By Dr. Joginder Singh

Date:31-10-06

Source: South Asia Post: Issue 26 Vol II

Punjab has shown an exemplary growth in agriculture. Its hardy peasants who were helped by research innovations, infrastructure, market incentives and investments can claim rightful credit. In the process, it has emerged as a potential food security belt of the country. However, the dominance of rice and wheat in the cropping pattern has created economic, social and environmental hurdles for any future growth. Thus a new policy is called.

The diversification of agriculture without much practicability is a mere slogan. For achieving the objective, area specific approach is required. The blocks having high intensity of ecological degradation, particularly in terms of fall of water table, having lower productivity of rice-wheat system and have adequate potential alternative crop enterprises may be taken on priority. Therefore, in such areas significant changes are possible with minimum policy interventions in terms of pushing up the yield of alternative crops by removing constraints in adoption of technology, incentive in lowering the cost of production through supply of quality seed, fertilizers, pesticides at the farmer’s doorstep and ensuring at least minimum support price of these crops through contract farming.

Punjab has a potential belt of cotton covering a sizable part of the cultivated area of state. This belt suffered since mid-nineties due to decline in productivity and prices of cotton apart from high fluctuations in return. The rising water table, serious attack of cotton pests and diseases resulted in fall in average yield of the crop. It can be observed that the area under cotton has been fluctuating from 450 to 750 thousand hectares in the state. The introduction of Bt varieties and crop management practices have demonstrated to substitute this area from rice to cotton crop, which has much higher industrial use, employment generation ability, has better export market and is environmental friendly.

Punjab is located away from sea, the transportation cost of exports from Punjab increase significantly. It has vast production potential of fruits, vegetables, floriculture, meat, milk, fish, spices, forestry, basmati, cotton, mushrooms etc. There is thus a strong need for setting up of dry port with integrated cargo handling cold storage and refrigerated transportation facility for export of such perishable products. In spite of increasing opportunity for export of agricultural products from developing countries like India, there is growing emphasis on sanitary and phyto-sanitary measures to protect human, animal and plant health. This requires strict legislation with respect to quality and improved processing and packaging facilities. Strengthening quality control measures including adoption of quality check systems for export units and setting up of treatment facilities for elimination of pest incubation for products are required in order to gain better access to the overseas markets.

The genetic improvement programmes incorporating attributes of commodities desirable for export and processing should get top priority in the research system. Unfortunately, our research focus has revolved around yield enhancement only and ignored the quality issues demanded by the international buyers and suitable for processing purposes. It is therefore, necessary that our products should meet the quality standards of the global market in order to increase exports. The extension agencies of the state should also gear up to provide technical know-how regarding the production, post harvest handling, processing, packing, grading, storage, handling etc of exportable commodities. Thus complete revamping extension system to cater to the requirements of changing scenario in agriculture is most essential. For providing better market outlook of different consuming and producing countries, a marketing intelligence cell needs to be created which should make available to the exporting agencies the timely, comprehensive and reliable information with respect to quantity and quality requirements and prices.

About 9 percent of the geographical area of the state along the Shivalik hills range having undulating topography, popularly known as kandi belt, is more suitable for organic farming of horticulture, vegetables, spices and other crops due to its agro-climatic conditions. The establishment of quality testing laboratories, market infrastructure and encouraging farmers’ cooperatives in the belt can play vital role promoting diversification and enhancing income of the poor farmers.

In spite of significant role played by the research and education system in the state agriculture, it has remained starved of funds since long due to paucity of funds with the state government. On the other hand, the commission agent arranges for unloading the produce, cleaning, sieving, auction, weighment and stiching bags. and thus earns the 2.5% ad velorem commission on farm products. The total commission earned by the Commission Agents in Punjab was about Rs45 crores during 1987-88 (at the rate of 1.5%) against Rs58 crores as market fee (at the rate of 2%). During 2002-03 the total commission has increased to around Rs385 crores (at the rate of 2.5%). The enhanced income of this agency was due increase in rate of commission, commodity prices and volume of production. The increase in production is mainly due to research efforts of research and education systems, which should have been provided with adequate funds rather than the Commission agents but even the premier research institutions like PAU are in serious financial crunch. As the commission agents’ lobby has become economically and politically the strongest in the food trade , it is very difficult to eliminate it . Direct sale of wheat to the govt. agencies on their godowns, millers on their flourmills, construction of silo and bulk handling there would reduce the handling cost.

To encourage private trade in agricultural commodities, policy measures such as free trade of products, uniform rates for market operations and market charges are essential. Market taxes levied on food grains in Punjab include Purchase tax is 4%, Market fee 2%, Rural Development cess 2.0%, Infrastructure cess 1.0%, Commission 2.5%, Labour charges 0.5% and Pucca Arhtia if any 1%. Thus, the market tax amount to 12-13% but in other states like UP & Haryana, the market taxes are much less as compared to Punjab that is why the private trade hesitates to enter in the grain market in Punjab, even for export. Octroi and entry tax should also be abolished to avoid unnecessary inconvenience in movement.

Contract farming is a novel concept, which ensures disposal of the produce at contracted price thus protecting the farmers from price fluctuations and uncertain lifting of the produce in case of over-production. Thus it helps promoting diversification for the crops where price risk is higher. On the other hand, it also ensures supply of quality raw material to the processors. The contract farming in the Punjab state is being promoted to encourage the production of those crops/enterprises for which the price variability in response to production changes is high. However, in the absence of growth in processing facilities, the success of contract farming becomes doubtful. The companies, which are being roped in as ‘buy back’ agencies, do not have any processing facilities. Similarly, the marketing infrastructure for these new enterprises is not well developed to absorb the increased marketable surpluses for these products. Therefore, the cultivation of these crops/enterprises is not picking up as was being envisaged when the scheme was launched in 2002. The agro-processors should be encouraged to enter into direct contract with farmers. Contract farming has to be made successful by involving research and extension systems.

Most of the production and marketing problems originate from decline in farm size. Till recently, the farm size has been getting smaller and land-agricultural worker ratio declining due to fragmentation of sub-division of the holdings turning the farms uneconomical and unviable. On the other hand, land lease market is less secured and less active. However, some structural change signifying increase in farm size has already come up. There is also a strong need to have a fresh look at legislations concerning policies on land lease system and ceiling limits from the commercial farming point of view. Land lease market should be made more secure. Migration of Punjab farmers to other states has been restricted by not allowing them the purchase agricultural land in the neighboring states. This issue needs to be taken up with the neighboring states governments.

Farmers’ organizations should be encouraged to take up processing, transport and marketing of produce in domestic and world markets. The farmers, in general, being small and marginal are unable to make huge investments on agro-processing and export their products. Formation of cooperatives for this purpose is the only solution. Small processing units of turmeric, soybean and mentha. are successfully working in specific pockets of the state. Such models can be replicated for other enterprises as well, for which the economic viability and potential market exist. Even the most successful primary cooperative service societies may be entrusted with this responsibility.

[Dr Joginder Singh is former Professor of Economics, Punjab Agricultural University, Ludhiana