BUDGET 2003 — COMMENT
Mr FM, you’ve shown the way, now pave it
Kuljit Bains
Vital statistics may be affected by a host of factors and there may be more to the story than just figures, but they do indicate the general shape of things. A look at figures for agriculture tells us the impending year is likely to see a dip of 3.1 per cent, owing largely to drought conditions.

WB team damns MSP, free power
P. P. S. Gill
Agriculture has an overriding importance in Punjab’s economy, though electoral politics matters in determining a government’s policies on revenue and expenditure. But no fiscal or economic reforms can succeed without agriculture as natural focus.

• Paddy giving land ill health

Cabbage gets Bt gene
Shirish Joshi
A team of Indian scientists led by Dr R. C. Bhattacharya working at the Indian Agricultural Research Institute at Hyderabad University has been successful in incorporating the Bt gene in cabbage.

‘Basmati only, we are British’
Britain is becoming a nation of rice eaters, and it wants to make sure it is eating only genuine basmati rice. New tests will be carried out on companies mixing basmati rice with cheaper rice to serve a sort of basmati blend.

BUDGET 2003 — COMMENT
Mr FM, you’ve shown the way, now pave it
Kuljit Bains

Vital statistics may be affected by a host of factors and there may be more to the story than just figures, but they do indicate the general shape of things. A look at figures for agriculture tells us the impending year is likely to see a dip of 3.1 per cent, owing largely to drought conditions. That notwithstanding, investment in agriculture as per cent of GDP has gone down from 1.6 per cent to 1.3 over the past decade. The Central Plan Outlay for agricultural activities (irrigation and flood control added) is about 2 per cent of the total. The subsidy bill and food stocks are unmanageable. The General Election is within sight. Not a very bright picture!

The wizened Finance Minister, Mr Jaswant Singh, cooked his Budget soup with these ingredients in his kitchen cabinet. While one need not highlight the importance of agriculture, what with the primary sector contributing nearly 25 per cent to the GDP, it pains if it is not given due attention or given misplaced attention.

His Budget speech gives one a feeling that while the spirit is there the flesh is weak. The general intent, save a few ideas, seems good, but the need is for him to put the money where his mouth is. The declarations have been very general and fund allocations stingy.

India, he said, “has the largest irrigated, arable landmass.” It has always been so, but has not worked wonders. The need therefore is to change direction and that needs money. The Finance Minister has stressed the need for diversification and yet stopped short of giving it the financial push it needs. It has for long remained an intellectual theory, much debated; it is time now for it to be implemented. Big money will be required to diversify, just as huge sums were invested to usher in the Green Revolution. An initiative on precision farming was announced with Rs 50 crore: the idea is good, but it may not be sufficient even to begin. The technology is absolutely needed, but it encompasses everything from satellite to farmer.

The government is caught between footing the bill for the MSP regime and rising food stocks. Given the pathetic condition of the small farmer and vote politics, there seems to be no way to go. As Jaswant Singh said in a TV interview, these are only the symptoms; we have to go to the cause. The only option possible is to step sideways: not to produce commodities that need MSP and add to the rotting stocks. This is where diversification comes in and why it is has to be treated as a solution to major economic problems. However, from the Budget it seems it has been treated as just another fancy idea and only given lip service.

For plantation crops like tea, coffee and rubber, the government announced a Price Stabilisation Fund of Rs 500 crore. The mechanism would obviously be essentially subsidy based, something frowned upon by economists. The FM himself might call it “symptomatic treatment.” What we need to work at is, Why are we failing in the world market, like Sri Lanka and China taking away major share of our tea market. We lack in the quality that the international market requires. Major initiatives are required to ensure farmers produce what may sell. Quick response systems have to be developed. Over the last year international vanilla prices shot up and regions in South India can produce it. This is where farmers need help. Instead of spending on R&D (which can be purchased cost effectively from world over), we need to spend on market information and farmer education.

It was pointed out that India has the largest cattle stock, but its quality is poor. Thus, duty on specified veterinary drugs has been reduced. This is welcome, but the health of the stock would not gain from this. The gene pool has to be improved, sufficient productive-breed sperm has to be imported and ingenuous ways of handling the non-productive cattle burden have to be found, maybe like ensuring only desired sex of animals is produced.

The FM wants to make the distribution of agricultural credit hassle free. As he put it, “credit for cars is on easier terms than for farm equipment or tractors.” Given the election situation, his statement is understandable. (Make buying cars as well as getting farm loans easier.) Unaccounted for loans to small farmers tend to be a double-edged sword. If used for farm inputs, they are good. But, as it often happens, if the farmer uses it as an expense account, he’s caught in a debt trap. The temptation is too much to resist. It has to be ensured that the money is spent on the farm, just as it is for the car.

The beating stick the minister gave his detractors is the hike in fertiliser prices. In contrast with AC and car prices going down, it does seem elitist. While the middle-class gets more spending power, the rural community less. Will there be more money spent in the market could be any mathematician’s guess. The long-term solution is to promote technologies like organic and precision farming to reduce the quantum of fertiliser consumed, and thus the subsidy.

The Rajasthani Finance Minister announced a programme for the deserts of the state. A sum of Rs 100 crore will be given for this over three years. Well, let’s drop this topic, we shouldn’t be nasty.

All said, the general direction is encouraging, only the government has to be realistic and walk in that direction too. Give agriculture its due.

WB team damns MSP, free power
P. P. S. Gill

Agriculture has an overriding importance in Punjab’s economy, though electoral politics matters in determining a government’s policies on revenue and expenditure. But no fiscal or economic reforms can succeed without agriculture as natural focus.

It was the agriculture-induced Green Revolution of the mid-60s and 70s that led to high economic growth rates, which have eventually plummeted to low depths since the mid 90s, as corrective policies were not thought of and applied. The present fault-lines in agriculture and allied sectors are thus a consequence of that failure.

Issues identified

Substantial slowdown in agriculture growth rate in 1990s.

Concerns about fiscal, economic and environmental sustainability of the wheat-rice farming system.

The policy and incentive structure (MSP) that discourages diversification.

Punjab today faces challenges to introduce and implement reforms that will jack fiscal performance and put agriculture on a sustainable growth trajectory and improve economic development.

It was with such concerns that the World Bank agreed to a request of the Department of Economic Affairs to send a mission team to assess and analyse the reforms initiated in Punjab and provide a blueprint for future growth. The team, headed by Vikram K Chand, has visited Punjab, held discussions and examined several documents/reports. Now it has submitted its policy note, hoping Punjab will learn its lessons.

World Bank experts Stephen Howes, Deepak Ahluwalia, Indira Rajaraman, Kruti Bharucha and Upasana Varma in their report have selected three areas, not at random, but because these are a “reflection of the nature of the challenges facing Punjab’’. Their report contends that agriculture is the primary engine of growth without which Punjab will neither be able to accelerate growth nor achieve fiscal sustainability. If fiscal and governance reforms are at the core of the state’s agenda, agriculture and power reforms are the nucleus.

How does Punjab agriculture look from the window of the World Bank? Agriculture and allied sectors constitute 40 per cent of the gross state domestic product (GSDP), compared to the 24 per cent average of Indian states. Poor performance of agriculture and its stagnation since the mid-90s has shackled Punjab’s economic growth.

To the World Bank, sustainability of the wheat-rice cycle for long is a matter of concern. A change in terms of agricultural diversification is imperative only if the current system of procurement based on minimum support price (MSP) is changed because it provides a powerful economic incentive to prolong this crop rotation. This has to be further coupled with still higher user charges for power and irrigation and shifting to meter-billing, private participation in establishment and management of markets, says the report.

Since Punjab is in an unenviable situation, the next one year is crucial to push through the proposed fiscal, administrative and power reforms, which have backward and forward linkages with agriculture.

Agriculture, says the policy report, is an important determinate of Punjab’s overall economic performance. After a growth rate of 4.9 per cent per annum in the 1980s, growth of the agriculture GSDP nearly halved to 2.5 per cent per annum in the ’90s. Wheat and rice are no longer the engine of growth. And in the last decade productivity growth of rice has slowed significantly and has impacted the overall slowdown in the sector’s growth.

Punjab now needs to be brace itself for “dismantling’’ of the MSP-regulated procurement system because of the huge stockpile of food grains and its poor off-take under the public distribution system. This has led to huge fiscal costs.

The report also mentions about changeover from zero pricing of power and water, suggesting further hike in user charges. If, on the one hand, it favours introducing metering of the agriculture sector, on the other hand it also talks of public expenditure in irrigation. The capital investment in irrigation has dropped from 1.2 per cent of the GSDP in 1997/98 to 0.4per cent in 2001.

Inadequacy of operation and maintenance (O/M) expenditure on irrigation is another area to which the report draws attention. The non-wage O/M expenditures were Rs 17.5 crore for a total command area of 3.1 million hectares in 2001/02. This is just 20 per cent of what should be spent on O/M, as per the norms of the Finance Commission.

The fact that the department expects to realise Rs 60 crore from user charges and intends to plough this back into O/M has been appreciated by the World Bank.

The report also stresses policy reforms to encourage agricultural diversification and discusses the issue of MSP, water/power pricing and wholesale markets. It favours efficient and scientifically developed wholesale markets for facilitating diversification to high-value crops and suggests Punjab follow Karnataka in involving the private sector in mandis. Even a Government of India expert committee in June 2001 had recommended this.

The report refers to procurement, MSP and unshackling Punjab from the wheat-rice rotation and finds merit in the ‘’Agricultural production pattern adjustment programme in Punjab for productivity and growth’’, prepared by the Chief Minister’s Advisory Committee on Agriculture Policy and Restructuring, headed by Dr S.S. Johl.

The World Bank comment is, “At this preliminary stage, it appears that while the income support idea has merit, its implementation will have to be carefully thought out so as to achieve the desired objective efficiently and at least cost.” The Centre is examining the same.

The World Bank policy report is likely to be taken up by the state government with the administrative secretaries concerned to follow or accordingly prepare their projects for funding by the World Bank.

Paddy giving land ill health Rice cultivation is having unintended adverse consequences on land and water resources. These, the World Bank sums up as follows: Rice is predominantly sown in Central Punjab districts as a major Kharif crop. This has resulted in unchecked exploitation of groundwater. As the water table gets lower at a rate of 30 cm per year, out of the 138 blocks at least 84 are now ‘dark’. Even in the absence of firm evidence, the report believes that the policy of free power to tubewells exacerbated the problem between 1997 and October 2002. The southwestern districts faced the opposite problem: water logging and salinity. The area is canal-irrigated. The excess use of water has caused this problem. The zero pricing of canal water was a disincentive to farmers to conserve water. Cotton was, thus, replaced by rice. Unbalanced use of chemical fertilisers has affected soil fertility with reports of wide spread deficiencies of micronutrients and decline in organic matter in the soil. The wheat-rice monoculture has reportedly led to an increase in weed infestation, pest and disease incidence and pollution from burning of rice straw.

Cabbage gets Bt gene
Shirish Joshi

A team of Indian scientists led by Dr R. C. Bhattacharya working at the Indian Agricultural Research Institute at Hyderabad University has been successful in incorporating the Bt gene in cabbage.

The development assumes importance as the new transgenic variety has been found to be resistant to diamond back moth, a pest that is most dreaded by cabbage growers.

Currently chemical insecticides are used to control the pest. But the pests are developing resistance to the synthetic insecticides.

Tests at the laboratory have shown it to be highly effective. But it has still to be demonstrated under open field conditions. The new Bt. cabbage variety has been developed by using one of the most popular varieties of cabbage, the ‘Golden Acre’.

The development is also of great significance at the global level as cabbage is an important vegetable grown extensively throughout the world. According to global estimates, the cost of the damage caused by the pest would be of the order of $1 billion every year.

Cabbage is among the oldest of vegetables known for human food. The wild ancestor of cabbage is native to the shores of the Mediterranean Sea. It also grows on the sea cliffs of Great Britain, where it was probably introduced by the Romans.

Of the many cultivated plants that have been developed from wild cabbage some are raised as ornamental plants, some as fodder for livestock, and a great deal more as food for humans.

No one knows for sure when cabbage came to India. It was perhaps introduced in India in the Mughal period. However, its popularity grew during the British rule. Today it is one of the most popular winter vegetables in India.

‘Basmati only, we are British’

Britain is becoming a nation of rice eaters, and it wants to make sure it is eating only genuine basmati rice.

The present list of approved basmati rice is too long and includes hybrids, therefore lowering standards, the agency now says. IANS