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PPP in Agriculture

PPP in Agriculture

The government's attempt to resuscitate agriculture by pumping in Rs 25,000 crore into the sector is noteworthy.

The government's attempt to resuscitate agriculture by pumping in Rs 25,000 crore into the sector is noteworthy. However, the sector's plight is not that of a company that has landed itself in bankruptcy and is in dire need of funds alone. The malaise is equally that of breakdown of institutions like extension counters of research outfits that delivered reforms a few decades ago and enabled us to become self-sufficient.

Take the case of wheat (see The Great Indian Grain Game, page 90), where we have now begun to undertake significant imports to meet domestic demand. The problem is that incremental production will now have to come from states like Bihar and Uttar Pradesh, where the yields are close to half that in Punjab and Haryana. Moreover, the number of mandis, a measure of ease in marketability of produce, is a fraction of that in the two northern states. The inefficiency of the state is only too well known. Now, to expect it to deliver some fast-paced reforms will be a tall order. Hence, the government must allow for public-private partnerships to deliver results. Companies like ITC and Reliance Industries have already ventured into the grains market in a small way. Perhaps, a way to ensure accelerated private participation would be to offer tax sops of the kind that sugar mills are being accorded in the wake of financial losses being incurred due to oversupply of sugar in the market-excise relief for a limited period.

To go about the reform agenda would mean that the government invests in areas that it is best capable of handling-irrigation (where the central government investments have been a mere Rs 4,000 crore per annum) and development of research institutions that help deliver robust crops as well as reduce the crop cycle time.

It must develop schemes that allocate the responsibility of developing the marketplace in the hands of the private sector; and reduce its role to merely that of regulation. Equally important is the need to ensure that the farmer gets loans at reasonable rates. This will require replacing the informal lending system of artiyas (who offer loans at rates as high as 36 per cent) with a well-networked banking system that offers credit at 9-11 per cent. For this to happen, the government must nudge the banking system to expand in rural India. A mature rural banking system will not only improve the growth in the agriculture sector, it will provide for inclusive growth of the kind that the Prime Minister keeps mentioning in various public meets.

That the package for the revival of the sector reeks of populism is only obvious, for otherwise, the government would have announced it two years ago. Justified populism, nevertheless, it is.

Published on: Sep 03, 2007, 5:18 AM IST
Posted by: AtMigration, Sep 03, 2007, 5:18 AM IST