High time that policymakers revisit the entire gamut of rice and sugar systems, from MSP/FRP to production and procurement, ensuring ‘more crop per drop’
By Ashok Gulati & Ritika Juneja
Agricultural exports touched $41.8 billion (bn) in FY21—a growth of 18% over FY20—bringing cheer in government circles. Juxtaposed against a target of $60 bn the Modi government had set out to achieve by 2022, it falls much short. From a strategic point of view, the key issue is whether this rate can be sustained? For that, we look at the composition of agri-exports.
Rice ranks first in agri-exports, with 17.7 million tonnes (mt) valued at $8.8 bn. It is followed by marine products ($6 bn), spices ($4 bn), bovine (buffalo) meat ($3.2 bn), sugar ($2.8 bn), etc (see graphics). Of these, rice and sugar raise concerns about competitiveness and environmental sustainability, as these are water guzzlers and heavily subsidised through cheap/free power for irrigation as well as fertilisers. On top, sugar exports have been further subsidised to clear excessive domestic stocks. This has led many sugar-exporting countries like Australia, Brazil, Thailand, etc, to register a case against India at WTO.
However, our main concern with the surging rice and sugar exports is on the sustainability front. India is a water-stressed country with per capita water availability of 1,544 cubic-metres in 2011, likely to go down further to 1,140 cubic-metres by 2050. One kg of sugar invariably has virtual water intake of about 2,000 litres. Exporting 7.5 mt of sugar implies exporting at least 15 bn cubic-metres of water. In case of rice, irrigation requirements for one kg vary from 3,000-5,000 litres, depending upon topography. If we take an average of 4,000 litres, and assume that half of this gets recycled back to groundwater, exporting 17.7 mt of rice means virtual export of 35.4 bnn cubic-meters of water. Together rice and sugar exports imply India exported over 50 bnn cubic-metres of water. Any sustainable strategy for rice and sugar exports must ensure these are produced with much less water by adopting appropriate farming practices such as alternate wetting drying (AWD), direct seeded rice (DSR), drip irrigation, etc.
But, at a broader level of agri-trade, it may be noted that in the seven years of the Modi government, agri-exports have remained lower than the level reached in FY14 ($43.3 bn) (see graphics). That’s the year when maximum agri-trade surplus (exports minus imports) was generated ($27.8 bn). That’s also when Indian agriculture was most globally integrated, with agri-trade (exports plus imports) touching 20% of agri-GDP. It has slid to 13.5% by FY21, indicating India is becoming less competitive in exports and more protectionist in imports, presumably in the name of Atmanirbhar Bharat. A long-term strategy should aim at conserving scarce water resources, reduce carbon footprint, with lower tariffs. Closer evaluation of non-basmati exports reveals another interesting fact: These exports are actually sourced not only below-MSP, but also below the average mandi prices in the country, after one adjusts for freight from mandi to port and loading charges at the port. How does that happen? One possibility is that part of the supplies through PDS and PM Garib Kalyan Yojana are leaking out and swelling rice exports.
It is high time that policymakers revisit the entire gamut of rice and sugar systems, from their MSP/FRP to their production and procurement, ensuring ‘more crop per drop’. In case of rice, procurement will have to be limited to the needs of PDS, and within PDS it is high time to introduce the option of direct cash transfers. All these will go a long way to promote better diversification of our agri-systems, better use of our scarce water supplies, lesser GHG emissions, save on unproductive use of financial resources locked up in burgeoning grains stocks with the FCI. And all these savings can be used for doubling investments in agri-R&D to improve productivity on sustainable basis and improve farming practices for minimising carbon emissions. An export-led strategy also needs to minimise logistics costs by investing in better infrastructure and logistics. Only then one can ensure sharing the returns of these investments with farmers to give them better deal in terms of higher and more stable incomes.
Gulati is Infosys Chair Professor for Agriculture and Juneja is a Consultant at ICRIER