column: Lets not piss away agriculture

Written by Sunil Jain | Updated: Apr 17 2013, 06:03am hrs
Ajit Pawar wouldnt need to piss in Maharashtras dams if the state didnt waste so much water in sugarcane

With Union food minister Sharad Pawar interceding on his nephew Ajit Pawars behalf, presumably the controversy over the latters insensitive remarksshould I piss in the states dams to fill them upwill die down soon. But Maharashtras drought-proofing requires a lot more serious thought than the flippant ones expressed by its deputy CM. Though the controversy over the R70,000 crore spent on creating irrigation facilities in the state is behind Ajit Pawarthe states white paper said the facilities had been created, as compared to a report saying nothing had been createdthe larger problem the state faces is similar to that in the rest of the country. The state grows too much of the wrong crop, resulting in a massive fall in water availability for the rest of the agriculture sector. While sugar accounts for just around 3% of the states total cropped area, it uses 60% of its total irrigated water consumption.

Sadly, the problem isnt restricted to just Maharashtra, or sugarcane. In the case of rice, the average Punjab farmer uses up 5,389 litres of water per kg of rice. This is double the 2,713 litres used in West Bengal. But no one really cares since the water is free. In the long-run, what it means is the states water-table is falling by around 3-4 metres each yearaccording to GS Kalkat, in charge of helping Punjab diversify from paddy, the way the water table is falling, even cultivating wheat would be a problem in the years ahead. On an average, the government gives the Punjab farmer R12,000 per acre per annum as power and fertiliser subsidy.

The obvious reason for why the situation persists is that the distortions in the minimum support prices (MSPs) announced by the government make it lucrative for the farmer to grow the wrong crops. The CACP has tried to fix things by, for the first time in Indias history, announcing a MSP for corn that equals that of paddycorn uses 80% less water and, based on current productivity levels, will give the farmer the same amount of money. Charging farmers for electricity to pump water will, of course, change the equation even faster, as theyll then look at all costs. The problem, of course, is that the state government is always free to increase the bonus on this; more important, if FCI isnt going to be procuring corn, how does the increased MSP help In most states, paddy and wheat sell at way below the MSP as there is hardly any FCI procurement there.

Moving away from rice in Punjab would not only help preserve water, it would help fix the havoc that vastly subsidised fertilisers have wreaked in terms of the nutrient balance. Higher soya cultivation, for instance, would also help fix nitrogen levels.

Apart from the fact that the government needs to accept the CACP recommendations of increasing MSPs of other crops while reining in those of rice and wheatthe 5% level recommendation for paddy is the lowest ever in the last 5 years and will probably go down badly with farmers, which would be problematic in an election year. You have to hear the Bhupinder Singh Hooda ad jingles on radio to know how important raising MSPs is.

One way to accept CACP recommendations while not hurting farmers is to move to a fixed subsidy per acre that is disbursed by the state directlyso, to use the Punjab farmer analogy, if he gets a subsidy of R12,000 per hectare per annum on paddy, give him that anyway even if he shifts to soya or corn.

That, in fact, is critical if India hopes to make its agriculture sustainable. Moving crops to eastern Indiarice from Punjab to West Bengal would help halve water requirements but would lower output by around 30% given the relative difference in yields. In the case of wheat, moving from Haryana to Madhya Pradesh would lower output by around 60%.

Apart from, say, per-acre-MSPs in eastern states, the local government need to be supportive in many other ways. In the case of sugar, Indias biggest production centres used to be Bihar and eastern UP traditionally. Once the licensing regimes for sugar mills came about, it became difficult to get themcooperatives as in Maharashtra found it easier to get licences, so the industry shifted there, and with this, the cropping pattern also changed. Getting higher yields in the eastern states means, for instance, governments need to have market yards, encourage building of cold storages and the private sector to set up milling/crushing units along with those to process the food. In most states, farmers produce can only be sold in government-mandated mandis, and through designated arhatiyas, leaving very little for the farmer. So, you can increase the price as high as you want, but the farmer will get little from it. In the case of Punjab and Haryana, mandi taxes are so high, they add up to around 14% of the price that FCI pays farmersin the case of Punjab, at R3,600 crore in FY12, the mandi taxes accounted for nearly 18% of the taxes it collected on its own.

CII-McKinseys latest report, which projects a 5.2-5.7% per annum growth in agriculture over the next two decades, has several recommendations including an agriculture technology mission, but the greatest changes will come from the government altering the incentive structure. CACP chief Ashok Gulati never tires of citing the Bt cotton storyfrom nothing in FY02, 80% of Indias cotton crop was Bt by FY08; this, despite the view that Indias R&D and extension systemto help farmers adopt new technologieswas supposedly comatose.

None of this is to say various agriculture missions wont helpindeed, the R4 lakh crore required to complete the irrigation potential in the country can come only from government, which chooses instead to fritter away a fourth of this each year on fertiliser and power subsidies for the farm sector. But, ultimately, there is no escaping the fact that markets need to be allowed to work first. A good example of this, the CII-McKinsey report points out, is that while the first report projected the food processing sector would be R2,25,000 crore in 2005 (at 2004 prices), in 2010 the size of the sector, at 2004 prices, was just R66,000 crore. Another important table in the CII-McKinsey report is the one on the relative efficiency of public and private extension services. While the Kisan Vikas Kendras spend 0.09 hours per cultivator per year, the private ones spend 2-3 hourswhile the former has 1 technical person for every 54,000 farmers in this beat, the figure is 1 for around 1,000 farmers for the private sector. As in the case of other sectors, the greatest help the government can render is to allow markets to functionto the extent, subsidies are being sought for areas like Bihar and West Bengal, these are to get over the distortions created over 65 years.