Economic Survey Emphasizes to Improved Productivity in Agriculture

 Disbursal of Subsidy on Fertilizers should Shift to DBT

Fixed Amount of Subsidy in the case of P And K Fertilizer Subsidy

There needs to be a Shift to Demand-Driven Agricultural Advisory Services

The Economic Survey 2015-16 presented today in the Parliament by the Union Finance Minister Shri Arun Jaitley stressed on the declining growth in agriculture, owing to two consecutive drought years and due to decline in production and area sown of major crops.The agriculture sector needs a transformation to ensure sustainable livelihoods for the farmers and food security for the population. The transformation in agriculture has to be steered by raising productivity in agriculture, by investing in efficient irrigation technologies, and efficient use of all inputs. Economic Survey 2015-16  emphasizes that to improve productivity in agriculture in India needs to be guided by followings:

(i)                 Irrigation 

To raise the productivity of agriculture in India there is need to expand the acreage under irrigation along with adoption of  appropriate technologies for efficient utilization of water through  suitable pricing. First, adoption of irrigation technologies which improve efficiency in the use of water is imperative in a scenario  where flood irrigation has resulted  in wastage of water. Second, focus on efficient  irrigation technologies  is owing to climate change and indiscriminate wastage of water in agriculture  and other uses. Having ‘more crop per drop’ through motto to improve  productivity  in agriculture which can ensure food and water security in the future.

Net irrigated Area to Total cropped area in India 

As per the latest available data on irrigation, the all India percentage distribution  of net irrigated are to the total cropped area during 2012-13 was 33.9 per cent.  There is regional disparity in irrigated farming, with net irrigated area to Total cropped area at more than 50 per cent in the states of Punjab, Tamil Nadu and Uttar Pradesh, while it is at less than 50 per cent in the remaining States. There is need to scope for increasing  the coverage  of irrigated area  across the country to  increase productivity in agriculture.

There is need to arrest the declining trend in efficient utilization  of irrigation potential and also reverse it in the next two three years. A larger share of funds available under the Mahatama Gandhi National Rural Employment Guarantee Act (MGNEREGA)/ other employment  generating schemes need to be  deployed  for creating and maintenance of community assets including de-silting  and repair of  tanks and other water bodies that are used for irrigation.

Efficiency in Irrigation 

Achieving efficiency  in the use of irrigation  systems will be the main determinant of agriculture productivity. The conventional systems of  irrigation have become on-viable in many parts of India due to  increasing  shortages of water, wastage of water through over irrigation, and concerns of salination of soil as per Task force on Agriculture (NITI Aayog, 2015). The introduction  of efficient  irrigation  technologies which are  both economically  and technically efficient like drip and sprinkler irrigation  can improve water use efficiency , reduce costs of production by reducing labour  costs  and power consumption.

Water Productivity 

Water productivity at  the all India level is very low and needs to be enhanced through tapping, harvesting and recycling water, efficient on-farm water management  practices, mirco-irrigation (MI), use of waste  water and resource  conservation  technologies. The overall irrigation efficiency of the major and medium irrigation projects in India is estimated  at around 38 per cent. Efficiency of the surface irrigation system can be improved  from about 35-40 per cent  to around 60 per cent and that of groundwater from about  65-70 per cent  to 75 per cent.

Mechanization 

The level of farm mechanization in India requires more to be done in terms of introduction of better equipment for each farming operation in order to reduce drudgery, to improve efficiency by saving on time and labor, improve productivity, minimize wastage and reduce labor costs for each operation. With shortage of labour for agriculture operations owing to rural urban migration, shift from agriculture  to services  and rise in demand for  labor in non- farm activities, there is need to use labour for  agriculture operation judiciously,  which makes a strong case for  mechanization of farming. The overall level of mechanization in farming is below 50 per cent in the case of majority of the farming operations in India.  With increasing fragmentation of landholdings and low rates of tractor penetration among small farmers, there is need for a market in tractor rentals, akin to cars and road construction equipment, driven by private  participation.  With suitable  mobile and internet  applications,  manufacturers of  tractors along with other stakeholders  need to deliberate  on this,  since it will also increase  demand for tractors.

The promotion of appropriate  farm equipment which are durable, light weight  and low cost, region, crop and operation specific using  indigenous/ adapted technologies need to be made available for small and marginal farmers to improve  productivity.

The basic inputs for increasing productivity  in agriculture is seed. It is estimated  that the quality  for seed accounts for  20-25 per cent  of productivity  (DAC&FW, 2015).

The issues that require immediate  attention  are:

(i)                 Affordability: 

Seeds which are open pollinated verities can be developed  by farmers from  their own harvested crops.  However,  for high-yielding  hybrid verities, the farmer has to depend on the market for  each crop.

(ii)                Availability:

Another concern is shortage in the supply of quality seeds. While there is a demand for banning  non-certified seeds, certification per-se does not ensure  quality seeds Ideally, facilitating  more  players (private and public) and competition in the market for seeds would improve availability  of quality  seeds at lower/comprehensive prices.

(iii)             Research and technology  for seed development.

Inadequate research and genetic engineering has been a constraint  in the development  of seeds/ seeds technology  in major crops during  the past few decades in India.  There is need to encourage  development  of seeds/ seed technologies  in both private and public sectors to initiate another round of Green revaluation. This development  should cover a all agriculture segments/ corps-cereals, coarse cereals, fruits and vegetables, pulses, oilseeds, animal husbandry  and pisciculture—simultaneously.

(iv)             GM crops and seeds: 

Concerns  about affordability  of hybrids  and GM seeds, environmental and ethical issues  in cultivation of GM crops, risk to the food chain, dieses spread and cross pollination have resulted in their non-introduction . These issues needs to be debated, tested, evaluated, so that introduction of hybrids is facilitated in the next six months. The adoption of hybrid and HYV seeds is one definite pathway to raising productivity in  Indian agriculture.

Fertilizers 

Fertilizers is a critical and expensive input required to improve agricultural output.  To facilitate and promote the use of fertilizers in order to improve  productivity, the  Government  has been providing  fertilizer subsidy  to farmers. The fertilizer subsidy is around 10 per cent of the total agriculture  GDP in 2013-14.

There is a need to rationalize fertilizer subsidy in an input, crop and region neutral format and minimize diversions. The disbursal of subsidy on fertilizers should shift to DBT, the benefits of which will be maximized, if all controls (including imports) on the fertilizer industry/outputs are lifted simultaneously. In the case of P and K fertilizer subsidy, with the Nutrient Based Subsidy (NBS) scheme, a fixed amount of subsidy will be given on each grade based on their content.

Crop-responsive, balanced use of fertilizers:

It is important to facilitate the optimal use of fertilizers depending on the soil health and fertility status.  Linking the soil health card to provide profile of the soil and fertilizer on the basis of the same profile utilizing fertilizer, even if not subsidized can improve the yield of crops.

Micro nutrients and organic fertilizers:

Indian soils show deficiency of micro nutrients like boron, zinc, copper and iron in most parts of the country, which limits crop yields and productivity. According to agronomic trails conducted by the Indian Council of Agricultural Research (ICAR), fertilizers  which supplement  micro nutrients the range of 0.3 to 0.6 ton per ha. The micro nutrient deficiency can be overcome if there is expansion of the use of organic fertilizer.  Moreover, it is cheaper for small farmers to adopt and use organic composting and manure.  This can help improve and retain soil fertility. With 67 % of Indian soil characterized by low organic carbon, there is great scope for enhancing the use  of  organic fertilizers.

Nutrient Management:

Judicious use of chemical fertilizers, bio-fertilizers and locally available organic manures like farmyard manure, compost, vermin compost and green manure based on soil testing is necessary to maintain soil health and productivity.

Regional disparity in fertilizer consumption: 

There are wide regional disparities in the consumption of fertilizers. These disparities in fertilizer consumption may be attributed to  the  availability  of irrigation facilities  in the high consuming  state since irrigation  is  a requirement for proper absorption of fertilizers.  I is necessary to reduce the disparities through appropriate   soil-testing  faculties and policy measures.

Pesticides:

In India, the farmer’s crop yield losses range from 15 to 25 per cent owing to the presence of weeds, pests, diseases and rodents. However, the use of pesticides without following proper guidelines, use of sub standard pesticides and lack of awareness about pesticides  use are key concerns  in India. These practices have give rise to pesticide residues being found in food products in India, posing major threats to the environment and human beings.

Farmers need to be educated about the classification of insecticides on rte basis of their toxicity. They should also be advised whether specific pesticides are suitable for aerial application.

Being environment friendly, non-toxic and cost effective, bio-pesticides need to be promoted among small farmers to improve  productive  in agriculture.  There is need to address the problem of availability of credit on several fronts. In respect of high interest rates, DBT may be considered  to replace subvention  of interest rates. The intermediation and refinance model to promote agricultural credit needs to be revisited and replaced with  DBT that shall subsidize  the interest  paid by the farmer, instead of subsidizing  refinance to financial  institutions.

The ratio of agricultural credit to agricultural GDP has  increased from 10 per cent in 1999-2000 to around 38 per cent by 2012-13. However, the share of  long-term credit in agriculture or investment  credit has declined from  55 per cent in 2006-07 to 39 per cent in 201-12. The decline in needs to be arrested  and reversed.

The regional disparity in the distribution of agriculture credit also needs or be addressed.  In India, farmers can avail of crop loans up to  Rs. 3lakh at 7k per cent interest  and the effective  rate of  interest has been lowered to 4 per cent during 2015-16 for those who repay their loans promptly. These measures help farmers tide over short-term contingencies and price shocks which may affect their seasonal operations.

The small and marginal farmers with Kisan Credit Cards (KCCs) can also avail the benefit of interest subvention scheme extended  for a further period of  up to  six months (post-harvest) against Negotiable Warehouse Receipts (NWRs) at the same rate as  available  to crop loan to discourage distress sale of corps by small  farmers.

Agriculture  Extension Services

Agriculture extension services  constitute another key input which can improve  productivity  in agriculture  by providing  timely advisory services to farmers to adopt best  practices, technology, meet with contingencies, market information etc.  In India, though there are multiple agencies offering agricultural advisory services, lack of functional autonomy, rigid hierarchal  structures  leading to lack of innovative  methods of  providing extension services  and coordination failures at multiple levels have resulted in inefficient  deliver of extension services.

There needs to be a shift to demand-driven agricultural advisory services that will cater to farmer, region and crop-specific needs. This can be done through a virtual connect, using IT (mobile and internet), integration of agricultural  extension services  with all stakeholders, their respective  hierarchy,  extension services  in other villages, blocks, agro climate  regions, largely for  sharing of information, suppliers of inputs, agro-processors, markets and their activity, especially price.

The National Food Security Act and Swachh Bharat are part of the Government’s Policy Agenda to Improve Maternal and Early Life Health

The Economic Survey 2015-16 presented here today in the Parliament by the Union Finance Minister Shri Arun Jaitley emphasizes that Indian economy will continue to grow more than 7 percent for the third year in succession in 2016-17 helped by a normal monsoon, despite global meltdown. The Economic Survey (2015-16) states that due to Government’s commitment to carry the reform process forward, conditions do exist for raising the economy’s growth momentum to 8 percent or more in the next couple of years. The survey underlines that despite global headwinds and a truant monsoon, India registered 7.2 per cent growth in 2014-15 and 7.6 per cent in 2015-16, thus becoming the fastest growing major economy in the world.

The Survey points out that the growth in agriculture sector in 2015-16 has continued to be lower than the average of last decade, mainly on account of it being the second successive year of lower-than-normal monsoon rains. As per the information of the Department of Agriculture, Cooperation and Farmers Welfare for 2015-16, the production of foodgrains and oil-seeds is estimated to decline by 0.5 per cent and 4.1 per cent respectively, while the production of fruits and vegetables is likely to increase marginally. A brighter picture is expected to emerge from the allied sectors consisting of livestock products, forestry and fisheries with a growth exceeding 5 per cent in 2015-16, which will provide some impetus to rural incomes.

Growth in industry is estimated to have accelerated during the current year on the strength of improving manufacturing activity. The private corporate sector, with an around 69 per cent share of the manufacturing sector, is estimated to grow by 9.9 per cent at current prices in April-December 2015-16. The Index of Industrial Production (IIP) showed that manufacturing production grew by 3.1 per cent during April-December 2015-16, vis-à-vis a growth of 1.8 per cent in the corresponding period of the previous year. The ongoing manufacturing recovery is is aided by robust growth in petroleum refining, automobiles, wearing apparels, chemicals, electrical machinery and wood products including furniture. Apart from manufacturing, the other three segments of the industry sector- electricity, gas, water supply and related utilities, mining and quarrying and construction activities are witnessing a deceleration in growth.

The Survey underlines that the growth in the services sector moderated slightly, but still remains robust. Being the main driver of the economy, the sector contributed about 69 per cent of the total growth during 2011-12 to 2015-16 and in the process expanding its share in the economy by 4 percentage points from 49 to 53 per cent.

The Survey in its outlook clearly points out that though the emerging market economies have clearly slowed down, the Indian economy stands out as a haven of macroeconomic stability, resilience and optimism and can be expected to register GDP growth that could be in the range of 7.0 per cent to 7.75 per cent in the coming year.

Time is ripe for industries to absorb excess generation capacity through “Open Access” to energize “Make in India” 

A progressive tariff structure can reduce costs for the poor without unduly burdening the rich 

The Economic Survey notes that sweeping changes have been made in the power sector in the last two years. 2014-15 witnessed the highest ever increase in generation capacity of 26.5 GW compared to the average annual addition of around 19 GW over the past five years. Capacity enhancements have brought down the peak electricity defecit to its lowest ever level of 2.4%. Central and state governments have come together to address problems related to the health of distribution companies and the debt overhang problem via the Ujwal DISCOM Assurance Yojna (UDAY).

The Survey states that renewable energy targets have been revised from 32 GW to 175 GW to give a policy push to the renewable sector and sustainable development. Grid parity for solar generation is on its way to becoming a reality with auctions under the National Solar Mission resulting in all time low tariff of Rs. 4.34 per KWh.

The Survey points out that the complexity of the tariff structure because of different tarriffs for different sectors prevents economic actors from responding sufficiently to price signals. Simplification in tariffs may improve transparency and yield consumption and collection efficiency along with governance benefits.

Further, the Survey states that the debt overhang of discoms has traditionally been a major bottleneck for the power sector. The States with highest losses are those where tariffs fail to cover the costs of electricity supply. Several states are now attempting to close this gap under the UDAY scheme.

Power sector’s impact on ‘Make in India’

The Economic Survey notes that the electricity supply and its quality impacts industrial outpout.  The electricity tariffs are unusually high for Indian industry, especially when quality is taken into account. The use of diesel generators in on the rise to protect against uneven power supply with total capacity around 72 GW and growing at the rate of 5 GW per year. High tariffs and erratic supply have led to a slow but steady decline in the growth of industrial electricity purchases from utilities and a gradual transition towards captive generation.

The compund annual growth rate (CAGR) of captive power generation between 2006-07 and 2014-15  is 9.3% compared to 4.6%  for electricity procured from utilities. This could be exacerbated in the coming years as decline in oil prices and costs of renewable energy alternatives may prompt a further shift to captive power.

Need of making India “One Market in Power” – Providing ‘Open Access’ 

The Survey states that steps have been taken towards ”Making One India”  in the power sector. The Open Access (OA) policy introduced under the Electricity Act 2003, which allows consumers with electricity load above 1 MW to procure electricity directly from electricity markets was the first step towards discovering a single market price for power around the country. Power Exchanges were set up in 2008 to operationalize the OA policy and create a national electricity market where price discovery occurs through competitive bidding. Increases in cross subsidy and additional surcharges for purchasing electricity from power exchanges, have acted as significant barriers, though they are key to balancing DISCOMS.

The power generation capacity has increased while the financial ability of discoms to purchase electricity has diminished. This has resulted in current power plant load factors reaching their lowest mark at around 60% as The Survey notes that the time is ripe to allow industries with higher power demands to absorb excess generation capacity through “Open Access” to energize “Make in India”.

Progressivity in tariff rates to reduce burden on the poor 

The Economic Survey says that India’s domestic power tariff schedules have greater scope for progressivity. It discusses the need to balance greater revenue collection with greater welfare allocations. It suggests that the tariffs for the poor can be reduced while covering costs and without unduly burdening those better off. Cross-subsidization will occur within the residential consumers itself – i.e. rich consumers with high consumption intensity within the residential sectors subsidise prices for consumers with lower consumption due to differential demand price elasticities.