The Hindu Business Line : Sow the right strategies

The farm sector grew at just 1.8 per cent per annum during the Tenth Plan period against the targeted four per cent. Stepping up public investment alone is unlikely to yield the desired results. It is time to rework the strategies with a sharper focus on irrigation planning and water management, revamping extension services, strengthening the farm credit institutions and greater reliance on contract farming, says S. D. NAIK.

— R. Shivaji Rao

Expanding irrigation is vital for the farm sector.

Reversing the sagging fortunes of the ailing farm sector is the major challenge facing the policy-makers today. As the Prime Minister, Dr Manmohan Singh, has aptly put it: “Reversing the prolonged slowdown in this sector is essential for our goal of inclusive growth, for ensuring that growth benefits all sections of society and all regions of the country.”

The agriculture sector still employs over 60 per cent of the population but its share in GDP has gone down to 18.4 per cent. The sector grew at just 1.8 per cent per annum during the Tenth Plan period against the targeted four per cent, impacting food security and accentuating rural poverty. To provide a boost to the ailing farm sector, the Prime Minister has announced a Rs 25,000-crore investment plan, to be executed over the next four years.

However, stepping up public investment in agriculture alone is unlikely to yield results. It is time to rework the strategies with a sharper focus on irrigation planning and water management, revamping extension services, strengthening farm credit institutions and shifting to contract farming.

IRRIGATION PLANNING

Expanding irrigation facilities is vital for the farm sector. As of now, irrigated land in the country, which total only 47 million hectares, produces 56 per cent of foodgrains while the rain-fed 95 million hectares account for the balance. Assuring water supply to this vast un-irrigated area can not only provide a big boost to agricultural production but also help the majority of farmers come out of abject poverty.

Unfortunately, despite spending huge amounts, the country has failed to tap the vast irrigation potential because of faulty planning, overwhelming importance given to large projects and poor governance. According to the Ministry of Water Resources, several of the 471 irrigation projects that spilled over to the Tenth Plan have not been completed. These, along with another 300 new projects proposed by the States during the Tenth Plan period, would require an estimated Rs 207,106 crore to be completed.

Even the Accelerated Irrigation Benefits Programme launched in 1996 and the Bharat Nirman Programme launched in 2005-06, under which irrigation was a key element, have failed to make a difference. The outcome of both the programmes has been disappointing with the actual implementation being less than 25 per cent of the target.

With most mega-irrigation projects proving to be a drain on the economy, there is an urgent need to adopt a new model that would concentrate on decentralised minor irrigation projects focussing on local water resources instead of large dams. The Government would do well to go for district-level planning for irrigation projects, including water harvesting and appropriate management of all available resources.

EXTENSION SERVICES

Agricultural extension, an important vehicle for transmitting new technologies and knowledge from lab to farms, is in a shambles. The extension services network suffers from funds crunch, under-staffing and poor governance. It is not decentralised enough to cover each of the agro-climatic zones so as to gather proper feedback from the field and prepare response plans.

As of now, there are only about 50,000 village- and block-level extension workers, many of whom are departmental promotees with no particular expertise or training in extension. There is an urgent need to create a cadre of trained and dedicated extension workers to bridge the knowledge gaps.

At present, there is a significant unmet demand for information. Most farmers want advice on input use, pest and disease control, general agronomic practices, livestock management, soil and water conservation, and so on.

AGRI-CREDIT

Notwithstanding the efforts by the Centre and the Reserve Bank of India over the past few years to accelerate the growth of institutional credit to the farm sector, the overwhelming majority of Indian farmers, indeed the rural population, still has only limited access to formal finance sources. The problem is particularly severe for small and marginal farmers, who are among the poorest. As per estimates, almost 87 per cent of the marginal farmers and 70 per cent of small farmers have no access to credit from a formal financial institution.

According to Dr M. S. Swaminathan, Chairman, National Commission on Farmers, credit reform is the key pathway to enhancing small farm productivity and ending farmer suicides. He suggested that keeping in view the decline in the profitability of agriculture and the farmers’ distress, the government should consider providing support to the banking sector for providing low-interest crop loans.

Incidentally, the World Bank has come forward to improve credit access to the farm sector. In one of the largest support packages announced on June 27, the Bank has approved a $600-million loan to India aimed at transforming farmers’ access to financial services. The project is in support of the Government’s programme to revitalise rural co-operative credit institutions. The country should make good use of this package to strengthen the rural credit system.

CONTRACT FARMING

A bright spot on the otherwise cloudy horizon is that the private sector is now looking at rural areas as a potentially important market and is keen on increasing its investments in the hinterland, thereby opening up opportunities for farmers. In this context, the private corporate sector is looking at contract farming to provide a proper linkage between the farm and the market.

Apart from big players such as Hindustan Lever, ITC, Pepsi Foods, the Tata group, Reliance, and Mahindra and Mahindra, a few mid-size companies have initiated backward integration with the farm sector.

The idea is to cut out the middlemen for the benefit of both the parties. The retail revolution that is underway, involving such giants as Wal-Mart, Reliance Fresh, ITC, the Birla Group, PepsiCo, Big Bazaar, and so on, is expected to provide a big push to contract farming in the coming days.

The coming together of Hindustan Lever, Rallis and ICICI for contract farming in wheat in Madhya Pradesh provides a good example of the great potential in this area. Under the system, Rallis supplies agri-inputs and knowhow; ICICI provides credit to farmers, and HLL buys the output.

A big push to contract farming will bring in private investment into the farm sector in a big way, provide a linkage between farm and food processing, eliminate middlemen and help transform agriculture into a viable and remunerative activity.