarantee, Bharat Nirman and other schemes. It laid especial emphasis on creation of an “integrated national market”, agricultural exports, and strengthening support to agricultural diversification for domestic food processing industry.

On the supply side, it is accepted that doubling agricultural growth is a very difficult task, especially so because no dramatic technological breakthrough comparable to the “green revolution” is presently in sight. We are also not exploiting the potential of existing technology. “In fact, most of the growth required in cereals, pulses and oilseeds is possible merely through plausible yield increase in currently low yield regions,” the paper admitted.

The National Commission of farmers has drawn attention to the knowledge deficit which constrains agricultural productivity. There have to be a linkage between farmers and experts, but extension system to establish and maintain this link has been virtually collapsed. The farming practices in large part of the country are sub-optimal. The approach paper portrayed ignorant farmers as culprits of misusing fertilizers that damages productivity of the soil. “These imbalances are themselves to some extent the result of a system of fertilizer subsidy which is irrational,” the approach paper says. It is a clear indication of the government intension to end fertilizer subsidy in coming years.

Farmers have never been getting farm credits at reasonable rates, and it is accepted by the paper as a “persistent problem”. In large part of the country the cooperative credit system is collapsed. Organized credit system through banks and other similar institutions has failed leading to excessive dependence of farmers on informal sources at exorbitant interest rates. “It is at the root of farmer distress,” thinks the Planning Commission.

The paper envisages “structural changes in the relation between agriculture and non-agriculture.” The government wants it to be market oriented and amend APMC Acts. It may be mentioned here that such reforms are being implemented in the new economic policy, which the government wants to accelerate in the coming years.

The government is for a type of agriculture production that “meet the specific requirements of the different markets being served.” “Contract farming is a potentially effective way of attracting corporate investors,” the paper envisages. “Although very limited at present, many states have already taken steps to facilitate this potential to assist the process of diversification. A greater focus is, however, necessary on enabling small farmer participation by encouraging group formation and providing suitable and effective regulatory frameworks. Existing vested interests in traditional trade channels often oppose these changes but they must be overcome.”

Similar to the Special economic zones (SEZs), government is planning to establish “Specific agro-climatic zones” in various parts of the country to introduce corporate farming, where owners of small holdings will have to give their land to the corporate houses. #