MANAGERIAL STRATEGY FOR AGRICULTURAL …

Occasional Paper - 35

MANAGERIAL STRATEGY FOR AGRICULTURAL DEVELOPMENT IN THE EARLY 21^' CENTURY

I M . I I ' A X •: ;-il«i,?.4M ait3

DR. P.V. SHENOI

Department of Economic Analysis and Research

Nationai Banl< for Agriculture and Rural Development

Mumbai

2005

Occasional Paper - 35

21^* §icn^ ^ yro^ar ^

MANAGERIAL STRATEGY FOR AGRICULTURAL DEVELOPMENT IN THE EARLY 21^* CENTURY

ST. T^M. 5l5M DR. P.V. SHENOI

Department of Economic Analysis and Researcln i\^^ ^ sfrf 4||CHIUI f fe rn tci5

National Bank for Agriculture and Rural Development

Mumbai

2005

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Author Dr. P.V. Shenoi

Formerly Secretary to the Government of India in t he Depar tmen t of Agriculture & Cooperation, New Delhi and Formerly Director, Inst i tute for Social & Economic Change, Bangalore 'Shanti-Prem', 20-C, I Main Road, RMV Extension, Stage-Il, Block-1, Bangalore-560094

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The usual disclaimer about the responsibility of the National Bank as to the facts cited and views expressed in the paper is implied.

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TABLE OF CONTENTS

STiair? ACKNOWLEDGEMENT

Page No.

OTT-^^^q vli-x EXECUTIVE SUMMARY xi-xiv

CHAPTER I INDL\N AGRICULTURAL DEVELOPMENT : 1-10 A GLOBAL PERSPECTIVE

CHAPTER II AGRICULTURAL PLANNING & IMPLEMENTATION 11-20

CHAPTER III AGRICULTURAL RESEARCH & EXTENSION 21-35

CHAPTER IV SUSTAINABLE USE OF LAND AND WATER 37-45

CHAPTER V CROP INPUTS : SEEDS AND FERTILIZERS 47-58

CHAPTER VI CROP INPUTS : PLANT PROTECTION AND 59-69 FARM MACHINES

CHAPTER VII CREDIT SUPPORT, INSURANCE, 71-82 MARKETING AND PROCESSING

CHAPTER Vni LIVESTOCK AND FISHERY DEVELOPMENT 83-92

CHAPTER IX INTERNATIONAL TRADE IN AGRICULTURE 93-102

CHAPTER X MANAGERIAL STRATEGY IN THE EARLY 103-116 2 P ' CENTURY

REFERENCES 117

111

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ACKNOWLEDGEMENT

The author is grateful to NABARD for assigning him the preparation of this Occasional Paper. He is also indebted to several colleagues and friends who provided constant support and encouraged him to write this monograph on the challenges facing the agriculture sector in the early part of the 21st Century. In particular, the author is grateful to Dr. M.S. Swamina than , Cha i rman , M.S. S w a m i n a t h a n Research Foundation, Chennai; Dr. G.V.K. Rao, Formerly Member, Planning Commission, Government of India; Shri T.R. Satish Chandran, Formerly Governor of Goa; and a number of other colleagues who have inspired and assisted him in the preparation of this book.

P.V. SHENOI

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EXECUTIVE SUMMARY

A robust growth in agricultural sector is of critical importance for speedy development of the Indian Economy in the early 21®' Century, since no less than 60% of the population earns its livelihood in farming operations. Indian agriculture has made notable progress in the 57 years of Independence, warding off fears of famines expressed in mid-1960s. But the rate of annual growth since 1990s, at 2.5 to 3.0%, has fallen short of the 4.5% needed to modernize our economy. The large expenditure on subsidies for current inputs like fertilizer, irrigation and electricity have starved the sector of the needed investment. Small and marginal farmers account for 78% of the total farmers b u t opera te only 3 2 . 5 % of t he cul t ivable a rea : m o d e r n farm technology cannot jaeld full benefits here since it does require a viable farm size and investible resources for efficient operation.

2. Global experience has shown that agricultures in developing countr ies have recorded high ra tes of growth when six preconditions co-existed : (a) effective land reforms, (b) expansion of productive technology, extension and marketing services, (c) high investment in rural infrastructure, (d) low level of direct and indirect taxation on farmers, (e) encouragement to farm exports and (f) competitive t rade environment through low dut ies on agricultural imports. On the other hand, low rates of farm growth have been seen in those countries which develop industries at the expense of agriculture and which have faulty macro-economic policies with overvalued currencies, undue protection of domestic output and high subsidies for agricultural inputs.

3. India 's macro-economic policy needs major reforms for imparting dynamism in the farm sector. Input subsidies, which starved the sector of investment funds, should be gradually but fully phased out by 2015, through a deliberate and gradua l increase in input prices over ten years, within the framework of a liberal input market. Chinese agriculture has shown nearly double the Indian rate of growth, without any input subsidy and within a framework of promotional investment. The subsidy money so saved by the Central Government in each State should be assessed and allocated to such State as budgetary grant , for Investment in critical rural and farm infrastructure. One per cent of project funds should be devoted to an annua l concurrent evaluation by experts for identifying constraints and drawing lessons for improvement.

xi

4. Three broad policy approaches are necessary for achieving the desired 4 .5% a n n u a l growth in the farm sector. First, market incent ives for farmers and agr icul tura l processors should be strengthened by removal of those regulations which interfere with free market mechanism, like stocking and movement restrictions, high margins for bank loans against stocks and price controls on inputs and produce. Futures/Forward Markets should be introduced to eliminate speculation. Secondly, the safety nets to protect the poor consumer should be better designed and better targeted : issue of food s t amps to them is better t han the present rat ion card system. Thirdly, institutional reforms should be carried out to help small holders, particularly through cooperative societies, with a judicious mixture of strong enforcement of financial discipline and of incentives for sound management.

5. The agricultural research and extension agenda should actively tackle constraints faced by small-sized farms like moisture stress, water logging, soil alkalinity and acidity, credit Inadequacy, etc. Managerial reforms can overcome const ra in ts like over-centralization and inadequate integration. Greater attention should be paid to enhance yields rather than to the nuances of agro-ecological sys tems. Our genetic wealth should be protected through in situ as well as ex situ conservation in gene banks, botanical and zoological gardens . Emerging technologies like biotechnology and information technology should be harvested. Greater inter-disciplinary work is demanded, with organizational and management reforms and with suitable incentives. Autonomy of research system should be strengthened for setting goals, judging performance and rewarding success.

6. For enhanc ing the effectiveness of extension system. Government agencies shou ld jo in h a n d s with pr iva te and community driven organizations. Research-Extension linkages should be strengthened. The quality of extension process should be improved by using techniques like participatory rural appraisal, group dynamics, leadership techniques, conflict resolution, data analysis , efficient documentat ion and information technology. Considering the high involvement of women in farm work, special efforts should be made to reach technology to them, with sensitive attention to their time windows, mobility and cultural situation.

7. Major steps are needed to improve efiiciency in sustainable use of land and water, through sensible watershed development

xii

and agro-climatic regional planning. Sta te Land Use Boards should be strengthened to achieve better coordination. Water use charges in major and medium irrigation projects should be revised to reflect the cost of operations and maintenance as well as the benefits from water use. Greater participation by water-users is essential in managing public irrigation systems. There is no socioeconomic jus t i f ica t ion for the s u b s t a n t i a l subs idy ( a n n u a l Rs 18,000 crores) for electric power; it ha s destabilized the electric supply system, reduced the efficiency of irrigation and thus hurt the long term interests of the farmers.

8. Seed technology h a s undergone a revolution, t h rough genetically modified seeds. India should seriously engage in the debate and take advantage of the evolving technology. The seed certification system should be reformed to encourage seed producers with integrity. The unfolding powers of Biotechnology should be harnessed to enhance jrields and protect for crops from biotic and abiotic stresses. We should adopt a sensible patent system which can help harness globally developed seeds with potential benefits for Indian farming. Laws should be upgraded to protect legitimate patents , plant varieties, farmers' rights and biological diversity.

9. Scientific use of fertilizers gives attractive returns, without requiring subsidy. Fertilizer subsidy should be phased out in five years' time. Integrated and scientific plant nutrient use should be promoted, of both organic and inorganic sources. Soil testing and fertilizer quality testing services should be strengthened.

10. An integrated plant protection strategy, for substantially reducing an estimated annual loss of Rs.50000 crores, needs a judicious mixture of chemical and biological approaches. Better cul tura l pract ices can reduce the depredat ion by pes t s and diseases. The legal provisions to fight adulteration of pesticides should respond to the evolving situation to be effective.

11. India 's farm mechanizat ion policy should promote the development and use of efficient implements and machines to raise productivity and enhance the use of farm power by 75% in 15 years time. Remote sensing technology should be harnessed to optimize the application of inputs.

12. Government of India's declared policy of doubling the flow of farm credit in three years' time by 2006 requires a revolution

xili

in political, administrative and managerial cultures, to promote efficient circulation of credit resources. Innovative mechanism like Kisan Credit Cards and Self-Help Groups should be strengthened. A sensible and workable farm insurance scheme, capable of self-financing, would go a long way in encouraging farmers to undertake reasonable risks in the adoption of better technology.

13. Efficient ag r i cu l tu ra l marke t ing and p rocess ing is indispensable for encouraging farmers to invest in costly current inputs. The price support system should strike a healthy balance between economic viability and protection of farmers' interests. The r ecen t fa i lures in t h i s sphe re , which led to a costly stockpiling of 60 million tonnes of foodgrains, should be avoided in the future. Adoption of better food processing technology can add considerably to the farmers' income.

14. India, as the largest producer of milk, should leverage this strength through quality upgradation and export efforts. India's recent emergence as a major producer and exporter of fishery products can be further strengthened through a larger investment in p roduc t ion facilities and p roc e s s ing -c um-ma rke t i ng infras t ructure . There is great potential for developing inland fisheries given the recent technological developments.

15. India's efforts to promote exports of farm commodities are facing formidable economic challenges from developed countries. India would do well to work closely with Australia and New Zealand to prise open the US and European markets.

16. Agricultural development in India in the first 25 years of the 2 1 s t Cen tu ry is full of cha l lenges in the policy and m a n a g e m e n t f ronts . Hardheaded policy choices have been recommended in th is paper to achieve technical excellence, economic gains, managerial efficiency and social justice in our agricultural sector, which will take India on a higher trajectory of socio-economic progress.

XIV

CHAPTER - I

INDIAN AGRICULTURAL DEVELOPMENT A GLOBAL PERSPECTIVE

1 Overview. 7 Critical Importance of Farm Development. 10 Agriculture Development since Independence. 12 Slow-down in the Ninth Plan. 16 Agricultural Policy in the Developed Countries. 19 Indian Agriculture in International Perspective.

OVERVIEW

1.1 The Indian farm sector has made significant progress in the 57 years of freedom. There has been a four-fold increase in cereal production, to feed a burgeoning population, which has expanded nearly three times. India stands first in the world in the production of milk at 86.4 million tonnes in the year 2002/2003.

1.2 The following data illustrate the progress made by Indian agriculture.

Table 1.1: Production of Crops, Milk and Pish

(million tonnes)

SI. No.

Crops 1950-51 1970-71 1990-91 2 0 0 0 - 0 1 2 0 0 3 - 0 4

1. Food grains 51 108 179 199 2 1 1

2. Sugarcane 57 126 241 301 2 4 5

3 . Cotton (million bales)

3 5 10 13.2 13.5

4 Nine oilseeds 5 10 19 18.6 25 .0

5 Milk 17 21 54 78.1 86 .4 (3)

6 Fish 0.8 2.4 3.8 5.7 6.2 (3)

Source : (1) Ninth Five year plan (Planning Commission, 1999 & (2) Economic Survey, Government of India, July 2004 (3) Relate to 2002/2003

1.3 But, there are weak spots too. Our productivity in crops, animals, etc., is one third to one half of international levels. Speedy and balanced economic growth, exceeding 6 per cent, requires an annual overall growth of the order of 4.5 per cent in the agr icul tura l sector as a whole, embracing crops, hor t icul ture , animal husbandry , dairy, fishery, etc. The average annual growth since Independence has been only around 3 per cent. What is worrisome is the slackening of growth since the Ninth Plan (1997-2002), with achievements generally at less than half of the production targets in several sub-sec to r s . The proportion of populat ion dependent on agriculture has come down very slowly, from more than 75 per cent at Independence to about 60 per cent, since a slowly growing non-agricultural sector has not been able to speedily provide jobs to the surplus labour from the rural areas.

1.4 Despite such less- than-gl i t te r ing progress made by our agriculture since Independence, it is possible for us now to nearly double the growth rate to 4.5 per cent or more, if we bes t i r ourselves with vision, dedication, ha rd work and systematic management. We in India have all the essentials : a hardworking farming community, fertile land, abundant water, dedicated scientists, imaginative private enterprise and productive farm support systems.

1.5 This book seeks to review briefly the progress made and problems faced since Independence in the development of the farm sector. It designs an agenda for efficient action during the early 21^' century, for the development of six essential ins t ruments for triggering further progress : technology, infrastructure, input supplies, economic incentives, market development and supportive macro-economic framework, leading to higher productivity and incomes for the farmers and others involved in the farm sector.

1.6 This first chapter proceeds to sketch the critical importance of farm development for socio-economic renaissance of India in the 21^' Century. It then proceeds to review progress made since Independence. This is followed by a brief analysis of the slowdown since the 9''' plan. The s ta tus of agriculture in developed countries is then examined. Finally, an analysis is made of Indian agriculture in global perspective.

CRITICAL IMPORTANCE OF FARM DEVELOPMENT

1.7 Comprehensive economic development all over the world has been initiated, financed and supported by its agricultural sector ; and India is no exception. Agricultural development is critical for poverty alleviation and job creation. In India, the largest sections of the poor come from the classes of casual farm labourers, tenants, sharecroppers as well as marginal and small farmers. The eminent economist Prof. W.Arthur Lewis has explained how a dynamic agriculture, using better technology as well as larger capital and labour i n p u t s , expands output and generates marketable surplus. It t hus triggers a beneficial development cycle, financing industrial and service sec to rs and abso rb ing the s u r p l u s farm population. The resultant increase in the demand for food and raw materials further propels economic growth.

1.8 It is useful to trace the development of Indian agriculture, in which the crop sector predominated with more than 80% of national income at Independence. Over the decades, as per capita incomes rose, so did the production and consumption of non-crop p roduc t s : like milk, meat , fish, fruits and vegetables. The latter's share in farm output has risen from abou t 10 per cent to 30 per cent s ince Independence . However, the development of industries and service sectors grew at a much faster rate, with the result that in 57 years, India's agricultural sector, hosting 60% of workers, accounts for less than 25% of national income now.

1.9 The population of India has exploded from 35 crores in 1947 to 105 crores in 2004 : a 200 per cent increase in 57 years. Farming continues to host the largest section of these illiterate poor, who need to apply a better technology to increase yields. Our agriculture thus faces the daunting challenge of extending an increasingly complex farm technology to a slowly educating rural labour force.

AGRICULTURAL DEVELOPMENT SINCE INDEPENDENCE

1.10 With a stagnant technology yielding diminishing returns to the application of capital and labour inpu t s and with a fast expanding populat ion, India faced the prospect of m a s s starvation in the mid sixties. A book by Paddock brothers in 1960s had predicted tha t India could not be saved from

famines. India suffered crop failures between 1965 and 1967 and had to import over 20 million tonnes of wheat from the USA for survival . This was the time when there was technological breakthrough in the shape of high yielding varieties of wheat and maize, through outstanding research by the American scientist Dr. Norman Borlaug in Mexico. This was also the time when an enterprising Indian Minister for Agriculture, Shri C. Subramanian took a bold decision to import several thousand tonnes of high-yielding wheat and maize seeds in the face of criticism. This was a watershed in Indian agriculture. Indian farmers in irrigated areas took to these high-yielding varieties and enhanced their yields by a factor of 100 to 200 per cent. This was the bi r th of the hallowed Green Revolution. Indian agriculture has never looked back since then. Our scientists worked hard to adapt these seeds to our agro-climatic systems using the high-jaelding vigour of Borlaug's genetic material.

1.11 Prof. T.N. Srinivasan of Yale University observes that the long-term growth rate in Indian agriculture sector has remained low at an annual rate of 2.5 per cent, despite potential for higher growth rate promised by the available technology. This low achievement, according to him, masks several significant changes over time, particularly the contributions made by area expansion and jdeld growth. In the period 1950-71, when the farmers largely followed traditional technology before the arrival of high 5^elding varieties (HYV) of seeds, area under all crops grew by 30 per cent and the index of yield per unit area grew only by 43 per cent. On the other hand, when the HYV seeds became popular, the area growth in the period 1971-97 shrank to just 11%, while the yield growth shot up to 6 1 % . reflecting t he impac t of t he new technology. Secondly, the contribution of different regions and crops to the aggregate growth also changed as well. Thus , while Punjab, Haiyana and Western UP led in 1970's, the Eastern S ta te s of Assam, Bihar, Orissa and West Bengal t aken together and West Bengal in particular performed dramatically better in the 1980's. Among the crops, the output of oilseeds doubled in the decade between triennia 1984-87 and 1994-97. Thirdly, the relative contribution of Kharif vis-a-vis Rabi crop, particularly in cereals, has declined over the years, thanks to the expansion of irrigation, which made Rabi crops possible in larger areas. While in 1970-71, the Kharif food grains output of 65 million tonnes constituted 67 per cent of

the total output of 97 million tonnes, 26 years later in 1996-97 , the o u t p u t of Kharif cerea ls at 99 million t o n n e s constituted only 55 per cent of the total output of 185 million tonnes ; the irrigated Rabi crop responded more favourably to the new high yielding technology.

SLOWDOWN IN THE AGRICULTURAL GROWTH IN THE NINTH PLAN

1.12 Table 1.2 below presents comparative data in the output and the yields of food grains, non-food grains and all crops in the 1980's and 1990's : -

Table 1.2: Principal Crops: Annual Growth of Output and Yield (%)

Crop Production Yield Crop

1980/90 1990/2001 1980/90 1990/2001

Foodgralns 2.85 1.66 2.74 1.34

Non-foodgrains 3.77 1.86 2.31 0.59

All crops 3.19 1.73 2.56 1.02

Source : Economic Survey, Government of India, 2001/02, para 1.13.

1.13 It is worrisome that the annual average growth rate of crop production has almost halved from 3.2 per cent in 1980's to 1.7 percent in 1990's. The decline is almost entirely due to the sharp fall in the annual yield growth from 2.6 per cent in 1980's to 1.0 percent in 1990's. This trend is the seen in bo th the food g ra ins and non-food gra in c rops , each accounting for about half of crop production. Most of the production and yield deceleration seems to have occurred during the Ninth plan.

1.14 Eminent economist Dr.Shankar Acharya has analyzed the situation, in his article "What Ails Agriculture" (Economic Times, March 7, 2002) and identified the following reasons for slow down in the 1990s. In the first place, the net investment in agriculture, mostly in major and medium irrigation projects, has actually fallen by 20 per cent between 1994 and 2001. Secondly, there has been deterioration in the maintenance and operation of irrigation systems, due to lack of resources from weak cost recovery. Pay increases have also reduced

funds available for maintenance. Thirdly, this has happened also for rural roads and State high way programmes, hitting agricultural marketing. Fourthly, there is also a perception that agricultural research, extension and development services are responding more slowly to farmers' needs. The higher salaries for extension staff have reduced the funds available for field extension work. Fifth, there has been an undue increase in the cost of market support operations, due to unduly high support prices for food crops, enhancing the cost of main ta in ing food stocks in public godowns; th is h a s reduced the funds available for research and development. Finally, there is growing evidence that high levels of urea subsidy for many years has distorted the balanced use of three important nutrients, namely nitrogen, phosphate and potash, in a way detrimental to soil fertility.

1.15 It is a matter of concern that in the more populous States, agricultural productivity has been hur t by the continuing fragmentation of the land holdings. The average size of operational holding has come down from 2.3 ha. in 1969-71 to 1.6 ha. in 1990-91. Fifty nine percent of the 107 million holdings in 1990-91 were considered marginal, i.e., below 1.0 ha. Small farms (1 to 2 ha.) accounted for 19 per cent of all holdings. Thus the small and marginal farms accounted for 78 per cent of the total farms operating only 32.5 per cent of the cultivable area. Improved crop technology does require a reasonable farm size for efficient operation; our agriculture is fast slipping away in this respect. Consolidation of holdings, a difficult enterprise, can make adoption of improved technology more efficient.

AGRICULTURAL POLICY IN DEVELOPED COUNTRIES

1.16 Future development of Indian agriculture involves greater engagement with the world economy, mainly in terms of import of high productivity technology and inputs as well as of greater export possibilities of Indian produce. As of now, India is a marginal player in global agr icul ture for two reasons : (1) we were concerned with basic food security; and (2) world t rade systems, regulated by the GATT (General Agreement on Tariff and Trade) did not cover agriculture till recently. The scenario has changed in both these parameters. India has proved that it can feed itself. Secondly, the future growth of Indian agriculture, particularly farm incomes and

6

jobs, may well depend upon our capacity to absorb more of globally best technology to enhance efficiency of our farms and also to export more of our farm products.

1.17 The yields of crops and animals in the developed countries as a whole have risen three to four times the present levels in India, due to the application of more productive technology and mechanized farming. In the USA and Europe, over the course of 20"^ Century, only about 5 per cent of the total population is left behind in farming. The average size of farms has progressively grown to thousands of hectares in USA ; and these farms are highly mechanized with t ractors and harvesters, etc. At the same time, cost of farming has also shot up; these developed countries have kept their farming sectors alive through huge public subsidies, by Government procuring farm produce at very high support prices. The European Union spent a mammoth $121 billion supporting agriculture in 2003, while Japan a lavish $45 billion and USA $39 billion (Economist, July 3, 2004). The total amount of aid disbursed by the World Bank group in the same period was only of the order of $50 billion. While the percentage of population in the agriculture sectors of developing countries has come down by a relatively slow 1/3'^'' (82% in 1950 and 55% in 2000), the same in developed countries has sharply declined by five sixth (from 37% to 5% in the same period). As the following table indicates, direct and indirect subsidies in the developed coun t r i e s have a s s u m e d p h e n o m e n a l proportions :

Table 1.3: Agricultural Support Estimates 1998

Country/Union Producer support per farmer '000 dollars

Producer support as % of farm receipts

Japan 21 6 3

European Union 19 4 5

USA 19 22

Mexico 1 18

Canada 8 16

Australia 3 8

Source : The Economist, London, A Survey of Agriculture, March 25, 2000

1.18 It is ironic that the developed countries which laud the virtues of free markets and which condemn subsidies for productive en te rpr i se do j u s t the opposite when it comes to their agricultural sectors. The developing countries had to work very ha rd to include agr icul ture in the agenda of the GATT (General Agreement on Tariff and Trade) for liberalizing agricultural trade. The World Trade Organization, which was set up in 1990s, took on board an agenda for reforming International Agricultural Trade System. The demand of the developing countries for a level playing field in the agricultural sector has not received adequate response from the developed countries, leading to a break down of talks in 2003, under the "Doha Round". A consensus has been reported in 2004; but the implications have not been revealed clearly so far.

INDIAN AGRICULTURE IN INTERNATIONAL PERSPECTIVE

1.19 The las t avai lable compara t ive s tudy , of ag r icu l tu ra l productivity of developing nations, in the four regions of South Asia. East Asia, Sub-Saharan Africa and Latin America, is found in the 1993 World Bank Study "East Asian Miracle". It presents the following picture :

Table 1.4: Annual Average % Growth in Agricultures of Four Regions

Si. No.

Region Agrl. Income Agri. Labour Agricultural Productivity

1 Sou th Asia 2.4 L 7 0.6

2 Eas t Asia 3.2 LO 2.2

3 S u b - S a h a r a n Africa 1.9 1.6 0.3

4 Latin America 2.3 1.7 0.6

1.20 It appears that the single most important factor in agricultural development, namely, growth of farm productivity, in South Asia (with India accounting for about three fourths of South Asia), is only about one-fourth of that in East Asia, in which China accounts for about two-thirds. It is well to remember that the average holdings in China are smaller than in India. The recent Year Books of FAO show how the food production per capita in India went up only by about 8 per cent in the last 20 years, as against 50 per cent in China and 12 per cent in Indonesia. In 1997, the per hectare yields in India

8

have been only 46 per cent of China's regarding all cereals, 65 per cent of China regarding wheat and 42 per cent of China regarding paddy. We in India have a lot of catching up to do.

1.21 Global experience in farm development has shown that there are stK beneficial and three negative factors, which influence the growth of agricultural output. They are set out in the following paragraphs.

1.22 The six beneficial factors are :

(a) effective land re-distribution and other land reforms, as in South Korea, Taiwan and China;

(b) expansion of agricultural services, particularly for creating and providing technology, extension, and marketing;

(c) heavy investments in rural areas, particularly for these nine infrastructural services : irrigation, roads, transport, electrification, storage, drinking water, sanitation, health and education;

(d) low level of direct and indirect taxation on farmers;

(e) encouragement to the export of agricultural produce; and

(f) relatively low tariff on the import of agricultural produce for preserving a competitive environment.

1.23 The agricultural policy framework in the fast-growing Asian countries avoided the following three harmful measures, which have imposed an estimated cost burden of 30 per cent on Indian farmers :

(a) Development of Industry at the expense of agriculture, by discouraging agriculture directly or indirectly, through food price controls and unduly high pro-industry allocations of public investment.

(b) Fau l ty macro -economic policies, like over -va lued cur renc ies , u n d u e protect ion of domest ic i n d u s t r i e s producing farm inputs and consumer goods used by rural households. Avoidance of these measures encouraged farm product exports aind also reduced the cost of production of c o n s u m e r goods and farm i n p u t s for the fa rming community.

(c) Subsidization of agricultural inputs : the farmers in East Asia were neither significantly "taxed", nor significantly "subsidized"; in contrast, Indian farmers suffered a 30% "tax" due to faulty macro-economic policies. East Asian farmers were given an opportunity to work in a competitive input and output market. They exploited their comparative advantages in relevant crops, animals, etc., making use of an efficient farm infrastructure, which charged competitive prices for these services.

1.24 Indian agriculture can scale up its annual long-term growth to a 4.5% in early 2 P ' century, if the six positive and the three negative lessons outlined above, derived from global experience, are incorporated in its action plans.

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CHAPTER - II

AGRICULTURAL PLANNING AND IMPLEMENTATION

2.1 Towards Sound Agricultural Planning. 2.5 Macro-Economic Policy Reforms. 2.6 Imbalances in the Public Budgetary Policy. 2.7 Need for a Dynamic Trade Policy. 2.9 Four Essential Policy Thrusts. 2.14 Implementation Strategy. 2.21 Conclusion.

TOWARDS SOUND AGRICULTURAL PLANNING

2.1 An agricultural policy can only be as sound as its objectives and as feasible as the macro-economic and micro-economic policy framework within which it is evolved. This chapter will examine the implications of the 4.5 per cent growth target proposed for the agricultural sector during the first decade of the 21^^ Century. It will then identify the major m a c r o -economic constraints, which need to be removed, and the four other policy initiatives that need to be taken to get the best results.

2.2 As noted earlier, the average rate of farm growth in the last fifty years has been of the order of 2.7 per cent. In fact, it came down to an annual average 2 .1% during the 9'^ Plan. Achieving the annual targeted level of 4.5% hence requires bold initiatives. In the first place, we have reached near demand sa tura t ion levels with an ou tpu t of 200 million tonnes of foodgrains output during the 9* Plan, though it can be argued that nearly one-fourth of the population lives below the poverty line; and with better employment and income creation, they could generate demand for 250 million tonnes of food. Thanks to the subsidized exports of food grains by the developed countries, the market for export of our food grains is not particularly bright. Greater care is needed in cost effective planning of food production, while ensuring that food security is not jeopardized. Secondly, there has to be substantial reduction of input subsidies during the 10* Plan,

11

which may reduce the incentives for the farmers to use fertilizers. Policy prescription here is to increase the efficiency and profitability of fertilizer application through use of better technology; this takes time and cannot be taken for granted. Thirdly, much of the future growth will have to come from the non-crop agriculture, like animal husbandry, dairy, fishery, poultry, horticulture, etc - all more capital- intensive than crop agriculture. If our farm credit system had been in a sound state, the lack of capital resources with the farmers would not have been a serious constraint. But, the fact is tha t our farm credit system is not in a sound state; and serious and unpopular steps will be needed to put it in a sounder condition. All in all, a 4.5 per cent annual growth would require the kind of outstanding initiative and courage displayed by the Governments and farmers in India in mid 1960's, when famines were staring at our faces.

2.3 Sound agricultural planning is built on the recognition of variability of annual output, due to rainfall and other seasonal conditions. But steady capacity-building in support services like research, extension, input supply, credit, marketing, processing as well as irrigation and other infrastructure would lead to a general uptrend in production capacity. For example, in the 10 years ending 2001/02, the average of the annual agricultural output growth levels was 3.4%. This hides behind it a fall in annua l crop output in 3 out of the 10 years, relative to preceding year, with the average of such output declines at 5.33%. In the rest of the 7 years, the crop output grew by more than an annual 5% in four years and less than s u c h 5% in three years . While the s teady expansion of irrigation makes for greater stability in output, a developing country like India has to ensure food security, particularly for t he 26% of t he popu la t ion below the poverty l ine, by maintaining buffer stocks of food grains at an adequate level. This is adjudged to be around 12 to 22 million tonnes for specific months, depending upon the proximity to the next harvest.

2.4 Indian planning has unfortunately erred in the management of food security in the 1990s : irrationally high support prices were offered to farmers, well in excess of levels recommended by the body of experts : the Commission on Agricultural Costs and Prices. As a resul t , the food t r ade did not find it profitable to stock and market food grains; and the burden

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fell squarely on the Food Corporation of India. At one time. Food Corporation of India had held very large stocks of the order of 65 million tonnes of virheat and rice : three times the peak levels prescribed. This entailed extremely high and wasteful costs of storage and financing; these annual costs exceeded the annual investments in agricultural infrastructure services Uke irrigation, research, extension, etc., an instance of populism overtaking sound economic sense.

MACRO-ECONOMIC POLICY REFORMS

2.5 Eminent economist Professor Ashok Gulati has estimated that the Indian farm community, as a whole, received only 70 per cent of their rightful receipts from the market, due to faulty macro-economic policies. He quotes an 18 country study by Schiff and Waldes (1992): farm economies grew only at an average of 2.7 per cent a n n u a l l y in c o u n t r i e s wi th dysfunctional macro-economics, while they grew at 5.2 per cent in those countries which had sound macro-economics : those with low inflation, low tariffs and subs id ies , free markets and low budget deficits. He holds that benefits from India's well-intentioned policy, to help farmers by subsidizing ag r i cu l tu ra l i n p u t s , have been more t h a n offset by a contradictory set of policies, like depressing prices of produce through physical restraints on storage, movement, sale and export of produce, as well as an overvalued Indian currency. As a result , in the course of the 40 years 1951-91 , the average share of an agriculturist in the nat ional income declined by 38 per cent; and the gross share of agriculture in GDP, slid from 56 per cent for 32 per cent, while the gross working population fell only by a marginal 7% from 71 per cent to 64 per cent. The economic crisis of 1991 induced us to start reforming our macro-economic policy, but much more needs to be done to deregulate and liberate the economy.

IMBALANCES IN THE PUBLIC BUDGETARY POLICY

2.6 Fa rmer s ' pr ivate inves tment in agr icu l tu ra l a s s e t s h a s tradit ionally been three to five t imes t ha t of the publ ic investments, particularly in infrastructure like irrigation. Public investment in farm sector has declined from 26.1 per cent of the total in the First Plan, to 11.9 per cent in the Seventh Plan and to 11.4 per cent in the Ninth Plan. As a result, there has been a slower gross capital formation in the

13

farm sector over the years . One important reason is the diversion of the resources towards fertilizer and irrigation subs idy , tota l l ing p resen t ly a very s u b s t a n t i a l a n n u a l Rs. 33,000 crore. Both fertilizer and irrigation water, when scientifically used, can yield for the farmer a 200 to 300 percent return on investment; hence there is no justification whatsoever for such subsidy. China, whose per hectare fertilizer use is three times of India's and whose irrigation coverage is twice that of India's, does not provide subsidies to farmers for either input. Moreover, 75 per cent of our land is in the hands of large and medium farmers, who thus receive a very large part of such subsidies; they do not in fairness deserve any subsidy. Again, every 1 per cent increase in crop output will broadly need a 2 per cent increase in the use of t he se i n p u t s , r e su l t i ng in s u b s t a n t i a l add i t iona l and continuous increase in the subsidy burden, year after year. These subsidies have also led to unwise and ecologically destructive use of fertilizer in some of our most precious farmlands, impairing their productivity. It is necessary to launch a major educational campaign to persuade our farmers accept right-pricing of inputs and outputs. The subsidy money so saved should be used to strengthen farm services and infrastructure.

NEED FOR A DYNAMIC TRADE POLICY

2.7 The traditional protectionist trade policy of India has inflicted a grave damage on India's economic development. In 1947, India enjoyed 1.5 per cent of world trade. In 1991, it had come down by two-thirds to 0.5 per cent, while agricultural trading was expanding fast; anti- trade measures like high protection, restrictions on exports, etc., are to be blamed. There has been a sea-change after the 1991 reforms; and Indian import duties have come down from an average of 150 per cent in 1980 to less than 25 per cent today, under the new dispensation of World Trade Organization. The potential for agricultural exports of traditional as well as non-traditional products such as cut flowers and fresh fruits is vast, provided that reputable exporters are encouraged with tax benefits and low-cost credit to build infrastructure for quality production, grading, storage, pre-shipment inspection, etc.

2.8 Unfortunately, India does not enjoy a high reputation for reliability, timely supply and quality in the international

14

market. Government bans exports of food grains to ostensibly protect the poor, when there is a domestic shortage; and this comes in the way of the long-term development of the export m a r k e t s . With t h r ee i m p o r t a n t m e a s u r e s , name ly (a) integration with the international markets, (b) development of sound forward markets and (c) well-targetted safety net for the poor, the adverse effects of such integration with the international markets can be mitigated.

FOUR ESSENTIAL POLICY THRUSTS

2.9 Professor Ashok Gula t i h a s made four g roup s of recommendations, which can help accelerate farm growth with both efficiency and equity in early 21^' Century:

(a) strengthening incentives for farmers and agri-processors;

(b) p romot ing i nves tmen t in ag r i cu l t u r a l and r u r a l infrastructure;

(c) institutional reforms; and

(d) promotion of equity and environmental balance. They are taken up one by one in the following paragraphs.

2.10 Two-thirds of the invisible 30% burden on the farmers, comes from a faulty macro-economic policy : it t hus is a "macro-economic tax". It is only recently that the Government, after losing a case in the WTO Tribunal, withdrew the quantitative restrictions on exports and imports. Export and import tariffs on produce in India should be gradually reduced to the Asian average, as also import duties on farm inputs. Restrictions should be removed on movements of farm produce, and compulsory levies on paddy and wheat withdrawn. Several regulations interfere with the free market mechanism and hurt the farmers' interests: like stocking and marketing regulations, high margins for bank lending against the security of stocks and price controls on inputs and outputs . Futures market should be introduced in all farm commodities, which will iron out irrational j umps and dips. All these will un leash the forces of competition and improve the market realization for the farmer.

2.11 Secondly, several policy reforms are necessary to promote inves tment in farm and rura l inf ras t ruc ture . Taking u p irrigation, it is found that the capital cost of irrigating one

15

additional hectare under a new major or medium project may even be in the region of Rs. one lakh or more. Including the operational, maintenance and depreciation costs, the annual economic cost of providing irrigation water may exceed of Rs. 5,000 per hectare. The actual public recovery of irrigation charge may not be even 10 per cent of the annual cost. With t h e progress ive de te r io ra t ion in the f inances of S ta te Governments , which operate major and minor irrigation projects, they would be finding it Increasingly difficult to maintain the present irrigation assets and to invest in new irrigation projects. Efforts are needed during the Tenth Plan to come to grips with the problems of improving financial viabil i ty in the provision of publ ic i r r igat ion services. Investment in irrigation and other farm Infrastructural services will grow only if such investment fetches fair returns to the economy. Policy needs to be oriented to promote bet ter returns to public and private investments in such avenues.

2.12 Thirdly, institutional reforms are urgently necessary to assist the small holders, who, with less than two hectare holding, a c c o u n t for more t h a n th ree four ths of the farming community in India. Let us remember that both Japanese and Chinese agricul tures are dominated by farmers with two hectare or smaller farms, with exceptionally high yields, t h a n k s to land consolidation, efficient input supply and m a r k e t s u p p o r t t h r o u g h discipl ined coopera t ives . The cooperative system, which is specially designed to support the small holder in India, has not been able to realize its full potential; enforcement of fincmcial and organizational discipline will go a long way to strengthen cooperatives.

2.13 Fourthly, the inst i tut ions in the agricultural sector need considerable social re-engineering. Protective cover of jobs and food security are essential for the one-third of our farm population below the poverty line. Correct and appropriate instruments should be deployed to achieve the growth and equity objectives : income policy for equity objectives and price policy for growth and efficiency and not the other way round. Professor T.N.Srinivasan cites evidence to show how it takes four rupees of public money to reach one rupee of benefit to a ration cardholder. Careful issue of food stamps to the truly deserving poor could substantially reduce the cost to the exchequer, by eliminating the exploitative ration shops and by reduc ing the size of the Food and Suppl ies

16

Department. Special attention needs to be bestowed in 21 ' Century on other social aspects of farm development, such as retrieving waste lands to expand resource base, preserving biodiversity for enlarging the gene pool and promoting viable crop insurance to save the farmer from the vagaries of the monsoon.

IMPLEMENTATION STRATEGY

2.14 The above review has highlighted the causes of relatively slow progress in agriculture in relation to the Plan targets of growth. The rationale for a new policy framework has been established, which secures market-determined input and output prices, which removes incentive-reducing distortions and which promotes investments in rural infrastructure. Now, we proceed to consider an implementat ion s trategy, for enhancing farm output by the targeted annual 4.5 per cent on long term basis, which may involve a 3 per cent growth for cereals which evidence a slowing demand and 8 to 10 per cent growth for oilseeds, pulses , dairy, eggs, meat , fish, flowers, fruits, forestry products, etc., for which demand is accelerating internally and externally.

2.15 In t he face of pe r s i s t ing food sho r t ages soon after Independence, the Central Government had wisely taken an overarching interest in agricultural development, even though it is a State subject, under our Constitution; better flow of financial resources has been thus facilitated for agricultural development. The Central Government had realized that slow progress in agriculture will create macro-economic instability, in the shape of (a) inflation holding down growth and equity, (b) large import of food stuffs, etc., with heavy pressure on foreign exchange resources; and (c) large rural unemployment, which subverts political stability. There are also nat ional economies of scale, on account of centralized farm research through the Indian Council of Agricultural Research. In order to secure food security in the whole of the country, a Food Corporation of India could effectively procure food grains in the food-surplus States for distribution in the deficit pockets all over the country.

2.16 Continuation of the above crisis-based model is no more justified in early 21*' Century, in the light of significant progress made in farm production in almost all States. The

17

time has come to move, from a stage of production at any cost, to a stage of cost-effective production in a competitive global economy. The time has also come to move away from a subsidy-propelled extension and input-supply system to a market-oriented one. It ha s been seen tha t much of the resources is devoted to the distribution of farm inputs and the ma in tenance of incentive benefits for r ich farmers. The Chinese agricultural model has established that subsidies are not indispensable for progressive smallholder dominated agriculture, to achieve high rates of growth.

2.17 But, the process of reduction of farm subsidies involving increased input costs is politically a very sensitive matter. The States will hesitate to accept such a paradigm shift, if they are net losers vis a vis the Centre and other States. It is essential to reach a consensus , on a creative process of replacing subsidies without losing benefits. J u s t like the methodology followed by the Finance Commissions to allocate financial devolution from the Centre to the Sta tes , it is necessary for the present Finance Commission to work out a rational, equitable and production-fhendly method to gradually phase out the input subsidies and output price-support subsidies . First, it should assess the amount of annua l average farm subsidy, direct and indirect, enjoyed by each State during the 9"" Plan and evolve a rational method of phasing it out over ten years. There should be no input or agri-service subsidy, or a subsidy-based price support system by 2015. The subsidy money so saved should be allocated to the States to build critical rural and farm infrastructural services like irrigation, drainage, rural roads, rural water supply, improvement of extension and rural marketing, etc., on the basis of professionally produced feasibility reports.

2.18 At present, several thousand crores of rupees are spent by the Central as well as State agencies under the central, centrally sponsored and State farm development projects. Performance cr i te r ia a re ha rd ly specified, nor are scientific p o s t -implementa t ion evaluat ions carried out by professional agencies. The shortcomings are revealed only in CAG audit reports , several years after the completion of the project expenditure, making timeW and cont inuous improvement difficult. The financial sanction orders of the State Department concerned (Agriculture, Irrigation, etc) should in future invariably mention the quantum of estimated benefit annually

18

in the course of project life, in terms of production, poverty alleviation, increased yield or quality improvement, increase in farmer incomes or o ther benefi ts from the p roposed investment: and all-out efforts should be made by States to realize such benefits.

2.19 There should also be an annual concurrent evaluation for each project by professionally qualified evaluators, as done in the World Bank Projects, for which at least 1 per cent of the project fund should be earmarked. Such evaluation should be based on s ta t i s t ica l ly s o u n d sample survey of t he beneficiaries, for assessing how far the project has achieved its economic and equity objectives. Project implementation shou ld be con t inuous ly improved in the l ight of t he recommendations of the concurrent evaluator. The Planning Commission/State Planning Board should modify the schemes and adjust fresh financial allocations for the succeeding year in the l ight of s u c h eva lua t ion . The project s a n c t i o n documents of the Central and the State Government as well as the concurrent evaluation reports should be made public documents and put on e-mail within two months of issue of s anc t i on and wi thin two m o n t h s of the rece ip t of t he evaluation reports of independent concurrent evaluators . These measures will largely dispel the grave lack of confidence the informed public has increasingly nurtured in the efficacy of Government-implemented projects.

2.20 It is necessary to introduce an element of accountability and performance guarantee , when the Sta tes receive cent ra l assistance and when the District Panchayats receive funds from the State Government. Independent scientific evaluations and corrective actions thereafter will improve public confidence in the utility of public expendi tures . There should be a Memorandum of Understanding, defining the rights and duties of Central , Sta te and Panchaya t agencies , performance warranties, and timely flow of assistance. There should be rewards for excellence in specified parameters as well as penalties in case of failure, including return of assistance. All this may look rather radical. But, the evaluation studies on several projects often show failure of parties to carry out their responsibilities, leading to wastage of public resources. The deceleration in agricultural progress to an annual 2 .1%, as against a target of 4% plus during the Ninth Plan, should serve as a warning to all agricultural planners.

19

CONCLUSION

2.21 We have taken note of the less than satisfactory performance of the agricultural sector during the last ten years of the 20* Century, despite increased outlays, which have been wasted on subsidies and ineffective schemes. It is the short-sighted subsidy-oriented system to blame, not the Indian farmer. Our scientists and farmers are amongst the best in the world, but they have been given a system, which defeats them all. The Indian farmer does not seek out hand-outs, but only a fair support system with reasonably efficient supply of technology, inputs and market Incentives. What is needed is the shedding of the subsidy syndrome, the promotion of liberal input and ou tpu t marke ts , and of dynamic extension and research systems in early 21^' Century. This book provides a roadmap to develop such a farmer-friendly system.

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CHAPTER - III

AGRICULTURAL RESEARCH AND EXTENSION

3.1 Birth of the Green Revolution. 3.3 Strengthening the Indian Agricultural Research System. 3.5 Challenges and Issues in Agricultural Research. 3.7 Management of Genetic Resources. 3.9 Research Planning and Priorities. 3.14 Human Resource and Systems Development. 3.18 Conclusions on Agricultural Research. 3.19 Agricultural Extension. 3.20 Extension Policy Reforms. 3.21 Institutional Restructuring. 3.25 Management Reforms in Extension. 3.26 Improving Research Extension Linkages. 3.27 Capacity Building of Extension Functionaries. 3.28 Empowerment of Farmers. 3.30 Mainstreaming Women in Agriculture. 3.31 Use of Information Technology. 3.34 Conclusions.

BIRTH OF THE GREEN REVOLUTION

3.1 The twentieth century has witnessed a revolution in the deve lopment of ag r i cu l tu re t h r o u g h epoch -mak ing breakthroughs in farm research and development. Thanks to the victory over several communicable diseases, there has been an explosion in the growth of populat ion, creat ing shortages of food, particularly in the developing countries of Asia and Africa. India suffered two successive years of extreme drought in 1965-67 when the survival of the country was Ccdled in question. Fortunately, at the same time, a revolution was t ak ing place e lsewhere in ag r i cu l tu r a l r e s e a r c h . Dr.Norman Borlaug, an American scientist working in Mexico, developed high yielding varieties of wheat and maize with a th ree- to- four fold inc rease in yields; he did so u s i n g germplasm of different capabilities collected painstakingly from different parts of the world, after a two decade effort. This

21

opened up a vista for survival for the then food-deficit countries including India, China and several countries of Africa.

3.2 The global community has made a valuable contribution in building up International research institutions with the best available scientists from all over the world, which in the 1960s onwards could develop high yielding varieties of paddy, wheat, maize, coarse cereals, oilseeds, etc., for the benefit of the poor coun t r i e s . Today, it can be said t ha t lack of technology is no more a serious constraint in feeding the world. But such technologies need to be further refined to adap t to three governing condit ions : (a) The scores of microclimates existing in several par ts of the world with different kinds of soil, rainfall, temperature patterns and day-lengths to sui t the small-sized farms in the land-scarce developing countries and to utilize the latter's abundant and cheap labour, while economizing on costly capital resources. There has been cont inuous progress in crop and animal husbandry as well as in milk production in the developing countries, thanks to the breakthrough in technology and due to the support given by the World Bank and other donors to the research and extension institutions, both international and those in the developing countries. Yet, immense opportunities are now opened up by technological revolutions in several fields: Molecular Biology, Biochemist ry , Physiology, Geographical Information System (GIS), Systems Analysis, Informatics, Remote-sensing, etc. Paragraphs 3.3 to 3.18 deal with agricultural research followed by paragraphs 3.19 to 3.34 with agricultural extension.

STRENGTHENING THE INDIAN AGRICULTURAL RESEARCH SYSTEM

3.3 Agricultural Research and Development is basically a State subject under the Indian Constitution However, the Indian Council of Agricultural Research (ICAR), a central government organization headed by the Union Minister for Agriculture as its President, coordinates and promotes nation-wide activities, carried out through central research institutions as well as by the State Agricultural Universities. The ICAR also coordinates with internat ional agricultural research and educat ional inst i tut ions for building up Indian research capabilities. These activities embrace the scientific research relating to

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crops, agro-forestry, animal husbandry, dairy, fisheries and related social and resource management. The ICAR has set up four national institutions which have the s ta tus of deemed universities : Indian Agricultural Research Institute, New Delhi on crops and hor t i cu l tu re , Indian Veter inary Research Institute, Izatnagar in UP, National Dairy Research Institute, Kamal in Haryana and finally. Central Institute of Fisheries Education at Mumbai. There are 47 central institutes dealing with important research themes relating to different crops, animals, birds, etc., including one at Hyderabad on research management. There are also five national bureaus on genetic resources and soil survey. In addition, 12 project directorates have been set up by ICAR to coord ina te wi th S t a t e Agricultural Universities on crop and animal sciences and to develop technical recommendations for the farmers. Moreover, several specialized research centres on crops and animals have been set up : twenty-one for crop sciences, nine for animal and fisheries sciences and three for general themes. Together, they implement several All India Coordinated Projects of national importance : 32 in crop sciences, 14 in hor t icul ture , 15 in na tu ra l resource management , 16 in an ima l sc iences and f isheries , 11 in eng ineer ing and technology and 1 in agricultural education. ICAR, thus, has a very comprehensive research agenda.

3.4 Thirty-seven Agricultural Universities have been set up by several State Governments with ICAR assistance for promoting educa t ion and r e s e a r c h in all eleven a s p e c t s of the i r agricultures, focusing specially on the problems prevailing in their States and for enhancing productivity in all aspects of their rural lives. The State Agricultural Universities (SAUs) work closely with the ICAR system, which also provides f inancial a s s i s t a n c e for development of educa t ion and research. Frequent conferences with SAUs are held by ICAR to exchange information on the research findings in all fields and d isc ip l ines , so t h a t the re is c o n t i n u o u s u p g r a d i n g of knowledge for improving research capabilities and outputs.

CHALLENGES AND ISSUES IN AGRICULTURAL RESEARCH

3.5 According to Dr.RS.Paroda, former Director General of ICAR, the present research system faces three challenges in the development of technologies to meet the emerging problems. The first challenge is to retain green areas as green, since

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they run the risk of losing fertility. Much of our irrigated and fertile areas in the Punjab runs the risk of water logging, alkalinity and other problems. These non-sus ta inabi l i ty Indicators have to be identified and precision farming adopted with t he he lp of r e s e a r c h and ex tens ion i n s t i t u t i ons . In te rd i sc ip l ina ry app roach is nece s sa ry to secure sustainability, particularly in rice-wheat crop combination areas. Secondly, technology has to be focused on turning grey areas green. More than sixty percent of our croplands are rainfed. They have an entirely different set of technical and environmental problems, arising from rural poverty, rapid population growth and inadequate application of technology. A unified strategy encompassing watershed management, hybrid technology and small farm mechanization would be useful. Integrated plant nutrient and pest managements can help minimize the use of costly inputs and improve resource conservation. Thirdly, optimization of valuable soil resource use improves life-supporting systems by efficiently providing food, fibre, fodder and fuel for meeting the basic human and animal needs. Correct techniques of irrigation, drainage and land use require multidisciplinary and inter-insti tutional approach. Water use efficiency, farm water conservation and wise use of farm chemicals such as fertilizers and pesticides would be the key for survival and development in future.

3.6 According to Prof.Dayanath Jha , an expert in agricultural research management, the following seven constraints need to be overcome for improving Indian agr icu l tura l research capabilities :

> Excessive centralization in the ICAR.

> Erosion of autonomy of the ICAR institutions and State agricultural universities.

> Lack of integrat ion amongst research , extension and education.

> Inadequate organizational strength in the ICAR and State agricultural universities.

> Excessive attention to commodities research at the expense of research into agro-ecological systems.

> Need to promote quality and excellence.

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> Weak linkages between partner institutions. Efforts are be ing made by the ICAR and S ta te Government s to overcome the above handicaps

MANAGEMENT OF GENETIC RESOURCES

3.7 Dr. M.S. Swaminathan has highlighted the growing concern at the collision between the human beings and the natural world : this may damage global eco-system beyond repair and thus lead to loss of genetic mate r ia l (Dr.M.S. S w a m i n a t h a n 'Government-Industry-Civil Society Partnership in Integrated Gene Management, in the millennium issue of Agricultural Finance Corporation, Mumbai, July-December, 1999). Six hundred leading scientists including 104 Nobel laureates from 70 countries signed this warning at the UN Conference on Environment and Development, held at Rio de Jane i ro in June 1992. They called for several reforms in the management of our n a t u r a l r e s o u r c e s inc lud ing more meaningfu l partnership between governments, industry and civil society for integrated gene management. In the past, the atmosphere, oceans and bio-diversity used to be respected as the common heritage of mankind. Alas, no more. An industrially advanced country like USA b u m s so much of fuel and puts so much of carbon dioxide in the air that the resultant global warming will damage large parts of the world. Thanks to indiscriminate deforestation, alien species invasion and genetic homogeneity in farming systems, bio-diversity is being destroyed, fast depriving the humanity of the genetic material to solve future problems.

3.8 The M.S. Swciminathan Foundation at Chennai is focusing on these problems, which have the potential of diminishing and eventually destroying the vitality of h u m a n race and the an ima l world. The policy r e c o m m e n d a t i o n s m a d e by Dr. S w a m i n a t h a n include (a) bio-diversity m a n a g e m e n t through tTcinsition from social exclusion to inclusion; (b) In-sttu conservation of genetic wealth through a nat ional grid of protected areas; (c) efficient Ex-situ conservation in gene b a n k s , botanical and zoological gardens; (d) communi ty conservation; (e) avoiding genetic homogeneity in farming systems; and (f) training for and promoting the role of women who have been the prime seed selectors and saviours for facilitating bio-diversity management.

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RESEARCH PLANNING AND PRIORITIES

3.9 The Indian Council of Agricultural Research (ICAR), the apex body for agricultural research in India is governed by the ICAR Act. It is designed to address challenges in sharpening research priorities, maintaining and increasing research quality and re levance as well as e n h a n c i n g efficiency. The s t a k e h o l d e r s like the S ta te Governmen t s ' ag r i cu l tu ra l universities and farming community should be associated in prioritizing and identifying the research themes. Only those research areas of clear comparative advantage, which promote public interest, should be supported with the public money. In par t i cu la r , r esea rch agenda should add re s s poverty alleviation, balanced regional development, rainfed agriculture, gender equity, etc., which are clearly in the public interest.

3.10 Emphasis should be shifted from narrow commodity research, towards comprehensive research on farming systems, for enhancing overall productivity and profitability of farmers. Premium should be placed on sustainability of production sys tems th rough efficient land and water management , integrated pest management, etc. This will need a broader p rog ramme approach , which c u t s ac ros s d isc ip l ines , commodities, divisions and institutions. This also requires prioritization of national and institutional programmes and strengthening inter-disciplinary and inter-institutional linkages. For example, watershed management in rainfed agriculture and rice-wheat system in irrigated agriculture are to be addressed through interaction of research and development efforts as well as plant-anlmal-man chain.

3.11 With the achievement of substantial self-reliance on cereals and other crops on cost-effective basis, it is necessary to proceed to diversify agriculture to place greater emphasis on livestock, fisheries, horticulture and agro-forestry. Special t h rus t has to be provided to value addition, post-harvest technology and agri-business aspects.

3.12 Future challenges can be met and opportunities exploited only if scientific and technological capabi l i ty is improved. Biotechnology has emerged as a powerful tool to address major biotic and abiotic s t r e s s with grea te r prec is ion . Similarly, information technology has undergone a revolution as also other new sciences relating to environment, geographic

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systems, crop modelling, bioengineering and agri-business. The promising concepts in these will have to be increasingly applied.

3.13 As the research tasks become more complex and as greater inter-disciplinary teamwork is demanded, success can come only through organizational and management reforms, so that the final r e su l t subs t an t i a l l y exceeds the s u m s of the contributions of the specialists in the research team. This will require incentives, rewards, training etc., as well as better understanding of the needs of the three stake holders: the farmers, service providers and consumers.

HUMAN RESOURCE AND SYSTEMS DEVELOPMENT

3.14 In research and development, anything less than the best quality in team members will reduce the efficacy of the research output. Academic inbreeding and falling quality of education can destroy the vitality of the research system. Provision of educational and training opportunities in the renowned scientific centres of the world can attract the very best of Indian young talent to agricultural sciences.

3.15 Concern has been expressed by Prof.Dayanath Jha, that our agricultural scientists are currently not able to make more effective contributions due to systems deficiencies. He urges t h a t t he ICAR shou ld help c rea te s t rong compet i t ive institutions at the State and zonal levels; he finds that many of the latter have been reduced to the level of camp followers due to cen t ra l i za t ion a t the ICAR level. Secondly, t h e autonomy of ICAR has been eroded over time, th rough a bureaucratic insistence on irrational uniformity. Coherent and per formance- l inked policies and p r o c e d u r e s , bef i t t ing au tonomous scientific inst i tut ions, should be developed. Thirdly, the integration between research, educat ion and extension, needed for innovation, is inadequate and should be strengthened.

3.16 The existing pat tern of commodity-based research at the central level needs to be reviewed. It may be more useful to reorganize research organizations to meet the needs of agro-ecological systems like the rainfed, the irrigated, the arid, the semi-arid, the humid and the hills areas.

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3.17 Efforts are being made to improve the efficiency of research system under the World Bank supported National Agricultural Technology Project, which began operations in November 1998. This project finances reforms needed for successful research : autonomy, decentralization, need-based research, project-based budget, prioritization-monitoring-evaluation (PME) processes, inter-disciplinary and inter-institutional research, systems o r i en ta t ion , in tens ive h u m a n r e s o u r c e development , performance-based incentives and reward systems, etc. This is a great challenge faced by our farm research system, which should avoid the temptation to follow the inflexible rules evolved for other sections of the Government machineries, where creativity and scientific b reak through are not the central goals.

CONCLUSIONS ON AGRICULTURAL RESEARCH

3.18 Our agricultural resccirch has no doubt traveled a long way in the last 50 years . But it faces formidable challenges in developing technologies for enhancing yields on cost-effective and environmentally sound basis for Indian farmers facing high const ra ints : small sized farms, inadequate capital, moisture stress, illiteracy, market uncertainties, etc. With bet ter training, incentives and organization, Indian farm sc i en t i s t s can be expected to tackle t h e s e cha l lenges successfully within a competitive global farming system.

AGRICULTURAL EXTENSION

3.19 The agricultural extension system is the conduit pipe between the research institutions and the farmers for convejang to the farmers improved agricultural technology, which can Increase their yields, and incomes within the frame work of their environment and assets. The following eight steps have to be taken for building an efficient agricultural extension system :

(i) Policy reforms.

(ii) Institutional restructuring,

(iii) Management reforms,

(iv) Strengthening the Research-extension links.

(v) Capacity Building and skill upgradation.

(vi) Empowerment of farmers.

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(vii) Mainstreaming of women in agriculture,

(viii) Use of media and information technology

EXTENSION POLICY REFORMS

3.20 Dr. Rita Sharma, an expert in this field, has recommended nine areas where extension policy needs to be reviewed :

(i) Farming Systems Approach : to replace the traditional single-discipline based, commodity-oriented approach of the T & V system, with an integrated farming systems approach, in a holistic way to fulfil a whole hierarchy of objectives, like food security, nutrition, sustainabiUty, risk minimization and income-cum-job generation.

(ii) Multi-agency extension service : to encourage the private and community-driven extension to compete with public extension services.

(iii) Primary responsibility of public extension services : to focus on economically backward regions and with small and marginal farmers as well as landless labourers, environmental protection, natural resource management, integrated pest management and agro-forestry, etc. - All areas presently not catered by private extension agents.

(iv) Promoting farmer participation : in working out the system description, problem diagnosis , s ea rch for appropriate techniques, designing implementation, M & E and feed back. The local knowledge of farmers wiU be an important input.

(v) Promoting demand-dr iven and farmer-accountable extension, replacing the T & V system, which was supply driven. Farmer groups like self-help groups, cooperatives and community associa t ions should be encouraged to articulate the kind of extension they need.

(vi) Promoting problem-solving skills : replacing the top down blanket dissemination of packages of practices.

(vii) Encouraging private sector involvement in technology transfer.

(viii) Charging for extension services : A market for private extension services should be encouraged. Processors with contract producers, commercial suppliers of seeds,

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agro-chemicals and machinery, vaccines and artificial i n semina t ion services should recover the cost of providing advice to their clients out of profit margins. Vulnerable groups however, will need to be protected through targeted subsidies and safety nets.

(ix) Effective regulation and enforcement : The multi-agency extension system enhances the responsibility of the State for effective enforcement, particularly of quality control of inputs.

INSTITUTIONAL RESTRUCTURING

3.21 It is clear that there is no unique extension system, which would suit all States and all parts of every State. A menu of various models should be finalized in every State to adapt to their need.

3.22 Despite the induction of private extension activities, the Government will continue to pay special at tention to the technology, mairkets and the Inputs requirements of small and marginal farmers as well as economically backward regions, where private entrepreneurs will not significantly invest in extension. This means that the 1,00,000 public extension functionaries (including VEWs and SMSs) will have to be posit ioned in a new inst i tut ional a r rangement , which is demand-driven, farmer accountable, bottom-up and following a farming systems approach. Three broad organizational models can be envisaged in such extension : (a) the ATMA model (six States) (b) single window broad-based extension model (as in Maharashtra) and Panchayati Raj institutions as in Kerala, West Bengal and Madhya Pradesh and (c) farmer direct contact as in Punjab.

3.23 The ATMA model (Agriculture Technology Management Agency) is a new concept. It is society registered under the Societies Registration Act and promoted under the World Bank funded ICAR Agricultural Research Project. The main objectives are (a) to decentralize decision-making to the district level through the creat ion of ATMA; (b) to increase farmer input into programme planning and resource allocation, particularly at t he block level and t h u s i nc rease accoun tab i l i ty of stakeholders; (c) to increase programme co-ordination and integration between departments to promote farming system innova t ions and farmers ' o rganiza t ions ; and (d) to fill

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technology gaps, to improve soil and water management as well as to reduce pesticide use through IPM programmes.

3.24 There is a move to review ICAR's role in extension. The primary mandate of ICAR is research, including research into extension methodology. It is felt that the extension programme in ICAR should be limited to reinforcing the research activities to make them more demand-driven and farmer-centric. The initial design of ICAR setting up one KVK in each district is likely to consume an unduly large part of its resources. It has been proposed that the KVKs be transferred to extension wing of the State Agricultural departments.

MANAGEMENT REFORMS IN EXTENSION

3.25 The Government of India suppor t to the State extension services should be conditional upon policy reforms and institutional restructuring with demonstrated ability to be technology-driven, to be farmer-accountable, to be farming system based, to be sustainable and capable of broad-based in teg ra ted delivery. It h a s been found t h a t t h e T & V personnel systems are not cost effective and needed to be phased out. While funding for salaries will continue to be the responsibility of the State Government, funds for technology d i s s e m i n a t i o n and appl ica t ion and for ope ra t ion a n d management may be shared between the Sta te and the Central Government.

IMPROVING RESEARCH EXTENSION LINKAGES

3.26 There are three ways of improving the research-extension l inkages . Firstly, direct interface between farmers and scientists is the ideal method : the scientist gets the picture undistorted by a middleman official. But the method is costly: it is difficult to appoint a large number of scientists to talk to millions of farmers. The second possibility is the activation of existing mechanisms, like Regional Committee of ICAR, Zonal meetings held by the Ministry of Agriculture, etc. These mechan isms need to be made more sensitive to cap ture farmer viewpoints. Thirdly, research priorities can be set based on micro-level extension strategies reflected in s trategic research and extension plans, based on participatory rural appraisa ls and developed jointly with district technology teams, including the scientists of KVKs, ZRSs or SAUs.

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CAPACITY BUILDING OF EXTENSION FUNCTIONARIES

3.27 An eight step action plan is recommended for building up the capacities of the extension functionaries in early 21^' Century:

(i) Formulation of an HRD Policy by States, through a skill gap analysis, embracing a compulsory training and skill upgradation plan for all extension staff, along with an effective system of rewards and incentives.

(ii) Preparation and implementation of a training plan for extension functionaries, on the basis of a skill gap analysis . The training plan should include modern techniques like the participatory rural appraisal, group format ion, l eade r sh ip ski l ls , conflict reso lu t ion , management of common property resources, use of different kinds of media, communication skills, data collection analysis and documentation.

(iii) A one- t ime ca tch u p g r an t for bu i ld ing t r a in ing infrastructure.

(iv) Upgrading the State-level Extension Management Training Institutes.

(v) St rengthening the National Agricultural Extension Management Institute (MANAGE).

(vi) Developing professionalism in a cost-effective manner.

(vii) Training of private extension functionaries in training institutions and SAUs.

(viii) Networking amongst all State level institutions.

EMPOWERMENT OF FARMERS

3.28 Farmers ' representatives, as major stakeholders, mus t be appointed on all decision-making bodies of public and private extension services and institutions. Efforts should be made to implement projects through or in close collaboration with farmers' groups, like watershed associations, cooperatives, etc.

3.29 Training and acquisition of new skills by farmers is a central part of the technology transfer system. Special attention has to be paid to five aspects of the process: (a) assessing farmers' needs and skills; (b) distinguishing different dimensions of

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t r a in ing , s u c h a s a w a r e n e s s , knowledge, ski l ls a n d reinforcement, and using appropriate channels and methods for each; (c) different kinds of technologies and advice required by different kinds of male and female farmers as well as the transfer mechanism (face to face, mass media, different types of groups) they prefer during different phases of awareness, trial and adoption of new skills and technologies ; (d) use of information technology to improve the quality and accelerating the t ransfer of information; and (e) organizing t ra in ing programmes on system-based and sustainable technologies, such as Integrated Pest Management and Integrated Plant Nutrition Management.

MAINSTREAMING WOMEN IN AGRICULTURE

3.30 Unfor tunate ly , women farmers have been neglected in extension efforts. It has been found that no less than 70% of operations in farming are carried out by women. Hence, it is very essential tha t women should be mainstreamed in all efforts to develop ag r i cu l tu re . Women s hou ld receive information relevant to their work in crops and livestock husbandry , so tha t they can make right decisions in the context of farm and home management. Efforts should be made to increase the proportion of female extension workers to one-third of the force, through incentives like scholarships and stipends. It is also essential to sensitize male extension workers to the needs, approaches and perspectives of women, through appropriate training and orientation programmes, taking into account women's time, mobility and cul tura l situation.

USE OF INFORMATION TECHNOLOGY

3.31 Rural communities have not yet been able to gain access to information technology infrastructure, in comparison with the u rban dwellers. Extensive use of IT between researchers , ex tens ion worke r s and r e s e a r c h e r s will he lp t r ans fe r information and technologies more cost-effectively, at least in the more knowledge-intensive forms of agriculture. Radio and TV have vastly increased their reach , as also recept ion facilities. They should strengthen dissemination of market information and intelligence, followed by dissemination of technology. GOl should consider support ing an exclusive agriculture channel on Doordarshan.

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3.32 The GOI should support State activities in IT, in three ways : (a) electronic access , through NICNET, to technical and administrative information; (b) e-mail access to ICAR and SAU researchers as well as State and central agricultural offices; and (c) electronic access to ARIS system of databases and worldwide webs.

3.33 Under the National Agricultural Technology Project, 24 block level farm advisory centres wiU be linked to each other as well as to district, state and national institutions. The objective is to link all the 5200 development blocks to the State and national internet system in a phased manner. The ultimate aim could be to promote private information shops and kiosks, franchised out to private sector (with unemployed educated rural youths, on the pattern of PCOs/STD shops). Training courses could be organized to make this possible. Secondly, privatization of selected, presently-public agro-services like artificial insemination services, soil testing, fertilizer advice, etc . , can lead to economies in public extension. Thirdly, co-financing of public extension services by farmer assoc ia t ions can reduce the p r e s s u r e on public finances and improve the accountability and responsiveness of extension to farmers. Finally, economies can be reaped through innovative financial devices, under which revolving funds could be set up for Government nurseries, farms, etc., to meet recurring expenditure, to be recouped through sale of services and material like seed. Budgetary support could be restricted to pay and allowances of staff.

CONCLUSION

3.34 Agricultural extension should adapt itself to a more diversified farming system, from its present simplistic accent on yield enhancement by increasing some limited inputs. Fanners will then adopt a wider range of inputs and practices as well as develop skills in their more efficient use. The mission of extension virill then become more complex. It -will also require a flexible approach , allowing specific information to be cus tomized for different farmer g roups . A s t ra tegy of institutional innovations will have to be evolved for efficiently harnessing the strengths of the private and public sectors, to service the needs of the farming community.

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3.35 While we have to carry forward the aforesaid future vision of extension, we have also to remember that Indian agriculture is at cross roads. Five factors have placed Indian agriculture in a difficult position : particularly our huge buffer stock of grains, our high support prices, failure of our farmers to repay to their loans, slow farmer response to the changing demand pattern in the food sector and the challenges posed by the world trade system. It seems that the Government, the domestic and internat ional marke ts cannot suppor t any significant crop price increase in order to offer fur ther incentives to the farmers. On the other hand, the utilization of the already available technology is sub-optimal; our average yields are ha rd ly half of wha t our t echno log i s t s have demonstrated, for any given agro-economic situation. The way out is more efficient and cost-effective agriculture. The way out is not higher support prices, nor higher farm subsidies and nor loan remiss ions . The extension sys tem h a s the onerous duty of carrying this difficult message to them that the way out is more efficient applicat ion of technology, t h r o u g h the above e ight -poin t ex tens ion s t ra tegy , for e n h a n c i n g yields and cu t t ing down on u n i t cos t s of production.

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CHAPTER - IV

SUSTAINABLE USE OF LAND AND WATER

4.1 Introduction. 4.3 Watershed Management. 4.7 Dryland Farming Technologies. 4.8 Land Use Boards. 4.9 Primacy of Irrigation Development. 4.11 Investment in Irrigation Development. 4.12 Unwise Start of New Projects Neglecting On-going Ones. 4.14 National Water Policy and On-going Reforms. 4.15 Power Supply to Agriculture.

INTRODUCTION

4.1 T h a n k s to the three-fold inc rease in popu la t ion s ince Independence, the land and water resources of India have come under t remendous pressure to produce food, fibre, fodder and other needs. While land under irrigation has since then increased nearly four-fold to contribute 56% of our food product ion, there h a s been great anxiety on account of inefficient irrigation management causing problems like water logging and salinity. Unwise deforestation and defective farm practices have led to soil erosion, adverse chemical changes like alkalinity and acidity and other damage to the productive capacities of the soil. In the circumstances, it is critical that steps should be taken for sustainable use of land and water for agricultural development that will meet the needs of the present generation without compromising the ability of the future ones to meet thei r own food needs and re la ted demands from the land. The National Agriculture Policy a n n o u n c e d by the Government of India in J u l y 2 0 0 0 , underlines the importance of improving the management of the country's land and water resources.

4.2 Fortunately, there have been successful examples in this sphere. Ralegaon Siddhi, a village situated in the chronically drought-prone area of Ahmednagar district of Maharashtra, is a sh in ing example. It had undergone deforestat ion and destruction. A social worker, Sri Anna Saheb Hazare, worked

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with the villagers for soil conservation, afforestation and check-dams to facilitate the percolation of rainwater into the soil profile to recharge the groundwater. While drinking water had to be brought by tankers earlier, now the farmers are growing two to three crops during the year. Similarly, in the village of Adgaon in Aurangabad district, under the leadership of a soci£il worker Sri Vijay Borade, the villagers pledged that they would neither axe the trees nor greize their animals. In a few years, they grew plenty of trees and also grasses, which could support on a permanent basis their needs of fuel-wood and fodder. Concerted social action is necessary to build soil and water resources for sustainable livelihood in the villages.

WATERSHED MANAGEMENT

4.3 Only about 40% of cultivable land is presently receiving irrigation. Most of the cost-effective major irrigation projects have already been taken up. In some of the major irrigation projects, doubts are emerging about the validity of the cost-benefit calculations, on the basis of which they were built; the net benefits are found to be smaller than the levels envisaged, due to falling quantity of water harvested and damages to beneficiary land, due to floods and sal in i ty . In the c i r cums tances , an impor tan t aspect of future mois ture management lies in 'watershed management', particularly in un-irrigated areas. Rainwater conservation and utilization is the foundation of a successful dryland farming. Watershed is an area, which generates and then stocks a body of water at the lowest point, with distinct hydrological boundary, which can be used for area development. Past experience shows that watershed projects implemented in drylands led to improved water availability in terms of additional surface storage and enhanced recharge of groundwater . In some areas such increased water availability in wells and storages led to increased cropping intensity by 50% over a period of 5 years (Sustainable Dryland Agricultural Development by H.P.Singh et cd. page 42, "Financing Agriculture", January-March 2003). The Government of India is encourag ing the S ta t e Governments with financial support in the development of wa te r sheds . For example, during the VIII Plan, 28 lakh hectares were sought to be covered by watershed development schemes at a cost of Rs.lOOO crores, working out at about Rs. 4,000/- per hectare.

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4.4 There has been a major change in agricultural planning since 1988, with the Central Planning Commission working with the States to undertake agro-climatic regional planning exercises, particularly to study the resource endowment, strategies for balanced development, comparative advantages, choice of priority activities, infrastructure needs and investments . Experts from agricultural universities and research institutions have delineated 15 regions with broadly common physical and env i ronmen ta l cha rac t e r i s t i c s , which aga in have been disaggregated into 73 sub-regions; thus the soil and water resource base has been made the foundation for agricultural plcinntng. Resource-based agricultural farm planning has come of age, embracing even smaller and inaccessible villages. It is expected that such broad-based growth and diversification of rural economic activities, resulting from area planning, would expand the economic space available to the rural poor.

4.5 Water is the most valuable resource in most a reas with reasonably good soils. Development of the watershed to optimize water use can yield large benefits in un-irrigated areas, provided emphasis is laid on flexibility, participatory processes and institution building. The pre-requisites for the success of these programme are: (1) liberal devolution of decision-making power, backed up by financial allocation directly to the district level and further to the village level; (2) creation of partnership between government, non-government organizations and the beneficiary farmers ; and (3) flexibility in terms of technical as well as financial norms for watershed treatments (page 386 'Enhancing Farm Productivity Through Land Development' by Amita Shah in "Sustainable Agriculture, Poverty and Food Security" edited by S.S. Acharya, Surjit Singh and Vidyasagar).

4.6 One of the important reasons for the higher productivity of Chinese agriculture has been the contribution made by the farming community (both of labour as well as capital) in their watersheds under the overall guidance of the commune, and encouraged by the State.

DRYLAND FARMING TECHNOLOGIES

4.7 The Central Research Ins t i tu te for Dryland Agricul ture, Hyderabad (CRIDA) under the ICAR umbrella, has developed productive techniques for enhancing yields under un-irrigated conditions. These include :

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> choice of crops varieties in cropping systems to match the availability of moisture and the length of monsoon;

> contingency crop planning for weather aberrations;

> c u l t u r a l p rac t i ces like timely sowing, deep til lage, mulching, integrated nutrient management, integrated pest management , improved farm implements , ra in water harvesting and recycling, etc.;

> alternative land use systems including trees, pastures , grass lands, silviculture, etc; and

> integration of livestock with arable crops, etc.

LAND USE BOARDS

4.8 One of the deficiencies in ru ra l p l ann ing is lack of coordination between different arms of the Government, like land revenue, Panchayat, agriculture, irrigation and rural development departments for sustainable land use, consistent with productivity and equity. This requires common strategy and approach as well as full understanding by all partners using the land, including farmers, urban planners and others. It is with this intention that the States had set up Land Use Boards for coordina ted l and r e source development . Unfortunately, these Boards have not been able to pull their weight and br ing about an enl ightened d iscuss ion and consensus. Energetic steps are needed in this direction.

PRIMACY OF IRRIGATION DEVELOPMENT

4.9 At the heart of the agricultural strategy of the Government is the promotion of irrigation, where cost effective, and support to moisture conservation in other areas. Most of the recent advances in crop development call for higher use of moisture to support high-yielding varieties of crops, while increasing cropping Intensity and reducing vulnerability to weather risks. Such intensive agriculture has also increased emplojnnent and incomes in rural areas. Thus, in 1998-1999, the total gross irrigated area reached 76 million hectares amounting to 39% of gross cropped area. Ground water irrigation contributed to 57% of net irrigated areas, followed by canals at 3 1 % and t a n k s a t 6%. The farmers funded this expansion in the groundwater-irrlgated area mainly with credit support from

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banks. However, there is an increasing apprehension about the sustainability of groundwater irrigation due to problems like water logging and salinity, particularly in canal-irrigated areas. Public policies, by under-pricing water and power, have contributed to overdrawal of groundwater and inefficient water use and thus to an impending crisis in this sector.

4.10 Thanks to the overexploitation of groundwater for irrigation (of as m u c h as 84% of total water use), a crisis h a s been developing to meet the requirements of industry and drinking. Recent years of drought have led to a water crisis in many States. A rational policy is urgently called for, with appropriate regulation and institutional arrangements, for water sector in general and irrigation sector in particular. Unfortunately, there is limited coordination in groundwater development. There is hardly any policy defining water entitlements, pricing and intersectoral allocations, leading to conflicts amongst users and to unsustainable water use in many areas. As many as seven Central Ministries are involved in water development and management, with a similar situation at the state level also. The Government of India Policy on Irrigation (2002) calls for a more coherent policy framework and an integrated water management system coordinated by the Ministry of Irrigation.

INVESTMENT IN IRRIGATION DEVELOPMENT

4.11 At present, capital expenditure on major and medium surface irrigation and flood control accounts for the largest share in public expenditures in the agricultural sector. In the period 1951-2002 , publ ic expend i tu re in sur face i r r iga t ion development amounted to Rs. 148,800 crores out of which nearly 2 / 3 was spent in the last ten years (1992-2002). Nearly 67% has been spent on major and medium irrigation, 16% on minor irrigation, 11% on institutional finance and only 6% on flood control. Meanwhile, the cost of bringing new land under canal irrigation has increased tremendously from Rs. 2 4 , 0 0 0 / - per hectar-e dur ing the F i rs t P lan to Rs. 1 ,56,000/- per hectare in the Ninth Plan period (in cons tant rupees) due to higher capital costs and project extension to more difficult areas. Maintenance of canals is getting neglected due to lack of resources causing early and rapid deterioration of completed structures and progressively higher operational costs. The subsidy involved in managing public irrigation system h a s caused a financial crisis in

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several States, apart from the enhanced costs of operation and maintenance (O & M) due to neglect in timely maintenance of irrigation infrastructure.

UNWISE START OF NEW PROJECTS NEGLECTING ONGOING ONES

4.12 In 2002, as many as 159 major and 242 medium schemes remained incomplete, tying up very large sums of capital in the ongoing projects without contributing any re turns . By 2002, only 149 out of the 308 major projects had been completed; and for the medium projects, it was 753 out of 1004 projects taken up. Yet, during the Tenth Plan, 67 new major projects and 130 new medium projects are being taken up, with questionable wisdom! Such long gestation periods for completing the projects create problems with respect to the reallocation of water within various parts of command areas when the system is completed. For example, farmers in the head-reaches of major and medium canals have often reaped a greater water entitlement than designed ; they subsequently oppose the necessary reallocation of water to the tail-enders when the system is completed. The Union Finance Minister in his budget speech delivered on July 8, 2004 has recognized this problem and has proposed over-riding priority in financial suppor t for projects, which in the first ins tance can be completed by March 2005 and in the second in s t ance completable by March 2006 and so on. He has also initiated a massive project for sound rehabilitation of some 5 lakhs neglected waterbodies.

4.13 A vicious cycle has resulted in many s ta tes due to rapid deterioration of surface irrigation infrastructure, on account of inadequate funding for operation and maintenance. As against a planned 67% water use efficiency, most irrigation systems show only a range of 30-40% leading to low productivity and inequity in supplies to tail-enders. This has called for repeated and costly rehabilitation systems to make up for inadequate maintenance. The poor supply to tail enders made the farmers default on water charges, denying resources for maintenance and operations and creating a vicious cycle of inefficiency. The recent hikes in salaries of public servants have further reduced funds for maintenance. Under pricing of water has reduced the incentive for farmers to save and use water efficiently. Continued over-application of water in some States

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has resulted in water logging and salinity problems. In some water- scarce States, cheap irrigation charges have encouraged the farmers to cultivate water-intensive crops like paddy and sugar. While various Finance Commissions have recommended tha t water charges should at least cover operat ion and maintenance costs plus a percentage (1% to 2.5%) of the capital costs, only one State (Maharashtra) has increased water charges to cover full O & M costs. As a result, major irrigation projects have become white elephants for many States, while large farmers get far more advantage out of such hidden irrigation subsidies than small and marginal farmers. A World Bank s tudy pub l i shed in 2004 shows t h a t in Rajasthan, small and marginal farmers, with 55% of holdings extending to 19% of the irrigated area, received in effect subsidy of Rs.2004/- and Rs.358/-, respectively, while large farmers holding 65% of the irrigated area enjoyed a subsidy of Rs.1940/- per household. The situation is more or less the same in Maharash t ra where the large farmer received a subsidy of Rs.33,000/- per household as against Rs.5,800/-received by marginal household. The World Bank s tudy concludes that a marginal farmer on an average received only about 1/10* of the subsidies received by a large farmer.

NATIONAL WATER POLICY AND ON-GOING REFORMS

4.14 The National Water Policy announced by the Government of India in 2002 seeks to ensure sus ta inab le in tersec tora l allocation and efficient use of the country's increasingly scarce wate r r e s o u r c e s , by promot ing the adop t ion of a comprehensive and integrated approach to p lanning and m a n a g e m e n t of wa te r r e s o u r c e s , wi th in a river b a s i n framework. It calls for rebalancing expenditures th rough demand-driven investments in rehabilitation and maintenance of infrastructure, through greater participation of users in managing the systems. It seeks recovery of at least operating and management costs to ensure longer-term financial and fiscal sustainabi l i ty of operat ions. It encourages greater participation by users in system management and seeks to reorient water agencies towards improving the quality of service delivery through on-going state reforms. Several States have adopted the proposed reform m e a s u r e s in var ious degrees, by increasing their water charges to cover a greater percentage of O & M costs and by promoting participatory irrigation management (PIM) with greater involvement of water-

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users associations. They have established State Water Use M a n a g e m e n t Agencies for in tegra ted p l a n n i n g and development, by management of water resources in their States, on a river basin basis. The Government of India has also Introduced an Intensive programme to encourage cost recovery of O & M cos ts , in addi t ion to encourag ing complet ion of on-going schemes u n d e r a n accelera ted programme.

POWER SUPPLY TO AGRICULTURE

4.15 Ever since the 1960's, there has been a greater emphasis on rural electrification programme, particularly for groundwater irrigation. As a result, by 1999, as much as 57% of the net irrigated area in India used pumps for raising groundwater. Several States provided investment subsidies for digging wells and provided electricity at very low ra tes . This led to a significant increase in the number of electric pumps. In the 19 years ending 1999, Andhra Pradesh and Madhya Pradesh witnessed a four-fold increase, Maharashtra and Kamataka a three-fold Increase and Tamil Nadu a sixteen-fold increase in the use of electric pumps.

4.16 Electric power is supplied to farmers in India at 80% subsidy on the domestic tariff rates, compared to 15% subsidy in Bangladesh. In Pakistan the tariff for pumps is 180% of the average tariff. Such low tariff in India has encouraged the farmers to pump more water than necessary, leading to declining ground-water tables in many areas and unduly encouraging water-intensive crops, like paddy and sugarcane. This has also led to a severe financial crisis in the State Electricity Boards and even fiscal crisis in many Sta te Governments. Till recently, Tamil Nadu and Punjab were providing power to farmers free of cost. In 2001-2002, the annual power subsidy to the agricultural sector in 19 States has been assessed by the World Bank at Rs.30,160 crores! This is extremely high, though this is likely to be an overes t imate by abou t Rs. 12,000 crores , s ince many Sta te Electricity Boards did not fit meters to the p u m p s and attributed all residual use to the fanners; this hid also power thefts by non-farmers. The consequential financial crisis in the SEBs has led to vicious cycles of reduced ability to undertake required investments, to respond to rising local demand as well as to maintain reliable day-to-day operations. As a result,

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they had to resort to rationing of power, leading to frequent power interruptions and voltage fluctuations, and resulting in pump burnouts ; this disrupted irrigation water supplies, lowered farm productivity and farm profits and eventually made farmers unwilling to pay even the highly subsidized charges. It is necessary to impress upon the farmers that the con t inu ing losses of SEBs could only lead to fu r the r disruption in power supply. It would be prudent on their part to realize t ha t a sui table tariff increase for agr icu l ture , matched by improvements in quality of power supply, would actual ly benefit them cost-wise, par t icular ly smal l and marginal farmers, through reduced damage to pump sets.

4.17 Sustainable use of groundwater is increasingly threatened due to over exploitation in many areas, consequent to under-pricing of electricity. For example, in the Punjab, 60% of the administrative blocks using groundwater are marked as over-exploited and endangered blocks. Next in line are Haryana and Rajasthan (40% each), Tamil Nadu (35%), Gujarat (30%) and Karnataka (10%). In several districts in Maharashtra , excessive withdrawals have caused the groundwater to drop by as much as 300 ft. in some areas, leading to wide-spread drying of drinking-water wells, which are mostly only 30-50 feet deep; the State Government had to dig costly bore wells for drinking water in these areas. Power subsidies are found to benefit mostly medium and large farmers. The States would do well to reverse their destructive populist energy policy at the earliest and cooperate with the Government of India in implementing the Electricity Act passed in June 2003, which provides the framework for power sector reform. Specifically, this law provides directions for facilitating private investment in power generation, fostering greater competition, tariff setting and improvement of services to farmers.

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CHAPTER - V

CROP INPUTS: SEEDS AND FERTILIZERS

5.1 Critical Importance of Seeds. 5.2 Indian Seed Industry. 5.6 Constraints faced by the Seed Industry. 5.8 Prescriptions Under the National Agricultural Policy. 5.9 Current Initiatives for Strengthening Seed Industry. 5.10 Inadequate Realization of Potential Yields. 5.11 Break-throughs in Biotechnology. 5.14 International Trade Implications for a Developing Seed

Industry. 5.18 Potential Benefits from Bio-Technology Applications. 5.20 Fertilizers. 5.27 Integrated Plant Nutrient System. 5.28 Bio-Fertilizers.

CRITICAL IMPORTANCE OF SEEDS

5.1 Agricultural revolution in crops is mostly a genetic revolution: seeds of different crops were developed incorporat ing all desirable traits, through crossing of varieties which abound in those traits and further re-crossing with others, till a more perfect seed with the desired improvements is developed. These desirable trai ts include high yield, bet ter quality of grain, fibre, flower or fruit, moisture economy, optimal period of growth coinciding with the period of monsoon or moisture availability, tolerance to acidic/alkaline soil, resistance to d i seases and pes t s , higher nut r i t ional value and be t t e r cooking and keeping qualit ies. In one sense, there is no perfect seed since further genetic crossing can always bring a better seed to meet the requirements of microclimates and other farming conditions.

INDIAN SEED INDUSTRY

5.2 In the grain sector, which accounts for a major part of Indian farm economy, there were few major scientific breakthroughs till mid-1960's; and the additional output from the use of bet ter seed was not very significant. The scene changed

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dramatically in mid-1960s with breakthroughs in breeding paddy, wheat and maize seeds , mainly in in te rna t iona l research institutions. Till then, reputed private sector seed companies In India dealt with mostly fruits and flower seeds. The Parliament enacted the Seeds Act of 1966 with a view to develop an industry capable of producing high quality seed. The National Seed Corporation was established in 1963 by the Government of India to encourage the production of high quality seeds for use by the farmers in different States. This was followed by the es tabl ishment of Terai Development Corporation and the State Farm Corporation of India for the same purpose. The World Bank supported several initiatives unde r the National Seed Projects to build seed industry, mostly in the public sector, through efficient seed production and seed processing activities.

5.3 With the evolution of high yielding varieties of seeds in horticultural crops of fruit and flowers in addition to th6se in cereals and oilseeds, the private sector began taking greater initiatives. A new seeds policy was announced in 1988 tP encourage seed producers in both public and private sectors. Around the year 2000, the sale of improved seeds is estimated at Rs. 2500 crores, with about 60% of the market share with the private sector and 40% with the public sector. The private sector focused mostly on hybrids, vegetables and floriculture, while the public sector units generally tended to produce the seeds in the cereals, pulses, oil seeds and fibre sectors with high volume and low profit margins. The Government of India holds conferences twice a year, on the eve of the Kharif and Rabi s e a s o n s , with the S t a t e s and seed p roduce r s for assessing the demand, production and distribution as well as to promote measures for higher quality seeds. Varieties and hybrids, which have proved their high quality in trials, are notified under the Seeds Law, sett ing out the s t anda rds expected of them. Any producer and seller of such nqtified seeds has to fulfil the specified standards, or face prosecution.

5.4 Genetically modified (GM) seeds represent the latest in the Green Revolution. GM paddy sown in China in 2003 has showed a higher yield, with lower doses of fertilizers and pesticides. GM seeds of paddy, wheat and maize have been bred for arid environments. Between 1996 and 2001 , the global sales of GM soybeans experienced a hundred fold increase, of maize a 36 fold and of cotton 14 fold. There is

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considerable hesitation in several countries about the long-term impact of GM crops; approvals are issued only after considerable scientific analysis. Caution is certainly necessary, bu t the demands for environmentally benign technologies, reducing fertilizer and pesticide use, should also be heeded.

5.5 An exper t commit tee was set u p in 1988 u n d e r the chairmanship of Dr. M.V.Rao to review the seeds policy with a view to promote faster development of the industry and better suppor t for the farmers with high quality seeds. Dr. Rao Committee recommended the extension of the seed law to the whole of the country and also the establishment of a National Seeds Board to coordinate the development of the seeds industry. The Committee also recommended legal control on the sale, import and export of seed.

CONSTRAINTS FACED BY THE PUBLIC SECTOR SEED INDUSTRY

5.6 Experts hold that only 25% of the demand for high quality seeds is met presently. There is a shortage of high quality breeder and foundation seeds, particularly of vegetables and of c rops like g r o u n d n u t , g ram, soybean and p e a s . The certification process is not popular with seed-producing farmers on account of high inspection fees and seed testing charges, particularly in the case of vegetables. Many State Seed Corporations face financial constraints and could not invest in quality seed production.

5.7 The crux of the mat ter is t ha t seed product ion Involves extremely high quality standards. High quality seeds do cost a lot; and small and marginal farmers find them too costly; but a high quality seed does indeed provide high returns to the farmers under efficient cultivation. Seed production is an exercise in high quality; and the rigidly rule-bound public sector organizations find it difficult to reconcile the high d e m a n d for qual i ty wi th the k ind of r e s o u r c e s and environment under which they operate. In the circumstances, seed companies in the private sector have succeeded in overtaking the public sector companies.

PRESCRIPTIONS UNDER THE NATIONAL AGRICULTURAL POLICY

5.8 The National Agricultural Policy of 2000 has made several recommendations for the development of seed industry : (a)

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survey and eva lua t ion of genet ic r e sou rce s ; (b) safe conservation of both indigenous and exogenously introduced genetic variability in crop plants , animals and their wild relatives; (c) promotion of bio-technologies for evolving plants which consume less water, or are drought and pest resistant, con t a in more nu t r i t i on , give h igher yie lds and are environmentally safe; (d) conservation of bio-resources through their ex-situ preservat ion in Gene Banks as also in-situ conservation in their natural habitites through bio-diversity pa rks ; (e) time bound programme to list, catalogue and classify the country's vast agro-bio-diversity; (f) strengthening seed and p lan t certification system with private sector participation; (g) establishment of a National Seed Grid to ensure supply of seeds especially to areas affected by natural calamities; (h) encouragement to research and breeding of new var ie t ies par t i cu la r ly in the pr ivate sector t h rough an appropriate law in line with India's obligation under the TRIPS agreement. Energetic s teps need to be taken both in the public and private sectors, through appropriate incentives from Government.

CURRENT INITIATIVES FOR STRENGTHENING SEED INDUSTRY

5.9 The Ministry of Agriculture pursues the following six measures for strengthening the seed industry:

i. Pilot scheme for seed crop insurance for wheat, paddy, maize, jowar, bajra, gram, arhar, groundnut, sunflower, soybean and cotton to provide financial security and income stability to the breeder seed growers in the event of failure of a well-invested of seed crop.

ii. A scheme for establishment and maintenance of a seed bank for meeting the requirements of seeds during na tu ra l calamity and also for developing necessary infrastructure for storage of seed.

ill. Implementing the law on plant varieties and farmers' rights protection through a legal entity called Plant Varieties and Farmers Rights Protection Authority, which will s t imula te inves tment for research and development of new plant varieties facilitating the growth of seed industry.

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iv. Strengthening of seed quality control system through training and other activities particularly a National Seed Research Centre.

V. S t rengthening of seeds development agencies like certification agencies and testing laboratories in the States.

vi. Financial assistance to public sector units promoting high quality seeds.

INADEQUATE REALISATION OF POTENTIAL YIELDS

5.10 According to agricultural scientists R.B.Singh and Praduman Kumar, Indian crop breeders have developed seed varieties with high j^eld potentials which however have been harnessed by the farmers only to a limited extent, varying between 15 and 55%, as indicated by the following data :

Table 5.1: Yield Gap of Crops in India

Crop Potential yield

(kg/ha)

National average yield

(kg/ha)

Yield Potential tapped %

Rice 4877 1903 39

Wheat 4960 2582 52

Maize 6022 1729 29

Sorghum 4437 842 19

Pearl millet 2755 779 18

Pigeonpea 1549 703 55

Cotton (lint + seed) 2347 347 15

Note : Potential yield and the average yield for 5 years (1996-2000) of best 5 entries of All India Varieties Trials of All India Coordinated Trials

Source : R.B.Singh and Praduman Kumar. "Acceleration of Indias' Agriculture Growth", p.259, Agricultural Situation in India, Special No. August 2002, Director of Ek:onomics & Statistics, Department of Agriculture & Cooperation, Government of India.

BREAK-THROUGHS IN BIOTECHNOLOGY

5.11 According to a noted Bio-technologist Prof. V.L.Chopra, Biotechnology offers a powerful tool in the 21*' Century for

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enhancing productivity by removing constrcdnts and protecting crops against biotic and abiotic s t resses tha t destabilize production. The new advances tn recombinant-DNA technology now enable transfer of genes across species barriers and also tailor-make genes and their controlling elements, to achieve expression at a specially selected time and in the desired organ. Moreover, exploitation of heterosis or hybrid vigour enables efficient production of large quantities of hybrid seed efficiently and economically, since fresh seed has to be used for each p lan t ing . The bes t -known s u c c e s s s tor ies of Biotechnology application in commercial agriculture now relate to pest and weed control, currently in 50 million hectares worldwide. Pest resistance is achieved by incorporating genes (like Bt genes), which produce insecticidal proteins in the p lant . For weed control, the crop is made res i s t an t by engineering appropriate genes into it and spraying the field with herbicide ; the weeds are killed while the crop is left unharmed because of its genetic resistance. Prof. Chopra is optimistic that Biotechnology would be able to find solutions also to remove abiotic constraints to crop productivity like lack of nutrients and of moisture, as well as inadequate soil health. Similarly, Biotechnology would be able to improve product quality. Illustrative examples are elimination of erucic acid and glucosinolates from mustard , improved protein content of bread wheat and higher levels of carotene in durum wheat. Other possible benefits from advanced research in Bio-technology could be the elimination of residues of plant protection chemicals, aflatoxins in the produce as well as extending shelf life of perishable agricultural produce.

5.12 For harvesting the benefits of Biotechnology for the common farmer, urgent and designed steps are necessary for orienting resea rch programmes on ra t ional bas i s and developing app rop r i a t e policy framework for implemen ta t ion . Biotechnology research is extremely costly; and hence careful selection of objectives and monitoring of results are needed. Public-funded research in agricultural Biotechnology would need to make careful appra i sa l of public benefi ts . The commercialization of Biotechnology products also needs efficient and sound regulatory process to ensure that public interest is served in terms of bio-safety, bio-diversity, ecology as well as environmental, social and ethical concerns.

5.13 Future efforts for improving the productivity of high quality

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seeds will require greater investment in research in the private sector, which can take place only if there would be adequate financial returns for such risky investmient. The seed industry has been asking the replacement of what it characterizes as 'The Command Control Structure" existing today, in favour of empowered participation and simplified structure of legislation and policy.

INTERNATIONAL TRADE IMPLICATIONS FOR A DEVELOPING SEED INDUSTRY

5.14 Recent ag reemen t s conc luded with the World Trade Organization by India do involve a kind of global intellectual property management regarding agricultural technologies. Highly productive seeds with many beneficial qualities can well be developed abroad and reg is te red in India for intellectual property protection; and India will have to accept and enforce such patent rights, if registered in India ; this is the pre-condition before such seeds are made available to Indian farmers. The Government of India also has to upgrade the Indian legal framework to be in tune with the agreements signed with the World Trade Organization. In order to achieve this, a number of legislative steps were taken in India. In the first place, the patent law was amended in 2002 to bring it in tune with TRIPS (Trade-related Intellectual Property Security) agreement for allowing patents in several areas related to agriculture, including agricultural Bio-technologies and related micro-organisms. Further amendments are expected by the end of 2004 to include product patents on pharmaceuticals and agricultural chemicals. In 1999, the Patent Act was amended to provide exclusive market rights (EMR) and mail box arrangements for foreign applications received for grant of patent in India, in accordance with TRIPS agreement.

5.15 Another major move in India was the enactment of Protection of Plant Varieties and Farmers' Rights Act, 2001, in order to provide protection of new, extant and farmers' varieties. This law also protects farmer's right as farmer-cultivator, farmer-breeder and farmer-conserver. Yet another development is the enac tment of Geographical Indications (Registration and Protection) Act 1999, enacted in accordance with Articles 22-24 of the TRIPS agreement providing for registration and protection of geographical indications (GI) of Indian goods. This law regulates the Authorized Users of such registered

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Indian GI goods and also provides for regis t ra t ion and protection GI of farm goods in the Indian Territory, where these are commercialized or proposed to be commercialized.

5.16 The Biological Diversity Bill, 2000 seeks to enforce the provision of the Convention on Biological Diversity (CBD), which India h a s signed as a member of World Trade Organization. This law prescribes procedures for facilitating access to Indian Biological Resources by interested foreign and Indian users. It also provides for an institutional mechanism for equitable sharing of commercial benefits accrued from the use of such resources or products. Another relevant law is the Environmental Protection Act 1986, which deals, amongst others, with bio-safety issues which are likely to emerge more intensely in the future.

5.17 It is clear from the above that progressive marketization of the seed technology and industry is going to affect the seed trade, while protecting the interests of Indian farmers presently and in the future as well as the interests of originators of genetic materials and breeders, who used them to create value.

POTENTIAL BENEFITS FROM BIO-TECHNOLOGY APPLICATIONS

5.18 Mr. P^ju Barwale, a leader of Indian seed industry, identifies four broad areas , which offer maximum potential for the application of Biotechnology for increasing yields and benefits for the farmers. {"Agricultural Inputs : A new Strategy in Financing Agriculture", Special Millennium Issue, Agricultural Finance Corporation Ltd., Mumbai, July-Dec, 1999, p.99-103). The first is the exploitation of hybrid vigour in rice, wheat, a r h a r / p i g e o n pea, mus t a rd and safflower. The Chinese scientists have successfully harnessed hybrid rice technology with the result that an area of over 18 million hectares has been sown to hybrid rice with 50 to 100% higher yields. Mr. Barwale estimates that an area of 20 million hectares can be sown to hybrid rice in India. Research in hybrid wheat is continuing. Initiatives are needed to accelerate hybridization research in pigeonpea. mustard and safflower. Secondly, biotic s t resses like pests , pathogens and weeds cause damage, ranging between 10 to 40% or even more. Amongst the strategies suggested here are the use of Bt gene technology to deal with pests, coat-protein technology to deal with viruses and use of genes for building resistance against herbicides.

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Thirdly, there are indications that International Rice Research Institute, Manila is on the verge of developing a super rice, embodjang a 25% genetic potential increase over the existing high jaelding varieties. It would be useful to buUd on this new ideotype for use in Indian rice-growing systems. Fourthly, bio-fertilizers can supplement fertilizer supplies for meeting the nutrient need of the crops. They Improve soil health and are cost-effective. It is necessary to improve the carrier material in Indian bio-fertilizers and enhance the viable Rhizobial counts, so that they can supplement the use of inorganic fertilizers with better economy and ecological sustainability.

5.19 Genetically modified (GM) seeds represent the latest in the evolving "Greener Revolution". GM paddy seeds sown in China in 2003 have shown higher yields, with lower doses of fertilizers and pesticides. GM seeds of paddy, wheat and maize have been bred for arid environments. Between 1996 and 2001, the sales of GM soybeans experienced a hundred fold increase, of GM maize 36 fold increase and of cotton 14 fold increase. However, there is considerable hesitation in several countries about the long-term impact of GM crops : approvals are issued only after careful scientific analysis. Caution is certainly necessary, but the demands for environmentally benign technology, capable of reducing fertilizer and pesticide use, should also be heeded.

FERTILIZERS

5.20 Modem high yielding seeds also happen to need high doses of p lant food like nitrogen, phosphates , po tash and mic ro -nutrients. It is necessary to have fertilizer products, which are suitable for different kinds of soils like acidic, alkaline, clayey and sandy soils. Plants also need micro-nutrients like Sulphur and Potass ium for optimum growth. Over time, the cost component of these plant foods has reached a high 50% of the total recurring cost, in States like Punjab. Annual fertilizer use in India reached an average of 85 kgs per hectare in the period 2002-03. It ranged from 175 kg per hectare in the Punjab to 29 kgs per hectare in Rajasthan during this period.

5.21 The IX Plan set a target of 19 million tonnes of fertilizer use by 2001-02, bu t the achievement was only 17.4 million tonnes. The N, P & K balance in fertilizer use in the recent times has shown deterioration against an ideal 4 : 2 : 1 for

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the count ry as a whole. Decontrol and the consequent increased prices of phosphate and potash from 1992 onwards has led to an imbalance of 6 : 2.4 : 1 In the year 2003-04, compared to 5.9 : 2.4 : 1 in 1992. Efforts are needed to add m i c r o - n u t r i e n t s to the popu la r ferti l izers to meet the nutritional needs of the crops.

5.22 Given the heavy pressure of population on the limited land in India, there is no sensible alternative to the scientific and enhanced use of fertilizer to reap high crop yields to feed the burgeoning population in the country.

5.23 A major issue facing agriculture policy In India is the question of fertilizer subsidies, which reached a substantial Rs. 8330 crores in the year 1999-2000 and a heavier Rs. 12600 crores in the year 2003-04. These subsidies had been introduced in early 1970's, on account of the sharp rise in the prices of petroleum-based feed stocks of the fertilizer industry, with a view to ensure their availability to farmers at affordable prices. The Union Ministry of Fertilizers and Chemicals computed the cost of production of each fertilizer factory and paid a subsidy that would be needed to sell the fertilizer at the Government-declared price. A flat rate of subsidy was given for imported phosphatic and potassic fertilizers. Expert analysis shows that the benefit of the subsidy went to the farmers to the extent of 2/3'^'' and to the Industry to the extent of 1/3'^''. With the removal of subsidy for phosphatic and potassic fertilizers and increased costs thereof, there has been a harmful distortion in the N, P and K balance; the relative higher application of N and lower application P and K have tended to damage soil fertility.

5.24 In 2001-2002 , the Government of India a n n o u n c e d its decision to rationalize fertilizer pricing and implement the recommendations of the Expenditure Reforms Commission, for a phased programme of price increases at 7% per year, ending with complete decontrol of urea by 2006. But, this has not been implemented in full.

5.25 There are strong indications that fertilizer subsidy leads to mis-allocation of scarce resources. Scientific studies show that fertilizer use is quite profitable in India at market-determined prices of fertilizer without subsidy. It has been reported that the Chinese farmers receive no subsidies on fertilizer; and yet

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the average use of fertilizer per hectare in China more than double that of India. What is needed is better extension to he lp the farmer u s e fertil izers scientifically and more profitably, so that the very large resources devoted to fertilizer subsidy on annual basis can be diverted to improving soil and water management, which can give permanent benefits to the farmers.

5.26 The Nat ional Agr icul tura l Policy of 2000 e m p h a s i z e s environmentally safe and productive use of fertilizers. Para-5 of the policy calls for a growth strategy tha t is based on efficient use of resources, which conserves our soil, water and bio-diversity; and Para-6 seeks to promote technically sound, economically viable, environmentally non-degrading and socially acceptable use of natural resources including land. Para-21 emphasizes the importance of adequate and timely supply of quality inputs like fertilizers at reasonable rates, as well as soil tes t ing and quali ty tes t ing of fertil izers. It emphasizes balanced and optimum use of fertilizers together with the use of organic manures and bio-fertilizers to optimize the efficiency of nutrient use.

INTEGRATED PLANT NUTRIENT SYSTEM

5.27 This system, according to Dr.M.R.Motsara, Soil Fertility Expert in the Union Ministry of Agriculture, ideally should have four components : (a) on-site resources generation; (b) mobilization of off-site nutrient resources; (c) resources integration; (d) resources management . On-site generat ion of resources stipulates recycling of crop residues, animal manures and the like, while off-site nut r ien t resources call for addition of chemical nutrients from outside resources. There has to be a balance amongst all the above four approaches calling for the involvement of cattle, poultry and other animals as well as plant resources and the use of chemicals for the conversion into agricultural products. Though the organic sources of plant foods are bulky, highly disorganized, dilute and difficult to organize, they have the great merit of improving soil structure and stimulating microbial growth.

BIO-FERTILIZERS

5.28 Dr. Motsara finds bio-fertilizers such as Rhizobium culture, as an effective source of n i t rogen supp ly to pu l s e crop.

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Azotobacter and azospiri l lum help in ni t rogen fixation, particularly in wheat, paddy, maize, cotton, sugarcane, fruit crops and vegetables. Likewise, the crops can get phosphorus from phosphate solubilizing bacteria (PSB). The use of blue-green algae in low-land rice has been found to be useful. The Government of India is promoting the use of bio-fertilizers in t he coun t ry by a r rang ing the t r a in ing of farmers and financially supporting bio-fertilizer units.

5.29 As noted above, plant nutrition for high yields is progressively becoming costlier. One of the research challenges of the future would be to promote genetically modified crops, which can yield more with the less plant food. Measures indicated in Para-5.19 need to be implemented.

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CHAPTER - VI

CROP INPUTS : PLANT PROTECTION AND FARM MACHINES

6.1 Objective of Plant Protection. 6.3 Eco-Friendly Approach. 6.6 Regulatory, Chemical & Biological Measures. 6.10 Integrated Pest Management Modelling and Transfer of

Technology. 6.11 Legal Framework. 6.13 Agricul tural Machinery and I m p l e m e n t s P o l i c y

Framework. 6.16 Benefits From Agricultural Mechanization. 6.20 Saving Post-Harvest Losses. 6.23 Future Priorities. 6.28 Information Technology. 6.29 Remote Sensing Technology. 6.31 Precision-farming Technology.

OBJECTIVE OF PLANT PROTECTION

6.1 The long term objective of Plant Protection Management is to evolve and strengthen institutions and resources for services like research, training, extension, quarantine (both domestic and foreign) as well as product ion, quali ty control and marketing of pesticides and equipment, in order to promote the protection of plants against pests and diseases, on a cost effective bas is . The shor t - term objective is to deploy the prevailing institutions and resources for preventing, if possible, pests and diseases and fighting them where they do occur. With progressively increasing investment in costly inputs, the stakes for protecting the crops have risen. The risks include seed-borne and fungi-caused diseases , soil and surface insects, weeds, rodents and non-insect pests. The strategies employed for protecting plants include pest surveillance, observation stations, forecasting and warning, demonstration of plant protection methods, training of staff and farmers, laboratories to test chemicals and equipment, development of suitable pesticides, chemicals and equipments and finally a

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supportive social and legal frame work. The Indian Council of Agricultural Research has built a number of inst i tut ions including laboratories to achieve the above purposes and provide guidance to scientists and farmers.

6.2 The National Agricultural Policy 2000 calls for a cautious and environment-friendly use of agro-chemicals. It underlines the importance of Integrated pest management (IPM) Including the use of blotic agents in order to avoid indiscriminate and injudicious use of chemical pesticides.

ECO-FRIENDLY APPROACH

6.3 Dr. S.P. Singh, Director of the Biological Control Project under ICAR s o u n d s a warn ing t h a t the ind isc r imina te u s e of hazardous plant chemicals has resulted in a reduction in the bio-diversity of natural enemy, outbreak of secondary pests, deve lopment of p l an t r e s i s t ance to pes t i c ides and contamination of food and eco-system. This warning comes in the face of sharply increasing demand for chemical pesticides, for example, by 13% in the year 2000-01. According to him, the annual crop losses due to pests, diseases and weeds, es t imated at Rs. 50 ,000 crores in the count ry , can be substantially reduced by adopting 1PM. Unfortunately, India's c o n s u m p t i o n of envi ronment- f r iendly b io -agen t s like e n t o m o p h a g e s , bo tan ica l and microbia l pes t i c ides , pheromones , etc., is less t han 1% of the total pesticide consumption, as compared to 12% globally.

6.4 Dr. S.P. Singh also cautions that excessive chemical control of pests has destroyed the natural enemies of pests in the cotton crop in Andhra P radesh . Bio-intensive in tegra ted pes t management (BIPM) is recommended, because it involves the conservation and augmentation of natural enemies of crop pests and adoption of all compatible cultural, mechanical, physical and genetic approaches, selective chemical pesticides, t o l e ran t var ie t ies and legal m e t h o d s . Modern genet ic engineering tools enable transfer of desired genes from wild plant relatives to enhance resistance to pests and diseases. The transfer of Bacillus tharingiensis insecticidal toxin gene into crop plants has helped to create transgenic tobacco, tomato, cotton, potato, etc. Cowpea trypsin inhibitor gene inf luences the digestive pro teases of a t t ack ing insects , reducing the damage to the plants. Likewise, wheat seeds

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have been developed resistant to rust, millet seeds resistant to powdery mildew, as also pulses resistant to viruses, rice-paddy seeds resistant to gallmidge and brown plant hopper, cotton seeds resistant to jessid and leaf curl virus and finally potato seeds resistant to late blight and bacterial wilt, etc.

6.5 Agricultural research should in future increasingly focus on cultural practices associated with crop production, for making the environment less favourable for survival, growth or reproduction of several pests. These measures include careful selection of s i t es /c rops , deep ploughing with or wi thout tractors, use of healthy seeds and seedlings duly treated with chemicals, appropriate planting dates and crop durat ion, destruction of off-type and volunteer plants , thinning and cropping, pruning, defoliation and destruction of crop refuse etc. Other environment friendly plant protection methods include mechanical and physical measures like hand-picking and destruction of eggs, larvae, etc., exclusion of offending organisms by screens and barriers, etc.

REGULATORY. CHEMICAL & BIOLOGICAL MEASURES

6.6 Regulatory measures aim at restricting the pest problem induced by the human activity. The parthenium weed problem appeared in late 1960s after bulk importation of wheat seeds from Mexico. The risk of introduct ion of alien pes t s h a s increased tremendously with the increased exchange of seed and planting material between nations. Even within India, there are risks involved in using apple seeds without tests, from certain districts of J a m m u and Kashmir and potato seeds from Nilgiris of Tamil Nadu.

6.7 At present, the most common method of pest management is the use of chemical pesticides. It is necessary to train farmers in the judicious use of such chemicals, including avoidance of prophylactic sprays, adopting strip treatment, spot application to only those areas with heavy incidence of pests, applying to the soil to avoid direct contact with natural enemies and the use of selective or non-persistent pesticides. Many pesticides have been banned in the advanced count r ies , b u t they continue to be used in India; this requires careful review and remedial action.

6.8 Greater research is now being focused on botanical pesticides, i.e., species of plants exhibiting insecticidal properties like the

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neem, pongamia and mahua. Another recent development Is the arrival of insect growth regulators (IGRs), which can prevent normal reproduction of the insects. Pheromones, which influence the sexual behaviour of insects, can help detect early population of several insects.

6.9 Biological measures recommended include encouragement to natural enemies of pests, which can reduce the population of crop pests, these include aphid-Uons, ground beetles, lady bird beetles, syrphid flies, spiders, frogs, etc.

INTEGRATED PEST MANAGEMENT MODELLING AND TRANSFER OF TECHNOLOGY

6.10 Prof. S. J a y a r a j , Formerly Vice-chancellor, Tamil Nadu Agricultural University calls for farmer-participatory IPM technology development followed by validation and transfer as suited to the local needs. He applauds the emphasis placed an IPM in the World Bank—supported National Agricultural Technology Project (NATP) implemented by ICAR. He cites the success achieved in Tamil Nadu, which was possible with the thorough-going analysis of agro-eco systems governing selected crops and the training given to the farmers in their Field Schools. The IPM has the virtue of economy, ecological-soundness and reduced use of insecticides.

LEGAL FRAMEWORK

6.11 There a re two i m p o r t a n t laws, which empower the Government in the public interest to enhance plant protection. The first is the Enforcement of Destructive Insects and Pests Act of 1914, for preventing entry of exotic pests. The Second is the Insecticide Act 1958, which regulates production and use of pesticide. Plant quarantine measures under the Act of 1914 seek to prevent introduction of exotic pests, diseases and weeds into India. The law also empowers the issuance of Phyto-Sanitary Certificates as per the International Plant Pro tec t ion Convent ion of 1951 , u n d e r the Food and Agricultural Organization, Rome. This law also empowers post-en t ry q u a r a n t i n e in spec t ions in c a s e s of impor t s of agricultural products. Thirty-two plant quarantine stations at various international airports, sea ports and land customs stations across the country operate under this law to prevent the entry of exotic pests, diseases and weeds in India and to enable the export of disease-free agricultural produce.

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6.12 In view of the toxicity of pesticides, the Government of India r egu la t e s the m a n u f a c t u r e , sa le , t r a n s p o r t , u s e and international trade under the Insecticides Act and the rules framed hereunder. The Act is implemented, amongst others, by the Central Insecticide Board constituted under the Act. This Board advises the Central and State Governments on technical matters arising out of the administration of the Act. The registration committee constituted under the Act registers the insecticides after satisfying itself about their efficacy and safety to h u m a n beings, an imals and environment . The Central Insecticidal Laboratory set up under the Act serves as a referral laboratory for quality control of pesticides. It also carries out pesticidal residues analysis and investigations on bioassay, medical toxicology, processing and packaging. Two regional pest icides tes t ing laborator ies at Khanpu r and Chandigarh assist the States through quality control tests . These institutions should take pro-active steps to promote scientific p lant protect ion in an environmental ly s o u n d manne r . Unfortunately, there are widespread repor t s of adulteration of pesticides; the Union and State Governraent agencies should hold raids across the country to ensure supply of quality pesticides to farmers.

AGRICULTURAL MACHINERY AND IMPLEMENTS: POLICY FRAME WORK

6.13 With its abundant farm labour, India's farm mechanization policy h a s been or iented to t he use of efficient tools , implements and machines, which raise farm productivity and r educe u n i t cos t of p roduc t ion , w i thou t l a rge - sca le replacement of human labour. This has led to the selective use of farm machines like tractors, power tillers, combine harvesters, irrigation equipment, plant protection equipment, t h r e s h e r s , other improved implements and h a n d tools . Though there is a steady increase in demand for agricultural machinery all over the country, there has been acceleration in demand in the North and North-West regions of the country, where the use of irrigation increases the productivity of such machines.

6.14 The National Agricultural Policy 2000 emphasizes the need for adequate and timely supply of quality agricultural machinery. It also calls for review and rationalization of the excise duty on farm machinery and implements, in order to reduce the

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burden on the fanners. Rural electrification would be given a high priority as a prime mover for agricultural development.

6.15 Studies have shown that the use of different farm equipments, in combination with other inputs, contributes to substantial increase in agricultural productivity. In particular, the increase in productivity from the use of seed-cum-fertilizer drills Is estimated at 10-15%, from plant protection equipment 10-20%, from harvesting and threshing equipment 5-10% and irrigation pumps 10-30%.

BENEFITS FROM AGRICULTURAL IN MECHANIZATION

6.16 Dr. Anwar Alam, Deputy Director General, ICAR enumerates the benefits from efficient agricultural mechanization in terms of increased production, productivity and profitability, by achieving timeliness in farm operation, bringing precision in metering and placement of inputs, reducing avoidable input losses and increasing utilization efficiency of costly inputs like seeds, chemical fertilizers, irrigation, water, etc. It also helps efficient use of animal and commercial energy for increased productivity, a t the same reducing uni t cost of produce, enhancing profitability and competitiveness. Its other benefits include conservation of produce and bi-products from both qualitative and quantitative damage, as well as reduction of drudgery in production and post-harvest operations.

6.17 The advent of Green Revolution since late 1960s has seen a swift increase in the demand for agricultural machinery to the present level of about Rs. 30,000 crores annually (Rs. 20,000 crores for power units and crop production equipment and Rs. 10,000 crores for post harvest equipments). The entire demand is met through domestic production. TTie pressure for greater efiiciency has led to larger engineering inputs involving high capacity, precision, reliability and energy efficiency, not only to increase productivity but also to save time. Farm power availability, however, has been a major constraint; efforts would be needed to step it up from 1.15 kW per hectare to 2.00 kW per hectare.

6.18 The Indian Council of Agricultural Research established the Central Institute of Agricultural Engineering in 1976 at Bhopal and also a division of Agricultural Engineering in the ICAR h e a d q u a r t e r s to promote r e sea rch and development in

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Agricultural Engineering. In 1989, the Central Institute of Post-harvest Engineering and Technology was set u p in L u d h i a n a to a d d r e s s p o s t - h a r v e s t eng ineer ing and technologica l p rob lems of cerea l s , p u l s e s , o i l - seeds , horticultural crops, fish and animal products. This research complex has developed so far 250 tools, implements and machines, of which about 60% have been commercialized at different levels. Gadgets that run on solar and wind energy, bio-gas and producer gas have been developed. Bio-gas plants have been developed which not only use cattle dung as feed stock, bu t tree leaves and other waste vegetation. Efforts should continue to improve efficiency and economy in such equipment.

6.19 There has been a tremendous increase in the use of farm power in the last 50 years from a level of 0.25 kW per hectare in 1951 (with animal power contributing 97.4%), to a level of 1.15 kW per hectare in 1997 (with animate source of contr ibut ing only 22.7%, mechanical sources 43 .5% and electrical 33.8%). This trend is expected to continue in the early part of 21^' Century.

SAVING POST-HARVEST LOSSES

6.20 Post-harvest losses continue at a high 10% level in food grains, 20-40% in fruits and vegetables, 10-12% in animal products and fishery, estimated by Dr. Alam at Rs.82,000 crores annually. Post-harvest losses can be reduced by half t h rough scientific use of different k inds of agr icu l tu ra l machinery. Losses in field crops can be minimized if harvested at optimum moisture, threshed in time and without undue losses, cleaned, dried and stored safely. Grain dryers are extremely useful here. In particular, the currently huge losses in horticultural crops can be prevented through a chain of cold stores as well as modified and controlled-atmosphere storage.

6.21 Dr. Alam urges that the experience of four decades of growth of agricultural mechanization has disproved the following three myths :

(a) Tractors combines, and other heavy machinery displace labour.

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(b) Heavy machines are not suitable for small and medium farmers.

(c) Small farmers will not adopt hi-tech technologies for production and processing of their produce.

6.22 The value of post-harvest losses in 1999 have been estimated at Rs. 82,325 crores consisting of (a) losses of cereals, pulses and oil seeds at 10% of output, of the value of Rs. 21,800 crores, (b) semi-perishables like potato, onion and tapioca at 20% of ou tpu t amount ing to Rs. 20 ,400 crores and (c) perishables Uke fruits, vegetables, milk, meat, fish and eggs at 2 5 % of the o u t p u t a m o u n t i n g to Rs . 58 ,125 c rores . S u b s t a n t i a l i nves tmen t for r educ ing t he se losses , as recommended above is called for, in the early decades of 21*' Century.

FUTURE PRIORITIES

6.23 The major th rus t in the future would be in the fields of mechanization of small farms, both irrigated and un-irrigated, t h rough a 3 fold s t ra tegy : (a) conservat ion tillage, (b) minimizing the requirement of energy while making the most out of available soil moisture and (c) reducing the turn around time between two crops. The machines recommended here include efficient rice transplantor, sugarcane harvester and cotton picker.

6.24 Farmers having reliable irrigation system will benefit by deploying micro-processor-based irrigation controls. ICAR proposes to set up four regional prototjrpe production centres to develop location-specific implements and machinery and to demonstrate their use.

6.25 Bio-gas product ion in the villages can augment energy supplies for farm operations and rural living, through three R & D measures; briquetting of fuel, improved cooking stoves and solar appliances for cooking. Conventional fuels used in tractors and engines can be suitably substituted by alternative bio-diesel and alcohol. Wind energy can be harnessed for water lifting.

6.26 The fu ture t h r u s t shou ld be on the deve lopment of appropriate drying and dehydration equipment for field crops,

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patterns, to convert single cropped areas into double cropped areas. Remote sensing data also can help in inventorying, monitoring and managing both surface and groundwater resources for augmenting the water use efficiency. Satellite data serves as a unique tool for extracting information on geology, geomorphology, drainage as well as land use and soils, which are essential for identifying not only the potential segments of groundwater resources, but also the sites suitable for constructing recharge structures. Satellite data has been used to prepare district-wise hydro-geo—morphological maps for all the 442 districts in the country. Bore-wells dug on the basis of these rnaps were 92% successful, as against 45% success rate by conventional methods.

6.30 The gap between irrigation potential and utilization can be reduced by increasing irrigation efficiency through remote-sens ing technology : by obtaining spat ia l and tempora l information on irrigation intensity, cropping pa t te rns and equity in distribution of irrigation waters and conducting diagnostic analysis for corrective management. Remote-sensing data can also be used for obtaining near real-time information in areas affected by major floods for making quanti tat ive estimates of the damage to the farm infrastructure. Remote-sensing systems also help in making reliable and timely estimates of crop acreage and production. The condition of crops, affected by factors such as the availability of water and n u t r i e n t , pes t a t t ack , d i sease o u t b r e a k and w e a t h e r conditions, can also be assessed through satellite mapping.

PRECISION FARMING TECHNOLOGY

6.31 According to Dr. D.P. Rao, Director, National Remote Sensing Agency, Hyderabad, capacity has been developed for precision farming technology (FFf), which allows farmers to adjust the application of inputs, duly considering the tn-field variability of soil and crop condition, resulting in greater production and productivity. PFT uses the global positioning system (GPS) comprising 24 satellites, which transmit signals picked up by user- receivers to define the receiver's location. Application of crop inputs Uke fertilizers and plant protection chemicals, both in quan t i ty and t ime, can be f ine- tuned t h r o u g h s u c h informat ion, the reby reduc ing the cost of p r o d u c t i o n . Currently, these techniques have been successful in large farm holdings; but in the near future, they can be expected to

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horticultural crops and fisheries, for minimizing losses in handling, safe storage and transport. The current neglect in adding value to agriculture produce will have to be overcome through the development and standardization of processes and equipment for value addition with an eye on export markets. Fossil fuels should be replaced through renewable energy sources. Cooking stoves should be improved to save energy. Solar energy will have to be an important energy source in production agriculture, agro-processing and rural living.

6.27 The conservation and efficient utilization of available water resources by using sprinklers, drip and "ferti-gation" will have to be adopted in the place of present systems.

INFORMATION TECHNOLOGY

6.28 With the arr ival of the in ternet , ICAR h a s crea ted the Agricultural Research Information System (ARIS) bringing together its Institutes and agricultural universities within India and abroad through the Cyber Network. Now it is possible to access electronically the libraries of various institutions to collect and use latest scientific information.

REMOTE SENSING TECHNOLOGY

6.29 The remarkable developments in space-borne remote sensing technology and its applications, during the recent decades, have proved their immense potent ia l for mapp ing and monitoring of various natural resources : particularly land, water and weather and also the related ones such as forests and access to agricultural information. Satellite data provide valuable information on physiography, which helps map the spatial distribution of different soil units, with limited field work. Using satellite data, soil maps can be prepared for the entire country, providing information on the Inherent potential and limitations of the soil for agricultural production and helping in designing efficient cropping systems and optimum land use planning. Such remotely sensed data can also help map and monitor various degraded lands, like salt affected soils, eroded soils, water logged areas, shifting cultivation areas, ravines, diara lands, etc. This information helps plan the reclamation of salt-affected soils and for applying post-reclamation production technology. The information generated on land use patterns also helps identify suitable cropping

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help in the fragmented land holding situations as in India. Such integration of information on natura l resources with socio-economic and meteorological inputs can help adopt opt imum crop management strategies at the micro level. C o n t i n u o u s improvements are t ak ing place in space technology, which can enhance our capabilities for surveillance mapping and management of resources in the early years of 21"' Century.

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CHAPTER - VII

CREDIT SUPPORT, INSURANCE, MARKETING AND PROCESSING

7.1 Agricultural Credit. 7.5 Innovation in Rural Credit. 7.7 Rural Infrastructure Development Fund (RIDF). 7.8 Recovery Performance. 7.9 Long-Term Measures for Investment Credit. 7.10 Agricultural Insurance. 7.13 Agricultural Marketing. 7.15 Price Support For Agricultural Commodities. 7.16 Agricultural Processing. 7.19 Agricultural Exports.

AGRICULTURAL CREDIT

7.1 An annuEil 4.5% growth in agricultural output may require an annua l growth of the order of 15-20% in the provision of timely and adequate credit suppor t to the farmers . The Central and State Governments in India have been taking proactive s t eps to promote the flow of agr icu l tu ra l credi t , par t icular ly to small and marginal farmers and weaker sec t ions of society, to enab le t h e m to adop t m o d e r n technology for increasing output and productivity. A farm credit system, to be successful, has to link with input supply and marketing: efficient and timely supply of quality inputs used with technological efiiciency would enhcince output of the farmer; and linkage with marketing would ensure the timely repayment of credit taken by the farmer, from sale proceeds. The co-operative credit system was strengthened soon after Independence for this purpose. Later, the commercial banks were brought into the picture, due to the inadequacy of the co-operative services. In the year 2003-04, a total credit of Rs. 80,000 crores was planned to be extended to the farming sector, of which 54% was to come through the commercial banks , 38% through co-operative banks and 8% through Regional Rural Banks, as detailed below:

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Table 7.1: Flow of Institutional Credit to Agriculture

(Rs. Crores)

Coop. Banks

Regional Rural Banks

Commercial Banks

Short term credit 23,920 4,680 23,400

Medium/Long term credit 6,160 1,400 20,440

Total 30,080 6,080 43.840

Percentage 38% 8% 54%

Source : Economic Survey, 2003-04, Ministnj of Finance, July 2004

7.2 The National Agricultural Policy 2000 calls for progressive institutionalization of rural and farm credit for providing timely and adequate credit to farmers. Rural credit institutions would be geared to prorhote savings, investments and risk management. Some of the special measures for this purpose include revamping of cooperatives to remove institutional and financial weakness, simplified procedures and promotion of Self-Help Groups.

7.3 During the X Plan (2002-2007), a three-fold increase in the flow of credit has been envisaged over the levels achieved in the IX Plan. The Government h a s confirmed in 2004 its intension of doubling the flow of credit in three years of time. But the most important challenge will be the continuing absence of repa3anent discipline and the disinclination on the par t of political and bank functionaries to enforce credit discipline by sale of mortgaged securit ies. In the 1990s, Government had to bail out commercial and cooperative banks from bad debts, through infusion of large capital resources from the budget. Considering that the overall repa3anent has been in the region of only 75%, and the continued slackness in credit discipline, it is going to be very hard to achieve such a steep target of credit disbursal.

7.4 For several reasons, the co-operative credit structure is facing severe problems, which have restricted its ability to function viably and to perform effectively its task of reaching out and meeting the credit requirements of all segments of rural community. They include the limited ability to mobilize capital and other resources, low levels of recovery of loans advanced, high transaction costs, frequent suspensions of recovery and

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administered interest ra tes . The impact of the externally imposed policy measures such as the waiver of loans, the continuing accumulated losses, regulated interest rate regime, etc., have left the cooperative credit structure in a very poor state. The future of the agricultural cooperative credit system would be bleak unless it bestirs itself and adopts strict and principled remedial measures : lending adequately on the basis of a positive production plan, enforcement of repayment discipline, integration of short- term and long-term credit institutions, removal of extraneous influence in its operations and adoption of modern management practices.

INNOVATION IN RURAL CREDIT

7.5 However, there have been two innovations, which promise some improvement in rural credit supply. The first is the Kisan Credit Scheme introduced in 1998-99, under which the farmers can access credit practically as a matter of right provided they are not defaulters. A total of 413.79 lakh cards have been issued, with the sanction of cumulative credit amount ing to Rs.97710 crores as of March 2004 (p. 160, Economic Survey, July 2004). Nearly 52% of such Kisan credit cards were issued by Cooperative Banks, followed by 34% by Commercial Banks and finally 14% by Regional Rural Banks.

7.6 The second important initiative has been the promotion of Self-Help Groups (SHG), focusing largely on the rural poor who have no sustainable access to the formal bamking system. These target groups broadly comprise small and marginal farmers, agricultural and non-agricultural labourers, artisans and craf tsman, as well as other poor engaged in smal l business like vending and hawking. By March 2004, 1.67 crore rural poor families accessed financial services through 10.79 lakh credit-linked SHGs; nearly 90% of these are exclusive women SHGs. More t h a n 3 0 0 0 0 b r a n c h e s of cooperative, public sector and private sector banks have extended loans to SHGs amounting to Rs.3904 crores by the end of March 2004, backed by refinance support of Rs.2124 crores from a pro-active NABARD. In the course of the year 2003-04, there has been a welcome 4 1 % of growth in the number of SHGs financed and a remarkable 8 1 % growth in the bank loans provided to the members.

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RURAL INFRASTRUCTURE DEVELOPMENT FUND (RIDF)

7.7 NABARD had set up the RIDF in 1995-96 for assisting State Governments with loans for strengthening rurEil infrastructure, which would help increase agricultural productivity and rural welfare. Commercial banks having shortfall in mandatory agricultural lending (16% of loan portfolio) were required to subscribe to RIDF bonds, at a relatively lower rate of interest, which was 6% in early 2004. In the budget for the year 2004-05, the Finance Minister has supported the continuation of RIDF with the corpus of Rs.8500 crores for the year, with revised guidelines. The priority areas qualifying for long term credi t s u p p o r t would inc lude micro'-irrigation, rainfed ag r i cu l tu re , pos t -ha rves t re lated suppor t , ag r icu l tu ra l marketing. Investment credit, etc.

RECOVERY PERFORMANCE

7.8 The poor recovery performance of the cooperative credit institutions is a major bottleneck in the smooth and adequate flow of credit . There have been pe r s i s t en t and chronic overdues at the grass root levels, which have held up the critical recycling of funds from the borrowers to the financing agencies . While micro-finance ins t i tu t ions cited above, consisting of mostly poorest asset- less individuals, have experienced an average recovery of over 90%, there is no justification for farmers ' failure to repay loans taken for agricultural production. This is the single important factor, which is going to affect the agricultural credit system and eventually the entire agricultural system. Practically in every dis t r ic t , t he re have been villages with discipl ined and business-oriented cooperative societies, which have credit recovery record of 95% and above; and yet, many of their neighbouring cooperatives have been poor loan managers. The continued survival of the cooperative credit system will depend on its ability to replicate the performance of such best societies. Wilful default in repaying loans by farmers should be considered a social and economic offence inviting sale of secured assets, since it penalizes faithful cooperators dutifully repaying their loans.

LONG TERM MEASURES FOR INVESTMENT CREDIT

7.9 Shri. Y.C. Nanda, a noted expert in Agricultural Banking and formerly Chairman of NABARD, has identified six major steps

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needed to facilitate annual bank credit flow of the order of Rs. 160,000 crores needed for 2100 :

i. examination of real sector policies and refinement thereof to e n s u r e m a r k e t - b a s e d price rea l iza t ion performance;

ii. a t t en t ion to pos t -ha rves t m a n a g e m e n t and va lue addition for enhancing profitability;

iii. improved extension support to bring technology to feirm gate;

iv. re-look at the legal framework relating to land laws and cooperate farming;

v. design of a risk management mechanism providing insurance for farming operations at reasonable costs; and

vi. refining of policy on pricing of in f ras t ruc ture and related services, to improve viability thereof, so as to facilitate entry of private sector therein.

In other words, the farm credit system can work well only if the six other components of agricultural system mentioned above are successfully put in place.

AGRICULTURAL INSURANCE

7.10 Lately India h a s been operat ing a "National Agricul ture Insurance Scheme" (NAIS) from Rabi 1999-2000 season, available for all farmers (both loanee and non-loanee) and irrespective of the size of their Icind holdings. It covers all the food crops, oilseeds and annua l commercial /hor t icul tural crops, in respect of which pas t da ta are available for an adequate number of years. Presently, eleven commercial crops have been covered unde r the scheme : b a n a n a , chillies, cotton, ginger, ju te , pineapple, onion, potato, sugarcane , tapioca and turmeric. The scheme is expected to be extended to all other annual commercial/horticultural crops in due course of time, subject to availability of past jrleld data.

7.11 While ac tua r i a l r a t e s would be charged in the case of c o m m e r c i a l / h o r t i c u l t u r a l c rops , the a c t u a l p remia a re

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subsidized : 3.5% of the sum assured in the case of bajra and oil seeds, 2.5% for other Kharif crops, 1.5% for wheat and 2% for other Rabi crops. Small and marginal farmers are entitled to a subsidy of 50% of premium, which is shared equally by the central and state Governments. It is proposed to phase out the premium subsidy over a period of five years. The scheme is operated on the basis "area approach" i.e., defined areas for each notified crops for widespread calamities and on an individual basis for localized calamities like hail storm, landslide, cyclone and flood. In 2003, the scheme was implemented by 23 States and 2 Union Territories. In Khnrif 2003, nearly 80 lakhs farmers were covered for an insured sum of Rs.8110 crores covering 123 lakh hectares and raising Rs. 283 crores as insurance premia. The total claims received were to the extent of Rs.l92 crores.

7.12 The Ministry of Agriculture h a s introduced in 2003 a new Farm Income Insurance Scheme (FIIS) in order to target the two critical components for a farmer's income, namely yield and price, through a single policy instrument. This scheme protects the farmers by integrating the mechanism of insuring production as well as market risks. The scheme thus ensures a minimum guaranteed income. If the actual income of the farmers falls short of the guaranteed income (product of average yield and minimum support price), they would be eligible for compensation to the extent of indemnity from the Agricultural Insurance Company of India. Initially, the scheme would cover paddy and wheat only. Such insurance would be compulsoiy for farmers for availing crop loans. This scheme is expected to eventually replace the National Agricultural Insurance Scheme.

AGRICULTURAL MARKETING

7.13 An important constraint faced by a majority of farmers, who have small and marginal holdings, is the price depression in the market for their produce soon after first week of harvest. The spread between the market prices in the harvest season and the lean s ea son can be as m u c h a s 50%. In the c i r c u m s t a n c e s , the s m a l l and marg ina l fa rmers need ins t i tu t ional suppor t to sell their produce a t a fair and equitable price after harvest. To protect the interest of such farmers. Government has promoted organized marketing of agricultural commodities through a network of regulated

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markets , where there would be open and fair auct ion of produce at the best prices. However, the regulated markets have been found, in several decades of experience, to achieve limited success in their mission of direct and free marketing, smooth raw material supplies to agro processors, information exchange and adoption of innovative marketing systems.

7.14 After a thorough study, the Ministry of Agriculture h a s formulated a model law in 2003 on agricultural marketing and contract farming in consultation with the State Governments and the representatives of trade and industry. The model Act permi t s legal ent i t ies , growers and local au thor i t i e s to e s t ab l i sh new m a r k e t s in any a rea . There will be no compulsion on growers to sell their products through existing regu la ted m a r k e t s . There will be di rect sa le t h r o u g h e s t a b l i s h m e n t of direct p u r c h a s e cen t r e s , a s well a s consumers / f a rmers marke ts , cut t ing out in termediar ies . Partnership between public and private interests would be promoted in the management and development of agricultural markets. Special markets with appropriate changes in their constitution can be set up for highly perishable commodities like onions, fruits, vegetables and flowers. There will be adequate provision to regulate and promote contract-farming arrangements . Commission agency will be prohibited. The marke t committee would promote al ternat ive marke t ing system, contract farming, direct marketing as well as farmers/ consumers markets . The State Marketing Boards should promote several measures , which would enhance farmer incomes : s tandardizat ion, grading, quality certification, market-led extension and training of farmers and market functionaries in related areas . Bureaus setting s t anda rds should be established for promoting grading, standardization and quality certification of agricultural produce.

PRICE SUPPORT FOR AGRICULTURAL COMMODITIES

7.15 The main objective of the Government 's price policy for ag r i cu l tu r a l p roduce shou ld con t inue to be to e n s u r e remunerative prices to the growers for their produce, with a view to encouraging higher investment and production, as well as to safeguard the interest of consumers by making available supp l i e s a t r ea sonab le p r i ces . For th i s p u r p o s e , t h e Government declares in each season minimum support prices for major agricultural commodities, on the recommendation of

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an expert agency : the Commission on Agricultural Costs and Prices (CACP), which harmonizes the interests of the farmers a n d t h e c o n s u m e r s . The Government shou ld organize purchase operations through public and cooperative agencies, besides other agencies designated by State Governments. Unfortunately, there have been ins tances of Government awarding higher support prices, than recommended by CACP on sound socio-economic grounds ; as a result, agencies like Food Corpora t ion of India had to buy extremely large quantities to hold up market prices at reasonable levels, since the private sector withdrew from the market, finding the unduly high support prices unworkable for them. At one stage, the Food Corporation of India was carrying more than 60 million tonnes of food grains i.e., more than double the maximum quantity needed for price stability; the subsequent disposal of surplus grains involved losses of several tens of thousands of crores. Grains had to be exported at extremely un- favourab le pr ices , which added to the losses . It is necessary that the Government should pay due regard to the r e c o m m e n d a t i o n s of the CACP for s ecu r ing a sound agricultural marketing system, which ensures justice for the farmers as well as the consumer, and which does not become an u n d u e b u r d e n on the Exchequer . Gradual ly , the responsibility of Food Corporation of India should be shared by the State Food Corporations in an increasing measure.

AGRICULTURAL PROCESSING

7.16 With the progressively increasing incomes, Indian consumers have begun demanding more sophisticated and instantly useable food products. This has led to a revolution in post-harvest operations : classification of produce by size, colour, t a s t e s , etc; their process ing into different p roduc t s for consumption, with easy and minimal treatment and cooking; long-keeping qual i ty u n d e r cold and ord inary s torage; appealing forms of packaging; facilitation for long distance transport; and semi-processing for facilitating instant or ready use. Different kinds of preservatives are added for facilitating long s torage and other desirable qual i t ies . Agricul tural processing has t hus become an advanced indust ry often earning far more for its service t h a n the farmer gets for pr imary product ion. Thus the farmer growing gra ins or producing milk may get less than 1/3"* of the price paid by the consumer of the processed product, since others like

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processors, transporters and marketers may have contributed much greater value in the supply chain.

7.17 The Central Food Technological Research Institute at Mysore, set u p by the Union Ministry of Scientific and Industr ia l Research, has been developing sound technologies for all measures in the food chain, from the farmers' field to the consumers' table, including storage, processing and cooking. The State Governments, the food processing industry and t r a d e shou ld work closely wi th CFTRI to u p d a t e the i r agr icu l tura l s torage and process ing opera t ions , so t h a t agricultural produce in their States can incorporate best value for the benefit of the consumer and fetch satisfactory prices for all the partners in this chain, including farmer, processor, marketer, etc.

7.18 Greater emphasis needs to be placed on the development of dairying, horticulture and floriculture, through the creation of the cri t ical in f ras t ruc ture for cold s torage, refrigerated transportation, processing, packaging and quality control. The Union and State Governments should work closely with the private sector to facilitate expansion of production, processing, marketing and exports of agricultural output. India is the largest global producer of coconut, cashew n u t s , ginger, turmeric and black pepper, while we are the second largest producers of groundnut, fruits and vegetables. India accounts for 10% of global food production, with the first rank in the production of banana , sapota and acid lime. India is the largest global producer of milk, the fifth largest producer of eggs and the seventh largest producer of meat. Yet India's share in the lucrative global food export market is less than 5%, due to our inability to enhance quality and exportability. The Central and State Governments should work closely with the private and cooperative sector, to improve cold storage and t r a n s p o r t facilities a s well a s to develop efficient marketing and export networks. Food industry can be as high-tech as software industry. All appropriate steps should be t a k e n in close coord ina t ion with t he pr iva te and cooperative sectors in the matter of research and development, processing machinery production, standardization, consumer survey, market development, transportation and trade policy operations. India has the potential to become the largest exporter of fruits and vegetables, provided we modernize our system and give the private and cooperative enterprises every

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encouragement for economically sound measures in this regard.

AGRICULTURAL EXPORTS

7.19 In 2003-04 agricultural exports constituted about 12% of the total exports of the country. With extremely fast expansion of exports of software and some other commodities and a rather slow expans ion in ag r i cu l tu ra l expor t s , the s h a r e of agricultural exports in total exports has come down from 44% in 1960-61, to 20.33% in 1996-97 to 14.19% to 12% in 2003-2004. The four largest commodity groups in our export basket in 2003-04 are marine products (19%), rice and wheat (19%), oil meals (9%), cashew (5%) and tea (5%). The export of rice and wheat was mainly prompted by the desire to reduce the excessive buffer stock. The total exports of agr icul tural commodities in the first eleven months of 2003-04 reached a level of 6.5 billion dollars in the total national exports of 55.7 billion dollars.

7.20 According to J .Rajeswar Rao, of t h e Indian Ministry of Agriculture, the stagnation in agricultural exports in recent years can be traced to distorted domestic prices for products l ike, r ice, whea t , oil mea l s , t ea and coffee and weak infrastructure for post-harvest operations and for export. Many mandies do not have sufficient storage and cold storage facilities. Export quota res t r ic t ions make Indian supply sources unreliable. Trade policy regime is characterized by restrictive approaches and adhocism. Market intelligence system is inadequate. The poor quality of products and of auction and certification system, etc., make it difiBcult to India to conform to in t e rna t iona l r e q u i r e m e n t s . The m a r k e t development and brand building efforts are inadequate. There is over-dependence on a few markets. Thus, it is clear that many of the const ra ints relate to increasing production, improving quality and productivity as well as expanding state of art modern infrastructure.

7.21 The Agreement on Agr icul ture u n d e r the World Trade Organizat ion is the governing protocol on promotion of agricultural exports. The EXIM policy (2002-2007) announced by the Ministry of Commerce is beneficial to the farming community as it makes exports freer, easier and rewarding for them. In order to take advantage of the new policy, suitable

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schemes involving the farmers need to be formulated to help export their produce, such as providing export intelligence to the farmers regarding the preferred products and varieties demanded by the international market. Apart from measures to help farmers produce high quality agricultural produce in demand in the export markets. Government has to extend assistance for setting up laboratories for testing quality of produce, for eliminating contaminat ion and for ensur ing freedom from fungi and bac te r i a . With high qua l i ty c o n s c i o u s n e s s , Ind ia ' s expor t s of several a g r i c u l t u r a l commodities can be boosted, particularly in marine products, cereals, cashew, tea, coffee, pulses , oil meals , fruits and vegetables, castor and tobacco. For certain commodities like Basmathi rice, India has made a name for quality, despite brisk competition.

7.22 There is large potential for organic farming in India due to a vide range of agro-climatic conditions. Many products can be grown without application of fertilizers or pesticides in rainfed areas. International demand for organic food is expanding fast. However, international regulations require certification of organic farming by accredited agencies. India has to meet the challenge of sound certification of exportable products in small farms, conforming to internationally prescribed norms. The demand for organically produced food is increasing globally. There are many areas in India, where fertilizers and agro-chemicals are not applied to a significant extent. These are the areas where organic farming under strict supervision can be promoted for boosting exports . There is considerable potential for boosting exports of products like Hand Picked and Selected (HPS) groundnuts, fruits and vegetables, spices, cashew, meat and poultry products, marine products and medicinal-cum-aromatic plants.

7.23 The EXIM Policy 2002-07 has emphasized the importance of agricultural exports and announced several policy measures to boost them:

> Free exportability of all agricultural products, except onion and niger seed, export of which is canalized th rough approved agencies.

> Removal of procedural restrictions like requirement for registration, packaging, etc.

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> Setting up of agri-export zones to enhance international market access and improve infrastructural facilities and ensure better flow of credit.

> Ass i s tance for reducing the marke t ing cost such as t ranspor ta t ion , handl ing and processing, of export of selected agricultural commodities.

> Financial assistance for improved packaging, strengthening of qual i ty control m e c h a n i s m and modern iza t ion of processing units.

> Arranging promotion campaign s u c h as buyer-sel ler meetings and participation in important International fares and exhibitions.

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CHAPTER - VIII

LIVESTOCK AND FISHERY DEVELOPMENT

8.1 Introduction. 8.5 Dairy Development. 8.10 The Outstanding Success of "Operation Flood". 9.18 Thrust Areas for the 21** Century. 8.14 Marine Fisheries. 9.26 Development of Inland Fisheries. 8.19 Fresh Water Aquaculture. 8.22 Brackish Water Aquaculture. 8.23 Danger of Diseases. 8.24 Strategies for the 21** Century.

INTRODUCTION

8.1 Crop production and Animal Husbandry are complementary functions not only from the point of view of production, but also in the use of their products. Thus animal husbandry provides bullock power and organic manure for the farming operations; and crop production provides fodder and other food items for the animals. In this process, the economics of both these operations are improved. Animal Husbandry and Dauying do not require much land; and they can be profitably combined with crop production. They can provide gainful employment for the farm families practically throughout the year, particularly for small and marginal farmers and landless labourers.

8.2 With the growth of the economy and increasing purchasing power, the citizens tend to eat more and more of animal and fishery products, which have higher nutritive value. Livestock sector produced 86.4 million tonnes of milk, 41.7 billion eggs, 52.1 million kgs of wool, 4.94 million tonnes of meat and 6.2 million tonnes of fish in 2002-03. The sector provided regular employment to I I million persons in principal s ta tus and 9 million in subsidiary s ta tus . Women constitute 69% of the labour force in livestock sector as agains t 3 5 % in crop farming. The livestock and fishery sectors contributed 5.4% and 1.1%, respectively to total GDP in 2002-03.

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8.3 India owns one of the largest livestock populations in the world and has now become the largest producer of milk at 86.4 million tonnes in the year 2002-03. India is also the sixth largest producer of fish and second largest producer of inland fish in the world. This sector can generate significant income and employment apar t from providing cheap and nutritious food; its exports also earned a foreign exchange of the value of Rs. 6680 crores in 2002-03.

8.4 This chapter deals with the development of dairy and fisheries (both marine and inland) in the 21'*' century.

DAIRY DEVELOPMENT

8.5 India is blessed with a huge bovine population of 196 million cattle and 80 million baffaloes, accounting for 5 1 % of Asian and about 19% of global bovine population. Fortunately, India is rich in genetic diversity of cattle with 30 different breeds having some unique property or the other. This genetic pool is a grea t s t r eng th for the count ry in the p re sen t era of advances in biotechnology. The buffaloe, which is considered the backbone of Indian dairy industry, constitutes less than 40% of bovine population, but accounts for more than half of the total milk production.

8.6 The world annual average growth of milk output was 1.48%; and its growth in most other milk producing countries has remained static. As against this, India's growth rate of 4.5% per annum augurs well for her potenticd to emerge as a major player in the export of milk products like whole mUk powder, skimmed milk powder, butter, cheese, etc. in the emerging market for these products in South East Asian countries and the Middle East; however, quality standards will have to be maintained.

OUTSTANDING SUCCESS OF "OPERATION FLOOD"

8.7 The Dairy Cooperative Movement, which started in 1950s in Gujarat under the leadership of Shri. Patel and Dr. Verghese Kurien has shown the developing world how grass root dairy operations can help remove poverty. The dairy movement has spread th roughou t India unde r "Operation Flood". This network of dairy cooperative institutions embrace 70000 dairy cooperative societies in 170 milk sheds, covering 9 million

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milk producer families. The average milk processed by these milk cooperatives has reached in 1999 some 10.2 million litres per day of which 9.4 million litres are marketed as liquid milk with the reminder converted into products like milk powder, butter , cheese and ghee. A milk processing capacity of a round 17.2 million litres per day h a s been established with a chilling capacity of 6.9 million litres per day and milk powder production capacity of 839 tonnes per day. Millions of litres of milk are hauled to the milk-deficit states of India, through insulated milk-tankers by road and rail to operate a National Milk Grid, balancing the regional fluctuations in milk demand and supply. Operation Flood has been considered as a model for the developing world. This project succeeded only because of strict adherence to modem technology, high quality consc iousness , cons t ruc t ion of infrastructure, right investment and a symbiotic relationship with crop husbandry.

8.8 Despite of aU these efforts, the per capita consumption of milk in India is low, a t 206 gm per day (less t h a n ICMR recommendations) and far below the world average of 300 gm per day. Fulfilling the requis i te s t a n d a r d s would mean increasing production by 150%.

8.9 The cont inued success of dairy cooperatives in the 21^ ' century would depend upon the capacity of dairy farmers to make their animals more productive within the economic and ecological l imits they face. The l eade r s elected to t he cooperatives as well as their employees have to educate and t r a in mil l ions of fa rmers . There h a s to be c o n t i n u o u s educat ion and t raining of dairy technic ians , R & D and investment In modem technology. Productive research at every stage of value chain would help reach world-class standards. The emphasis on quality should never be relaxed. All the above steps will help in building a competitive advantage in the dairy industry, which is fast becoming internationally competitive.

8.10 The rapid growth in India's milk production has been mainly through an Increase in the number of animals, rather than by improved productivity. The average output of an Indian cow is only 987 kg per lactation as against the world average of 2038 kg per lactation. Such low productivity is caused by the gradua l breed deteriorat ion due to general neglect over

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centuries and the consequent rise in the population of nondescript cows (80%) and buffaloes (50%), along with the chronic shortage of feed and fodder, coupled with their poor nutritive value and low fertility of animals. Another weakness is the degrada t ion of grazing land in which the large unproductive animal population competes with the productive animals. Yet another constraint is the failure of farmers in taking up scientific feeding and management practices. The yields of dairy animals are reduced due to epidemic diseases and endemic health problems, also reducing the chances of export. The future scope for export will depend upon our capacity to pack milk in bulk packings in disposable and temperature-regulated containers, production of low fat (1.5%) milk as well as elimination of pesticide residues. We need to develop external quality assurance sys tems, which fulfil international standards.

8.11 Even though India produces about 13% of the global output, our share of the international market is less than 1%. The World Trade Organization's regulations are being liberalized to promote trade in agricultural commodities including milk. India and New Zealand are the only two milk-producing nations that do not subsidize dairy farmers. Hence, we have a comparative advantage in exporting dairy products, provided they fulfil the international specifications on quality, reliability and integrity.

THRUST AREAS IN DAIRY DEVELOPMENT

8.12 The following measures are essential in early 2 P ' century to upgrade India's cattle live stock and to enhance technical and economic efficiency:

(a) Improvement in breeding efficiency by expanding the artificial insemination network further to cover more rural areas.

(b) Ex tens ion of embryo t rans fe r technology from the laboratory to the field level.

(c) Biotechnology could be used as a tool to develop saline water resistant fodder, higher-protein fodder, free from anti-nutritional factors and alkaloids.

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(d) Development of disease resistant crossbred animals by applying gene manipulation techniques.

(e) Genetic upgradation of cattle and buffaloes and expansion of existing infrastructure and delivery of breeding inputs and services to the farmers.

(f) Systematic dissemination of appropriate technologies for production of clean milk free from pesticide residues.

(g) Reaching the un-reached farmers.

(h) Improving the quantity and quality of feed and fodder.

(i) Developing pasture land, cultivation of fodder trees and fodder crops through appropriate agro-forestry models, using common property resources.

(]) Strengthening disease control and prevention services.

(k) Sett ing up a reliable animal hea l th information and disease reporting system.

(1) Training the farmers in value addition in dairy products like ghee, butter, paneer, khoa, yogurt, etc.

{rb} Institutional and organizational support in terms of credit delivery and insurance.

MARINE FISHERIES

8.13 India is the sixth largest producer of fish at 6.2 million tonnes in the year 2002-03 of which 3 million tonnes are of marine origin and 3.2 million tonnes are of inland origin. India happens to be the second largest producer of inland fish in the world. The output of fish has gone up by 63% in the 12 years ending 2002-03, when nearly half a million tonnes of marine products were exported earning foreign exchange of the value of Rs. 6680 crores. Fisheries sector is recognized as a powerful generator of income and employment. It is also a source of cheap and nutr i t ious food. The sector provides employment for 10 lakh fishermen, in addition to 12 lakh others including 5 lakh women employed in the post-harvest sector.

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8.14 The potential for marine fishery realization has been assessed at 3.9 million tonnes, just about 30% higher than the present output. Marine fishing activities in India have unfortunately witnessed uncontrolled exploitation followed by Inefficient management. The present system of free access to the sea needs to be modera ted with the regula t ion of common property rights and introduction of the concept of responsible fishing. There has been massive overcapitalization in fishing capacity. The per capita production of fish has declined as each fisherman continues fishing till his average cost equals average returns. The active population in flshtng has increased four-fold in the last 40 years, without any scientific method of exploitation of common fishing grounds, resulting in decline in catch rates, higher fishing mortality and dominance of juvenile fish in the catch.

8.15 The following strategies are needed for the exploitation of marine fishery resources in an environment friendly and efficient manner in early 21^' century:

(1) Effective implementation of the regulatory measures for optimizing the exploitation of the fishery resources in the inshore waters.

(2) Exploitation of the deep sea and oceanic resources in the EEZ and beyond.

(3) Effective prevention of third country fishing in the Indian EEZ.

(4) Increasing the pace of motorization of the artisanal craft to improve their capabilities.

(5) Monitoring and regulating fishing effort in the inshore waters.

(6) Protection, conservation and sustainable utilization of marine biodiversity.

(7) Manpower development in R & D, f ishing and processing sectors.

(8) Development of infrastructure like fishing harbours , berthing facilities, capacity utilization of post harvest infrastructure.

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(9) Stock enhancement through artificial rehabilitation.

(10) Fish aggregating devices and sea ranching.

DEVELOPMENT OF INLAND FISHERIES

8.16 In the inland fishery economy, fish are harvested under two systems : (a) Inland capture fisheries from 45000 kms of rivers, 126000 kms of channels , 2.7 million hec ta res of e s t u a r i e s and 2.05 million h e c t a r e s of reservoi r s , (b) Cultivation of fish called aquaculture in ponds and tanks of fresh water (estimated at 2.4 million hectares in India) and brackish water (estimated at 1.42 million hectares). They are dealt with in the following paragraphs.

8.17 The extensive network of Indian rivers and channels constitute one of the major inland fishery resources of the country apart from providing original germplasm. This resource is under-exploited : the average yield is 300 kgs per kilometer, 1/6"^ of the actual potential. The average yield from the reservoirs is only 20 kg per hectare per year, which can be increased upto 5 times through sustained stocking support, balanced fishing effort and enlargement of mesh size. The extensive flood-plain wet-lands especially in the States of Assam, West Bengal, Bihar and Eastern Uttar Pradesh are rich in nutrients : and the fish yields can be increased upto five t imes from the present yield of 200 kg per hectare per year, by following cultural practices like pen culture, cage culture, etc.

8.18 China, India and South East Asia have witnessed a major increase of the order of annual 9% in the last 10 years in the production of fresh water and brackish water fish.

FRESH WATER AQUACULTURE

8.19 In the last 10 years, thanks to the development of highly productive fish, the pond productivity has gone up from 600-800 kg per hectare per year to 8 - 10 tonnes per hectares per year, in several parts in the country, with the national average being a round 2000 kg per hec ta re per year . The mos t important fish exploited here is the carp, while a host of others like cat-fish and molluscs are also brought into the culture systems. A range of technologies such as pen culture, cage culture, running water fish cul ture, sewage-fed fish

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culture, rice-cum-fish culture and integrated farming systems have made fresh water aquacul ture increasingly popular across the country. Carps account for 82% of the total fresh water output, the more important varieties being catla, rohu, mrigal, kalbasu, silver carp, etc.

8.20 The above-mentioned sharp increase in carp production was possible due to a break-through in fish breeding technology. Induced breeding through h5^ophysation has given the thrust to m a s s p roduc t ion of qual i ty spawn , in a control led environment , reducing the dependence on n a t u r a l seed collection. The development of the synthetic formulation, ovaprim, has helped the farmers in induced breeding of carps, both in terms of efficiency and cost. From earthen pits to double-walled hapa hatcheries and associated modifications, carp hatcheries have come a long way from the traditional running water glass ja rs or circular hatcheries, increasing efficiency and cutt ing costs. Moreover, the technology of multiple carp breeding has prolonged the normal breeding seasons of carps and resulted in quantitative increase in seed output.

8.21 Fishery scientists have developed cultural practices to suit input availability in any region as well as the investment capabilities of the farmers. Another breakthrough has been the integration of poultry, duckery, piggery and other animal outputs as also horticultural crops, along with fish culture ; this has shown potential outputs of the order of 3 to 5 tonnes of fish per hectare per year, solely with the use of their byproducts. Intensive cultural technology has established o u t p u t levels of 10 to 15 tonnes per hec ta re per year, indicating the possibility of 100-200% increase in the total output in the near future.

BRACKISH WATER AQUACULTURE

8.22 There h a s been a b r e a k - t h r o u g h in b r a c k i s h water aquaculture also. There has been a transition from the use of natural seed resources to the use of hatchery-produced seeds. The cultural techniques used include water exchange, aeration and fortified artificial feeds. Shrimp farming to-day contributes a s m u c h a s 50% of the sh r imp o u t p u t from 1.5 lakh h e c t a r e s . Unfor tunate ly the i n d u s t r y failed to achieve sus ta inable production on account of haphazard growth leading to the outbreak of epidemic diseases.

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8.23 The recent acceleration in the miovement of live fish and shell fish across borders has resulted in the occurrence and spread of economically serious diseases, like the white spot disease in farmed shr imp. The most common cause s of d i sease in farmed fish and shell fish are inadequate farm management, local pathogens, poor water quality and other environmental fac tors . In the c i r c u m s t a n c e s , s t r i c t San i t a ry and Phytosanitary (SPS) measures are necessary to protect human and an ima l life. Under the World Trade Organ iza t ion regulations, SPS measures based on scientific principles are prescribed, with the proviso that they should not be used as disguised restriction to trade. Technical standards on animal and fish health have been laid down by WTO in consultation with Food and Agricultural Organization (FAO). A system has been laid down by WTO called HACCP - "Hazard Analysis and Critical Control Points" for minimizing and eliminating risks. Some of the h a z a r d o u s ma te r i a l s a re c o n t a m i n a n t s , pathogenic organisms, heavy metals and chemicals like antibiotics.

STRATEGIES FOR THE 21^^ CENTURY

8.24 The important strategies for early 21^' century for sustainable inland fish production are set out below :

a. Development of genetically superior fish breeds, systematic measures against fish diseases, recycling of abundan t organic m a t t e r and comprehens ive env i ronmen ta l management.

b. Need to develop complete package of technology for different levels of fish production i.e., 2 tonnes, 5 tonnes and 100 tonnes per hectare.

c. Development and production of balanced feeds for different kinds of fish.

d. Demonstration of improved technologies in farmers* ponds in different agro-climatic zones.

e. Establishment of fresh water prawn hatcheries especially in the West Coast of India and also in saline soil belts of inland fisheries.

f. Development of integrated fish farming.

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g. Development of economical and eco-friendly feeds.

h. Health monitoring, prevention and control of diseases with emphasis on seed certification and quEirantine measures, and

i. Environmental impact assessment to promote eco-friendly technologies and practices.

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CHAPTER - IX

INTERNATIONAL TRADE IN AGRICULTURE

9.1 Historical Perspective. 9.6 Distortions in Developed Countries' Farm Sector. 9.10 Critical Examination of World Trade Organization (WTO)

regarding Agriculture. 9.12 First Instrument : Tariffication. 9.19 Second Instrument : Domestic Support. 9.23 Third Instniment : Export Competition. 9.24 Agriculture Trade in Early 21** Century.

HISTORICAL PERSPECTIVE

9.1 India was a signif icant ne t expor te r of a g r i c u l t u r a l commodities before the First World War. Soon thereafter, the trading countries of the world began a game of competitive p ro tec t ion i sm in order to p romote the i r i n d u s t r y a n d agriculture against imports. This was one of the important reasons for the economic depression in the 1930's, eventually leading to the destructive Second World War in 1939.

9.2 In a rare burst of the creative statesmanship, the victorious powers, particularly USA, UK and France, combined together in 1945 to establ ish three in terna t ional ins t i tu t ions for promoting understanding and harmony in the arena of finance and trade : the International Monetary Fund, the International Bank for Reconstruction and Development (the World Bank) and the General Agreement on Tariff and Trade (GATT), with the respective objectives of stability of currency value, flow of development finance as well as introduction of some ground rules in international trade, particularly reduction of import duties.

9.3 The performances of the above three inst i tut ions, though marked by controversies at times, have on the whole helped the world, particularly developing countries, to reach higher levels of prosperity. Those developing countries, which followed an enlightened public policy focusing on supply of social services to their citizens like education, health, etc., and leaving to the private sector to focus on the production of the

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goods and services, have done better than other countries, which comprehensively controlled the economy. We in India unfortunately followed the latter pa th and duly paid the peneilty : sinking to a low place, 130"" amongst 160 countries of the world, in terms of socio-economic development in 1990. While comparable developing countries have reduced their poverty to below 10% of their population, we in India have still 25% of the population under the poverty line.

9.4 Under the GATT regime, international trade expanded twenty t imes between 1950 and 1997, while the global income expanded six times. International trade was progressively liberalized; and the average level of tariffs globally came down from 4 5 % in 1946 to 5% in 1986. Unfortunately, India preferred to follow an inward-looking socialist philosophy; it raised its overall import duties from a level of 40% in 1946 to about 150% by 1986. We preferred a strong self-reliance policy, without caring to see whether we had a comparative advantage in import substitution of many goods and services. Effective measures were not taken to promote exports. As a result, India, which had 1/6'^ of the world population, saw its international trade come down by two thirds, from a low 1.5% of the world trade to a lower 0.5% of it, in the 40 years ending 1986. The international value of the rupee, which was 21 American cents per rupee in 1947, fell to 13 cents a rupee in 1967 and further to 8 cents a rupee in 1991 and presently to 2.2 cents a rupee in the year 2004. We would have done well if we had exploited our comparative advantages of cost-effective production of only those goods and services, which we could export profitably; we would have been better off to impor t t hose goods and services in which we had no comparative cost advantage. Instead, we went on producing those goods and services , in which we did not have comparative advantage and whose domestic cost of production was much higher than of its imports. We ignored the fact that the concomitant high import duties benefited only inefficient domestic industries, and that they acted as a penalty on the common man, who consumed those highly-priced goods and services.

9.5 The cumulative burden of inefficiencies gradually built up to precipitate an economic crisis in 1991, forcing India to make a U-turn in its economic policy. We devalued the rupee sharply, reduced income tax burden on our enterprising

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citizens from a punishing 90% to a reasonable 35%, reduced import duties to help import materials which we could not produce ourselves and gave incentives to exporters , for earning foreign exchange to finance such imports. There has been great improvement, in both macro and micro economies of India, after trade reforms in the period 1991-2004, both in terms of economic growth and social equity.

DISTORTIONS IN DEVELOPED COUNTRIES' FARM SECTOR

9.6 While many developed countries seek liberalization and free trade in the developing countries, they followed a contrary policy regarding their own respective agricultures, particularly in Europe, USA and J a p a n . The la t ter subsidized the i r farmers very substant ia l ly as shown in Table-9.1 below, though their farmers formed less than 5% of their labour force and contributed less than 2% of their GDP.

Table 9.1: Agricultural Support Estimates (1998)

Country Consumer subsidy Producer subsidy Country

Subsidy per consumer

($)

Subsidy as % of farm

receipt

producer support per farmer ($)

% of gross farm

receipts

1. Japan 577 52 21,000 62

2. European Union 189 32 19,000 44

3. USA 15 3 19,000 22

Source : Economist, London

The only exception has been the Caimes Group, consisting of Australia, New Zealand and some other countr ies whose economy is dependent on agricultural exports and which oppose such protectionism.

9.7 Despite claims of liberalizing agr icul tura l t rade to help developing country exports, tariffs on agricultural goods in developed countries still run on an average of 40%, compared to well under 10% for many industrial goods; and import quantity restrictions (quotas) remain tight. Prof. Kym Anderson of the University of Adelaide in Australia reports tha t the removal of such distortions by rich countries would boost agricultural trade, increasing incomes in the poor as well as rich countries by $ 160 biUions annually : about six times the annual aid by the World Bank.

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9.8 In addition to the above subsidies, the rich countries also have often used science to keep the exports of the poor c o u n t r i e s ou t . Under t he San i t a ry a n d Phy to - san i t a ry Agreement (SPS), a country is entitled to restrict imports if they compromise human, animal or plant health, through the impor t of farm p roduc t s conta ining insec ts , v i ruses or chemicals. International standards in this area are set by a joint body of the World Health Organization and Food and Agriculture Organization, called Codex Alimentaries. Then there is a dispute regarding the science of food : European Union thinks that hormone-treated beef was not safe and b a n n e d impor t s from America and Canada . Amer icans however, have won this argument in the WTO tribunal. But, there are also arguments that genetically modified crops are not safe; and imports, hence, can be banned.

9.9 It is reassuring that WTO has so far acted objectively and prudently through its Adjudication Panels and has won the confidence of a large majority of its members. However, the Doha Round of WTO negotiations, which started in 2002, have been bedeviled by a sharp division between developed and developing countries regarding agricultural trade, though an apparen t breakthrough in the negotiations have been achieved in mid 2004.

CRITICAL EXAMINATION OF WORLD TRADE ORGANIZATION CWTO) REGARDING AGRICULTURE

9.10 The Agreement on Agriculture (AoA) in the Uruguay Round (1995) provides a framework for the long term reform of agricultural trade to secure the following three objectives: (a) exposing the agricultural trade towards market forces; (b) improving predictabi l i ty and stabil i ty in import ing and exporting countries; and (c) reducing trade-distorting domestic s u p p o r t m e a s u r e s . It also provides some flexibility to developing coun t r i e s , a l though u n d e r r a t h e r s t r ingen t conditions, while implementing the reforms.

9.11 The th ree impor t an t i n s t r u m e n t s to achieve the above objectives, provided in the AoA, are the following :

(d) Tariffication, which converts to a quantified rate of tariff the degree of protection a country wishes to provide to its agriculture at the trade border.

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(e) Domest ic s u p p o r t , which reflects t h e degree of subsidization a country wishes to accord to its agricultural sector.

(f) Export competition, the degree of export subsidy a country wishes to extend to its farm sector.

FIRST INSTRUMENT : TARIFFICATION

9.12 The most important component is the requirement that all non-tariff border measures (like quantitat ive restrictions) should be replaced by tariff, so as to benchmark initially the existing level of protection. Tariffs resulting from this process, as well as other tariffs already existing, are to be reduced by developed and developing countries, over a period of six and ten yea r s respectively, by an average of 36% and 24% respectively. Moreover, these minimum reductions are required under each tariff line (commodity group). A member country is allowed to retain import restr ict ions unti l the end of the implementation period, under certain carefully and strictly defined cond i t ions . However, exis t ing m a r k e t a c c e s s opportunities would be maintained under a "special treatment clause".

9.13 There have been unfor tunate loopholes in the process of tariffication, which have allowed some countries to bind their tariffs at levels much above the prevailing average in many cases. Japan and Korea have successfully achieved a delay in the tariffication of their very heavy barriers to rice imports. The Japanese consumer pays eight times more per kg of rice, but imports are not allowed. Other instances of hiking of base tariffs, vis-a-vis actual tariffs include : (a) 3 1 % on beef and veal, which had a base of only 3%, (b) 361% on rice by the EU as against a base of 153% and (c) 58% on rice as against 3% by Thailand, a country which prides itself as one of the biggest rice exporters on account of its efficiency in that crop!

9.14 The case of India is not much different. India had committed to zero tariff bindings on rice, plums, fresh grapes, dried skimmed milk, maize, millet and sorghum during negotiations between 1947 and 1962. India in 1990s proposed under the UR to bind its tariffs for most agricultural products at very high levels : 150% for meat and fish, 100% for milk and cream, 40% for bu t t e r and cheese, 100% for wheat and

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pulses, 45% for certain edible oils, 300% for coconut and palm oil and 150% for cotton and sugar.

9.15 A Committee appointed by the Government of India, in 1991, to suggest tax reforms, had however recommended in 1993 tha t the tariff levels for different categories of agricultural products should be fixed only at three levels : 0%, 10% and 50%.

9.16 Prof. Ashok Gulati (in his outstanding paper with two others entitled Indian Agriculture in a Globalizing World published in special millennium issue of Agriculture Finance Corporation in December 1999) recommends tha t India along with other developing countries should negotiate for more liberal trade environment. In order to ensure easier export access to the developed country markets, many of which have been highly protective, the following five recommendations have been made by him :

(a) Abolition of all quotas and quantitative restrictions on imports and exports around the world, except for those countries that have acute BOP problem. In particular, the tariff quotas tha t are widely applied by the developed countries must be abolished and replaced by equivalent tariff at the earliest.

(b) Replacing all specific rates of import duties by rates on ad valorem basis.

(c) Ceiling on tariff binding for any agricultural product at no higher than 50% for any country.

(d) Reduction of tariffs along each tariff line and not merely reduction of average tariff levels or average for groups as a whole.

(e) Negotiation for commodities bound at zero tariff (like rice, skimmed milk powder, sorghum, maize, etc.) in earlier rounds of GATT to raise it to 50% tariff bindings, as with other agricultural commodities.

9.17 It is important to realize that quota system is essentially damaging to the developing world and therefore its abolition should be the first item on India's negotiation agenda.

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9.18 Prof. Ashok Gulati strongly recommends tha t developing count r ies like India should be bold and aggressive and suggest a cap on maximum tariff binding at 50% on any agricultural commodity. It is unwise to ask for, say 300% tariff, and in reality, impose tariff of 15 or 30%, for example on edible oils. When count r ies like India ask for 300% protection, they lose the moral right to ask for reduction of protection by developed countries. There is another reason for suggesting a cap at 50% maximum tariff. The base period for tarification, 1986-88, witnessed low agricultural prices. This meant that tariff equivalent calculated as the gap between the higher supported internal prices and the low world price was unusually large. The new tariffs that were based on this large tariff equivalent in 1986-88 offer better protection in the other years, when the world prices are normal. Thus, the process of tarrification on the basis of 1986-88 prices was really "dirty tarrification" according to experts . As a resul t , g radua l reduction in these high tariffs as agreed under the Agreement on Agriculture really slows down the process of opening up on the part of the rich world. Replacing this entire process by a maximum cap of 50% would be in the interests of India and other developing countries.

SECOND INSTRUMENT : DOMESTIC SUPPORT

9.19 India can logically contend tha t she is not giving u n d u e protection to India's agriculture [Laxman Rekha of 10% of farm GDP) on the following grounds :

(a) As reported by WTO's reviews of India's trade policy in 1998, the domestic suppor t to Indian agricul ture, on product-specific side was negative to the extent of 38.5% and on the non-product specific side to the extent of 7.5%; in the aggregate, it is much less than the prescribed upper limit of 10%.

(b) India h a s also observed r e s t r a i n t in avoiding any significant export subsidy, the only exception being income tax exemption on export earning.

9.20 The Uruguay Round goes beyond border measures that are traditionally the target of GATT disciplines ; it seeks to bring some restraint on domestic support measures as well. Prof. T.N. Srinivasan of Yale University holds that such measures, with minimal or no impact on trade, (the so-called permissible

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green box measures), need not be reduced. In particular, income support to farmers, "decoupled" from production, could continue. Research, disease control, infrastructure and food security policies are included in the "green box policies". Other policies, such as direct payment to limit production, and those that encourage agricultural and rural development are also excluded from the purview of reduction commitment, so long as they do not in total account for more than 5% and 10% respectively, of the value of output, in the developed and developing counties, respectively; they are also required to reduce non-excluded support by 20 and 13.3% respectively, during the implementation period.

9.21 Prof. Srinivasan points out the possible loopholes in the implementation of reductions in domestic support measures. Main farm programmes of the US and EU seem to have been exempted. Japan is found to even increase its direct payments to farmers. Whereas, in the case of manufactures , direct export subsidies are outlawed, subsidies for agricultural exports by developed and developing countries are only to be reduced, respectively over six and ten years, to a level of 36 and 24%, below the 1986-90 base period level. Again, quantity of subsidized exports is to be reduced by 2 1 % and 14% respectively. Prof. Srinivasan finds these com^mitments to be more liberalizing, since they are much harder to evade. While the formally-agreed-upon extent of liberalization may appear to be substantial, these have been substantially neutralized by several factors, such as loophole-ridden tarification process, fairly long implemientations periods, permitted exemptions and the continuation of some trade-distorting policies.

9.22 Prof. Ashok Gulati recommends the following stand for India, on the substantial domestic support by developed countries to their agriculture, while it happens to be negative for India :

(a) The ceiling for total AMS (Aggregate Measure of Support) should be 40%. For each product separately, the ceiling should be 30% in case of product-specific support.

(b) Reduction commitments on the domestic support ought not only to be on the total AMS, but also on each product-specific support separately, as well as on non-product-specific support. India should argue for faster reduction in individual product-specific domestic support, than for non-product-specific support.

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(c) For es t imat ing total AMS, bo th product-specific and non-p r o d u c t - s p e c i f i c s u p p o r t s h o u l d b e a d d e d , w h i c h t h e cur ren t agreement requires. India mus t ensure tha t th is is done even if the product-specific suppor t is negative. India should not accept a rguments tha t negative product-specific suppor t should be treated as zero.

(d) With respect to the direct payment to the farmers, a clear d i s t i n c t i o n h a s to b e m a d e b e t w e e n t h e G r e e n Box Measures (public and technology-based suppor t to farmers) a n d the Blue Box m e a s u r e s (direct payment to producers). G r e e n Box M e a s u r e s a l o n e s h o u l d b e e x e m p t f rom reduc t ion commi tmen t s . The Blue Box Measures , on the o the r h a n d , ough t to be inc luded in t h e AMS sub jec t to reduct ion commitments .

(e) Ind ia s h o u l d jo in t h e C a i r n s G r o u p led by A u s t r a l i a in inc lud ing the Blue Box M e a s u r e s in AMS a s well a s in f a s t e r r e d u c t i o n of d o m e s t i c s u p p o r t a n d a b o l i t i o n of import restricting quotas .

(f) If there is a question of changing the base period of 1986-88 , to some recen t period, t he period 1996-98 could be t aken as a new base for calculations of AMS.

THIRD INSTRUMENT : EXPORT COMPETITION

9.23 On export competition, India should seek complete bann ing of expor t subs id ies . In te rna t iona l t r ade shou ld be founded on c o m p a r a t i v e c o s t a d v a n t a g e a n d n o t t h e c a p a b i l i t i e s of m e m b e r countr ies to subsidize exports a n d dis tor t t he bas ic foundation of comparative advantage and efficiency.

AGRICULTURE TRADE IN EARLY 21^^ CENTURY

9.24 Agricultural exports increased from $ 3.5 billion in 1990-91 to $ 6.7 billion in 2 0 0 2 - 0 3 . However, a s a pe rcen tage of to ta l merchandise exports, the sha re of farm exports declined from 19% in 1990-91 to 12 .8% in 2 0 0 2 - 0 3 . A m o n g s t t h e major farm expor t s in the first 11 m o n t h s of 2 0 0 3 - 0 4 a re m a r i n e p roduc t s (18.7%), followed by rice (12.3%), oil mea l s (8.7%), w h e a t (7.0%), fruits a n d vegetables (5.9%) a n d p e a (4.9%). The Government of India had built u p excessively large s tocks of rice and wheat, through price-support measures ; these h a d

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to be exported through grant of WTO-compatible subsidies. Agriculture exports in the first 11 months of 2003-04 formed 11.7% of the total exports, down from 13.5% in 2001-02.

9.25 Agriculture is an important industry in India, bringing 25% of the national income. Our agriculture produces some of the finest p roduc t s in grains , fruits and vegetables, whose consumption can be promoted all over the world : but, we should be in a position to mainta in quality, adopt best packing practices and follow efficient export systems. The measures needed to boost agricultural exports are : (a) free exportability of all agricultural products, without creating obstacles through channelization and restriction; (b) removal of procedural restr ict ions like requirement for registration, packaging, etc.; (c) establishment of agricultural export zones to enhance international market access and improvement of infrastructural facilities and provision of adequate credit; (d) encouragement to business houses through tax sops and investment credit to enter export business, particularly of Indian fruits and vegetables for which there is high overseas demand; (e) financial ass is tance for improved packaging, s t r e n g t h e n i n g of qual i ty cont ro l m e c h a n i s m s and modern iza t ion of p rocess ing u n i t s ; and (f) p romot ion campaigns such as buyer-seller meetings and participation in important fairs and exhibitions.

9.26 Agricultural imports at $ 2.8 billion in 2002-03 accounted for 4 .6% of total impor ts and formed 40% of the value of agricultural exports in the year 2002-03. An overwhelming part of agricultural imports are edible vegetable oils forming 72% of the total imports in the year 2003-04, followed by pulses (14%) and cashew nuts (9.0%). Much of the cashew nu t imports enables the industry to process and re-export them. For example in 2003, the imports of cashew nuts were valued at 255 million dollars, while exports were valued at 424 million dollars. An overwhelming proportion of vegetable oils belong to palm oil family, from South East Asia, at low import prices. India attempted to develop domestic oil palm economy without any significant success. Further efforts on cost-effective basis are needed in the oil-seed sector, to add value and to achieve better performance. India imported pulses of the value of 566 million dollars in 2002-03 (20% of the total imports); efforts should continue to produce pulses in India more efficiently and economically.

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CHAPTER - X

MANAGERIAL STRATEGY FOR THE FARM SECTOR IN THE EARLY 21^^ CENTURY

10.1 Introduction. 10.2 Agricultural Planning and Programming. 10.6 Agricultural Research and Extension. 10.12 Agricultural Extension. 10.16 Sustainable use of Land and Water. 10.17 Crop Inputs : Seeds and Fertilizers. 10.24 Crop Protection. 10.27 Agricultural Machinery and Implements. 10.29 Agricultural Credit of Insurance. 10.30 Agricultural Marketing and Processing. 10.32 Livestock and Fishery. 10.35 International Trade in Agriculture. 10.39 Conclusion

INTRODUCTION

10.1 The foregoing nine chap te r s have set ou t a t length the perspectives, objectives, technology, socio-economics and management of several farm development activities needed In the 21^ ' Century . The t ime h a s come to s u m u p the managerial strategy needed in the next 25 years to reach an annual agricultural growth of 4.5%. This has to be achieved with social justice in a farm economy dominated by small holders and constrained by limited capital . This chap te r highlights for each sub-sector the more important managerial dimensions : they relate to planning, organizing, staffing, directing, coordinating, controlling and budgeting, in an effort to achieve optimal outcomes in terms of efficiency and equity. Farm development in the 21^' Century is also expected to cont r ibute significantly to several social goals : poverty alleviation, job creation, improved nutrition, gender justice and environmental sustainability.

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AGRICULTURAL PLANNING AND PROGRAMMING

10.2 Annual targets in terms of quantitative magni tudes , (eg. Increased flow of inputs and outputs, reduced unit costs and subsidies, etc.) should be deliberated, finalized and stipulated for each area and for each sectional management in the agricultural sector. Planning should recognize the vagaries of weather which is the fact of agricultural life : any period of ten years is likely to see a fall in crop output in three years from preceding year's level. A buffer stock, seasonally ranging from 12 to 22 million tonnes of food grains has to be kept to meet the demand, particularly from vulnerable sections of the community, assessed at about 26% of our population in the year 2004. Support prices for crops and other outputs have to fulfil both efficiency and equity goals.

10.3 Input subsidies should be gradually but fully phased out by 2015. through a deliberate and gradual increase in input prices over 10 years. As Chinese agriculture has proved, scientific use of inpu t s provides attractive re tu rns large enough to meet the full and unsubsidized cost of inputs , leaving a suitable margin of profit. The subsidy money so saved by the Central Government in each year in each State should be assessed and allocated to each such State as b u d g e t a r y g ran t , for bui ld ing cri t ical r u r a l and farm infrastructure : irrigation, drainage, rural roads, extension and training infrastructure, etc. This will provide an incentive to the States in cooperating with the Central Government in phasing out input subsidies over ten years.

10.4 Each project involving capital and revenue expenditure should devote at least 1% of its budget for an annual concurrent evaluation ; this will reveal the degree of success in fulfilling efficiency and equity objectives as well as the means of further improving the outcome. Managerial efficiency can be thus continuously improved. Trophies and prizes for States and individual leaders should be established for outstanding performance at the State and National levels, so that the pursuit of excellence is promoted in project management.

10.5 The following are the three broad policy approaches needed for achieving a 4.5% annual growth in farm output :

a) Strengthening market incentives for farmers and agri-processors, by the removal of those regulations, which

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interfere wi th free m a r k e t m e c h a n i s m , s u c h a s s tocking a n d movement res t r ic t ions , high marg ins for b a n k loans a g a i n s t s t o c k s , p r ice c o n t r o l s on i n p u t s a n d p r o d u c e . Futures/forward markets should be introduced to eliminate u n d u e s p e c u l a t i o n in m a r k e t s a n d to i n t r o d u c e p r i c e stability.

b) T h e sa fe ty n e t s to p r o t e c t t h e p o o r s h o u l d b e b e t t e r designed and bet ter targeted. The i ssue of food s t a m p s to t h e d e s e r v i n g poo r is far b e t t e r t h a n t h e r a t i o n c a r d sys tem which leads to malpract ices in rat ion shops .

c) I n s t i t u t i o n a l r e f o r m s h e l p s m a l l h o l d e r s , p a r t i c u l a r l y t h r o u g h s o u n d c o o p e r a t i v e s o c i e t i e s , w i t h a j u d i c i o u s m i x t u r e of s t r o n g e n f o r c e m e n t of f i n a n c i a l d i s c i p l i n e a n d of i n c e n t i v e s for a d h e r e n c e to s o u n d financial norms .

AGRICULTURAL RESEARCH AND EXTENSION

10.6 The agr icul tura l r e sea rch sys tem shou ld successful ly tackle t h ree chal lenges : (a) to r e ta in the g r een -nes s of t h e Green Revolut ion a r e a s by tackl ing non- sus t a inab i l i t y factors like water logging and alkalinity; (b) tu rn ing 'grey' a rea into green t h r o u g h w a t e r s h e d m a n a g e m e n t , hybr id technology, s m a l l f a r m m e c h a n i z a t i o n , i n t e g r a t e d p l a n t n u t r i e n t a n d p e s t m a n a g e m e n t , e t c . ; a n d (c) o p t i m i z a t i o n of v a l u a b l e soi l r e s o u r c e u s e t h r o u g h c o r r e c t t e c h n i q u e s of i r r i g a t i o n , drainage, soil nutrition, etc. The research agenda should p lan technologies for the typically Indian constraints such a s small sized farms, inadequate capitcil, mois tu re s tress , illiteracy, etc.

10.7 Our agricultural research system needs creative m a n a g e m e n t t o o v e r c o m e s e v e r a l c o n s t r a i n t s s u c h a s e x c e s s i v e c e n t r a l i z a t i o n , i n a d e q u a t e i n t e g r a t i o n a m o n g s t r e s e a r c h , e x t e n s i o n a n d e d u c a t i o n , n e e d to p r o m o t e q u a l i t y a n d e x c e l l e n c e a n d s t r o n g e r l i n k a g e s b e t w e e n p a r t n e r ins t i tu t ions .

10.8 I n d i a h a s to r e s p o n d to t h e w a r n i n g i s s u e d a t t h e UN Conference on Environment and Development held a t Rio de J a n e i r o in J u n e 1992 . Severa l re forms a r e n e e d e d in t h e m a n a g e m e n t of ou r n a t u r a l r e s o u r c e s , i n c l u d i n g s t r o n g e r par tnership between Government, indust ry and civil society in

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integrated gene management as well as protection of the atmosphere, oceans and bio-diversity as the common heritage of m a n k i n d . As recommended by M.S. S w a m i n a t h a n Foundation at Chennai, greater care needs to be taken for in-situ conservation of genetic wealth through a national grid of protected areas as well as efficient ex-situ conservation in gene banks, botanical and zoological gardens.

10.9 Research planning by the Indian Council of Agricultural Research should move from narrow commodity research towards comprehensive research on farming sys tems. A broader programme approach is needed cut t ing across disciplines, commodities, divisions and ins t i tu t ions b u t focusing on maximizing returns from plant-animal-man chain. While continuing efforts towards more cost effective production of crops, greater emphasis is needed on livestock, fisheries, horticulture and agro-forestry to respond to the rising demand for these products

10.10 India should take steps to harvest emerging technologies like biotechnology and information-technology. Future success will come through greater inter-disciplinary teamwork as the r e sea r ch t a s k become more complex. These need organizational and management reforms, incentives, rewards, continuous training, etc.

10.11 Human resource and systems development is at the heart of enhancing research output . For this purpose , academic inbreeding should be avoided and a competitive culture should be promoted. Autonomy of ICAR should be promoted to set goals, to judge performance and to reward successful efforts. There has to be a healthy balance between basic and applied research as well between commodity and systems research.

AGRICULTURAL EXTENSION

10.12 For enhancing the eflfectiveness of agricultural system, several managerial measures are needed. The extension system should be able to enhance food security, nutrition, sustainability, risk minimization and income-cum-job generation. Private and community-driven extension should be allowed to compete with Government extension services. Farmer groups like self-help groups and community associations should be enthused to par t ic ipa te in propagat ion of be t te r technology. The

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institutional arrangement should be reviewed to secure the best mix to reach technology efficiently to the farmer.

10.13 Research extension linkages should be strengthened so that t he fa rmers can get the bes t and l a tes t cost effective technology. Continuous efforts need to be made to build the capacity of extension functionaries to reach out to the farmers and effectively transfer the latest techniques to enhance productivity. The skills of extension personnel should be built up with strategies like participatory rural appraisal, group dynamics, leadership skills, conflict resolution, use of different kinds of media, communication skills, data collection analysis and documentation.

10.14 A sound extension system would empower farmers' community through consultations on all important matters affecting their interests and through their primacy in groups like watershed associations, cooperatives, etc.

10.15 Considering that 70% of farm operations are carried out by women, special efforts m u s t be made to sensi t ize male extension workers to the needs, approaches and perspectives of women through appropr ia te t ra in ing and or ien ta t ion programmes, taking into account women's time, mobility and cultural situations. Finally, the time has come to make the best use of information technology to disseminate relevant package of p rac t ices as well as informat ion on i n p u t availability, market possibilities, etc.

SUSTAINABLE USE OF LAND AND WATER

10.16 The nation's valuable land and water resources are not being scientifically ut i l ized. The cost benefit equa t ion from investment in land development and irrigation has been sub-optimal in the last 50 years. There has been deterioration in the qual i ty of product ive land and in the efficiency of irrigation. In order to reap sustainable benefits, the following steps are extremely necessaiy in early 21*' Century:

(a) The examples of successful watershed development in Ralegaon Siddhi in M a h a r a s h t r a and s imilar efforts elsewhere need to be widely replicated for sus ta inable development of dryland agriculture through environment-friendly cultural and resource management practices.

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(b) Agro-cl imatic regional p l ann ing based on re source endowment , s t ra teg ies for ba lanced development , exploitation of comparative advantage, etc. should become part of farm development in every village.

(c) The package of practices developed at Central Research Institute for Dryland Agriculture (CRIDA), Hyderabad, for enhancing 3aelds under un-irrigated conditions have proved to be extremely productive and environment friendly. They should be widely disseminated and implemented.

(d) The State Land Use Boards for Coordinated Land Resource Development should be duly empowered and energized for strengthening interdepartmental coordination, which alone can e n h a n c e s u s t a i n a b l e land use , cons i s t en t with productivity and equity.

(e) The broad irrigation strategy followed so far needs to be deeply scrutinized since it has not yielded full dividends, due to factors like high financial cost of canal irrigation, loss of productivity in land due to waterlogging and salinity, under-pricing water and power, overdrawal of groundwater and inefficient water use. The investment in irrigation development of the order of 1,50,000 crores till 2002 has not yielded adequate re turns to sus ta in the system, calling for huge annual subsidies. The subsidy involved h a s caused financial crisis in several States leading to neglect in timely maintenance of irrigation infrastructure. Efforts should be made to take the farming community into confidence as to the need for fair and just payment of irrigation charges for long-term efficient maintenance of irrigation infrastructure by the government.

(f) Due to unwise start of new projects neglecting ongoing ones and i n a d e q u a t e funding of opera t ion and maintenance, the irrigation efficiency has been as low as 30 to 40% as against a planned level of 67%, leading to low productivity, inequity to tail enders and necessitating costly rehabilitation programme to make up for inadequate maintenance . Under-pricing of water h a s reduced the incentive for farmers to use water efficiently ; water-economizing crops are sacrificed in favour of water-intensive crops like paddy and sugar. As recommended by successive Finance Commissions, the water charges should

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cover atleast operational and maintenance cost, plus a small percentage of the capital costs (1% to 2.5%). Only Maharashtra has acted upon this recommendation. As a r e s u l t major i r r igat ion projects have become whi te elephants in many states with undue benefit for large farmers at the expense of small farmers. A World Bank study shows that a marginal farmer on an average received only about 10% of the subsidy benefit received by a large farmer, unit area-wise. Necessary fiscal measures should be taken to reverse this inequitable regime.

(g) There has to be greater participation of water-users in managing public irrigation systems, as recommended in the National Water Policy announced by the Government of India in 2002, for ensuring sus ta inable inter-sectoral allocation and more efficient use of the increasingly scarce water resources.

(h) In 1999, no less than 57% of the net irrigated area in India h a s used most ly electr ic p u m p s for r a i s ing groundwater. Electric power has been supplied to farmers in India at about 80% subsidy, compared to 15% subsidy in Bangladesh and 180% charge in Pakisthan. This has led to over-use of electric pumps , leading to declining groundwater tables and causing severe financial crisis in State Electricity Boards and even fiscal crisis in many state governments. This subsidy in 2001-02 has been assessed at about Rs. 18,000 crores per year : several multiples of the total expenditure on extension, research and other farmers' services. This has crippled the state electricity boards , disrupt ing irrigation water supply, lowering farm productivity and eventually making farmers unwilling to pay even the highly subsidized charges. A constructive dialogue has to be mounted to convince the farmers about this suicidal situation and the need for right-pricing of electricity for sustainable electric supply and long-term positive development. This is the single biggest challenge facing the public sector.

CROP INPUTS : SEEDS AND FERTILIZERS

10.17 Revolutionary changes are taking place in crop technology through improved seeds and fertilizers. India needs to harvest such evolving technology subject to environmental and other safeguards.

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10.18 While the Green Revolution in mid-1960s led to a Jump in the po ten t i a l yields of paddy, whea t and maize, r e sea rch breakthroughs in 1990s and subsequently hold promise of large breakthroughs in several crops, particularly through genetically modified seeds. Between 1996 and 2001, the global sales of genetically modified (GM) soybeans experienced a 100 fold increase, of maize 36 fold increase and of cotton 14 fold inc rease . While cau t ion on the impac t of GM seeds is warranted, the available evidence shows that this is the shape of future technology. India should seriously engage in the debate on GM seeds, in order to get the best benefit with appropriate caution.

10.19 It is estimated that only one fourth of the demand for high quality seeds is met presently. Progressive seed producers find the legally prescribed certification process too bothersome. A creative via media has to be found to encourage enterprising and farmer-friendly organizations with integrity to produce high quality seeds without irksome restrictions.

10.20 The National Agriculture Policy of 2000 has made several recommendations for the development of seed industry (see paragraph 5.8). These need to be implemented in a manner acceptable to reasonable seed producers and fulfilling the interest of the farmers.

10.21 One important initiative for early 2 P ' century would be to h a r n e s s the cons iderab le powers of Biotechnology in enhancing crop productivity by removing constraints and protecting crops against biotic and abiotic s t resses . The technology involves recombinant-DNA processes, exploitation of hybr id vigour, so lu t ions to pes t and weed prob lems , improvement of product quality, elimination of residues of plant protection chemicals, etc. Biotechnology research is extremely costly; and hence, careful selection of objectives, formulation of projects, monitoring of results, appraisal of public benefit and commercialization of technology products would need priority attention. The present "Command Control Structure" in the public domain of seed sector needs to be rep laced by empowered pa r t i c ipa t ion by i n d u s t r y and simplified modalities of legislation and policy.

10.22 Another important challenge in seed sector is the development of a strategy to harness globally developed seeds, which have great potent ia l for benefiting Indian farming. A p a t e n t

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protection system, which would meet the specifications of World Trade Organization, which would be of significant benefit of Indian farmers and yet would yield at t ract ive returns to the international seed suppliers, is the need of the hour. Legislations relating to patents , protection of plant varieties and farmers' rights and biological diversity have an important role to play to protect India's interest. The four-fold benefi ts highlighted by Mr.Raju Barwale, a noted seed industrialist need to be borne in mind (vide para 5.18).

10.23 The per hectare consumption in 2002-03 of fertilizer in India reached an average of Rs.85 kgs per hectare. It is paradoxical that Chinese farmer uses 3 times the fertilizer vis-a-vis the Indian counterpart despite the fact that the fertilizer is not subsidized in China; and it is subsidized to the extent of more than 20% in India costing Rs. 12,600 crores in 2003-04. Environmentally sound and efficient fertilizer use in India requires gradual reduction of subsidy by, say. 2010 and increasing the returns to fertilizer use. This requires integrated and scientific plant nutrient use through four fold strategy of (a) on-site nutrient resources generation: (b) mobilization of off-site nutrient resources; (c) resources integration; and (d) r e s o u r c e s m a n a g e m e n t {see p a r a 5.27). This cal ls for strengthening of soil testing and counseling services, use of bio-fertilizers and better micro-management involving the time, dosage and methodology of use of different plant nutrients at different stages of the crop growth. The gradual phasing-out of the large fertilizer subsidy in the course of the next five years poses a great challenge to the agricultural extension system, since the farmers would not pay a higher price for fertilizers without a larger accrual of benefits, mostly due to bet ter technology of fertilizer application.

CROP PROTECTION

10.24 The Nat ional Agr icul ture Policy 2000 u n d e r l i n e s t he importance of integrated pest management, including the use of biotic agents , in order to avoid indiscr iminate use of chemical pesticides, since the lat ter can reduce the biodiversity of the natural enemy and can promote outbreak nf secondary pests, as well as plant resistance to pesticides and contamination of food and eco-system. However, a judicious mixture of chemical and biological approaches has to be followed to reduce the a n n u a l crop loss , e s t ima t ed a t Rs. 50,000 crores in the country in the year 2000. Bio-

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intensive integrated pest management needs to be promoted, involving the conservation and augmenta t ion of na tu ra l enemies of crop pests, as well as adoption of all compatible cu l tu ra l , mechanica l , physical and genetic approaches , selective chemical pesticides, tolerant varieties, etc. Modern genetic engineering tools should be utilized to transfer desired genes from wild plant relatives to enhance resistance to pests and diseases. Research system should increasingly target c u l t u r a l p rac t i ces in crop p roduc t ion , for mak ing the environment less favourable for survival, growth, reproduction of several pests.

10.25 In the early 21^' century, greater emphasis is needed on regulated chemical and biological measures for dealing with the pest problem. Some of these measures include training of farmers for judicious use of such chemicals, greater focus on botanical pesticides and biological measures such as natural enemies of pests.

10.26 The legal framework for enhancing plant protection includes better focused laws on destructive insects and pests, as well a s on insecticides; it needs cons tan t upgrading to meet evolving challenges. The regulations on manufacture, sale, transport, use of other activities under the Insecticides Act need to be regularly reviewed to upgrade their effectiveness and to efficiently fight adulteration of pesticides.

AGRICULTURAL MACHINERY AND IMPLEMENTS

10.27 India's farm mechanization policy aims to promote the use of efficient tools, implements and machines, which can raise farm productivity and reduce unit costs without large-scale replacement of human labour. The ICAR has to continuously improve location-specific technologies for increasing the energy efficiency and reliability of farm implements and machines, so that the use of farm power can be increased from the present level of 1.15 lakh kW per hectare to 2.00 kW per hectare by 2015.

10.28 Several steps need to be taken to reduce the alarmingly high pos t -harves t losses of annua l Rs.82,000 crores through scientific use of different kinds of agricultural machinery. The future strategy should include conservation tillage minimizing the requirement of energy, while making the most of available soil moisture and reducing the turn-around time between two crops, all through the use of efficient machines . Several

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machines like micro-processor based irrigation control, bio-gas equipment, drying and dehydration equipment, sprinklers, drip and ferti-gation as well as the use of information technology can subs t an t i a l l y inc rease the r e t u r n s to the farming enterprises. Remote-sensing technology has increasingly helped in improving m a n a g e m e n t of surface and g r o u n d w a t e r resources. Precision-farming technology developed at National Remote Sensing Agency, Hyderabad has shown great promise in adjusting the application of inputs, taking into account the in-field variability of soil and crop conditions, leading to greater productivity. Developments in space technology hold great promises in improving the efficient management of our natural resources.

AGRICULTURAL CREDIT AND INSURANCE

10.29 Fu r the r growth in farm ou tpu t will depend on sizeable expansion in credit support of the order of annual 40% to enable use of larger quantities of farm inputs, machinery and irrigation. The Government of India has pledged to double the growth of credit supply in the three years ending 2006; but success will depend upon enhancing repayment performance to the order of 90% : the actual level in many States in early 2000 ' s h a s been u n d e r 60%. A revolut ion is needed in political, administrat ion and managerial cul tures for the critical five steps needed : lending adequately on the basis of a r a t iona l farm plan , s t r ic t enforcement of r e p a y m e n t discipline, integration of short-term and long-term institutions, removal of political extraneous interference and adoption of modern management practices. Innovative mechanisms like Kisan Credit Cards and Self-Help Groups should be expanded on sound footing. Speedy development of rural infrastructure is basic to the desired 5% annual farm growth. Some of the other critically needed measures include market-based price-realization, sound technology extension, efficient post-harvest and value-addition operations, effective legal enforcement measures and supportive infrastructure. The Farm Income Insurance Scheme introduced in 2003 needs to be improved in the light of experience, to provide effective income support to farmers, particularly of weaker sections, to cover several farm-related risks.

AGRICULTURAL MARKETING AND PROCESSING

10.30 The prevailing system of regulated markets has mostly failed to serve the interests of small and marginal farmers, who

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form the majority of the farming community. The model agricultural law formulated by the Ministry of Agriculture in 2003 builds on the lessons of bitter experience; and the liberalized provisions in this proposal need to be implemented to minimize irksome restrictions and to maximize free and fair m a r k e t i n g p rac t i ce s , inc lud ing con t r ac t farming, s tandardizat ion of grading, quality certification, etc. The Cen t ra l and S ta te Governments should not r epea t the extremely costly errors of excessive price support measures in 1990s, caus ing the withdrawal of the prevailing market mechanism and to the extremely costly stocking of huge quant i t ies of the order of 60 million tonnes by the Food Corporation of India. State Food Corporations should be encouraged with due incentives to share the price support responsibility cast on the Food Corporation of India.

10.31 The food i n d u s t r y h a s to r ise to the chal lenge of the increasing sophistication needed to meet the burgeoning demands of consumers, for better value in terms of taste, storabllity, etc. It has to work increasingly in coordination with food technologists (as in the Central Food Technological Research Institute, Mysore City) for this purpose : more so in t he s p h e r e s of dairying, ho r t i cu l tu re and f lor icul ture . Government and agricultural processing industry need to work together closely for improvement in six spheres : research and development, processing systems and machinery, consumer surveys , marke t development, t r anspor ta t ion and t rade development.

LIVESTOCK AND FISHERY

10.32 India is the largest producer of milk in the world (86.4 million tonnes in 2003-04) ; but it enjoys a very small part of global t r a d e due to an inabi l i ty to p roduce milk p r o d u c t s of internationally accepted grade. The dairy cooperative system ("Operation Flood") deserves continuing national support for further development on cost-effective and quality sensitive basis. This requires constant upgradation of our cattle wealth in terms of productivity, quality, scientific breeding, feeding and veterinary support.

10.33 India holds the sixth rank in the world in overall fisheries production; and in inland fisheries, the second. Reforms needed in marine fisheries Include regulation of common property rights in the sea, scientific exploitation of common

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fishery products , faster motorization of ar t i sanol crafts, manpower development in R&D, development of infrastructure like fishery harbours, berthing facilities, etc.

10.34 The average jaelds in inland fisheries can be increased five to six t imes with improved planning and development. The output of carps, which account for 82% of the fresh water output, can be stepped up threefold through the adoption of a range of technologies like pen-culture, cage-culture, running water fish culture, sewage-fed fish culture and integration with poultry, duckery, piggery cultures. The productivity of b rack i sh water fishes like sh r imps can be significantly increased through cultural techniques like water-exchanges, aeration and fortified artificial feeds. Special efforts are needed to strengthen the observance of sanitary and phyto-sanitary m e a s u r e s prescr ibed by FAO and WTO. Efforts shou ld continue to develop genetically superior fish breeds, more efficient feeds as well as efficient management practices in order to step up jrields.

INTERNATIONAL TRADE IN AGRICULTURE

10.35 India ' s t r ade protect ion policies for over 40 yea r s after Independence have cost it dear in terms of development. The t rade prospects for developing countries have been made worse due to restrictive trade policies by several developed countries in their agricultural sectors. The provisions relating to tarrification, domestic support and export competition in the Agreement on Agriculture in the Uruguay Round seek to liberalize trade in favour of efficient agricultures amongst the developing countries. Professor Ashok Gulati has made five recommendat ion for liberalizing t rade for the benefit of developing c o u n t r i e s : (a) abol i t ion of all q u o t a s a n d quantitative restrictions on trade; (b) replacement of specific ra tes of import dut ies by ra tes on ad valorem bas i s ; (c) maximum 50% tariff binding; (d) reduction of tariffs along each tariff line; and (e) negotiation for commodities bond at zero tariff earlier to rain it to 50% tariff bindings.

10.36 In the continuing negotiations relating to domestic support, India should seek six changes :

(a) ceiling for total AMS should be 40%;

(b) reduction commitment on domestic support should be both on total AMS and on each product-specific support;

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(c) for estimating total AMS, both product specific and non-product specific support should be added.

(d) While "green box measures" should be exempt from (b) reduction commitments, "blue-box measures" should be included in the AMS subject to reduction commitments.

(e) India should join the Cairns Group led by Australia to make common cause for gain and j u s t t r ea tment for agricultural trade.

(f) The period 1996-98 should replace the period 1986-88 for the base period for calculations of AMS.

10.37 On export competition, India should seek complete banning of export subsidies.

10.38 Indian agricultural exports hold great promise If several steps are taken : free exportability removing canalization and restriction, removal of procedural restrictions, establishment of agricultural export zones, tax sops and investment credit for farm export activities, etc.

CONCLUSION

10.39 Now we have come to the end of our j ou rney , in the exploration of a managerial strategy for developing our farm sector, in the early 21®' century. Farm development has seen the great impact of technological, economic, managerial and social innovations in the last decades of 20'^ century. Many of these influences will continue in the early 2 P ' century. The gathering momentum of internationalization in all social and economic forces will have its impact on the farm sector, as well as the phenomenal advances In agricultural sciences. Greater internat ional mobility of technology, capital and population will influence our farming systems beneficially, if we open up our heads and hearts to them.

10.40 Indian policy-makers would do well to remember that without careful targeting of public subsidies in our farm sector, valuable resources will have been frittered away; and the social agenda for the benefit of small and marginal farmers would remain sterile. Hard-headed policy choices have been r ecommended in the foregoing c h a p t e r s to achieve technological excellence, economic gains, managerial efficiency and social justice, in our agricultural sector, in the early part of the 21®' century.

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REFERENCES

1. 9* Plan, Planning Commission, New Delhi.

2. Economic Survey, Ministry of Finance, Government of India, 2001-04.

3. Annual Reports of the Department of Agriculture and Cooperation, Ministry of Agriculture, 2001-04.

4. The Hindu Survey of Agriculture, 2001-2004.

5. Journal of Agricultural Finance Corporation, Mumbai, 2001-04.

6. Occasional Papers, Published by NABARD, Mumbai.

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