Agriculture: High and Dry

High are the prices of agricultural produces, and dry are the fields. But the high prices are mostly in the retail sector. So, it’s only “dry” for the farmers. This shortly sums up this year’s agricultural scenario.

Bad luck comes in company. So, along with the onset of economic slowdown since the later half of last year, this year, the rain god has suddenly gone off for a long vacation. Severe lack of rainfall has created a drought situation for almost half of the country, and along with a plunge in global demands due to ongoing downturn this is creating havoc in the agricultural sector which has experienced a major slowdown in 2008-09.

Agricultural Output
The growth rate of agriculture and allied activities decelerated from 4.9 per cent in 2007-08 to only 1.6 per cent in 2008-09, implying an alarming fall in growth rate by 3.3 per cent.

Over the production in 2007-08, total volume of foodgrain production in 2008-09 has reduced by 0.4 per cent. In fact, apart from the increase in volume of production of rice by 2.8 per cent, all other foodgrains has experienced a decline in production in 2008-09 as compared to 2007-08. While pulses production has declined by a significant 3.9 per cent, wheat production has declined by a noticeable 1.2 per cent. The production of the coarse cereals has also declined by a significant 5.1 per cent in 2008-09 as compared to 2007-08

The production of the non-food crops is in a more dire state. Total production of oilseeds has declined by 5.5 per cent, while sugarcane and cotton production has declined by 16.9 per cent and 10.1 per cent respectively. The production of jute and mesta also declined by 7.9 per cent in 2008-09 as compared to 2007-08.

Agricultural Prices
The prices of agricultural produces have gone through tremendous inflationary phase over the last one year. The WPI inflation of food articles in primary commodities has gone up to 7 per cent in 2008-09 from 6.5 per cent in 2007-08. The contribution to inflation of the food articles increased from 13.2 per cent in 2007-08 to a massive 129.2 per cent in 2008-09.

Rainfall and Area Cultivated
This year, rainfall has been 26 per cent less than the normal levels. The acuteness of the problem can be understood by the fact that out of total 600 odd districts in India, 252 have been declared drought hit as of mid-September. It is grave problem for agriculture, particularly for a country whose 60 per cent of cultivable land is rain-dependent.

The area of cultivation of Kharif paddy acreage is still lagging significantly by 62.35 lakh hectares from the last year’s levels. This means at least 10 million tonnes of less rice will be produced this year. Jowar (sorghum), bajra (pearl millet), sugarcane and groundnut are the other major crops, whose cultivation area has reduced significantly as compared to last year’s levels due to drought situation.

Farmers’ Suicides
Despite last year’s farm loan waiver scheme, the ghost of farmers’ suicide is still posing a challenge for the government. The recent reports of spate of suicides among farmers in Andhra Pradesh or more recent news of self annihilation of farmers in Vidharbha is questioning the commitment of the government towards the farming community of this country.

Government Initiatives and Indifference

• In Budget 2009-10, the government has increased its Central Plan outlay by about Rs 600 crore as compared to the last year. However, this amount might prove to be too meager to overcome the current downturn in agriculture. Moreover, some crucial areas such as soil and water conservation have been, as usual, neglected.
• While remaining committed to increasing irrigation on paper, the government has not increased the budget spending on micro-irrigation from what was spent last year. This will surely cause severe problem in the long-run and particularly in the short run.
• Allocation on Rashtriya Krishi Vikas Yojana has been increased by more than 40 per cent from what was actually spent last year.
• The allocation on important projects and schemes for North Eastern region and Sikkim has been increased by negligible amount. We may have to pay a high price for neglecting these important projects to bridge the gap of regional disparity in agriculture.
• The government is continuing with the pay ups of the rest of the farm-loan waiver amounts in this year as well. The government has also extended a subsidized loan scheme for those who clear their dues in time. However it would have been better if government tried to revive the sector by increasing public investment directly, rather than in an indirect manner by providing credit for the banks and hoping that the money will be utilized by private players as loans.
• Based on the recommendations of the National Commission on Farmers (NCF), the government has adopted the National Policy on Farmers. The major policy provisions are provision for asset reforms, water use efficiencies, bringing new technology, disease free planting materials, good quality seeds, and support for women, credit, insurance etc. There are also initiatives to include bajra, jowar, ragi and millet in the food security basket.
• However, the government did not pay any attention towards the key recommendations of the NCF. There is still no effort to implement the recommendation of providing agricultural credit at 4 per cent rate of interest. Neither there is any initiative to build up a remunerative price mechanism for the farmers’ produce.
• The Public Distribution System (PDS) is suffering heavily under sheer government negligence. On the contrary to the recommendation of the NCF to revitalise and universalize PDS, the government is making every effort to dilute it further.
• There has been a whopping Rs 25,000 crore reduction in fertilizer subsidy in Budget 2009-10 over what has been actually spent in 2008-09. This reduction in subsidy will certainly be accompanied by increase in price of fertilizers. In this state of general economic crisis, and a particularly grim agrarian situation, reduction in fertilizer subsidy may prove disastrous.

Act or Perish
The need of the hour is to find out solutions for the root problems that are troubling the agricultural sector. However, such problems will be intricately related with the general structure of the overall economy. A proactive planned State intervention in the problems of the agricultural sector is the need of the hour.