Subir Roy: Global food shortage an opportunity

VALUE FOR MONEY

We are into a period of global food shortage and rise in food prices which were not anticipated even a few years ago. A steeply rising food import bill in the medium term could well be on the cards. This is likely to put a severe strain on the Indian government's efforts to reduce poverty and more equitably distribute the economic gains of the last four years.

But this challenge can be turned into an opportunity and gives the country's policy makers a chance to address and partially solve the related problems of low agricultural growth and stubborn poverty in rural areas. The challenge and opportunity are both contained in a comparison with China. Though India has 1.47 times more arable land than China, the latter uses its land much better. Its cereal yield is 2.18 times India's. If Indian farm productivity and incomes can be dramatically raised, both global poverty and food shortage will be partially mitigated.

To meet the challenge, absolutely the first task is to improve water management "" putting more water at the reach of cultivators. This cannot be effectively done through large or even medium irrigation projects but through watershed management and massive numbers of micro irrigation works. Quite simply, every village has to do something to trap and hang on to rain water by both rejuvenating ponds and storages and also creating new small catchments. Even if nothing else changes, more water and recharged ground water levels will raise output and yields. Substantial public investment in this in recent years has not produced results that make a difference. The way to get better results will be to empower panchayats more to execute these projects, along with monitoring up the ladder.

Second comes the need to sharply take forward reforms in the fertiliser pricing policy so that the small gains in the recent past in balanced fertiliser application are accelerated. The excessive emphasis of the past on subsidising urea, which played havoc with soil nutritional balance, should not be perpetuated. This soil nutritional imbalance has been aggravated by the main grain growing areas of north India continuing to cultivate rice and wheat for decades, thus lowering soil quality further. So along with more balanced fertiliser pricing, a change in cropping patterns will help restore soil quality and lay the foundations of better yield in the coming years.

The third and fourth areas requiring action are interestingly not within the main ambit of farming. They are addressing the need to build roads to all villages and taking power to them. This will have a tremendous impact on the rural economy by making it much easier for the farmer to send his produce to the consuming centres and accessing inputs as also consumer goods. The availability of power will not just extend the cold chain but sharply raise the overall productivity of the rural economy. It has been said with much insight that if you bring water, power and roads to the farmer, he on his own will achieve substantially greater value-adds.

The fifth area of action is to greatly enhance the price realisation of the farmer. This has to be done in two ways, by allowing direct procurement from farms by large buyers like retail chains. The elimination of layers of intermediaries will not only improve farmers' realisation but also benefit the consumer. It is also relatedly necessary for commodities markets, spot and futures, to function much better than they have done till now to help discover prices and cover risk better. Progress on this front has till lately been impeded by the various state agricultural produce marketing acts but most of them have now been abolished. So urgent regulatory attention is needed to enable commodities markets to do their assigned job.

The sixth area of action, and this is likely to be the most controversial, is to sharply up farm support prices for key cereals and also make them a reality for pulses and coarse cereals. Such support prices, along with not so sharply rising ration shop food prices leading to higher food subsidies, are anathema to the dharma of fiscal prudence that has held sway from the nineties. But the current situation is that distributing imported food through ration shops at moderate prices is leading to paying a far higher price to the foreign farmer than his Indian counterpart. This is hardly rational.

Sharply hiked support prices, combined with carefully calibrated ration shop prices, will raise agricultural incomes, make farming more remunerative and reduce poverty across the board by simultaneously keeping in check open market food prices. Through this mechanism, a part of the recent gains from high growth will be transferred to the impoverished countryside. A sharply hiked food subsidy bill can be inflationary in the short run (until food output rises in response to the higher prices) but high inflation from high food prices will be a reality even without the additional subsidy.

A rural rejuvenation, in the wake of better farm incomes and an improved quality of life resulting from more roads and power, will make life more habitable in the countryside and reduce at the margin the migration pressure on cities.

The only problem with the foregoing is that none of these policy initiatives is new or disputed, except perhaps the raising of food subsidy via upped support prices. But they have not yet been effectively put in place. The only answer to that is, these things have to be done. Otherwise the hope of a rapid decline in poverty, created by the high growth rate of the last few years, will be negated.

subir.roy@bsmail.in