Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004
Industry & Economy
Agri-Biz & Commodities - Cultivation
Govt to facilitate crop diversification
Mumbai , July 8
CROP diversification, a pet theme recurring in the speeches of all finance ministers in recent years, found place in the United Progressive Alliance' s first Budget presented by Mr P. Chidambaram.
"Time has come to encourage farmers to diversify into areas such as horticulture, floriculture and oilseeds," he pointed out adding that oilseeds is a critical area as last year, despite production of 25 million tonnes of oilseeds, the country imported edible oils worth $2.5 billion (over Rs 11,500 crore).
The Finance Minister has assured that the Government will facilitate farmers to diversify into oilseeds by promoting superior seed technology and through an appropriate policy of price support. It is not clear if the Government has a specific action plan to boost production and productivity of oilseeds; most probably it has none.
Experts in the Government are aware of the serious limitations to raise the output. Absence of breakthrough in seed technology, dependence on monsoon (lack of irrigation) and cultivation in small and marginal lands are the main causes for low yields (less than one tonne per hectare versus global average of 1.6 t/ha).
If a part of the 26 million hectares under oilseed cultivation has to shift to irrigated lands, the price realised or income earned by growers should be attractive; in any case, no less attractive than growing fine cereals, wheat and rice.
At the same time, it must be borne in mind that higher oilseed prices will push domestic edible oil prices higher and hurt consumer interest. So, there is an inherent conflict here. Mr Chidambaram has proposed to deploy an appropriate policy of price support. We need to wait and watch.
Importantly, higher prices by themselves are unlikely to ensure higher production. Under Indian conditions, the production response to prices is rather limited as farmers face several constraints in raising output.
Therefore, a holistic approach to addressing the issues confronting the oilseeds sector is necessary. Not only raising production and productivity of oilseeds, but also improving the quality of output as well as raising the efficiency of processing industry deserve attention.
The oilseeds processing industry is highly fragmented with a large number of small and medium crushing units, solvent extraction plants, refineries and vanaspati units.
Horticulture: The Finance Minister wants Anand Model of marketing through cooperative societies followed in case of fruits and vegetables, similar to milk and milk products. He has proposed a National Horticulture Board with the goal of doubling horticulture production from the present level of 150 million tonnes to 300 million tonnes by 2011-12.
The success of such efforts is to a large extent dependent on the active cooperation of State governments. Higher production of fruits and vegetables should be supported with creation of adequate rural infrastructure in the form of warehouses, cold chains, primary grading/sorting facilities and so on.
The fruits and vegetables processing units in the country numbering over 5,000 are small and fragmented. More investments are necessary in setting up modern, large-scale processing plants. A glut in the market and price collapse is the last things a grower wants.
Private sector should be encouraged to enter into contract farming arrangement with growers of oilseeds and horticulture products so that the marketability of the produce improves
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