A prognosis of gloom

Print edition : August 03, 2002

The government is seriously constrained in the matter of managing the consequences of the drought, owing to the inadequate reach of the PDS, the pattern of its foodgrain stocks and its aversion to launching a massive food-for-work programme.

HALFWAY through a 16-week-long monsoon season this year, the government has been forced to admit that India faces the prospect of the "worst and most widespread drought" in over a decade. With 320 out of the 524 districts for which data are available having received deficient, scanty or no rainfall between June 1 and July 17, even a significant recovery in the monsoon is unlikely to save this year's kharif crop from some damage. What is more, the drought seems to be concentrated in States where agriculture is a major income source and that are crucial from the point of view of generating surpluses for deficit States. State-wise data on the proportion of districts receiving deficient, scanty or no rainfall, released by the India Meteorological Department, put the figure at 92 per cent of the districts in Uttar Pradesh, 93 per cent in Punjab, 100 per cent in Haryana and Himachal Pradesh, 97 per cent in Rajasthan, 85 per cent in Chhattisgarh, 74 per cent in Andhra Pradesh, 69 per cent in Tamil Nadu, 68 per cent in Orissa and 52 per cent in Karnataka.

According to estimates released by the Ministry of Agriculture in mid-July, the three crop categories where cultivation has been affected most seriously are kharif coarse cereals, pulses and oilseeds. In the case of coarse cereal the area covered by cultivation was at that point in time only 74.4 lakh hectares, which reflects a 41 per cent drop compared with the corresponding figure for the previous year. Area declines have been particularly sharp in the case of maize, jowar and bajra, which are staple items for the poor. In pulses the area covered till then was only 18 lakh ha, compared with the previous year's figure of 30.2 lakh ha and a "normal" level of 103 lakh ha. Finally, area covered by oilseeds had fallen short of the previous year's level by 51 per cent at 45 lakh ha. The drop here has been particularly sharp for soyabean - from 51 lakh ha to 18 lakh ha.

Combined with pessimistic predictions on monsoon recovery over the coming weeks, this evidence should have generated panic under normal circumstances. The government has indeed sat up and expressed concern, driven by the recognition that State elections are around the corner and general elections not too far away. But the response has been late in coming and subdued because the government was lulled into complacency by three factors.

The first factor relates to the consecutive excellent or moderately good monsoons that the country experienced over the last few years. Given the intensity of the shortfall, when it occurred, during those years and given its geographical distribution, it meant little for food security in a country where foodgrain consumption data point to a fall not just in terms of per capita consumption but also in terms of overall calorie intake even among the poor.

A parched paddy field in Allahabad.-RAJESH KUMAR SINGH/AP

The second factor is the expectation that even if the intensity and spread of the drought is as bad as in 1987, the fall in production is likely to be to the order of less than 10 per cent. The third factor relates to the belief that the large stocks of foodgrains that have accumulated in government godowns as a result of high procurement and falling offtake is more than adequate to take care of any such contingency.

In fact, encouraged by the available level of stocks, the government has declared that there is no danger of the drought affecting consumers adversely. Union Agriculture Minister Ajit Singh reportedly stated: "There is no dearth of foodgrains or other essential items for the consumer, which can even be imported. It is the farmer who is going to be really hit because he faces loss of income."

THE failure to mention the agricultural labourer here is surprising since according to the 55th round of the National Sample Survey on employment relating to 1999-2000, rural households dependent on wage employment in agriculture or other areas amounted to 22 per cent of the total in Uttar Pradesh, 33 per cent in Punjab, 26 per cent in Haryana, 22 per cent in Rajasthan, 40 per cent in Madhya Pradesh, 50 per cent in Andhra Pradesh and 45 per cent in Karnataka. Most of these households, which are on the margins of subsistence, would be affected by the fall in cultivation associated with a drought in two ways. They would not be able to earn adequate money incomes and they would be squeezed by the likely rise in food prices, particularly for commodities like coarse cereals which they consume.

Given this prospect, it is surprising that the policy initiatives announced by the government recently seem to focus only on the farmer. To start with, resources from the Calamity Relief Fund, which was created at the instance of the 11th Finance Commission and has had at its disposal Rs.11,000 crores over a five-year period, are to be used to finance relief work. But the nature of such relief work has not been defined. Further, the fact that in a statement to the press the Minister for Agriculture has said that these resources are going to be made available to all farmers in drought-hit districts and not just small and marginal farmers is revealing. It fails to mention the agricultural worker, whose plight is likely to be aggravated.

Most of the other proposed measures are directly aimed at farmers. The National Bank for Agriculture and Rural Development (NABARD) is to be instructed to defer recovery of interest on crop loans, and there is a small probability that interest dues may be waived altogether. Guidelines are to be issued to sugar mills to pay out arrears due to cane growers. And deferred payment of premia under the National Agricultural Insurance Scheme is to be condoned.

The problem is that, besides ignoring the huge proportion of the rural population with limited or no assets, this partial, and yet to be implemented, response fails to engage the three most important bottlenecks to any successful management of the consequences of the drought.

The first bottleneck is the inadequate reach of the public distribution system (PDS) in most States, especially in the rural areas, which makes the task of reaching food to those who would need it a daunting one. In fact, government policy over the last few years has moved in the direction of diluting the system rather than strengthening and expanding it. As a result, the government would have to reach its stocks to the needy through the private trade, which is bound to resort to speculative hoarding, since prices are expected to rise in a situation like this. This makes the presence of large stocks in government godowns an inadequate insurance against both localised shortages as well as price increases.

The fact that the government's stocks do not contain significant amounts of the commodities in whose case the shortfall in output is likely to be the largest, constitutes the second bottleneck. While the availability of large foreign exchange reserves with the government may facilitate the import of these commodities, this would have to be through the private trade route in the current liberalised trading environment. Here again, private speculative activity is bound to drive up prices.

The third bottleneck is the government's aversion on fiscal grounds to launching a massive food-for-work programme, and therefore its lack of experience in managing such a programme. It is almost common knowledge now that a phenomenon like drought can be devastating not so much because of the lack of access to food supplies but because of the lack of requisite employment and income that allows people to purchase the food that is available. Over the last few years, when evidence was mounting that food stocks were accumulating in government godowns even while poverty was persisting at relatively high levels and reports of starvation were flowing in from parts of the country, there were many people who made a case for using the food surpluses as a means to launch a more extensive food-for-work programme that would provide employment and incomes to the poor as well as stimulate demand for an industrial sector which was burdened with excess capacity.

If the government had not ignored these calls on the grounds that it was not a fiscally prudent strategy to adopt, it would have been in a position to respond quickly to the income reduction-induced threat of near famine conditions. Not having responded, however, it would, even if it tries now, be hard put to set up and manage such a large exercise in time to avert any significant human damage.

THESE bottlenecks to dealing effectively with the consequences of drought are already having their impact. Quite early into the monsoon season, expectations of a monsoon failure triggered an increase in the prices of many agricultural commodities - the foodgrain stocks and the foreign exchange reserves with the government notwithstanding. To quote a few instances, in the Mumbai wholesale market, the price of groundnut oil rose from Rs.420 per 10 kg trading lot on July 6 to Rs.438 by July 13. Refined palmolein gained Rs.17 during the same period to close at Rs.347, and refined soyabean oil jumped from Rs.330 to Rs.346 per 10 kg. On July 15, groundnut oil jumped further by Rs.10 to Rs.448 and palmolein by Rs.11 to Rs.358.

Meanwhile, governments in the affected States are sensing the danger of loss of employment among the large mass of workers who are either partially or completely dependent on wage employment for a living. Not surprisingly, they have approached the Centre for a combination of food and cash support for relief and food-for-work programmes. Andhra Pradesh, for example, has asked for Rs.610 crores by way of financial assistance and 10 lakh tonnes of foodgrains for the purpose. While a "Centre-friendly" state like Andhra Pradesh is likely to get a quick response, experience suggests that Delhi would be far less receptive to demands from many other States, making the rural workers and farmers victims of cynical political strategies.

THUS, three immediate outcomes are likely, unless the monsoon recovers sharply. First, a decline in farmers' incomes as a result of loss of production and livestock. Second, the loss of agricultural workers' livelihoods as a result of the contraction in rural wage employment. Third, a sharp increase in food prices, as a result of speculation encouraged by the limited reach of the government's PDS as a means of reaching food to the poor, especially in the rural areas. Since the government's efforts to counter these tendencies can only work partially, any further failure of the monsoon can be devastating.

The second-order fallout of the decline in incomes and rise in food prices would be a sharp erosion in the real purchasing power of a large section of the population and a greater reticence on the part of the government to undertake expenditures that can aggravate the inflation. Both of these are bound to squeeze the demand for manufactures. Thus, an intensification of the recession, which already afflicts the industrial sector, could ensue.

Thus the complacence, reflected in official statements, generated by the government's huge food stocks and large foreign exchange reserves is by no means warranted. But such complacence clearly dominates, encouraged by the tendency to see in the drought an opportunity to offload the embarrassingly large stocks of foodgrain in government godowns.

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