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January 2011 Vol 55

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Editor : Manogyan R. Pal

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C O N T E N T S

CHALLENGES OF A RURAL URBAN CONTINUUM ................5 Yoginder K Alagh

HARNESSING THE DEMOGRAPHIC DIVIDEND FOR AGRICULTURAL REJUVENATION ...................................12 M S Swaminathan

CLIMATE CHANGE AND INDIAN AGRICULTURE ................16 K V Thomas

STRENGTHENING SMALL FARM SECTOR.............................18 V S Vyas

THREE IDEAS TO GET AGRICULTURE GOING ....................22 Ashok Gulati, Kavery Ganguly

FINANCING AGRICULTURE : SOME ISSUES ........................26 K G Karmakar

REVITALIzING AGRICULTURE THROUGH IMPROVED TECHNOLOGY ...................................31 S Ayyappan, Ramesh Chand

RAINFED AGRICULTURE – CONCERNS, OPPORTUNITIES AND STRATEGIES .......................................37 B Venkateswarlu, CA Rama Rao

DO YOu KNOw? Genetically Modified Foods .........................41

MAJOR ISSUES IN AGRIBUSINESS : A SMALLHOLDER PERSPECTIVE ............................................44 Sukhpal Singh

HORTICULTURE IN INDIA: STATUS AND PROSPECTS ..........................................................49 Bijay Kumar J&K wINDOw ...........................................................................53VALUE CHAIN SYSTEM IN AGRICULTURAL FINANCING ...................................................54 B B SahooPULSES : INCREASING AVAILABILITY ...................................58 Prasoon Verma NORTH EAST DIARY ...............................................................61CONTRACT FARMING IN INDIA ...............................................62 Shailendra Bhushan Sharma SHODH YATRA BAMBOO PROCESSING MACHINE ..........................................66ORGANIC FARMING : PROBLEMS AND PROSPECTS ..........68 Kuldeep Sharma, Sudhir Pradhan BEST PRACTICES AUGMENTING FARM INCOME .................................................71 Sandip Das

2 YOJANA January 2011

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For the past decade as Indian industry went places, recording a hearty rate of growth, the story of Indian agriculture remained an also ran. Successive governments have put in plenty of effort but the results were still weak. This

is surprising as in the same period except for 2008, the monsoon went through one of the longest periods of regular annual rainfall pattern. Despite this favourable initial condition, the rate of growth of the agriculture sector has been low.The one spoilsport in the agriculture story was of course the stagnant rate of public investment. The state, hamstrung by vastly competitive demands on its resources, initially and also by the realisation that public investments in irrigation and others were not yielding quick results, moved the money elsewhere.

But now, in the aftermath of the global meltdown, the consensus of informed opinion has switched to the view that consumption demand from rural India has been the great stabilizer for industry. The impetus for that rural consumption demand has to come from rising productivity in agriculture. In turn rising productivity can only come if adequate investment is made at all stages of agricultural operation. Not surprisingly the push for these improvements has come from one of the longest spells of rise in prices of food products―the persisting inflation in food that has just begun to soften. So we have a fortuitous combination of circumstances that, if harvested, can create huge value upgradation for the Indian agriculture sector and in turn for the entire economy. The components of these improvements are well known like seed technology, better management of post harvest operations like preservation of produce in warehouses and of agricultural marketing.

So even though it may seem oft repeated, the time for an agricultural revolution is here. Probably the most important element of that will be the plans for a second green revolution. The government has already indicated that it is very keen to start it off in the dryland areas of the south and in the rich but weakly tapped soils of the eastern Indian states. A debate is already raging in the country, if such a rise in productivity will also necessarily entail a movement towards genetically modified crops . The need of adequate grains to feed a vastly rising population is immediate and so the decision has to be made carefully, as the government has indicated. The associated issues are of infrastructure to run the crops from the farm gates to the market. Most of the states have a poorly developed set of roads and even less carriers to undertake the task. In this context the need for refrigerated trucks and cold storage chains across the country is an immense investment possibility as well as the need of the hour. The government has to also make changes in the law to allow for the trading of warehouse receipts and that of the agricultural produce marketing act that makes transport of most agricultural produce across state boundaries, a crime. The list is large, the need is to start moving right now. q


About the Issue


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H I S A R T I C L E discusses demand for Indian agriculture and the spread of markets. Indian agricul ture

should be seen as a rural urban continuum and opportunities perceived accordingly. Urbanization and structural change in the labor force is taking place at a faster pace than usually argued. This has also been borne out recently by the Labour Bureau

Demand

The underlying long term trends are in terms of growth of agricultural demand and diversification of the demand basket with non foodgrains growing faster than grains and non crop based agriculture like animal husbandry growing even faster. Within crops, demand for tree crops grows faster. These trends are driven by the growth of the economy, urbanization, income distribution and of course

population growth. It is to these factors that we now turn.

The major fac tors influencing the level of demand of a good are:

(1) population: its size, distribution by age, rural/urban mix, etc.

(2) income and its distribution,(3) prices and availability of other

commodities and services (4) tastes and preferences.

These factors are sometimes called determinants of demand (See Tomek and Robinson, 1972, p.14).

Population

UN projections given by the UNU/IAS have been used here. (Table 1). FAO in their latest food demand projections for India in 2008, which estimate that a population of 1.0 billion in 2000 will go up to 1.2 billion in 2015 (FAO, 2003,2008; also see N.Alexandratos, 1995).

Challenges of a Rural Urban Continuum

AgRiCulTuRE

Yoginder K Alagh

ANAlySiS

TA more

productive mindset would be

to orient policy to concentric

circles of prosperity around

diversifying agricultural

bases and growth centres

The author is Chairman, Institute of Rural Management, Anand; Chancellor, Nagaland University and Vice-Chairman, Sardar Patel Institute of Economics & Social Research. He was Former Minister for Power, Planning and Science and Technology, GOI


Table 1 uN Population Projections

Year Population (million)

(1) (2)2000 1012.662005 1087.462010 1152.162015 1211.672020 1271.17

Source: Mukherji, et.al, 2001;also see (FAO, 2003,2008 and N.Alexandratos, 1995)

The Eleventh Plan’s population numbers are close to these trends. The Plan does not have a separate population projection exercise but in one of its sections the numbers given are 1208 million for 2011-12 and 1283 million for 2016-17.

Demand Behaviour

Table 2 gives estimates for the urban rich and rural poor in the seventies in India and some estimates of income (expenditure)

elasticities from Complete Demand Systems for the Nineties.

Income Growth

India will grow between 6 to 8% annually and will become the third or fifth largest economy of the world in this period. The investment rate and productivity growth will be the drivers. For example around a third of India’s GDP growth in 97/03 is technology driven. Trade will also matter and

Table 2 Income Elasticities in India for Agro Products Structure and Changes Sl No Commodity Engel Curve

Specification1 Estimate for Seventies EstimateforNineties2

0 1 2 3 4a. urban non poor

b. Rural poor

a. urban non poor

b. Rural poor

1 Paddy 0.18 0.18 2 Wheat 3b.Semi Log 0.15 1.823 Jowar _0.97 0.514 Bajra 3b.Semi Log _1.26 0.925 Other cereals _0.14 0.01 0.14 0.463

6 Pulses 3a. Semi Log 3bLinear 1.48 0.06 0.33 1.407 Vegetables 3b. Linear 0.79 0.058 Fruits 1.62 1.21 0.88 1.044

9 Spices 0.40 0.7910 Milk and Products 3a. Linear 0.10 3.06 0.97 2.3611 Meat and eggs 3a. Linear 0.02 1.55 0.69 1.3912 Sugar 0.79 2.07 0.73 1.4713 Gur 3a. Semi Log 0.17 1.8014 Vanaspati 1.03 neg15 Edible oil 0.70 1.33 0.64 1.1316 Tea 3a. Linear 0.03 1.3717 Coffee 1.55 1.74

Note: 1.Unlessotherwisespecifiedtheestimatesareelasticitiesfromdouble-logfunctions.Inothercasestheestimatesareslopecoefficientsofthespecifiedfunctions.

2. TheestimatesarefromCompleteDemandSystems.TheRuralPoorarethecategory“moderatelypoor”andtheUrbanNon-Poor,similarlysointhenon-poor.

3. referstoallcereals 4. referstofruitsandvegetablesSource: MunishAlagh,2006,p.59(FortheSeventiestheestimatesarederivedfromNSSmonthlyhouseholdconsumption

datafromthe28thround1973/74.SeeGovernmentofIndia,PPD,PlanningCommission,1979.FortheNineties,theestimatesarefromC.Ravi2001).


India’s trade will become around 4% of world trade.

The Drivers will be Investment, Technology and Productivity: K n o w l e d g e , T r a d e a n d Competition

Productivity growth analysis scenarios indicate that in order to sustain a high growth of the economy of the order of 8 to 9 per cent as given in the so called Scenario C, the TFP has to grow by 5 per cent or more. Trade and Competition will give the edge.

Some estimates suggest that trade shares of around 4% of world trade will be needed. Frugality needs investment rates going up. These economic preconditions will have to be fulfilled if the positive projections are to be achieved. (See D.Nachane, 2006))

Demand

The estimate is prepared using the best fitting Engel curves given in Table 2. above. This is done separately for rural and urban areas. Given the population projections

and these behavioural estimates the requirements for human consumption is worked out. To that, seed feed and wastage figures are added and total demand is worked out. The Projections are as presented in Table 4.

Growth of cereal demand between 2020 and 2030 is 13% over the decade. On the other hand growth of demand of fruits and vegetables, eggs, chicken and milk is much higher. The decadal growth figures for potatoes is twenty four percent, thirty percent for vegetables, forty percent for milk, two hundred percent for eggs and two hundred and fifty percent for chicken. Demand for beef, mutton and pork also goes up but given religious reasons the absolute figures are low. The low growth of cereal demand is compensated by very high demand growth of non cereal based and non crop based agricultural goods.

Rural urban Perspectives

A big artefact which is not wholly correct is that urbanisation in India is low and not growing fast. It must, however, be noted that the urbanization pattern in India is decentralized. While very small urban settlements are not growing, the share of smaller Class1 towns is high. (100.000+). P. Krugman, getting the Nobel prize for work on international trade has also worked on regional growth patterns and urbanization. He explains urbanization as the outcome of both centrifugal and centripetal forces. While the urban growth rate in the 1980s went down from 3.8 per cent to 3.12 per cent, that

Table 3Growth of Output, Factors of Production and TFP in India: 1970-2000

(Percentage)Period GDP Capital Labour TFP

1970-80 2.60 3.59 1.98 0.491980-90 5.67 4.41 1.13 4.211990-00 5.73 5.97 1.82 3.682000-10 7.54 4.97 2.69 4.622010-20 9.24 4.04 3.49 5.69

Source:Y.K.Alagh,UNU,2000andY.K.Alagh,2006a.

Table 4 Demand Projections (in Million Tonnes)Food group 1999-2001 2015 2030

Cereals 159 199 225 (13.1%)

Potatoes etc 25 37 46 (24.3%)

Fruits & Vegetables 108 160 208 (30.0%)

Vegetable oil 11 18 23Sugar 29 40 47Eggs 2 3 6

(200%) Chicken 1 4 10

(250%)Milk 66 104 146

(40.4%)Beef, mutton & pork 4 5 7

Figuresinbracketsare2030/2020X100 Source: F.A.O., 2008


of Class I towns went up from 6.39 per cent to 8.39 per cent in India. In our futures study we postulated that these trends will continue (Y.K. Alagh, UNU, 2000, 2006). In other words, the fast growth of Class I towns since the 1980s–-the period when the Indian economy grew at a rapid rate– will continue.

There is no reason to believe that the elasticity of urban settlements with a minimum size (1,00,000 +) w.r.t. per capita income will decline. Krugman denotes this elasticity as b. In fact, it will determine the growth of such towns in the future, but the population share of smaller towns will shrink. This feature has been modelled (Alagh, et al., UNU, 2000).

This model uses the following assumptions;i. growth of Class 1 cities will

be as in the eighties of the last century

ii. the increase in the share of the Class 1 cities of the urban population will be as in the eighties

The first assumption will increase projected urban growth and the second will dampen it. Small towns will not grow and areas around large cities will merge with them. It may be noted that the data from the nineties cannot be used since it underestimates these trends as we will see below. Areas in million plus cities will grow in clusters of habitations growing to one lakh and above. This model can be stated as follows;1. U1t = A(Yt)

b

2. Upt = U1t / K+U10

U1= Population in Class 1 towns Up= Urban PopulationY = Per capita income in constant

pricesU1=Share of Population in Class1

towns in urban populationK= the constant U1t – U10

Andb= elasticity of Class1 towns

population growth w.r.t Y. Urban Population will now be forecast from:Upt= A(Yt)

b /K + U10

Assume a growth of 6.6% annual in per capita income then the rate of growth of Class 1 cities will be 4% for the period 1991 to 2020, since b is 0.6. The share of urban population will be 42% in 2020 as compared to the official figure of 32% ( See GOI, Technical Group, 2006).

Urban population growth in this model varies positively with the growth in per capita income and negatively with the share variable. My friend, the late P.Visaria, who was an urban pessimist, noted that migration to big cities is ‘hampered ‘by workers living in smaller communities, who commute for work. We had argued in our Futures study that his model is consistent with the pattern of urbanization with clusters of settlements coming up around large conglomerations. With the growth of per capita income being around 4 per cent annually and ‘b’ as estimated in the 1980s, urban population in 2020 can be projected to be around 530 million. Our main purpose here is to argue that policy should not be

concentrated only on rural non-farm output and employment. In fact, in a dynamic economy of the Indian type, the distinction between the village and the small urban settlement can be very counter-productive and lead to all kinds of protectionist distortions. A more productive mindset would be to orient policy to concentric circles of prosperity around diversifying agricultural bases and growth centres. The numerical framework suggested above shows that such possibilities are very real and substantial in India.

Transportat ion, land use, marketing infrastructure and technology dispersal policies can all be oriented towards the fulfillment of this objective. In fact, it will be more sustainable. Slum populations are 25 to 40 per cent lower in smaller Class 1 towns as compared to million plus cities. The details of these policies are contained in the UNU Sustainable Development Study for 2020 (Y.K.Alagh, 2000, 2006)

More recently UN studies have established through international comparisons the point we have made in earlier Indian studies reported above to the effect that India is urbanized more than what it says and its non farm employment growth is globally comparable. The FAO bring this out in a global comparison and analysis. FAO and World Bank “distinguish three categories of countries: agriculture-based, transforming and urbanized. India is found in the transforming country category, with a clear


historical trajectory of moving from being agricultural-based ” (FAO, 2008, p.4)

The FAO note that according to popular statistics India is less urbanized, but they point out that:

“On the other hand, what constitutes “rural” is in fact somewhat subjective and what is considered urban or rural varies considerably among countries. The Brazilian definition, which is currently a political controversy, is partly based on administrative divisions, and shows a rural population of 19 percent. The OECD on the other hand, uses a simple measure of population density of over 150 people per square kilometre, which, for Brazil would give a figure of 25 percent. If we apply this to India, where only a small proportion people live in areas below this density, it would give a rural population of

only nine percent—quite a contrast to the normal Indian view of being 70 percent rural. Although as we have seen, Brazil is much more urbanised, 20 percent of the population lives in areas with fewer than 50 inhabitants per square kilometre; in India less than one percent do.” (FAO, 2008, p.5)

The FAO go on to add:

“This is particularly important, discussed in more detail below, when we look at the village-level economies. If we measure how isolated the rural population is in terms of market access, using a definition of more than five hours of travel time to reach a market town of more than 5,000 people, only five percent of South Asians live in “remote areas” whereas more than 30 percent of Africans are in this situation. Similar mcharacteristics hold true for the percent of the population living in

higher potential agricultural areas,.” (FAO, 2008,p.4)

Our argument therefore is that urbanization is proceeding much faster than earlier estimates of scholars like A.Kundu, who worked with the low urbanization growth rates of the Census 1991/2001 period. For example for Gujarat, Yoginder.K.Alagh and P.H.Thakkar worked out that a number of habitations which met the Census 2001 criteria of urbanization were still classified as ‘villages’. According to the Population Census-2001, Census Towns are non-statutory towns and are actually rural areas, but satisfy the following criteria:

(A) Minimum populat ion of 5,000

(B) Density of population of at least 400 persons per sq. km.

(C) 75 per cent of the male working population engaged in non-agricultural activity.

It was found that in the decade 1991-2001, in Gujarat, rural non agriculture main workers increased more than urban non-agriculture main workers. As per the 2001 Population Census, there were 122 big villages in Gujarat, each of them satisfying the three Census criteria of non statutory towns. These villages had a total population of 11.21 lakhs. If this is taken as a correction factor, then the revised estimate of degree of urbanization of Gujarat for the period 1991-2001 will be nearly 39.57 per cent (earlier estimate being 37.36 per cent and the correction factor being 2.21 per cent).

The following picture illustrates this


The level of urbanization in Gujarat has therefore not increased by 2.87 % points, but 5.06% points, which is close to double the earlier estimated change and makes a big difference in policy and forecasting work.

Increasingly in global work and expert studies higher estimates of urbanization are being projected a s compared to t he u rban pessimist projections. Thus the International Water Management Institutes Strategic Analysis of the National River Linking Project has a demographic projection by A.Mahmood and A. Kundu (Amarasinghe, Shah and Malik, 2008, Paper,6).However they examine sensitivities to higher urbanization rates in the three volume study on water futures as compared to official figures. According to them

“According to others, this is even a conservative estimate of population growth in India (Y.K.Alagh cited by Amarasinghe and Sharma,2008)” (U.Amarasinghe, T.Shah and P.S.Malik,. ed., 2008,p.12) The IWMI studies quote a higher figure

of urbanization of 45% by 2025 as compared to a lower figure of 37% for that year (S.Verma and S.Phansalkar,2008, in Amarasinghe, Shah and Malik,2008,ed.,p.29 and also discuss the 21st century as an urban century, p.40).

The United Nations has also recently reproduced the Alagh version of the Krugman model of urbanization as estimated for India. (See United Nations., 2008). To conclude therefore for this study we project that the rural population share will go down to 58% in 2020 and 55% in 2025. This compares with the official projection of 68% in 2020 and 64% in 2025(GOI, 2006, Table 10, p.56).

Rural Population in 2020 will therefore be 738 million out of the total population of 1273 million projected above. The Eleventh Plan has projected the rural labor force as 45.7% by 2016/17, the last year for which they have given projections (GOI, 2008, Vol.1, p.75, Table 14A). An earlier projection by G.S.Bhalla and P.Hazell (Bhalla and Hazell,2003, p.3478) using age specific participation rates

separately for rural areas was 46.9%. We assume a participation rate of 46% and get a figure of 340 million as the labor force. This is much lower than the figure of 404 million estimated by Bhalla and Hazell on account of a much lower estimate of urbanization.

We have separately developed a small model to provide a framework for such discussions (Y.K.Alagh, 2010, forthcoming). Its main contours are as follows;

A benign process will be in the following larger frame work :

India 2020Total Population (million) 1273Rural Population (million) 738Labour participation rate % 46Labour Force (million) 340GDP growth (% annual) 8.5GDP agricultural growth (% annual) 4%Employment elasticity w.r..t.. -0.3% Agricultural growth (Low)Employment elasticity w.r.t. Agricultural growth (High) -0.1%Land augmentation throughIncrease in cropping intensity (High) 0.5%Increase in cropping intensity 0.0 to 0.2%

In a benign framework of development, agriculture will grow at 4% annual, technological change and diversification will be high so the shift away from agricultural on this account will be 20% over the

Table 5Level and Growth of urbanization in Gujarat

YearNumber of

Towns

Population (in Million)urbanization

(in %)Entire State urban Areas1 2 3 4 5

1961 181 20.63 5.32 25.771971 216 26.70 7.50 28.081981 255 34.09 10.60 31.101991 264 41.30 14.25 34.492001 242 50.67 18.93 37.36

2001 Revd 364 39.46 30.14 39.57Source:Yoginder.K.AlaghandP.H.Thakkar,2006a.


decade 2010-2020. (Elasticity of -0.3%). This will mean a corresponding increase in real wages of the agricultural labour force.

If the shift does not take place on account of poor agricultural productivity increase, with an employment elasticity of minus 0.1, and a growth rate of these per cent annual, the shift will be 4% and an insignificant increase in real wages of the agricultural sector. The need for programme like NREGA will be intense with the present trends of wages of the labour force worsening. This will be a very cruel process of economic transformation.

The only other factor which will affect outcomes in this logical framework is the augmentation of the land base of Indian agriculture. This aspect is discussed in the context of the Land and Water questions. If land augmentation emerges again with success of the interrelated issues of land and water management, cropping intensity rises by 0.5% annual and in the decade 2010 /2020, real wages would rise by 7% additional or 27% in the total and rural-urban inequality would go down. There are apart from the two big question marks about non renewable resources, particularly land and water

Conclusion

We must believe and work for the fact that in the next decade, Indian agriculture will meet the requirements of food security and rapidly diversify itself. It will function in a rural urban continuum, with rapid developments of markets and shifting of working populations from villages to linked small towns and also from crop production to value added activities. Employment growth will be high in these activities, chasing a high rate of economic growth. All this will happen if the institutional structure gives the appropriate signals in term of technology and organizational support and the necessary economic support in terms of pricing and infrastructure support. Otherwise there will be rising food prices chasing few goods and immiserisation. q

(E-mail:[email protected]) YE-

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URING HIS recent visit, President Barak Obama pointed out that India is fortunate to have a youthful

population with over half of the total population of 1.2 billion being under the age of 30. Out of the 600 million young persons, over 60% live in villages. Most of them are educated. Gandhiji considered the migration of educated youth from villages to towns and cities as the most serious form of brain drain affecting adversely rural India’s development. He therefore stressed that we should take steps to end the divorce between intellect and labour in rural professions.

The National Commission on Farmers stressed the need for attracting and retaining educated youth in farming. The National Policy for Farmers placed in Parliament in November 2007, includes the following goal– “to introduce measures which can help

Harnessing the Demographic Dividend for Agricultural Rejuvenation

AgRiCulTuRE

M S Swaminathan

OPiNiON

If educated youth choose to live in

villages and launch the new agriculture

movement based on the integrated

application of science and

social wisdom, our untapped demographic dividend will

become our greatest strength

to attract and retain youth in farming and processing of farm products for higher value addition, by making farming intellectually stimulating and economically rewarding”. At present, we are deriving very little demographic dividend in agriculture. On the other hand, the pressure of population on land is increasing and the average size of a farm holding is going down to below 1 hectare. Farmers are getting indebted and the temptation to sell prime farm land for non-farm purposes is growing, in view of the steep rise in the price of land. Over 45% of farmers interviewed by the National Sample Survey Organisation want to quit farming. Under these conditions, how are we going to persuade educated youth, including farm graduates, to stay in villages and take to agriculture as a profession? How can youth earn a decent living in villages and help to shape the future of our agriculture? This will require a three-pronged strategy.

D

The author is Member of Parliament (Rajya Sabha) and Chairman, M S Swaminathan Research Foundation


l Improve the productivity and profitability of small holdings through appropriate technologies and market linkages

l Enlarge the scope for the growth of agro-processing, agro-industries and agri-business

l Promote opportunities for the services sector to expand in a manner that will trigger t h e t e c h n o l o g i c a l a n d economic upgradation of farm operations.

Opportunities in the services sector in rural India are crying for attention. Hence, I shall concentrate on giving a glimpse of the untapped opportunities awaiting our educated youth to take to a career of remunerative self-employment in villages. The National Commission on Farmers had recommended a reorientation in the pedagogic methodologies adopted in our Farm Universities, in order to make every scholar an entrepreneur. For example, the course in Seed Technology should be so restructured that it becomes, “Seed Technology and Business”. This will make it unnecessary for the scholar to go to a Business School after earning an agricultural degree.

Some years ago, the Government of India launched a programme for enabling farm graduates to start agri-clinics and agri-business centres. This programme administrated by NABARD, and MANAGE located in Hyderabad is yet to attract the interest of educated youth to the degree originally expected. It is hence time that the programme is

restructured based on the lessons learnt. Ideally a group of 4 to 5 farm graduates, who have specialized in agriculture, animal husbandry, fisheries, agri-business and home science could jointly launch an agri-clinic cum agri-business centre in every block in the country. Agri-clinics will provide the services needed during the production phase of farming, while the agri-business centre will cater to the needs of farm families during the post-harvest phase of agriculture. Thus, farm women and men can be assisted during the entire cropping cycle, starting with sowing and extending upto value addition and marketing. The multi-disciplinary expertise available within the group of young entrepreneurs will help them to serve farm families in a holistic manner. The Home Science graduate can pay particular attention to nutrition and food safety and processing and help a group of farm women to start a Food Processing Park. The group should also assist farm families to achieve economy and power of scale both during the production and post-harvest phases of farming.

Opportunities for such young entrepreneurs for ini t ia t ing programmes in the fields of soil health enhancement, plant and animal health care, seed technology and hybrid seed production, are several. Climate resilient agriculture is another area needing attention. In dry farming areas, methods of rainwater harvesting and storage and watershed management as well as the improvement of soil physics, chemistry and microbiology, need to be spread widely. The cultivation

of Fertilizer Trees which can enrich soil fertility and help to improve soil carbon sequestration and storage, can be promoted under the Green India Mission as well as the Mahatma Gandhi National Rural Employment Guarantee programme. A few fertilizer trees, a Jal Kund (water harvesting pond) and a Biogas plant in every farm will help to improve enormously the productivity and profitability of dryland farming. In addition, they will contribute to climate change mitigation.

The Yuva Kisans or young farmers can also help womens’ self-help groups to manufacture and sell the biological software essential for sustainable agriculture. These will include biofertilizers, biopesticides and vermiculture. The Fisheries graduate can promote both inland and marine aquaculture, using low external input sustainable aquaculture (LEISA) techniques. Feed and seed are the important requirements for successful aquaculture and trained youth can promote their production at the local level. They can train rural families in induced breeding of fish and spread quality and food safety literacy.

Similar opportunities exist in the fields of animal husbandry. Improved technologies of small scale poultry and dairy farming can be introduced. Codexalimentarius standards of food safety can be popularized in the case of perishable commodities. For this purpose, the young farmers should establish GyanChaupals or Village Knowledge Centres. Such Centres will be based on


the integrated use of the internet, FM Radio and mobile telephony. For example, artisanal fishermen going out into the sea in small boats can now be empowered with information on wave heights at different distances from the shore line and also on the location of fish shoals. Such techniques will help to transform the lives of small scale fisher families.

In the services sector designed to meet the demand driven needs of farming families, an important one is soil and water quality testing. Young farmers can organize mobile soil-cum-water quality testing work and go from village to village in the area of their operation and issue Soil Health and Water Quality Cards to every family. Very effective and

reliable soil testing kits are now available. This will help rural families to utilize in an effective manner the nutrient based subsidy introduced by Government from April 1 this year. Similarly young educated youth could help rural communities to organize gene-seed-grain-water banks, thereby linking conservation, cultivation, consumption and commerce in a mutually reinforcing manner. It is only through the provision of such services that we can achieve the goal of improving the economic well being of rural families.

Young farmers can also operate C l ima te R i sk Managemen t Centres, which will help farmers to maximize the benefits of a good monsoon, and minimize the

adverse impact of unfavourable weather. Educated youth can help to introduce in rural India the benefits of information, space, nuclear, bio- and eco-technologies. Ecotechnology involves the blend of traditional wisdom and frontier technology. This is the pathway to sustainable agriculture and food security, as well as agrarian prosperity. If educated youth choose to live in villages and launch the new agriculture movement, based on the integrated application of science and social wisdom, our un tapped demograph ic dividend will become our greatest strength. q

(E-mail:[email protected]/ [email protected])

NAIP HELPS FARMERS REALIzE THEIR DREAMS

Millions of floriculturists in Tamil Nadu are now increasingly looking at newer markets to export their produce, thanks to the National Agricultural Innovation Project (NAIP)- a joint project by Indian Council of Agriculture Research (ICAR) and World Bank. The $250-million project,

largely funded by the World Bank ($200 million) has managed to provide cost-effective innovative solutions to farmers, especially in the areas of floriculture and health food (millet jowar and bajra) to help cater to foreign markets.

The project, which took off in 2006, has applied for patents in 31 technologies-of which six patents have already been granted. In three and half years, they have worked on enhancing value chain and reducing post harvest losses. They are combining and validating present technology and have fast-tracked upstream research works. The project will be taking technology relevant to districts or using area-specific technology to provide innovative help to farmers.

Enhanced packaging technology for Jasmine flower growers from Tamil Nadu and usage of banana fibre for making fabrics are among the various highlights of the project. The new technology has enhanced shelf life of flowers and has successfully enabled growers in Tamil Nadu to export to Gulf, European and American markets.

Fabrics from banana fibre has created employment opportunities in Gujarat, Tamil Nadu and Andhra Pradesh and several units are coming up in these states to make fabrics from Banana fibre. Value-added products such as multi roti grains and bajra lassi have been a huge success. The project is also working on increasing income and nutritional supplements in tribal areas. The underutilized trees/fruits are exploilted to add extra income to rural areas.


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Broadly speaking, conservation agriculture

with stress on environmentally

curative and preservative

practices needs to be given utmost priority at this point of time

Climate Change and Indian Agriculture

AgRiCulTuRE

HERE IS no doubt that the earth is warming up. Eleven of the hottest years in the last half century have been

recorded after 1990. This is certain to impact the way our agriculture is managed. It has been reported that wheat yield declined by 5 percent when average temperature during March increased by 1˚ C in Punjab. At the same time the rice yield increased to the tune of 12%. In Rajasthan 2 degree celsius rise in temperature is projected to reduce the production of grains by 15%. Studies conducted by the ICAR project a loss of 4.5 billion tonnes of overall wheat production with each degree rise in temperature throughout the growing period. Evidence also shows that most of the warming that is bringing about such changes in agriculture can be attributable to human activities. As per the report of the Intergovernmental Panel on Climate Change (IPCC) the net

The author is Union Minister of State for Agriculture, Food & Public Distribution & Consumer Affairs.

increase in temperature is likely to be 5.8 degrees Celsius by AD 2100. This is likely to impact a series of inter-related environmental systems like global hydro-eco-systems, sea level, crop production and related agricultural activities.

There is a general consensus amongst researchers that green house gas (GHG) induced warming would have major impact on agro eco systems. The gases that cause green house effect include carbon dioxide, methane, nitrous oxide, ozone, and chloro fluro carbons. The atmospheric concentration of these gases has been increasing at alarming rates in the recent years, causing an increase of about 0.76 degree celsius in mean air temperature over the last 100 years . As per the fourth assessment report of IPCC, these changes in temperature will have a detrimental impact on many physical and biological systems. This IPCC report and a few other studies indicate the probabilities of 10 to 40

K V Thomas

CONCERNS

T


per cent loss in crop production in India with increase in temperature by the end of the century.

Agriculture, and the techniques of cul t ivat ion employed in a particular region also affect the rate and outcome of climate change. In fact, agriculture itself is a major contributor to climate change as it involves process like deforestation, desertification, higher use of fuels and fertilizers which might contribute to increased nitrogen concentrations in the earth’s atmosphere.

Over the Indian sub-continent the rise of temperature is likely to range between 3.5 and 5.5 degree celsius by 2080, according to studies. These projections show more warming during the winter season than during the summer season. The distribution of surface warming suggests a mean annual rise in temperatures in north India by 3 degree celsius or more by 2050. The study also suggests that during winter the surface mean temperature could rise by 3 degree celsius in northern and central parts while it would rise 2 degree celsius by in southern parts by 2050. In case of rainfall a marginal increase of 7 to 10 percent in annual rainfall is projected over the sub-continent by the year 2080. However, the study suggests falling rainfall by 5 to 25 per cent in winter while it would be 10 to 15 per cent increase in the summer month’s monsoon fall over the country. It was also reported that the date of onset of summer monsoon over India could be more variable in future. The projected changes in climate will have both beneficial and adverse

effect on the environmental and socio economic system. The larger changes will have the more adverse effects.

This indicates that increase in temperature is likely to be less in Kharif than in the Rabi season and Rabi rainfall is largely uncertain whereas Kharif rainfall is likely to increase by as much as 10% favouring rice. Such global change will affect agriculture through its direct and indirect effect on crop, livestock, pests, disease and soil, thereby threatening the food security of many countries. India will have to intensify efforts to overcome this.

The higher temperatures in north India will have a significant impact on the wheat field. The higher temperatures will reduce the full grain formation by inducing early flowering . A temperature increase of 0.5 degree Celsius will reduce wheat yields by about 10 per cent if rainfall does not increase simultaneously. Overall a wheat loss of 4 to 5 million tonnes for every 1 degree rise and a loss of wheat by 10 to 15 per cent for every 2 degree rise in temperature can be expected.

The loss in net farm revenue will range between 9 to 25 per cent for a temperature rise of 2 to 2.5 degree celsius. However, increase in atmospheric carbon dioxide is expected to have positive physiological effects by increasing the rate of photo synthesis. The effects of increase in carbon dioxide would be higher on C3 crops like wheat because they are more susceptible to carbon dioxide shortages.

Mitigation and Resilience to Climate Change

A series of measures have been thought of for mitigating the adverse impact of climate change on Indian agriculture. One strategy is to develop transgenic crops which are tolerant to changes in temperature, carbon dioxide and heat. The planting cycle, spacing and the input management have to now keep pace with the rapid change in the climatic parameters. Water needs to be conserved and used sparingly.

A forestation has to become an integral part of conservation agriculture and a lot more stress needs to be put into this. For example rice straw should compulsorily be used to feed animals and the practice of burning the rice straw should be discontinued because of its adverse impact on contributing carbon dioxide to climate warming.

Conservative irrigation using drip irrigation systems need to be introduced in various agro climatic regions of India with increase in temperature due to climate change. Protected agriculture using shaded climate controlled houses are useful for nursery production through the reduced effect of global warming. Rational use and conservation of forests and land resources, prevention of desertification etc. would go further in reducing the impact.

Broadly speaking, conservation ag r i cu l tu re wi th s t r e s s on environmentally curative and preservative practices needs to be given utmost priority at this point of time. q

(E-mail:[email protected])


India’s vast small farm sector can be a strong feature of the economy rather

than a drag on it if such institutions

and practices can be scaled up, and become the rule rather than

exception

Strengthening Small Farm Sector

AgRiCulTuRE

URING LAST few decades major changes have taken place in the agrarian structure in our country. Land holding structure in

India is sliding downwards, w i th p rogress ive ly g rea te r concentration in the marginal and small holding groups. Not only is the number of such holdings increasing, the area cultivated in these groups is also expanding. For the country as a whole, small (including marginal) farms constitute 83.5% of total holdings, with major concentration in Uttar Pradesh, Bihar and Andhra Pradesh. Share of land cultivated under these holdings in a number of states is one third or more of the total cultivated area of the respective state, only exceptions being Maharashtra (31.7%), Punjab, (29.9%), and Rajasthan (22.6%).

Most small farmers are below the poverty line and belong to the socially disadvantaged groups. The opportunities thrown up by

The author is a member of the Economic Advisory Council to the Prime Minister.

the opening up of the economy and a rising middle class can, as of now be availed only by those farmers who have access to resources. In this context, neglect of small farmers may result in a divide within the rural sector. 70.5% of small farm land is devoted to cereals, with some production of seasonal fruits, vegetables, dairy products. Small farms do not generate any surplus, the difference between income and consumption for the small farmers is – Rs. 655 per month.(Data from 59th round NSS, 2003)

Available Options

Although a shift to the non agricultural sectors like industry and services seems the straightest solution, it would not really be possible to accommodate such a huge number of small farmers in these capital intensive sectors in the foreseeable future. Our objective therefore, should be to make the small farms economically viable, surplus generating, enterprises. Following are some options aimed towards this end:

V S Vyas

PERSPECTiVE

D


a) Enlarging farm holding b) improving productivity of the existing crops, c) introducing high value crops. These are not mutually exclusive options, and are also very much feasible.

Enlarging farm holdings

Even a small addition to the land of the small holders can make a significant difference, as reflected in the difference in the poverty ratio between the marginal(i.e., those operating less than one hectare) and the small farmers (those cultivating between one to two hectares). There are three ways in which the holdings of the small farmers can be expanded: by leasing-in land, acquiring surplus land through Land Reforms, or by purchasing land in market.

LegitimizingTenancy

A large number of marginal and small farmers lease in land to expand their meagre holdings. Most states hold tenancy as illegal; hence these transactions are not recorded. NSS (2003) has recorded 7% of the operated area as leased in area and 11.5% of rural households as those who lease in land. Micro studies all over the country have shown that 15 to 35 percent land is leased in. Among the tenants, large majority are the marginal and small farmers. Only in highly commercialised areas phenomenon of ‘reverse tenancy’ exists. If tenancy can be made legal, within the provisions of ceiling, and registered, more land, and on better terms, can be made available to the marginal and small farmers.

LandReforms

Redistributive land reforms was tried in the past. The legislation

involved declaring ceiling on land holding and distributing ’surplus’ land among landless, marginal and small farmers. This was a bold initiative, but proved to be totally flawed when it came to implementation. There were serious leakages at all stages; less land was declared surplus than what should have been declared, (land declared surplus was only 1.86% of the cultivated area); less land was taken possession of than the declared surplus; less land was allocated to the beneficiaries than was acquired; and, less land was actually given possession than what was allocated. Yet, as several micro level studies have shown, wherever redistributive land reform was implemented properly it benefitted those who got land. As the Committee on State Agrarian Relations and the Unfinished Tasks in Land Reforms has stated, substantial area of land can be acquired for redistribution, even if the existing laws on ceiling are properly implemented. Though it must be admitted that in the given circumstances it is proving to be “an idea whose days have gone”

Operationoflandmarkets

Resor t ing to marke t l ed operations to enlarge holdings is not taken seriously in our country. This needs to be revisited. Bank finance to individuals to purchase land is of course miniscule, but where ever the state has taken interest, it has acquired large chunks of land – for example, for establishing SEzs. What is less known is the acquisition of land for establishing homestead.

NABARD has a scheme to refinance amount advanced by banks for land purchase, which was started during the quarter January-March 2002. Hardly

any state has taken advantage of the scheme. Only Haryana showed some interest, with less than 8000 persons availing of the scheme in the last 5 years. In no other state even 1000 persons have avai led of the scheme during this period.

T h e r e a s o n s f o r v i r t u a l failure of the scheme include the fact that : (i) information is not disseminated by banks, or by the state governments in the Sta te Level Bankers Committee(SLBC), (b) land records have not been updated, hence banks find it difficult to advance loan, (c) there is wide gap between District Land Ceiling Rates (DLC) and the market rates. As the banks tend to finance at the DLC rates, small/marginal farmers are not in a position to fill the resource gap, (d) generally,the owners do not sell irrigated land, and there is little interest in purchasing small fragmented pieces of dry land (e) large farmers are not interested in selling land as the land values are increasing rapidly.

All these hurdles can be removed and an active land market can be brought to existence with small farmers benefitting from it. But it will need active support of the state governments and the banks.

A t l e a s t t h r e e s t a t e s , Karnataka, Andhra and West Bengal have acquired large areas of land for construction of homes for the homeless. The procedures evolved, especially in case of Karnataka, are a fair blend of market forces, s t a t e in i t i a t ive , and ac t ive participation of panchayats. It should be possible to enlarge this program to get land for marginal farmers.


Improving productivity in existing enterprises

There was a good deal of r e sea rch in t he 1960s and 1970s on the size productivity relationship in agricultural sector. The overwhelming evidence suggested that the relationship is adverse and the small farms were more productive. The explanation given was that small farmers use their own resources more intensively resulting in higher productivity. This conclusion was challenged in recent years as purchased inputs claimed larger share in the input structure and the small farmers were constrained as far as own cash resources or credit was concerned. But more recent evidence at the all India level has suggested that per hectare value of output on the small farms is even today higher than that on the medium and large farms. It was Rs.14,754 on the marginal farm and Rs. 13,001 on the small farms, as against Rs.12,335 as average for all farms. However, because of the small area this income is not adequate and disadvantages of the small size are not compensated by higher per hectare output.

I t should be remembered that most of the south eastern and eastern countries including China have smaller holdings than ours, yet mainly because of higher productivity farmers are able to earn much larger income. There is large scope to improve productivity and earn higher income from the traditional crops on the smallholdings.Yields of these crops (i.e. rice, wheat, millets etc.,) in our country are much lower than those obtained in other major producing countries. They are lower than the yields obtained by the progressive

farmers in the same regions in the country. The prospect for a remarkable increase in yield on all types of holdings is illustrated by the growth in area, and income from two dynamic crops, i.e., Bt cotton and maize. The main factors determining the growth of these crops are: (a) size neutral, h igh yie lding var ie t ies , (b) economy in input use, (c) better quality, (d) active participation of the private sector in input suppl ies , pr incipal ly seeds, and (d) growing market.Such prospects exist in other major crops also, (e.g. hybrid rice). There are farming techniques for the traditional crops, which can reduce costs and increase yield. System of Rice Intensification (SRI) is an example of such improved techniques.

Shift to high value crops

Another option for the small farmers is to shift from low value subsistence crops to high value crops in view of (a) increasing demand due to income growth and urbanization (b) higher and regular income flow, and (c) labour intensive production.

As it is, the small farmers devote some land and resources to high value crops to generate cash income. The share of the high value crops, such as spices, fruits and vegetables is slowly increasing. Yet, small farmers find it difficult to make a major shift from grain based cropping pattern to high value crops due to over arching requirement for self-provisioning. Even if it is assumed that farmers with increased income can purchase grain from the market, there are three major hurdles in shifting to high value crops - high capital requirement, difficulties in marketing, and high

risks entailed in raising high value crops.

Credit

There has been phenomenal growth in credit to agriculture from the organized sector in the recent years. Yet the credit available to the small farmers is not increasing. Difficulties in availing credit are more severe for tenant farmers and those small farmers who are not able to offer collaterals. They have to depend on the informal sources to obtain credit on onerous terms. Innovat ions favor ing smal l borrowers such as Self Help Groups have largely bypassed the small farmers, as the main thrust is on consumption loans, or loans to small artisans. Disintegration of cooperative credit system has further worsened their plight.

Marketing

Because of the small lot for sale, lack of holding capacity and immediate need for cash, small farmers are always at a disadvantage in dealing with middlemen. The handicaps get aggravated in case of perishables like vegetable and fruits. For providing appropriate marketing facilities, along with transfer of super ior technology and assured supply of inputs, contract farming is advocated. Contract farming is not a new innovation in Indian agriculture; it was introduced decades back by sugar factories both in the private and cooperative sectors and later by milk unions. These arrangements were successful to the extent farmers had decisive voices in these institutions.

RiskMitigation

Propagation of high value agriculture in Indian agricultural


set t ing is predicated on the access to reliable instruments of crop and income insurance. Existing instruments such as agricultural crop insurance to mitigate weather induced risks, and minimum support prices to ensure minimum prices for the staple crops, are not functioning properly. Defects in these devises are now well known and need to be corrected so that small farmers may take advantages of these protective measures. In the present circumstances the better alternative will be to propagate mixed farming with emphasis on self-provisioning, and ‘commercial crops’ , or agriculture related enterprises such as dairying, playing a supplementary role. This is the model which bulk of the farmers in risk prone areas are adopting on their own. Small farmers on the fringe of towns should be supported to develop farm horticulture in more efficient ways. As a rule, for this highly vulnerable group the strategy for diversification should be guided by the norm of ‘from familiar to less familiar’.

Improvements in Del ivery Systems

T h e r e a r e t e c h n o l o g i e s available to raise productivity of the existing crops as well as to expand the share of high value crops. Policy environment at the macro level is by and large favourable. The major difficulty is the inefficiencies in the delivery systems.

Whatever strategy is adopted, the success hinges on the efficiency of the delivery systems. The small farm groups are potentially viable in most of the ecological

regions in our country provided institutional support is provided to them in terms of extension, credit, marketing and risk mitigation. An important ingredient of agricultural strategy should be to strengthen institutional structure to support the small farm agriculture.

We have an extensive network of institutions, but they are of little avail to the small farmers.Reforming delivery systems in order to make them congruent to small farm agriculture is extremely important. State policies in this as in other respects should be consciously designed to support the small farm sector.

Policies for strengthening delivery system have to grapple wi th twin rea l i t i es : h igher transaction costs to deal with the small farmers, and growing sophis t icat ion in market ing and processing of agricultural produce.

This suggests a multi pronged strategy:a) Aggregation of farmers’ needs

for inputs and sale of their produce.

b) In present circumstances homogeneous groups of agricultural producers, with joint liability and catering to multiple needs of farming can provide effective foundation for an efficient and equitable agrarian structure. Producers Company model has much to commend in this respect

c) Integrating various functions such as input supply, extension and quality control, and more importantly, the marketing and processing with larger organizations in a vertical manner is another possible

route. We have now sufficient experience of working with different models of vertical linkages, and should be able to adapt them to the given circumstances.

Adapting the large delivery inst i tut ions in credi t , input supply etc., to the reality of the small-scale agriculture by reducing transaction costs. This can be done as illustrated in the credit delivery by organizational innovations such as Business Correspondent model, and by use of IT and other technologies as practiced by several private sector firms dealing in the agricultural input supply or marketing of agricultural produce.

For risk mitigation, there is a need for strengthening and improving existing crop insurance system, popularizing warehousing receipts as negotiable instrument, aggregating farmers to operate in the future markets, and encouraging value chain financing by the financial institutions.

We have successful examples o f i n n o v a t i o n s s u p p o r t e d by r e sea rch and ex tens ion e s t a b l i s h m e n t s , f a r m e r s organizations safeguarding and furthering members interests, innovative credit supply and marketing institutions, innovative r i sk - sha r ing a r rangement s , successful interface with spot and forward markets by the farmers groups. But such examples are few and far between. India’s vast small farm sector can be a strong feature of the economy rather than a drag on it if such institutions and practices can be scaled up, and become the rule rather than exception. q



Reforming the three “I” s – namely investments,

institutions, and incentives - will be critical for bringing in

and scaling up innovations in the agricultural sector

Three Ideas to get Agriculture Going

AgRiCulTuRE

NDIAN PLANNERS and policy makers do realize how critically important it is to have more than 4% growth in

agriculture to give any meaning to “inclusive growth”. It is also recognized that major investments would be needed, both by public and private sectors, to achieve this end. Keeping this in mind, much larger budgetary resource allocations have been made in agriculture by the public sector, especially since 2003/04, which is reflected in a steep increase in gross capital formation in agriculture (GCFA) on public account. The private sector capital formation in agriculture, which is almost three times higher than that coming from the public sector, had started increasing since 1999/2000 (Figure-1). As a result, by late 2000’s the total GCFA was two to three times higher than what it was in mid 1990s at constant prices (Figure-1). Even as percentage of agri-GDP, the GCFA has more than doubled during the

The authors are respectively Director in Asia and a Senior Research Analyst at International Food Policy Research Institute, New Delhi.

last decade (Figure-1). Yet, the agri-GDP growth has not accelerated substantially (Table-1). If at all, the actual growth rate (average annual or trend growth) since 2000/01 to 2009/10 is somewhat lower than that obtained during 1992/93 to 1999/2000, or during the pre-reform era of 1980/81 to 1991/92 (Table-1).

T h i s t y p e o f s o m e w h a t unexpected result, i.e., rising investments and capital formation in agriculture and yet falling or constant rates of growth in agri-GDP is puzzling. It can happen only if one assumes that the overall efficiency (productivity) of capital is falling substantially or that capital formation figures are more on paper and very less is translating in real capital on the ground (read as large leakages, especially in public capital formation), or that it has long lags between capital formation (like dams, reservoirs, canals etc.) shown in terms of money spent and when it starts giving real returns, or

Ashok Gulati Kavery Ganguly

OPiNiON

I


that the challenges to agriculture in terms of climate change, falling water table, or land degradation (losing top soils etc) have increased so substantially that even enhanced investments in agriculture are not enough to take it beyond the 3% growth barrier, or it could be a mix of all these factors combined. More research is needed to decipher this riddle properly.

In the meantime, however, it may be noted that unlike the overall economic growth pattern, agricultural performance in India has been quite volatile. The coefficient of variation (CV) during 2000/01 to 2009/10 was 1.9 compared to 1.1 during 1992/93 to 1999/2000. This is almost six times more than the CV observed in

overall GDP growth of the country (Table-1), indicating that high and perhaps increasing volatility is a real challenge in agriculture, which is likely to increase in the years to come in the wake of climate change. If that is so, which is still a conjectural hypothesis, then having near zero percent growth in agriculture GDP in 2009/10 in the wake of worst drought since 1972/73, should be considered a commendable achievement of these rising investments. It means that in order to do a proper analysis of investments and growth; one has to take out the influence of weather first. We don’t intend to do this at this stage but flag this issue for researchers and policy makers who are concerned with low growth in agriculture.

Another feature of Indian agriculture growth story is that it has performed in highly varied form at state and sub-sectoral level. Although highly volatile in certain states, Gujarat’s agri-GDP has registered a growth rate of 10.2%, Bihar at 4.2%, Uttar Pradesh at 2.2% and West Bengal at 2.4% during 2000/01 to 2008/09. From a sectoral perspective, the high value sector (fruits and vegetables, livestock and fishery) has been growing at a much faster rate than the traditional crops sector and there is potential for further expansion. Given the rising share of high value commodities in the total value of agricultural output (48.4% in TE2008/09); this segment is likely to drive agricultural growth in the years to come. Being highly perishable in nature, this segment is also crying for faster and better linkages between farms and firms in the logistics, processing and organized retailing. While the agri-system is under a structural transformation, there is need for better policy communication and reforms to hasten the speed of agricultural diversification in India.

Institutional reforms for better farm-firm linkages

Reforming institutions related to plethora of controls in the agri-system has the potential to unleash a major change for the better. It will involve doing away with the compulsory levy system in commodities like rice (upto 75% in states like Punjab, Haryana, etc) and sugar; movement, zoning, and stocking restrictions under the Essential Commodities Act, and replacing the system of taxation of primary agricultural commodities with value added taxation. It

Figure-1: Gross capital formation in agriculture (GCFA) on public and private account

Source:BasedatafromNationalAccountsStatistics,CSO,GovernmentofIndia

Table 1: Agricultural and Total GDP performance in India Agricultural GDP Total GDP

% annual average growth rate & (CV)1980/81 to 1991/92 3.8 (1.5) 5.2 (0.5)1992/93 to 1999/00 3.8 (1.1) 6.3 (0.2)2000/01 to 2009/10 2.4 (1.9) 7.2 (0.3)

trend growth rate (%)1980/81 to 1991/92 3.0 5.11992/93 to 1999/00 3.2 6.32000/01 to 2009/10 2.9 7.6Source:NationalAccountsStatistics,CSO,GovernmentofIndia,variousyears.Note:CVdenotescoefficientofvariation


is important to create a unified agricultural market and thereby creating a level playing field for the public and private sectors. The Agricultural Produce Marketing Committee Act has been under discussion for a long time. The Centre had also advised the states to amend this on the lines of a Model Act in 2003 to promote private sector participation and encourage direct firm-farm linkages through contract farming arrangements, etc. While many states claim to have amended the Act, they have done so only partially. The ground reality appears quite different, and there is an urgent need to examine and evaluate this thoroughly. The objective should be to incentivize and mobilize large investments in the emerging value chains of perishable commodities to bring about reduction in wastages and add value in the supply chains. Compressing the value chains by strengthening direct firm-farm linkages has particular relevance in bringing the small and marginal farmers closer to the markets and this is important in achieving the inclusive growth objective.

The issue of futures markets, warehouse receipt system, use of information technology to empower the growers to benefit from emerging markets, and even encourage the growers companies to link with bigger processing and retailing firms remain very much stuck in controversy. But all these will have to be taken up in holistic package of reforms, if we have to get the markets right.

It is also time to free up the land-lease markets. Vibrant land-lease market can also attract large investments, especially by the private sector. This can also pave

the way towards market induced consolidation of holdings and benefit from economies of scale. But to do it in a manner that the owners of land feel safe in leasing out their lands to other farmers or even companies, land records need to be computerized to ensure transparency and reliability. Currently, official statistics reveal that only about 7% of land is leased-out while micro-studies in several states indicate informal tenancy exists on about 20% of land. Under informal tenancy arrangements, credit remains restricted and high cost, starving the land from investments that can make it more productive. Reforms in the land lease markets are also important to overcome the challenge of fragmenting farms and consolidating industry. About 88% of holdings being less than two hectares (operating about 44% of area), it is challenging to aggregate and standardize their produce for any large scale processing or retailing company in emerging value chains. Freeing up land lease markets can go a long way in addressing this challenge.

Agricultural credit market requires major overhauling and loan waivers can do the least to bring about any sustainable solutions. Nearly 42.4% of all farmer households and nearly 50% of farmer households possessing up to 2 hectares of land avail loan from non-institutional sources at high rates of interest (Report of the expert group on agricultural indebtedness, Ministry of Finance, Government of India. 2007) Banks have failed to meet the targeted 18% (agricultural credit as percent of total commercial bank lending to agriculture) which comes under the priority sector lending. Micro-

finance institutions have lately come under heavy attack due to their extremely high rates of interest, somewhat akin to money lenders. Regulating the formal sector and rendering it more accessible to farmers can help them avoid relying on informal sources.

Incentives: Rationalizing subsidies to boost efficiency in resource use, and propel investments: Rationalizing input and output subsidies can unleash the potential for greater efficiency in resource use and also trigger investments in agriculture. Food, fertilizer, power and irrigation subsides together account for 15.1% of agricultural GDP in TE 2009/10 up from 7.8% of the same in TE 1995/96. It is time to rationalize these subsidies that have outlived their significance in the present form. Irrigation subsidies need to be rationalized and promote efficient use of resources through water users’ association or integrated water management systems. Rather than providing free power, separating feeder lines for agricultural uses as observed in the Jyotigram experiment in Gujarat will be more economically rational (Shah & Verma 2008).To the extent possible, subsidies on fertilizers, power, seeds, agricultural machinery, etc. should be given directly to the farmers, especially the smallholders and in disadvantageous areas. This would go a long way in augmenting fa rmers ’ incomes and a l so incentivize them to use the resources more efficiently. Investments in rural infrastructure; roads, markets, cold chains, processing units as also agricultural R&D will be important to realize higher agricultural growth. The marginal returns on public investments in roads, agri-R&D,


etc are much higher than those on fertilizer subsidy or free power (Fan, Gulati, & Thorat 2008). Some of these investments which are of public good in nature will have to be taken by the public sector such as roads, markets and other infrastructure. Those pertaining to value chains, technology, etc will flow from the private sector.

Reforming the three “I” s – namely investments, institutions, and incentives - will be critical for bringing in and scaling up innovations in the agricultural sector. Technology has played an important role in improving productivity and also achieving major breakthrough in the past as observed during Green Revolution

in 1960s-1970s, Bt revolution in cotton or hybrid maize in 2000s and it can be further replicated in other sectors. Similar technological or marketing innovations in horticulture or livestock sector can benefit a large number of smallholders already engaged in these sectors. Innovations along the value chains, in linking farmers to markets, enhancing value addition are critical for higher growth as also income augmentation of smallholders. There are a large number of private players who have already forayed into the organized processing, retailing and also agri- input/service sectors, and have the potential to scale up investments. However institutional hurdles in doing business and also the stop-

go policy approach continue to dampen the momentum.

It is quite evident that Indian agriculture will be more demand driven and future sources of growth increasingly lie in the high value sector. Hence it will be important to usher in the right reforms and envisage synergies between the public and private sector to ensure higher and sustainable growth in the long run. The onus of delivering certainly does not lie with the public sector alone but creating an enabling environment will help foster better partnerships critical for higher agricultural growth. q

(E-mail:[email protected] [email protected])

YE-

1/11

/2


OST 1990 India has emerged as one of the world’s fastest growing economies. Its GDP growth rate

of about 9% in the last few years is historically unparalleled except by our neighbour China. With rapid economic and social growth, however, new challenges emerge as also new growth strategies. For sustainable economic development, the crucial agricultural sector has to grow at a consistent 4% growth rate to GDP. Given the fact that 60% of our farming is monsoon dependent, ensuring consistent growth in food production is a major challenge, especially in wake of global warming and consequent climatic changes.

Credit has a very important role to play in supporting agricultural p roduc t ion and inves tment activities. The total credit flow to agriculture during the 10th Five

Financing Agriculture : Some Issues

AgRiCulTuRE

K G Karmakar

OVERViEW

Small and marginal farmers should be helped to liberate themselves from the stranglehold of moneylenders

and should be given priority for

accessing low cost credit

Year Plan was expected to grow at a compound annual growth rate (CAGR) of 26.38%, as against the CAGR of 18.63% achieved during the 9th Five Year Plan. However, although the total agricultural credit has increased during the last six years, there are serious quantitative as well as qualitative concerns. The poor outreach of the formal institutional credit structure is a serious issue that needs to be corrected expeditiously. The findings of the National Sample Survey Organisation (NSSO) 59th Round (2003), reveal that only 27% of the total number of cultivator households received credi t f rom formal sources while 22% received credit from informal sources. The remaining households, comprising mainly small and marginal farmers, had no credit outstanding. Comprehensive measures aimed at financial inclusion in terms of innovative

P

The author is Managing Director, National Bank for Agriculture and Rural Development (NABARD)


products and services to increase access to financial services and institutional credit, are required. Other issues such as ensuring credit flow to tenant farmers, oral lessees and women cultivators, complex documentation processes, high transaction costs, lack of availability of quality inputs across all regions, inadequate and ineffective risk mitigation arrangements, poor extension services, weak marketing links and sectoral and regional issues in credit are also required to be addressed expeditiously. The lack of rural credit bureaus also delays the process of sanction of agricultural loans as there is need to reduce loan risk and documentation procedures.

Agriculture Sector Constraints

The importance of agriculture in the Indian economy, in terms of providing livelihood opportunities to 650 million of its population and raw material for a large number of its industries, cannot be overstated. For the Indian economy to maintain its growth momentum on a sustainable basis, the agriculture sector would have to play a more important role than it has in recent years. The actual growth in the agriculture sector during the first four years of the 10th Five Year Plan has averaged only about 2% per annum as against 4% per annum as envisaged during the Plan period (2002-07). While the share of agriculture GDP in the overall GDP has declined from around 35% in 1980-81 to around 18% at present, the fall in the proportion

of population dependent on the sector has been insignificant from 70% to 66% only. The rapidly worsening ratio between the rural per capita income from farm and non-farm sectors is causing serious concern. While a majority of the workforce is still dependent on agriculture, the GDP growth rates in agriculture is marginally above the rate of growth of population, in contrast to the high growth in the non-agricultural sector. Secondly, growth has been uneven across regions and crops. Thus, despite achieving self-sufficiency in food grains production at the national level and technological advancements in agriculture, starvation deaths and suicides continue to plague a large section of the farming community in different parts of the country.

The decline in the share of the agricultural sector’s capital formation in GDP from 2.2% in the late 1990s to 1.7% in 2004-05 is a matter of concern. The decline in profitability of agriculture during the nineties by 14.2% could be one of the major reasons for lack of growth in the private sector investment in agriculture. Investment in irrigation, land d e v e l o p m e n t , w a t e r s h e d d e v e l o p m e n t , a g r i c u l t u r a l marketing infrastructure and rural roads are increasing agricultural productivity and incomes. Revival of the cooperative credit institutions through legal and institutional reforms as per Vaidyanathan Committee recommendations, and financial support is expected to improve the flow of credit to

the agriculture sector and increase investment in the sector.

Constraints in Agricultural Credit Flow

In a developing country the objective of monetary and credit policies should be to change the risk profile of the agriculture sector and credit policy should be a part of the macro-economic management policies. Agricultural Credit refinance policies should be viewed as a market correction tool and also for growth enhancement and risk reduction. A narrow monetarist view should not colour the credit and refinance policies which currently reflects a sub-optional appreciation of agriculture as a very important component of the economy. The need is for low cost funds for NABARD to reduce the cost of finance for farmers and ensure that farmers access credit at 4% (as recommended by the National Commission on Farmers, headed by Dr.M.S.Swaminathan in 2007). Farmers will be unable to reduce input costs for seeds/fertilizers/pesticides and other essential inputs like water, labour etc. The only way is to reduce cost of credit by giving this in a subsidized mode.

The Finance Minis ter in the budget speech for 2010-11 announced an effective interest rate of 5% (including 2% for prompt repayment as incentive). This is a step and in the right direction if Indian agriculture is to remain competitive and vibrant. However, with 80% credit going for crop loans and corporate, only


about 20% is for investment credit in agriculture (more for thresher combines, tractors etc. and less for irrigation, animal husbandry, fisheries sectors). Also, since 1990’s, there is a steady closure of non-profitable rural branches by commercial banks. In many poor s ta tes l ike Jharkhand, farmers are not able to avail of low interest rates and pay interest rates exceeding 11% . These need to be investigated by RBI/MoA/MoF. There is a need for a Farm Credit Assistance Corporation as set up in USA in 1987, where

agriculture contributes only 1.6% to GDP and employs only 2% of the American work force.

Since 2004, there has been a spurt in agricultural credit due to GOI initiatives such as “ Doubling of Agriculture Credit” in 2004-2006, Agricultural Debt Waiver Scheme, 2008 and the strengthening of cooperatives due to the Vaidyanathan Committee – I recommendations. However, the Vaidyanathan Committee II recommendation for the long term co-operative credit societies, have yet to be implemented. The

agricultural credit scenario has been good over the last 3 plans but the average GDP growth rate for Agriculture seems to be declining as under :

Agricultural Growth Rate

Ninth Plan (1997-98 to 2001-02) 2.50Tenth Plan (2002-03 to 2006-07) 2.47Eleventh Plan (2007-08 to 2009-10) 2.20

Agr icu l tu ra l c red i t t a rge t s since 1997-98 and the actual achievements, are set out in Table-1 .

Though agricultural credit data on paper is impressive, the small and marginal farmers are unable to access credit easily. There is excessive lending to the agricultural sector in metropolitan areas indicating that indirect lending for agriculture has gone up for activities such as warehouses, cold storages, irrigation, rural electrification etc. There is evidence that the same set of credit worthy farmers are availing of credit with new borrowers still struggling to secure credit. The GOI’s loan waiver schemes and concessional interest schemes tend to benefit farmers who have access to bank credit and have further enhanced flow of credit to the non-defaulting farmers! These are typically large and medium farmers with multiple income sources, not relying wholly on risk-prone crop credit. Small and marginal farmers should be helped to liberate themselves from

Table-1 Agri.credit projections and achievement (Rs. Crore)

Plan Credit target Credit achievement % Acievement

IX Plan

1997-98 33375 31956 95.7

1998-99 38645 36860 95.4

1999-00 44780 46268 103.3

2000-01 52108 52827 101.4

2001-02 60842 62045 102.0

Total 229750 229956 100.1

X PLAN

2002-03 82073 69560 84.8

2003-04 105958 86981 82.1

2004-05 137285 126309 92.1

2005-06 178476 180486 101.1

2006-07 232778 229400 98.5

Total 736570 692736 94.0

XI PLAN

2007-08 242000 254658 105.2

2008-09 282000 301908 107.1

2009-10 324000 366919 113.2

Total 1638000 923485 56.4

2008-10 848000 923485 108.9


the stranglehold of moneylenders and should be given priority for accessing low cost credit through KCC mechanism. Farmers suicides have also come down drastically especially among cotton growers, largely due to the excellent pest free transgenic Bt cotton seeds which have reduced crop failures and not so much due to improved access to institutional finance. The recent crisis in micro finance would only reduce accessibility to credit sources for the small and marginal farmers. If financial inclusion is relevant, the Central/State Governments must ensure that all farmers especially the small and marginal ones, get priority access to cheap farm loans and not the better-off farmers who are able to access institutional credit more easily.

Though NABARD has been s t r iv ing to access low-cost funds for reducing the cost of agricultural credit, its ability to meet sectoral challenges and direction of credit to desired section of the agriculture sector is increasingly being questioned. A quick review of the financial support from NABARD for the rural agricultural sector reveals that refinance to agriculture as a % of the ground level credit to agriculture since the creation of NABARD in 1982, rose from 23% to 51% in 1989-90 and thereafter has declined to 10% in 2009-10. Thus, NABARD’s refinance is now inconsequential to the agriculture sector. The proportion of NABARD’s refinance for minor irrigation which was 52% in

1982-83 has reduced to less than 5% in 2009-10 while other sectors like Dairy Development, Animal Husbandry, Forestry, Fisheries together would account for less than 12% of the refinance flow.

The major focus of NABARD is on the following l Ensuring sustainable livelihood

f o r f a r m e r s , i n c l u d i n g agricultural labourers

l Productivity enhancement from subsistence to sustaining levels through technological interventions

l Institution building to facilitate access to credit, technology marketing and markets

l Addressing basic social infrastructure needs especially health, sanitation, drinking water and education

l S o c i a l s e c u r i t y a n d r i sk mi t iga t ion fo r the marginalized

Accordingly, NABARD has experimented and successfully demonstrated various approaches in addressing the key issues indicated above.

wadi Approach

S u s t a i n a b l e l i v e l i h o o d oppor tuni t ies or in tegra ted development of tribal communities primarily through orchard based farming systems. A typical wadi project covers 1000 families in a cluster of 20-25 tribal hamlets with a support of Rs.4 crores @ Rs.40,000 per family over 7-8 years. Plantation activity is taken up in the first three years and each

family is supported for 5 years for orchard development. Wadi projects have benefitted 1.7 lakh tribal families and has a corpus of Rs.1150 crore.

wa t e r s h e d – S u s t a i n a b l e M a n a g e m e n t o f N a t u r a l Resources

Since 1992, development of micro watersheds for sustainable production systems has been taken up in different watershed programmes. A Watershed Fund with a corpus of Rs.12103 crore has been built up. Over 1915 projects were sanctioned covering 15-32 lakh farmers over 3030 villages. The participatory approach includes voluntary labour (shramdan) and is an integral part of the programme with emphasis on self help, environmental sustainability and poverty alleviation, all supervised b y t h e Vi l l a g e Wa t e r s h e d Committees.

System of Rice Intensification

Though not supported by ICAR, this package of practices developed in Madagascar 25 years ago, is being actively supported by State Governments and farmers in Tamil Nadu, Andhra Pradesh and Tripura and sporadically in other areas. Intensive t raining and pi lot projects have been initiated. This system is a boon for small and marg ina l fa rmers as i t reduces input costs of seeds by 60% and water irrigation costs by 40%, reduces fertilizer costs by 30% and enhances production


by 35% over the tradit ional t ransplanted r ice . Research for similar water saving crop techniques in barley, wheat and sugarcane have been initiated with promising results.

Seed Village Concept

With poor germination rates of 55-60% and poor seed replacement rate of less than 15% the quality of seeds available to the farmer, is the single most important determent of farm productivity. For localized seed production and availability of quality seeds, farmers need to retain control over the availability, distribution and cost of quality seeds on a localized basis. This will reduce cost of seeds and ensure better seed replacement, eliminating transport costs etc. Farmers must insist on seed germination rates of 90%

Institution Building to aid farmers l The Lead Bank Scheme,

1970 needs to be reviewed and the RBI’s attempts to revise the scheme in 2010, too may not meet actual ground level requirements. Also financial inclusion for farmers by ensuring KCC’s for all farmers over a 5 year crop cycle, should be implemented. Rural employment in agri processing, off-farm and non-farm activities which enable the unemployed rural youth to participate, has to be taken up on a priority mode. The National Rural Livelihoods Mission of the MoRD needs

to be strongly supported by all banks including NABARD and RBI.

l Farmers Clubs’ Association and JLGs

O v e r 5 5 , 0 0 0 F a r m e r s Clubs have been started by NABARD with the support of various banks covering 1.05 lakh farmers in 587 districts, as against a target of 1 lakh Farmers Clubs by 2012. These clubs ensure technology transfer mechanism, credit counseling, market advocacy besides giving training, visits to farms, SHG linkage with banks/universities/technical inputs and help in credit discipline including loan recovery, formation of Joint Liability Groups of farmers for access to farm credit. Farmers Association are also being nurtured so that groups of Farmers Clubs can play the role of facilitators for produce grading, costing, packaging and transportation so that the aggregators role can be played by them. This will enable farmers to enhance the i r f inanc ia l marg ins which today is enjoyed by middlemen.

l ICT Intervention for farmers T h e i n t e r v e n t i o n s i n

technologies can ensure extension of timely, accurate and needed financial, market and technical data, and lead to a quantum jump in productivity and financial

margins of farmers. The key interventions which have been successful are :

E-sagoo (Hyderabad, AP) – for pathological investigation of cotton crops

E-kutir – (Nayagarh, Orissa) – for advice on integrated agricultural inputs, market data and credit

E-chaupal (M.P., Chattisgarh etc) for market prices and rates

Reuters Lite (Maharashtra) for advice on crop weather and market data Producer companies

India achieved self-sufficiency in food grains in the 1970’s and has sustained it since then. Yet the concerns about the low per capita food energy intake and non fulfillment of basic nutritional requirements of a large percentage of the population have kept the issue on food security alive even today. Apart from the issues related to agricultural credit flow discussed above, the country today also has to contend with issues like lack of adequate storage for foodgrains, degradation of natural resources and c l ima te change and i t s a t tendant problems. Al l these problems have to be attended to comprehensibly if agricultural development is to be carried out on a sustainable basis. q



If farmers use recommended high-yielding varieties/

hybrids, adopt improved practices,

use quality seed and adopt

appropriate time of sowing/ planting

it will lead to large improvement in

productivity

Revitalizing Agriculture through Improved Technology

AgRiCulTuRE

N D I A H A S b e e n striving to achieve 4 per cent growth in agriculture since the 8th Five Year plan. The 9th

plan raised the target to 4.5 per cent, but subsequently, the National Agriculture Policy (2000) , the 10th plan and more recently the 11th plans reiterated the target of 4 per cent growth in the sector in order to achieve 9 per cent growth for the whole economy, meet the food and nutrition needs of a population growing at the rate of more than 1.4 per cent per annum and also to achieve the goal of inclusive growth.

A c t u a l a c h i e v e m e n t s i n agriculture growth show that while the 8th plan indeed achieved more than the target growth of 4 per cent, the average annual growth rate of GDP of agriculture and allied sectors turned out to be 2.5 and 2.4

The authors are Director General,Indian Council of Agricultural Research and Director, National Centre for Agriculture Economics and Policy Research, New Delhi respectively

per cent respectively during the 9th and 10th plan periods. The last two years of 10th plan and the first year of 11th plan (2005-6 to 2007-8) recorded average growth of 4.7 per cent. However, the rate of increase in agricultural output slipped to 1.6 per cent during 2009-10 owing mainly to unfavourable weather conditions for crop sector. India faced severe drought in many parts of the country due to failure of south west monsoon during the year 2009 (Fig. 1). Despite the severe drought during 2009-10, agriculture output increased by 0.40 per cent. In the past a drought of this magnitude always brought down level of agriculture production. The extent of decline was as high as 5.24 per cent during the previous drought in year 2002-03 which was relatively less severe than the drought of 2009-10.

S Ayyappan Ramesh Chand

PERSPECTiVE

I


From the above it is clear that the sector needs to grow by more than 6.5 per cent in each of the remaining two years of the 11th plan to attain average growth rate of 4 per cent for the whole plan. It appears that the 11th plan will not succeed in realising average agriculture growth rate of 4 per cent but it is likely to achieve

higher growth than the previous two plans if there is no serious supply shock in the remaining period.

The growth prospects in agriculture need to be seen in the light of potential for and sources of growth. Technology has to play a critical role to harness the

potential and to tap various sources of growth.

Potential for Growth

Various indicators suggest that there is a vast potential for growth of agricultural output in the country. This follows from (a) inter and intra regional range of variations in agricultural productivity (b) gap between actual yield at farmers field and the yield that can be obtained from improved technology and (c) potential of technology to break ceilings in productivity.

Inter state comparison of productivity reveals tremendous variation in almost all crops and enterprises. Range of productivity of selected crops in major producing states and average productivity for the whole country are presented in Table 1. It can be seen that rice yield in Madhya Pradesh is less than one fourth of the yield in

Fig.1: Growth rate of GDP in agriculture and allied sectors at 1999-00 prices since Eighth Plan (%)

Source: National Accounts Statistics, GOI.

Table 1: Range of Crop Productivity in Major Producing States 2007-08(Yield - Kg./Hectare)

CropsHighest (H) Lowest (L) National

AverageRatio

State Yield State Yield H/LRice Punjab 4019 Madhya Pradesh 938 2202 4.285Wheat Punjab 4507 Karnataka 946 2802 4.764Jowar Andhra Pradesh 1420 Haryana 453 1021 3.135Bajra Haryana 1843 Jammu & Kashmir 595 1042 3.097Sugarcane Tamil Nadu 107484 Bihar 35496 68877 3.028Maize Andhra Pradesh 4607 Madhya Pradesh 1288 2335 3.577Gram Andhra Pradesh 1448 Rajasthan 466 762 3.107Arhar Gujarat 1109 Andhra Pradesh 652 826 1.701Masur Bihar 793 Madhya Pradesh 440 622 1.802R/ mustard Gujarat 1635 Assam 523 1001 3.126Groundnut Tamil Nadu 1957 Uttar Pradesh 598 1459 3.273Cotton Punjab & Haryana 663 Madhya Pradesh 233 467 2.845

Source:AgriculturalStatisticsataGlance2009,MinistryofAgriculture,GOI.


Punjab. The gap is larger in wheat. Maize yield in Madhya Pradesh is less than one third of the yield in Andhra Pradesh. Likewise, productivity of sugarcane in Bihar is one third of Tamil Nadu. Among the major producing states highest yield for most crops is more than three times the lowest yield.

A study on inter regional variations based on district level data show amazing spread in input use and crop productivity across the country. During 2004-05 per hectare fertiliser use varied from as low as 2kg/hectare of net sown area in some districts to more than 400 kg in some districts. Per hectare value of crop output in the most productive district in the country was found to be 33 times the productivity in the district at the bottom (Chand et.

al. 2009). These extremes indicate the possibility for raising output by pulling up low productivity regions.

Productivi ty variat ion in livestock sector is more glaring than crop sector. Milk yield per milk animal (bovine) ranged from 1.38 kg/day in Chhatisgarh to 7.94 kg in Punjab during 2007-08 (DAHD 2008).

Frontline demonstration of various departments provide clinching evidence of large gaps between what is attained at farmers fields with adoption of improved technology and what is attained with the practice followed by farmers. This is illustrated in the case of two major crops viz. paddy and wheat, information for which is furnished in Tables 2 and 3.

Punjab, which is agriculturally quite advanced, shows yield gap of 10% in the case of wheat. There is a scope to increase wheat yield by more than 25% in Uttar Pradesh and Bihar and 30% in Madhya Pradesh, West Bengal, Uttranchal and Karnataka by adopting improved practices at farmer’s field. Yield with improved practice is more than double the state average in Bihar while the gap is 50% for Uttar Pradesh. Wheat cultivation is now expanding to warmer areas like Karnataka and Maharashtra. Average yield in these states, particularly in Karnataka, is awfully low.

Rice in India is grown under different typologies like rainfed up-land, rainfed low land and irrigated. Under rainfed conditions improved practice can raise farmers’ yield

Table 2 : State-wise performance and potential of wheat as revealed by actual yield and yield with improved practice and farmers practice

Yield: Kg/ha 2002-03 to 2004-05

State Improved Farmer Actual (A) Yield gap % between

Practice (I) Practice (F) 2003-04 I and F I and A

Uttar Pradesh 4206 3324 2794 26.5 50.5

Bihar 3651 2905 1783 25.7 104.8

Punjab 4463 4035 4207 10.6 6.1

Haryana 4751 4520 3966 5.1 19.8

Rajasthan 3948 3724 2794 6.0 41.3

Gujarat 4034 3491 2681 15.6 50.5

Madhya Pradesh 3297 2472 1789 33.4 84.3

Maharashtra 3411 2907 1335 17.3 155.5

Himachal Pradesh 2616 2126 1380 23.0 89.6

West Bengal 2766 2081 2316 32.9 19.4

Uttaranchal 3388 2444 1877 38.6 80.5

Karnataka 3608 2761 480 30.7 651.7

Source: Raw data on crop yield with Farmers practice and Improved practice was provided by O/O Agricultural Production Commissioner, MOA, GOI, New Delhi.


by 19% in Chattisgarh, 46% in Uttar Pradesh, 66% in Jharkhand and by 134% in Manipur (Table 3). Boro rice is now getting a lot of popularity. Farmers in Uttar Pradesh obtained yield close to that with improved practice, whereas, the gap was highest in Assam. Under irrigated conditions the gap between improved and farmers practice ranged between 14 to 59%.

The large yield gap is a clear pointer to the potential for raising output through effective dissemination of technology already developed. But this is not happening mainly because of absence or weak Research-Extension-Farmer linkages.

S o u r c e s o f G r o w t h a n d Technology

The common sources of growth in agriculture are increase in area

or number of livestock; higher use of inputs like fertiliser, agro chemicals, seeds, and energy; expansion of irrigation, improved technology. Improvement in technical efficiency, changes in product mix from low to high value, product integration, more intensive use of resources like land (crop intensity) are the other sources for raising agriculture output.

Table 3: State-wise performance and potential of rice as reveled by actual yield and yield with improved practice and farmers practice

Yield: Kg/ha 2003-04 to 2004-05

State Improved Farmer Actual Gap % between

practice practice 2003-04 I and F I and A

Rainfed (upland) 2003-04

Chhattisgarh 3740 3138 1455 19.2 157.0

Jharkhand 2292 1380 1695 66.1 35.2

Manipur 4277 1830 133.7

Uttar Pradesh 3620 2480 1942 46.0 86.4

Rainfed (shallow lowland)/ Boro; 2003/04, 2004/05

Assam 4520 2550 1534 77.3 194.7

Chhattisgarh 3554 2784 1455 27.7 144.2

Jharkhand 3480 2300 1695 51.3 105.3

Manipur 6350 5095 24.6

UP 3656 3432 2187 6.5 67.2

Irrigated

Chhattisgarh 3919 3137 1455 24.9 169.4

Bihar 4883 4158 1516 17.4 222.1

Gujarat 5585 4890 1891 14.2 195.3

J&K 7488 4705 1941 59.1 285.8

UP 7050 5200 2187 35.6 222.4

Uttaranchal 3850 3200 1942 20.3 98.2

Source: Raw data on crop yield with Farmers practice and Improved practice was provided by O/O Agricultural Production Commissioner, MOA, GOI, New Delhi.


Area Expansion

Out of total area of 305.5 million hectare for reporting land use statistics in the country, crop cultivation is taken on about 140 million hectare which comprises more than 45 per cent of the total area. This area, termed as net cultivated area, has remained more or less constant during the last five decades. The ratio of net sown area to total area in the country is much higher than the global average and it is not considered ecologically desirable to raise share of cultivated area in total area beyond the present level. Also, demand from industrial uses, infrastructure, housing and urbanisation is forcing conversion of agr icul tura l land to non agricultural uses. Thus, there is no scope to expand area available for cultivation in the country. On the contrary, this area is going to face a declining trend in future. There is another dimension of area which is related to crop intensity. Despite high pressure on land, cropping intensity in India has remained low. Within an agriculture year, second crop is taken on less than 38 per cent of the cultivated area. This implies that about 90 million hectare cultivable area remains fallow in kharif or rabi season. This is a very substantial source of growth in agriculture output in future.

There are many reasons for low cropping intensity. These include water/moisture stress, availability of crops and varieties with duration that suit the crop

growth season and fit into crop sequence, specific cultivation practices, risk due to recurrent floods or droughts etc. Most of these constraints can be addressed through technology. National Agricultural Research System has developed technology packages for moisture conservation, and, crop cultivars that can survive various abiotic stresses. Tailor made crop varieties are now available that give numerous choices for various length of crop durations. These varieties and hybrids have ideal maturity and p l an t a r ch i t e c tu r e fo r intensification and diversification of cropping systems. A large set of Resource Conserving Technology is available to take care of constraints like moisture stress to take crop on land left fallow. However, the awareness level and adoption rate of these technologies is awfully low.

Input Use and Efficiency

There is vast scope to increase use of yield enhancing inputs and to improve efficiency in input use to raise agriculture output. For instance, fertiliser use in India is much lower than many other agricultural countries despite tremendous growth in fertiliser use. Comparable data on fertilizer show that India used 121kg NPK per hectare of arable land during 2005-07, which, though close to the world average, is far below the fertilizer use in major agricultural countries. Fertilizer consumption in China in the same period was 328 Kg per hectare of arable land. Thus, China uses 2.7 times the fertilizer use in India per hectare of arable land. This is an important factor for productivity differentials between India and China.

Fertilizer use in India is lower than Pakistan and Bangladesh also. Further, fertiliser is used

Fig.1: Fertiliser use per hectare of arable land in selected countries during 2005-07.

unit: kg NPK

Source: World Bank (2010).


indiscriminately. Because of this, efficiency of fertiliser use remains low. The use of recommended doses of fertilizers based on soil tests along with their correct time of application is very crucial for higher use efficiency. In addition to major nutrients (N, P and K), use of secondary- and micro-nutrient based on their available status in the soil is critical for realizing production potential. Integrated nutrient management practices developed by agricultural research system are useful in maintaining soil health and sustaining long-term production.

Role of Technology

Productivity of almost all crops is quite low in most states in India. Institutes under Indian Council of Agricultural Research, and State Agricultural Universities have developed varieties and technologies which are capable of giving much higher output per unit of resources. The higher growth can very well be realized through adoption of available technologies that minimize the gap between attainable yield, as demonstrated by various experimental farms, and farmers’ fields. Adopting these technologies promise tangible yield gains of 40-100% (ICAR 2007).

Indian Council of Agriculture Research has proven and cost effective technology for reclaiming problem soils. About 25 million ha of acidic soils in the country have low productivity, less than 1 tonne/ha, due to deficiencies as well as toxicities of certain

nutrients. Liming and adequate fertilizer use have the potential to double productivity of these lands. Thus adoption of cost-effective technology of ICAR to ameliorate the soils could contribute additional 25 million tonnes of foodgrains per annum. Similarly, about 8.5 million ha of soils affected by alkalinity/salinity in the country have very low productivity and could be reclaimed with gypsum application which has already been used to reclaim over 1 million ha of such lands in Haryana and Punjab. This technology needs to be extended to other salt-affected areas of Gujarat, Uttar Pradesh, Rajasthan, West Bengal and Andhra Pradesh. What is required is to ensure the availability of gypsum with fertilizer dealers at a reasonable price. It is estimated that such technology can benefit 5 million ha area to provide additional 10 million tonnes of foodgrains (ICAR 2007).

ICAR has also developed Vermicomposting technology which is environment friendly and useful for conversion of rural and urban organic wastes into good quality manure. Vermicompost improves physical, chemical and biological environment of soils and overall crop productivity. Large quantities of biodegradable waste are available from crop residues (350 million tonne), vegetable and fruit wastes (5 million tonne), press mud (5 million tonne), poultry litter (1 million tonne) and city waste (57 million tonne). Besides, 5-6

million tonne of low-grade rock phosphate are also available for product ion of enr iched vermicompost. These can serve as important source of enhancing productivity.

T h e I n d i a n C o u n c i l o f Agricultural Research is engaged in harnessing modern scientific knowledge to develop high-yielding, open-pollinated varieties and hybrids that are resistant/ tolerant to major biotic and abiotic stress factors, efficient in input use, and adapted to different agro climates, suited for irrigated and rainfed areas. More than 4000 high-yielding varieties and hybrids in different crops have been developed for commercial cultivation. Site specific technological interventions for accelerating agriculture growth have already been identified. If farmers use recommended high-yielding varieties/hybrids, adopt improved practices, use quality seed and adopt appropriate time of sowing/ planting it will lead to large improvement in productivity as well as quality of produce in many crops. Similar technologies are also available in livestock and fisheries. Based on the potential of these technologies it is quite feasible to put Indian agriculture on 4 per cent growth trajectory. This requires serious efforts to disseminate and promote adoption of improved technologies i n c r o p s , l i v e s t o c k a n d fisheries. q

(E-mail:[email protected] [email protected])


What is proving to be inadequate

is identifying critical, location specific problems

in different regions and finding

solutions to them

Rainfed Agriculture – Concerns, Opportunities and Strategies

AgRiCulTuRE

NDIAN AGRICULTURE continues to be largely rainfed with nearly 60 per cent of the cultivated area not having any access to irrigation. Even if the

country’s full irrigation potential is realized, half of its cultivated area will continue to be under rainfed farming. What is more important is that these rainfed regions are home to about 40 per cent of population and to most of the rural poor in India. The Indian economy is now poised to take off to a higher growth path and performance of agriculture is critical to achieve and sustain such growth . For agriculture to contribute to the economy, performance of rainfed agriculture remains critical. In fact, rainfed agriculture assumes importance from the considerations of growth, equity and sustainability.

Rainfed agriculture is largely practiced in arid, semi-arid and sub-humid regions in the country, where the annual precipitation is lower than the evapo-transpiration demand. Coarse cereals (87.5%), pulses (87.5%), oilseeds (77%), and

The authors are respectively Director and Principal Scientist (Agricultural Economics) at Central Research Institute for Dryland Agriculture, Hyderabad

cotton (65.7%) are the predominant rainfed crops grown in India (CRIDA, 2007).

Recent Growth Performance of Rainfed Crops

The production of coarse cereals in the recent decade (1997-98 to 2007-08) increased at the rate of 2.2 per cent though the area declined at a rate of 0.46 per cent (Fig 1). Among the coarse cereals, yield growth was fastest in case of pearlmillet (3.09%) and slowest in case of sorghum (1.62%). The yield growth in coarse cereals was faster than that observed in rice and wheat.

The production performance of pulses continued to be low. Both area and yield did not show any significant growth. As far as oil seeds are concerned, faster yield growth was observed in rapeseed and mustard (3.51%) and groundnut (1.77%) and slower growth in soybean (0.3%). In case of cotton, the yield increased at a significant rate of about 9.04 per cent per annum and led to a production growth rate of over 9 per cent per

B Venkateswarlu CA Rama Rao

OVERViEW

I


annum. Introduction of Bt.cotton played an important role in this growth.

Key Concerns

Rainfed agriculture is inherently dependent on monsoon and so any aberration in the course of monsoon impacts the production and productivity. Rainfed agriculture is also characterized by poor and degraded lands. Geography of rainfed agriculture and poverty largely overlap. In other words, regions where rainfed agriculture is predominant are poorer and underdeveloped making them more vulnerable to any external or environmental shocks. Poor soils and low rainfall together limit the length of growing period and crop choice. Frequent incidence

of droughts and floods poses a threat to realization of potential yields as well as to the investments. Occurrence of extreme climate events especially in recent decades and incidence of insect pests and diseases are other important factors that limit productivity. Growing scarcity of natural resources, especially of water as a result of increasing competition from non-agricultural uses and changing climate, will prove to be the most limiting factors. Small size of farms resulting in low marketable surplus, eroding demand for rainfed crops like coarse cereals, inadequate public investment in rainfed agriculture and lack of adequate policy and institutional support are the major concerns that need to be addressed. Policies related to

input pricing, credit and food grain procurement and distribution also adversely affected the profitability of rainfed crops, in particular, millets. All these factors together resulted in an environment that is not so conducive to invest in technology adoption.

Opportunities

The National Agricultural Research System over years has developed a number of technologies that showed promising results in terms of enhancing productivity and profitability levels of rainfed crops. An indicative list of such technologies with focus on natural resource management is provided in Table 1. The low adoption rate of many technologies is mainly due to poor extension services, lack of timely availability of inputs and labour intensive nature of some of the technologies. With the implementation of the MGNREGA, this constraint may be overcome and there is good scope to enhance the adoption of these technologies.

In addit ion, a number of improved varieties of sorghum (CSV 17, CSH 23, K 11, etc), sunflower (KBSH-42, 44, 53, DRSH 1, LSFH 35, PFSH 118), rainfed rice (CR Dhan 40, Shusk samrat, Virender, AAUDR 1, Salmeshwari, etc), castor (DCS-177, DCH-519, GCH-7, Kiran) are now available which have superior traits and suitable for rainfed cultivation.. Other important technologies that can be transferred with better gains are those related to soil fertility management, mechanization of sowing, interculture and harvesting and IPM. Potential of these technologies is also well reflected in the realizable yield gaps.

The on-going development programmes such as MGNREGA, R K V Y, N H M p r o v i d e a n opportunity for extending these technologies on a larger scale. There Source:ComputedfromBhatiaetal(2006),Murthyetal(2007)


are some success stories emerging out of convergence of development initiatives with institutions that develop technologies and those that work with communities more closely. For example, investments in farm ponds are proving to have strong income effects by enabling a change in cropping pattern in favour of market-oriented crops as well as by increasing crop yields. Similarly, there is ample scope for more equitable and efficient use of ground water when appropriate social and technical arrangements are made like ground water sharing and adoption of efficient methods of irrigation (http://crida.ernet.in/NAIP/ss/Success%20Stories-2010.pdf). Both these interventions involved different institutions which played complementary roles that resulted in the desired outcomes.

There is a considerable potential to apply frontier sciences such as biotechnology, information and communications technology, nanotechnology, model ing , geospatial technologies in rainfed farming.. For example, the advances in biotechnology will help more effective utilzation of available germ plasm to develop crop varieties with tolerance to drought,

heat, insect pests, etc. Similarly, the developments in ICT will enable farmers to receive information on crop management and to get connected to distant markets. Nano technology based products can be developed to enhance soil moisture storage and seed hardening.

There is a heightened awareness about and acceptance of newer, innovative, participatory and flexible approaches among various research and development agencies concerned and this is bound to enhance their capacity to be more effective and efficient in fulfilling their responsibilities.

Another important opportunity for enhancing the demand for coarse cereals largely grown in rainfed conditions lies in the National Food Security Act which is likely to be enacted soon. Once it becomes effective, it would be necessary to include coarse cereals in addition to rice and wheat in meeting the food grain entitlements of those who are eligible. This will pave way for a more favourable price and procurement environment for profitable cultivation of coarse cereals.

Strategies

Investments in agricultural research will go unrealized if technologies are not adopted by farmers. But if these investments are to be transformed into better economic well being and welfare outcomes , both technology d e v e l o p m e n t a n d p o l i c y environment are to be made more responsive and effective. Following are some issues that need attention of research managers and policy makers.l U s e t h e p o t e n t i a l o f

biotechnological tools to breed for improved crop varieties that are high yielding, resistant to water scarcity and flooding, pests and diseases, and can adjust to the possible changes in length of growing period because of climate change.

lMore research on harvesting and use of rain water. Even without a climate change, it is imperative to harvest and use rain water more economically. If the possible impact of climate change is considered, the issue becomes more complicated. We need to be prepared for prolonged droughts and heavy rainfall events within a season.

Table 1. Potential NRM technologies that can be adopted on a wider scaleTechnology Target region BC ratio Extent of

adoption (%)Ridge-furrow planting of pigeonpea and rice Eastern UP 1.5 25Compartmental bunding North Karnataka 2.13 10Ridge and furrow cultivation with baliram plough in vertisols

Solapur region 1.76 60

Broad bed and furrow/ridge planting in vertisols Malwa region in MP 3.25 75Improved ridger seeder for planting rainfed crops Western dry zone of

HaryanaSaves seed, time and increases yield

25

Groundnut+pigeonpea intercropping (7:1) Rayalaseema in AP Extra returns of Rs.2500/ha 70Cotton+sorghum+pigeonpea+sprghum (6:1:2:1) Vidarbha Meets multiple needs 10Toposequence based cropping system Vidarbha Reduces soil loss by 20% LowSupplemental irrigation to mustard with harvested rain water

Agra in UP 3.8 10-15

Farm ponds for rain water harvesting Telangana in AP Extra returns of Rs/2000/ha Low


This means that there is a need to plan for large water storage structures as well as for smaller ones that collect flood water and store for use later.

lThe current focus on water resource planning at the river basin scale is not appropriate for water management in rain-fed agriculture, which overwhelmingly occurs on farms of < 5 ha at the scale of small catchments, below the river basin scale. Therefore, focus should be to manage water at the catchment scale (or small tributary scale of a river basin), (Rockström et al., 2007).

lResearch is needed to make wate rshed deve lopment programmmes more effective and efficient by identifying cost-effective interventions, and more equitable, participatory and sustainable resource management while ensuring post project sustainability.

lResearch on use of solar and wind power for water lifting and conveyance.

lMore research on weather forecasting for medium and long range and its timely dissemination to help in preparing for the contingencies at the micro and macro level.

lP r o a c t i v e p o l i c i e s f o r developing technologies to grow crops that have market but are to be grown in harsher and more uncertain environment or develop markets for crops that can do well in the harsher environments.

lInvest in development of safety net mechanisms such as creation of grain, fodder and seed banks as well as risk management options like weather insurance.

lDiversification of cropping pattern and enterprises by integrating livestock.

lStrengthening institutions that link farmers to markets to enable even small farmers to realize better prices by aggregation.

lThe enormous diversity of rainfed farming regions require more efforts in developing location specific technologies and strategies. This also means giving importance to adapting and refining technologies in a farmer-participatory framework. In fact , the generic problems of rainfed agriculture are more or less adequately understood. What is proving to be inadequate is identifying critical, location specific problems in different regions and finding solutions to them. This is likely to prove a major challenge for researchers, research managers and development agencies.

lPutting in place an effective early warning system for minimizing the impacts of weather aberrations on crops.

Recent Initiatives that have bearing on Rainfed Agriculture

MGNREGA

Al l t he l and and wa t e r conservation woks being carried out under the MGNREGA indirectly help in drought proofing. Since 60% of the works under this scheme are related to land and water conservation, there is immense scope to tailor the works to improve land and water resources and contribute to enhanced production in rainfed agriculture. The key challenge lies in having adequate trained manpower at the village level who can identify the relevant works and include them in the annual action plan of the scheme and its scientific execution

IWMP

The Integrated Watershed Management Programme with

revised guidel ines also has great potential to contribute to natural resource management and stabilizing rainfed crop production. Under this scheme, large watersheds upto 5000 ha will be covered with better integration of ridge to valley approach and going beyond water conservation to include livelihoods of people in the watershed.

NAPCC

Of the eight Missions under the National Action Plan on Climate Change, one is the Mission on Sustainable Agriculture. Dryland agriculture and risk management figure prominently in the National Mission and hence it is a challenge to channelize the resources available under the scheme for formulating innovat ive and meaningfu l projects.

ResearchonClimateResilienceT h e I n d i a n C o u n c i l o f

Agricultural Research (ICAR) has already initiated network research on studying impacts of climate change on Indian agriculture. It is aimed at evolving drought and heat tolerant varieties and better ways of managing natural resources so that agriculture, particularly in rainfed regions becomes more resilient to climate change. The ICAR is likely to launch a mega programme, National Initiative on Climate Resilient Agriculture which among other things, quantifies the vulnerability of different agro climatic regions to climate change and will help develop adaptation strategies, organize demonstrations on farmers fields that help cope with climatic variability and capacity building of different stakeholders. ICAR is also preparing district-wise contingency plans to cope with drought, floods, heat wave and cold wave, etc. covering agriculture and allied sectors. q(E-mail:[email protected]/

[email protected])


DO yOu KNOW?

What are genetically modified (GM) Foods?

Genetically Modified Foods are foods derived from genetically modified organisms. Genetically modified organisms (GMOs) are those whose genetic material (DNA) has been altered through techniques of “recombinant DNA technology” or “genetic engineering” to develop certain desired traits like pest resistance, higher nutritional value, longer shelf life etc. In the process selected individual genes which have been identified to be responsible for a certain desired trait may be transferred from one organism into another, even between non-related species.

Alternatively, there can also be deletion of identified genes from the genetic material of an organism. Some food varieties whose genetically modified versions have been developed in the world include tomato, soyabean, corn, cotton, brinjal, rice, canola, sugar beet etc.

why are GM Foods grown ?

GM Foods are developed and grown due to certain perceived benefits for producers or consumers or both. One prime objective in this regard is to enhance crop protection by developing breeds that are resistant to insects, viruses, herbicides, extreme cold, salinity, poor soil etc. For example in order to develop pest resistance, the gene for toxin production from

GENETICALLY MODIFIED FOODSthe bacterium Bacillus thuringiensis (BT) is being introduced into the genetic material of certain plants like corn. This toxin is currently used as a conventional insecticide in agriculture. The idea is that if the plant itself starts producing the toxin and develops an inbuilt resistance to pests this will reduce the external use of insecticides, thereby reducing the adverse effects associated with such use. Similarly virus resistance is achieved through the introduction of a gene from certain viruses which cause disease in plants. Plant biologists are working to develop breeds that have genetically engineered resistance to various plant diseases. Herbicide resistant varieties are also being developed (eg soyabean) so that the external application of herbicides can be reduced. An antifreeze gene from cold water fish has been introduced into plants such as tobacco and potato to develop genetically modified varieties that can tolerate cold temperatures and unexpected frost.

Another objective is to develop breeds that have higher nutritive values than traditionally grown varieties of the same food. For example, a variety of rice has been developed with high Vitamin A content.

Certain foods are known to cause allergies. Genetically modified, non allergy inducing varieties of such foods are being produced.Besides these, GM foods are being developed to grow faster than

their traditional counterparts, greater productivity and having larger shelf lives.

All the above advantages of GM foods are considered very important to ensure food security for the growing world population.

what are largely the concerns regarding GM Foods ?

The concerns regarding GM Foods are with regard to their influence on the environment, human health and economy.

On the health front the three main issues are relating to allergenicity or the possible tendencies to provoke allergic reaction, gene transfer or the transfer of genes into the human body and its consequences and outcrossing or the mixing of GM variety of a crop with the conventional variety. In case of the first two concerns although rigorous safety testing is carried out before a GM food is declared safe, there is apprehension regarding the long term effects of its consumption. Outcrossing can sometimes be a problem as was shown when traces of a maize type which was only approved for feed use appeared in maize products for human consumption in the United States of America. However, several countries have adopted strategies to reduce mixing, including a clear separation of the fields within which GM crops and conventional crops are grown.


On the environment front some issues of concern include the capability of the GM Foods to potentially introduce the engineered genes into wild populations; detrimental effect on beneficial insects or a faster induction of resistant insects; the persistence of the gene after the GMO has been harvested; the stability of the gene; the reduction in the spectrum of other plants including loss of biodiversity.

On the economic front there are issues with regard to patenting of GM varieties. There are concerns that patenting of new plant varieties will raise the price of their seeds, thus hitting the small farmers. The apprehensions about fighting possible patent infringement through introduction of suicide genes into plants which give rise to sterile seeds will further mean that the farmer has to purchase seeds every year.How are GM foods regulated in India ?

In India, the regulation of all activities related to GM and their products is governed by “RulesfortheManufacture/Use/Import/ExportandStorageofHazardousMicroorganisms, GeneticallyEngineeredOrganismsorCells,1989 under the provisions of the Environment (Protection) Act,1986 through the Ministry of Environment and Forests (MoEF). The Rules, 1989 are pr imar i ly implemented by MoEF and the Department of Biotechnology (DBT), Ministry of Science and Technology t h r o u g h s i x c o m p e t e n t authorities: the Recombinant DNA Advisory Commit tee

(RDAC); the Review Committee on Genetic Manipulation (RCGM); the Genetic Engineering Approval Committee (GEAC); Institutional Biosafety Committees (IBSC); State Biosafety Coordination Committees (SBCC), and District Level Committees (DLC). The competent authorit ies under the Rules 1989 have framed guidelines, protocols, procedures for evaluating biosafety, toxicity, allergenicity, field trials, food and feed safety, production processes, large scale use of genetically modified organism (GMO’s) and products thereof and their release into the environment. In addition the Food Safe ty S tandards Authority of India, which came into existence following the enactment of the “Food Safety and Standards Act, 2006” has been charged with consolidating various food laws and establishing a single regulatory agency in place of multiple regulatory agencies. This includes replacing India’s most important food regulation, the Prevention of Food Adulteration Rules of 1955, with the proposed Food Safety and Standards Rules and Regulations 2009. Broadly,

the agencies entrusted with various responsibilities are as follows:

How prevalent are GM crops in India ?

Bt Cotton is so far the only GM crop grown commercially in India. With the moratorium on Bt Brinjal, there are so far no GM foods grown commercially in India. However, since GM crops have the potential to increase farm yields, reduce farm costs and thereby increase farm incomes, the government has been very supportive of the efforts to develop transgenic crops. Many transgenic crops are currently being developed and tested at various public and private institutions. Indian Council of Agriculture Research (ICAR) is implementing a mega Network Projec t on Transgenics in Crops (NPTC) to initiate and strengthen the Research and Development (R&D) efforts on functional genomics and transgenic crops. In view of concerns regarding the risk to human health and the environment from the use

Activity Responsible AuthorityContained research (laboratory and greenhouse) RCGM (DBT)Event selection trials/BRL 1 trials RCGM and GEAC (MoEF)Food safety assessment of GM foods (viable and processed) FSSAIEnvironmental risk assessment of GM organisms GEACApproval for commercial release of GM foods (processed) FSSAIApproval for commercial release of GM foods (viable i.e. LMOs) GEACApproval for environmental (commercial) release of GM Organisms GEAC


of GM crops, Government has adopted a case by case approach to assess safety concerns in respect of each transgenic event. All issues relating to bio-safety, environmental safety, etc., have been entrusted to a strict regulatory regime under the provisions of the Environment (Protection) Act, 1986 as mentioned above. Genetically modified (GM) crops are already being planted in 25 countries, including 15 developed and 10 industrialised countries as per ISAAA, 2008.

What are the international regulatory systems in place with regard to GM foods/crops?

No specific international regulatory systems are currently in place. However, several international organizations are involved in developing protocols for GMOs.

The Codex Alimentarius Commission (Codex) is the joint FAO/WHO body responsible for compiling the standards, codes of practice, guidelines and recommendations that constitute the Codex Alimentarius-the international food code. Codex principles do not have a binding effect on national legislation, but are referred to specifically in the Sanitary and Phytosanitary Agreement of the World Trade Organization (SPS Agreement), and can be used as a reference in case of trade disputes. The premise of these principles dictates a premarket assessment, performed on a case-by-case basis and including an evaluation of both direct effects (from the inserted gene) and unintended effects (that may arise as a consequence of insertion of the new gene).

The Cartagena Protocol on Biosafety (CPB), an environmental treaty legally binding for its Parties, regulates transboundary movements of living modified organisms (LMOs) with the objective of protecting biological diversity of a country from the potential risks posed by living modified organisms. GM foods are within the scope of the Protocol only if they contain LMOs that are capable of transferring or replicating genetic material. The cornerstone of the CPB is a requirement that exporters seek consent from importers before the first shipment of LMOs intended for release into the environment. India has also ratified the Protocol.

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It is important to not just add value in agribusiness chains

but also share that value with

other stakeholders, especially supplying

farmers to make such arrangements

sustainable

Major Issues in Agribusiness : A Smallholder Perspective

AgRiCulTuRE

GRIBUSINESS IS an interesting sector in many ways. It is evincing keen interest and involvement from

various stakeholders especially processing and retailing sub-sector players . Agricultural markets are changing dramatically everywhere. The small farmer is increasingly being asked to compete in markets that are much more demanding in terms of quality and food safety, more concentrated and integrated, and much more open to global competition.

Small farmers with holdings of less than 2 hectares accounted for 85.9% of all operational holdings in 2002/03, and 42% of the total cultivated area in India. Large holdings (>4 ha) declined to only 6.4% by 2000/01 and accounted

The author is faculty at the Centre for Management in Agriculture (CMA), Indian Institute of Management (IIM) Ahmedabad

for 37% of the area. By 2003, the average size of the holding came down further to 1.06 hectares. Of the total, 64% are marginal (i.e. below one ha each) and 18% small holders (i.e. between 1-2 ha each).

Mos t impor tan t ly, sma l l producers face production and marketing risks which make them vulnerable to poverty. There are many policy and market instruments of risk reduction in India including crop/weather insurance against yield/production risk; state-sponsored tools e.g. Minimum Support Price (MSP) for 24 crops besides statutory m i n i m u m p r i c e ( S M P ) f o r sugarcane, Market Intervention Scheme (MIS) for some crops in some states, and Farmer Income Insurance Scheme (FIIS); market based institutions i.e. Futures

Sukhpal Singh

ViEW POiNT

A


markets and Warehouse receipt system, besides other mechanisms like diversification of crops and use of risk reducing inputs. But implementation of MSP has been weak except for a few crops in a few regions and has often failed when farmers were in need of it the most.

Further, there is interlocking of markets in the case of the marginal and the small farmers and, more so in irrigated areas as i r r igated agr icul ture has higher needs of modern inputs. The input market constraints include lack of information about markets, lack of business and negotiating experience and lack of a collective organization which deprive small farmers from interacting on equal terms with the other market participants or market intermediaries. As a result the prices they receive are lower than those obtained by larger farmers due to their weak bargaining power and holding capacity. In wheat, marginal holders had the highest yield per hectare compared with all other categories in India but, they realized the lowest prices per quintal and sold the lowest percentage of their output in grain markets.

Therefore, it is important to highlight the major issues which need to be resolved if we wish to leverage the new interest and potential of corporate agribusiness for smallholder development and involvement.

This article highlights the major issues in agribusiness sector based on the experience in India and elsewhere. Next section discusses the pertinent issues from a smallholder perspective and section 3 concludes the paper with some suggestions on policy and practice in agribusiness sector in India.

Major issues in agribusiness in India

Exclusionofsmallholders

In the environment of Indian policy where inclusive growth is the buzzword now, it is surprising to note that there is almost complete exclusion of smallholders from modern agribusiness markets. This exclusion can be of many types- area, crop, technology/practice, and terms and conditions of the linkage. There is plethora of evidence that smallholders in India have not been included in most of the modern market arrangements like contract farming or retail chain linkage. It is not incidental that most of the contract farming projects are in the states of Punjab, Haryana, Gujarat, Maharashtra, Karnataka and Tamilnadu which are agriculturally developed states. On the other hand, vast areas of India such as Bihar, Jharkhand, Chhatisgarh, Orissa, West Bengal, the entire north-east India and areas of Uttarakhand, Himachal Pradesh, Kerala and Jammu and Kashmir have been bypassed by these projects. These are areas with the highest concentration of

small and marginal farmers. This essentially means that contracting agencies do not encourage the participation of those who need to be helped as risk preference and innovativeness require not just attitude but also resources and risk taking capability.

Further, most of the crops and enterprises being linked to modern markets are high value crops and enterprises which are riskier than traditional crops and enterprises. Therefore, a vast majority of smallholders who are not into these crops and sectors, get excluded from benefits of modern market linkage- domestic or export.

It has been found by so many studies of contract farming operations that most firms work with large and medium farmers, with the exception of firms in Karnataka, Tamil Nadu, and Andhra Pradesh which worked w i t h s m a l l a n d m a r g i n a l farmers due the nature of the crops (cucumber/gherkin, and broiler chicken). This bias in favour of large/medium farmers is perpetuating the practice of reverse tenancy in regions like Punjab where these farmers lease in land from marginal and small farmers for contract production.

Similarly, in the fresh fruit and vegetable retail chain led procurement of vegetables, it is medium and large growers who are the contract growers for these chains with only a few exceptions l ike Namdhari Fresh which


involved small holders as well and practised contract farming with the vegetable growers. Though it is argued that vegetable crops are more suitable for small holders due to their labour intensity and regular income, but the market/buyer does not seem to favour small holders.

ForeignDirectInvestment(FDI)infoodretail

A major plank of the argument for allowing FDI in retail trade is the benefit for farmers as the backward linkage of retail trade. It is this aspect which needs to be debated and discussed – whether it is crucial to domestic economy, or whether the link between retail FDI and agriculture and rural economy may be far fetched. For examining this point, one can go by the experience of the domestic fresh food retail chains which have not made any difference to the producer’s share in consumer’s rupee so far , other than lowering the cost of marketing for the producers, since retail chains have collection centres in producing areas unlike the mandis which are in distant cities and towns. But, these retail chains buy only ‘A ‘grade produce, which may form only a part of the farmers’ output. The farmer ends up going to the mandi to dispose off the remaining or rejected produce. Recent studies across chains and states reveal that other than lower transaction costs, the farmers did not realize any major benefits from dealing with these chains. The chains were procuring from

‘contact’ farmers without any contract or commitment to buy regularly. Further, it was only relatively large and/or resourceful farmers who were working with most chains. Thus, since, by and large, retail chains do not work with smallholders due to higher transaction costs of doing so, the noise about smallholder benefit due to retail chain linkage is exaggerated and the direct linkage is either absent or pretty weak.

Wastages in the perishableproduce sector

Another argument in favour of retail FDI is made in terms of investment needed for cold chain infrastructure to reduce wastages in the fruit and vegetable sector. First of all, there is nothing like absolute wastage in these commodities as every grade of produce is finally sold for some price. What is termed wastage is, infact, value loss. The experience of domestic players in this sector shows that if it is not paying, they will not invest in this infrastructure or withdraw as quickly as they invest. Today, in Gujarat, which was one of the pioneers in perishable retail food chains, there is only one chain (Reliance Fresh) left in the market. Others have wound up their procurement and retail operations as fast as they had started. Further, since fruits and vegetables account for only a small part of the farm production and processing sector, should it be

used to make an argument about opening up the entire food retail sector to FDI?

Pricing in contract farmingand‘contact’farming

Contract farming has also been used in many situations across the globe as a policy step by the state to bring about crop diversification for improving farm incomes and employment. In India, contract farming promotion is now part of the policy at the union and the state levels with Agricultural Produce Marketing Committee (APMC) Act being amended in most states. But, in India, the contracting agencies and the retail chains give market price based prices to their supplying contract or ‘contact’ farmers. The question which should be asked is: Is it a fair practice, as in India, market prices fluctuate so widely? If market prices were efficient, why did the chains have to go to growers? Most of the liberalization in the farm sector including abolition of the APMC Act in Bihar has been on the basis of the assumption that APMC markets have behaved monopolistically and, therefore, need to be done away with or made to compete with other channels. If that was true, why should a buyer go back to the same mandi to discover procurement price? This is a serious issue as even a significant premium over market price may not help a farmer if open market prices go


down significantly which is not uncommon in perishable produce markets in India. Thus, the issue of what is fair price for the primary grower in a chain remains as there is little transparency in pricing and costing of operations.

Policyandresearchindifferenceto smallholders

Most of the schemes for agribusiness/agricul ture are bereft of the provisions for small producers and, thus, do not reach the small producers. For example, Ministry of Food Processing Industries had been providing an incentive since the beginning of the 9th Plan in the form of a reimbursement of 10% of the value of raw materials procured through contract farming with farmers with a maximum ceiling of Rs. 10 lakh per year for a maximum of three years with the condition that any organization (private/public/co-operative/Non-Government organization (NGO)/joint venture/assisted) worked with at least 25 farmers under contract for at least three years. It extended reimbursement for 37985 farmers under contract farming. It never specified the type of farmers the agencies should work with. Similarly, Government of Punjab through Punjab Agro Foodgrains Corporation (PAFC) had been reimbursing extension cost to the contract farming agencies/facilitators at the rate of Rs. 100 per acre for three years to promote contract farming for diversification. But, doing it

irrespective of the size of holding of the contract growers defeats the purpose as it did not ensure that small and marginal farmers who could not afford to pay for extension and needed to be brought into the contract system were included.

Further, academic research i n t h e m a i n s t r e a m I n d i a n agricultural universities does not attend to small farmers’ concerns. Most of the t ime, farmers are looked upon as h o m o g e n e o u s l o t a n d n o t different iated for designing so lu t ions o r unders tand ing impact of interventions. For example, studies on the impact of a food retail chain generally state that the chain procurement has been good for small and marginal farmers despite the fact that the field data shows that land holding size as well as the size of irrigated and dry lands was higher for food chain farmers than traditional market farmers. Then, such studies conclude that the retail chain model was suited for small farmers, despite the fact the f ie ld data used shows that chain was working with relatively larger farmers both in terms of local land holding size as well as standard definition of small farmer in India (upto 5 acres) besides other resources like borewells to which chain farmers had better access. Similarly, international deve lopmen t agenc ies l i ke the World Bank also ignore

smallholder dimension when they report findings from field, a n d c o n c l u d e t h a t m o d e r n markets are inclusive, and make recommendations based on such misinterpretation of the data.

Conclusions

R i s k r e d u c t i o n a n d management are crucial factors in helping smallholders in modern moderns and production contexts. Market linkage with corporate sector agencies , whether in domestic or export markets, need to reduce smal lholder production and market risk for giving better livelihood out of farming enterprise. Risk reduc t ion fo r smal lho lde rs requires not only fixed prices but also quality input supply at right time, production and marketing extension and crop insurance. It is important to not just add value in agribusiness chains but also share that value with other stakeholders, especially supplying farmers to make such arrangements sustainable and contribute to development. There is need to have pro-smallholder policy and practice as well as collectivities of the smallholders like produce companies to create better bargaining power, lower cost purchase of inputs and better sale of produce. NGOs and development agencies should look at agriculture and its markets more proactively to promote rural livelihoods and should intervene on behalf of smallholders. q



YE-

1/11

/11


Horticulture as a commercial venture

in open field and climate-controlled

conditions is a recent development

and has been found to be more

remunerative

Horticulture in India: Status and Prospects

AgRiCulTuRE

NDIA IS the second larges t producer of fruits & vegetables in the world, next to China. Planned development

in the sector started with the 7th plan and gained structure and momentum during the 10th and 11th five-year plan periods.

Though horticulture is not new to us, it has largely been a low investment and low input segment of agriculture in which the nature of plantations varied from large, unattended fruit orchards owned by landlords, to backyard horticulture owned by individual families to cater to their daily needs of fruits & vegetables. Horticulture as a commercial venture in open field and climate-controlled conditions is a recent development and has been found to be more remunerative than traditional crops in rain fed and degraded land stretches, providing scope for crop diversification.

The author is the Managing Director of National Horticulture Board, Gurgaon.

Growth Pattern of Horticulture

As per draft final estimates of the National Horticulture Board, horticulture production during the year 2009-10 is estimated to be of the tune of 226.87 million MT from horticulture area of 21.16 million Ha, recording an annual growth rate of 5.66 % over the year 2008-09. During this period, growth rate of production of fruits has been estimated to be 7.39% which is higher than the annual growth rate of 4.39% over year 2007-08. On the other hand, annual growth rate of vegetable production during the year 2009-10 has been only 5.51 % which is only marginally higher than previous year’s growth rate of 4.89%. This is largely attributed to large scale loss of potato crop due to late blight in West Bengal. Floriculture sector has been estimated to be stagnating during the year 2009-10, mainly due to continuous down slide in exports of flowers from 36,241

Bijay Kumar

OVERViEW

I


MT in year 2007-08 to 30,798 MT during year 2008-09 and only 26,814 MT during the year 2009-10.

India is endowed with diverse agro-climatic conditions and has a huge variety of horticultural produce ranging from temperate, sub-temperate, sub-tropical, tropical to arid types. However, the three main crops of banana, mango and citrus fruits cover more than 65% of area under fruit crops and share about 68% of annual fruit production of the country. Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka and Kerala put together contribute to about 55% of the total area under fruit and contribute about 62% of total fruit production of the country.

West Bengal, U.P., Bihar and Orissa occupy about 46 % of production area of vegetables and contribute 62% of total vegetable production.

The increase in production of fruits in recent years is contributed largely by area expansion- the increase in productivity has played

only a secondary role , as the Figures 1 and 2 show. Andhra Pradesh, Maharashtra, Tamil Nadu, Gujarat, Karnataka and Jammu & Kashmir have contributed to area expansion in a big way. Productivity continues to be low on account of inadequate production of quality planting materials for vegetatively propagated fruit crops, lack of validated prescriptions for hi-density plantation, canopy management and inefficient plant protection.

In case of vegetables however, enhancement of productivity has played as important a role as area expansion as the figures 3 and 4 show. This may be largely attributed to introduction of hybrid vegetables, transfer of technology by private sector initiatives and public sector research and input production system. Area expansion in case of vegetable crops is a distinct phenomenon in regions situated in close proximity to capital towns and metropolis of NCR Delhi, Mumbai and Kolkata.

S c h e m e s o f H o r t i c u l t u re Development

The National Horticulture Board was set up in the year 1984 by the Ministry of Agriculture. NHB schemes are designed to promote capital intensive, commercial horticulture farms. A number of new production clusters have been developed under NHB schemes for crops like grapes, pomegranate, sapota, mangoes, banana, citrus fruits,

Fig1-Areaunderfruitcultivation

Fig2-Productivityoffruitcrops


guava, aonla, date palm, litchi and hi-tech floriculture. In addition, Post Harvest Management (PHM) and cold chain infrastructure too have been promoted in a big way. As a result, production of export quality fruits & vegetables, flowers, mushroom is taking place in protected conditions. Open field crops too are being cultivated under conditions of high density plantation, computerised fertigation with micro irrigation and integrated pest management. A number of production units are compliant of Global Gap norms

and organic-certified by accredited agencies.

Post harvest handling of fruits & vegetables is getting attention resulting in the development of world class pack houses for a number of fruits such as grapes, mangoes, banana, mushroom, cut-flowers, walnuts etc.

Schemes o f hor t i cu l tu re development have also resulted in higher levels of farm mechanisation. Introduction of new and imported plant varieties and farm machinery too have taken place under the plan schemes.

C o m m e r c i a l i s a t i o n o f horticulture through schemes of NHB has indirectly benefitted small & marginal farmers, but has fetched only limited direct benefit to them. The schemes of horticulture development have been made inclusive by launch of two mission mode schemes known as National Horticulture Mission (NHM) and Horticulture Mission for NE and Hilly States (HMNEH). The two mission mode schemes cover a large number of beneficiaries and also address issues of seed production, market infrastructure etc in more focused manner. The three schemes of horticulture development have modernised the production system as well as post harvest handling system.

Benchmarking Technology S t a n d a r d s f o r P H M Infrastructures

As majority of producers are small and marginal farmers, PHM infrastructures like pack houses, cold storages and fleets of refrigerated vans etc is coming up under custom-service business model . Under this business model, services are provided for horticultural produce largely on “Owners’ Risk” basis. National Horticulture Board has, therefore, bench-marked technical standards for cold s torages for f resh horticultural produce, modern fruit ripening units, specialised transport vehicles including refrigerated vans etc. Creation of National Centre for Cold Chain Development (NCCD) is a further bold decision taken by Ministry of Agriculture for institutionalising the initiatives taken by NHB in this regard.

Fig3–Areaundervegetables

Fig4–Productivityofvegetables


Influence of Market Access on Development of Commercial Horticulture-

Horticulture development is slow in the areas where capital intensive, credit linked schemes of NHB could not take off, such as West Bengal, Bihar, Orissa, UP, Jharkhand, Chattisgarh, M.P., J & K and the NE States. This is so despite concerted efforts made under schemes of NHM and HMNEH. It may be inferred that adoption level of modern scientific production and PHM practices for fruits & vegetables is not only determined by efficacy of extension initiatives and access to capital but also by economics of activity. Access to hi-end market is therefore, seen to be a critical factor in development of commercial horticulture and adoption of post harvest management practices.

R o l e o f C o s t E f f e c t i v e Transport

Keeping in view the highly perishable nature of horticultural produce which is generally high volume-low value in nature, availability of cost effective, long distance transport facilities is critical for development of commercial horticulture. With improvement in road transport, the situation is changing favourably but the same is not cost effective over long haulage distances. It may be noticed that the horticultural produce like banana and onion from Maharashtra; mangoes from Andhra Pradesh, Karnataka, Tamil Nadu, Citrus from Maharashtra, Andhra Pradesh etc reach markets in far flung areas of the country due to long distance, concessional transport support provided by

Indian Railways. But horticultural produce from most of other states where producers / traders are not organised as interest groups are not able to get similar benefits resulting into poor market access.

On the other hand, i t i s noteworthy that though the present system of long distance transport of fruits and vegetables by rail rake may provide an economical solution to transport bottleneck but the same results in avoidable post harvest losses. Fruits are first stocked in open railway yards and then loaded into ordinary railway wagons which are not ventilated and which get very hot during summer season.

Import Related Challenges

There is a huge rise in the import of fruits like apples. Almost 98% of this is from USA, China, Chile and New zealand, both in terms of quantity and value. USA has a leading share of 44.8%, followed by China (37.5%), Chile (9.7%) and New zealand (5.8%), respectively in terms of value. This is happening even though custom duty on import of apple is 50%. This flags not only the need for transfer of production and PHM technology and introduction of storage infrastructures but also the urgent need to improve the long distance market access of Indian horticulture produce.

Introduction of a Modern Multi-modal transport system for long distance transport of fresh horticulture produce- “Bagbani Rail”-

A mul t i -moda l , modern transport system is on the anvil

by the joint effort of National Hor t icu l ture Board (NHB), Container Corporation of India (CONCOR) and Indian Railways (IR). As per the plan, a suitable combinat ion of refr igerated freight containers and specially designed insulated & ventilated freight containers shall form a containerised rail rake which will be exclusively used for transport of fresh horticulture produce between ident i f ied or ig in-des t ina t ion pa i r s on point to point and Assured Transit Time basis. Value added services like picking horticulture produce from pack-houses and making delivery at warehouses at market centres or ports and insurance cover may also be offered by CONCOR to the end-users. Indian Railways has been requested by NHB to extend all existing concessions available for transport of horticulture produce by ordinary railway wagons to transport by proposed modern multi-modal transport system. National Horticulture Board has offered financial assistance in the form of subsidy for capital investment in preparation of rai lway rake and set t ing up terminal facilities by CONCOR and in marketing of services offered by it. The project also involves developing back-end and front-end infrastructures and carrying out extension services among end-users which will b e c a r r i e d o u t u n d e r p l a n s c h e m e s o f H o r t i c u l t u r e Development. q



FRuIT YIELD AT AN ALL-TIME HIGH IN THE VALLEY

FRUIT production in Jammu and Kashmir has touched 20 lakh metric tonnes this season – an all time high-thanks to bumper apple crop. Since the beginning of the year, the horticulture officials were optimistic about a good fruit harvest with some even predicting the yield to go beyond 30 lakh metric

tonnes. However, continuous rainfall and hails destroyed some of the apple crop in the Valley’s north.

The bumper fruit production has come as a good news at a time when the Valley has witnessed a series of violent incidents that has had a direct impact on the growers. Despite shutdowns and road-blockades, the apple growers managed to dispatch fruit-laden trucks to different parts of the country. In July and August, most of the growers could not send their fruit to other states as the national highway and other highways were disrupted for many days due to the protests. But things have improved now, and hundreds of apple laden trucks are being sent to different cities every day. The bumper production has slightly affected the rates in the markets and increased the production cost.

Bhat, who owns a big fruit orchard in north Kashmir, said: “At 10 to 12 lakh tonnes earlier, Kashmir growers were leaders in apple production, with a rise in production, we are now eyeing the international market". Horticulture department were expecting apple production in the state to cross 1.2 million tonnes mark. The estimates for this year’s apple production is set to cross 1.2 million metric tonnes. The department has also established some new markets in addition to the old ones so that the growers can sell their crops with ease. This year horticulture department also introduced some of the exotic varieties of the fruit, which are yielding good results. q

J&K WiNDOW

REVIVAL PLAN FOR SAFFRON CuLTIVATION

Finally, there’s hope for the shrinking saffron fields of 226 hamlets in Pampore along the Srinagar-Jammu National highway close to the summer capital. The Union government has allocated Rs 373 crore to the state for the revival of the golden crop, whose acreage has dwindled from 5,707 hectares

in 1997 to a worrying 3,010 hectares in 2006-2007. The reason for the downslide of the state’s legendary saffron sector, which produces the world’s most expensive spice by weight, are manifold-from drought, lack of irrigation facilities, ancient farming practices, pollution, illegal constructions, cement factories.

Under the scheme-called Economic Revival of J&K Saffron Sector in Mission Mode—jointly managed by the Union Agricultural Ministry and the state government, funds would be primarily used to irrigate the fields. This year, more than 30,000 kanals of land will be provided with irrigation facility and sprinkle method of irrigation will be introduced. Irrigation pumps will be provided to the farmers to over come the drought-like situation. Growers will also be taught to use fertilizers and pesticides judiciously as also scientific methods to protect their crop from diseases and extreme climate conditions. Every farmer will be given Rs. 26,000 for every kanal of land to replace the seeds with fresh and hybrid varieties.

Under the project, the government is also planning to set up a spice park at pampore to market different varieties of saffron, besides a quality control laboratory with ISO certification for intervention related to production and productivity. For the past few years, saffron produced in Iran and Spain has been facing some tough competition to the Kashmiri saffron. Saffron production started dipping in 1990 due to severe drought like conditions. In the past, farmers cultivating saffron were working without any technical guidance and many a time the crop was hit by various diseases. If the rescue plan works, Kashmir’s saffron produce would revive in the next four years. q


Strategic alliances within key value chains between

farmers, corporate sector and banking sector may be one

promising way to mend many

of the ills of the agricultural sector

Value Chain System in Agricultural Financing

AgRiCulTuRE

N SPITE of dynamic growth in the industrial and service sectors , a g r i c u l t u r a l s e c t o r has lagged behind. In

particular, during the past two decades, there has been a distinct slow down in the agricultural growth. As a result, the gap between growths of agriculture and other sectors has widened. Due to risks and uncertainties in production, marketing and access to institutional credit by the small and marginal farmers has been quite low. The other difficulties faced by the small farmers include absence of collaterals for getting bank loans, increased expenditure on cultivation and marketing and low returns. Therefore, the typical Indian farming is all about poor farmers, fragmented landholdings, minimum farm mechanization, traditional agricultural practices, low use of inputs and poor market linkages. All these result in poor

The author is Assistant General Manager, National Bank for Agriculture and Rural Development (NABARD), Karnataka Regional Office, Bangalore

performance of the sector in spite of robust overall economic growth, leading to farmers continuing in a low investment/return production cycle and increasing agrarian distress, which are manifested through migration, farmers’ suicides and reduced participation in agricultural activities.

S m a l l f a r m e r s a n d agricultural producers and exporters in developing countries can be included successfully in global agricultural value chains. Such an integration would benefit both the small farmers as well as the corporate sector. While the corporate sector will get assured and quality commodities, the small farmers will get quality inputs including credit facilities, technology and market for their produce. In the process, the value chain will generate employment at each stage of value addition. Besides, it will encourage crop diversification to suit the demand, tastes and preferences of the consumers.

B B Sahoo

PERSPECTiVE

I


The Rural Credit Market

The rural credit market includes institutional agricultural finance, trade finance/moneylenders and micro finance. While agricultural finance is dedicated to financing agriculture-related activities, micro finance provides financial services to the low-income people for a variety of purposes in farm, off-farm and non-farm areas. The small-sized loan demand and no/incomplete documentation of property make fund flows costly in the rural areas. The high cost of handling transactions and increased travel requirements by consumers and bankers aggravate the situation further. Financial reforms and financial disciplines also reduce the scope for rural credit. Today, while the focus of commercial banks is on improving efficiency and profit, most of the regional rural banks and cooperative banks are battling poor governance and operational inefficiency. Although there are some viable institutions in regional rural banks and cooperative banks, a majority of them have been struggling with the problems of over-staffing, under capitalization and mounting non-performing assets. Therefore, in comparison with the urban areas, the overall credit scenario in rural areas is less organised in terms of available financial products. A number of traders have ventured into money-lending. To secure credit form them a farmer often pledges his entire produce without any assurance for a remunerative price for the same. This is especially so in the case of horticultural crops with a high demand market outlay such as mangoes, apples, oranges, grapes,

etc. This is also the case with other cash crops like chillies cotton, etc. This segment of traders/shopkeepers as also ‘adtiyas’ who lend money to farmers, have been financing agricultural operations, but at terms favourable to themselves and not to farmers.

Value Chain in Agriculture

Present Scenario

In the traditional selling system, farmers produce commodities that are “pushed” into the marketplace, but they are isolated from the end-consumer and have little control over input costs or the funds received for their goods. They are isolated from the consumer, as well as their demands and preferences. R&D is focused on production and on reducing cost of production. But in a value chain marketing system, farmers are linked to consumers’ preferences and tastes through

backward flows of information and products. They work closely with suppliers and processors. Through continuous innovation and feedback, the returns to farmers and various stakeholders in the value chain increase.

At each stage of the value chain, the players require credit. They approach either formal sources and/or informal sources for their credit needs. Many a time, the financial services offered by the formal channels fall short of the stakeholders’ requirement. The other problems faced by the players are collateral, excessive paper work and undue delay in sanctioning and disbursement. As a result, the stakeholders’ dependence on non-formal financial sources increase. For their pre-harvest and pre-export trade credit requirements they depend on non-formal financial sources. Trade association,


accepting warehouse receipt as a collateral and farming under contracts influence the farmers to depend on non-formal channel. The dynamics of these arrangements are as set out below.

Trade Credit

Trade credits in the form of either inputs like seeds and fertilizers or products like grains and horticultural products are provided by traders to farmers for a specified duration. The financial transactions are made in either cash or kind. The duration of finance may be short-term or seasonal. In the value chain, the main player usually takes position at either end of the chain. The importers and wholesalers and large processors operate on the downstream end. The traders, input dealers, farmers’ organisations and farmers operate between the upstream end and downstream end. The importer/wholesaler or exporter/wholesaler/processor sells inputs on credit to traders, input dealers and farmers’ organisations, usually for a short-term, which is sufficiently covers the time needed for the borrowers to re-sale the inputs. Finally, farmers and traders sell their product to either downstream actors or upstream actors. Effective screening of clients, cost recovery and enforcement mechanisms are built into the loans given by the lender to the borrower. The capital charge is embedded in the system through increased price for inputs and/or reduced price for products. Lenders deal with individuals they know through personal contact or prior business relationships. In the case of new client, lender

seeks guarantor. Processors and wholesalers tend to work through the traders, dealers, shopkeepers and cooperatives. The ability of the borrower to repay the loan is assessed by the commercial relationship that has developed between lender and borrower. In most of the cases, lenders accepts crop as a collateral.

Warehouse Receipts (since Oct. 2010)

Producers and traders deposit commodities at the warehouse. The system involves the issuing of documents and warehouse receipts as evidence that specified commodities of stated quantity and quality have been deposited at a particular location by the depositor. Standards are used to define the quality of the product deposited. Each deposit needs to meet these standards. The depositors may be producers, farmers’ groups, traders, exporters, processors, individual farmers or even corporate bodies. The system offers clear mechanisms for tapping and protecting the use of deposited produce as collateral. The issuer of the warehouse receipt holds the stored commodity by way of safe custody and he is legally liable to make good any value lost through theft or damage. The warehouse receipt system helps in lowering post-harvest losses and getting the farmers remunerative price for their produce. The major benefits of warehouse receipt are : (a) warehouse commodity can be used as collateral for getting an advance from bank, (b) it helps the depositor to wait until a conducive market condition, (c) application of standardized grades allows trading

by description, thereby reducing transaction cost, and (d) shortens the marketing chain and increases producers’ margin.

Contract Farming

In contract farming, the exporter, processor or major wholesaler generally supplies inputs, skill, technology, extension facilities and financial services to various stakeholders. All such services are generally linked to the purchase agreement. This agreement can be tacit or formal. The loan can be issued in cash or kind. Generally in the contract system, the corporate body gets bank loan and passes it on to the farmers and traders. A number of ways are adopted to recover the capital cost. He may pass the interest rate charged by the bank onto the producer or adjust prices, either in the form of higher unit prices for inputs, lower prices for product, or a commission or fee that is assessed. He may also charge a fixed interest rate on outstanding advances. As the earning of the lender depends more on sale rather than offering financial services, he concentrates more on the borrowers’ ability to deliver the required quantity and quality of the product. In the process, farmers gain access to inputs and finance, higher productivity, reduced risks and reliable access to market.

Proposed Value Chain Model

Due to inadequate linkages, credit , marketing and other facilities, a large number of small and marginal farmers are left out from producing remunerative cash crops and are forced to continue in low investment/return production cycle. As a result, given an option,


many farmers are willing to take alternative occupations. Therefore, by offering a remunerative price for crop produce, the farmers can be encouraged towards crop cultivation. Credit, linkages, skill and certified seeds are the next set of requirements. Finally, it is to provide secure platform to small farmers, as a result of which they can broaden their horizons by taking up additional activities (such as dairying, piggery, fishing or some non-farm activities) other than crop cultivation. Strategic alliances within key value chains between farmers, corporate sector and banking sector may be one promising way to mend many of the ills of the agricultural sector. In this model, the corporate/cooperative sector will play the lead role and the government will play the role of a facilitator.

To start with, the initial work is to help farmers and micro & small enterprises gain access to finance for value chain upgradation. The main problems faced by the small farmers are credit for working capital, quality inputs, extension

services and fair price for their produce. Even the middle players in the supply chain could not expand their business in the absence of financial support. Most of the banks do not respond to different players in the supply chain due to inadequate collateral and limited market for their produce.

Under direct monitoring and supervision, informal groups like self-help groups (SHGs), farmers’ clubs (FCs) and farmers’ associations (FAs) may be formed. Lead ing non-governmenta l organisations (NGOs) may also participate in the alliance. While SHGs, FCs and FAs can screen and organize farmers, distribute inputs, reduce costs, monitor the progress, deliver extension services, the NGOs and corporate sector can link farmers with financial institutions, share information, help reduces risk and market produce. As a result, scale and quality of smallholders’ operations and their marketing access will increase.

To expand financial services, f i nanc i a l i n s t i t u t i ons may also consider financing of the

stakeholders, who will on-lend to small farmers. The examples of trade credit, warehouse receipt and contract farming may be experimented by the financing banks. Promotion of credit in this regard will reduce banks’ credit risk and will result in faster services in financing of small farmers. As a result of the association, farmers will also get access to a wider range of services, including savings and investment credit. With cost structure more appropriate to small farmers, small-scale warehouses may be designed and financed. It will allow the farmers to sell when market prices are more advantageous. Trader credit through better yields and more secure market channels can influence potential farmers to join the value chain. As credit and other embedded services are included in the contract farming, small farmers can increase their productivity and gain access to high-value markets. However, care must be taken to remove unnecessary players in the value chain. q


YOJANAForthcoming

IssuesFebruary 2011

The focus for this issue will be the Gram Sabha in which we will bring to you the changing face of rural India

March 2011 This will be a Special Issue on the Union Budget

February 2011&

March 2011


ULSES ARE of vital importance for the vast vegetarian population of India. This food group shares 6.9 g

per caput protein in India as against 3.5 g in the whole world. It is also a cheaper source of protein as compared to an animal source. Though the exact protein requirement varies from person to person, WHO has worked out a requirement of about 50 g protein per day per person. As per ICMR, a minimum of 1 g protein is needed per kg of body weight. Depending upon the nature of work of the individual, the required quantity may increase. If all protein requirement is to be met through vegetarian sources only, then one would need to consume cereals, pulses and milk. Considering protein intake from cereals, milk, and other sources, ICMR has recommended a daily

Pulses : Increasing Availability

AgRiCulTuRE

Prasoon Verma

OVERViEW

The present crisis has to be dealt with available resources

and techniques, which certainly

have the potential to at least double the

production and availability

of pulses

intake of 43 g of pulses per capita per day. But as production of pulses is near stagnant at around 15 million tons, per capita availability remains around 35 g per day. To meet domestic requirement about 3 million tons of pulses are being imported annually. The country is witnessing a real crisis of pulses, as evidenced by the unprecedented rise in cost of dal.

Pressure for increasing the production of pulses has become really strong today as the heavy price rise is threatening the common man’s dal-roti or dal-chawal. Pulses have attained the status of precious commodity. The Minimum Support Price for pulses has been increased by Rs. 700/- as incentive to growers, while only a meager rise of Rs. 50/- has been made for paddy. Impact of increase in MSP will be reflected in coming seasons.

P

The author is Scientist (ASPE), Agricultural Engineering Section, Indian Institute of Pulses Research, Kanpur


Recently when officials of the agriculturally most advanced state of Punjab were asked to educate farmers for incorporating at least one pulse crop and switching from rice-wheat rotation, a lot of reluctance was encountered. Paddy production is more profitable in the state as compared to pulses, because paddy is grown here mostly for export purposes and thus fetches better profits than pulses. Since profitability is a key factor for any resourceful farmer, preference will be given to input responsive crops which can fetch better returns in national or international markets. Thus, pulses will remain to be grown in areas where they are currently being grown, i.e., rainfed areas, where farmers can grow them with minimum inputs. Increasing pulses production without increase in area is a real challenge for a country where majority of vegetarians depend heavily on pulses.

Despite India being the largest producer of pulses, the productivity of this item is very low. Efforts are on to increase pulse production through increase in productivity. Several varieties with high yield potential and disease resistance h a v e b e e n d e v e l o p e d a n d demonstrated successfully. But impact of new varieties could not be realized due to non-availability of quality seeds, inappropriate use of chemical fertilizers, lack of timeliness in irrigation, and poor management of crops. As pulses

are grown in low input conditions by small and marginal farmers, it is difficult to achieve desired increase in production in a short span of time. Increase in cost of commodity, minimum support price and high market demand are blessings in disguise, prompting farmers to go for cultivation of pulses, but these blessings are not lucrative enough to attract resourceful farmers.

Under such circumstances concerted efforts are required to be taken for benefit of pulse growers, with a view to increasing per capita income of poor and marginal farmers who can play major roles in bringing self sufficiency in pulse production. Development of new varieties and their adoption in production chain is a time taking process. The war against pulse availability can be fought with the arms already at hand, by adopting viable strategies that are likely to make farmers take up pulse production.

Circulat ion of seeds of improved varieties : Despite development of many potential high yielding varieties through efforts of breeders, it is difficult to put such varieties in production chain due to lack of seed chain. Lots of varieties have been developed for each agro-climatic zone. But if seed is not made available to farmers, the very purpose of variety improvement fails. Identifying fewer varieties for each climatic zone (not more

than five followed by other five promising varieties) will ensure timely availability of seeds of desired quality.

Reducing post harvest losses : As per rough estimates about 20% of pulses are lost in various post harvest operations. Storage and milling contributes maximum to the losses. With proper management, if these losses can be confined up to 10 %, about 1 million ton more of pulses will be available for human consumption. Pulses stored in the form of dal are less prone to infestation, even in simple structures like earthen pots, cloth or polythene bags, metal and plastic containers etc., in which external infestation can be prevented.

Cottage scale pulse milling : Pulse milling at cottage scale gives higher milling recoveries, as at cottage scale even broken grain is consumed as dal and it is easy to manage small quantities. Various research organizations viz., CFTRI, Mysore, PKV, Akola, CIAE, Bhopal and IIPR, Kanpur have developed mini dal mills for the purpose. Establishment of mini dal mills in production catchments will enhance rural income and employment opportunities. Most of these mills use abrasive surface (emery) for husk removal, but this in turn causes scouring of cotyledons. Powder of cotyledons gets mixed with husk and this milling by-product is utilized as cattle feed. In IIPR Mini Dal Mill de husking and splitting is


done with the help of rubber-steel vertical chakki, which results in higher dal recovery and less powdering, even though it leaves 5-10% husk cover over the dal surface. The dal obtained is quite comparable with cottage scale dal, with good fiber content and flavor. It also does not require any kind of polishing.

Consuming whole : Consuming whole grain of pulses will minimize milling requirement. Almost all pulses, except pigeonpea are consumed as whole. Preference for whole grain products will add fiber to food along with minimizing milling losses. There is need to develop secondary and tertiary products using whole grain flour.

utilizing milling by-products: Where milling is essential, by-product (husk and cotyledon powder), if produced hygienically can be utilized for developing high fiber low protein products. These by-products are often consumed at in rural households. Commercial exploitation of milling by-product will make more pulse available for consumption. It can also be utilized for therapeutic purposes, to obtain higher returns.

Making pulses remunerative: To promote pulses some out of box thinking is required. One such idea can be giving incentive on per unit area basis to pulse growers. When pulses contribute to national food security, soil health, reduces fertilizer requirement, are grown

by poor and marginal farmers mostly in rainfed areas, pulse growers should be given more incentives. Procurement support, as given in wheat and paddy, will also motivate farmers to go for pulses.

Propagating production technologies : With available varieties and package of practices, achieving world average yield is not a difficult task. All out efforts to propagate production technologies is needed urgently . Adoption of integrated crop management, including production and protection technologies, can do wonders to increase pulse production.

Area expansion : Increasing area by reaching to new niche, like rice fallow and wastelands is another viable option for increasing cropping intensity. With efficient tapping of rainwater, newer areas can be brought under cultivation of pulses.

A c h i e v i n g p o t e n t i a l production: Critical inputs and timely operations are vital to get potential yield of improved varieties. Inputs like quality seeds, fertilizers, timely irrigation, and established plant production and protection measures and appropriate farm operations have the potential to double production of pulses, even with available resources.

Income augmentat ion : Processing and value addition of

agricultural produce including pulses will generate income and employment opportunities. Growth of rural economy will reduce pressure on burgeoning urban population. Processing at production catchments will also reduce transportation, storage and processing losses, making more pulses available for human consumpt ion . Pulses based primary, secondary and tertiary processed product industries can play a major role in enhancing rural income.

Development of varieties and its adoption in production chain is a long term process. Advantages of improved cultivars have not been realized so far due non-availability of quality seeds. Efforts are on to bring recently developed improved varieties in production chain. Breeders are still working to develop high yielding, input responsive, disease-pest resistant varieties, using breeding and biotechnological tools, but again this will take some time to reach farmers and end users i.e. consumers. The present crisis has to be dealt with available resources and techniques, which certainly have the potential to at least double the production and availability of pulses, provided they are used efficiently and pulse growers are provided policy support. q



North east diary

RAIN HARVESTING THE TREND

To solve the problem of water scarcity faced by the people settled atop the mountains, Mizoram Government has been extending its help in constructing water tanks at different places to harvest rain water. The water, thus, collected is enough to meet the requirement of the people round the year. With

the success of this innovative and convenient approach of rain harvesting, Mizoram Government is planning to construct more such water tanks in other uncovered areas at an estimated project cost of Rs 5 crore from next year. Although Mizoram receives an annual rainfall of 250 centimetre, people living on the hill tops normally suffer from water scarcity as the rain water runs off quickly down the steep mountain slope.

The Government has also chipped in with assistance to help in construction of water tanks at many places for harvesting the rain water for the people as its water supply scheme has limited coverage on account for the topographical feature of the State. Around 341 villages have been so far brought under the water supply scheme of the Mizoram Govt. and over 305 villages, mostly in rural areas, are yet to get the full benefit of the Rural Water Supply Scheme being taken up by the Govt.

In addition to this, there are 130 other villages which these schemes have not been able to cover. In such a situation, Mizoram Govt. initiated the project of rain water harvesting since 1986 to solve the problem of water scarcity in these villages. Today, rain water harvesting tanks are conspicuously present in almost every part of Mizoram. These tanks have been constructed close to residential areas. According to an official of Mizoram Government, till date, 24, 185 rain water harvesting tanks have been constructed with the assistance of Mizoram Government while another 1,242 private tanks by individual families. q

HORTICuLTuRE TECHNOLOGY MISSION

The Horticulture Technology Mission has scripted a huge success story in Mizoram. Floriculture is making it possible for even ordinary women in the state to earn handsome money. Lalthuamliani of Durtlang village, about eight kilometeres north of Aizawl, who began her anthurium cultivation

with 1,000 plants, now has 10,500 plants and earns upto Rs 35,000 a month.Lalzamlovi, a housewife living in Aizawl earned Rs 1 lakh from her anthurium garden located at

Ramrikawn, about an hour’s drive from the city, in 2007 and has tripled her annual income since. The launching of the technology mission for Northeastern States in 2001-02 was a turning point for the Horticulture department in Mizoram. There had been a revolution in the awareness of the potential of horticulture as a sustainable means of livelihood ever since this mission was lunched.

The impact of the technology mission in the State can be felt in the production of cash crops and fruits, but the womenfolk in the State mainly benefit from floriculture, like cultivation of anthurium and rose. Anthurium cultivation was introduced under the thechnology mission by the State Horticulture department in November, 2002 by selection of 24 potential growers.

As most of the anthurium growers are women, the mission’s success story in Mizoram has become part of the implementation of the National policy for Empowerment of Women in the country.

There are now more than 400 anthurium growers earning an average of Rs 6,000 to Rs 20,000 annual incomes and forming ‘zo Anthurium Growers Society.’ q


HE STRUCTURE of Indian agriculture has undergone rapid changes during the ninet ies due to the pressure of

commercialization and increased dependence on trade. One of the important characteristics of Indian agriculture is the small size of land holdings and the inability of the Indian farmers to compete with the large scale farming of the developed countries. One of the ways to deal with this system is to bring small and marginal farmers together to deal with a particular agriculture product.

The concept of contract farming in rural India is not very old. Contract farming is agricultural production carried out according to an agreement between unequal parties: companies, government bodies or individual entrepreneurs on one side and economically weaker farmers on the other,

Contract Farming in India

AgRiCulTuRE

Shailendra Bhushan Sharma

ViEW POiNT

Contract farming can certainly lead

to sustainable cultivation

practices. However, appropriate institutional

arrangements, government

intervention and legal provisions are

needed for this

which establishes conditions for the production and marketing of farm products. In this process the farmer agrees to provide established quantities of a specific agricultural product, meeting the quality standards and delivery schedule set by the purchaser. In turn, the buyer commits to purchase the product, often at a pre-determined price. In some cases the buyer also commits to support production through supplying farm inputs, land preparation, providing technical advice and arranging transport of produce to the buyer’s premises. When contract farming is managed efficiently it reduces risk and uncertainty for both as compared to buying and selling crops in the open market.

In India, the contract farming concept was prevalent in the sugar industry where farmers agreed to grow sugarcane at a pre-notified price for decades. Later on established

T

The author is Head, Department of Management, Noida College of Physical Education, Dadri.


business houses like PepsiCo, Reliance, ITC, Hindustan Uni Lever and McDonalds have entered into agricultural production and introduced a number of horticultural crops and now their products have a high demand in the international markets. As with any form of contractual relationship, contract farming has both advantages and disadvantages.. If any party does not follow the terms of the contract, then the affected party stands to lose. Despite the problems, contract farming is gaining popularity in rural India . This study reviews the major advantages and disadvantages of contract farming in India.

Advantages for Farmers

Contracting is fundamentally a way of allocating risks between a company and the farmers. The main advantage of contract farming for farmers is that the buyer (sponsor) undertakes to purchase all produce grown, within specified quality and quantity parameters. Contracts also provide access to a wide range of managerial, technical and extension services to farmers. By the contractual arrangements farmers can arrange credit from a commercial bank to fulfill their fund requirements. The government of India should encourage farmers to form grass-root level associations or informal cooperatives owned and managed by farmers themselves or producer companies. For farmers, production and marketing risks are reduced because of the following advantages:

l Contract farming involves considerable production

support in addition to the supply of basic inputs such as seed and fertilizer, thereby reducing the uncertainties associated with input availability, quality and costs. Services such as land preparation, field cultivation and harvesting as well as free training and extension can be provided by agribusiness firms. Input quality and adequacy to the agricultural production activity contracted is ensured and translated into higher productivity and higher returns.

l In India small and marginal farmers face difficulties in obtaining credit for production inputs . Under contract farming, working capital credit is typically supplied by the sponsor. However, financial arrangements can be made with the banking system or government agencies to offer investment credit for the acquisition of machinery, buildings, etc. In this situation the sponsor can give guarantee to the banks..

l T h e l a t e s t p r o d u c t i o n techniques are necessary for farmers to increase productivity as well as to meet the demand of high quality standards. The small-scale farmers are frequently reluctant to adopt new technologies because of high costs involved. Because agribusiness firms have a direct economic interest in improving farmers’ production so most of the larger sponsors prefer

to provide new technology to the farmers.

l Contract farming makes a farmer skillful by the means of efficient use of farm resources, improved methods of applying fertilizers and chemicals, knowledge to maintain quality, record keeping and the supply and demands of national as well as international markets. Farming contracts also make a farmer fol low str ict ly the timetable of ridging, fertilizing, transplanting and pest control, etc.

l The sum that a farmer receives for his crops in the open market depends on the prevailing market prices as well as on their ability to negotiate with buyers. Contract farming can overcome such kinds of uncertainties. In contract farming guaranteed and fixed pricing structures often reduce the uncertainty about sales price of agricrops.

l S m a l l a n d m a r g i n a l farmers hesitate in making diversification into new crops because they have limited marketing opportunities. The sponsors offer a solution to this problem by providing market guarantees to the farmers and assuring supply to the purchasers.

Disadvantages for Farmers

Indian farmers are still not aware enough to understand the concept and benefits of contract farming. In fact in India contract farming


has not benefited the farmers as much as was expected. To protect the interests of farmers appropriate ins t i tu t iona l a r rangements , government intervention and legal provisions are needed. The risks associated with farming can be reduced by contracting but the contracts themselves generate a risk source, thus leading to many disadvantages for farmers. The potential disadvantages associated with contract farming are:

l Sometimes the farmers have to face risks when the agribusiness venture is introducing a new crop to the area. Such risks may be related to production and market. Since prices fixed in contracts are based on future market expectations, substantial variations in production and market conditions can lead firms to force renegotiation or to engage in contractual hold-up. Such conditions may include a change in government policy, an ample supply depressing market prices and a variation in exchange rates that significantly raises input prices, etc.

l Competition for scarce labor resources at the time of farming activities may create problems for the farmers. In fact the farming activities such as transplanting and weed control, traditional cultivation methods o f t en p roduce more effective results than mechanical methods. When the farmers become dependent on a prescribed technology,

it makes them vulnerable to output and productivity manipulation by agribusiness firms.

l If the farming contract is made only for a single crop then this monopoly of the sponsor can show a negative effect in the future. Also if the contract is for long term, it might lead to gradually decreasing real prices received by farmers.

l By the continuous use of different technologies farmers may abandon traditional cult ivation methods and products. Contract farming can disrupt decades old farming patterns of cultivation and animal rearing. In the case of termination of contract, it might be difficult for farmers to re-establish the traditional ways.

l In contract farming the farmers easily get the credit provided either directly by the company or through a third party. However, the risk of indebtedness for farmers grows, if the company provides poor technical advice, there are significant changes in market conditions or the company fails to honor the contract.

l The staff representing the sponsor may exploit farmers in issuing contracts and buying crops. In many cases the sponsors can themselves be dishonest or corrupt. In such cases farmers run the risk of losing everything for their investments in production and primary processing facilities.

Advantages for Sponsors

Sponsors have many options to obtain raw materials for their production and marketing activities. In contract farming sponsors follow the strategy to minimize transaction costs, primarily the ones related to asset specificity and uncertainty. The main potential advantages for sponsors are as follows:

l Sponsors in contract farming are ensured about greater regularity of agricultural product supplies to the firm. The firms can schedule the deliveries to match the timing of the demands from their own clients. Poor weather, crop disease and other causes of production failure enables sponsors to share the risk with contracted farmers.

l The rapid industrialization process has created shortage of farmland in India. Land Ceilings Act was also one of the reasons for contract farming coming into existence in India which stipulated that “agribusiness firms cannot own and cultivate land for their raw materials requirements. Therefore, contract farming was the only option for agribusiness firms.

l Sometimes it is difficult to purchase distinct varieties of produce in the desired quality and quantities in the open market. Contract farming makes quantity and quality controls more manageable. For example, a multinational company PepsiCo, engaged


in manufacturing tomato ketchup in Hoshiarpur district of Punjab found that the local varieties of tomatoes were unsuitable for processing into paste. Because of this factor it decided to go into contract farming.

l Labor costs tend to be lower under contract farming since administrative responsibilities are to be managed by the farmers instead of sponsors. Farmers can appoint farm labor and they may not be bound to the same labor laws as agribusiness firms.

l When the size of agricultural land is big, input costs per unit are reduced. Firms that acquire large quantities of farm inputs can attain economies of scale in purchasing for agricultural production. Lower input costs play an important role in maximizing the profit of farmers as well as of sponsors.

Disadvantages for Sponsors

Like farmers agribusiness firms also have to face risks in contract farming. For example, in the late 1990s, the opposition to the role of multinational corporations by the farmers in India had a negative effect on investment in contract farming by foreign agribusiness sponsors. The main disadvantages faced by sponsors are:

l Farmers can involve themselves in extra-contractual sales and it is difficult to control when alternative markets exist. This is also problematic when

non-contracted farmers get higher prices by an established sponsor. It creates a mental pressure on contracted farmers to sell their crop to the third party. Contractual hold-up by farmers is one of the main reasons for the failure of contract farming in India.

l Farming contract should be made with such farmers whose land is suitable to cultivate contracted crops. If the sponsor contracts with landless farmers and traditional landowners for farming, there a danger can arise for the sponsor’s investment being wasted as a result of farmer and landlord disputes.

l Sponsors have to face the frequent risk of misuse or deviation of inputs supplied under contract for purposes other than those for which they were intended. It is a big disadvantage for the sponsor, as the contracted crop’s yields will be reduced and the quality affected. A part of the total production may also be consumed by the farmers for their own purpose. If inputs or outputs are deviated sponsors have to bear the loss.

l In India agriculture is a culture in itself. Sometimes farmers are unable to follow the strict timetables of farming because of their social obligations. So many times tradition and custom values in India play the role of barriers for farmers in contract farming.

l Firms with good brand image are particularly affected by risk of undermining the corporate image. For agribusiness firms conflicts with farmers may arise or negative impacts of the contract farming on the environment might exist.

Conclusion

Despite certain disadvantages, a clear priority has been given to the development of contract farming by the government. A working group set up by the National Development Council has made a set of proposals to promote contract farming in India, i.e., greater liberalization of rules and regulations, tax rebates for food processing, duty-free imports of machinery and equipment and liberalized imports of seed varieties. National Agriculture Policy of India envisages that “Private sector participation will be promoted through contract farming and land leasing arrangements to allow accelerated technology transfer, capital inflow and assured market for crop production, especially of oilseeds, cotton and horticultural crops” Contract farming can certainly lead to sustainable cultivation practices. However, appropriate institutional a r r a n g e m e n t s , g o v e r n m e n t intervention and legal provisions are needed for this. q(E-mail:[email protected])

In the December 2010 issue of Yojana it was mistakenly mentioned on page 3 that Meghalaya shares a boundary with all other north eastern states. The error is regretted.


Bamboo Processing Machine

ShODh yATRA

O S H I A L WA Y S had a keen interest in machineries and automobiles, which led him to develop many of his innovations. He has

developed a bamboo processing machine/lathe for the removal of nodes and outer surface.

Using bamboo powder, a by product of this machine, he developed a composite material, which he used in further developing a small electric hydro generator and a low-cost bamboo wall.

Background

Imli Toshi is a serial innovator originally hailing from Mokokchung in Nagaland. Having remained unemployed after completing BSc (Geology) in 2002, he started trying his hand at making new products with the hope that these may show him and other unemployed youth avenues for employment. Many of his innovations are the result of his observation and heightened awareness. In 2003, for washing his family car, he needed water from a nearby water fall which was located

T some distance away from road level. He decided to install a pump in the water channel itself to pump the water to road level. Unlike conventional pumps, this zero head energy pump is placed axially in the direction of flow in river to capture the energy from flowing water. Axial momentum of water is harnessed to drive the centrifugal pump vanes and generate power. This innovative pump was awarded by NIF during the third National Biennial competition. NIF has extended Toshi financial assistance under MVIF ,Value Addition and Research and Development from time to time.

Genesis

While more than 50% of bamboo species and 66% of produce out of about 80.42 million tonnes (GOI, 2001) occurs in North-East India, there were very few technologies to add value to bamboo, say for furniture. In Nagaland, bamboo based furniture is often made by local carpenters using inadequate hand tools. Lack of dedicated machines at affordable cost has

The dedicated bamboo processing

machine is an integrated unit that can remove knots,

do the planing and polishing of the surface and

facilitate inner and outer contouring of

the job


stymied the efforts of the local woodworker. Even removing the hard green covering on the bamboo has remained a challenge for many users. Having worked extensively with bamboo, Imli Toshi recognized the need to build a user friendly machine that would handle the sequence of tasks.

When the design idea first crystallized in his mind, he built a simple prototype. Next, he approached NIF NE Cell for funding and submitted the proposal and drawings.

The prototype named as Arulepsa was developed with the help of National Mission on bamboo Application (NMBA) funding and NIF support. It was capable of processing bamboo, removing the outer knots, smoothening the surface, while enabling wood carving and final surface finishing of the job. While taking trials of his Arulepsa, Toshi noticed that there was a lot of bamboo dust/powder produced as waste material. Having an innovative temperament he made a composite material by mixing this powder with locally available resin and made a portable hydro generator combining the design of his earlier zero head water turbine and a Chinese made hydro generator.

Innovation

T h e d e d i c a t e d b a m b o o processing machine is an integrated

unit that can remove knots, do the planing and polishing of the surface and facilitate inner and outer contouring of the job.

Precision control is achieved with a soft touch, four-way joystick linked to a robust electro-mechanical control logic kernel. The machine has overall size of 4x2x12 ft and weighs 75 kg. It is electrically operated using a 1 HP motor running on 230 V AC supply to drive a spindle at the range of 40 to 90 RPM. It has been built with dedicated and independent sub-systems including the two stage planer, the bamboo feeder assembly, the self adjusting gripper assembly and two sets of fixtures for inner and outer contouring (carving). The Planer assembly is the heart of machine and consists of a two-stage planer unit. The first stage achieves removal of the outer green covering and knots and the second stage makes the surface smooth. Prior art mentions machines for removing the outer green layer and knots of bamboo. Prior art has also disclosed individual machines for multipurpose and cross cutting, parallel splitting and sizing of bamboo. Universally, complete woodworking on bamboo needs an assortment of machines such as Four Side Planer, Sanding machine, Finger jointing machine, Double End Cutting and Shaping Machine and Stick Sizing machine for making the stick in the desired size. Separate machines have also been used for internal and external knot removal, slicing the bamboo for making slivers, and making the square bamboo sticks and a tool post accessory fitment for polishing them.

The highlight of Imli Toshi’s equipment lies in using a single versatile wood processing platform

that facilitates seamless removal of knots, planing, polishing and carving of bamboo. The precision in work is achieved by deploying the dedicated control center and a user friendly four way joystick. For his hydro generator made out of the composite material, first, he developed a lightweight yet strong composite material using bamboo and resins. The constituents were bonded by pressure and heat. He used this material to design the components of a hydroger. Field trials were done using this hydroger in a small stream. A 20 feet long, 8 inch dia. feed pipe was fitted to the inlet channel of the hydroger. When the water flow hits the impeller, it rotates and the change of flux in the field coil induces the desired current. The arrangement of the magnets and the field coil was configured to produce 1 kw of electricity.

Portfolio of innovations

His product portfolio includes an innovative egg boiler, a hot water filter, and bamboo strip making machine for agarbatti sticks , an incense stick making machine and a weed uprooting device for hilly regions. One unit of the Bamboo processing machinery/lathe has been purchased by the Nagaland Bamboo Mission. Five units of his bamboo strip making machine for

agarbatti sticks were also purchased by the Garo Hills unit of the North East Region

C o m m u n i t y R e s o u r c e Management Project. This was facilitated by NIF. Incorporating several improvements, his novel machines have broken new ground in design, utility, elegance and social relevance. q

(E-mail:[email protected], www.nifindia.org)

Themachinefacilitatesseamlessremovalofknots,planing,

polishingandcarvingofbamboo.


CHANGE IN the system of agriculture in a country of more than 1.20 billion people should obviously be a well thought out

process. Green Revolution in the post-independence era has shown the way for self-sufficiency in food, but sustaining agricultural production against finite natural resources demands a shift from ‘resource degrading’ chemical agriculture to ‘resource protective’ organic agriculture. While chemical agriculture has led to increase in secondary and micronutrient deficiencies, increase in pesticide use, unscientific water management and distribution, reduction in productivity as well as quality of produce, extinction of gene pool and environmental pollution, organic farming is seen today as the best option to attain sustainability in the crop production.

There are, however, problems in adopting large scale organic farming in a country like India. These include lack of awareness, marketing problems, shortage of biomass, inadequate supporting

Organic Farming : Problems and Prospects

AgRiCulTuRE

Kuldeep Sharma Sudhir Pradhan

ViEW POiNT

India can enjoy a number of benefits

from organic farming, major

among them being conservation of

natural resources, improved soil

fertility and water quality, prevention

of soil erosion, preservation of

biodiversity

infrastructure, high input costs, lack of financial support, inability to meet the export demand etc. These problems are discussed below.

PROBLEMS

Lack of awareness

Farmers lack knowledge about both compost making and its proper application. There are many modern techniques of making compost, including vermi composting, but awareness about these is very minimal, with the result that the compost that most farmers prepare is usually not of good quality. Similarly, since application of manure is done without giving due consideration to the timing or to the optimum moisture content, its efficacy is often very poor.

Result oriented marketing

While it is important to ensure the marketability of organic crops, that too at a premium over the conventionally grown crops, it is found in reality that the organic crops fetch lesser as people are

A

The authors are respectively Chief Editor and Technical Officer, Directorate of Information and Publications of Agriculture, ICAR, , New Delhi


not ready to pay higher prices for them.

Scarcity of biomass

Experts are of the opinion that the readily available organic matter is not enough to meet our requirements of compost. A lot of the crop residues which could be composted/ vermi composted get lost in the fields as it is very difficult to collect them and put them to use. Chemical fertilizers, on the contrary are easier to purchase, given of course that the farmer has the purchasing power.

High input costs

Traditionally the small and marginal farmers in India have been practicing some sort of organic farming using local or farm renewable resources like groundnut cake, neem seed and cake, silt, cow dung etc. However, this is becoming more and more difficult as the costs of these inputs are rising and are now higher than those of industrially produced chemical fertilizers and pesticides.

Marketing problems of organic inputs

The bio fertilizers like Rhizobium,Azosp i r i l l um, Azo tobac ter,Phosphorus solubilising bacteria, Vesicular Arbuscolor Mycorrhizae like Glomus spp. and biopesticides like Allicin, Nicotine sulphate, Sadabilla, Nemacide, Pyrethrum are yet to become popular in the country. There is a lack of marketing and distribution network for them because retailers are not interested in these products, as the demand is low. The erratic supplies and the low level of awareness of the cultivators also add to the problem

Lack of financial support

Unlike countries like Germany, no financial support from the government is available in India for farmers who opt for organic

farming. Support for marketing of the organic products are also not forthcoming either from the state nor from the union governments.

Inability to meet the export demand

The demand for organic products is high in advanced countries like USA, European Union and Japan. It is reported that the US consumers are ready to pay a premium price of 60 to 100 per cent for the organic products. The upper classes in India are also following this trend as elsewhere. The market survey done by the International Trade Centre (ITC) during 2000 indicates that the demand for organic products is growing rapidly in many of the world markets while the supply is unable to match it.

PROSPECTS

Indian agriculture should be able not only to maintain and sustain the production of food grains, but also to increase it substantially. In this context, organic farming could be introduced in areas like the rain-fed, north-east and hilly regions of India which are largely practicing traditional farming methods and have not switched to chemical farming. The conversion to organic farming should be done in a phased manner in order to reduce risks during the initial years. This will also address the problem of not having enough organic manure to meet all our agricultural needs. Even chemical fertilizer is applied only in 30% of the cultivated area which is irrigated, and the remaining land is under rainfed agriculture with almost no fertilizer application. Also the rainfed area under cultivation accounts for only 40 % of the food grain production of the country. Moreover, the simple technologies with low input use have been developed for dry farming and they can be

transferred to the farms for organic cultivation. The resulting increase in productivity and sustainability of production will increasingly contribute to the betterment of the economic conditions of the dry land farming community, which is one of the poorest in the country.

An estimate indicates that about 600 to 700 million tonnes of biomass is available to be converted to manure. Such conversion increases the nutrient value from 0.3-0.4 to 1-2 per cent. Attempts can also be made to increase the supply of biomass by allocating a portion of the cultivated area to grow tree manure crops. These plants can be harvested to be used for making composts. Schemes can be devised to grow green manure crops in public lands on the lines of the social forestry programmes.

Seve ra l a l t e rna t ives fo r supply of organic soil nutrients like vermi-composts and bio-fertilizers exist. Technologies have been developed to produce large quantities of these nutrients. Crop specific bio-fertilizers (Rhizobium,Azosp i r i l l um, Azo tobac ter,Phosphorus solubilising bacteria, Vesicular Arbuscolor Mycorrhizae like Glomus spp.)which are suitable for cereals, millets, pulses, oilseeds, vegetables, fruits, flowers etc. are also available. Vermi-composting and bio-fertilizer manufacturing can be undertaken to increase the supply of organic manure to meet the demand.

S o m e i m p o r t a n t p o i n t s pertaining to promotion of organic farming are:l Introduction of core course on

the concepts and the practices in organic farming in the curriculum of under-graduate and post-graduate programmes at different State Agricultural Universities and other research institutes.


l Standardization of mechanism or methods for organic farming practices.

l Formulation of appropriate package of pract ices of productions of different crops under organic farming systems.

l Expert groups, comprising of eminent agricultural as well as social scientists and progressive farmers may be constituted for visiting farms of successful farmers associated with organic farming practices.

l Dissemination of information l Programme on organic farming

should be implemented based on operational guidelines / roadmap and technical brochure circulated to each state and union territory of India.

l The action plan should include information about the area covered under adoption of organic farming that has not been covered under certification and also for the projects taken up for certification from 2005-06 to 2009-10 duly indicating whether certificate has been obtained.

l The marketing arrangements should be tied up for the certified organic produce. Programme of Organic Farming should be linked with certification in identified and compost clusters and not in an isolated manner and public awareness should be increased.

l The states and union territories of India should submit the proposal for organic certification only for those areas that have been covered earlier under adoption of organic farming.

The farmers of India have been practicing eco-friendly agriculture for centuries. Even now many farmers use local renewable resources and manage self-regulated ecological and biological processes. India can enjoy a number of benefits from organic farming, major among them being conservation of natural resources, improved soil fertility and water quality, prevention of soil erosion, preservation of biodiversity, generation of rural employment, lower urban migration, improved household nutrition, local food security and reduced dependence on external inputs . The protection of environment and the consequent increase in the quality of human life will be other contributions of organic farming. q

(E-mail:[email protected]/ [email protected])

YE-

1/11

/3


ARMERS ACROSS the country are taking up horticulture and other activities such as fishery and poultry to augment farm income.

Sunakar Mishra, a farmer from Jajpur district in Orissa, has turned a major portion of his rice growing agricultural land into a profitable commercial business by taking up fishery and cultivation of fruits and vegetables in a big way. Mishra, who was growing only rice in 36 acres of land (partly owned and leased), availed a loan of Rs 56 lakh for land shaping and buying seeds of rice, fish and prawn from the local branch of SBI three years back. He has already paid back the loan amount, after introducing the rice-fish system in his farm land.

This has happened because of the integrated rice-fish system developed by the Orissa-based Central Rice Research Institute (CRRI), an affiliate body of Indian Council for Agricultural Research (ICAR). Farmers like Mishra are ensuring that besides providing

food security, rice cultivation also guarantees livelihood security.

Under the rice-fish system developed by CRRI specifically for the water logged areas of the state, a major portion of land is used for paddy cultivation, while a smaller part is developed as a fishpond. The bund can also be used for seasonal vegetables and horticulture plantation.

During monsoon months when water table is high, popular varieties of fish such as katla and rohu are bred in the paddy field. When water recedes they swim back to the fishpond adjoining the rice field. A hectare of land under rice-fish system would produce around 15-18 quintals of food crops, 2-3 quintals of fish and 30-35 quintal of fruits and vegetables.

“After ensuring the food and nutritional requirement of a small family, the system would provide a substantial income of around Rs 50,000 annually. The purpose was to ensure that rice cultivation is commercially viable or profitable,” said TK Adhya, Director, CRRI.

Augmenting Farm Income

BEST PRACTiSE

Sandip Das

Farmers like Mishra are

ensuring that besides providing

food security, rice cultivation also guarantees

livelihood security

F

The author is a Delhi based journalist.


After the commercial success of the system, Nabard has asked scheduled commercial banks to support farmers in accessing agricultural credit mainly in the low lying and waterlogged areas of the state for inland fisheries. “Nabard has approved the system as a bankable enterprise,” Adhya added.

Similarly Gangu Ram, another farmer from Dumka district of Jharkhand has taken to cultivating potato after he got to know that most of the potato supplied to the state is from the neighbouring West Bengal, and he could get better market price for the produce. Since last year he has started to cultivate potato as a rabi or winter crop in his four acres of land, which provides him with additional income source (around Rs 20,000 per annum) while the kharif paddy crop takes care of his family’s food security needs.

Increasingly farmers across the country are diversifying into cultivation of crops such as fruits and vegetables and allied activities such as fishery and poultry which would fetch better price in the market, besides traditional paddy and wheat.

Data from the agriculture ministry indicates that with a production of more than 28.2 million tonne of fruits and 66 million tonne of vegetables, India has emerged as the second largest producer of fruits and vegetables in the world. Brazil occupies the top slot. ICAR scientists have developed more than 1,500 cultivars of horticultural crops, many of which have been adopted by farmers. In potato and many other crops, cultivars developed by ICAR are grown across the country. About 20 million hectares of agricultural land have already

been covered under horticulture crops, which result in yield of 91 million tonne. Though these crops occupy only around 10% of the cropped area, they contribute over 18% to the gross agricultural output in the country.

Even fisheries considered as a ‘sunrise sector’, have witnessed a faster growth rate than that of crop and livestock. During the last 25 years, marine and inland fish production has been growing at a healthy rate of 4.6% and the output is around 7.3 million tonne per annum at present. More than 750 species of fish of the 1600 traded in the country belong to fresh water. A recent report prepared by the National Fisheries Development Board (NFDB) has recommended that fisheries should be brought under the Agricultural Produce Marketing Committee (APMC) for bringing in efficiency in the trading system. It has advocated setting up of domestic market intelligence cells under the respective fisheries departments for ensuring that fishermen get value for their products.

Outbreak of bird flu at regular intervals and volatility in the feed prices (soyabean meal and maize) have been major factors adversely impacting the expansion of the country’s poultry industry, estimated to be more than Rs 20,000 crore.

“The key issue is to increase the productivity and profitability of the small holdings by bridging the gap between actual and potential yield and there are gaps between what we can achieve and what has been our achievement till now,” M S Swaminathan, well known agricultural scientist and Chairman, M S Swaminathan Research Foundation has said. Swaminathan, also referred to as

father of India’s green revolution has noted that the big challenge is how to give income orientation to farming, without which we would not be able to attract the younger generation to this activity.

Though horticulture crops give higher returns as compared to paddy and wheat, the participation of majority of farmers, especially smallholders in the emerging opportunity for diversification has been constrained due to the high risk in production and marketing. Also the transaction costs are too high, which are mainly the result of small pieces of land, tiny marketable surpluses and perishable nature of high-value commodities.

The average size of land holding has reduced to less than 1 hectare which is projected to be 0.68 hectare in 2020 and 0.32 hectare in 2030 if the trend continues. The bottom 82% of the farme rs posses about 0.63 hectare land holding, which is fragmented and deteriorating in quality.

“Smallholders are efficient in product ion but t iny and f r agmen ted p i eces o f l and holdings enormously increase their transaction costs and reduce their bargaining power due to small quantity of marketable surplus. Innovative institutional arrangements are needed for s m a l l h o l d e r s , w h i c h m a y consolidate their produce, reduce transaction cost, minimize risk, and l ink with remunerat ive domestic and global markets,” P K Joshi, Director, National A c a d e m y o f A g r i c u l t u r a l Research Management said. Thus for even larger diversification we need a huge financial thrust for creating infrastructure for expansion of horticulture and allied activities. q


Yojana January

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