How a rich yield of rice and wheat is poor for the economy

Indian agriculture is in serious need of a course correction. With farmers in the fertile Indo-Gangetic plains of Punjab, Haryana and western UP concentrating mainly on rice and wheat, the country's agricultural output has got skewed in favour of these two crops.

The production of pulses and oilseeds lags behind the growing demand as the returns from these crops cannot match those of wheat and rice which give a much higher yield per acre. Consequently, the country has to take recourse to large scale imports to fill the gap as prices of edible oil and pulses tend to shoot up due to the shortage. However, these imports entail a huge outgo of foreign exchange that ranges anywhere between $12-15bn a year.

Hoarding

In fact, countries like Canada and Australia have taken to the cultivation of chickpea (chana) essentially to meet India's demand for pulses. Similarly, the Malaysian economy is thriving on edible oil exports to India.

The prices of pulses are likely to remain firm during the current year as the production is not expected to keep pace with the rising demand for this essential item.

Food minister Ram Vilas Paswan has assured of a crackdown on hoarders and more imports to bring down prices.

However, past experience has shown that each time India steps into the international market to buy food items the prices go up as the country is seen to make large purchases given the huge size of its population. This exposure to the volatile international market only tends to weaken the fundamentals of the economy as inflation spirals out of control and a rising current account deficit weakens the rupee.

Since the minimum support price (MSP) offered to farmers does not compensate for the low yield of pulses and oilseeds they are not keen to go in for these crops.

In fact, the market prices of pulses tend to rise way above the minimum support price that the government announces. In the current scenario, for instance, while the MSPs of various pulses are in three-four thousand rupees a quintal (100kg) range, the market price has shot past the seven thousand rupees per quintal mark.

The cultivation of oilseeds and pulses is largely confined to areas which lack an assured irrigation and where the more lucrative wheat, paddy and sugarcane crops cannot be grown.

Pulses

The government also has in recent years not been giving pulses and oilseeds the same kind of attention that it gives to the procurement of wheat and rice.

Thus while the FCI godowns are overflowing with wheat and rice, pulses and oilseeds are in short supply.

In fact with Andhra Pradesh becoming surplus in rice and production of the cereal going up in Tamil Nadu, the southern states are not in a position to absorb the huge surplus being produced by states like Punjab. This rice cultivation is also adversely impacting the environment as the water table in Punjab has been declining over the years. Between November 2013 to November 2014, for instance, the water table dipped by as much as two metres in 74 per cent of the area of the state.

Any shift away from paddy cultivation to oilseeds, pulses, horticulture and even dairy farming would save a huge amount of water in the Indo-Gangetic plains and also cater to the growing demand for these items in urban areas. The switch in the crop pattern would also ease the pressure on rivers such as the Ganga, Yamuna and Satlej which have been reduced to a mere trickle because of the heavy demand for irrigation water. The government has come up with various schemes such as the "accelerated pulses development programme'' and the Rashtriya Krishi Vikas Yojna (RKVY) to diversify and promote agricultural growth but these have not been successful at the ground level.

Audit

The comptroller and auditor general of India (CAG), had in an audit report tabled in Parliament last month, highlighted financial irregularities and lack of proper planning in the Centre's Rs 32,460 crore flagship RKVY implemented by the state governments from 2007-13.

According to the CAG report out of 393 projects of the RKVY worth Rs 6,017.2 crores that were selected for audit examination, financial irregularities and underperformance was detected in 150 projects that constituted 38 per cent of the total.

CAG found several instances of funds meant for farm projects being diverted to personal accounts of officials.

The report concluded, "RKVY remained without any financial scrutiny through the internal audit of the ministry and the monitoring mechanism was not very effective." Interestingly, the report also highlights a few "good practices'' where honest and dedicated officials did bring about a positive change.

It lists the successful installation of "bulk milk coolers'' at a cost of Rs 31.76 crore in five districts of Rajasthan in 2011 with the objective of improving the quality of milk, and milk products and averting economic losses to farmers due to the spoilage of milk. Similarly, three horticulture projects in Tripura for growing off-season vegetables and block plantation of pineapple were reported to be doing well.

These bright spots indicate that the transformation of Indian agriculture into a more diversified and vibrant economic activity is feasible provided those entrusted with the task go about their work with integrity and a sense of commitment.