A Note on Agriculture & Irrigation

This note highlights the main issues and outlines the proposed action plan in respect of the following five major areas in Agriculture & Irrigation:

(1) Augmentation of water resources for irrigation;

(2) Conservation of irrigation water;

(3) Agricultural research & extension;

(4) Diversification of agriculture and reforms in marketing; and

(5) Institutional credit for agriculture.

I. Augmentation of Water Resources for Irrigation:

(A)Main Issues:

Nearly 40% of the available irrigation potential from major and medium irrigation projects in the country still remains to be exploited. Over 400 such projects were in the pipeline at various stages during the Ninth Plan period. When these on-going projects are completed, bulk of the remaining irrigation potential would have been exploited. Decline in public investment and the thin spread of resources over a large number of projects are responsible for the delay in the completion of these projects. The resource-poor states in the eastern and central regions account for the bulk of the irrigation potential remaining to be exploited. At the current levels of investment, the projects in hand in the country will take about 28 years for completion. Even for bringing it down to 10 to 15 years, the rate of investment will have to be almost doubled.

According to CMP, “irrigation will receive the highest investment priority and all on-going projects will be completed according to a strict time schedule”(P.4). CMP says further that “all existing irrigation projects will be completed within three to four years”(P.12).

Nearly 80% of the available potential from minor irrigation sources, consisting predominantly of ground water resources, has already been exploited. However, further progress towards the exploitation of the remaining potential hinges on the availability of electric power for pumping water in the eastern states where as much as 75% of their ground water potential still remains to be exploited.

The CMP promises that “the UPA government will launch a comprehensive national programme for minor irrigation of all lands owned by dalits and adivasis”(P.9).

(B)Proposed Action Plan:

The Advisory Council may discuss a credible time frame for completing all the on-going major and medium irrigation projects in consultation with the Planning Commission and the Ministry of Water Resources. For this, the NAC may obtain the information on:(1)the number of on-going major and medium irrigation projects;(2) their stages of completion, e.g. the investment already made and that needed to be undertaken for each project;(3) project location indicating whether it is a backward or drought prone area;(4)time schedule for completion of the projects; and (5)area to be irrigated from each project when completed.

Similarly, the NAC may seek information from the Planning Commission/Ministry of Agriculture on the proposed programme for minor irrigation of all lands owned by dalits and adivasis and any other programmes for minor irrigation of lands held by the small and marginal farmers in general. This may include information on the level of rainfall, existing potential for minor irrigation of such lands in different parts of the country, resources needed for this programme and the time schedule for its completion.

II. Conservation of Irrigation Water

(A)Main Issues:

Since water-use-efficiency for irrigation is very low in the country, achievement of water security depends not only on the exploitation of the remaining potential but increasingly on the efficient and productive use of available irrigation water. There exists a vast gap now between the knowledge available for improving water-use-efficiency and its actual application in the country. This is explained by the lack of incentives to follow improved practices under the existing system of management and pricing of water. When compared to the efforts towards augmentation of water resources through the irrigation projects and through rain water harvesting, the efforts towards conservation of available water resources through their efficient use have been negligible. On the contrary, the existing systems of water delivery and pricing encourage wasteful use of water.

Involvement of user-farmers in the management of irrigation systems at various levels is accepted the world over as an effective alternative to the present system of management by the government, as well as to privatisation. Participatory Irrigation Management(PIM) being experimented in the country towards this end has thrown up certain useful lessons: Unwillingness to devolve adequate powers to the Water Users' Associations(WUAs) and insufficient infrastructure for capacity building at grass roots level have inhibited the participation of user-farmers and impeded the growth of leadership at the local level. Therefore, there has to be a vigorous drive towards the empowerment of Water Users' Associations in the country by putting in place an adequate infrastructure for capacity building and for extending the coverage under PIM, as, at present, only about 15 percent of the net irrigated area in the country is partially covered.

The rising subsidies on irrigation water from canals and on electricity for pumping water have caused severe deterioration of the systems due to the neglect of their maintenance in addition to becoming fiscally unsustainable. Further, they have led to the highly wasteful use of canal water, ecological degradation from water logging, salinity and pollution, excessive consumption of electricity, and overdrawl of ground water resulting in the shortage of drinking water in several parts of the country. There is, therefore, an immediate need to reverse this process.

Awareness on the part of the farmers about the harmful consequences of rising input subsidies and their cooperation in pricing the inputs on a volumetric basis is essential for making the change-over politically feasible and sustainable. A possible solution is to evolve a system where the village communities develop a stake in the conservation of resources. As an experiment, Water Users' Associations and Panchayati Raj Institutions (PRIs) can be fully empowered and induced to charge and collect water and electricity rates from the farmers on the basis of the volume of actual consumption where metering is possible, or, on the basis of the quantities of water received or electricity consumed as estimated by the farmers' associations where metering is uneconomical or otherwise infeasible. In such situations, Panchayats can regulate the cropping pattern and the use of water for raising water-use-efficiency and productivity. The revenues so collected should be allowed to be retained wholly by the WUAs and Panchayats for maintenance and development of irrigation and rural electricity services.

Alternatively, a subsidy at a flat rate, say, on the estimated consumption of electricity on holdings upto one or two hectares, can be given to all the farmers or only to the small and marginal farmers, requiring them to pay for the extra consumption. This would have the merit of providing relief to a large number of deserving farmers in a manner that is politically feasible, even as there would be an incentive to conserve electricity and water.

The experience from the on-going watershed development programme for drought proofing of rain-fed agriculture by conserving land and water resources is reported to be encouraging, at least in the initial period of a few years following the adoption of new guidelines in the mid-1990s.The single most important factor accounting for the positive impact of this programme is community participation and decentralisation of programme administration made possible under the new guidelines. Yet, the present level of participation seems highly inadequate for sustaining this development, especially in areas where the programme has proceeded too fast by fulfilling the targets for completion of works without the required institution-building and leadership formation at the grass roots level. The coverage has, nevertheless, to expand through increased outlays, as only about 25% of around 107 million hectares of degraded land in the country is estimated to have been treated so far.

The situation calls for empowering people inhabiting the watersheds by delegating authority to their committees and user-groups. Mobilising adequate contribution from the land owning households on a regular basis for the maintenance of assets created, and ensuring equitable benefits to weaker sections, especially the landless poor, are essential for sustaining the movement. The second major task is creation of awareness and capacity building through training at various levels by entrusting this to an autonomous nodal agency at the national level and by guaranteeing adequate funding. Third, a major shift is needed in the existing policy for dryland or rain-fed agriculture by according greater priority to agricultural research and extension, supply of inputs, infrastructure development like roads and marketing and price and credit policies.

According to the CMP, “the UPA government will introduce a special programme for dryland farming in the arid and the semi-arid regions of the country. Watershed and wasteland development programmes will be taken up on a massive scale. Water management in all aspects, both for irrigation and drinking purposes,will receive urgent attention”(P.5).Further, “all existing schemes for drought-prone area development will be reviewed and a single major national programme launched”(P.15).

(B) Proposed Action Plan:

There is a need to review the working of the programmes for the Participatory Irrigation Management (PIM) in respect of surface irrigation as well as the Watershed Development Programmes in the drought prone areas under the new guidelines. It would be useful if the Planning Commission could take initiative to hold separate workshops on these two subjects involving Ministries of Agriculture and Water Resources, representatives of state governments, and concerned NGOs., and arrive at recommendations keeping in view the mandate of the CMP and the recent proposals in the Central Budget towards reviving the tanks for rain water harvesting.

III. Agricultural Research and Extension:

(A)Main Issues:
Agricultural Research:

India is endowed with one of the most advanced agricultural research systems among the developing countries in terms of scientific skills as well as its reach, even though a great deal of restructuring is needed for its efficient functioning. Indian farmers, despite low literacy levels, have responded exceptionally well to the opportunities opened up by new technologies. Also, frontier technologies like biotechnologies remain underexploited in the country. Therefore, the returns from investment in agricultural research and extension in the country can be expected to be very high, relatively quick, and assured.

The existing public outlay on agricultural research and education stagnating around 0.5% of agricultural GDP in the country is too meagre and needs to be stepped up substantially. At the same time, there is considerable potential for raising the effectiveness of these outlays by reordering the priorities in agricultural research and redefining the relative roles of public and private sectors in research and extension.

There is a need for a shift away from individual crop-oriented research focused essentially on irrigated areas towards research on crops and cropping systems in the drylands, hills, tribal and other marginal areas. In view of high variability in agro-climatic conditions in such unfavourable areas, research has to become increasingly location-specific with greater participation or interaction with farmers. Greater attention to research on horticultural products that are land-saving as well as water-saving, animal husbandry and dairying integrated with crop production, and on small ruminants can benefit resource-poor farmers and women, besides being environmentally sustainable.
Progress in post-harvest technology is essential to promote value addition through the growth of agro-processing industry.

Private sector participation in agricultural research, extension and marketing is becoming increasingly important, especially with the advent of biotechnology and protection being accorded to intellectual property. However, private sector participation tends to be limited to profitable crops and enterprises undertaken by the resource-rich farmers in well-endowed areas. Public sector research has to increasingly address the problems facing the resource-poor farmers in the less-endowed regions. There is a need to avoid overlapping between the two sectors even as the complemetarities between them are fully exploited, by restructuring the existing institutions for management of agricultural research. A high-level body of scientists could be entrusted with the task of delineating the roles of public and private sectors.

Extension:

The existing Travel & Visit (T&V) system of extension is top-down in its approach, has a narrow focus in so far as it is oriented to individual crops grown in favourable areas, offers very little scope for the initiative and participation by the farmers and is also not accountable to them. Further, the squeezing of assistance to states by the central government for extension services has led to the virtual breakdown of extension machinery in the states. As a result, farmers are becoming increasingly dependent upon the private sector for extension services. In the absence of public regulation of such services, the resource- poor and gullible farmers are becoming victims of exploitation by the unscrupulous traders and moneylenders interested in selling spurious material e.g., seeds and pesticides.

There is, therefore, an immediate need for revamping and revitalising the existing agricultural extension system in the country, so as to conform to the new priorities in agricultural research, with adequate financial support from the centre and the states. The main ingredients of this reform should be :

(1) Active involvement of farmers through user groups and Self Help Groups(SHGs), and accountability to them;

(2) Enabling participation by the private sector, farmers' associations and the NGOs, to complement public services, by putting in place an independent regulatory body, to which samples can be submitted for quality checks, encompassing inputs like fertilizers, pesticides, and seeds;

(3)Increasing use of media and Information Technology, including cyber kiosks, to disseminate the knowledge on new agricultural practices and the information on output and input prices for improving the effectiveness of agricultural services in general. The use of information technology will reduce the requirement of a large number of extension workers at the block level and would indeed complement, to a considerable extent, the services rendered by the extension workers in remote areas;

(4) Building gender concerns into the system, for example, by manning the extension services predominantly by women in hill and tribal areas where farming is managed essentially by women; and

(5) Capacity building of extension functionaries and farmers, among other means, through distance education.

In this context, the CMP promises that “The UPA government will ensure that public investment in agricultural research and extension, rural infrastructure and irrigation is stepped up in a significant manner at the very earliest”(P.4).

(B) Proposed Action Plan:

In the light of the issues raised above and the mandate of CMP, the NAC may like to look at the research priorities of the Indian Council of Agricultural Research, their strategy for agricultural extension and the proposed allocations. It may be useful, to begin with, to get ICAR’s response to the issues formulated by the NAC, before it is decided to hold further discussions and consultations.

IV. Diversification of Agriculture and Reforms in Marketing:

(A)Main Issues:

In response to the growing domestic demand for non-cereal items of food as a result of the rise in per capita income, there has been a diversification of agriculture into dairying, poultry, edible oils, fish, meat, vegetables and fruits, etc. This process of diversification got further impetus from a big rise in export demand with the opening up of the economy and exchange rate liberalization in the early 1990s.These enterprises being labour-intensive are suited to small holders and lead to a rise in wage employment. They are also environment-friendly, as they generally require less land and water.

However, agricultural policy in respect of price, technology, infrastructure and institutions has so far been foodgrain centered and has been slow to respond to the requirements of diversified agriculture. Major policy initiatives are called for to bring the relative prices of foodgrains in conformity with the emerging trends in demand. Public and private investment has to be stepped up in agricultural research , especially in biotechnology, focusing on new activities and the unfavourable areas. Many of the new products being highly perishable, there is a need for the development and upgradation of infrastructure for roads, markets, storage and processing.

Institutional innovations would be necessary to facilitate vertical integration of farms with firms and retail chains. These innovations would help to channel more credit for such enterprises and also to provide adequate insurance cover against risk. Restrictions against the entry of big players, domestic as well as foreign, in storage, processing and marketing have to be eased and contract/ cooperative farming encouraged for reducing transaction costs, so as to attract greater investment, latest technology and credit flow to the farmers.

According to the CMP, “the UPA government will give the highest investment, credit and technological priority to the continued growth of agriculture, horticulture, aquaculture, floriculture, afforestation, dairying and agro-processing that will significantly add to the creation of new jobs”(P.4).

(B)Proposed Action Plan:

This would require periodic assessment of the growth of output, priorities in agricultural research, pattern of credit flows and production programmes of the governments at the centre as well as the states. NAC may consider suggesting to the Planning Commission to initiate such studies/assessments once or twice a year through expert groups.

V. Institutional Credit for Agriculture:

(A)Main Issues:

About 60% of the credit requirements of farmers are now met by the institutional sources, and the remaining 40% by informal sources like money lenders who charge very high interest rates. However, small and marginal farmers (less than 2 ha.), including tenants, who account for nearly 80% of holdings and one-third of area operated, depend far more heavily on informal sources. Among the formal credit institutions, the commercial banks have emerged as a major player in agriculture credit accounting for about 50% followed by cooperatives (about 43%) and RRBs to the extent of about 7%.

In the post-reform period, despite the rise in capital-intensity of agriculture in the wake of its diversification, and despite broadening the definition of 'priority sector' by adding a number of activities hitherto financed outside the priority sector, the direct agriculture advances by the commercial banks declined to 11-12% of net bank credit as against the original target of 18%. The position is much worse in the eastern and north-eastern states, even though the commercial banks are saddled with excess liquidity. The Rural Infrastructure Development Fund (RIDF), started a decade ago as a measure to provide infrastructural support to agriculture in lieu of its falling share in commercial bank credit, has remained grossly underutilised, basically for want of matching contributions from the state governments. In the process, individual needs of the farmers for investment and production credit are not being adequately met. This declining priority to agriculture is apparently explained by the efforts on the part of the banks to reduce 'transaction costs' and minimise 'risks'. Nothing short of a major change in the mindset, and a new code informed by social purpose, initiated and monitored by the authorities in the banking system, can remedy the situation.

Under the prevailing economic scenario of liberalization and globalisation, the cooperatives have to be strong enough to compete in the open market. They may need to be assisted in recapitalisation and also by substantially increasing the quantum of refinance by NABARD. Also, the proposals initiated by the Centre for amending the cooperative laws of the states with a view to inject professionalism, autonomy and transparency in the functioning of these societies need to be followed up expeditiously.

Kisan Credit Scheme, aimed at providing adequate and timely support to the farmers from the banking system in a flexible and cost effective manner, does not seem to be succeeding in its avowed purpose because of various stipulations and restrictions. Its operation seems to be limited to only fertilizers from fixed shops. A more farmer friendly credit card system needs to be operated so as to realise the objectives of the scheme.

High value agriculture needs higher working capital and also entails higher risks. Facilitating credit through processors, input dealers, NGOs, etc. that are vertically integrated with the farmers, including through contract farming, for providing them critical inputs or processing their produce, could increase the credit flow to agriculture significantly. These dealers/processors can act as non-banking financial intermediaries, who can get refinance from the banking sector and can give loans to agriculture, and bear the risk of default. Such arrangements would reduce transaction costs and ensure good recovery. Policy changes are needed to facilitate such intermediation by freeing up interest rates within a band.

Self-Help Groups of women for providing micro-credit have been a success story in the country. Such households being essentially landless, credit by SHGs has been confined mainly to activities falling outside agriculture. However, their experience does point to the promise that groups comprising small and marginal farmers, especially women farmers, hold in managing credit for land-saving activities like animal husbandry, dairying, horticulture, agro-forestry, etc., provided there are contractual arrangements with dealers and processors for the provision of inputs and services for marketing. As capital assets of these farmers are limited, community/group collateral and the produce on farmers' land, including that of tenants, should be considered as collateral in granting credit.

According to the CMP, “the rural cooperative credit system will be nursed back to health. The UPA government will ensure that the flow of rural credit is doubled in the next three years and that the coverage of small and marginal farmers by institutional lending is expanded substantially. The delivery system for rural credit will be reviewed. Immediate steps will be taken to ease the burden of debt and high interest rates on farm loans.”(P.4).

(B) Proposed Action Plan:

In pursuance of the CMP, the Government of India announced a comprehensive policy on agricultural credit on June 18,2004, stipulating, among other things, doubling of the flow of credit to agriculture from all institutions in three years, and increasing it by 30% in one year. However, within the limits of this overall target, NAC may consider suggesting the need for a sub-target in the case of small and marginal farmers, requiring, say, more than doubling of credit flow in their case. This is because they are heavily dependent on the non-institutional sources at present and there is a high probability that large farmers would corner a disproportionately large amount of credit from the institutional sources and relend part of it to the small and marginal farmers at high interest rates. The NAC may hold discussions with the representatives of the RBI and the NABARD periodically to monitor the progress in the implementation of credit policy for agriculture.

C.H.Hanumantha Rao