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1 CHAPTER-7 CONCLUSION, MAJOR FINDINGS AND POLICY SUGGESTIONS 7.1. INTRODUCTION: Indian agriculture has, since Independence, made rapid strides in taking the annual food grains production from 51 million tonnes in early fifties to 206 million tonnes and recently to million tonnes increased food grain production during , it has contributed significantly in achieving selfsufficiency in food and in avoiding food shortages. Over 200 million Indian farmers and farm workers have been the backbone of India s agriculture. Trade in agricultural goods can play an important role in promoting economic development especially economies like India. Despite having achieved national food security the well being of the farming community continues to be a matter of grave concern for planners and policy makers. The establishment of an agrarian economy which ensures food and nutrition to India s billion people, raw materials for its expanding industrial base and surpluses for exports, and a fair and equitable reward system for the farming community for the services they provide to the society will be the mainstay of reforms in the agriculture sector. The present chapter has been divided into three parts. The first part deals with recording of facts on the summary and conclusion on rice economy. The second part focuses on major findings of rice economy. The last part is devoted to major policy and suggestions perspective useful for rice policies impact on production, trade and prices at international and national level SUMMARY AND CONCLUSION: The growth of agriculture and allied sectors continues to be a critical factor in the overall performance on the Indian Economy. It might be recalled that this sector had grown in excess of 5.0 per cent on average annual basis in the triennium ending when real GDP grew in excess of 9 per cent. This 202

2 sector accounted for 12.7 per cent of the real GDP in the first half of Rice is the second largest produced cereal in the world. Rice is one of the most important food grain in the world, accounting for more than 20 per cent of global calories consumed. Globally, million tonnes of rice is traded every year. Historically, there have been some 6 major exporting and 30 major importing countries, which collectively account for 80 per cent of the total exports and 80 per cent of the total imports of rice. This could be due to the fact that limited land is available for cultivation. The export market for basmati rice has been going up by an average of 24 per cent per annum. Moreover, the Indian sub-continent holds the monopoly in basmati rice trade. Despite the increased growth rates in rice exports as outlined above, it is to be emphasised that India could perform well and better in future too, only if the factors such as dynamic global market, good domestic harvest, price competitiveness etc., are favourable. In Asia, India has the largest area under rice. It was 44.5 million hectares i.e., 29.4 per cent of the global rice area. Of the total harvested area, about 46 per cent is irrigated, 28 per cent is rainfed lowland, 12 per cent is rainfed upland and 14 per cent is flood prone. Rice is one of the largest traded commodities in the world with a total quantity touching 16.4 million tonnes. The south-east countries account for about 40 per cent of the rice trade in the world. (Mangala Rai, 2004). Decline in productivity along with high input costs has affected the supply economy of rice with a spurt in demand; price escalation of rice with reduced supply has led to new dimensions of the rice economy of the country. At present rice milling of paddy is regulated across the value chain and the sector has struggled to generate a cost return on invested capital in excess of its cost of capital primarily due to high mandated paddy price and volatile rice prices though there is huge increase in domestic demand for rice production has not increased in the same proportion to match the demand. The higher cost of raw materials in the 203

3 total costs of processing indicates the need for increasing efficiency in procurement system. There is need for deep reforms in input pricing policies for environment sustainability of rice system. An integrated holistic approach and adequate institutional support for farmers involved in rice production is necessary to promote rice economy in India. There is an urgent need to reform price policy at levels of producers, wholesales and consumer technological up-gradation, a competitive pricing strategy, improved storage and marketing could play roles in combating food price inflation. They exploit both the producers and consumers by paying unreasonable low prices to the farmers and by charging exorbitantly high prices from the consumers. The present study focuses on subsidies and tariff, costreturn, structure of paddy processing and its market changes, which will have significant influence on domestic price of rice which in turn will produce its impact on production and trade of rice MAJOR FINDINGS: The present major findings of study have been made under the thematic/classifications of the consumption, productivity, production, area per hectare, export, import, prices, cost of cultivation and procurement of rice with global and national perspective ) CONSUMPTION: 1.1 The international market in rice is segmented into a large number of varieties and qualities which are not easily interchangeable because of strong consumer preference. Ordinary indica rice is the most commercialized one followed by aromatic rice. 1.2 Due to significant change in the pattern of food consumption there has been a decline in the consumption of rice and pulses and an increase in the 204

4 consumption of wheat. The effect of decline in total rice consumption gives negative income elasticity of demand of rice ) PRODUCTIVITY: 1.3 Yield of rice in irrigated areas is substantially higher than in non-irrigated areas. There is considerable regional disparity and dismal performance of production of rice. 1.4 Production of rice in India is constrained by low productivity. 1.5 The annual average growth rate in the yield of rice during 1980 to 1990s was 3.19 per cent but it declined to 1.34 per cent, during the next decade. However, it showed signs of marginal increase by rising to 1.61 per cent during Looking to the CAGR it is revealed that in the first decade of reform period i.e., from the CAGR was 1.87 per cent but decreased to 0.64 per cent during The CAGR of yield per hectare of rice was highest in case of Brazil accounting for 3.67 per cent during , followed by Viet Nam 3.17 per cent, Pakistan 3.06 per cent, and Bangladesh 2.67 per cent, Brazil again was ahead of other countries in terms of CAGR in for yield per hectare of rice 3.62 per cent followed by Bangladesh 2.22 per cent, and Pakistan 2.03 per cent ) PRODUCTION: 1.7 During 1986 to 2007 the main reason for the fall in price is can be accounted for high growth rate in rice production in Asian Countries. The production in Indonesia had increased by about 16 per cent from and it was the largest rice importer in the world. 1.8 Production of rice during the long period of 22 years i. e., from to has largely stagnated between a minimum of per cent in and a maximum of per cent in This general trend 205

5 has been observed relating to yield per hectare during the corresponding period. 1.9 The compound annual growth rate of rice production during to was higher in Orissa (4.73), Chhattisgarh (4.58), and Haryana (4.04) compared to other Indian states There has been a decline in the area under rice production between and in states like Andhra Pradesh, Assam, Tamil Nadu, Uttar Pradesh, Bihar and Orissa. On the other hand area under rice production in states like Chhattisgarh, Haryana, Punjab and West Bengal increased relatively during the corresponding period ) AREA: 1.11 The area per hectare under rice in terms of CAGR in was highest in Myanmar i.e., 2.50 per cent followed by Viet Nam 2.31 per cent and Pakistan 2.23 per cent, Myanmar again was a head has led other countries in terms of area under rice procurement i.e., in per cent followed by Pakistan which account for 2.29 per cent ) EXPORT: 1.12 Since, exports of non-basmati rice has been opened since September, 2011; India has exported 7.2 million tonnes in FY and 4.7 million tonnes in first half of FY As per FAO, India has emerged as the worlds largest exporter of rice in the calendar year Share of milled rice in exports indicates significant trends. The CAGR was third highest accounting for per cent in case of India compared to CAGR of Brazil (19.22) and Bangladesh (36.46) from Major countries in terms of CAGR in the share of rice milled exports in the world in the terms of value are Philippines, Indonesia, Bangladesh and Myanmar other countries with substantial CAGR of exports of rice were China, India and Viet Nam. 206

6 1.14 The share of rice exports in total exports of agricultural commodities has gone up during the first half of the decade of 1990s. The share reached the peak of per cent in but reached the lowest at 9.60 per cent in The trend indicated a downward movement of CV and the CAGR. Thus, rice exports from India indicate a dismal trend during the last two decades. The share of basmati rice exports in total rice exports is higher compared to non-basmati rice There is a continuous decline in the percentage of exports to production of rice from to Severe competitions from major rice producing countries and continuous rise in domestic consumption of rice in the country have contributed to this trend India s share of long-grain milled and brown rice, paddy of both milled and brown rice, paddy of both milled and brown variety in world exports is higher than other countries followed by Philippines, Japan, Indonesia, Brazil and USA ) IMPORT: 1.17 Major importers of rice paddy in the world are Sri Lanka, Benin, UAE, Philippines, Cote d Ivore and Syrian Republic. The share of UAE in rice paddy imports in 2008 was the highest at $ million tonnes followed by Saudi Arabia (23.03), Malaysia (13.02), Philippines (10.72) and other countries PRICES: 1.18 World price of rice showed continuous increasing trend from , during the world price of rice almost got doubled when compared to prices There has been a high inflation of prices of food-grains and rice during and In terms of duration and magnitude the food price spiral witnessed from January 2008 onwards was the highest since

7 Two factors responsible for food price spiral are high MSP offered and high level of food-gain procurement by the government Domestic wholesale prices and support prices of rice have been lower than international prices, especially during the last six years. As exports of nonbasmati rice were banned since April 2008, Indian farmers could not exploit this price competitiveness PROCUREMENT: 1.21 State-wise trend of procurement of rice of major producing states in India indicate a sustained upward procurement of rice during to in Punjab, UP, Orissa, West Bengal and Chhattisgarh. However, a small declining trend is observed in procurement of rice during the corresponding period and is observed in Haryana, Andhra Pradesh and Tamil Nadu Rice procurement by states to central pool in India has indicated that CAGR of procurement is higher in case of Bihar (39.99) followed by West Bengal (21.49), Tamil Nadu (20.39), Orissa (10.16), Assam (9.30) and Uttar Pradesh (7.90). The CAGR of rice procurement of these states during to is higher than the average (5.27) for India. The CAGR of other states is less than India s CAGR of COST OF CULTIVATION: 1.23 Cost of cultivation of paddy in different states in India indicates wide variations relating to different costs. Costs of A1 and A2 are highest in Tamil Nadu followed by Andhra Pradesh. In Karnataka and Haryana the cost is more than Rs. 10 per hectare compared to the other states. Similar trends are also found relating to the costs of A2+F1, B1, B2, C1, C2 and C2x The time unit cost of production showed a rise in green revolution areas partly due to rising cost of inputs and partly, but more importantly, due to stagnation in yield levels. 208

8 1.25 For paddy, however, there has been violent fluctuations in yield which related in costs of production per unit of output. In certain years, therefore, procurement prices have remained below the full cost of production MAJOR POLICY SUGGESTIONS: With regional disparity and dismal performances the rice production system has undergone tremendous changes over the decades. Proper diagnosis of the changes and their characteristics is essential to formulate regionally differentiated targeted policy interventions. In-depth understanding of a system resilience and likely future demand for rice research requires more insights into the on-farm dynamic of the existing production system and the pattern of change. The world rice market needs a seller of last resort. The possibilities of evolving a global food reserve system or other similar options to be urgently explored. It is desirable to adopt a system of rice intensification (SRI) methods of cultivation for reduction in cost of production of paddy. Direct procurement of rice from millers by organized retailers would help in reduction of price of rice. There is need to ensure farmers access to sufficient quantities of improved seeds, chemical fertilizers and other complementary inputs to improve their rice yields. There is need for evolving appropriate export promotion strategies to diversify the directions of trade to other countries and it is imperative to find new markets besides expanding the existing markets in major importing countries. 209

9 Indeed, government control of imports and exports in rice and other grains to stabilize domestic prices contribute to the higher variability of world rice prices. The fact that the two major rice producing and consuming countries, China and India, are large in size with domestic price stabilization objectives in the interest of the consumers, it may not be totally inappropriate for these countries to build comfortable levels of domestic stocks and rely on international markets only marginally. This is not only in their own national interest (of these countries) but also in the interest of the international rice market stability. The government has a view to make food management meaningful and efficient, even with NFSB in its current form. Suggestions basically ask for liquidating these excessive stocks in various forms as delineated below. With liberalization, one could expect a higher share of production to be traded, while the complete integration of large rice producers such as China and India would also bring more stability to world rice markets. Development of cost reducing rice production technology may help to increase farm income and even influence farmers to allocate more area to rice to support rice production, but a major breakthrough in technological front for augmenting rice productivity seems exigent to overcome present stalemate. Till then, an integrated approach to targeted rice research programme both irrigated and rainfed areas for productivity and production food security in India have to be developed. Some major gap reliable data update, extended policy reports and database documents like, major exporting states/district-wise respective area improper statistics and figures have to be taken care of? The original Green Revolution States face the problem of stagnating yields and over-exploitation of water resources. The answer lies in crop 210

10 diversification. Hence, in the recent Union Budget, a sum of 500 crore has been provided to start a programme of crop diversification that would promote technological innovation and encourage farmers to choose crop alternatives. The lessons learnt from the successful states in PDS management should be replicated in poor-performing states. Alternative system of PDS can also be explored in these states. One of the reasons for increasing paddy price is the increase in cost of cultivation of the same. People today prefer to consume more of non-cereals, and among cereals the preference is for rice as against coarse cereals. The increase in food subsidies is benefiting rice producers in regions where the government procures these two crops most conspicuously, that is, Punjab, Haryana, AP and Karnataka. There is need for further research to understand the consistently poor performance of PDS in some states and reasons behind improvement in others. Besides, increasing the efficiency of public expenditure and strengthening of social safety net programme like, ICDS, NFSM, Mid-Day Meal, PDS, etc. The lessons learnt from the successful states in PDS management should be replicated in poor-performing states. By all accounts the food bill subsidy allocation should be between ideally Rs 20,000 to Rs. 30,000 crore, unless the government intends to reduce the number of beneficiaries. Recall Second Green Revolution Extended Swaminathan Committee Report. Returns over cost C2 in real terms has not consistently increased in any of high and low productivity states. Study suggests increased productivity alone will not guarantee increased profit from paddy cultivation. 211

11 Procurement infrastructure to be strengthened to have consistent profit in paddy cultivation. SRI method of paddy needs to be promoted as it appears to reduce cost of cultivation and increase yield. Disaggregated data study is needed why West Bengal farmers cultivate paddy despite incurring losses in most number of years than any other states? 212