Troubled record, poor outlook

An end-season review of monsoon performances, crop prospects and policy responses presents a bleak picture.

SINCE a flurry of official activity early in August, the drought relief effort across the country has tended to be rather restrained, with the government shifting its attention to the serial bailouts of the troubled public sector financial institutions. Estimates of crop damage and the financial outlays required to mitigate the drought-induced distress had been received from most States. But the verification of these claims needed to be done and the Central government seemed to pin its hopes on a late monsoon revival, deferring the moment of decision till the season ran its course.

At the end of September, with the kharif harvest due to begin in a matter of weeks, the decision on minimum support price (MSP) for the main crops could not be deferred any longer. The Ministry of Agriculture had received a report of the Commission on Agricultural Costs and Prices early in September, but returned it for reconsideration since it supposedly found little consistency in the reasoning offered by different members of the CACP. By late-September, with the imperatives of drought relief factored in, the CACP revised its earlier majority opinion that MSPs could largely be maintained unchanged. Instead, it suggested a bonus of Rs.20 a quintal over the MSP on all varieties of paddy, a waiver of interest on farm loans to make up for crop losses, and a rollback of fertilizer prices.

The financial implications of this package of measures caused some consternation in government circles, though the moral case for fiscal prudence was damaged by the readiness with which the financial institutions' bailouts had been agreed on in the preceding weeks. With a noisy demonstration in New Delhi by Punjab Chief Minister Amarinder Singh providing the backdrop, the Cabinet met on September 26 at the Prime Minister's house and decided to disregard the CACP report. MSPs for all the major kharif crops, it decided, would be retained at existing levels.

It was soon apparent that the government had exposed itself to multiple political hazards. Farmers in Punjab and Haryana, already restive following the delay in finalising kharif procurement prices, began a series of protest demonstrations, blocking rail and road links into their States. The Shiromani Akali Dal, a partner of the ruling coalition at the Centre, made its displeasure more than evident. And Union Agriculture Minister Ajit Singh sought to impress upon the government that the neglect of agrarian interests in a drought year could potentially be disastrous.

On September 30, with Amarinder Singh scheduled to convene an all-party meeting in Punjab the next day to discuss the agrarian crisis, the Centre gave in. A bonus of Rs.20 a quintal was notified for paddy, with the proviso that this would not be added on to the MSP for future reference, but was a specific measure of drought relief. Concurrently, similar orders of increase were announced on the MSP for other major kharif crops such as groundnut, soyabean, cotton and the main pulses. Decisions on the other CACP recommendations, said Minister Ajit Singh, would be made at the next meeting of the Cabinet. On current reckoning, neither a rollback of fertilizer prices nor a waiver of interest on farm loans will be easy to push through. The Finance Ministry is known to harbour serious reservations about adding to its fiscal responsibilities, as also imposing the burden of interest waiver on the commercial banking system. Conservative estimates of the sums involved run in the region of Rs.6,000 crores.

The procurement bonus that has been allowed could mitigate some of the effects of the drought in Punjab and Haryana, where farmers bring a substantial surplus to the market. The unprecedented dry spell in July had deprived the crop sown the previous month of the natural nourishment of the monsoon, compelling farmers to pump up groundwater at enormous additional cost. Without an assured higher price for their produce, many of them could face financial ruin.

Inevitably, the decision got entangled in competitive politics and the final decision on the procurement bonus left most farmers unsatisfied. The agitational programme may well be suspended as farmers direct their attention to the upcoming harvest. But political lobbying is only likely to intensify.

Following the two-day National Conference on Agriculture for the Rabi Campaign 2002-03, the government released tentative estimates of the foodgrain output expected from the current kharif crop. Working with the figure of the overall monsoon precipitation being 19 per cent below the norm, the conference noted that the monsoon revival in August and September had enabled some regions to take up a late sowing of vital food crops. The "quick estimate'' of foodgrain output for 2002-03 was put at 91 million tonnes, that is, almost 21 per cent below the figure for the previous year's. The rice output could be about 14 per cent below the previous year, though area sown till mid-September was down by 20 per cent.

Ajit Singh is now credited with the view that the late monsoon revival could to a great extent mitigate the drinking water and fodder shortage in the States most seriously affected. And with moisture in the soil now restored to relatively healthy levels, an intensive programme of sowing in the rabi season could yield a harvest of over 100 million tonnes of grain, making good much of the kharif deficit.

THESE projections for the future may well prove rather too optimistic, though the central issue today is that the Government is yet to formulate the range of responses necessary to cope with existing conditions of adversity. Crop loss estimates filed by the States run to a cumulative total of close to Rs.20,000 crores and the two facilities that are deployed to meet these the Calamity Relief Fund (CRF) and the National Calamity and Contingency Fund (NCCF) cannot meet more than a fraction of this requirement.

The peculiar difficulty posed by this year's monsoon is that it began well, inducing a generalised exuberance of sowing in June. July then turned out to be the worst month in a century, with a 49 per cent rainfall deficit in aggregate and virtually no precipitation in the States of Punjab, Haryana and Rajasthan. The massive potential loss of crops in these States was only partly contained by heavy recourse to groundwater irrigation. And even if the agrarian situation in Punjab and Haryana can be salvaged partly through an increase in procurement prices, the devastating losses suffered by Rajasthan pose a far more intractable problem. Here, the parlous fiscal situations of both Central and State governments seem to afford only a narrow range of options for relief efforts.

As of September 25, the overall deficit in monsoon precipitation for the country stood at 19 per cent, which puts the 2002 drought in the same league as the 1987 visitation. A crucial difference though is that all four monsoon months in 1987 were characterised by acute moisture stress, while in the current year virtually the entire deficit was recorded in the single month of July. This means effectively that the magnitude of the crop loss this year could be much greater than in 1987. And while the detailed surveys are carried out to estimate the quantum of compensation that needs to be paid out, the Central government seems to be in no hurry to augment its revenues to meet the payments that will soon be falling due.

Of the 36 (meteorological) sub-divisions that the India Meteorological Department has identified, 20 have had deficient and one has had scanty rainfall this year. If a finer leval of disaggregation were to be done, then of the 517 districts, 276 have had deficient and 39 have had scanty rainfall. The worst affected sub-divisions are West Rajasthan and East Rajasthan, with rainfall deficits of 70 and 59 per cent respectively. Punjab and Haryana have suffered deficits in excess of 30 per cent and rainfall in all of Uttar Pradesh has been short by over 20 per cent.

For many of these States, normal precipitation is just sufficient to balance out the water budget for a whole year. And with the magnitudes of the shortfall recorded this year, it could be only a matter of months before acute distress begins to manifest itself, calling for a policy response that remains to be even conceived.