For a Second Green Revolution

A Seminar Report
A recent Indo-French seminar discussed the weaknesses of Indian agriculture, the limits of input subsidies, and the scope for reform towards a second green revolution. A report.
BRUNO DORIN
he Indo-French seminar Agricultural Incentives and Sustainable Development: Past Trends and Future Scenarios organised by the Centre de Sciences Humaines (CSH, New Delhi) in collaboration with the Indian International Centre (IIC) brought together more than 40 distinguished scholars. The objective was mainly to debate the relevance and sustainability of input subsidies for agriculture (water, electricity, fertilisers) from six points of view: public finance (chair: J M Boussard, INRA), income distribution (chair: B Barua, Ministry of Agriculture), food security (chair: G S Bhalla, JNU), environment (chair: A Vaidyanathan, MIDS), foreign trade (chair: S Baru, ICRIER) and modelling of scenarios (chair: P Sen, Planning Commission). Ten Indian speakers prepared papers to initiate the discussion. On the French side, three papers were presented on India, dealing respectively with the formation and distribution of productivity gains, input subsidies and competitiveness, and price policies and agricultural supply. is a general system of cross-subsidies for electricity, a sharing of fertiliser subsidies with industrialists, and difficulty in assessing capital costs for irrigation. However, B Dorin and T Jullien (CSH) consider that at least US$ 6.57 billion have thus been transferred to agriculture through such subsidies in 1995-96. This amount, which is slightly higher than the one declared by India to the WTO for the same year, accounts for 8.6 per cent of agricultural GDP whereas the percentage was only 2.7 per cent 15 years earlier. Per hectare cultivated each season (1, 2, even 3 seasons per year depending on the region in India), this accounts for an average subsidy of 35 dollars, and represents an annual income transfer of 188 dollars per farmer in a rich state such as Punjab while it is only 14 in a poor state such as Orissa. Cropwise distribution is also unequal since rice, wheat and sugar cane absorb more than 60 per cent of these public grants. The Indian products and producers who benefit from these subsidies have thus become much more competitive than others in the domestic market, especially in comparison with those located in nonirrigated arid or semi-arid zones. These subsidies, which are considered to be nonproduct-specific, end up leading to an overestimation of the competitiveness of certain Indian agricultural products on the international market: the price of Indian wheat, for instance, appeared to be, on an average, 12 per cent less than world prices between 1990 and 1995, but when one takes the input subsidies into account, it is, in reality, 4 per cent higher (B Dorin, T Jullien). At the same time, these input subsidies lead to wastage of resources, which further causes serious environmental problems, especially the dramatic overuse of groundwater reserves (A Vaidyanathan). They also induce limited recourse to traditional inputs such as

organic manure, which has now become rare and expensive, whereas it is organic manure that ensures that the chemical fertilisers used are fully effective in the long-term (B C Barah, NCAP). The illusion of food self-sufficiency also stands denounced: the green revolution may have made India self-sufficient in cereals, but it also made it highly deficient in other food products such as oilseeds and pulses that are essentially cultivated in arid or semi-arid zones (B Dorin); widespread famines may be over, but undernutrition and malnutrition (proteins, lipids, iron, iodine, vitamins, etc) remain dramatically widespread (A Shariff, NCAER). V Shiva also blames the planners for having placed the country under the control of agribusiness multinationals, all the more so now since they supply modern inputs (seeds, pesticides, fertilisers, etc) and provide credit to farmers given the fact that agricultural credit is no longer a government priority. Indian farmers are, therefore, in a very vulnerable position, and the total delinking of production and distribution forces them to bear the ever-increasing production costs, without any increase in their income (V Shiva, RFSTE).

Challenges of Incentives
It is a fact that, even several decades after the launch of the green revolution, Indian agriculture remains, for the most part, subsistence agriculture. In fact, the surplus accounts for 1980-96 show that the increase in agricultural production essentially resulted from work and assets of an increasing population of farmers (+ 29 per cent in 15 years) forced to survive on the same plot of land. The total productivity surplus is, therefore, very modest, and may even be negative without the input subsidies which, in this context, replace the kind of technical progress that usually takes place when labour is replaced by capital (B Dorin, N Pingault, J M Boussard). For economists like S S Acharya, these input subsidies also remain an essential tool for the general pricing policy: they reduce the cost of production of some essential food items upstream, and therefore the consumer price of these items downstream. Some other Indian economists also believe that this low inputs low outputs price policy, coupled with the public distribution system (PDS) providing cheap rice, wheat and sugar from surplus production areas, should free

Constraints of Input Subsidies

Ever since the green revolution, and more significantly since the 1980s, both state as well as the union governments have been devoting an increasing share of their budget to subsidise both the production and consumption of fertilisers (S S Acharya, IDS), water (A Vaidyanathan, MIDS) and electricity for pumping water (A Sen, CACP), to the detriment of fixed capital investments, as well as the proper functioning of the concerned public sector undertakings or departments. To assess the amount of benefits that actually accrue to agricultural producers is, however, a delicate exercise, given the fact that there

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deprived farmers from producing these staple foods so that they can better profit from other agricultural production (A Sen). The latter hypothesis can be debated at length, but not the fact that Indian agriculture is globally highly taxed, according to WTO criteria. Indeed, the aggregate measurement of specific and non-specific support (AMS) appears to be negative, to the tune of -62 per cent of the value of agricultural production in 1997 (A Gulati, IEG). This is why India has been released from any international commitment to reduce its domestic support to agriculture, and furthermore, why it considers that its farmers cannot fairly compete with those from Europe and the US who enjoy much larger and increasing subsidies, now hidden in the Blue and Green Boxes (G S Bhalla, JNU). Agricultural incentives provided in Europe and the US have been specially criticised, but the fundamental right to support ones agriculture and to ensure ones food self-sufficiency is also reaffirmed, just as the farmers right to receive water on time and in sufficient quantities (A Vaidyanathan). It has also been recalled that Indian input subsidies made it possible to parry the catastrophic scenarios to which India was subject before the launch of the green revolution (A Gulati), and that without them, the country would not be able to meet its future domestic demand. From that point of view, P C Bansil estimates that after accounting for changes in food habits, the Indian demand for foodgrains (cereals and pulses) will not exceed 240 million tonnes by the year 2020, i e, + 69 million tonnes in comparison with 1993, including 24 million tonnes for cattle feed. These projections concur with those made for the period up to 2030 by P Kumar and R S Paroda who estimate, on their part, that emerging challenges will be in other sectors, especially that of meat, eggs, fish, milk, vegetables and fruits, whose demand could go up threefold as compared to 1995 with a per capita GDP growth rate of 5.5 per cent. The challenges that will have to be taken up are, therefore, substantial, but compared to other countries in south Asia, India has proven to be better prepared if one takes into account its past achievements (P Kumar, R S Paroda). However, two sophisticated models developed for the state of Haryana have clearly shown that the major factor that would limit future production would be water (P K Aggarwal IARI, N Kalra, S Kumar, A K Vasisht),

and that a (hypothetical) change in the input price equation (higher charges) affects rice and cotton, for the benefit of other productions like milk (V Alary, D Deybe).

Towards a Second Green Revolution

Thus, India must initiate a second green revolution, with a markedly different recipe than the one used for the first. Today, everybody acknowledges the limits or constraints of the present subsidies, either from the financial, social, nutritional or environmental point of view. They have led to distortion in resources use, and it is time to phase them out to better encourage, for instance, modern water saving devices. However, despite their criticisms, many Indian economists straightaway dismiss the replacement of the present system by any other mechanism of incentives and redistribution. Indeed, input subsidies are still considered to be the best incentives, given that farmholdings are small and socially heterogeneous. Moreover, as many believe, the shift towards decoupled support (direct payments delinked from production, as has been implemented in the European Union, for example) would lead to an uncontrollable escalation of claims and expenses in India. On the other hand, greater output price support would attract strong condemnation from the WTO (existing procurement prices for wheat and rice are already higher than world prices). For want of better solutions, or for fear of the agitation radical reforms could provoke, the general feeling is therefore to move towards a more rational management of the existing system. There seems to be a consensus with regard to the principle of billing (groundwater, electricity in certain states) or increasing input costs (surface water, fertilisers), just as it is agreed that charges should be made on the basis of quantities consumed (installation of water and electricity meters). But since attempts in these directions have failed so far, some Indian economists are now convinced of the following three points: (1) Any fiscal approach to this problem is destined to fail as one cannot politically or reasonably ask a sector that is poorer than others to make bigger sacrifices. (2) Any reforms that are introduced should be presented as an effort to better utilise subsidies (which would not be limited in the long run, if properly managed) for the greater benefit of farm-

ing communities. (3) This calls for the active involvement and participation of the concerned communities. In the case of water and electricity, this reasoning leads to strongly recommend the decentralisation of both distribution and collection of resources at the village level, with a reward system for those who play the game by its rules. This proposal in itself calls for a revolutionary change in behaviour, both in rural areas as well as in the ministries at New Delhi or in state capitals. But it is undoubtedly changes of this kind that will bring about the second green revolution in India, along with the following indispensable adjunct: the development of statistical information (establishment, updating and large spreading of consistent databases at multiple levels, like on livestock feeding in peculiar Indian conditions) and of integrated studies (of economical, technical, cultural, biological... systems inter-linked on different scales, and taking into account risk and related aspects). EPW
[The author is solely responsible for this report as well as for remarks attributed to persons quoted. On this account, the latter may feel that the author has unreasonably shortened, extended or distorted the nature of their talk: please refer to the persons quoted for further clarifications and quotations in other texts.] Papers presented at the Seminar Agricultural Incentives and Sustainable Development, CSH-IIC, New Delhi, April 3-4, 2000. Acharya, S S: Fertiliser Subsidies in Indian Agriculture: Some Issues, pp 22. Aggarwal, P K, N, Kalra, S Kumar and A K Vasisht: Exploring Land Use Options for Sustainable Food Production: Methodological Framework, pp 10. Alary, Veronique, Daniel Deybe: Price Policies and Agricultural Supply: The Responses of Producers in Haryana, pp 22. Bansil, P C: Demand for Foodgrains by 2020 AD, pp 26. Agricultural Subsidies, pp 37. Barah, Bhuban C: Agricultural Production System and Environmental Sustainability: Lessons from Long Term Manuarial Experimental Trials, pp 21. Dorin, Bruno and Thomas Jullien: Input Subsidies and Agricultural Competitiveness Within and Outside the Country (1980-1996), pp 22. Dorin, Bruno, Nathanael Pingault, Jean-Marc Boussard: Formation and Distribution of Productivity Gains in Indian Agriculture (19801996), pp 23. Gulati, Ashok: Indian Agricultural Subsidies in a Globalising World (oral presentation). Paroda, R S and Praduman Kumar: Food Production and Demand Projections in South

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Asian Countries: Policy Implications for Indian Agriculture, pp 59. Shariff, Abusaleh: Food and Nutrition Security in India since 1972-73: The Household Dimension, pp 22. Sen, A: Energy Subsidies in Indian Agriculture:

Some Issues (oral presentation). Shiva, Vandana: Green Revolution: Agricultural Productivity versus Environment (oral presentation). Vaidyanathan, A: Political Economy of Water Pricing: Some Lessons from India, pp 18.

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