Value Chain Analysis of Paddy in Andhra Pradesh

Value Chain Analysis of Paddy in Andhra Pradesh By Dewasish Ghoshal PGDM (Agriculture) NAARM, Hyderabad Project Mentor Dr Babu Dhanapal Scientist NAARM, HyderabadNATIONAL ACADEMY OF AGRICULTURAL RESEARCH MANAGEMENT RAJENDRANAGAR, HYDERABAD

ACKNOWLEDGEMENTI would like to extend my deep sense of gratitude to Center for Sustainable Agriculture(CSA) and Dr. G V Ramanjaneyulu who gave an opportunity to work with their organisationfor this assignment, which has been a pleasant and immensely valuable learning experience forme.I am happy about the way this project went on and proud that it has been completedsuccessfully.Thanks also go to Dr. N.H.Rao (Director NAARM), Dr. P.K.Joshi (Ex Director, NAARM),Dr. G.P.Reddy & Dr. K.H.Rao (Course Director PGDM), Dr. Babu Dhanapal (Projectmentor) and other PG cell officials PGDMA, NAARM for their guidance, which has always beenthere with all the students of PGDMA course and thanks to all the colleagues, NAARM facultyand staff.My deep regards for my father, mother, my brother and sisters who are the most valuablepossessions in my life and have always been there to support me in all my ups and downs.Dewasish GhoshalPGDM (Agriculture)NAARM, HyderabadNational Academy of Agricultural Research Management, Hyderabad Page 2

DECLARATIONThis is to declare that, I, Dewasish Ghoshal, student of Post Graduate diploma inManagement Agriculture (2009-2011), NAARM, Hyderabad, has given original data andinformation to the best of my knowledge in the project report titled, “Value chain analysis ofpaddy in Andhra Pradesh “and that, no part of this information has been used for any otherassignment but for the partial fulfillment of the requirement towards the completion of the saidcourse.I also agree in principle not to share the vital information with any other person outside theorganization. Dewasish Ghoshal PGDM (Agriculture)National Academy of Agricultural Research Management, Hyderabad Page 3

CERTIFICATE This is to certify that the project entitled “Value chain analysis of paddy in Andhra Pradesh” submitted to the National Academy of Agricultural Research Management (NAARM), Hyderabad in partial fulfillment of the requirements for the award of the degree of POST GRADUATE DIPLOMA IN MANAGEMENT (AGRICULTURE) is a faithful record of bona fide work carried out by Dewasish Ghoshal under my guidance and supervision and that no part of the report has been submitted for any other degree or diploma. It is further certified that the assistance and help received during the course of the investigation has been duly acknowledged by him. Place: Hyderabad Date: April 24, 2011 Project Mentor Dr. Babu Dhanapal Scientist, NAARMPGDM (A) Course Director Director NAARMDr. G P Reddy Dr. N H RaoPrincipal Scientist, NAARM National Academy of Agricultural Research Management, Hyderabad Page 4

Table of contentsAbstract………………………………………………………………………………………….....6Chapter I: Introduction…………………………………………………………………….....7Chapter II: Review of literature…………………………………………………………...12 A. Pre production…………………………………………………………………………13 B. Production……………………………………………………………………………...14 C. Post production……………………………………………………………………….15Chapter III: Methodology…………………………………………………………………...16Chapter IV: Result and Discussion……………………………………………………….17 A. Factors and Relationship………………………………………………………………..18 B. Constraints and opportunities in paddy value chain…………………………..31 C. Factors that affect paddy Prices……………………………………………………….33 D. Cost of cultivation in Paddy…………………………………………………………….34 E. Marketing of Paddy………………………………………………………………………..38 F. Rice exports and levy systems………………………………………………………….45 G. Value addition to enhance profitability…………………………………………….47Chapter V: Summary and Conclusion…………………………………………………..49References…………………………………………………………………………………………51AnnexureNational Academy of Agricultural Research Management, Hyderabad Page 5

AbstractRice is one of the most important food crops grown in India. During last four years there hasbeen an abrupt increase in the price of paddy affecting the purchasing power of middle andlower middle class consumers. Rice being the staple food of Andhra Pradesh, it is of atmostimportance to analyze the way it is produced, marketed and the role of different actors in thischain. This study mainly focuses on the trends and issues from farmer to consumer throwinglight on the price margins of different actors involved in the total paddy value chain. Levysystems, role of millers, government agencies, civil supplies and other alternative systems ofprocurement of paddy are studied. Along with these issues, a major area of concern is theproblems and issues involved with production of paddy with respect to power supply, irrigation,and increase in cost of cultivation, fall in net incomes, mechanization, irrigation, labour issues,input usage, credit and marketing.National Academy of Agricultural Research Management, Hyderabad Page 6

CHAPTER I IntroductionRice remains a staple food for two-thirds of the world‟s population and has become an item ofcommerce since the last two decades. Throughout history, rice has been one of man‟s moststaple foods. About four-fifths of the world‟s rice are produced by small-scale farmers and areconsumed locally. Rice cultivation is the principal activity and source of income for about 100million households in Asia and Africa.Most believe that rice originated in India, around 3000 BC, when locals discovered the plantgrowing in the wild and began to experiment with it. Cultivation and cooking methods arethought to have spread to the West rapidly and by medieval times, southern Europe saw theintroduction of rice as a staple grain. In several Asian languages, the words for rice and for foodare identical. Rice cultivation has been carried into all regions that have the necessary warmthand abundant moisture favourable to its growth, mainly sub-tropical regions, rather than areasthat are too hot or cold. Fortunately, India has a conducive environment to produce rice.India is the home country for rice and it is staple food for more than 65% of its population. It isbeing grown in variety of situation. India is the second largest producer of rice after china. In theyear 2010 India‟s rice production was 132mMT, which is 26% of the global production.The present study has three fold objectives that concern the agricultural economy of AndhraPradesh, particularly paddy farming sector. First it examines the existing paddy productionscenario in Andhra Pradesh. Secondly, it identifies the price discovery mechanism at differentstages of paddy value chain. Finally, it examines the impact of government policies on paddyvalue chain.World Production ScenarioAccording to the Food and Agriculture Organization (FAO) of the U.N., 80% of the world riceproduction comes from 7 countries. However, if we talk about world rice production 2009-2010,the figures below show the worldwide rice production by countries- in fact, the top ten countriesof world counted for their rice production.National Academy of Agricultural Research Management, Hyderabad Page 7

Source: FAO, Regional Office for Asia and the Pacific, Bangkok.There has been a major decline in world rice production since late 2007 due to many reasonsincluding climatic conditions in many top rice producing countries as well as policy decisionsregarding rice export by the governments of countries with considerable rice production. Globalrice prices started increasing in November 2009 after months of steadily declining sincereaching an all time high in May 2008. Problems related to rice supply in two major riceproducing countries- India and the Philippines- have been the primary reason for low worldproduction of rice and the reversal of price trend.World Rice Production in 2010As of January 2010, planting of paddy crops was already well advanced in southern hemispherecountries. In South America, however, the season opened negatively due to drought or excessiverainfall that has delayed sowing of the main crops. It is also feared that drought related to ElNino may decrease rice production in Indonesia. Australia is expected to show an increase inrice production though its output would remain below the highs of the early-2000s. The riceproduction outlook is uncertain in southern African countries in view of the January and Marchcyclone period there.National Academy of Agricultural Research Management, Hyderabad Page 8

World trade in rice in 2010 is predicted to recover slightly to 30.5 million tonnes. This increaseis supported by a strong import demand from Asian countries, especially the Philippines.Purchases by Brazil and the United States might also rise, while deliveries to African countriescould diminish. The 2010 trade recovery would be sustained by increased rice exports byThailand which and also by China, Myanmar and Viet Nam, compensating for reducedshipments from Cambodia, the United States and Uruguay. Indian stocks, however, would notbe available to the international market but will provide relief to the Indian domestic ricemarket as the country doesnt need to turn to import in the near future.As a result of the improved 2009 production estimates, the FAO forecast of world rice stocks atthe close of the marketing years ending in 2010 has been raised by 6 million tonnes to 123million tonnes, representing a 1% drop from opening levels. Much of the contraction to close theyear with a 24% draw down to 24.5 million tonnes. Conversely is expected to be in the five majorexporting countries, which, as a group, are predicted, rice importing countries like Indonesiaand the Republic of Korea, are expected to build their inventories. Relative to worldconsumption, global rice reserves appear ample and sufficient to cover roughly 27 percent ofutilization in 2010.Area, Production and Yield of Rice in IndiaNational Academy of Agricultural Research Management, Hyderabad Page 9

From a nation dependent on food imports to feed its population, India today is self-sufficient ingrain production and also has a substantial reserve. The progress made by agriculture in the lastfour decades has been one of the biggest success stories of free India. Agriculture and alliedactivities constitute the single largest contributor to the Gross Domestic Product, almost 33% ofit. Agriculture is the means of livelihood of about two-thirds of the work force in the country.India is the worlds second largest rice producer, followed by China. The production of rice inIndia has shown an increasing trend. It has increased from 34.58 million tonnes in 1960-61 to92.76 million tonnes in 2006-07.The demand for rice in India is projected at 128 million tons for the year 2012 and will require aproduction level of 3,000 kg/hectare significantly greater than the present average yield of 1,930kg/hectare. Government of India is targeting to achieve production of 129 million tons of rice by2011-12 with the growth rate of 3.7% along with other food grains.Paddy in Andhra PradeshSource: Department of agriculture and cooperation, Andhra PradeshRice is the major food crop in Andhra Pradesh (AP) and the state is often called „Rice Bowl‟(Annapurna) of India. It is grown round the year in three seasons, the kharif, rabi and summer.Rice is grown under irrigated conditions in the command areas of tanks and canals and undertube wells in rainfed areas. It is also grown as dry rice under rainfed conditions during kharifNational Academy of Agricultural Research Management, Hyderabad Page 10

season in hilly tracts. In terms of rice productivity, the state with its productivity level of 2471kg/ha, ranks fourth in the country after Punjab, Tamil Nadu and Haryana. Comparison of meanyield of best entry under All India Coordinated Research Project (AICRP) on rice over 7 yearsperiod with the state average yield for irrigated rice indicates a gap of 36 percent.National Academy of Agricultural Research Management, Hyderabad Page 11

CHAPTER II Review of literatureAsia‟s rice based livelihood systems are the contiguous and largest of all food producing systemsof the world. Asian rice lands produce 92% and consume 90% of the world‟s rice and providefood and livelihood base to slightly more than half of the total world population (little more than3 billion). The total rice harvested area of 135 million hectares is mostly scattered among smalland resource poor farmers and provides employment to a large number of rural landless.These rice lands also support more than 50% of the world‟s hungry.Rice is a preferred staple food for more than one half of the world‟s population. Rice is rich ingenetic diversity, with thousands of varieties grown throughout the world. In its naturalunmilled state, rice comes in many different colours, including brown, red, purple and evenblack.The rice supply chain provides livelihood to millions of people across the developing world.(Rice is the staple food for 65% of the total population in India). The global changes in trade andtechnology development have profoundly changed the situation today. The small and marginalfarmers at one end of the chain are not only economically disadvantaged but often politicallypowerless, and when their interests are pitted against those of more powerful actors at the otherend, they often lose. Therefore, understanding the institutional and political economyunderpinnings of the organizational structure of a particular commodity or a sector is crucial fordesigning a set of measures that enables the poor to take fuller advantage of greater access tomarkets.Hundreds of millions of people spend more than half their incomes on rice to feed their families.At the same time, rice farming is a major source of employment, especially for the poor, andabout four-fifths of the world‟s rice production is grown by small-scale farmers in low income,developing countries. All over the world, rural women have traditionally played, and continue toplay, an important role in both rice production and rice post-harvest activities.In many areas, tasks related to rice planning, weeding, harvesting and processing are thedomain of women. Numerous actors take part in the value chain that links rice farmers to finalconsumers: farmers, local traders, millers, wholesalers, retailers, and exporters in addition tothe state owned Food Corporation and Public Distribution System. Other participants includetransporters, seed companies, agrochemical companies, agricultural equipment companies,irrigation companies, banks, inspection agencies, commerce and tax departments, agriculturalNational Academy of Agricultural Research Management, Hyderabad Page 12

departments, farm organizations, miller organizations, research organizations, extensionorganization, policymakers, and consumer organizations. The relations among differentparticipants in a sector determine the means by which benefits are distributed within the chainand influence the way different actors try to improve their positions within the chain. From theconstraints identified, it is possible to derive policy recommendations to raise the returns ofpoorer households within the sector.Pre-ProductionWith the green revolution, the dependency of farmers on external inputs has increased. Thisdependency has increased the costs of cultivation and also created several ecological problems.The productivity oriented extension systems have encouraged excessive monoculture of the cropand varieties. India which once had 30,000 varieties of rice; today gets 75% of its riceproduction from just 10 varieties (Return to Good Earth, 1990). Availability of good qualityseeds in sufficient quantities locally is a major requirement. Retaining farmers‟ control over theseed is a major challenge with new legislations coming in, favoring corporate control over theseed. Similarly the various GM rice varieties in the pipeline for approval bring in the issues ofpatents and monopoly control over the seed by the MNCs in addition to posing new hazards.The new GM varieties of rice biofortified with beta carotene, iron etc could add to the healthproblems rather solving them. In spite of the reports across the world on the GM contaminationin rice, Indian government/research establishments are aggressively promoting the GM path.In addition the IPR implications of such research are much less understood. Many of thesuccessful models established by various organizations on local resource based, organicproduction systems are remaining as isolated cases. The present support systems in the form ofsubsidies, credit or insurance favor only external input (chemicals, hybrids etc) basedproduction systems. Government subsidies ultimately reach fertilizer and pesticide industriesand do not support farmers to effectively make use of their local resources. This call for acomplete recasting of the way government and financial institutions supports the provision ofinputs.The national and state governments recently initiated few programs on the capacity building onorganic farming. All these initiatives are welcome, but without a paradigm shift in theconceptual understanding replacing the chemical inputs with bio-inputs may not really solve theproblems of small producers and sustainability. All these are aimed at promoting (large scale)certified organic production to fetch premium price in international markets.National Academy of Agricultural Research Management, Hyderabad Page 13

ProductionRice is grown under a wide variety of conditions in India. Rice is the only cereal that can standwater submergence, and this helps to explain the long and diversified linkages between rice andwater. For hundreds of years, natural selection pressures such as drought, submergence,flooding, and nutrient and biotic stresses led to a great diversity in rice ecosystems. Historically,rice cultivation has been a collective enterprise. The investment and shaping of the landscapethat are needed for the ponding system (terraces) require collective organization within thecommunity. Water management also relies on collective interest: crop and water calendars mustbe organized for large blocks of fields in order to manage water efficiently and organize suchwork as land preparation, transplantation and drying for harvesting. With construction of damsand after the Green Revolution, rice became predominantly a canal-irrigated crop.Traditional Tank systems were totally neglected. Gradually farmers even in rainfed areas startedcultivating rice under tube well irrigation. This has led to exhaustion of the ground water andseveral cascading ecological and economic problems. An acre of rice production in pondingconditions requires about 6 million liters of water which translates to 5000 liters of water foreach kilogram of rice production. This shows the burden on the scarce natural resources.An innovative system of growing rice with less water was initiated in Madagascar named Systemof Rice Intensification (SRI). This system which is based on sound ecological and agronomicprinciples not only reduces water utilization by about 40% but reduces the seed quantityrequired to 2 kg/acre and increases the yields by at least 20%. The experiences from AndhraPradesh, Tamil Nadu and Jharkhand show the advantages of the system. SRI for the first timeafter green revolution has brought in several innovations from farmers into mainstreamagriculture. SRI also clearly demonstrates the biological potential of soil to support the plantgiven suitable conditions. SRI is best suited for the organic production systems. While SRI issuitable for certain conditions, there are various other such successful initiatives which need tobe understood and promoted.Though paddy is a self pollinated crop and has wide variation, research scientists focused ondeveloping hybrids - as a high-end technology by public sector research and to retain controlover the seed by the private companies forcing the farmers to buy seed every year. This wouldincrease the cost of seed at least by three times.National Academy of Agricultural Research Management, Hyderabad Page 14

Post-ProductionMost resource-poor farmers have very limited capacity for retaining their produce after theharvest until they get good prices. Prices are generally low immediately after the harvest and theaccess of the small producers to infrastructure like storage and processing facilities is quitelimited. In addition, lack of transparency and lack of awareness regarding the procurement bythe Govt. agencies/mill owners add to the woes of the farmers. Also there are several moves towithdraw the minimum support prices and market intervention operations.Procured rice is distributed through the Public Distribution System in the country. Similarly thisrice is also used in the Food for Work program and national food assurance programs.While all these are aimed at providing food to the poor, such initiatives lead to „sanskritisation‟of food habits which also lead to changes in cropping patterns. The millets were completely leftout of the support structures, and the growers suffer due to lack of demand and effectivemarkets. Some innovative ideas like Rice Credit Line, which advances food to labor in leanperiods and gets in return their labor, have been tried in states like AP.Growing awareness about the health hazards of the chemicals used in production processes hasincreased the demand for organic foods. Several organizations have stepped into the organicproduction systems to capture the premier (but now also increasingly those in Asia‟s biggercities) western markets. But it has limitations for small scale producers like high price ofcertification, inaccessible distant markets and difficulties to meet the strict internationalstandards for organic production in a local/Indian context etc. National organizations likeAPEDA (Agriculture Produce Export Development Agency) have programs to subsidize thecertification but focus on international markets. Local markets are only starting to develop.National Academy of Agricultural Research Management, Hyderabad Page 15

CHAPTER III MethodologyThe present study was based on analysis of secondary data and primary data collected by CSApreviously. CSA has collected primary data from farming community of 12 villages in 3 districts(Nalgonda, Warangal, Karimnagar) in Telangana region of the state were selected. Data wasalso collected from the commission agents, Millers, Traders involved in the rice chain.The village covered under the study was both rainfed and irrigated area, the irrigation soursewas manly tubewell. The villages are selected based on the access and availability of partnerorganizations. However, farmers were selected on random basis from each village. The surveywas taken up with 100 farm households growing Paddy in districts of Andhra Pradesh. Thestudy was taken up in 12 villages Haridasnagar, Agraharam, Pothireddy palli, Venkatapur,Padira in Karimnagar (5 villages in Karimnagr), Maryala, Cheekatimamidi, Kanchal thanda,Chowderpally, Masanpally(5 villages in Nalgonda district), Singarajupalli, Einabavi (2 villagesfrom Warangal district). The data on cost of cultivations in different methods of Paddycultivation especially farmers growing paddy with conventionally (Using chemicals), farmersgrowing paddy without pesticides (NPM) Non-Pesticidal Management, farmers growing paddyorganically (without fertilizers and pesticides) and finally farmers growing Paddy by SRI(System of Rice Intensification).The data analysis has done with the help of MS excel.Methodology adopted for collection of Data: Survey by questioners (By CSA) Individual interviews with the farmers (By CSA) Reports of different studies Reports by daily News papers Different websites Group discussion with the farmers (By CSA) Data already collected by CSA (Especially in Srikakulam and Kurnool district)National Academy of Agricultural Research Management, Hyderabad Page 16

CHAPTER IV Results and DiscussionPaddy value chainNumerous actors take part in the value chain that links rice farmers to final consumers: farmers,local traders, millers, wholesalers, retailers, and exporters in addition to the state owned FoodCorporation and Public Distribution System. Other participants include transporters, seedcompanies, agrochemical companies, agricultural equipment companies, irrigation companies,banks, inspection agencies, commerce and tax departments, agricultural departments, farmorganizations, miller organizations, research organizations, extension organization,policymakers, and consumer organizations. The relations among different participants in asector determine the means by which benefits are distributed within the chain and influence theway different actors try to improve their positions within the chain. From the constraintsidentified, it is possible to derive policy recommendations to raise the returns of poorerhouseholds within the sector.A. Factors and RelationshipLand HoldingsYear Share in number of holdings Marginal Small Semi-Medium Medium Large1955-56 38.6 18.3 17.7 16.7 8.71970-71 46.0 18.5 17.4 12.7 4.31976-77 46.6 20.3 17.4 12.7 4.31980-81 49.3 20.9 16.0 9.1 2.11985-86 54.2 20.8 15.2 8.0 1.81990-91 56.0 21.2 14.5 6.9 1.32000-01 60.9 21.8 12.4 4.3 0.62005-06 61.6 21.9 12.0 4.0 0.5Source: Andhra Pradesh Human development Report, 2007The Majority of the farmers growing Paddy in the study area are small and marginal farmers.Out of the 100 household interviewed 90 % are small and marginal farmers and only 10% of theNational Academy of Agricultural Research Management, Hyderabad Page 17

farmers are Big farmers. Even though majority of the farmers having 5 to 10 acres, ricecultivation is confined to only 1 to 2 acres and the main reason for restricting the Paddycultivation is irrigation, water usage, fluctuating rainfall patterns. As per the Department ofAgriculture data on land holdings in the state is being collected from 1970-71 through aquinquennial Census of Land holdings and the latest relates to 2000-01. The average size ofholdings in the State, which was 1.36 hectares during 1995-96, had declined to 1.25 hectaresduring 2000-01.The data on land holding structure from 1955-56 to 2005-06 show that operational holdingshave become much less concentrated where as absolute number and area covered by large andmedium holdings has declined since the mid-1950s. There has been significant increase „in theshares of marginal and small farmers in the number of holdings. The share of marginal farmersin the number of holdings increased from 46% in 1970-71 to 61.6 percent in 2005-06Quality seedAndhra Pradesh is known for its rich diversity of rice varieties. The varietal diversity representsthe wide diverse agro-climatic conditions, growing seasons and consumption preferences.Medium to long duration (120-170 days) varieties are grown in fertile Krishna Godavari Zone.State has a long coastal belt and short duration (110-125 days) varieties are grown in theNorthern Coastal Zone. Southern Zone mainly grows long duration (165-170 days) varieties andSouthern Telangana grows medium duration varieties while Northern Telangana grows mainlythe short duration varieties. The fine quality of grain preferred for consumption.Availability of quality seed timely and at affordable price to all the farmers is important for goodcrop but it is a constraint for rice farmers in India. The Supply of certified rice seed from publicinstitutes‟ accounts for about 15 percent and the private companies for about 8 percent only. Theremaining about 77 percent requirement is met either by storing own seed or by farmer-to-farmer exchange. Analysis of certified/ quality seed distributed from 1990-91 to 2000-01reveals that not much progress was made for increasing the quantity of seed distributed . Therewas some increase from 1997 but it again declined in 2001. Private companies are increasingtheir seed supply in the market. The potential for marketing good seed can be judged by the factthat Co-operatives in Andhra Pradesh are producing rice seed with farmers and marketing it notonly in the state but also in other states too.National Academy of Agricultural Research Management, Hyderabad Page 18

The preference of farmers in selecting a particular variety varies from place to place and regionto region and the market preferences of that particular area. In the survey area 50 % farmers aregrowing IR-64, 20 % farmers are growing MTU-1010, At about 10% of the farmers are growingBPT and Remaining farmers are using other varieties.Last four to five years farmers are growing only old rice varieties viz., Badava mashuri, Vijetha,sona masuri, swarna were grown in east and west Godavari districts of Andhra Pradesh. As perfarmers voice they said that they are getting only 35 to 45 bags/acre out of which 20-25 bags isgoing to the land owners on Lease (A study by Jana Vignana Vedika, 2007).Hybrid RiceAndhra Pradesh has highest area under hybrid rice seed production. Though the industry andthe government is pushing hybrid rice, there is lesser acceptance by farmers. The area underhybrid rice in India has increased only by 1 % (from 1.2 lakh ha in 1997 to less than 2.0 lakhacres in 2005) in the last one decade. In AP the adoption is very less. Seed industry is tryinghard to push hybrids as it can increase the seed dependency. Unfortunately, the agricultureuniversity and Directorate of Rice Research (DRR) located in AP are also spending most of theirresources on hybrid rice development. DRR has a collaborative research project with MahycoResearch Foundation to develop and market hybrid rice in India.GM riceIn Andhra Pradesh, during 2005-06 GM rice field trails were conducted in the farmers‟ fields.After resistance from the farmer‟s organizations and civil society organizations, the trials werediscontinued. However, the trials in Haryana, Tamil Nadu and Utter Pradesh were burnt by thefarmers and Chhattisgarh government has burned the field trials in Raipur. The rice tradersassociation has moved to Supreme Court and could get stay on conduct of field trials in basmatirice growing regions as the trade security measure.Fertilizer usageThe data on cost of cultivation in the sample area shows that there is no correlation between thedosages that the scientist, are recommending in different crops and the actual usage on farm bythe farmers. The officials are calculating the requirement of fertilizers as per the scientificrecommendations. As per the official recommendations the fertilizer requirement in paddy isNational Academy of Agricultural Research Management, Hyderabad Page 19

one bag of D.A.P, 2 bags of Urea, 40 kgs of Potash but in practice farmers are using 3 bags ofurea, 1.5 bags of D.A.P and 25 kgs of potash.As per the records of Agricultural department as on 27th September,2008, the sowing statuswas 75.5 lakh hectares and out of which 46.52 lakh hectares is pulses, Sorghum, Jowar, Bajra,Ragi, Sesamum and castor mainly are rain fed crops. The consumption of fertilizer is very less inthese crops, even if they use it is very minimum that is 2 to 2.5 bags per hectare. So for 46.52lakh hectares of Dryland crop might have consumed 5, 81,500 Metric tonnes. In such cases asper the Govt. if 6 lakh Metric tonnes were used for Dryland crops the remaining 22 lakh metrictonnes is sufficient for wetland crops. If this much quantities of fertilizer are really available inmarket there no need of farmers demanding fertilizers.Fertilizer crisisThe usage of fertilizer came down in the study area and they used to apply 2 Bags of Urea, oneBag of DAP, 1 Bag of SSP and one bag of MOP but this year due to hike in fertilizer prices theyhave applied only one bag of urea, one bag of DAP, 25 kg of MOP. The fertilizer cost of 10farmers from Kurnool of different social strata indicates that the average cost per acre of paddyis Rs.2438 (Table-)During this year government could able to supply enough fertilizer only few districts viz.,Visakhapatnam, Chittoor, Nizamabad, Medak, Mahaboobnagar and as per that there should beshortage of fertilizer, even though more fertilizer is supplied to other districts still there is crisis.The excess has moved to other states and only big farmers have access to the fertilizers. Thesmall and marginal farmers did not get enough fertilizers. Majority of the fertilizer subsidydisbursed in cash out of the Rs.22, 000 crores corpus announced by the Union Governmentthree weeks ago in August 20 has gone towards imported urea. Out of this fund only Rs.6000crores has been disbursed for Indian manufacturers.Due to shortage of fertilizers in Andhra Pradesh there is lot of malpractice and adulterationhappened with Fertilizer traders, Government Agencies in Andhra Pradesh. To know the factsthe revenue department and Agricultural Department conducted a survey by seeing bill booksfrom dealers, and collected information from 22,500 farmers. According to this 80 % of thefertilizers were used by East Godavari, West Godavari, Krishna, Guntur, Khammam farmers andthe rest of the 20% fertilizers are used by the farmers of remaining districts. The major farmerNational Academy of Agricultural Research Management, Hyderabad Page 20

attacks on dealers, government agencies are from these 20% utilizing districts. The 10% of thefarmers involved in the survey said that they are not getting fertilizers on time and here andthere the agencies have sold fertilizer bags Rs.5 to Rs.10/- more than the MRP rates.Fertiliser 2003-04 2007-08 Difference in four Production MRP/ba Subsidiy Production MRP/ba Subsidy/bag years (in cost/bag g /bag cost/bag g Rs./bag)DAP 696.95 486.20 210.75 2513.55 486.20 2027.35 1816.60MOP 368.20 231.25 136.95 1169.76 231.66 938.10 801.15Urea 500.80 250.80 250.00 500.80 250.80 250.00 0.00(Gasbased)Urea 850.80 250.80 600.00 1750.80 250.80 1500.00 900.00(Napthabased)ComplexFertilisers20:20:0: 540.60 378.15 162.45 1707.69 327.24 1380.45 1218.0013 Phos28:28:0 694.20 471.65 222.55 1941.86 389.01 1552.85 1330.30023:23:0 598.20 415.50 182.70 1328.44 319.54 1008.90 826.20016:20:0 496.40 368.80 127.60 1314.40 305.50 1008.90 881.30010:26:26 613.90 434.10 179.80 1965.19 374.24 1590.95 1411.1512:32:16 631.40 440.35 191.05 2057.02 397.12 1659.90 1468.8514:35:14 666.85 449.80 217.05 2222.12 425.62 1796.50 1579.4515:15:15 523.45 362.55 160.90 1281.54 286.29 995.25 834.3517:17:17 573.60 420.80 152.80 1622.76 301.81 1320.95 1168.1519:19:19 621.75 431.10 190.65 1742.12 337.32 1404.80 1214.15SSP 190.75 158.25 32.50 456.80 176.80 280.00 247.50(Powder)Source: Circulated to Cabinet by Government of AP, 2007National Academy of Agricultural Research Management, Hyderabad Page 21

The government increasing chemical fertilizer subsidies is worry some. During 2008-09estimates are reaching Rs.119772 when compared to Rs.18299 crores in 2005-06, Rs.25952 in2006-07 and Rs.40338 crores in 2007-08.Years 2005-06 2006-07 2007-08 2008-09Fertiliser Subsidy 18299 25952 40338 119772* (estimated)Pesticides in Rice ProductionIt is the large farmers who use more pesticides in rice production (Chari et al. 2000).Occurrence of pest and diseases is more frequent in the command coastal areas,where yearly two to three crops are grown. The predominant and endemic pests like brown planthopper (BPH), blast and rodents in Godavari delta consume maximum pesticide load into thepaddy ecosystem. Rodents (90% Bandikoot bengalensis, 10% Musa muscus) also causesignificant loss in the costal area. Chemicals are being to kill this rodent. A variety ofinsecticides, fungicides, rodenticides and herbicides (Endosulpon, Monocrotophos, Carboryl,Quinolphos, Chloropyriphos, Ekalux, Carbofuran, Metacid, Bavistin, Contof, Tilt) are used asmono and in cocktails. Use of pesticides is harming the ecosystem. Farmers realize that rice andfish production system has been is adversely affected by pesticide use in coastal AndhraPradesh. Farmers also have the feeling that the high use of pesticides, which particularly heavyspraying at milky stage may have residual effect in the produce, is harm-full for both humansand animals (through fodder). High rates of use of pesticides (chlorinated compounds,carbomates, granules, some times pyrothroids, systemic insecticides and fungicides, strongherbicides like round up, spraying pesticides at milky stage of the crop) for controlling fungaldiseases and insect pests of paddy, for example, may lead to high levels of toxic residuesentering the non-agricultural environment.The organochlorine pesticides from the surrounding paddy fields are another source of pollutionin the rivers of, Krishna and Godavari at Andhra Pradesh and are responsible for deteriorationof water quality. Besides these, additional nutrients enter the river with the domestic sewagefrom the settlements especially the Godavari and Krishna command areas.The intensive use of pesticides leaves high level residues in soil and groundwater. Organicactivity is an essential component of humification in improving soil structure is therebyNational Academy of Agricultural Research Management, Hyderabad Page 22

impaired. Slowly degrading compounds cause a gradual build up of residues in the soil andthreat to underground water in the form of deposits. Organochloride insecticides tend toaccumulate in the biological food chain of predators.There is increase in prices of pesticides, within three month to 70 to 80%. Pesticide industriesespecially MNC‟s are selling some crucial molecules @ 16 times more than the actual prices areindirectly responsible for hike in prices of other 14 generic molecules. The chemical that is Pesticide Name 2007-08 2008-09 Percentage Price Rs. /Lit Price Rs/Lit increase Acephate 75 % 350 625 75 Monocrotophos 270 450 67 Glyphosate 320 500 56 Cartap Hydrochloride 40 80 100 Cartap Hydrochloride 50 350 700 100 Phorate Granules 36 52 44 Hexaconazole 5 % 240 400 67 Profeophos 50 % 350 450 29 Chloropyriphos 20 % 160 250 56 Cypermethrin 25 % 275 350 27 Imidacloprid 17.8 % 750 1500 100 Acetamapride 1000 1800 80 Quinolphos 220 350 59 Butachlor 180 300 67generally promoted against spodoptera available in the name of PROCLAIM in the market issold in the market @Rs.8000per liter and the same chemical is available in Pakistan and chaina @ Rs.500, imagine the kindof robbery that‟s happening with Indian farmers. In India 6000 crores worth of pesticides areavailable in the market and out of that 60 % share goes to 20 MNC‟s Bayer, Monsanto,etc., andthe remaining 40% share goes to 1000 small Indian companies. The prices of “Glyphosate” achemical used to control weeds increased to Rs.500/lit within 3 months period of time. Theprices of chemical “Cartap Hydrochloride”- 50% S.P that are used to control stem borer in cropslike paddy increased to 100%. The chemical used to control Sucking pests “ Imidacloprid”Increased from Rs.750 to Rs.1400National Academy of Agricultural Research Management, Hyderabad Page 23

Farm mechanizationData from the study indicates that 98 % of the farmers are preferring paddy harvesters forharvesting paddy due to severe shortage of labour in the kharif season. One more complaint isthat the straw that is coming by mechanical harvesters is not having that much quality and themilch- animals and livestock do not prefer to eat ultimately this indirectly leading to shortage offodder in the villages. Farmers are spending Rs.1500 to Rs.2500/ acre based on the hours ofharvest in the study area.IrrigationIn Andhra Pradesh as for as irrigation system is concerned the total land having completeirrigation facility is only 45 lakh hectares, out of which 15 lakh hectares of land is producing twocrops in a year but the remaining land of 30 lakh hectares fallow land. Second crop is grown infew hectares of fallow land under rain fed conditions. The Gross area irrigated under wellsaccounted for a major share of 46.6 per cent (27.96 lakh hectares) followed by Canals with 37.2percent (22.31 lakh hectares) and Tanks with 12.7 percent (7.62 lakh hectares) in 2005-06.TheNet area irrigated in the State increased to 43.93 lakh hectares in 2005-06 from 38.81 lakhhectares in 2004-05 showing an increase of 13.2 percent. Net area irrigated under Wellsaccounted for a major share of 45.2 per cent (19.87 lakh hectares) followed by Canals 35.8percent (15.72 lakh hectares) and Tanks 15.1 percent (6.62 lakh hectares) in 2005-06. Source-wise gross and Net area irrigated. In the most intensively cropped areas under rice, wheregroundwater is often used for irrigation, water tables have been falling at the alarming rate ofone meter per year or more! In Andhra Pradesh, the total irrigated area (net) increased from27.47lakh ha in 1955 to45.27 lakh ha in 2000. Much of the growth in irrigated area in A.P. since1985 has come from tube wells and the area under tanks has decreased. There was noimprovement in irrigated area from 1975 to 2000 under canal system. Rice is the mostimportant irrigated crop in A.P. In A.P., large parts of new irrigated area are being cropped withrice and the proportion of rice area that is irrigated is increasing.Water management also plays an important role in realizing genetic yield potential of ricevarieties and hybrids. Irrigation water management influences crop growth and grainproduction. Yield reduction in rice in some potential areas is often due to improper watermanagement. During wet season cyclic submergence gave similar grain yield to that ofcontinuous submergence. The irrigation water management varies from 2500 mm undercontinuous submergence, to 1250m m under intermittent irrigation to 1050 mm underNational Academy of Agricultural Research Management, Hyderabad Page 24

irrigation once a week. Further cyclic submergence requires less water (DRR, Agro techniquesfor increased rice production).Crop loansThe farmers in the study area are taking Rs.1500 to Rs.25000 to meet the input requirement forrice cultivation. There was delay in issue of crop loans to farmers ultimately the farmers has todepend on the money lenders to get loan @ 36%. The target of crop loans this year was 20thousand crores out of which the target for kharif itself is 14 thousand crores. The crop loansissued to farmers by august, 28th is only 5,939 crores only. Even today banks are not showingany interest on crop loan as a result of this 95% of farmers growing crops on lease did notreceived any loan from institution.Statistics show that the Indebtedness in farm households in the state is highest in the country.About 82 percent of the 60.34 lakh, households are found weighed down by the loan burdencompared with the national average of 48.60 percent. According to the national sample surveyand the state directorate of Economics and statistics, the average outstanding loan per farmerhousehold in Andhra Pradesh is Rs.23,965, almost double the national average of Rs.12,585.The cumulative financial burden on the indebted 49,49,300 farm households is about Rs.11,861crore. The indebtedness among the social groups in the state too is higher than the nationalaverage – 78.40 percent in STs (36.54 percent nationally), 79.20 percent in SCs (50 percentnationally), 83.25 percent in OBCs (51.41 percent nationally) and 83.72 in others (49.48percent).The statistics also highlight substantial levels of landlessness. Farmers are being forced to sell orgive up their land because of their inability to repay debtsFrequent droughts, lack of planningand knowledge on institutional credit, farming practices, dwindling size of land holdings andexcessive reliance on private money lenders are some of more issues the farmers face.  According to the survey by Reserve Bank of India Rs.534 out of every 1000 rupees of credit to farmer is going from Money lenders in Andhra Pradesh.  Another report by world bank says that only 24% of the farmers are getting institutional credit in Andhra Pradesh  According to Tribal development reports, Seethampeta, in tribal areas money lenders are collecting Rs.3000/- worth of Paddy grains on 5000 rupees credit they‟ll give  The interest rate by private money lenders was reported to be 24 to 34 % in Kurnool district and 36 to 60% in MahaboobnagarNational Academy of Agricultural Research Management, Hyderabad Page 25

Loan waving scheme was proposed by central government and as per the estimatesapproximately Rs.71,680 crores of loans may be waived during this year. But actually the totalamount waived by different banks till 7th july, 2008 was below Rs.70, 000 crores. As per theBanker‟s committee report, In Andhra Pradesh nearly Rs.12, 557 crores worth of loans werewaived off by this scheme. But during implementation of the scheme, as per the terms andconditions it implied to 66.25 lakh farmers @ 10,197 crores were expected to be waived off. Outof this 56 lakhs of small and marginal farmers worth loans worth of Rs.8,420 crores, 10.25 lakhbig farmers loans worth of 1,770 crores. What about the 25 lakh farmers who doesn‟t have anybank account, this farmers doesn‟t come under the coverage. But in reality this scheme hashelped only 20 to 30% of farmers; even in this 90% of farmers are big f In Guntur district 3.80lakh small and marginal farmers waived of loans worth of Rs.810 crores. During this year kharifthe crops loans to be given in the district was Rs.1100 crores and till now only Rs.500 croreswere given. Despite of all these things the cost of cultivation has drastically increased due toincrease in seed prices, increase in fertilizer prices, and Second time purchase of seeds due tonon-germination of seeds. Diesel crisis increased the ploughing costs. This situation pushed thefarmers once again into the clutches of money lenders and the farmers have to lend the money@ Rs.5 interest rate. According to a report Khammam district farmers have already got loan ofRs.500 crores, Nalgonda district farmers got loan of Rs.400 crores from private money lenders.(Report from PRAJA SHAKTHI, 17TH Semptember, 2008)Power Supply ProblemsAll farmers in the sample area expressed the power supply problem and they said that there isinterrupted supply of power in the kharif season. The power supply was only 7 hrs. High voltageduring this interruption is burning the motors in the bore-wells. This is costing another Rs.2000to Rs.3000 in the season that is adding to the cost of cultivation.In Andhra Pradesh as on July, 2008 there was demand of power of 200 million units and thesupply was only 174.5 million units. The 7 hours power to Agriculture is restricted to 3 to 4 hrsin different districts. The supply is not more than 4 hrs in Srikakulam, Power supply was givenin 3 intervals i.e., morning, After noon and night shifts in Krishna district. Power is supplied intwo shifts in Anantapur district.Crop insuranceCrop insurance to the insurance to farmers is delayed in this year and the crop insurance of2006 was already paid before September 1st week itself. The major reason for this delay might beNational Academy of Agricultural Research Management, Hyderabad Page 26

that this total amount has not been counted in the allocated budget. In Andhra Pradeshgovernment has already brought small and marginal farmers under crop insurance coverage.The state and central governments would bear the 10% discount announced on premium.According to this the State government has to bear 5% premium along with bank service chargeswhich may be around 6.72 crores of rupees. Compensation of 539.89 crores has already paid to6.43 lakh farmers exaggerated with crop damage. During 2007 there was crop damage of 14,092in Kharif and 10,732 farmers in Rabi and these amounts to be 7.25 crores in Kharif, 4.19 croresin Rabi.The Crop losses paid by Govt. on natural disasters(Crores)Year Central Govt.(crores) State.Govt(Crores)1995-96 87.91 29.31996-97 93.14 31.051997-98 98.29 32.761998-99 103.3 34.431999-00 107.69 35.9Source: Rythuvani, October, 2007 40% of net sown area irrigated, 60% dependent on rains Most irrigation from non-perennial sources Affects adoption of improved crop production techniques because of high risks and low marginsDamage due to floods and heavy rains:The damage due to floods in August 2006 there was severe havoc in 13 districts and there wasdamage in 525085 acres, produce worth of Rs.525.66 crores. For this damage government hasonly paid Rs.45.59 crores and the crop loss not beyond Rs.750 per acre.During February 10-11 of this year, due to untimely rains 7 districts in the state suffered heavyloss of Rs.695 crores and there was heavy loss to paddy crop. Government announced that theywill facilitate to make crop issuance scheme for the benefit of the farmers. State Governmentincreased the compensation to farmers on natural disaster, the hike was only Rs.400 to 500 andthat benefit goes to a farmer having 2.5 acres.National Academy of Agricultural Research Management, Hyderabad Page 27

Drought is another disaster that is having major impact on paddy chain. Every year 80 lakhs ofsmall and marginal farmers are affected by the drought. According a survey out of net cultivatedarea 30 lakh acres in kharif and 12 lakh acres in Rabi of small and marginal farmers are affectedin Andhra Pradesh. The cultivated land has to kept fallow every year. During 1981-82 the totalcultivated area was 280 lakh and out of that 83.64 lakh acres were kept fallow. In 2004-05 thefallow land due to drought increases to 110.45 lakhs.HailstormsThis is another problem that is causing a major mess to Andhra farmers, that too mainly inTelangana Region. In Enabavi village of our study area even though farmers have overcome theissue of cost of cultivation by shifting towards organic, this is a major problem of naturalcalamities that is causing severe damage. During 2007-08 in Enabavi, there was severe damagein 60 acres of Organic Paddy due to hail storms.Activity Men Women Men Women Machine cost/Day Cost/dayPloughing 2 0 300 0 2400Puddling 2 0 300 0 0Land Preparation 1 1 150 70 0Sowing 1 1 150 70 0Seed treatment 0 2 0 150 0Transplanting 1 17 150 1190 0Fertilizer application 2 3 300 210 0Manure Application 1 2 150 300 0Weeding 0 15 0 1050 0Harvesting 0 0 0 0 2000Straw removing 1 5 150 350 0Drying `1 2 150 300 0Bagging 1 1 150 70 0Transportation to 2 0 300 0 0market 15 49 2250 3760 4400Source: Based on Primary data from present study  In 2004 between January 20th-25th, 80 thousand acres of paddy crop was damaged in Warangal, Adilabad, Karimnagar, Khammam, Ranga Reddy, Anantapur and Medak districts.National Academy of Agricultural Research Management, Hyderabad Page 28

 During 2004 February, 19,20th there was damage on Paddy crop in Doktala, Ponnala, Patan villages  2004 April, 24th and 25th there was damage of crop around 82160 acres due to hailstorms  Due to hailstorm in 2007 may, 4th there was crop losses about Rs.200 crores in Karimanagr, Waranagal, Adilabad and the entire paddy kept for drying was damaged.Gender segregated activities of Paddy CultivationWomen play a key role in agriculture and food security of the family. Women headapproximately one third of the households living below the poverty line and are majorproducers, earners, buyers of family food and meal-makers. Historically the wage rate forwomen had been lower than men and this along with the fact that they are more efficient incarrying out certain agricultural activities increases their demand in comparison to men. Theirparticipation in rice cultivation at various stages is also quite high. They dominate in carryingout all activities except land preparation. Wage rates in most states are highly discriminatoryeven for the same type of work. In some cases they get almost half the wage of men. This makestheir food security further vulnerable. This is inspite of the fact that they are considered moreefficient in carrying out some activities like weeding and harvesting. Women also playsignificant role by processing paddy, selecting and storing seed. They are more experienced andefficient in these tasks than their man counterparts. But their contributions and skills arerecognized, neither by the family members nor by the researchers and policy makers.Surprisingly enough most officials are either not aware or they do not want to acknowledge suchfield realities.Decision making in Paddy chainThe study mainly focused on involvement f women in different Activities of paddy cultivationand it was found that nearly 15 men labour is involved in one acre production of paddy and 49women labour are required. Recently mechanical harvesters and transplanting machines havereplaced the women involvement. The cost of labour has drastically increased i.e. Rs.50 to menand Rs.30 to women in 2005-06 to Rs.150 to men and Rs.70 to women in 2008. This is makingpaddy cultivation a dilemma to farmers.National Academy of Agricultural Research Management, Hyderabad Page 29

Women Men Collective Purchase of Inputs 0 61.6 38.4Seed storage 39.8 60.8 0Variety to be grown 0 53.84 46.1Agriculture land use 0 46.15 53.84Cropping pattern 0 30.7 69..23Credit accessibility 0 61.53 38.47Ownership of machines 30.76 69.23Ownership of Land 15.39 7.69 76.92Money Management 15.38 7.69 76.9Transportation to market 0 53.85 46.15Household consumption 0 46.15 53.84*Data from current studyData indicates that in most of the activities there is collective decision making, except seedstorage, ownership of land, money management nearly 15% women alone take decision apartfrom men and collective decision making. In case of seed storage 39.8 % women are takingdecision.In case of Purchase of inputs 61.6% men only take decision and 38.4% take collective decision inthe family. In case of varieties to be grown 46.1 % would take collective decision. In case ofownership of land and machines there is 69.23% and 76.92% of collective decision is there.The gender involvement data , of Einabavi and Singarajupalli villages is same. The activitieslike ploughing, puddling and other land preparation acivities are carried out by men.Transplantation and weeding are the two activities that purely involve women. In case of SRIpaddy cultivation, weeder is operated by men only. Harvesting is another major activity whichinvolves 90% women. It is very clear that, where there is more of physical activity, women areinvolved. Transporting is taken care of by men. There is difference in wage rates also. Whenmen are paid Rs 120, women are paid 100. The wages for most of the operations are 60 and 50.Rs 60 for men and rest 50/40 for women.In case of decision making, all the decisions except how much to be kept for householdconsumption, are taken by only men. Women are informed the decisions taken. This clearlyindicates there is increase in participation of women in decision making of rice cultivation in theform of collective decision makingNational Academy of Agricultural Research Management, Hyderabad Page 30

B. Constraints and opportunities in paddy value chainThe farming is in crisis since last 4 to 5 decades and farmers are committing suicides as farminghas become unviable. During 1950‟s the percentage share of Agriculture in India was 55%. It hasdrastically come down to 14.6% in 2009-10. On the other hand the other industries aremanaging the prices on their own and food grain prices were controlled by the government andinsisting the farmers in such a way that the farmers is not even getting minimum support price.If you go through the prices of different commodities from 1997 to 2007, in this decade itselfthere is 25% increase in rice prices, 25% increase in wheat prices, 25 % increase in pulses, 17%increase in prices of Maize, 7% increase in cotton prices at consumer level. But there is nominalincrease in Minimum support price at farmer level by the government.Minimum Support Price of Rice in IndiaKeeping in view the interests of the farmers as also the need for self reliance, the government isannouncing Minimum Support Prices (MSP) for major crops from year to year. Farmers are freeto sell in the open market or to the Government at the MSP depending on what is moreadvantageous to them.The price support policy of the Govt. is directed at providing to insurance to farmers against anysharp fall in farm prices. The minimum price is fixed beyond which the market price cannot fall.There were substantial increases in the MSPs of rice and wheat after the mid-nineties. MSP ofpaddy was increased by Rs 35 per quintal in 1997-98.Minimum support price of paddy (Rs/quintal)Kharif Crop (According to Crop As on 10.06.2010 (Rs. year) per quintal)Commodity Variety 2004- 2005- 2006- 2007-08 2008- 2009- 2010-11 05 06 07 09 10Paddy Common 560 570 580 645/850 850 950 1000 Grade 590 600 610 675/880 880 980 1030 ASource: Directorate of Economics and Statistics, Department of Agriculture and CooperationNational Academy of Agricultural Research Management, Hyderabad Page 31

State-wise Procurement of Rice in Major Rice Producing States under MSPSource: Department of Food and Public DistributionSource: Department of Food and Public DistributionNational Academy of Agricultural Research Management, Hyderabad Page 32

C. Factors that affect Rice Prices  Weather Role of weather in rice production is immense. Temperature, rainfall and soil moisture are the important parameters that determine the crop condition. Further, natural calamities can also affect crops. Markets keep watch of these developments.  Minimum Support Price Changes in the minimum support prices (MSP) by the government also have immense impact on the price of rice  Government Policies Exchange rates, fiscal policies, export incentives and export promotion also influence price.  Substitute Product Availability of substitute products at cheaper rate may lead to weakness in demand. This situation happens especially when the main products price tends to become higher.  Consumption Rice consumption depends on two factors - population and Income. Lets take for example Asia. Rice is the staple food of Asia. Low-income groups consume more rice according to the per capita income increase. But as the income increases, there arrives a point when the consumption starts to dip. Income growth and reduction in population result in a low consumption of rice.  Seasonal Cycles Seasonal cycles are present in rice cultivation. Price tends to be lower as harvesting progresses and produce starts coming into the market. At the time of sowing and before harvesting price tends to rise in view of tight supply situation.  Demand International demand as well as domestic demand both affects the prices of rice. Breakthrough in the technology may increase the productivity and would lead to more supply. This may bring some softness in the price.National Academy of Agricultural Research Management, Hyderabad Page 33

D. Cost of cultivation in PaddyThe data on cost of cultivations was analyzed separately for farmers practicing conventionalpaddy cultivation (inundated paddy using chemicals), Non-Pesticidal Management (Without useof chemical pesticides), Organic system of production and System of Rice Intensification (SRI)with low water usage.S.NO Practices Conventional NPM Organic SRI Rs/Acre farming (Rs/Acre Rs/Acre (Rs/Acre)1 Land preparation 1341.23 1236.89 1164.00 1200.002 Sowing 0 0 0 03 Transplanting 1266.00 1289.00 1280.00 573.004 Ploughing 1800.00 1607.69 1500.00 1550.005 Puddling 560.00 546.15 514.00 500.006 Transplanting 1340.80 1303.84 1200.00 1300.007 Fertilizer Cost 2400.00 1764.61 0 820.008 Plant Protection 1500.00 0 0 08 Weeding 1050.00 742.30 890.00 1200.009 Harvesting 3000.15 2888.46 1800.00 1900.0010 Labour cost 4522.8 4366.53 3200.00 4125.1212 Yield (Quintals/Acre) 24 23.7 24.6 24.813 Straw yield(Quintals) 55 54 52 5214 Straw income/Acre 1400.00 1350.00 1350.00 1350.0015 Price 850.00 875.00 895.00 865.00 realized/Quintal*16 Total Cost of 17280.98 15745.47 11548.00 13168.12 cultivation16 Gross income 20400.00 20737.50 22017.00 21452.0017 Net income 4519.02 6342.03 11819.00 9633.88*Data from 100 farm house holds and available data with CSA(MSP) was Rs. 850/q. Wherever farmer could sell paddy directly they realized better price.In case of conventional farming the net income that the farmer is getting is Rs. 4519.02, in NPMpaddy the Net income is Rs. 6342.00/acre, in Organic (based on farmers declaration and sold indomestic markets) method the net income is Rs. 11819.00/acre and in SRI the net income onPaddy is Rs.9633.88/acre. During the peak periods (transplantation, weeding, harvesting)during the season there was a sudden increase in wages of labour in all the villages. TheNational Academy of Agricultural Research Management, Hyderabad Page 34

increasing labour costs and shortage during the peak periods is leading to large scale mechanization in the form combine harvesters, transplanters and large scale usage of weedicides is taking place in the paddy growing areas of Andhra Pradesh. In the current season (Kharif, 2008) with the shortage of chemical fertilizers and the hike in the prices of pesticides the chemical usage have drastically came down. The tenant farmers incur an additional cost of Rs.2000 to Rs.3000 tenancy leaving net income of only Rs.2000. The Paddy farmers in Andhra Pradesh are spending on an average 16 thousand rupees per acre, this includes, pesticides, fertilizers, tractor, diesel and labour. The average yield is 27 q/ acre yield and if this is sold as per the Minimum Support Price (MSP) farmers realize Rs.18000 per acre. Despite of the hard work and time in the entire season ultimately the farmer is getting only Rs.1000 to Rs.2000/ acre as net incomes. The Acreages/ production/productivity/Cost of cultivation in major rice growing states of IndiaS Particulars A.P T.N KARN ORIS W.B U.P PUNJ HARYN ATAK SA AB ANAo. A1 ACRAGE (Lakh acres) 98.34 50.65 36.82 110.7 142.83 138.88 65.24 24.952 Production (Lakh 175.7 78.3 86.1 102.9 217.6 166.9 152.8 49.1 tonnes) 53 Productivity 1784 1546 2348 930 1523 1212 2342 1851 (Kg/Acre)4 Seeds (Rs/Acre) 305 1010 405 239 405 467 362 1295 Fertilizer (Rs/Acre) 1163 1432 2226 720 819 666 1026 12066 Pesticides (Rs/Acre) 454 214 431 142 70 26 525 6247 Labour, Management 3475 3700 3910 2871 3780 2393 1940 3307 (Rs/Acre)8 Machinery (Rs/Acre) 1086 1630 1853 1081 1224 820 1590 12769 Irrigation charges 379 455 235 43 548 752 1350 1292 (Rs/Acre)10 Interest on Investment 447 783 285 466 646 750 653 947 (Rs/Acre)11 Land use tax (Rs/Acre) 18 0 6 0 15 3 0 012 Rental value or Lease 3876 2600 2753 1738 2236 1890 3757 3508 (Rs/Acre)14 Cost of cultivation total 11784 12248 12365 7363 9948 7900 12857 12966 (Rs/acre) National Academy of Agricultural Research Management, Hyderabad Page 35

15 Productivity(Kg/Acre) 2146 1766 1900 931 1400 1260 2850 1808 as per CACP16 Production cost 555 679 706 544 640 637 494 775 (Rs/Quintal) The above data shows that the productivity of rice is highest in Punjab followed by Haryana and Andhra Pradesh. Seed cost is highest in Tamil Nadu. Rental value in Andhra Pradesh @ Rs.3475/ acre is highest and puts a big burden on the tenant farmers. Decrease in Farmers’ annual income The Agricultural development in Andhra Pradesh is very steady for the last 10 years compared to Non-Agricultural sector. The other sectors show a growth rate of 10 to 12 % annually but the farming sector is showing only 3 % growth rate annually in Andhra Pradesh. According to a report by Sample survey (N.S.S) the annual income to the farmers in Andhra Pradesh through agriculture is only Rs.9000 Farmers Share in the Rice Chain Farmers are getting a minimum share in the value chain of commodities and most of the share is going to middlemen, Trades in Paddy. The small and marginal farmers are not having any go down facilities to store the produce until she gets a better price, poor economic status is the main reason that even though they are not getting fair price they are selling the produce below the MSP(Minimum Support price). In Andhra Pradesh, approximately 203.48 lakh quintals of Paddy is produced both in kharif and Rabi. At the time of harvesting farmers are selling to the commission agent @ Rs.650/75 kilograms of Bag. Within 3 to 4 months time the stored paddy if the commission agent sells in the market, he would get Rs.1250/ 75 kg bag. As a whole the farmers in the state are getting only Rs.17, 635 crores and the traders for simple 2 to 3 moths‟ storage are getting Rs.33, 913 crores. This indicates that farmers are losing Rs.16, 278 crores in Paddy itself.  The data from the Survey area clearly shows that 80% farmers are selling their produce to the middlemen immediately after harvesting, to meet their family requirements.  The AMC, Civil supplies is delaying the procurement of rice from the farmers and 60% of the produce harvested is going to middlemen National Academy of Agricultural Research Management, Hyderabad Page 36

 The Government Agencies and Civil supplies instead of purchasing directly from the farmer they are procuring from Millers, Traders and paying the bonus of Rs.50 to them instead of paying it to farmers  The Payment by AMC civil supplies is by cheque and it is taking nearly 30 to 45 days after selling the produce and the middlemen is giving spot cash or 10 to 15 days payment  This attract the farmer even thought they‟ll procure paddy by less price as he has to meet his family needs  Only big farmers having go-down, storage facilities are able to store the Paddy till the AMC, Civil supplies department procures and getting the MSP and BonusIn case of farmer it is equally important to him to market his produce as that of producing crop.Farmer is facing lot of burglary in marketing his produce in the market. Every year farmer islosing 17% of profit by immediately selling the produce in rice to meet his immediate needs.National Academy of Agricultural Research Management, Hyderabad Page 37

E. Marketing of PaddyHow much a farmer get if he directly sell in the marketThis is an experience of direct marketing from the farmers to the consumers. CSA has facilitatedthe entire supply. During 1997-98 the stock f Paddy after they sell in the market was calculatedto be 25 quintals in Enabavi , organic village in Warangal district. It was directly linked toconsumers that were agreed to buy the rice @Rs.23/kilo, The available stock was 2500 kilo withthe farmers. The total value of 2500 was Rs.57000 and he was requested to pay 50% of theamount immediately to the farmers as advance.If the farmer have directly sold paddy in thelocal market the price they might have got was Rs.1900/ quintal. But when they were linkeddirectly to consumer, they got Rs.2300/quintal. The profit margin is 400/Qunital. For 20qunitals the profit margin was Rs.8000. After deducting the Cost of milling, Transport, thefarmer could able to get Rs.6000/ profit margin/Qunital.Marketing interventions by the VOs (Village organizations)The objective of collective marketing at IKP is (a) to enable the rural poor to obtain the bestprice for their forest produce and Agricultural Commodities,(b) to minimize the cost of inputs tothe rural poor farmers and (c) to create Marketing facility at their doorsteps.Starting with theNational Academy of Agricultural Research Management, Hyderabad Page 38

procurement of Neem Fruit and Red gram in 2001 inMahabubnagar the marketinginterventions in IKP have registered a significantincrease in this financial year with pick up inpaddy procurement activity. In addition to the V.Os, MSs have successfully implemented villagelevel collective marketing of Paddy, Maize, Chillies, Neem, Red gram, Soya bean,Castor,Groundnut, Turmeric, Cashew, and NTFP besides Agricultural Inputs etc.Maize procurement undertaken by CBOs in 2005-06 at Minimum Support Price @ Rs.540 perquintal has enabled the farmers of the state to get a net benefit of Rs.50 to Rs.100 per quintal.Similarly Paddy Procurement under MSP 2007-2008 benefited farmer by Rs.75/- to Rs.100/-Per Quintal. Various marketing initiatives are taken up in 2007-2008. Paddy procurement istaken up by our CBOs in many districts. During this year upto December 2007, CBOs haveprocured a total of 45.91 lakh quintals of agricultural and NTFP commodities worth Rs.303.61crores. VOs have an ambitious plan to scale up the marketing activities by opening 6000Procurement Centers by 2013-2014. Every VO will function like a Mini Market Yard.Trends of traders and commission agentsCSA has interviewed 3 commission agents in the Bhonagir AMC and the major findings are asfollowsThe commission agents are 1. Juluru Narasimha Rao& co 2. Faizer Rahaman Chisti 3. Ranga Kristaiah and companyThe area of operation by them is as follows:Particulars Juluru Narasimha Rao Faizer Rahaman Ranga chisti Kristaiah & CoArea of operation 4 to 5 villages 15-20 Villages 16-18Turn over There is decrease in Turn over No change in Turn Turnover is still as there is decline in over maintained Productivity and FCI & Civil supply is also Purchasing the commodityTurn over 30 to 40 lakhs earlier but 50 Lakhs 50 LakhsNational Academy of Agricultural Research Management, Hyderabad Page 39

approximately came down to 20 LakhsWhere they sell the Local rice millers Local rice millers, Local Riceprocured Rice FCI, Civil supplies millers, FCI, Civil suppliesThe average price Rs.780 approximately Rs.800 Rs.775they are offering to Approximately ApproximatelyfarmersThe process of Bidding and Auction Bidding and Bidding andselling to Millers Auction AuctionThe commission 5% 5% 5%after selling tomillersStorage and Provided by miller Provided by miller Provided bybaggage millerGunny bag cost Rs.15 to 20 Rs.15 Rs.18No.of.Hamali 5 8 6Hamali charges Rs.16/bag Rs.16/bag Rs.16/bagPayment schedule 15 days 2 to 3 days 10 daysto farersPreference of Millers and FCI Millers and FCI Millers and FCIselling byCommissionagentsAs per their opinion, every year the procurement of paddy by FCI, Civil supplies starts late.Where there are rains it‟ll stop the procurement. By that time these agencies starts procuringfrom the farmers almost 75% of procurement by the money lenders might be over.Survey of local marketThe grades announced by the AMC in Bhonagir area is as follows:GRADE-A: B.P.T, Samba Masuri, IR-64, MTU-1010, Hamsa, Surekha, JGL, YerramalleluNormal : Swarna Mashuri, 7027, Gottimokkalu, MTU-1001Three years Arrivals in AMC bhongirS.No. Year Quantity(Quintals) Value Procurement by FCI& Civil (Rupees) Supplies1 2005- 1,25,094 6,31,73,587 062 2006- 4,90,920 58,42,06,623 18,09,347National Academy of Agricultural Research Management, Hyderabad Page 40

073 2007- 10,91,883 73,78,29,825 24,19,018 084 2008- 3,64,007 as on Dec 09Source: Records of AMC BhonagirDuring 2006-07 the total arrival was worth of Rs.58 crores, 42 laks arrival FCI& Civil suppliespurchased only grains worth of Rs.24 lakhs, 19,018.Data on the prices of Paddy at Bhongir Market During 2008S.NO Month Year Variety Minimum Maximum Model Price Price price1 Jan 2008 IR-64 770 770 7702 Feb 2008 IR-64 790 790 7903 Mrach 2008 BPT 800 800 8004 April 2008 BPT 790 790 7905 May 2008 IR-64 775 775 7756 June 2008 IR-64 775 775 7757 July 2008 BPT 775 775 7758 August 2008 BPT 775 775 7759 Sep 2008 Hansa 800 860 830 2008 MTU-1010 780 800 79010 Oct 2008 IR-64 820 860 830Source: www.agmarknet.inThe above data clearly shows that there is no much difference between the Minimum price,Maximum price and Model price. On an average the prices of IR-64 in the Bhongir market isRs.777.5 even though the MSP announced is Rs.850+ Bonus of Rs.50/-.Main Problems in MarketingThe major reason for burglary of the farmers is the lapses in the marketing system and due tothese, farmers have to sell their produce in village itself. To repay the loans even though theprices are less he is forced to sell the produce in the village itself, despite of the fact that theprices after harvest would be low. They are selling the produce to those money lenders who lendthe money for crop production. Apart from this they are not having proper storage facilities inthe villages.National Academy of Agricultural Research Management, Hyderabad Page 41

Food Corporation of India is procuring rice from traders and millers as per their requirementand when they are requested to directly purchase from farmers showing so many causes. Therice traders, millers in the state are having good contact with the FCI and they are managing FCIto procure rice from them, so that they can procure rice below MSP from the farmers and theycan get the Extra Bonus, instead of FCI directly paying to farmers. Millers are showing fakeauthentication that they have procured the paddy on MSP.Details of rice procured from millers by FCI from last 7 yearsThis clearly shows that the interest that FCI sowing to procure rice from millers is not there inprocuring Paddy from the farmers. During 2006-07 Food Corporation of India and CivilSupplies Department procured one lakh tonnes and 6 lakh tonnes of paddy only in the statewhen the production of paddy including Kharif and Rabi was 180 lakh tonnes. It clearly showsthat remaining nearly 173 lakh tonnes of Paddy is procured by millers and traders below MSPrates. Year Procurement from millers (Lakh Metric Total Tones) Raw Boiled 2001-02 46.35 17.61 63.96 2002-03 19.59 6.55 26.14 2003-04 29.27 13.18 42.45 2004-05 26.35 12.55 38.9 2005-06 25.28 20.55 45.83 2006-07 31.91 16.53 48.44 2007-08 42 20 62Source: Rythu Vani, 2007Food Corporation of India, department of civil supplies is the major source of rice procurementin Andhra Pradesh. The negligence they are showing in procurement of Paddy is going to cost ahuge on food security. This is also going to influence the new scheme of Rs.2/kilo. Due to lack ofbuffer stocks if you import rice it will cost much as it includes huge cost of transportation. If yousee the data from 2001 onwards, in 2001-02 the target for procurement was 47 lakh tonnes andin that year they could able to procure 46 lakh tonnes. From that year onwards they could ableto procure 25 to 60 % over the target. The civil supplies department is also moving in the samepath, the farmers are selling the paddy to the private commission agents. Due to this majority ofthe farmers are not even getting Minimum support price announced by the government.National Academy of Agricultural Research Management, Hyderabad Page 42

Commission agents, millers are saying that they have procured on MSP, showing the recordswith fake bills and they are claiming the bonus announced by the government.  FCI and civil supplies departments are starting their procurement very late in the season at that time all the paddy might have been procured by Commission agents and millers  The cost of rice till it reaching to FCI may become Rs.12  During August the prices of paddy in the retail market was Rs. 23.08 and this has reached to Rs.24.12.  It was estimated that there might be 36 lakh tonnes of Paddy stored unlawfully with traders and millersCumulative paddy procurement by millers, fci, civil supplies in the state Cumulative Paddy Procurement (In Tonnes)S.NO As on 22-02-08 As on 22-02-081 Arrived 55,54,327 44,80,4822 Purchased By FCI 7,7893 Civil Supplies 18,241 40,520 IKP-Civil Supplies 74,247 63,710 Sub-Total 92,488 1,04,230 Grand Total 1,00.277 1,22,6974 Purchased By Miller FAQ 51,78,437 40,76,183 NON-FAQ 2,75,559 2,81,602 TOTAL 54,53,996 43,57,7855 TOTAL Paddy Purchased By Govt.Agencies & Millers FAQ 52,78,768 41,98,880 NON-FAQ 2,75,559 2,81,602 TOTAL 55,54,327 44,80,482Source: Rice Vision, Vol-5, Issue-7, February, 2008The above data clearly indicates that 80% of the purchases by FCI is from millers and millers.National Academy of Agricultural Research Management, Hyderabad Page 43

District wise food grains held in AP region as on 15.2.2008 by FCIFCI District Storage RICE Total Capacity(Lakh Raw Boiled Rice(Lakh tonnes) Grade-A Common Grade-A Common Tonnes)Guntur 200200 58120 30040 10900 0 99060Kakinada 496610 21028 325774 1704 2813 351319Karimnagar 235842 100648 27002 17667 374 145691Khammam 110840 2817 40258 1273 1041 45389Kurnool 136364 36432 12431 1842 0 50705Mahaboobnagar 190000 48327 23884 6389 0 78600Nalgonda 417814 98846 42530 19076 240 160692Nellore 110000 15360 23290 1920 0 40570Portblair 7500 1265 0 0 0 1265Sanathnagar 103333 52085 13279 735 0 66099Srikakulam 90529 1066 97085 0 0 98151T.P.Gudem 446880 129093 133173 1344 174 263784Vijayawada 318590 171028 18468 7810 2699 200005Vizag 159842 7136 91697 0 1052 99885Warangal 173415 30888 65190 6661 5453 108192Grand Total 3271621 825316 944181 83646 13886 1867029Source: Rice Vision, Vol-5, Issue-7, February, 2008Wastage of Food Grains by FCIThis year nearly 10 lakh tonnes of food grain were damaged in FCI go downs, even though FoodCorporation of India (FCI) had spent 242 crores to protect these food grain,it was not successful.This is mainly because of lack of good storage facilities in Food Corporation of India. The totalquantity of grains might have been used to fed nearly One crore population. According to theRTI filed by Ashish Bhattacharya of Delhi, it came to know that during last 10 years, nearlyhundred of crores worth of food grain was damaged in FCI. According to the report of FCIduring 1997-2007 period 1.83 lakh tonnes of Wheat, 3.95 lakh tonnes of Rice, 22 thousandtonnes of Paddy. In Andhra Pradesh, Karnataka, Tamil Nadu and Kerala nearly 43,069 tonnesof food grains were damaged.National Academy of Agricultural Research Management, Hyderabad Page 44

F. Rice exports and levy systemsAs per the government order issued on 24.7.2008, the millers, has to pay new levy prices tonewly procuring rice on this year MSP. The old Levy rates would applicable to the rice procuredbefore june,24th in which major procurement by rice millers has already over. This year levy freecertificates were issued to the millers who doesn‟t have paid 100% levy by August and this hasgiven a scope for free trade of rice in Andhra Pradesh. There were heavy stocks approximately3.5 lakh tonnes of rice laid in Kakinda port and the rice millers paid Rs.60 to Rs.70/- more thanMSP to East and west Godavari farmers as these districts are near to Kakinada port. Suddenlythere was ban on Non-Basmati Export to other countries. As per the rice millers generally theexport Non-Basmati Rice would be grown in Rabi. Due to ban on Non-Basmati exports therewill be impact on Rabi acreage of rice this year and this problem was solved when central govtgave permission to export Non-Basmati rice.When ban was imposed on Non-Basmati rice, in local commission agents, Millers and tradershave drastically reduced the procurement prices According to the Rice millers association theyfelt that the ban on Non-Basmati might have influenced Mainly southern states. There wasprocurement of rice below MSP at that time. If this ban was not there may be competitionamong the millers and there might be incidences where they have purchased rice by givingRs.60 to Rs.70 above MSP. According their view due to regulation on inter-state exports there isimpact on boiled rice that is not usually consumed in Andhra Pradesh. The boiled rice millersare paying levy and selling this in Kerala and tamilnadu. When there is regulation on this mayimpact on cropping pattern of farmers of Andhra Pradesh and there is chances to swift tocommercial crops in Rabi. Generally two varieties “MTU-3626” (PRABHAT) which is generallycalled as “Bondalu” is used as boiled rice.,Millers used to buy this variety by paying higher pricethan MSP. But when there is no regulation the purchases from farmers will not be there Andthere is possibility in shifting of farmers to commercial crops.Hike in Levy pricesThis year there is hike levy prices and as per Rice Vision The Levy prices for common Raw rice isRs.1492.60, Para Boiled Rice Levy is Rs.1486.00, Grade-A raw rice levy is Rs.1540.10 andParaboiled raw rice the levy prices are Rs.1532.80 and if the rice mills are below 8 km of FCI, thetransport charges are included in Levy itself. The rice millers during 2007-08 as per theestimate of Indian government paid 94.98 % of Levy. The Levy aid by millers itself is 70 lakh 43National Academy of Agricultural Research Management, Hyderabad Page 45

thousand, seven hundred thirty six tonnes and this does not include the procurement by Civilsupplies corporation and Procurement by other agencies.Rice Processing MillsThere has not been significant increase in the capacities in rice milling in the last five years(Ministry of Food Processing Industry, 2003). There is a large number (90,000) of old hullers,which need modernisation. Details of different types of rice processing units are presented inTable 9. Modern mills help in recovering good quality rice bran for oil extractions. Presentlyannual rice bran extractions is about 525,000 t. of which 300,000 t. is edible oil. Besides largequantity of rice bran cake is produced as a by-product from rice bran oil mills and this cake isused for animal feed and for export. The slow rate of modernization of hullers is attributed tothe compulsory levi imposed on mills by the states. Rice mills do not provide a healthyenvironment for the workers. Dust in the rice mill is a serious health hazard and lead torespiratory disease. Instead of managing the problem of dust most mill owners keep on shiftingthe duty of the workers in a way that no one gets exposed to the dust for longer duration.Disposal of water from the par boiling units is another hazard for health as well as for the soiland/ or river/stream water where it is disposed. Though there are some regulations to controlenvironmental pollution but in practice there is hardly any check on it. Enough safety measurelike gloves and physical protectors to the eye, head and against dust allergy are not provided tothe workers in the mill.Huller mills started replacing hand-handling and presently paddy is milled in huller, disc-sheller and rubber-rolt-sheller mills.The comparative installation costs and out terms of rice from three types of mills employed inIndia. Huller mill Disk Sheller Rubber Roll Sheller Capacity (1 tonne / hr) (1 tonne / hr) (2 tonnes / hr) Installation Cost Rs.40,000 Rs.65,000 Rs.1,80,000 Out turn of raw-milled Rice 63-65% 65-67% 67-70% rice Brokens 2% 2% Bran 35-37% 5% 5%National Academy of Agricultural Research Management, Hyderabad Page 46

Husk 22-27% 22-25% Broken percentage in 30-40% 22-30% 10-15% Rice*Data from Status paper on Rice - P.V. Subbaiah Choudary, Advisor, CIFA, S.M. Ahamed Ali,Director-Institutional Development, FFAG. Value addition to enhance profitabilityValue addition could also enhance profitability of rice production. A wide spectrum of productdevelopment can be identified like better extraction and preservation of bran oil, processed andcanned ready to eat products, vitamin, iron or calcium enriched flaked or puffed rice, flavoredrice, starch extraction from broken rice etc. Besides, tailoring rice varieties specially suited forsuch product development can be considered. Cultivation of organic rice for niche domestic andexport markets may be considered for value addition. Identification and scientific validation ofmedicinal rice varieties with theraptic value and their cultivation for wider marketing is anotherarea deserving attention.Number of rice mills in the study states, 1998States Hullers Sheller Huller cum Modern Total mills sheller rice millsAndhra Pradesh 4609 1776 2364 12995 21744Source: Annual Report, 1997-98, Ministry of Food Processing Industries, Govt. of IndiaDemand for sorted, graded and polished rice in the export market; particularly for basmati riceis high. This has given rise to installation of export oriented units (EOU) and 40 such units havecome up in the last five years (MFPI, 2003).Main Marketing Channels in Andhra PradeshProducer  Market/Agent Mill TraderWholesalerRetailerConsumerProducer  Market/Agent MillWholesalerRetailerConsumerProducer  Cooperative MillTraderWholesalerRetailerConsumerProducer  MillFCIPDSConsumerProducer  MillConsumerNational Academy of Agricultural Research Management, Hyderabad Page 47

Hike in rice pricesThe acute shortage of Rs. 20 per kg superfine rice in twin cities for the last couple of weekscontinue to leave consumers high and dry despite the government claims on availability ofexcess rice in godowns across the State.The problem may aggravate with millers stoppingproduction of superfine Sona Masoori rice, the most preferred variety by consumers. As of now,the city is getting 50 to 75 metric tonnes per day as against the demand of over 500 metrictonnes per day, say traders.While some shopkeepers have been displaying a „no-stock‟ board,others are selling the rice as and when wholesalers deliver the stock. Few other traders hadtotally stopped selling superfine rice (with five per cent or less broken rice) for Rs.20 fearinglosses and in turn, are selling other varieties forcing consumers to shell-out more. Peopleexpected some relief after the government fixed the rate of superfine rice at Rs. 20. But thereseems to be no relief given the increasing prices of essential commodities as well as othervarieties of rice.Miller’s voiceAs per the millers it is not It‟s not feasible for them to sell rice at Rs.20,” contends HyderabadMillers Association vice-president Y. Shankar Reddy. He says it would be better if thegovernment enhances the price from Rs. 20 to Rs. 24.Exponential Growth rates of wholesale price index some important agriculturalcommodities.Crop Period 1981-01 Period 1981-91 Period 1991-01 Chow Test F- ValuesRice 3.6314* 2.699* 3.9583* 16.8533*Wheat 3.278* 2.4401* 3.8563* 20.6862*Pulses 4.2586* 4.3046* 3.7245* 0.90878Tea 3.417* 4.3953* 2.7281* 1.3328Raw Cotton 3.7844* 2.4764* 2.9401* 7.4794*Jute 3.3946* 4.2647* 3.0681* 0.6699Sugar 3.1176* 2.1267* 3.2858* 2.4548*Edible Oils 2.9866* 3.7683* 1.052* 18.3388Cotton Yarn 4.2851* 3.4688* 4.027* 2.4125* significant at 5 % level of significance.Source: Computed using data from Indian Agriculture in Brief,2000National Academy of Agricultural Research Management, Hyderabad Page 48

CHAPTER VIII Summary and ConclusionMajor constraints for improvement of the livelihoods/income of small and marginal riceproducers is the lack of knowledge about prices, quality parameters, sustainability aspects ofrice production and lack of lobbying power. There is more number of agricultural laborersincluding a significant number of women than cultivators. Lack of local earning sources forcethem to migrate to other areas. There is a need to lobby for their wage rights while beingsympathetic to the labour needs of small and marginal farmers. Planning activities that mayenhance their capability to earn more will go a long way in ensuring food security of thisvulnerable group. Organic rice production and manual processing of rice may help to generateemployment to the poor and particularly woman.Conclusion The major problems in rice cultivation seem to be high water and chemical usage, and the resultant ecological and economic crisis. Ecological/organic farming methods are proven to sustain production and provide better margins to farmers Organising farmers and moving them up in the value chain has shown to be bringing in additional benefits to the farmers. The current support systems do not support sustainable production models. There is an urgent need to make the shift. The GM rice poses new threat to rice cultivation in the country. The contamination reports from US and other countries already show the scale and range of the problem. As the country of origin of rice, India should abandon the GM rice, as better rice varieties are available in the existing traditional varieties. The major change that has happened recently is increase in cost of labour i.e. Rs.4000 on an average/ per acre. There is severe power crisis that needs to be addressed as most of the paddy cultivation is irrigation through bore-wells We need to promote the participation women in supply chain and there is shift towards collective decision making from men alone taking decisionNational Academy of Agricultural Research Management, Hyderabad Page 49

 There is increase in cost of cultivation and increase in pesticide prices and it is the time to promote organic method of cultivating paddy with increasing organic matter in the soil to prevent ecological issues like methane emission Promotion of SRI , Dry paddy cultivation to reduce the usage of water in the rice fields Organizing the farmer cooperatives and arranging finances for holding, processing and selling paddy on better price by the farmer collectives To Sustain the rice production system we need to shorten the rice chain and as per the study the share of farmer in the regular system is only 33% but in case of Farmers directly selling or farmers cooperatives marketing rice Due to lack of market information regarding prevailing prices, arrivals etc., most of the producers market the paddy/rice in the village itself, which deprives them of getting remunerative returns Generally, the price of paddy/rice goes down in the post harvest period (3-4 months immediately after harvest) due to heavy arrivals in the market and later shoots up, which results in unstable prices. Grading of paddy/rice at producers‟ level ensures better prices to producers and better quality to consumers. However, most of the markets are lagging behind in providing grading service at producers‟ level To avoid the distress sale, storage facilities in villages are found to be inadequate. Due to lack of storage facilities at rural stage, substantial quantity is lost. Providing better access to credit to farmers to reduce dependence of money lenders Lack of market finance is one of the major marketing problems in the smooth running of marketing chain. Most irrigated rice cultivation is highly chemical input intensive and there is a need to increase efforts to make production practices sustainable.National Academy of Agricultural Research Management, Hyderabad Page 50

ReferencesDepartment of Agriculture & Cooperation Andhra PradeshFAOCenter for Sustainable AgricultureRythuvani Oct‟2007Directorate of economics and statisticsDepartment of Food and public distributionAPMC Bhonagirwww.agmarknet.inRice Vision Vol-5 Issue-7 Feb‟2008Rice-P.V. Subbaiah Choudary, Advisor,CIFA, S.M. Ahamed Ali Director-InstitutionalDevelopment, FFAAnnual Report 2007-08, Ministry of Food Processing Industries GOINational Academy of Agricultural Research Management, Hyderabad Page 51

AnnexureI. Procurement of Rice under MSP by Govt. in Andhra PradeshProcurement of Rice under MSP by Govt. in Andhra Pradesh (Fig in 000 tonnes)State 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 02 03 04 05 06 07 08 09 10Andhra 6425 2635 4230 3906 4971 5328 7597 9061 4471PradeshTamil Nadu 852 107 207 652 926 1077 969 1199 981West Bengal 48 126 925 944 1275 642 1429 1667 977Chhattisgarh 1921 1291 2374 2837 3265 2865 2743 2848 3069Source: Department of Food and Public Distribution.National Academy of Agricultural Research Management, Hyderabad Page 52

II. Minimum support price of paddy (Rs/quintal)Kharif Crop (According to Crop As on 10.06.2010 (Rs. year) per quintal)Commodity Variety 2004- 2005- 2006- 2007-08 2008- 2009- 2010-11 05 06 07 09 10Paddy Common 560 570 580 645/850 850 950 1000 Grade 590 600 610 675/880 880 980 1030 ASource: Directorate of Economics and Statistics, Department of Agriculture and CooperationNational Academy of Agricultural Research Management, Hyderabad Page 53

III. Share of Various Countries in World Production of paddy Year 2008COUNTRY Production % ShareWorld 685013 100.00China 193354 28.23India 148260 21.64Indonesia 60251 8.80Bangladesh 46905 6.85Viet Nam 38725 5.65Myanmar 30500 4.45Thailand 30467 4.45Philippines 16816 2.45Brazil 12100 1.77Japan 11029 1.61Pakistan 10428 1.52USA 9240 1.35Egypt 7253 1.06Cambodia 7175 1.05Korea, Republic of 6919 1.01Nepal 4299 0.63Nigeria 4179 0.61Sri Lanka 3875 0.57Iran 3500 0.51Madagascar 3000 0.44Source: FAO, Regional Office for Asia and the Pacific, Bangkok.National Academy of Agricultural Research Management, Hyderabad Page 54

IV. All-India Area, Production and Yield of Rice along with coverage underIrrigationAll-India Area, Production and Yield of Rice along with coverage under Irrigation Area - Million Hectares Production - Million Tonnes Yield - Kg./HectareYear Area Production Yield Area Under Irrigation (%)2000-01 44.71 84.98 1901 53.62001-02 44.90 93.34 2079 53.22002-03 41.18 71.82 1744 50.22003-04 42.59 88.53 2077 52.62004-05 41.91 83.13 1984 54.72005-06 43.66 91.79 2102 56.02006-07 43.81 93.36 2131 56.72007-08 43.91 96.69 2202 56.92008-09 45.54 99.18 2178 NA2009-10* 41.85 89.13 2130 NA2010-11** 36.95 80.41 2177 NASource: Directorate of Economics and Statistics, Department of Agriculture and Cooperation.* Fourth Advance Estimates as released on 19.07.2010.** First Advance Estimates as released on 23.09.2010.Note: The yield rates given above have been worked out on the basis of production & areafigures taken in 000 units.National Academy of Agricultural Research Management, Hyderabad Page 55

Value Chain Analysis of Paddy in Andhra Pradesh

by Dewasish Ghoshal on May 03, 2011

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