Help those who help themselves

Vijay Vyas summed this up as a finding of the NCAER World Bank Institute of Economic Growth Seminar held recently at Delhi in a session I chaired. This was also agreed to in a meeting the ADB had organised at Manila on Rural AsiaBeyond the Green Revolution, in April. We are taking no cognisance of this change of the global assessment of Indian agriculture and going to the negotiations like babes in the wood.

The Government in India is, to use an expression of the late Raj Krishna, knowledge proof but even a major industry body which is generally very alert on signalling the Indian interest said in a letter sent to decision-makers on April 3: “On the input side, the subsidy level is around 7 percent, while on the output side due to under pricing, the subsidy level is 38 percent. Hence, the net AMS comes down to a negative figure of 31 percent.

International financial institutions have been making reduction of subsidies the major focus of their attention. The ADB which generally takes a very sensible and strategic approach to agricultural reform has also come out on subsidy reduction as a major future agricultural policy in Asia.

Thus natural resource management in Asian agriculture will be managed if we “remove subsidies onfertilisers, pesticides and credit and charge the full cost of irrigation water and electricity.” It is an obstacle to efficient markets for growth in rural areas. It is of course true that there are subsidies in India, which do not help the growth of agriculture, encourage inefficient use of resources and in fact distort the distribution of rural income. These subsidies have to be eliminated. However there has to be a sense of proportion about policy reform packages.

Water delivery efficiencies are invariably as low as 30 percent.

Experimental projects done for the Sardar Sarovar plan have demonstrated that the design levels of around 60 percent can in fact be achieved with proper delivery systems. But the farmer is expected to pay for the water he doesn’t get and if he does not pay, that is a subsidy. There is not a single rural infrastructure in which efficiency prices are followed.

When the farmer was given proper deliveries he was willing to pay, as the Rajasthan government discovered when itimplemented a tatkal pumpset connection scheme. Also, most persons who deliver water through rented pumpsets get good prices because the farmer gets adequate supplies in the root zone of his crop. There are bad subsidies and they have to be eliminated, but efficient supply systems are an important part of any reform package.

There was another aspect which was brought out in the ADB seminar on Asian agriculture after the Green Revolution in the next millennium. Incidentally, at the meeting of the ADB board this was easily the most popular event with people sitting on the floor in a jam packed hall. This newspaper has carried the Guardian story on that meeting.

The story, which appeared on May 2, naturally missed out India, because it had an EU perspective. But India was discussed extensively in that meeting. The main report by Peter Hazell of the International Food Policy Research Institute had made the point that sustainable agricultural growth will have to be widespread growth and also that subsidiesshould be eliminated.

I was an invited commentator on the study and made the point that our strategy in the next phase was to raise cereal productivity in favourable areas and diversify agriculture, including tree crops in the dry and rainfed areas and other problematic agroclimatic regions, including the hill slope and mangroves.

We had the technology and a number of successful examples were there, particularly from cooperatives, NGOs and private sector initiatives, making profit from the rapidly diversifying the expanding food basket in India. But in many of these areas there were in fact no “markets” or they were there in a very rudimentary form. Input and credit costs were high and the farmer got low prices for his product.

The state would have to play a promotional role and my friend the French economist of Polish origin Ignacy Sachs had described my proposals for this kind of initial temporary support as Alagh’s proposals for meeting “front up” costs. These proposals were at the heart of theRio Declaration which saw from our work the relation between land and water development and appropriate cropping sequences in the fertile areas and the global problems of sea warming and the ozone layer.

The state would have to play a role in helping those who help themselves if widespread agricultural growth is to take place of a sustainable kind.