Bitter ‘Casteism’ In Sugar Industry

In India casteism is prevalent and practised beyond Hindu society in industry. This is particularly manifest in our sugar industry, which in terms of production is the world’s second largest after Brazil. What is more, we happen to be the biggest consumer of the sweetener on the earth, not a flattering statement on our dietary habit. Casteism in this agro-based industry, which has a major role in sustaining the rural economy of major sugarcane growing states such as Uttar Pradesh, Maharashtra and Karnataka has developed due in no small measure to government patronage to a limited number of groups with ownership of a good number of factories in sizes well over what is considered ideal economies of scale. What also has given them a predominant status in the industry allowing them to influence government policy to their advantage is the location of their mills in areas where sugar content in cane is considerably higher than national average.

The strategy of these groups to invest in a big way in downstream distilleries making ethanol from molasses on a growing scale and power plants producing electricity by burning bagasse has enabled them to stay in the black even during sugar downturn years. Though they too failed on occasions to make payments to cane supplying farmers in their captive area during the last two seasons marked by bumper production here and globally and low prices for sugar, these groups began the 2019-20 cane crushing year with cane bills cleared. Lucky are the farmers supplying the raw material to such groups.

Sadly, no such comfort is available to millions of others growing cane for use by factories not in good financial health and, therefore, not able to honour export obligations. The system works like this: In a year of sugar surplus when under supply pressure, ex-factory price of the commodity falls much short of production cost, New Delhi will sanction an export quota for the industry which then is equitably apportioned among sugar factories. Not every industry constituent will, however, sell sugar in the world. Industry official Om Prakash Dhanuka says cane crushing mills far removed from ports like the ones in Bihar and the ones not familiar with global trade will give their export quota to groups not far away from the coast and also engaged in export.

There is a catch here: When global sugar prices rule higher than in India, the transferor (a unit not using the quota itself) will ask and get paid for using the quota by the transferee. But when opposite is the case as now, quotas will not change hands unless the transferee is compensated for the loss to be incurred in export. But a number of factories following their poor working over the past many seasons find their finances in such parlous state that there is no way they can rustle up money to compensate the transferee for the loss embedded in exports.

As is the case, farmers supplying cane to mills not able to execute the allotted quantity of export are to bear the brunt though they are not in any way responsible for export not happening. The government gives two types of subsidies to make exports feasible. (The objective is if a significant portion of the massive inventory of sugar with mills cane be sold in the world market then the industry will be spared the cost of carrying stocks to the extent of exports. Moreover, the sheer presence of a massive inventory – the current season has opened with bewilderingly high stocks of 14.57m tonnes – keeps sugar prices low compromising mill capacity to clear cane bills.)  First, mills are compensated for the cost incurred to move sugar marked for export from factory to the port.

Second, where farmers come in is the stipulation that the cane subsidy will be directly credited to the bank accounts of growers supplying the raw material only to exporting mills. This also is a relief to mills for the subsidy is to extinguish a portion of cane price dues. On August 28, the cabinet committee on economic affairs approved export subsidy of Rs10,448 a tonne to sugar mills involving an expenditure of Rs6,268 crore to facilitate export of 6m tonnes by 2020 September end. Cane growers in pockets of UP and Bihar linked to weak factories are wondering aloud why should they be penalised by way of denial of cane subsidy whatever the omission by industry constituents. For the sake of argument, it can be said that the subsidy is linked to export and therefore, the government is not to be blamed if farmers making supplies to non-performing mills are left out of the scheme.

But the economic sufferings of millions of farmers resulting from mills not being able to clear cane bills running into months should be of concern to the government. Around 190 of 525 odd factories in the country are in distress – in most cases it is acute and in others it is moderately so. As is known, sugarcane is the most important of all cash crops in the country for whose payment within two weeks of delivery to factories is guaranteed by the government. The fair and remunerative price (FRP) at Rs275 a quintal for the current season, same as last time is fixed annually by New Delhi on a review of recommendations by Commission for Agricultural Costs and Prices (CACP). While some states stick to FRP, some others have state advised prices (SAP), which actually mean loading FRP with a premium.

The cash crop moniker for cane lost all its meaning when in May the industry owed over Rs21,000 crore to farmers, including Rs12,00 crore to growers in UP. Even now, all-India cane dues remain at Rs10,000 crore with UP having the largest share of Rs4,000 crore. No wonder cane growers denied of payments by mills are seeing their debts rising to unacceptable levels standing in the way of meeting their social commitments, including weddings and sradhs. This and also reports that except for a few crops like rice and wheat are sold below MSP are contributing in no small way to fall in demand for fast moving consumer goods in rural India. This financial year’s first half working of Hindustan Unilever to ITC to Godrej Consumer Products will all attest to it. The sugar industry was given an export quota of 5m tonnes for the season ended September 2019. But actual shipments to foreign destinations were 3.8m tonnes. No doubt, the inability of weak mills to participate in exports will explain the shortfall in overall despatches of sugar abroad. This year, New Delhi has given the industry a bigger 6m tonne export quota. But again for reasons of poor financial health, ailing and sick sugar mills will have no role in export. When sick mills need support in every possible way, has come the distressing news of their buffer quota being reduced for their failure to participate in export. The size of sugar buffer, the maintenance and interest cost of which is financed by the government, has been raised to 4m tonnes for the current season against 3m tonnes in 2018-19. The fact remains that more are the weak mills made to suffer, greater will be the distress for farmers.

Can Orissa’s Mineral Wealth Reach Bottom Of Pyramid?

The challenge for Indian bureaucrats from the level of district magistrate to chief secretary, on whose shoulders rest welfare-oriented administration of a state, is to understand well “local aspirations” and then create condition for their fulfilment. Indian administrative services, inherited largely from the British Raj but with many amendments and improvements since Independence, require young recruits to spend a good number of years in districts to have a feel of the challenges facing Bharat, distinct from urban India, before they are moved to state capitals or to the Centre.

Orissa chief secretary Asit Kumar Tripathy, who remembers his days long time in the past at Rourkela, which figures prominently in the national map as a major steel producing centre, where he was additional DM, admits that “local aspirations” for jobs and economic opportunities in several mineral producing centres in the state have remained largely unfulfilled. Tripathy makes a particular reference to Keonjhar district, which “makes a significantly large contribution to the state’s iron ore production, but is still without a steel plant.”

Such a venture, ideally to be undertaken by the private sector or in its absence by a union government owned undertaking, would create thousands of jobs directly and in the tertiary sectors requiring a variety of skills. These may not be available at Keonjhar at this point. But skills impartation to the local youth is a challenge that the state is ready to undertake.

Orissa’s endowments in the form of abundant natural resources such as iron ore, bauxite, coal and chrome ore should lead to job creation outside agriculture in mining and equally importantly in their local processing. Many see in the rise in demand for local processing of industrial raw materials instead of allowing their easy movement across the country a spurt in sub-nationalist sentiment. This may not be in conformity with the idea of India. But then the challenge for state level leaders is to take care of “local aspirations” for economic opportunities. We have not as yet found way to strike a balance between the two pulls.

The gross state domestic product (GSDP) growth in Orissa in recent years has been better than many states and also higher than the country’s GDP growth rate. Commendably, the eastern state grew at 8.4 per cent in 2018-19 compared with 7.4 per cent in the previous year. Orissa will be required to advance sustainably at a high rate and ensure that the resulting benefits percolate down to weakest sections of society. Incidentally, Orissa is next only to Bihar among the country’s bigger states to have the maximum number of people below the poverty line. According to Niti Aayog SDG India Index Baseline Report, 32.59 per cent of population of Orissa exist below the poverty line against 33.74 per cent in Bihar. 

No one will grudge the state claiming credit for a higher rate of growth of 6.6 per cent over a seven year period in per capita income to Rs75,796 when the national average was 6.1 per cent. But where are the evidences except for the information provided in the state economic survey that the average monthly household income in agriculture where close to 48 per cent of workers are engaged has continued to rise since 2012-13 that the condition of the poorest of the poor is improving at a desired rate? As has been seen in many states, including Andhra Pradesh, Chhattisgarh and Orissa, people below the poverty line swell the ranks of Maoists.

Poverty alleviation will demand more and more mineral deposits are put to auction for opening of new mines. Mineral deposits are found in remote places where there is hardly any economic activity. Official data show the Orissa mining sector contributes 10.8 per cent to GSDP. A friendlier disposition to mining by way of giving clearances quickly and lowering state levies on the basis of discussions with miners will see in a few years the sector’s share in GSDP going up by quite a few notches. Boosting minerals production will only be half the battle won. At a recent brainstorming session in Delhi with steel industry leaders by the steel ministry, Tripathy regretted that even while Orissa government had been proactive in reserving land in abundance in places like Kalinganagar, Rourkela and Keonjhar, “land capacity utilisation” had remained low to the disappointment of state administration.

According to the latest survey by the Indian Bureau of Mines, in the country’s iron ore resources of 31.32bn tonnes, the share of Orissa is 7.2bn tonnes, largest among all states. Not only this, the state which accounts for around half the country’s production of iron ore, extracted 118.5m tonnes in 2018-19, up 12.8 per cent over the previous year. So Tripathy’s disappointment is understandable that so much ore is leaving the state instead of being processed within. But at the same time what is to be taken into account is his admission that at “about 30m tonne crude steel capacity, logistics concerning moving steel making ingredients from mines and ports to steel mills and then egression of finished steel products is a nightmare.” The primary reason for nightmarish state of logistics, as is underlined in the economic survey is the very poor rail connectivity in the principal mining and steel production centres.

Chief minister Naveen Patnaik says: “The state generates revenue in excess of Rs15,000 crore for the railways. Yet the entire route length in Orissa is only around 2,500 km with a density of 16, which is much less than the national average of 20. What is more, it is hugely lower compared to adjoining states like West Bengal with density of 43.4 and Jharkhand 24.3.” The minerals and metals industries suffer the most from shortages of wagon rakes during the summer when the railways are required to give “high priority” to move coal to power plants. What kind of pressure steelmaking brings to bear upon logistics becomes understandable when what Tripathy says is considered: For every tonne of steel, three tonnes of raw materials are to be moved to mills and then finished products are to be sent out to domestic and global markets.

The available logistics in the form of rail and road transport is not found good enough to support steel capacity of 30m tonnes. One then wonders how will Orissa, which is supposed to have a share of 100m tonnes in the country’s projected 300m tonne steel capacity build up by 2030-31 support that big an industry with the available infrastructure. Till now, signs are not there of rapid development of infrastructure. Tripathy sees in building of “multimodal transportation in which the state’s two major rivers Brahmani and Baitarani will pay a major role” the answer to logistical challenges emerging from the steel industry. River transportation much in use in the US and Europe to move dry bulk cargoes is cost effective and environment friendly. At the same time, Orissa’s railway network for movement of goods needs rapid beefing up.

Modi-Yogi Doublespeak On Renewable Energy

The Uttar Pradesh government is working at cross purposes with the Centre’s policy to promote non-fossil fuels based energy

‘If wishes were horses, beggars would ride’ is an old Scottish proverb dating back to the 17th century which looks to have gone down well with our Prime Minister Narendra Modi. Achievable or not, Modi keeps on making promises not necessarily supported by ground reality. But he has the advantage of people trusting him. Modi won many hearts, specially of the environmentalists, when at the recent United Nations climate action summit in New York he announced India ambitiously resetting the renewable energy (RE) target at 450 gigawatt even while the country is losing steam in its march towards the 2022 RE capacity goal of 175 GW.

A combination of factors, including policy deficit, state governments insisting on low tariffs for electricity derived from renewable sources and they not always honouring power purchase agreements (PPAs) or revising PPAs arbitrarily marks the Indian RE power scene. No wonder then solar power capacity addition here last year was down to 6.5 GW from 9.4 GW in 2017-18 and in the first quarter of 2019-20, it was a disappointing 1.4 GW.

US President Donald Trump had reasons to demur when Modi said that the world was not doing enough to overcome the challenge of climate change. Therefore, he bravely announced at the summit that “India is here not just to talk about the seriousness of this issue, but to present a practical approach and a road map. We believe an ounce of practice is worth more than a tonne of preaching.” But back home, Modi has to contend with the fact that India is a Republic where the states have full powers on many subjects, including agriculture and there is also a concurrent list, leaving room for serious disagreements on issues.

Apparently, it should work to the advantage of Modi that the Hindu nationalist Bharatiya Janata Party as it has a formidable majority at the centre, it runs the government in 21 states either on its own or in partnership with other parties. Uttar Pradesh happens to be India’s largest state, which, according to Modi himself, suffers from development indicators of sub-Saharan Africa than anywhere else in Asia. UP remains among the least preferred investment destinations because of poor law and order situation, religious strife, governance deficit and power shortages. The UP scene has not improved at all in the last couple of years though BJP has 312 of 403 Assembly seats.

BJP being in absolute power both at the Centre and in Lucknow, it should be a given that the latter will faithfully dispose what the prime minister may be proposing. Unfortunately, this is not happening in the case of promotion of green energy. Considering the fact that the state happens to be the country’s largest producer of sugarcane and sugar, it has the potential to produce more green energy in the form of ethanol for blending with petrol and also produce clean electricity by burning bagasse. Om Prakash Dhanuka, a former president of Indian Sugar Mills Association, says: “The sugar industry presents the unique example of converting by-products of sugarcane, namely, molasses and bagasse into wealth in the form of renewable green energy. The carbon footprint of ethanol and bagasse fired electricity is considerably less than energy derived from fossil fuels such as crude oil and coal. Moreover, the higher the supply of renewable green energy, more will the country save on cost of imports of oil and coal.”

Even while India has estimated geological coal resources of 319.02bn tonnes and its 2018-19 production was 731m tonnes, up 8.1 per cent from 675.40m tonnes in 2017-18, India still had to import as much as 236m tonnes last year against 209m tonnes in the previous year. Perhaps more worrisome is the country’s oil import dependence going up from 80.6 per cent in 2015-16 to 83.7 per cent in 2018-19 with oil consumption during this period growing from 184.7m tonnes to 211.6m tonnes. The country’s oil import bill ominously rose from ₹171,702 crore in 2005-06 to ₹881,282 crore in 2018-19. “We need to give a push to rapid development of green energy capacity by making optimal use of sustainable resources such as sunlight abundantly available in most parts of the country, wind and biomass in the context of the Organisation of Petroleum Exporting Countries (OPEC) forecast that India would record the fastest annual average oil demand growth in the world at 3.7 per cent through 2040. We also have reasons to be greatly concerned about our hosting 14 of the world’s 20 most polluted cities,” says Dhanuka. Rapid growth in oil demand has to be seen against the background of the country declaring an ambition to become a $5 trillion economy in the next five to six years from the present $2.8 trillion.

The compulsion to have cleaner air in our cities and also to relieve the pressure that oil imports leave on our balance of payments, New Delhi has recently given some major incentives to sugar mills for stepping up production of ethanol, which should progressively raise the rate of its blending with petrol. Traditionally, here ethanol is made from what is called C heavy molasses, that is, after most juice is extracted from cane for sugar making. Going a step forward and in order also to counter the sugar industry’ viability being compromised under the weight of overproduction of the sweetener for two seasons in a row, New Delhi last year wisely allowed the industry to use B heavy molasses, which retains a good amount of juice. Going even a step forward, the government has cleared cane crushing factories to produce ethanol directly from cane juice. Prices for ethanol to be made from all three categories have been revised upwards to the industry’s satisfaction. A major relief came its way with goods & services tax reset at 5 per cent from the earlier 18 per cent.

But the Yogi Adityanath administration in disregard to what the centre is trying to do has given an order that sugar mills in UP will have to reserve 16 per cent of their C heavy molasses for units engaged in making country made liquor (CML) against 12.5 per cent earlier. The state government excuse for the unjustified move is since molasses production in the 2018-19 sugar season (October to September) is down to 4.7m tonnes from 5.5m tonnes expected earlier, CML producers in the state need to be compensated by raising the percentage of their molasses entitlement. While sugar factories will be parting with the 16 per cent quota of C heavy molasses at ₹75 a quintal, if they are to buy it from the market the cost will be anything between ₹450 and ₹500 a quintal. CML and India made foreign liquor (IMFL) happen to be the two most important sources of excise revenue for the state. It is precisely for the sake of revenue that the interest of the sugar industry has been sacrificed.

Then again the arbitrary decision by the UP Electricity Regulatory Commission that henceforward sugar factories will get ₹2.89 a unit against the earlier ₹4.88 a unit for their cogenerated electricity derived by way of burning bagasse has come as a disincentive for sugar factories on green energy mission. The Commission has arrived at the lower electricity rate by assuming without any justification the cost of bagasse at ₹1,000 a tonne from the earlier ₹1,600 a tonne. The current UP market rate for bagasse is, however, ₹1,800 a tonne. The two instances show beyond doubt that the UP government is working at cross purposes with the centre’s policy to promote non-fossil fuels based energy.

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Recycle Old Vehicles: Curb Pollution, Create Business

The government must motivate people to give up 15-year-old vehicles by incentivising the process. Next, it must draft a sound scrappage policy and build a chain of recycling units across the country

We don’t expect our leaders to be aware of the works of the two world’s leading environmental economists Martin Weitzman, the recluse who passed away on August 27 and the Nobel laureate William Nordhaus. Even then they, specially the ones living in Delhi who are exposed to inhaling toxic air, should be well aware that the millions of end of life vehicles (ELVs) are the principal culprits for fouling the city environment.

As early as 2000, New Delhi drawing lessons from the standards in the US where the focus is on emission of nitrogen oxides (NOx) and particulate matter (PM) and the European Union where the concern is more about carbon dioxide (CO2) and carbon monoxide (CO) formulated Bharat Stage Emission Standards (BSES). In phases, the norms were made more stringent and once a new stage is set, all new vehicles will have to compulsorily conform to it.

Now the government in an attempt to ensure that all new vehicles still do less harm to air quality is leapfrogging Bharat Stage V to BS-VI to be effective from April 1, 2020. This definitely is an environment positive move, though introduction of improved technology will mean higher prices for vehicles. Definitely a small price to pay for air quality improvement. The automobile industry’s concern is that this is to happen when it is facing the worst demand slump in two decades.

Sales of cars and SUVs fell for ten months in a row till August 2019. Every manufacturer, except for new entrants like South Korean Kia and Morris Garages (popularly known as MG) owned by Chinese state enterprise SAIC, has been forced by sharp demand collapse to cut production and shut factories and showrooms. But in the process countless number of workers had to be laid off. Unfortunately our finance minister Nirmala Sitharaman instead of acknowledging what is happening in the automobile industry is one manifestation of the economy being gripped in a deep economic crisis wanted us to believe that shared mobility and young people using Ola and Uber services are the cause.

No doubt lowering of Goods & Services Tax (GST) from the peak slab 28 per cent to 18 per cent could prove to be an effective stimulus for demand revival. Many states with their finances in a bad shape are expectedly demurring. But as the situation is, the GST Council should be able to reach a consensus that cars up to a value of say Rs10 lakh will attract 18 per cent GST to encourage middle class to own vehicles. The empirical evidence through all economic crises here and elsewhere is that buying by the rich and the very rich are immune to market swings. Therefore, let the exchequer continue to get the maximum from sales of the likes of BMW, Benz, Aston Martin, Porsche and Bugatti, all recession proof.

To return to ELVs from the current automobile crisis. We have on the registers of regional transport authorities, a disturbingly large number of 28 million ELVs, predating introduction of BSES seriously compromising air quality, particularly in our principal cities. Ideally, 15 year old vehicles should be sent to scrap yard. This is based on global experience that emission level of old cars is ten times more than the ones in ideal condition. In the case of ageing trucks, their emissions are at least eight times higher than the new ones. The question is why ELVs in such numbers are still running in already highly polluted cities like Delhi, Mumbai and Kolkata without the authorities taking action against the owners? Obviously, the authorities don’t want to offend the urban middle class and transport companies in which many politicians have a stake.

Even while a vehicle scrappage policy is under consideration for quite some time, the lawmakers are not able to decide whether the owners will be forced to surrender more than 15 year old vehicles for dismantling or the scheme will be principally voluntary but with such built-in incentives that will motivate people to surrender ELVs. Back in 2016, the government was toying with a voluntary vehicle fleet modernisation programme. But nothing came out of that. In recent weeks minister for highways and transport Nitin Gadkari and Sitharaman have spoken of the need for a well considered scrappage policy.

They will do well to heed the advice of industry veteran Pawan Kr. Goenka, managing director of Mahindra & Mahindra. He says in our kind of situation the scrappage policy cannot be mandatory but has to be motivational for ELVs surrender. “People who are doing with old vehicles belong to the lowest economic bracket among vehicle owners. You should not force them to give up their vehicles. That will not be right. It has to be voluntary and incentivised. It’s also important to offer a considerable incentive to motivate people to send ELVs for scrapping,” Goenka says.

Environment and replacement of scrapped vehicles by new ones using the vehicle surrender linked incentive money are not the only issues involved in the scrappage programme. Apply the circular economy concept, you will find in ELVs sent for ‘depollution. dismantling, baling and shredding’ have a lot of wealth in the form recovered metals, specially steel, which is an important feedstock for steelmakers using electric arc furnaces (EAFs) and induction furnaces (IFs).

The thriving unorganised vehicle recycling units through their highly unscientific and environment compromising process are annually generating around 28m tonnes of steel scrap against requirements of 35m tonnes by the steel industry. Therefore the deficit of 7m tonnes are imported from the European Union, UAE, the US, Japan, etcetera, at considerable outgo of foreign exchange. The steel ministry has estimated that EAFs and IFs here will need 55m tonnes of scrap by 2030-31.

Ministry officials say considering the large local ELV population, India is well placed to generate enough scrap to meet the steel industry’s future demand for this raw material and imports could be eliminated. But for this to happen, the country must build a chain of authorised recycling units in different parts of the country equipped with automated plant and machinery. Why only self-reliance, there is potential to create modern recycling units close to ports which will facilitate import of ELVs from south and south-east Asia and the Far East and then export steel scrap. Unlike India, many countries in this part of the world do not have blast furnaces (where iron ore is used) and make all their steel through EAFs and IFs. They will be ready buyers of any surplus steel scrap that this country may generate in future.

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Can India Implement Ban On Single-Use Plastic?

Plastics manufacturers are trying to find fixes of popular concerns but the petrochemical industry has a strong lobby and this is why violations of environmental norms happen with impunity

It is not a day too soon there is promise of India coming down with some force on the single use plastic, which the quintessential bottle holding still water principally represents. In the available order in the country, hardly anything of importance will move till the prime minister himself will herald a campaign. For example, the Swachh Bharat Abhiyan, a five-year mission launched with great fanfare in 2014 coinciding with the 150th birth anniversary of Mahatma Gandhi took wing nationally because Narendra Modi made it his signature policy. Even then, we will be far from a ‘clean India’ by this yearend because of citizenry apathy. Hopefully, he will do better with putting a stop to the use-once-and-discard plastic items.

On the Independence Day speaking from the ramparts of Red Fort, Modi said: “Can we free India from single use plastic? The time for implementing such an idea has come. May teams be motivated to work in this direction.” Earlier on the World Environment Day in 2018, the then minister for environment, forest and climate change Harsh Vardan said attempts would be made to phase out use of single use plastic by 2022. Not unexpectedly, nothing worth telling has happened since the minister spoke. Except for a good number of states notifying full or partial ban on single use plastic.

But as is not uncommon in India, the state level fiat is respected more in violation than in observance. What is to be remembered is that the petrochemical industry has a strong lobby and this is the reason why violations happen with impunity. Is it any surprise then that the country’s leading retailers such as Big Bazaar, Reliance Retail and V Mart are far from being environment friendly as they continue to give buyers the bought items in plastic bags? An example of the triumph of convenience and consumer preference over keeping the environment clean.

Plastics, the emblem of postwar consumerism are described as the workhorse of modern economy. They are finding a wide range of applications because of their light weight, robustness, easy formability and price advantage over competition. Riding on these strengths, global annual production of plastics advanced from 15m tonnes in 1964 to over 350m tonnes presently. Consulting firm McKinsey says in case the present rate of demand growth is sustained, albeit defying the spasm of popular disgust against the harmful effect on environment and health, then plastics output will take a leap to 600m tonnes by 2034. Confidence about demand growth is high among producers, particularly in the US. The North American market is seeing record amounts of capacity in the pipeline.

Not surprisingly green activists and others are alarmed by the development. The concern is because not only are there emissions of enormous quantities of greenhouse gases in the course of production of plastics, the environment suffers further damage as overwhelmingly large portions of used plastics go into landfills, or are burnt or are left to litter everywhere from city streets to seashores to foothills of mountains. We do this without realising that plastics escaping the established waste collection system will be floating on the earth for centuries, all the time causing harm to the environment. The intended life of single use plastic products is not even a year but for the laxity on the part of administration in India and elsewhere they virtually get an infinite life.

A report co-authored by McKinsey, Ellen MacArthur Foundation and the World Economic Forum estimates the negative externalities of plastics at $40bn, including pollution impact and that is more than the industry’s annual profits. The report gives the warning that if the future demand growth for plastic products remains at the current rate then the global plastic-waste volume will climb to 460m tonnes a year by 2030 from 260m tonnes in 2016. The present waste volume is already a major environmental concern. But the waste size forecast for the future will take the problem to “a whole new level,” says the report. A chart prepared by culling information from multiple sources shows the recycle rate of plastics at lower than 40 per cent compares poorly with steel at 80 per cent, aluminium cans and glass at 78 per cent and beverage carton at 43 per cent. What particularly raises despair is the rate of recycling rate at a pathetically low of 10 per cent for polyethylene, which is the most commonly produced plastic.

As against the growing public discontent over the poor rate of plastic recycling, the World Steel Association and International Aluminium Association are upholding the virtues of circular economy under which not only the end of life metal products are collected and shredded for recycling but facilities have been built in production systems for optimum reuse of water and energy. Public anger besides that is forcing more and more governments to take action against single use plastics – as many as 127 countries have either banned or levied taxes on disposable plastic bags – the industry will have to contend with competition emerging from alternative biodegradable products such as wood fibre bottle, recently unveiled by brewer Carlsberg. Is it not time for jute goods makers to put their house in order to regain the market lost to plastic bags used in packing foodgrains and sugar? Unfortunately, ownership of jute mills, except for a few, has moved from respectable corporate houses to traders who lack foresight.

Modi hasn’t spelt it out in any detail, but his angst must be occasioned by almost a third of all plastic packaging leaks amounting to more than 8m tonnes a year finding its way into the oceans polluting waters. No wonder we read frequently reports of marine species such as whales, turtles and fishes perishing due to their unwittingly ingesting plastics thinking these to be food and choking themselves to death. To everyone’s horror, microplastics have been found in the remote reaches of the Arctic. Not only in tap water, but plastic fibres are found in more than 90 per cent of bottled water.

No wonder then plastics manufacturers are finally trying to find fixes of popular concerns. Some independent companies are working on breaking down plastics into their components for conversion into new materials. Scientists say waste polyethylene is a potential carbon source that could be made into value added polymers. Noticeable progress has been made in laboratories to turn waste plastics into a pliable wax like substance to which then is added other elements resulting into bioplastics. We don’t have at this point any estimate of how much of waste plastics in India could be recycled. But developed countries are targeting 70 per cent recycling by 2030. McKinsey has recommended decoupling of plastics from fossil feedstocks by way of exploring and establishing renewably sourced feedstocks. But this will be a journey which will meet with serious opposition from the powerful oil industry.

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India Facing a Severe Water Crisis

Water – India Has A Hole In The Bucket!

Indiscriminate extraction of precious groundwater and recurring monsoon deficits are leading the country to a severe water crisis in the near future

Decades of neglect in rightly managing our fresh water resources, which in any case are quite tight considering its multipurpose uses, including supporting agricultural operation and quenching the thirst of over 1.3 billion, is now spelling untold miseries to millions across the country as it poses a threat to India’s ambitious growth targets.

Drought having gripped 43 per cent of the country and the monsoon deficit still at 17 per cent, thanks to some strong rains in the north but masking the persistent rains shortfall in the south, a large percentage of population is having a nightmarish existence. The government machinery as usual is found wanting in providing relief to people living in parched parts of our earth.

The principal culprit for the current state of affairs is unarguably the indiscriminate way we have been extracting groundwater and in the process earning the dubious distinction of being the world’s most aggressive miner of the precious resource. To put it in perspective, India’s groundwater extraction exceeds the combined tally of the world’s second and third largest users, namely, China and the US.

India is home to 17 per cent of the world population but has to make do with 4 per cent of the earth’s fresh water. China, which houses more than a fifth of the world population, has only 7 per cent of its fresh water. It, however, faces the perennial challenge of meeting minimum water requirements of North China plains where close to 42 per cent of the country’s population lives but holds only 8 per cent of its water resource.

Like China, the US owns 7 per cent of the world fresh water. But it has the advantage of being home to 4.3 per cent of world population. No wonder, the US indulges in the luxury of leaving an average water footprint that is double the global average. No matter that the country owns the world’s largest fresh water lake system in the world in its Great Lakes and the mighty Mississippi river, the importance of conservation and efficiency in use for future security in water supply is not lost on the US Administration. Incidentally, water is one of the seven science missions of the US Geological Survey.

We in India are sourcing over 70 per cent of our water requirements from below the surface drilling aquifers at progressively greater depths without leaving adequate time for natural replenishment. Mihir Shah, a former member of the defunct Planning Commission says: “Over the last four decades, around 84 per cent addition to the irrigated area came from groundwater. Most of this was from deep drilling of tubewells or borewells, which are the single largest source of irrigation as also drinking water, in both rural and urban India.”

Going deeper and deeper the aquifers for water extraction has meant our mining the resource in a growing number of places where the water comes with unacceptable levels of fluoride, arsenic and iron. Use of such water leaves people with serious bone deformities and lung and bladder cancer. Extraction of groundwater at levels where the resource found is polluted and its use results in the government spending millions for treatment of the diseased.

A major failing of our hydrological planning is not conserving enough water for offseason that is beyond the monsoon months. Even after we have built a few thousand large and small dams in different parts of the country, our per capita storage of 215 cubic metre (CM) compares unfavourably with 1,111 CM in China and 1,964 CM in the US. In water conservation, Russia’s per capita tally at 6,103 is way ahead of other countries.

Prime Minister Narendra Modi in his first monthly radio broadcast programme ‘Mann ki Bat’ after winning the elections reminded the water hungry listeners that “only 8 per cent of all rain water in India is conserved… It’s now time to solve the problem” by giving a push to greater grassroots water conservation efforts. What the PM has proposed now should have actually been implemented in past years with great force. Maybe the administration is awakened to the situation now because of the spectre of millions of people in drought affected parts of the country are driven to the edge and food production is to take a hammering. The latter is because more than half of the country’s arable land is rain-fed. India receives around 70 per cent of rains during the southwest monsoon beginning in June and petering out in mid-September.

What India must be geared to is the weakening monsoon in South Asia caused by climate change. Rains in the region were below average for five years in a row, with 2015 being the worst at 86 per cent. Think tank Niti Aayog says in a report that the country faces the harrowing prospect of 40 per cent of its people not having access to drinking water by 2030.

Furthermore, at least 21 cities, including the national capital will run out of groundwater in 2020.  Hospitals in southern Indian states finding piped water supply gone dry are getting it for the time being from local politicians owned fleets of water tankers at usurious rates. But this source of water may also run dry and too soon.

In Delhi, less than one fifth of homes have the luxury of piped water supply. In a growing number of places, whatever groundwater is extracted comes with chemicals and other contaminants. It is in the context of tightening water supply is to be seen Modi’s promise of delivering piped water to every home by 2024. As things are now, there is every chance of this post election victory promise remaining unfulfilled as his earlier commitment to create 10 million jobs every year.

Veena Srinivasan of Ashoka Trust for Research in Ecology and Environment will attribute the deteriorating water scene in the country to “multiple causes, both climate and anthropogenic… Of course, the drought itself is caused by a deficit in precipitation and climate change certainly has something to do with the changing precipitation patterns. But… we can’t absolve ourselves from the crisis that we ourselves have precipitated with mismanagement, and specifically by over-extracting groundwater.” She thinks Green Revolution gave licence to millions of farmers to use groundwater without limits to “rise out of poverty.”

The fact is when in the beginning of the sixties India was plunged in a major food crisis, Norman Borlaug and his prescription for breakthrough in rice and wheat productivity not only made the country self-reliant in food but also generated surplus for exports. Remember when Green Revolution was launched, the awareness of water conservation was hardly there in India or for that matter anywhere else. In subsequent times, however, the administration in Punjab and Haryana should have discouraged water guzzling rice cultivation in favour of less water using crops. In any case, the present crisis could have been avoided by the local government disallowing indiscriminate exploitation of underground water.

Farm and allied sector’s contribution to gross domestic product (GDP) has come down over the years to less than 15 per cent while it accounts for over 90 per cent of total water use. Again nearly 90 per cent of extracted groundwater is used in irrigation. But as Niti Aayog CEO Amitabh Kant says water use efficiency in our farm sector is among the lowest in the world. He says: “Our farmers use three to five times more water than Chinese, Israeli and American farmers for producing the same crop.” The remedy prescribes by Kant is to motivate farmers to “adopt cropping patterns based on agro-climatic zoning” to economise on water use. At the same time, radical modification of “subsidies and minimum support price” is needed to “disincentivise farmers from growing water intensive crops.”

Om Prakash Dhanuka, a former president of Indian Sugar Mills Association and a Bihar based producer of sugar, sees no justification of growing highly water-intensive sugarcane in parts of the country, which are highly drought prone and perennially short of water. Because of our surplus sugar production, we are desperate to export large quantities to wriggle out of price falls in the domestic market. But we must remember that when we are exporting sugar or rice, we are also exporting water.

Dhanuka, however, says: “It’s not all despair. For example, at Hiware Bazar village in Maharashtra, the community of farmers is opting out of sugarcane and cotton growing for less water-intensive crops. Farmers are not allowing any more digging of borewells and they are practising water management on scientific lines. We are also seeing similar farmer initiative in Andhra Pradesh and Telengana. Water management will have to be a nationwide movement in which the government, scientists and farmer community must participate wholeheartedly.”

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Glaring Chinks In Iron Ore Mining Policy

All stakeholders in the mineral mining sectors are living in uncertain times, thanks to flawed lease policies by Union and state governments

Mineral resources in India from iron ore to bauxite to coal are majorly found in remote centres of Orissa, Jharkhand and Chhattisgarh where people, who hardly figure on the radar of the powers that be in Delhi, eke out a difficult existence unless they are employed by mining groups for ore extraction and allied works. No wonder then, when resources remain hidden under the earth and in the absence of their raisings, the places become fertile ground for spread of extremist movement or what is popularly known as Naxalism in India. The country’s mineral belts are generally rains deficient and the hard stony soil there does not support worthwhile crop cultivation.

The fragile peace that exists in the country’s sensitive mineral-bearing regions will be put to test as the leases of merchant miners of iron ore and manganese ore will expire on March 31, 2020 under a directive of the January 2015 amendment of the 1957 Mines and Minerals (Development and Regulation) Act.

In a questionable wisdom, the authors of the amended Act had for the first time made a distinction between merchant, captive and government groups owned mines. In what appears to be palpable discrimination, the 2015 version of the Act prescribes that while the existing leases of non-captive merchant miners are valid till March 2020 that of captive mines will remain in force till March 2030. What is more captive mine owners alone are given the right of first refusal when their mines are put up for auction.

As for Union and state government owned companies such as Steel Authority of India, National Mineral Development Corporation and Orissa Mining Corporation, they are allowed extension of existing leases for a period of 20 years at a time beyond the stipulated period of 50 years. Remember, ahead of 2015, there was no distinction between captive, non-captive and government ownership of mines. In every respect, including lease tenure, all three groups got identical treatment under the law.  No longer so.

Discrimination part may or may not get set right by way of amendment of the 2015 MMDR Act. But what is of immediate concern is the large number of iron ore and some manganese ore mines owned by merchant groups that will stop operation on lease expiry in March 2020 making in the process thousands of workers unemployed. The same fate is awaiting many more thousands who are engaged in the long chain of logistics between mines and use of iron ore by steel mills domestically and in foreign destinations. This is to happen when the country’s unemployment rate is worryingly high and few new jobs are created with deceleration in economic growth.

Speak to minerals industry experts and they will tell you in one voice that there is no way the concerned state governments will be able to complete auction of the merchant mines whose tenure of leases will run out in nine months. Even assuming that auctions are held and successful bidders chosen, it will take them a long time, going by established patterns to secure all the sanctions, including environment and forest clearances (ECs and FCs) before they could start ore extraction.  Yes, the Supreme Court has given a ruling that for auctioned mines that were operational earlier, the new lessees would automatically get ECs and FCs transferred to them from earlier lessees. But we are seeing new lessees’ frustrating wait for transfer of ECs and FCs for mines in Karnataka.

This correspondent on his recent visits to some Orissa and Jharkhand mines whose leases are to expire next March found workers and managers rattled by an unsettled future awaiting them. They have no clue as to whether the central government in view of the inevitability of anarchy setting in mining centres will do the sensible thing of extending leases of merchant miners to 2030 in line with captive mines or it will let mayhem happen.

The ground reality is this. It emerged at a recent mines ministry coordination cum empowered committee (CCECC) meeting that New Delhi has advised the concerned states to start auctioning mines expeditiously “so that the incoming miners have time to take preparatory steps to make the mines functional.” If any proof is needed, this alone is enough to confirm that the administration has no appreciation of the consequences of such a move. In fact, a recommendation of this kind could open a Pandora’s Box and the evils that will come out will be difficult, if not impossible to contain.

The law says: “On the expiry of lease period, the lease shall be put up for auction.” This means the concerned state governments can start the process of auctioning the iron ore and manganese ore mines only after their current leases expire in March 2020. There are other constraints too. According to rule 12 (gg) of the Minerals (other than atomic and hydrocarbon energy) concession rules, 2016 “a lessee is entitled to remove within six months after the expiry of lease period all or any one mineral excavated during the currency of lease, engines, machinery, plant …. and other works.”

Furthermore if a lessee is not able to remove all that is his, he will under the law get an extra one month to do so. The lessee, therefore, has a total of seven months after lease expiry to remove all his stuff, including mineral stocks.

In spite of the protection that current leaseholders enjoy under the law, the prospective bidders, emboldened by state governments, may seek to do due diligence of mines whose leases still have months to expire. An Orissa based mine owner says: “In that event, we most likely will go for legal recourse as due diligence by outsiders will interfere with our day to day operation. All mines stakeholders are living in uncertain times.”

An agitating issue for iron ore mines in Orissa and Jharkhand is the unsold pithead stocks of 127 million tonnes – 85 million tonnes in Orissa and 42 million tonnes in Jharkhand. The stocks are mostly fines of grades with iron (fe) content of up to 62 per cent for which there are no domestic buyers. Yes we can find buyers for the low grade ore abroad, particularly in China provided New Delhi will dispense with 30 per cent export duty on grades of up to 62 per cent fe content. The ill-advised export tax has robbed Indian ore of global competitiveness.

Some miners have made the suggestion that in the unlikely event of auctions going through, the successful bidders (lessees) should be “mandated” to pay to the existing lessees for pithead stocks “on the basis of last ex-mine grade-wise prices published by Indian Bureau of Mines.”  But why should new lessees carry the cross of massive unsold stocks of departing mine owners, specially when demand for fines and low grade iron ore remain low. Will the government then remove the 30 per cent export tax on iron ore with up to 62 per cent fe content to facilitate pithead stock disposal in foreign markets? Export duty removal remains the budget expectation of the Federation of Indian Mineral Industries.

However covetous steel mills here unlike their counterparts in China, Japan and South Korea may be of captive mines, steel producers in eastern India without mines ownership are dreadful of the impending prospect of chaos engulfing the iron ore sector. Remember, working mines in Orissa and Jharkhand meet as much as 45 per cent of iron and manganese ore requirements of the steel industry in eastern India. According to rating agency India Ratings, iron ore production disruption following lease expiry will be around 60 million tonnes a year.

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Make In India Logo

Economy Could Be Worse Than What Statistics Show

The biggest challenge for NDA-II will be to fix the faltering economy

The opposition though could never unite against the incumbent Narendra Modi government had a fairly good chance to put up a decent fight in the general elections had it been able to pin down the Hindu nationalist Bharatiya Janata Party-led National Democratic Alliance into debating the sputtering economy and never-ending rural distress during the long campaign.

But the Modi-Amit Shah duo was smart enough to steer clear of all that and focussed on the government’s success in fighting local terrorism and that originating from across the border. The damage that Pulwama terrorist attack could have done to the electoral prospects of BJP was more than compensated by way of a daring airstrike at a Pakistani terrorist base at Balakot.

Proving all psephologists wrong as the NDA was inching towards a decisive victory with BJP alone winning 303 seats in the 542-member Lok Sabha, some opposition leaders didn’t give up their claim to the prime minister’s office till counting of votes began. Congress president Rahul Gandhi’s not unjustified tirade that cronyism as evidenced in an Anil Ambani company securing a meaty contract in New Delhi’s Rafale jet deal with Dassault of France remained in practice during NDA I regime and his slogan relating to chowkidar (watchman) was turned on its head by Modi himself.

Naveen Patnaik, leader of Biju Janata Dal who has now won a fifth term as chief minister of Orissa, was an exception who could see what was awaiting an ambitious opposition but without any bearing. A gentleman politician that Patnaik is, he kept his distance from the “non-cohesive opposition” not necessarily because his “interaction with the PM has always been cordial and he proved to be helpful.”  

If the economy does not function well, then the worst affected is the common man. The ones in the job market will be angry if employment opportunities are not there. That the opposition was not able to convert the disillusionment with the NDA’s indifferent economic performance into votes shows how cleverly Modi-Shah turned the discourse to the emotive national security issue and the Prime Minister’s success in raising the country’s profile abroad resulting in many leading companies from the US, the European Union and China making significant investments here.

But first, in what shape the economy was found when the electoral battle was fought. India’s gross domestic product growth at 6.6 per cent in the 2018-19 third quarter ended December was the slowest in five quarters. If anything, things had worsened since. There are reasons to believe that GDP growth in the year’s final quarter could be down to 6.4 per cent. The Central Statistics Office has recently further lowered GDP growth forecast for 2018-19 to 7 per cent from 7.2 per cent in January. NDA will in any case be boastful that India still remains the fastest growing economy among major nations.

For a nation with ambition of urbanisation and modernisation, it is important that industrial production should be recording significant rates of growth. But in the case of India with a population of 1.3 billion, industrial production fell steadily in the three months since December to finally contract by 0.1 per cent in March. What is particularly worrying is that manufacturing sector with a weight of 77.63 per cent in the index of industrial production shrank by 0.4 per cent in the final month of 2018-19 on top of a 0.3 per cent fall the month before.

India hardly had any export growth in the last five years. Economist Kaushik Basu, a former government of India chief economic adviser and now professor at Cornell University believes: “For a low wage economy like India, a little policy professionalism – a combination of monetary policy and micro incentives is all that is needed to grow this sector.” Unfortunately, all the government rhetoric of manufactured products, commodities and services should find their way into the world market in growing quantities has not been backed up by policy design. Economist Rathin Roy, member of the prime minister’s economic advisory council, is worried that the Indian consumption story is trailing off. He argues that India’s consumption is driven by its “top 100 million citizens” who could afford things like cars and air-conditioners. 

But the NDA II will have to contend with the challenge of providing “nutritious food, affordable clothing and housing, health and education – the leading indicators of economic growth – for the whole population,” says Roy. But it is beyond the capacity of the government to arrange subsidies and income support to ensure consumption on this massive scale. Roy says: “At least half the country’s population should earn incomes enabling them to buy things at affordable prices so that a maximum of 500 million people can be subsidised for their welfare.” Roy gives the warning that unless India is able to achieve this in the next decade, it will be headed for a “middle income trap” when it will be face to face with the reality of not being able to achieve rapid growth easily and compete with developed economies.

The country’s economic situation may be worse than the information available from government agencies. This is because official data about growth and job situation are under cloud. The institutions associated with collection, analysis and dissemination of data have been for sometime subject to political interferences. Indian data like the Chinese are now seen with suspicion by institutions and economists here and abroad. The question is asked if the official GDP data faithfully reflect the multi-year lows in growth in power generation, air traffic and passenger vehicle sales.

Moreover, according to the Centre for Monitoring Indian Economy, the unemployment rate at 8.1 per cent in April 2019 was the highest in the last two and a half years. This is in spite of Modi, an autodidact, making the promise in 2014 that his government would create 10 million jobs a year. Notwithstanding Modi’s promise to double the income of farmers by 2022, rural distress, going by their indebtedness and inability to secure officially announced minimum prices for crops, except for wheat and rice, is on the rise.

The biggest challenge for NDA II will be to fix the faltering economy. As has been seen earlier in Gujarat when Modi was chief minister (2001-14) and thereafter in NDA I rule, he is inclined to be the final arbiter in economic decision making. But a problem is there as has been pointed out by Financial Times editor Lionel Barber and Morgan Stanley head of emerging markets Ruchir Sharma. Barber writes in FT: “But it is uncertain whether he (Modi) grasps the economy’s complex challenges, or the financial system’s woes. Nor is it clear that his few advisers have the technical expertise – or courage – to explain it, to help him calibrate his kinetic policymaking.” Sharma is equally emphatic that the prime minister needs “new voices in his brain trust… more expertise in his inner circle might have helped prevent an experiment like demonetisation.” Sharma has warned that the voters will not be found forgiving if Modi makes another big mistake like demonetisation.

When private sector investment is disappointingly low, a redeeming feature is the sustained interest of multinationals, which are already here to do more. The others are arriving in India at regular intervals.  All emerging markets, including India want FDI as besides capital, it brings technology and create jobs. The Indian automobile industry is the best example of none of the major global brands wants to miss out on the promise that this market holds. Demand fall for vehicles is seen as a phenomenon that will go away in a few quarters. The latest to get into the Indian auto band wagon is Morris Garages owned by China’s largest automaker SAIC. At its Halol plant in Gujarat, MG will be making cars with 75 per cent localisation. That creates a lot of jobs. Similarly, Scandinavian furniture maker Ikea which made its debut in India in August 2018 is committed to procure at least 35 per cent of what is kept in its stores. Wal-Mart of the US completed a $16bn acquisition of India’s largest e-commerce firm Flipkart in August in the hope that the two would achieve a lot more together than each could separately.

Unfortunately FDI is still not significant in metals and mining in spite of the sector’s pressing need for foreign capital and technology. This is because at every stage leading to mining from exploration to prospecting to finally getting mining leases, investors will encounter frustratingly long bureaucratic delays. India will be a major gainer if the world’s largest producer of steel ArcelorMittal is not made to wait any longer to acquire the insolvent Essar Steel for which it has trumped all the other bidders. Insolvency & Bankruptcy Code says all resolutions must happen in nine months. But even after more than two years, ArcelorMittal has not got the ownership of the insolvent Essar Steel. Simpler rules and absence of red tape will make India an even more compelling destination for FDI.

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Rural Distress In India

Lessons From China In Tackling Farm Distress

State governments must adopt a rental model for farm machinery and encourage crop diversification for improvement in soil health, productivity and profitability of farming

As is generally the case with articles published in National Geographic, Tracie Mcmillan’s piece on ‘How China Plans to Feed 1.4 Billion Growing Appetites’ based on extensive travel throws light on how the country is managing to overcome the shortcomings of restricted availability of land and a good portion of that not particularly fertile for farming, tiny holdings throwing a major challenge to mechanisation and restricted availability of water to lift crop productivity.

As China continues to become more prosperous with its growing ranks of urban population seeking Western-style diets, the demand on Beijing goes well beyond ensuring food security to industrialise the agricultural economy at rapid rates. The country figured most prominently in the recent shift of largest metro areas from Western Europe and North America to China. According to Global Metro Monitor 2018, China’s share of the 300 largest metropolitan economies of the world rose from 48 in 2012 to 103 in 2016. During this period, North America’s share is down from 88 to 57 and Western Europe’s from 68 to 43.

ALSO READ: No Quick Fixes To Agrarian Crisis

Shanghai, Beijing and Hong Kong are home to people whose per capita income is much higher than their counterparts engaged in farming and allied activities in rural China. India’s northern neighbour is already close to 60 per cent urban and that has been a long march from 19.8 per cent of the Chinese population living in cities in 1980. According to the World Bank, by 2030, up to 70 per cent of the Chinese population or around 1 billion people will be living in cities. Urbanisation in India has started speeding up more recently and the Bank says that half the country’s population will be living in urban centres. Growing urbanisation as it requires reorganisation of agriculture giving greater weight to livestock and milk and dairy products in gross value added in the sector creates many new economic opportunities.

Farmers getting better value for fruits and vegetables, livestock and milk when the agricultural economy goes through the process of industrialisation has been seen in China for over two decades. The immediate fallout of that will be significant reduction in crop wastage, which in the case of India ranges from 30 to 40 per cent. The average farm size in China is smaller than in India. In fact the two countries, which between them have a population of 2.75 billion have farms whose average size is among the smallest in the world. But as the prospects of getting jobs giving incomes higher than tilling land in tiny plots will ever offer and the charm of city lights are underpinning steady migration to urban centres, the broader agricultural landscape contours will undergo great changes.

This has already happened in a much bigger way in China than in India. The National Geographic article says: “Every kind of agriculture is now happening all at once: tiny family farms, gleaming industrial meat factories and dairies, sustainably minded high-tech farms, even organic urban ones.” Urban Chinese with high disposable income are not only eating meat three times as much as in 1990, they have become big buyers of all kinds of processed food. Their health concerns heightened by recent scandals concerning selling of sub-standard domestically produced food products have reinforced their preferences for foreign branded stuff.

No wonder then, foreign food companies as they are making enormous exports to China are braving the country’s complex regulatory regime to build plants there. Their efforts are bringing relief to local consumers who remain suspicious of the quality of local processed food products. But doesn’t this development go against what President Xi Jinping said some years ago that “our rice bowl should be mainly loaded with Chinese food?”

Whatever XI might have said, China still swears by Deng Xiaoping’s famous ‘cat theory,’ which says: “It doesn’t matter if a cat is black or white; as long as it catches mice, it’s a good cat.” Deng who was the de facto leader of the country between 1978 and the early 1990s wanted the job (rapid economic development) done, without making distinction between planned and market economy.

India’s tryst with foreign food companies goes back to many decades. From Levers to GSK Consumer and from Heinz to Danone are finding growing ranks of loyal consumers here of the items they are making at local plants. At the same time, however, some local groups such as Gujarat Cooperative Milk Marketing Federation, the owners of Amul brand, Mother Dairy and Godrej Agrovet have fortified their position in the market based on product quality and brand promotion.

More and more local and foreign companies are making investment in the dairy sector, India being the world’s largest producer of milk at 155.5m tonnes. ITC, which is steadily building new businesses to reduce its dependence on tobacco and cigarettes has ambitious dairying plans.

Agriculture is going through gradual structural changes in India and China. While figures for China are not available, India’s Economic Survey 2017-18 says the share of crops in the farm sector gross value added (GVA) was down from 65 per cent in 2011-12 to 60 per cent in 2015-16. In the corresponding period, the share of livestock in agriculture GVA was on ascendency.

ALSO READ: Cane Farmers Stressed, Sugar Mills Helpless

India’s progress in realising values from crop diversification leaves much to be desired. The government at the federal level and in states must encourage farmers to assiduously pursue crop diversification that is to result in improvement in soil health, land productivity and profitability of farming. Water being in short supply in Punjab, Haryana and western Uttar Pradesh, it is desirable to use land now under paddy to grow crops like oilseeds, pulses and coarse cereals. Scope remains for shifting of land now under tobacco to growing other crops.

ALSO READ: Crop Diversification Can Fight Rural Distress

What are the common shortcomings of farm economy of China and India? The 10th agriculture census says not only did the average Indian farmland size shrink more than 6 per cent to 1.08 hectares from 1.15 hectares between 2010-11 and 2015-16, but the share of small and marginal holdings ranging up to 2 hectares rise to 86.2 per cent from 84.97 per cent of total holdings. In China, factors such as continuous diversion of land to construction, natural disasters and damage to environment led to a fall in total arable land for a fourth year in a row in 2017 to 134.86 million hectares, down by 60,900 hectares from the year before. As if there is a competition between the two countries, well over 90 per cent of over 200m farms in China are less than 1 hectare in size.

Mechanisation, which is essential to cope with growing shortages of farm labourers and boost productivity, becomes a challenge when the holdings are so small. Consolidation of land holdings is easily said than achieved. Small farmers are not able to raise funds to buy all the machinery and implements needed for tiling of land to harvesting of crops. China has found a solution to the problem by opening centres wherefrom farmers can take all kinds of machines on hire. The last Economic Survey here speaks of innovating “custom service or a rental model by way of institutionalisation of high cost farm machinery.”

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Punjab Farmer With Wheat Crop

Crop Diversification May End Farm Distress

A diversified cropping pattern will help in mitigating the risks faced by farmers in terms of price shocks and production/harvest losses

If a country’s chief executive does not have an economics background and is not counselled by academically sound economists then he will be prone to making ambitious announcements which are more likely than not to run aground. More in an attempt to diffuse the growing unrest among farmers resulting from their not receiving right prices for their crop almost every planting season condemning them in growing indebtedness, Prime Minister Narendra Modi made a promise in February 2016 that the government would ensure doubling of income from cultivation by 2022.

This is more easily promised than likely to be redeemed. Ahead of the start of the two sowing seasons, the government will announce minimum support prices (MSP) for 14 kharif (summer cum monsoon) crops and 8 rabi (winter) crops. All this besides, New Delhi will require of sugar factories to pay ‘fair and remunerative price’ (FRP) for sugarcane, revised every season (October to September) on recommendations of the Commission for Agricultural Costs and Prices (CACP). The government has asked CACP to fix MSPs in a way as to ensure that farmers get at least 50 per cent higher than cost of inputs such as seeds, fertilisers and irrigation water and also unpaid value of family labour.

Whether the growers are getting MSP or are forced by circumstances to sell their crops below minimum prices, the government helped by largely an unquestioning media along with a huge publicity campaign could create a myth that finally deliverance had come for Indian farming community. In an ideal situation, farmers should see MSP as sovereign guarantee. In case they fail to realise MSP in the open market, they should be able to turn to official agencies to dispose of their crops at government guaranteed prices.

An on the spot survey carried out by Jai Kisan Andolan (JKA) a few months ago coinciding with kharif output arrivals in the market shows that on average the farmers were selling for anywhere between ₹500 (for cereals) and ₹2,000 (for dals) per quintal below the MSP. Yogendra Jadav of JKA says: “Farmers had lost around ₹1,150 crore in the first three weeks of the marketing season as they were forced to sell below the MSP.” No wonder then, the country saw protesting farmers arriving in thousands in Delhi and Mumbai to draw national attention to their privation.

The official procurement being over the years mainly focussed on rice and wheat, it has become a given that the weighted average of mandi prices of other crops such as a number of oilseeds, maize, tur and urad would trend below MSP. A spokesperson for Crisil Research says: “Our assessment indicates that crop profitability (in the past few years) has dropped across nine of the 15 states when assessment is made of 14 key MSP crops covering over 50 per cent of the sown area. We believe the challenge for the government goes beyond fixing MSP to ensuring farmers get it by strengthening the procurement machinery.” 

Close to 50 per cent of the net cropland area of 180m hectares (9.6 per cent of global coverage) being rainfall dependent, land productivity and crop size are influenced by monsoon behaviour. No wonder then, agriculture and allied sectors growth rate fluctuated between minus 0.2 per cent in 2014-15 and 4.9 per cent in 2016-17. While there are assurances from India Meteorological Department that the country will be spared El Nino, private weather forecasting agency Skymet says the southwest monsoon has a 50 per cent chance of being normal this year. So India is likely to have a good monsoon three years in a row creating condition for a good harvest.

But celebrations of the likelihood of good rains by farmers must await the prices they would be able to realise once their next crop is in the market. A structural weakness of the farm sector is that there is an inverse relationship between farm incomes and production. Prices of farm produce and incomes of growers tend to fall in times of bumper harvest. In this context is to be remembered that despite all the extension programmes the country is having over the decades, farm productivity here for most crops remains well below the world average, not to reckon the best that obtains in places such as Israel with the most efficient use of whatever little water is available, China and the US. To give two examples: First, Indian rice yield of 2,191 kg a hectare falls way short of the global average of 3,026 kg a hectare. Second, our wheat productivity of 2,750 kg a hectare also compares poorly with world average of 3,289 kg a hectare.

India will do well to take a lesson or two from China, which with less land than us under rice and wheat has remained at the top of world chart in terms of productivity and production volume. Thanks largely to the size of our cultivable area and normal monsoon rains in most major crop producing states in the current season (July to June), India is to have food grain production of 281.37m tonnes during 2018-19 compared with 277.49m tonnes in the previous agriculture season. Rice production is to be up 4.59m tonnes to 115.6m tonnes and wheat will be marginally better at 99.12m tonnes.

With this level of production, pressure will be building on the government to procure more rice and wheat than it normally does. Not surprisingly, therefore, the current season has seen the second highest ever wheat procurement of nearly 36m tonnes. Open market wheat prices are up by nearly 10 per cent. But with wheat MSP being pegged at ₹1,860 a quintal plus a bonus available at the state level, farmers would be inclined to give his produce to official agencies. Rice procurement is likely to be a record 45m tonnes. Procurement still falls short of expectations of farmers.

At the current level of procurement, India at the opening of 2019-20 agriculture crop year in July will have stocks of 77.2m tonnes, including 47.6m tonnes of wheat and 29.6m tonnes of rice. This will then be 36.1m tonnes higher than the ideal opening inventory for a season. Even while under the private entrepreneur guarantee scheme 15m tonne of covered space capacity has been created since 2010, safe and scientific food storage still remains a point of major concern. One also has to consider the major economic cost of storing grains well over the buffer norm. Of no less concern is the substantial loss of grains that India and many other countries suffer in the course of storage.

Should not then India be laying greater stress on crop diversification, specially progressively moving land from wheat and paddy, the latter specifically in states such as Punjab, Haryana and western Uttar Pradesh where water is scarce? The 2017-18 Economic Survey says: “A diversified cropping pattern will help in mitigating the risks faced by farmers in terms of price shocks and production/harvest losses.” The Survey acknowledges that because of the enormous volume of land under cultivation, the country has “tremendous potential for crop diversification and to make farming a sustainable and profitable economic activity.” It’s time India had gone in a big way to grow high value crops, including horticulture items for which the demand is strong both within and outside the country.

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