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A Perfect Crisis In The Making

Author: Administrator Account/Friday, February 24, 2017/Categories: Commodities

A Perfect Crisis In The Making

The rain Gods were not kind enough this Rabi season, and according to the Meteorological Department, they are unlikely to be very generous in the coming monsoon months. The agricultural distress looks certain to snowball into a major socio-economic crisis for the government. 

First, the unseasonal rains during the month of March created havoc in Indian agriculture sector. The unexpectedly widespread precipitation took place just when the Rabi crop was ready for harvesting. Lakhs of acres of standing crop have been damaged across northern and south central India. 

The normal average rainfall in India during March and the middle of April stands at 47.8 mm. This year, it nearly doubled at 100mm. 

The eastern states of Bihar and Jharkhand witnessed excessive rainfall to the extent of 400% and 900% respectively till the second week of April. While the home minister Rajnath Singh was quick to personally assess the damage along with Bihar chief minister Nitish Kumar, other states too have borne the brunt of nature’s unanticipated fury. Other northern states to witness above normal, heavy rainfall were Uttar Pradesh (488%), Haryana (500%), Delhi (521%) and Rajasthan (1037%). The crop damage due to rains could be more in these North and North-western states as they are the top producers of Rabi crops such as wheat, mustard and chana. Few states of Central and western part of India like Madhya Pradesh, Gujarat and Maharashtra were seen a depreciation in rainfall of 721%, 642% and 572% respectively. Karnataka, Telangana and Andhra Pradesh are the states which witnessed the excess than normal rainfall in the Southern peninsula region with excess rainfall of 218%, 337% and 121% respectively.  

During the period under review, out of 36 meteorological sub-division, 30 sub-division received excess rainfall. About 18 sub-divisions in North West and Central India received excess rainfall where most of the Rabi crops such as wheat, mustard, chana, and barley are grown. 

According to preliminary estimates released by Ministry of Agriculture, 107 lakh hectares have been damaged. After consultation with various state governments, these figures were revised to 80 lakh hectares. This damage will have a telling effect on India’s food basket. Large part of India’s consumed commodity i.e., wheat is grown in this season. Besides, many of the oilseeds and pulses are also grown in this season. You can imagine the supply side problems created by the output fall of these crops.  

The impact of this effect was already seen in the market in terms of a spurt in prices of various products within a short span of time. During the period from March 1, 2015 to 15 April 2015, 30 meteorological sub-divisions received excess rainfall, which contributes 85% of the agricultural area. 

Government Support

The government, while offering compensation to those affected by natural events, must find a way to tackle the wider farm distress. In the aftermath of the flash rains, the government has announced new measures such as easing the eligibility norms and raising the compensation amount. As per the new guidelines, farmers whose crop damage to the extent of 33% are eligible for compensation against earlier rule of 50%. The amount of compensation was also increased from Rs. 3600 to Rs. 5400 per acre. Over and above the central government assistance, all the state governments are chipping in. 

The additional fiscal burden on the government’s finances on account of this relief package comes to around Rs 11,000 crore. 

Even though both central and state governments extend their support to the farming community, these measures may not protect the interest of the consumers. The production shortfall would directly impact the consumers, which will ultimately to lead to greater inflation. In order to keep the wholesale price of these products, government needs to bring in stringent measures like imposing stock limits, allowing duty free imports, and curbing of exports. Whenever the country faced food shortage, the central government sourced grains from the international market and we would expect same kind of measures during current season. However, these decisions will be taken by the government only after assessing the exact amount of crop damage.

The Way Forward

Since the Indian agriculture is largely based on rainfall for its water requirement and weather vagaries like recent unseasonal rainfall will impact to the large extent on overall situation. In order to overcome this kind of situation there is requirement for an alternate kind of agriculture in India. 

During such times, the need for crop insurance arises. Though the Indian citizens are well aware of various kinds of insurance products like life and general, the Indian government has also made a provision for crop insurance in order to protect the interest of farmers during the period of natural disasters. However, the awareness about crop insurance among farming community is very limited. Hence, the role of government through various state agricultural universities and crop insurance agency has to create awareness about this product. As per statistical figures, crop insurance coverage is low in the states of Punjab, Haryana, Madhya Pradesh and Western Uttar Pradesh and all these states together contribute a major portion to India’s food basket. Any weather aberration during crop harvesting stage in these states will disturb India’s food chain. Further, banks, who are lending agriculture loans are also not considering crop insurance mandatory norms. Hence, there is need for legalizing of crop insurance to protect the interest of the farmers. 

Further, the land holdings in India are fragmented and distribution in small pieces, hence, there is requirement for cooperative farming where group of farmers put their hands together to grow particular type of crop instead of distributing small piece of land for various crops. The central and state governments should come forward for encouraging cooperative farming. 

If the above mentioned measures are not considered seriously, India has to rely on imports for meeting its growing population.

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