Surplus or shortage: Proactive policies needed to serve farmers' interest

Experts call for a change in the narrative towards more diversified high-value production, better prices for farmers, marketing reforms, eco-friendly cultivation, among other things

The southwest monsoon of 2018 was over nine per cent below average. An additional fall of 1-2 percentage points would have easily classified 2018 as a monsoon-deficient year as per the parameters set by Indian Meteorological Department (IMD).

Normally, such a huge shortfall in average rainfall should have led to big drop in production. However, the first advanced estimate for 2018-19 projects a different scenario, pegging foodgrain production at almost 142 million tonnes, which will not only be 0.6 per cent more than that in 2017, but could also be a new record.

While subsequent estimates might lower the final output, given that the first estimates are usually a preliminary assessment of the crop, the data does indicate another year of bumper harvest in several crops.

And if India finally reaps a big harvest in kharif 2018, this will be third consecutive year of big rise in kharif foodgrain production starting 2016-17. The years 2014 and 2015 were drought years.

A big reason for the rise in production, though, is that the monsoon shortfall was largely restricted to eastern and north-eastern parts of country, which aren't major contributors to farm output.

However, given that rainfall in some western and central parts of the country has also been deficient and almost 31 per cent of the country received ‘below normal’ showers, the rise in production also points to waning influence of monsoon on farm production.

Eminent farm economist and Director of Indira Gandhi Institute of Development Research (IGIDR), Mahendra Dev, said in a recent lecture at the Annual Conference of the Indian Society of Agricultural Economics, that the coefficient of variation in agriculture has declined from 2.76 per cent between 1961 and 1988, to 1.87 per cent between 1988 and 2004 and to 0.75 per cent between 2004 and 2014.

This shows that volatility in agricultural growth has been declining and has been quite low the past decade.

That apart, Indian farmers are also increasingly responding to price signals as a reaction to low prices fetched by them the past few years.

However, given that almost 50 per cent of Indian agriculture is still rainfall-dependent, while the country lacks basic storage facilities in many crops and has an inconsistent trade policy, surplus situations can at best be temporary and could turn into shortages in a matter of just a few months.

A big case in point is 2018-19 sugar production. From a high of over 35 million tonnes projected a few months back, the output now is estimated to be somewhere in the range of 30 million tonnes. This would not only be almost a 17 per cent lower estimate in just few months, but could be even 7 per cent lower than last year’s actual production.

All this has happened because a significant part of Maharashtra’s sugarcane growing belt received less than adequate rainfall in 2018 and the standing crop has also been impacted by grub infestation.

Clearly, surpluses can turn into shortages in a matter of few months and, possibly, even weeks in India.

Data of the past 10 years, sourced from a range of official sources, shows that except for wheat, rice and, to some extent, sugar, the production of most food crops has fluctuated sharply, depending upon that year’s rainfall distribution, price and trading curbs (milk is the sole exception, with production increasing even in drought years).

Take the case of pulses. Before the current surge, India reached its highest-ever production of pulses at 19.25 million tonnes in 2013-14, but two consecutive drought years pulled the output down to 17.15 million tonnes in 2014-15 and 16.35 million in 2015-16.

As a result, the prices of some pulses, mainly arhar, had touched almost Rs 200 per kg before the government intervened by fast-tracking imports and even scouting for countries in Africa to grow pulses for Indian consumers.

And all this happened just few years back. In other words, it could happen again unless India finds a major technological breakthrough, such as the new arhar variety, PUSA-16.

Whether the issue is that of surplus or of shortage, India’s policies need to gear up to handle both these problems more efficiently and effectively to ensure that farmers don’t stand to lose as has been the case the past few years.

“We seriously need to re-orient our policies from production-centric to export-oriented and identify specific markets and products that have export potential and grow only those crops,” P K Joshi, Director for South Asia, International Food Policy Research Institute (IFPRI), told Business Standard.

He said markets such as Africa and East Asia should be tapped more effectively to export surplus Indian 

agriculture produce, which could solve the problem of excesses, but for that to happen export tariffs and policies should be more farmer-centric rather than consumer-focused, as has been the case so far. States should play a bigger role in this and come out with clear strategies to boost export of farm products.

“In the case of imports, though, we need to cautious as there is production surplus,” Joshi said.

In a recent discussion with Business Standard, Ashok Gulati, Infosys Chair Professor at ICRIER, also said that to deal with surpluses, the government needs to abolish the Essential Commodities Act (ECA), allow the private sector to hold stocks and enable organised retail.

The issue also requires contract farming, especially in perishables, bypassing the ‘Mandi’ system and pushing through reforms of the Agriculture Price Market Committees (APMC), which are long overdue.

“Only then can one hope for some structural turnaround. Short-term fixes of export subsidy or government stocks may not help much,” he said.

Mahendra Dev of IGIDR, meanwhile, points towards the need for a more fundamental change in the country’s approach towards agriculture.

“Basically, we have to change the narrative on agriculture towards more diversified high-value production, better remunerative prices and farm incomes, marketing and trade reforms, high productivity with fewer inputs, and lesser dependency on chemicals and pesticides. Farming should be inclusive and embrace women, youth and small farmers. It should be nutrition sensitive, environmental-friendly and sustainable,” he said.

The five ‘I’s in agriculture: Incentives, Investment, infrastructure, Institutions, Information’ have to be modified to achieve the goals, Dev added.