Tuesday, 21 July 2015

Agriculture Distress | Reasons and Solutions

Background
  • Global Slowdown yet India remains a bright spot; but agriculture remains a concern.
    • Jaitley promised that as tax revenue goes up, an increasing share would be spent on building a strong and vibrant agricultural sector. 
  • Nabard
    • estd: 1982 (33 years in 2015)
    • Functions like: 
      • Extending rural credit for myriad programmes ranging from rural roads and irrigation under the Rural Infrastructure Development Fund (RIDF)
      • Building value chains with farmer producer organisations (FPOs) and micro-finance initiatives. 
      • Latest - First national implementing entity (NIE) of the Green Climate Fund (GCF) of UNFCCC. 
        • As an NIE, Nabard is supposed to lead and promote work on climate change adaptation and mitigation, especially in agriculture and rural development activities. 
    • First three years of the 12th Plan (2012-17), the average rate of growth in agri-GDP has been a mere 1.7 per cent against a target of 4 per cent --> Agrarian distress --> Cause of concern
      • Nabard chose “mitigating agrarian distress and enhancing farm income” as a suitable topic for discussion, which was inaugurated by Jaitley. 
  •  In discharging its role as a facilitator for rural prosperity NABARD is entrusted with
    • Providing refinance to lending institutions in rural areas
    • Bringing about or promoting institutional development and
    • Evaluating, monitoring and inspecting the client banks
    Besides this pivotal role, NABARD also:
    • Acts as a coordinator in the operations of rural credit institutions
    • Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development
    • Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development
    • Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development
    • Acts as regulator for cooperative banks and RRBs
Take aways from the above lecture (very important as the content is by several brilliant speakers who have devoted their lives to Indian agriculture and rural development.) 
  • What are the root causes of agrarian  distress today? 
    • Monsoons
      • Monsson 2014 a drought followed by unseasonal rains -->  damaged to rabi crop
      • Falling global agri-prices -->  Domestic farm prices fall (e.g. roce, corn, sugar, groundnuts etc.) --> Farmers' income falls --> no servicing of loans --> demands for a loan waiver. 
    • Other reasons
      • Small and fragmented holdings, 
      • excessive specialisation 
      • Input intensification of agriculture
      • Restrictive markets
      • Fertilizer subsidy
        • Geographical biasness in agriculture (PB, HRY, Western UP)
          • fertilisers we need more water.
          • Focus of fertiliser subsidy is on Nitrogen (as Urea is still under statutory price control) --> So subsidy mainly benefits the areas which are deficient in Nitrogen. Thus geographical biasness created
Solutions related to water -->  water management.
  • Focus on water for irrigation
    • Make irrigation cost-effective to drought-proof agriculture and manage our water resources more efficiently. But water has its problems
  • Water & electricity is highly subsidised and at places even free —> naturally farmers go for water-heavy crops like rice and sugarcane, wherever they get access to water --> these two crops are being produced in excess of domestic requirements --> So exports --> India exported 12 million metric tonne of rice in 2014-15 --> we are the largest exporter of rice for the third year in a row and Sugar is also in plenty, but cannot be exported due to low global prices --> Major crisis in the sugar industry of cane arrears touching unprecedented levels of Rs 21,000 crore --> This above in total means exporting billions of cubic meters of scarce water --> This must be rationalised through innovative policies that can reward farmers for saving water (and power) and diversifying away from water-guzzling crops. 
    • Now Nabard can take up this challenge, of managing water, under its new role as an NIE of the GCF by promoting sustainable and more diversified agriculture and it could have a high pay-off. 
  • What is government doing in this regard?
    • The government has taken a right step by raising the funding of the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) to Rs 50,000 crore for the next five years --> PMKSY consolidates the watershed management and accelerated irrigation benefit schemes --> more money can be expected.
Solutions for other problems relating to farm distress
  • SNT and Innovation
    • For more crop for every drop of water, Nabard can spearhead the promotion of innovative farming practices (such as the system of rice intensification and precision farming) and technologies (like drip and check dams) through its network of NGOs and FPOs
  • Insurance
    • irrigation will take some time to deliver so immediately work on this
    • Overhauling the existing crop insurance system to make it more robust and responsive to farmers’ needs and that the government is currently working on this. 
  • Market Reforms
    • Markets have a consensus that we need to organise farmers into groups (FPOs, cooperatives or any other form) --> it leads to create scale, and integrate them with commodity value chains. 
      • For building value chains and ensuring farmers get their due share, a lot of market reforms will be needed
        • Changes in the APMC regime
        • Building infrastructure (rural roads, warehouses etc). 
          • Nabard is already doing quite a bit of work in this area and could scale up its operations to make sure that farmers get a good remunerative price for their produce. 
  • Building value chains can also create millions of off-farm jobs within the rural economy. 
  • Problem with FPO
    • Linking FPOs to front-end organised retailers or food processors will be a challenge as both are at a nascent stage and many states do not even allow organised retail. 
    • The announcement of an e-national market by the government cannot take off unless several of these hurdles are cleared and grading of products introduced from the beginning. 
  • Fertilizer subsidy management
    • already done - made nutrient based for P and K but should also bed one for N
    • Soil Health Card Scheme will make farmer aware of which fertilizer to use in which crop and soil. 
Conclusion
Thus, in brief, agrarian distress can be relieved and farmers’ incomes enhanced with better irrigation and water management, more diversified agriculture, robust science-based crop insurance, as well as better access to markets. This will also help promote more sustainable agriculture. Nabard can surely contribute to achieving much of this.
Reference - The Indian Express

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