Turning agriculture around should be the top priority of government in the new year.
India became the world’s fastest-growing economy in 2015. Indian agriculture, however, fared much worse. Agriculture grew only by 0.2% in FY15. Two consecutive years of drought, unseasonal rains in rabi season and falling food prices in global markets have driven farmers to desperation. Turning agriculture around should be the top priority of government in the new year. We suggest changes in five existing government programmes to bring agriculture back on track in 2016.
Irrigation: More than half of India’s net sown area is rain-fed and droughts continue to be the most common reason for crop loss to Indian farmers. The government launched the R50,000 crore Pradhan Mantri Krishi Sinchai Yojana (PMKSY) in 2015 to increase irrigated area and reduce risk in agriculture. The central budget for irrigation has doubled with PMKSY. However, increasing budget allocation alone would not be enough.
Between 1991 and 2007, India invested over Rs 2.55 lakh crore in public canal systems—five times the PMKSY budget. Yet, the canal-irrigated area decreased by 38 lakh hectares during that period. Similarly, even after decades of 50-90% subsidy, micro-irrigation covers less than 5% of India’s cultivated area. We can repeat the same old mistakes in PMKSY or we can learn from the successful irrigation programmes in recent years.
Madhya Pradesh increased its irrigated area increased by 20 lakh hectares between 2003 and 2014 with public investment of less than Rs 2,000 crore. Improving the management of irrigation systems created this miracle in the state. Similarly, Gujarat has been successful in promoting drip and sprinkler irrigation when most other states have faltered. Developing farmer-friendly ways of delivering micro-irrigation subsidy and changing subsidy norms to foster more competition among suppliers are major reasons for Gujarat’s success.
Solar pumps: Rapidly declining cost of solar panels offers yet another opportunity to make irrigation more affordable to farmers. IFPRI research in Bihar shows that solar pumps led to increase in crop yields and cropping intensity, and allowed farmers to successfully grow paddy even in a drought year. In Rajasthan, solar pumps helped fruit-growers reduce cost of irrigation, improve product quality and earn higher returns from agriculture. Like micro-irrigation, state governments are smothering the spread of solar pumps also by ill-designed subsidy schemes. Rather than high subsidies, public policy should focus more on innovative financing mechanisms to promote adoption of this technology in agriculture.
Soil health: The year 2015 was the ‘International Year of Soils’. The government has launched an ambitious programme to deliver soil-test based recommendations for fertiliser applications to all 140 million landholders. IFPRI’s research shows that the soil-testing programme will have little impact on fertiliser use in agriculture.
Farmers’ incentives also need to change. Urea is heavily subsidised; other fertilisers are not. Policy-makers fear a backlash if any attempt to reduce subsidy on urea is made. However, Uttar Pradesh and Gujarat have shown that it can be done. Since 2011, urea attracts an additional tax of R940 per tonne (17.7%) in Uttar Pradesh and Rs 300 per tonne (5.5%) in Gujarat without much political backlash or deleterious effect on agriculture.
Pulses: The year 2016 has been named the ‘International Year of Pulses’. India is the largest producer, consumer and importer of pulses in the world. However, pulses prices are uncomfortably high at the moment. Many state governments have started subsidising pulses through the public distribution system (PDS). IFPRI research shows that including pulses in PDS is an expensive policy with only a small impact. The only meaningful way to make pulses affordable is to increase their production in India. After remaining stagnant at 13-14 million tonnes per year for four decades, pulses production has jumped to 18-20 million tonnes in recent years. We need to build on this momentum to raise production to at least 25 million tonnes by 2020. This is an entirely achievable goal.
Farm mechanisation: Farm mechanisation can increase productivity, profits and sustainability of agriculture and reduce drudgery of farmers. The challenge is to make machines small and affordable. The government provides capital subsidy on machines. It should also support research & development (R&D) to develop smaller, cheaper and more fuel-efficient machines. The majority of Indian farmers will always rent machines from others. We need competitive machine rental markets. Else, machines will become a major source of rent extraction from smallholders. Radio-taxi like mobile phone-based applications and custom-hiring centres in the public-private mode are some such innovations that need to be tested and scaled-up.
Indian farmers have always been quick to respond to incentives. They can once again turn agriculture around from a drag to a major driver of India’s growth story. Let us hope that our state and central governments will take the necessary steps to bring prosperity to our farmers through right policies.
Joshi is director South Asia, and Kishore is research fellow, International Food Policy Research Institute (IFPRI)