Revitalizing Agriculture in Andhra Pradesh:

Role of High-Value Commodities

P. Parthasarathy RaoICRISAT

IFPRI-ICRISAT Collaborative ProjectJuly, 2005

Presentation

• Andhra Pradesh: a snapshot

• Agriculture sector: a silent crisis

• Mapping of High-Value Commodities (HVCs)

• Policy interventions

• Conclusions

Andhra Pradesh:A Snapshot

Andhra Pradesh, India

Andhra Pradesh: fast facts• Population: 76 million• Rural population: 63%• Agriculture GDP: 25%• 3 agroclimates: dry, semi-arid, and coastal• Irrigated area: 45%• Front-runner in macro-economic reforms• World Bank: “Andhra Pradesh is a leader in

economic reforms but not yet in economic growth”

Andhra Pradesh is catching up with other developed states

Agriculture Sector:A Silent Crisis

Andhra Pradesh farming sector: Facets of the crisis

• Yield stagnation in traditional crops– Food self-sufficiency achieved– Accounts for 35% of rice

procurement in India• Relentless pressure on natural

resources– Declining water tables– Unsustainable rice cropping

• Excessive use of inputs– Fertilizers, pesticides, water,

electricity• Newer pressures from trade

liberalization – Prices, quality, sanitary and

phytosanitary (SPS) measures

• Rising rural unemployment• Decline in rural per capita

incomes• Inadequate access to formal

credit• Poor rural and marketing

infrastructure• Profound disquiet in rural areas

– AP has dubious distinction of highest farmer suicides

– High levels of out-migration to urban areas

– Highest incidence of child labor• Chandra Babu Naidu’s

Government voted out of power in 2004

Annual compound growth rates of agriculture sub-sectors and GDP, Andhra Pradesh (1993-94

prices)

Diets trending away from basic cereals

Mapping HVCs

Share of high value commodities: Andhra Pradesh to All India

Composition of the value of agricultural production by level of diversification;Andhra Pradesh, 1999-2001 (1980-82 prices)

Districtwise HVC share in total value: Andhra Pradesh,

Distribution by HVC share

Change in share, 1982 to 2001

Indicators High

(Zone 1)

Medium

(Zone 2)

Low

(Zone 3)

Population density (No./KM2) 319 291 236

Urban population (%) 37 22 22

No. of small land holders (%) 82 84 78

Irrigated area (% to GCA) 34 59 36

Feed availability (t/livestock unit)

1.3 2.0 1.6

Rainfall (mm) 793 1031 847

Selected indicators by level of diversification; Andhra Pradesh, 2001.

Income from HVCs - Kurnool, AP: 2002-03 (household survey)

Rainfed

Irrigated

Employment effects of HVCs, AP, 2002-03 household survey (average)

Factors determining diversification : All HVCs, Vegetables and Poultry meat & eggs: Tobit model results, 1999-2001

HVCs: Challenging policy terrain

• Marketing– Domestic– Export

• Processing

• Contract farming– Case study: Gherkins

• Credit

• Infrastructure

Price spread: selected markets, Andhra Pradesh, 2004

Vegetables

Fruits

Agri-Export Zones (AEZ) in Andhra Pradesh

Share of food processing industry by type: Andhra Pradesh

Company Crop Area (ha) District Covered

Sical, Godrej, PalmtechMark fed.

Oil palm 38000 East & West Godavari

Cadburys India Ltd Cocoa 8500 East & West Godavari

BHC Agro Vegetables 417 Chittoor

Global Green, CapricornFoods Ltd.,

Gherkins 3333 AEZ-Gherkins Districts

A.V.Thomas Co. Marigold 208 Ananthapur

Dabur IndiaAmla (IndianGooseberry)

417Across State

Exim Foods Pvt. Ltd. Baby corn 208 Around Hyderabad

Venkateshwara Hatcheries Broiler birds 50-75 farms Around Hyderabad

Source. A.P Horticulture Department.

Contract farming: a new frontier

Distribution of priority sector creditAndhra Pradesh 2003-04

Crop sector

Priority sector

Distribution of credit by diversification zones, Andhra Pradesh, 2003-04

Policy Interventions

Pro-HVC policy interventions

• Pricing water• Building efficient marketing

networks– Implement Model Marketing

Act– Dismantling government

monopoly

• Increasing investments in infrastructure– Roads, cold storage, bulk

coolers– Foster improved linkages

between rural-urban markets

• Emphasizing vertical integration thru’ contract farming– Increase enforceability– Harness private sector

innovations in food processing and marketing

• Adding value thru’ processing– Simplify procedures for setting

up food processing industries• Enhancing access to formal

credit– Expand crop/rainfall insurance

schemes• Enabling public-private

partnerships– Extension