Input Policy in India- Vijaylaxmi Pandey
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Input Policy in India- Vijaylaxmi Pandey

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    Input Policy in India- Vijaylaxmi Pandey Input Policy in India- Vijaylaxmi Pandey Presentation Transcript

    • Role of Input Policies in Transforming Agriculture in India Vijay Laxmi Pandey Indira Gandhi Institute of Development Research, Gen. A.K. Vaidya Marg, Goregaon (E), Mumbai Email: vijay@igidr.ac.in Presentation on 26 September 2013 at ReSAKSS – Asia
    • Characteristics of Indian Agriculture • 67% holdings < 1ha; Av. operated holding - 1.16ha • Number of operational holding – 138 million (89m-1980/81) • Area irrigated – 45%; NPK use 144 kg/ha • Food grains production – 257 MT • Cropping system dominated by cereals – Rice yield – 2.37 t/ha; Wheat yield – 3.14 t /ha • Diversification towards high value crops • High fiscal burden of input subsidies • Increasing role of private sector 2011/12 1990/91 Share in GDP 14% 31.4% Share in employment 51% 61% Net agricultural export US$ 23.6 billion US$ 2.74 billion
    • GDP Growth Rates & Instability of Agricultural Production (1970-71 to 2011-12) Economy Agril&Allied Agril. Instability Pre Green Revolution 1960-61 to 1967-68 3.09 0.81 0.43 12.92 Early G. Revolution 1968-69 to 1974-75 2.84 1.77 1.70 6.55 Maturing of Green Revolution 1975-76 to 1987-88 4.24 2.48 2.77 11.16 Pre and Period of Economic Reform 1988-89 to 1994-95 5.00 3.18 3.15 7.32 Post Reform Period 1995-96 to 2003-04 5.89 2.22 2.14 11.53 Recent Period 2004-05 to 2011-12 8.08 3.36 3.46 6.23 Period after World Food Crisis 2008-09 to 2011-12 6.83 3.47 3.66 7.24
    • Variables Coef. SE P>|z| [95% CI] Fertilizer 0.084 0.026 0.001 0.032 0.135 GCF 0.146 0.017 0.000 0.107 0.173 CI 3.765 0.369 0.000 3.042 4.488 TOT 0.125 0.062 0.045 -0.003 0.247 Variables Coef. SE P>|z| [95% CI] NIA 0.152 0.023 0.000 0.105 0.198 NIAGW 0.035 0.011 0.002 0.013 0.057 Rainfall 0.033 0.007 0.000 0.020 0.046 Variables Coef. SE P>|z| [95% CI] TOT 0.486 0.242 0.044 0.013 0.960 Credit 0.462 0.024 0.000 0.416 0.509 VoO= f( FERTILIZER, GCF, CI, TOT) CI = f(NIA, NIAGW, RAINFALL) GFCF = f( TOT, CREDIT) NIA= f(GCFP, CREDIT) R squared – 0.989 R squared – 0.804 R squared – 0.905 R squared – 0.988 Determinants of Agricultural Growth Variables Coef. SE P>|z| [95% CI] GCFP -0.055 0.086 0.522 -0.224 0.114 Credit 0.244 0.049 0.000 0.148 0.340
    • Period Policies •Impact 1960-61 to 1987-88 Emphasis on Public investment & Institutional reforms Restrictive trade policies HYV (1967); Input subsidies; (Inv> sub) Nationalization of Banks (1969) Retention Price Scheme (1977) NABARD (1982) • food grain production • Agril GDP Growth •Self-sufficiency in R&W • poverty (64% -1967; 56% - 1973) • intercrop & inter-regional disparity 1988-89 To 2003-04 Agro Climatic Regional Planning (1988) Economic reforms; Freeing of trade URAA (1994) Private sector role ;Public Investment National Agricultural Policy (2000) Bt Cotton introduced APMC Model Act (2003) •Agril Export •ToT improved for brief period •Subsidies •Growth Agril. GDP post reform period •Contract farming 2004-05 to 2011-12 Emphasis on Public sector role Public investment Priority to rainfed agriculture NPS for fertilizers Nutrient Based Subsidy NFSM, RKVY, NHM, MGNEREGA Increase in area and yield of cotton Growth in agril GDP Improvement in ToT
    • 0.294 0.931 4.985 10.148 38 63.34 76 85 101.2 111.9 191 307 318 362 421 467 403 403 499 491 Area under Bt Cotton and Yield of Cotton Crop Bt Area (Lakh Ha) Yield Role of Agricultural Inputs Seeds • HYV seeds in 1967  Green revolution • Hybrid maize – 1980s • Bt cotton – (2002/03) - new technology & private sector role • 70 % seeds farm saved; Low seed replacement rate • Share of private seed industry in seed production- 57.7% (2006) • Need for effective regulatory mechanism – availability of quality seeds at reasonable prices • Seed Bill (2004)- compulsory variety registration & mandatory declaration of GM seed. – Farmers allowed to save, use, exchange & sell unbranded seed of a protected variety • New Seed Bill (2011) – (not passed) increase production & supply of quality seed
    • Fertilizer • Price elasticity of fertilizer demand = -0.65 • Share of fertilizer subsidy in total agril. subsidy  59% • Farmers share in total subsidy – 62% • Early 1970s – controlled fertilizer prices - very nominal subsidy • 1973-74 – Oil crisis-> increase in fertilizer prices – Farm Gate Prices doubled • 1977 – Retention Price Scheme -To encourage investment in domestic fertilizer industry  Increase in fertilizer subsidy – fiscal burden –(0.43% of GDP in 2003/4) • 1991 – Decontrol of P & K fertilizers  Unbalanced use of fertilizers  NPK Ratio – 5.9:2.4:1 – 1991/92 - 9.5:3.2:1 – 1992/93  Reduction in fertilizer use efficiency • Environmental problems • Difference in consumption across the crops and regions • 2010 - Nutrient Based Subsidy –N,P & K – for 17 fertilizers products, urea not included 0 200 400 600 800 1000 1200 Fertilizer subsidy(Rs Billion)
    • Irrigation • 90% of government investment – canal irrigation • Very high correlation between irrigation &use of fertilizer & yield • Price elasticity of irrigation = -0.72 • Decline in net canal irrigated area in recent years – Increase in area under ground water irrigation –>private investment • Widening gap between potential created and utilized • Water charges very low  increasing subsidy burden • Variation in spread of irrigation across the states • Delay in completion of irrigation projects, leakages, faulty design • National Water Policy (1987) ; revised Model Water Bill in 1996 to regulate ground water development • Revised National Policy (2002): bring together key issues related to water rights, availability, sustainable use, etc. but not backed by law
    • Credit • Financial sector reform -1991 – Annual growth rate in agril. credit disbursal declined from pre-financial reform period (14.8% in 1980-90 to 10.9% in 1990-2000) • Still ~30% household rely on non-institutional sources interest rate – 36%-120% per year • Agril. share in total credit disbursal of commercial bank- 11% as against mandatory stipulation of 18% • Structural shift in agril credit – co-op. to comm. Banks (~ 73%) • Exclusion of small and marginal land holders Electricity • Highly subsidized to agriculture; some states fixed rate • Over exploitation of ground water in some states
    • Effect of Some Policies & Programmes Policies/ Programme Effects Production Marketing & Value Addition Risk Mitigation & Income Augmenting Environmental Sustainability Fertilizer subsidy Nutrient based subsidy + + + + - - - Irrigation subsidy + + + + + - Power Subsidy ++ ++ - National Mission for Sustainable Agriculture +++ + +++ ++ NFSM ++ + + NHM + + + + + RKVY + + + + MMPO + + + + + + Pesticide Management Bill + + ++ APMC Model Act + + + + + + - Kisan Credit Card + + + + MG NREGA --+ + + + +
    • Issues Related to Input Subsidies 1. Estimates of subsidies – resource cost not reflected truly for the inputs  Fertilizer subsidy  high cost - inefficiency in production; high price of feed stock  Power subsidy  Entire loss of state electricity boards attributed to farms  High losses due to low plant load factor of many old plants  Inefficiency in transmission & distribution  Canal Irrigation  Inflated costs –bad design, over extended command area, delay & leakages, inefficiency in management 2. Subsidies enabled to keep food grain prices low, adopt new tech of production & increase in production 3. No or very little marketed surplus for 67% farmers operating on less than 1 ha land  can’t be compensated by increase in output price if input price increases 4. Input Subsidies price subsidies mostly cornered by the rich
    • Input Subsidies (Fertiliser, Power, and Canal Irrigation) and Public Investment in Agriculture, 1980-2008 0 100 200 300 400 500 600 700 input subsidy in Rs billion P.Investment in Rs billion
    • Way Forward  Input subsidies need revamp environmental friendly & reach targeted beneficiaries particularly the marginal and small farmers  Need for proper &effective regulatory mechanism- GM crops  availability of quality seeds at reasonable prices  Need to improve the efficiency of irrigation water use through technological innovations & innovative institutional mechanisms.  Participatory Irrigation Management WUA should be made fully autonomous, with rights to design norms for collection of water charges, collect charges &retain them.  More role for private sector should be envisaged  Adoption of improved and resource saving technology –ZT, SRI  Increase share of agriculture in total credit lending of commercial banks for small and marginal farmers  Many good programmes viz., NFSM, RKVY, etc. already there, need better coordination, monitoring & implementation
    • Thank You