In a first-if-its kind initiative, the government has sought R6,000 crore as a soft loan from the Asian Development Bank for planting natural rubber in an additional 1 lakh hectares identified in seven northeast (NE) states.
Anticipating that the move could anger rubber growers in Kerala, where more than 90% of the domestic production comes from, the government has decided to give them an insurance cover to offset losses when prices fall below a certain level.
According to official sources, the ADB assistance, to be availed of by the Centre, would be extended to the NE states — 70% as loan and the balance as grant. Farmers would be leased out the identified government land conducive for cultivation of rubber and given funds for meeting initial cultivation cost. The idea, the sources said, is to cut natural rubber imports, which constitute 40% of domestic consumption at present.
If the experiment of using multilateral money to improve rubber productivity becomes a success, it will then be extended to other plantation crops such as coffee and tea, the sources said.
After having received a positive response from ADB for this proposal, the commerce ministry, the sources added, has written to the seven NE states. The Prime Minister’s Office is keen to expedite the process, while the ministry will hold a workshop to seek responses from the stakeholders on the new approach.
Arunachal Pradesh — which has 8,000 of the targeted 1 lakh hectares — has agreed to participate in the project while replies are awaited from other states such as Assam (50,000 hectares), Mizoram (16,000 hectares), Meghalaya (12,000 hectares), Tripura (10,000 hectares), Manipur (2,500 hectares) and Nagaland (1,500 hectares). The potential area for rubber cultivation in the seven NE states is 4.5 lakh hectares, including 1.55 lakh hectares already planted. Of the remaining 2.95 lakh hectares, the newly targeted area for planting rubber is 1 lakh hectares.
Prime Minister Narendra Modi has made boosting economic growth in the northeast one of his priorities, given the necessity to tackle insurgency, left wing extremism and the region’s strategic importance.
Kerala, a major rubber producing state, has objected to the proposal saying rubber growers are suffering due to prices falling to a six-year low. It claims higher production will result in prices dropping further, adding to farmers’ woes. While an insurance cover is being offered to the state’s growers, a part of its cost will have to be borne by the state government. Commerce ministry sources claimed that some Kerala-based growers are considering forming joint ventures with their northeastern counterparts to grow rubber there.
What has also prompted the ministry to seek ADB funds is the reluctance of states to allocate enough funds for plantation crops such as rubber, the sources explained. The crop’s long gestation period makes it difficult for the government in power to show any immediate positive results before the electorate, they added.
The Centre also has limited resources owing to fiscal constraints. The ADB had recently said it is aiming for a 50% hike in lending to India to $12 billion by 2018.
The commerce ministry is also in talks with the ministry of environment, forests and climate change (MoEF) regarding the clearances for planting natural rubber in the identified 1 lakh hectares The MoEF had on previous occasions objected to activities that would include cutting forests and monocropping areas (growing the same crop for years without rotating it with other crops) saying it would lead to destruction of biodiversity. The commerce ministry has also sought the MoEF’s nod to treat natural rubber as part of ‘forest produce’ in the Indian Forest Act.
In 2014-15, India’s natural rubber production fell by around 17% over the previous fiscal to 6.45 lakh tonnes, while domestic consumption grew 4% to 10.2 lakh tonnes. As a result, imports of the item were up 22% to 4.4 lakh tonnes in the year, while exports stood at just 1,000 tonnes. Production is likely to grow by 16.3% to 7.5 lakh tonnes this fiscal, while consumption is estimated to grow by 3.4% to 10.6 lakh tonnes in FY16.