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Indian Agriculture: Challenges and Opportunities for Indian Plastics Industry

Indian Agriculture: Challenges and Opportunities for Indian Plastics Industry

India will need 320 MT of foodgrains by 2025 to cater to a population of 1.3 bln � as per an stimate of the Ministry of Agriculture. Boosting farm output is urgent as India will never be free from swings in international prices in a globalised world. India's agricultural productivity still ranks far below the best in the world. Foodgrain production in 2007-08 was 230.7 mln tons enough to cater to a population of 1.1 bln. Within India, different states have different productivity due to various reasons- One reason is land holding. According to the Ministry of Agriculture, average landholding in Punjab in 2001 was 4.03 hectares. In West Bengal it is 0.82 hectares. This is due to �Operation Barga�- the land reform movement. Ownership distribution in West Bengal with small and marginal farmer is 84% of the total agriculture land, as against 43% in the rest of India, as per KPMG-CII report of December 2007. West Bengal's yield of rice is 2.5 tons/hectare while both Punjab and Karnataka record 3.8 tons/hectare. The yield Egypt is 9.54 tons/hectare and China manages 6.26 tons/hectare for comparison. Higher yields are also due to hybrids.
Agriculture Miracle - Gujarat State: Learning for Plastics Industry
Gujarat's economy has been outperforming the rest of the country since 1990. However, this has been largely because of rapid industrial growth. Agriculture has never been an important part of Gujarat's growth story. Over long term, Gujarat's agriculture grew faster even though the state is known for semi-arid land. Agriculture in Gujarat, after 2000, has picked up dramatically, recording average annual growth rate of 9.6% in its agricultural state domestic product (SDP) during 2000-01 to 2006-07. This is in sharp contrast to the mediocre growth rate of 2.9% year in the national GDP from agriculture and allied sectors.
The preliminary analysis points out massive boom in cotton production and growth in high value sector such as livestock, fruits and vegetables. There is also rise in wheat production.
Sector 92-93 to
99-00
00-01 to
05-06
Sector 92-93 to
99-00
2000-01 to
05-06
(A) (B)    
Paddy 12 8.6 Total Food grain 7.3 11.0
Wheat 12.8 23.1 Total Cereals 8.6 11.0
Maize 10.3 15.9 Total Pulses 5.3 11.7
Cotton 10.5 36.1 Total cash crops(excl.cotton) 10.5 19.2
Banana 2.5 12.1 Total fruits & vegetables 8.6 14.4
Potato 5.8 11.1 Total Agriculture & livestock 5.4 11.2
Livestock 5.0 6.6  
Milk 4.9 6.9
Table 1 gives a bird's eye view of annual rates of growth before and after 2000. In case of wheat and pulses, the growth rates nearly doubled and cotton has jumped 3.5 times. Banana, potato and milk too experienced acceleration in growth rate. The coefficient of variation (CV) for all crops and crop groups has been lower in the period after 2000 than before. This makes it important to explore the sources of stabilizing influences in Gujarat Agriculture. Agricultural growth in Gujarat has been a miracle. Today Gujarat leaders are making tall claims such as
� Growth rate fastest in the country of 13% since 2004-05.
� Area under food crops jumped from 36.6 lakhs hectares in 2004-05 to 47.11 lakh hectares in 2007-08.
Total food grain production has improved by 55% from 51.53 lakh MT in 2004-05 to 79.95 lakh MT in 2007-08. There are many questions on what is driving this growth:
1. Is it a succession of good monsoons?
2. Better market opportunities.
3. Sardar Sarovar Irrigation project.
4. Efforts by farmers and government.
However, this is not act of God but government policy drivers have contributed significantly to this growth. It is lesson to learn for other governments, to kick start agricultural growth.
Exogenous Drivers of Agricultural Growth
1. After 1999-2000, drought prone regions of Saurashtra, Kachchh and North Gujarat received above normal rainfall during all these years. Central and Southern parts are covered by canal irrigation.
2. Market environment such minimum support price (MSP) for cotton, wheat and other crops announced by Central government have provided strong incentive to farmers to increase production. However, high MSP of wheat, cotton and other crops were available to farmers of all the states.
3. The emergence and wild fire growth of �illegal� local production of Bt Cottonseed by relatively unknown entrepreneurs brought down the prices of cottonseed. Bt cottonseeds made by Mansanto are priced at Rs. 1600 for a 450 gm packet which was made available by Gujarat Entrepreneurs for Rs. 650 for 450 grams packet. Hence, Gujarat Cotton boom has been aided by reasonably priced quality Bt Cotton seed.
4. Despite the threat of fake seeds farmers from faraway Punjab throng to North Gujarat, Mansa town which emerged as the Bt Cotton Seed hub. A train binging hordes of Punjab farmers from Jalandhar to Mehsana is now popularly called �Bt cottonseed Express�.
5. Cotton Corporation of India has sizeable procurement operation in the state. Export demand is strong and Gujarat has emerged as largest cotton producing state and major cotton supplier to China. However, exogenous factors cannot explain the Gujarat agriculture miracle. After 2002 drought, monsoons have been kind to most parts of India, except in 2009. High MSP was also available to all states. The overall economic boom that India has enjoyed should have generated a demand pull for farm products all through the country. Yet it was only Gujarat which experienced rapid acceleration in agricultural growth during these years. This has led the researchers to hypothesize that Gujarat's agricultural boom is likely driven by Gujarat specific drivers, which may include policy initiatives of the government of Gujarat.

Policy Drivers of Agricultural Growth
Gujarat state adopted an aggressive industrial policy. Gugarat government has actually devoted a great deal of energy and resources to accelerating agricultural growth in the state through broad spectrum of policy initiatives. These can be grouped in the following:
I. Improved Market Access
1. Gujarat was amongst the early states to amend the Agricultural Marketing Committee (APMC) Act to enable farmers to directly sell their products to wholesalers, exporters, industries and large trading companies without having to operate through commission agents. The amendment also helped create conditions to spread contract farming. The government also encouraged large corporates to establish retail chains to source their requirements directly from farmers.
2. Gujarat government also pursued aggressive policies to promote diversification to high value crops, especially fruits and vegetables and spices.
3. Government offered direct capital subsidy of Rs. 2.5 lakhs to set up green house, besides 25% relief in electricity duty. This helped in horticulture production which increased by 108% between 2000-01 and 2005-06.

II. Technical support, Extension and Credit
1. Like elsewhere in India, the agricultural research and extension system in Gujarat has deteriorated. The Gujarat government took several initiatives to revive farm extension, technical and credit support to farmers. It unbundled the monolithic Gujarat Agricultural University into 4 independent universities with significant increase in resources and autonomy provided to each of them. The Scientists of the revitalized agricultural universities were the mobilized to reinvest the defunct World Bank induced �Training and Visit� (T&V) agricultural extension model.
2. Gujarat evolved its annual month-long Krishi Mahotsav campaign as unique extension model that brought agricultural scientists, extension staff, agro-industries, input supplies, cooperatives, banks, local and state level political leaders together on a platform to exchange knowledge and information on the latest technologies and market opportunities. Large exhibitions were organized in all the agricultural university campuses and district towns which were attended by thousands of farmers.
3. A Krishi Rath � complete with audio-visual equipment, posters, and models and accompanied by scientists and administrators, visits every village of the state. They also carry out vaccination of the cattle; distribute kits on agriculture, animal husbandry and horticulture to the five poorest farmers in the village. Scientists give lectures and also undertake soil health tests and give soil health cards and recommend the best possible crops for the soil type.
4. Agricultural loan disbursements in Gujarat have clocked 20-25% annual growth rate. In last three years ending 2006-07, agricultural loan disbursals in Gujarat doubled from 4,735 crores in 2003-2004 to 10,468 crores in 2006-07.

III. Canal Irrigation
Gujarat became a separate State in 1959. Successive Gujarat Governments have devoted substantial budgetary resources to construction of major and medium canal irrigation project.The largest of such project is the Sardar Sarovar Project (SSP) which has been mired in controversies and disputes. SSP height is raised to 121.5 meters and there is enough water in the dam to irrigate 1.8 mln hectares as originally planned. The main 4 branch canals are ready but government is facing major road blocks in acquiring land for creating the network of distributors, minors and sub-minors. As a result, against target of 1.8 mln hectares, the SSP is irrigating only 80-100 thousand hectares mostly in Narmada, Bharuch and Vadodara districts. Apart from SSP, several large canal irrigation systems � Mahi, Ukai-Kakrapar, Karjan, and Damanganga provide a network of canals mostly in central and south Gujarat has surpassed other states in many fields of agricultural policy; management of large irrigation projects remains an area with much scope for improvement and innovation.

IV. Management of the Groundwater Economy
Gujarat Government has undertaken some unconventional initiatives in managing the groundwater economy.
1. Enthusiastically made common cause with farming communities in undertaking decentralized rainwater harvesting and groundwater recharge work. Government has lent strong support to communities and non-governmental organizations (NGOs) to expand this work in a participatory mode under Sardar Patel Sahakari Jal Sanchaya Yojana. The scheme performed best in Saurashtra and Kanchchh regions, but for the state as a whole. By December, 2008, nearly 5, 00,000 structures were created: 1, 13,738 Check dams; 55,917 Bori bandhs; 2, 40,199 Farm ponds; 62,532 Large and small check dams were constructed.
2. Gujarat government created Gujarat Green Revolutions Committee (GGRC), a special purpose vehicle (SPV) for promoting micro-irrigation, with annual funding of Rs.1500 crore to be replenished as needed. While the government of India offers an annual subsidy of Rs.400 crores to promote micro irrigation for the whole country. GGRC developed a subsidy-loan scheme which is by far the best offered by any state to adopters of micro irrigation. As a result, the spread of micro-irrigation technologies is more rapid in Gujarat than other states during recent years.
3. Jyotigam Yojana : Ironically this was designed to ration power supply to farmers and provide 24/7 three phase electricity to non-farm rural users. Most Indian states charge subsidized flat tariff for farm power and some states like Punjab, Tamil Nadu and Andhra Pradesh provide free power. However, the quality of farm power supply is poor. Power comes with frequent interruptions and very low voltage. During 2003-06 Gujarat government implemented Jyotigram Yojana with the aim of providing 24/7 power supply to villages. Government invested Rs. 1,200 crore in separating agricultural feeders from non-agricultural feeders throughout Gujarat. With this Gujarat Government started rationing power supply. Gujarat follows all three recommendation of International Water Management Institute (IWMI).
• Ration power supply to fit irrigation demand schedules.
• Provide power ration against a fixed, preannounced schedule.
• Overcome farmer resistance by offering to farmers uninterrupted power supply of full voltage.
Gujarat farmers get 430 � 440 voltage, with interruptions and are provided on strict schedule.
4. Road and Other Infrastructure: Rise of dairy cooperatives which sent trucks to collect milk from village�s twice daily provided push to improve rural road connectivity in Gujarat. Many dairy unions contributed to road construction. Today, Gujarat has 37.77 KM of roads per 100 sq.km. and a road density of 1.35 km per sq.km. 98.7% of rural roads are surfaced. Good roads are the best building blocks for rapidly growing agriculture.

Analysis:
Productivity of Gujarat from lands - captured by the value of crops and milk per hectare � increased by 34.8% in 2006 compared to 2000.
Canal Irrigation - Central and South Gujarat output per hectare increased by 20.9%, by 22.5% in Tribal areas, by 35.5% in North Gujarat, by 43.6% in Saurashtra and Kuchchh. It was postulated that Agriculture State Domestic product (SDP) has four variables-
• Shift from low value crops to high value crops.
• Increase in the value of crop yield per hectare.
• Increase in the Gross cropped Area (GCA).
• Improved farm-gate prices and margins.
The major contributor to the Gujarat agricultural growth is GCA. The state has been adding two lakh hectares per year to GCA, Saurashtra, Kachchh and North Gujarat has added 12 lakh hectares to their GLA between 2002 to 2006. However, South and Central Gujarat have not shown much increase in GCA. Most expansion in Bt Cotton area as well as area under rabi wheat has occurred in Saurashtra and Kachchh. 50 years ago, South and Central Gujarat were the heatland of India's cotton economy but today their place has been taken by Saurashtra and North Gujarat. Gujarat increased its cotton yield over six fold from 175 kg. Per hectare in 2001-02 to 798 kgs./hectare in 2008-09 because of the combined effect of Bt cotton and irrigation in Saurashtra and Kachchh and North Gujarat. In these regions, Bt cotton and wheat revolutions are surely due to -
• Investments made by government and communities in check dams, percolation ponds, farm ponds and such other ground water recharge systems.
• Succession of good monsoons.
• Improved quality of power supply post Jyotigram.
• Support to micro-irrigation.
Gujarat has charted out a new course for its agricultural economy which has posted an impressive 9.6% rate of growth since 1999-2000.

Learnings for the Plastics Industry
Gujarat is cited as a best example of states of India. Overall, agriculture growth is 2.9% on GDP scale. All other states are between 2.9-9.6%.What India Plastics Industry can contribute towards growth in agriculture sector? How Plastics Industry should approach agriculture sector? These are important questions.
Plastics are used world over in agriculture sector. There are three important areas:
• Water Management
• Pre-Harvest Protection
• Post Harvest Management
Water Management is the sector where plastics have penetrated well throughout India. Plastics industry is forefront in supplying PVC pipes and drip irrigation. Government has also extended support in the form of subsidy and loans to farming community. Once water is made available, pre and post harvest technologies come in picture. Developed countries have done substantial work on pre and post harvest management. However, this work needs to be translated to Indian Weather conditions, its tropical climate and geographical location of India. This is applicable more for pre-harvest technologies.
The developed world has well established cold chain. This is absent in India. Due to this reason the post harvest losses are estimated at 30 to 40%. Plastics industry can definitely contribute in this area. Agriculture sector also generates waste products which plastics industry can use and give added value to waste products.
Gujarat study above has postulated four variables. Plastics industry should concentrate on �Increase in the value of crop yield per hectare�. We have seen in recent year�s enormous growth in Flexible Packaging Sector which can produce wide variety of films. This is a well developed sector on technological basis. Therefore, the beginning should be made for various types of films which are used by agriculture sector. There is enough scientific work generated all over the world which needs to be translated to Indian climatic and geographical conditions.

Broadly agriculture sector needs
• Mulch films
• Silage films
• Greenhouse films
• Wide films
• Tunnel films
• Films for ground sterilization
• Geo membrane
Mulch film has been well studied subject over last many years in the developed world. It is an established fact that use of Mulch film improves crop yield, uses less water. Indian Plastics industry has supplied black colour mulch films to agricultural sector, which was often bad and have killed the concept of mulching. Farming community is not confident on the quality of mulch films. Time has come to prove to our fellow citizens that Indian Plastics industry can supply practically non tearable films. Today, there have been enough technological breakthroughs in material science together with best of processing machines that industry has in 21st century this is not a myth but reality.
There have been good number attempts made by Indian Plastics industry to make and supply films depending on the work done in developed countries. However, farming community was supplied with substandard products due to lack of scientific knowledge and unhealthy competition within the industry. Farming community had bad experience of film tearing, loss of properties, Indian farming community is not confident about plastics products made in India. Plastics industry should develop quality products, extend guarantee, provide application knowhow for use of the products. It should demonstrate how yield can be increased using plastics products during pre and post harvest period. Apart from films there are many products which can be developed using injection moulding, blow moulding and roto moulding specific to Indian farming community. Land ownership is different in India. States like Gujarat may have more land ownership per family, but state like Bengal has much less land per family due to land reforms carried out by local state government. It is therefore more important that even small farmers much participate in this higher yield per hectare exercise. Western world has gone much further and has developed many different kinds of mulch films based on multilayer technologies. Such films are made in different colours. One side is black and the other side is white or coloured as required by the specific crop. It has been proven that crop yields improve drastically using such films. Degradable films are also being developed and used by agricultural community.
Similarly Green house films and other plastic products for greenhouses have been developed. Today's Green house film is much sophisticated in terms of addivation for flouriculture application.
In Gujarat State, area under food crops is close to 50 lakh hectares. If we consider 40 Micron film of close to 40 gsm, it will be a huge amount of film required for mulching. Hence, if we target only 1% penetration in initial 2 to 3 years, it will still be a huge number of 20,000 tons annually only in Gujarat State on one season and one crop basis. This is only for mulch films. If we target other films specially post harvest packaging films.

Future Scenario
It is important how much money small and marginal land owner in states make. Can Indian Plastics industry help him to make more money. For example, in the fertile land of West Bengal and water availability farmer takes two crops of rice. Can he take further crop due to efforts of plastics industry. If farmer grows cash crop like potatos then yield of Rs.21 tons/hectare and price of Rs. 400/quintal, he makes Rs.10,752 in revenues in a year.
There is a scope of public private partnerships (PPP) in the farm sector to ensure that Indian Agriculture grows at annual rate of 4% and beyond. There is a growing recognition of the fact that if India to hit double digit growth figures in coming years, key probably has to be agriculture. Government will encourage link between agriculture and organise retail. Foreign and domestic chain retailers have begun investing in the supply chain which includes cold storages. The collabration between Bharati Enterprises launched Field Fresh Foods and UK based ELRO holdings, an investment arm of Rothschild family, plans to bring a total of 20,000 acres under cultivation in the near future by contracting with farmers. Tata Chemicals agri-business, named Khet-se Agri Produce India, has got into bio-disel, fresh fruits and vegetable production. Reliance retail has its 'farm to fork' stategy.
Above developments have to be recognised by the Indian Plastics Industry, which is mostly urban and has been interacting with urban society. The only plastic products which have penetrated in Indian Agriculture are plastic pipes (mainly PVC) and drip and sprinkler irrigation systems. Plastic Flim converters are predominantly serving packaging industry and this section of plastic processing industry needs to collaborate with organised retailers who are urban and who will develop links with agriculture community. This will open up new market for plastic products for preharvest and postharvest products which are mainly films of various types.
The government is trying to address rural road connectivity under The Bharat Nirman program which was conceived with the objective of unleashing the growth potential of villages by upgrading rural infrastructure. It was proposed to upgrade 1,94,132 km of roads. But the progress is slow. Therefore the agriculture related supply chain suffers from maximum inefficiency. Cumulative wastage in this supply chain is estimated to be 9.8% of the agriculture component of GDP. The archaic infrastructure for reaching the agricultural produce from farm gate to consumers has meant huge losses in transit and large mark ups in pricing due to extra layers of intermediation.
This is a challenge for the Indian Plastics Industry.
Prime Minister Mr. Manmohan Singh's inaugural address to the 'Economic Times� award ceremony for the corporate excellence: �The challenge before the political leadership in India today is to meet the aspirations of energetic new India, and, at the same time, take care of concerns of the less endowed less previlaged sections of our society who are no less energetic�.
Reform: Reform is, in the final analysis, about changing mindsets. We must have the courage to think out of the box. We must have the courage to think anew. To question old beliefs, to seek new pathways. As an old Chinese saying goes � a road is made by walking. We must learn to walk in new directions and create new roads to progress.
Opportunity: Leadership among the Indian Plastics Industry, need to guide the Indian Plastic Processor to tap the market potential of Indian Agriculture. The bridges need to made with the plastics processors and Indian farming community at all levels. Case studies need to be created over a period of time, which would be showcase to the farming community, demonstration of higher yields, guaranteeing higher income by reducing the wastage. This is the job of the leadership to open the gateways and orient the plastic processor spread all over India towards the new markets, at the horizon. The Indian Plastics Industry can multiply several times if this Indian Elephant of Agriculture starts moving.
(Reprinted from Article in Plastindia Magazine, Issue No. 32, by Dr. Yatish B. Vasudeo, Chairman, Plasticulture Committee, Plastindia Foundation)
 
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