Go for PPPs in agriculture

India today is on the brink of a conundrum, brought about by the unusual ‘problem of plenty'. In a country still reeling from the effects of high food inflation, the sudden surge in agricultural output is bringing with it a unique set of challenges.

While on the one hand rural purchasing power has gone up in the recent past, it should be admitted that this affluence is limited and hasn't percolated deeply. We still have distress continuing in several States, resulting in farmers declaring a crop holiday, due to the fact that the cost of production is still higher than the minimum support price.

PROCUREMENT MECHANISM

A key part of the current problem lies with the State procurement system. Despite strengthening of the procurement mechanism of the State government, thousands of farmers have been waiting in line for their produce to be sold. When farmers are unable to wait longer, they are forced to sell their precious crop to traders for less than the minimum support price (MSP).

According to several reports, the procurement price of wheat has fallen in several parts of Gujarat, Bihar, and eastern UP, and it is less than the State-set MSP. The situation is no different for some other crops like sugarcane, cotton and rice. The low price is already hitting small and marginal farmers, as they don't have holding capacity.

One of the best ways to achieve foodgrain management is by frequent procurement and distribution; produce should be sold to a large number of small traders and consumers, in small batches, as compared with the present system of bulk procurement and distribution being followed for a few months.

UNRELIABLE DATA

The farm data in our country has been really shocking, to say the least. Recently, it was reported that we exported coffee much more than what the Coffee Board reckoned the production for the entire year would be.

The research report, published by Kotak Bank in August 2011, gave very detailed information regarding the areas sown crop-wise, as well as the water level in the various reservoirs. With various such reports, the Government should be able to predict, with reasonable accuracy, the expected output at least for the next season, and formulate the policy for export.

In the last Budget, we announced that we will make use of remote-sensing technology, to improve the reliability of our data collection, which would enable decision-making in a more scientific manner, which hasn't happened so far.

Interestingly, the Deputy Governor of RBI recently commented that, while agricultural credit has grown, it is more from the urban and metropolitan branches of the banks, which raises the question as to which segment the credit is actually flowing to.

As per the report, the share of rural credit in agriculture has come down from 58 per cent to 38 per cent, while the share of metropolitan credit has gone up, which will not add to productivity. Little is known regarding agricultural credit to various crops, horticulture, allied activities, even on a consolidated basis.

It is sad to note from RBI, that not only has the flow of farm credit gone down but the sector which is getting the credit is also not known.

It is imperative to collect data sector-wise, so that remedial action can be taken.

PROGRESS IN GUJARAT

According to a research report, between 2001-10, Gujarat has recorded an agricultural growth of 10.97 per cent. Steps like investment in agricultural infrastructure to improve the irrigation system, use of the latest technologies, and establishment of a dedicated power grid to ensure regular power supply for the agricultural sector are major reasons for the high agricultural growth rate. Efficient management of groundwater resources is a major aspect of Gujarat's agricultural miracle, raising yields and reducing cultivation costs.

Farmers in the State have adopted increased mechanisation, as well as the use of high-end implements to increase productivity. It has not only enhanced income, but also discouraged them from migrating to urban areas for jobs. The other States should also focus on small irrigation projects and watershed facilities, which are cheap and affordable.

PPP MODEL

Considering the potential for growth in agriculture, there is an urgent need to focus on the PPP (Public-Private Partnership) model, with the participation of local people. The social equity in product or and ownership by farmers are the best mantras for getting confidence as well as implementation.

India is a major producer of sugar globally; yet we occasionally import sugar to meet the shortfall in domestic production and consumption. The primary reason for the shortfall lies in uncertainty in sugarcane production. The production environment is such that it does not encourage wider corporate interests. The sugar industry is not known to have taken required adequate interest in promoting the cultivation of sugarcane, barring a few leading corporates, due to insufficient supporting policy framework and excessive political interference at the state level. Perhaps, this is true even for cotton. There is a great scope to increase the production of processed food, if we can bring the industry near the place level of horticulture production.

The social equity model derives itself from the basic PPP approach for the infrastructure sector that is based on Build-Operate-Transfer (BOT). This model represents a shift away from the regular grant and subsidy model, to one based on PPP. Most often, this equity would also need to be provided, directly or indirectly, by the public agency; however, ultimately, it will be the individual members of the community concerned who will have stake in the project.

The model focuses on involvement of all stakeholders. Since landholding in India is fragmented, we should follow a different approach (aggregation of small landholdings) without disturbing the ownership, to increase the productivity in agriculture.

(The author is Co-Chairman – Agriculture Forum, CII (Southern Region) and CFO, TAFE. The views are personal.)

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