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POLICY GROUP
1
Townhall Presentation
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POLICY GROUP
Rural Infrastructure and AgriculturalProductivity:
the Indian Experience
DEVELOPMENT CONFERENCE ON
INFRASTRUCTURE
29 June 2011
Cape Town International Convention
Centre, South Africa
Ritu Anand, IDFC
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POLICY GROUP
Contents
Green Revolution and Rural Infrastructure
Impact of Rural Infrastructure
Challenges
Policy Response and Way Forward
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POLICY GROUP
The context
0
10000
20000
30000
40000
50000
60000
1951 1961 1971 1981 1991 2001 2010
GDP at factor cost (constant prices)
Agriculture GDP
Rs billion
The targeted growth rate of 9-9.5% in GDP during 2012-2017 depends on a
4% growth rate in agriculture
0
100
200
300
400
500
600
700
1981 1991 2001
Total Labour force
Agricultural workers
million
…but still 60% of workforce isin agriculture
Share of agriculture in GDPhas fallen to 17%...
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POLICY GROUP
Food security: Sustained high foodgrain (rice and wheat) production
turned India into a food self-sufficient nation
Contributed to reducing poverty in rural areas
56
5346 39
37 28
1973-74 1977-78 1983-84 1987-88 1993-94 2004-05
Rural poverty (%)
A reassessment of the poverty line in India in 2009 led to a revision of
rural poverty rates upwards. Nevertheless, the declining trend in rural
poverty persists.
India‟s Green Revolution
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POLICY GROUP
6
Technology:Seed, Fertilizer,
Pesticides, Far
m equipment
and machinery
Physical
Infrastruct
ure:
Irrigation,
electricity,
roads,
storage
Communic
ationInfrastructu
Institution
al
infrastruct
ure:Agricultur
al
research,
extension
&
education
technolog
y,
financialservices,
marketing
Technology:
Seed, Fertilizer,Pesticides, Farm
equipment and
machinery
Physical
Infrastructure:Irrigation,
electricity,
roads,
storage
CommunicationInfrastructure:
ICT
Institutional
infrastructure:
Agricultural
research,Extension
technology,
credit,
marketing
Components of green revolution
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POLICY GROUP
Irrigation: The “quiet revolution” of groundwater
20
30
40
50
60
70
1950-51 1960-61 1970-71 1980-81 1990-91 1995-96 2000-01 2005-06 2006-07 2007-08 2008-09
m i l l i o n H e c t a r e s
Total net irrigated area
0
10
20
30
40
50
% share of
irrigation
sources
Tube wells
0
10
20
30
40
50
% share of
irrigation
sources
Canal
7
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POLICY GROUP
Infrastructure support to agriculture
0
500
1000
1500
2000
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2007-08
Foodgrain yield (kg/hectare)
0
4000
8000
12000
16000
20000
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2007-08
Energised pumpsets (‘000)
0
500
1000
1500
2000
2500
3000
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2007-08
Rural roads (km ‘000)
0
10
20
30
40
50
60
1969 1988 1991 1994 1997 2000 2003 2006 2009
m i l l i o n M T
Foodgrain storage capacity
8
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POLICY GROUP
Some key factors underlying the spread of rural
infrastructure
Farmers, not the public sector, expanded irrigation
Could not have been possible without grid extension; REC was
established to provide loans to State Electricity Boards for ruralelectrification; state governments subsidized electricity provision to
agriculture
Government expanded rural roads network
Government set up Food Corporation India in 1965 to market agricultural
produce
The Government broadcaster, All India Radio played a vital role in
creating awareness of new seeds, fertilizers, and farm techniques9
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POLICY GROUP
The links between physical infrastructure, agriculture
and development
Irrigation, rural electrification and rural road development have significant impacts on
agricultural output and productivity
Direct impact on agriculture: Increase in crop intensity and crop yield from better input supplies
Increase in share of cash crops by improving input supplies and providing access to markets
Indirect impacts – increasing non farm incomes:
Each rupee increase in value added in agriculture stimulated an additional rupee of value added
in the regional non farm economy
Half the indirect income gain was due to demand for inputs and marketing/processing services,
and the remaining half from increased consumption due to higher agricultural incomes.
The multipliers for physical infrastructure were much higher than for social spending.
Poverty impact: large number of beneficiaries are small farmers and landless labourers
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POLICY GROUP
Irrigation and roads have a significant impact on
productivity and incomes
Irrigation Roads
Sample size 338 projects 15 roads
Increase in crop intensity 10-42% Up to 15%
Change in crop pattern 11-33% Up to 30%Increase in crop yield 10-50% Up to 20%
Savings from wastagenearly 3% of the crop; price gain
of more than 2%
Study by IFPRI (2006)
13.451.36 5.31 1.39 0.26 0.96 0.84 1.09
84.5
9.7
123.8
41
3.8
22.6 25.517.8
R&D Irrigation Roads Education Power Conservation Health Anti-poverty
Programs
Returns to agricultural production (Rupees Per Rupee
Spent)
No. of Poor Reduced/Million Rupee Spent
Study by NABARD (2010)
11
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POLICY GROUP
Socio-Economic Benefits
World Bank (2005): prevalence of poverty inirrigated districts is one-third of non-irrigatedrural districts
Planning Commission (2010) evaluation of 138rural road projects• Agriculture income increased by 17.6% whereas
income from nonfarm activities increased by12.11%.
• 79% of the residents in the sample projectvillages reported that access to marketsimproved significantly. 77% also reported thataccess to nearby urban areas improvedsignificantly.
• Direct poverty impact: A majority of thebeneficiaries are either landless labourers or
have less than 3 acres of land (60%).
Irrigation
Recharge of groundwater from surface
water schemes
Increased availability of drinking water
Increased dairy activity
Increase in flora and fauna
Roads
Increase in land value
Increase in asset holding including cattle,
tractors, housing, etc.
Access to transport facilities, education,
medical facilities
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POLICY GROUP
Role of Rural Telephony
Several studies show that telephones have the following uses in
agriculture:
Information regarding seeds is the most important use
Mandi (market) price is the second most important This is followed by plant protection and fertiliser application
An overwhelming majority of farmers report that mobile phones increase
household income
From a livelihoods perspective, the telephone is most used to address
vulnerability at times of crisis and for social networking, particularly
within the family
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POLICY GROUP
AO: Welcome to Avaaj Otalo! You can get to
information by saying a single word, or by
dialing the number. To ask a
question, say ’question’, or dial 1; to
listen to announcements, say
’announcements’, or dial 2; to listen to
the radio program, say ’radio’, or dial 3.
User: (dials 1)
AO: OK, you want to ask a question.
To record your own question, press 1.
To listen to the questions and answers of
other farmer friends, press 2.
User: (dials 1)
AO: OK, you want to record a question.Please say your question slowly and
clearly after the beep.
User: How can I protect my cotton crop frommealy bugs?
Avaaj Otalo: A “voice blogging” service…
Designed by an NGO and IBM
India
An interactive, on-demandinformational resource that would
complement a weekly Gujarati
radio program.
Farmers found tremendous valuein listening to other farmers‟
questions. 77% of interviewees
identified this as the main reason
they liked the forum.
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POLICY GROUP
Challenges
Decelerating growth in foodgrain production
Falling public investment
Large subsidies
Over-use of natural resources
Storage and marketing chain
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POLICY GROUP
Growth rates in yields
Annual growth of crop yields (%) between 1980-90 and 2000-10
has fallen for the two most important food grains, rice and
wheat.
3.2 3.1
1.6
0.6 0.6
3.0
1.2
2.4
4.1
1.6
0.7
4.0
1.5 1.6
0.0 0.2
3.8
11.2
Rice Wheat Other
foodgrains
Gram Tur Other
Pulses
Sugarcane Oilseeds Cotton
1980-81 to 1989-90 2000-01 to 2009-10
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POLICY GROUP
Fall in agricultural investment
5
10
15
20
25
1
2
3
4
5
1951-52 1956-57 1961-62 1966-67 1971-72 1976-77 1981-82 1986-87 1991-92 1996-97 2001-02 2006-07
% ooa cta omao
% oG
Capital formation in agriculture as a share of GDP (LHS)
Capital formation in agriculture as a share of total capital formation (RHS)
Green Revolution
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POLICY GROUP
Large subsidies
Fertilizer subsidy introduced in 1970 and has increased to Rs 613 billion
in 2009/10 (nearly 1% of GDP).
Irrigation subsidy
Canal irrigation estimated to vary between 0.05% - 0.19% of GDP amongst 5
states reported in World Bank (2004)
Electricity subsidy for tube well irrigation, with electricity tariff for agriculture
just 15% of cost of electricity
Food subsidy: Rs 585 billion in 2009/10, nearly 1% of GDP.
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POLICY GROUP
Vicious cycle arising from electricity subsidies
19
Subsidized electricity through
low tariffs
Low investments & poor O&M
leading to deterioration in
capital stock and equipment
Poor quality of service
including unscheduled
outages, and voltage
fluctuations
Low willingness to pay due to
crop losses and pumpset
burnouts from irregular
supply, voltage fluctuations
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POLICY GROUP
Stressed groundwater
reservesDegrading soil quality
Excessive utilisation of natural resources
Stable terrain
Low to mediumdegradation
Severe degradation
Naturally degraded
Criticality 1995 2004
Safe(50-70%)
96 68
Semi-critical(70-90%)
2 14
Critical(90-100%)
1 5
Over-exploited(>100%)
2 14
(Per cent)
20
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POLICY GROUP
„Food saved is food produced‟: an inefficient supply chain
Food grains
Lack of adequate storage facilities
Majority of storage facilities are located far away from areas of consumption, increasing „food
miles‟
Horticulture
Post harvest losses of 20 to 30 per cent in horticulture crops
Poor packaging, grading, processing and sorting facilities
Lack of adequate means of transportation
Hugely inadequate storage capacity
o Present storage capacity of cold stores is sufficient for only 12 per cent of the total
production of fruits and vegetables
o Cold storage facilities for meat are almost negligible and in states like West Bengal, there is
none for a commonly consumed product such as fish
o Issues of utilization for existing facility: 80 per cent facilities are accounted for by potatoes
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POLICY GROUP
The Agricultural Marketing Chain
R&D, extension, market intelligence services by
government, but inadequate
Inefficiencies in agricultural markets in India,
primarily due to:
Regulatory regime: undue state intervention in
pricing, marketing etc.
Barriers to entry by private operators
Non-transparent methods of pricing, e.g. lack of
auction of graded items
Small farmers have limited access to wholesale
markets
Farmer
Pre-Harvest Contractor
Commission Agent/
Broker (Regulated byAPMC)
Wholesaler Regulated byAPMC)
Retailer
Consumer
22
After intermediaries‟ margins and handling costs get added,
farmer gets only 25% - 60% of the price that the consumer pays finally
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POLICY GROUP
Government‟s Response and Way Forward:
importance of rural infrastructure
Gradual shift from subsidies to productivity-enhancing investments
Regeneration of natural resources
Agricultural diversification
Measures to increase the improved functioning of markets (rural
infrastructure) and value-addition (eg agro-processing, cold chains)
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POLICY GROUP
• An umbrella programme, Bharat Nirman was launched in 2005 for up-gradation of the rural infrastructure
• 30 per cent of total projected investment of Rs. 13 trillion by Central and state governments on all
infrastructure to be spent on rural infrastructure
Bharat Nirman: Government of India‟s response to
the rural infrastructure deficit
Ministry of Rural
Development
• Habitation over 1000 population to be
provided an all-weather road (54648
habitations)
• Every habitation to have a safe source of
drinking water (55,067 uncovered and
331,000 slipped back habitations)
• 6 mn houses to be constructed for the
rural poor
Ministry of Power • Every village to be provided electricity
• (119,570 un-electrified villages)
Ministry of
Communications and IT• Every village to be connected by
telephone (66,822 villages)
Ministry of Water
Resources
• 10 million hectares of additional
irrigation capacity
• 73 per cent of target habitations and86 per cent of road length completed
• Almost 99 per cent achieved
• About 83 per cent of targetcompleted
• Over 80 per cent completed
• Nearly 98 per cent of villagesconnected
• 73 per cent of target achieved
Target Achievement*
* Attempt has been made to source latest data, and are from 2009 to 2011, and only meant to provide a broad sense of project status. Time periods not the same for all sectors.
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POLICY GROUP
Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA) and its links to agriculture
MGNREGA‟s objectives include the creation ofsustainable rural livelihoods through regenerationof natural resources
Contributions to the agricultural sector
70 per cent works relate to „Green Jobs‟ - waterconservation, water-harvesting, restoration, renovation anddesilting of water bodies, drought-proofing, plantation and afforestation
Improvement in ground water, agriculturalproductivity & cropping intensity, soil fertility
and moisture conservation
Earnings per household has increased from Rs2795 in 2006-07 to about Rs 5000 per month in2009-10 – led to increase in agricultureminimum wages – better bargaining power
Launched in February 2006, the
largest employment programmein human history provides at least
100 days of guaranteed wage
employment in every financial yearto every rural household that
demands work
Employment within 15 days of
application for work
At least one-third of persons
have to be women
Central government outlay of Rs.
335 billion in 2009-10 generating
employment for over 52 million
households during the year
Need to focus on moving from wage employment to sustainable rural livelihoods; from unskilled to
skilled labour; productivity increases for small and marginal farmers in rainfed areas25
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POLICY GROUP
Water Management
26
…initiatives underway, but progress has been slow
Increased outlay: Eleventh Plan outlay is nearly as
much as the entire expenditure on watershed
programmes since their inception in India
Expanding irrigation area: Against the anticipated
annual rate of creation of irrigation potential of about
3.2 million ha, the average rate of creation of irrigationpotential during 2009-10 will be about 1.83 million ha
per year
Participatory Irrigation Management : By the end of
2007, about 20 per cent of the total command of
existing irrigation projects had been covered through
Water Users Associations
Technology adoption: Drip irrigation, farm ponds in Andhra Pradesh
National Mission on Micro Irrigation: launched in June
2010 with an initial outlay of Rs 80 billion; assistance
available for drip and sprinkler systems,
implementation of advanced technology
Challenging times ahead…
• Aging assets which are in urgent need of
maintenance
• Low water storage capacity of 200 cubic meters per
capita compared to over 5000 cubic meters for every
citizen in Australia and USA, 2500 cubic meters percapita in China
• Large number of irrigation projects have been
started but not completed
• Dependence on ground water for irrigation : annual
extraction of groundwater is highest in the world
• Largely government dominated, little interest from
private sector
• Too many decision chains in the water management
cycle
• Ministry of Water Resources: irrigation
• Ministry of Rural Development: watershed
management, MGNREGA, rural drinking water• Ministry of Agriculture: water use efficiency
• Ministry of Urban Development: urban water
supply
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POLICY GROUP
Water Management and Energy Efficiency: some
pragmatic solutions to energy groundwater nexus Targeted investments and innovations in water storage and
management facilities like farm ponds and check dams
Harnessing, conserving and developing degraded natural
resources through watershed programs that are community-led
Significant energy savings
possible from the use of
efficiency pump sets.
Savings of 55% of energy
consumption have been
reported
Drip irrigation could reduce
energy consumption by 20%
and ground water use by 42%
Use of DDG Renewable Energy for water pumping has carbon saving
benefits as well
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POLICY GROUP
Use of local resources for rural energy
28
There exists potential for greater use of renewable energy in DDGs
Innovative alternatives to grid extension need to be explored. DDG+mini-
grids offer flexibility in design and operation to meet the very modestenergy needs in rural areas and can be readily deployed in areas where
grid extension is expensive or infeasible Potential for greater use of
renewable energy in DDGs
Encourage use of alternative/renewable electricity for powering telecom
infrastructure
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POLICY GROUP
Managing the changing food basket
New wave of agriculture: Agro-based industries
Huge opportunities for establishing agro – processing units for
oilseeds, food grains, sugarcane and animal products
Innovations in storage decentralization
Moving towards a decentralized food storage system has long
lasting implications for reducing food miles besides improving
access and entitlement to the needy
Public Private Partnerships
Involving private sector in the management of food
procurement and distribution
o FCI awarded contract for bulk movement to a private player,
Adani Agri Logistics in 2008
New mechanisms to link farmers to markets
Contract farming: tried out in a few States
National spot exchanges: for reducing handling costs and
better access to information
Infrastructure facilities in market places
Faster growth in per
capita incomes andurbanization triggering
shift towards high vale
commodities like fruits,
vegetables, fats and
oils, and animal
products such as dairy,
poultry and eggs
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POLICY GROUP
30
Rapid increase in rural teledensity due to reduced
prices from competition
While rural teledensity increased by 18 times since 2006, urban teledensityincreased by 5 times at best over any 5 year period.
Saturation of urban markets causing telelcos to move to rural areas.
Sharing of infrastructure such as cell towers allowed telecos to reduce costs.
To extend connectivity to remote areas, provide support (through USOF) to private
mobile operators in setting up communication networks irrespective of technology
proposed
7.46 10.16 12.2 14.3220.74
26.88
39.4548.52
66.39
88.66
119.73
147.88
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(Q3)
Urban Teledensity (%)
0.7 0.9 1.2 1.5 1.6 1.7 1.9
5.9
9.5
14.8
24.3
31.2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(Q3)
Rural Teledensity (%)
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POLICY GROUP
THANK YOU
31
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