Agri sector all set to bounce back with record foodgrain output after 2 drought yrs, but farmers' woes may continue due to notes ban

The agriculture sector is all set to bounce back leaving two years of drought behind and may well pull off record foodgrain output of 270 million tonnes in 2016-17 on good rains, but farmers' woes may continue due to adverse impact of notes ban and low sales realisation.

The farm growth is estimated to rise at over 5% this fiscal, from 1.2% in the previous year, on the back of record kharif foodgrain production at 135 million tonnes (mt) and likely bumper output in the ongoing rabi season, helped by good monsoon in most parts of the country.

"The agriculture sector has done well during the year. We received good monsoon after facing the drought year. Kharif in general was very good and rabi sowing has been brisk. We are hopeful of bumper production this year," Agriculture Secretary Shobhana Pattanayak said in an interview.

Although agri-experts have raised concerns about impact of demonetisation on rabi crops and the likely effect of forecast of warm winter on wheat crop, the secretary said the government is not "downgrading" the target for 2016-17 crop year.

"Our target is to achieve foodgrain production of 270 million tonnes while our last peak production was 265.04 mt in 2013-14 crop year (July-June)," he said.

"Agriculture sector growth was lower last year because of drought. But from that level, we will move higher."

On farm sector growth, NITI Aayog Member Ramesh Chand said: "It will be spectacular growth after facing two drought years. We are expecting a growth of 5.5% this year."

The growth rate of agriculture and allied sectors will be 5.3 per cent even if wheat productivity throughout the country is lower by 3% due to rise in temperature, he said.

Asked about adverse impact of demonetisation on farmers, Pattanayak said there is not much impact as the credit system has been strong in rural areas and farmers have become more resilient over the years.

"Our farmers have witnessed very strong drought in last two years and yet they have bounced back. I don't think it has really impacted," he said.

However, farmers' organisations as well as former agriculture minister Sharad Pawar have expressed deep concern about impact of demonetisation, saying farmers are unable to buy quality seeds and fertilisers for their rabi crop and are also facing problems in selling crops for want of demand.

Despite record kharif production this year and expected good crop in the rabi season, farmers' conditions continue to be grim due to lower sales realisation, with domestic and global commodity prices staying depressed.

The demonetisation of Rs 500 and Rs 1,000 notes has also affected the domestic demand of fruits and vegetables, forcing farmers to sell their produce at throwaway price.

About farmers' woes, agri-economist Ashok Gulati said: "This year, production is likely to bounce back and therefore, much better than last year. However, farmers are already under debt. And prices of cotton, basmati rice and, with demonetisation, many fresh fruits and vegetables are depressed. Because of that, despite higher production levels, farmers have not gained much."

2016 began on a sticky note as the country's overall foodgrain output remained flat at 252 mt in 2015-16 crop year due to second straight year of drought.

Pulse output fell to 16.5 mt resulting in high prices for most part of the year that kept the government on its toes, which took various steps to cool prices and bring relief to consumers.

The measures like domestic procurement and import to boost local supplies helped ease the prices of tur and urad from about Rs 200 a kg, but chana continues to rule high.

As per the official estimate, wheat output rose to 93.55 mt, from 86 mt, but FCI's procurement fell sharply and domestic prices of wheat and its products began to rise towards the end of the year. The government scrapped import duties on wheat to boost domestic supply.

To provide relief to farmers hit by the cash crunch, the government has given them an additional two months to repay their crop loans due in November-December and said prompt repayment will be eligible for the extra 3 per cent interest subsidy.

The government had earlier allowed farmers to buy seeds through old Rs 500 notes from central and state-owned seed companies as well as from ICAR and central varsities. It had also asked fertiliser companies to sell soil nutrient on credit basis to farmers.

To check food inflation, import duties on palm oils and potatoes were reduced. Stock limit on sugar mills were also imposed to check prices although improved domestic rates helped industry clear arrears to farmers.

The year also saw the successful rollout of the landmark National Food Security Act (NFSA) across the country.

Programmes like new crop insurance scheme and eNAM to link all 585 mandis on an electronic trading platform were announced to augment farmers' income.

In this year's budget, the government raised agri-credit by Rs 50,000 crore to Rs 9 lakh crore for the current fiscal and levied 0.5 per cent Krishi Kalyan cess on all taxable services to fund farm initiatives.

Eminent scientist M S Swaminathan hailed the new schemes, but stressed on proper implementation. He also wanted the government to pay farmers 50 per cent more than the production cost as part of the minimum support price (MSP).

Expressing concern over poor implementation of agri schemes, Gulati, the former chairman of the Commission for Agricultural Costs and Prices, said: "The government should focus completely on agriculture and try to implement some of the programmes properly."

The year also witnessed the government fixing the maximum retail price and royalty for cotton seeds, including Bt cotton, based on its order issued at the fag end of 2015.

The move was opposed by biotechnology firms while the domestic seed manufacturers were in favour of the decision. Global biotechnology major Monsanto threatened to re-evaluate its India business. It plans to introduce new products, besides entering into the legal battle against this order.

However, NCP supremo Pawar recently attacked the NDA government for taking such a move, saying "Indian agriculture is being brought back to licence and control raj which is detrimental to the growth of the sector".

"The government of the day should not have hostility to improve systems and technologies," he said, adding that the government is overly "cautious" on the technology front.