Punjab's Agriculture Sector Can't Rest on its Past Glory

From seeds and machinery to livestock and irrigation, the state needs to change the status quo. One eye must be firmly kept on the future.

Note: This is the second in a two-part series on the state’s agriculture sector. The first part, which sums up the challenges, can be read here.

If Punjab’s agriculture sector is to succeed, it has to think beyond short-term crises such as the current pandemic-induced one.

For instance, the Expert Group headed by Montek Singh Ahluwalia has made important recommendations about seeds, agricultural research, livestock, dairy and food processing.

It has been noted that Punjab has been successful in producing large quantities of potato seeds. However, Andhra Pradesh and Telangana have emerged as major producers and processors of other seeds. For production of vegetable seeds like radish, cauliflower, turnip, capsicum, brinjal etc. a temperate climate is more suitable. Therefore, the hilly states of Jammu and Kashmir, Himachal Pradesh and Uttarakhand are most appropriate for production of these seeds.

In the last two decades, the hybrid seeds market has gained ground in the country. Telangana is the largest producer of hybrid seeds, followed by Maharashtra and Karnataka. Out of the total hybrid seeds market in India, paddy has a market share of only 9%. The major part of the hybrid seeds market is Bt cotton (41%), followed by maize (15%), fruits and vegetables (13%) and paddy (9%). The hybrid seed market in the country is dominated by private companies.

Planting material for fruits is in high demand. The success in banana cultivation has been possible due to tissue culture. The Agriculture Universities in the State can collaborate with leading seed companies to attract them to the state. In August 2019, a group of experts chaired by Dr R.S. Paroda had submitted a ‘Report on Policies and Action Plan for a Secure and Sustainable Agriculture’ to the Principal Scientific Advisor to Government of India. It had also recommended to set up sub-mission of horticulture on quality planting material to take up large-scale production of high-quality planting material for horticultural crops, especially using tissue culture technology.

The Expert Group recommends Punjab to invest more in research and development. Several areas of agriculture are in crying need of exploration. For example, drip irrigation for paddy needs validation.

Machines and parts

Hiring of farm machinery is quite common in all states. Even without mobile apps, the farmers were able to locate small holders to hire their tractors and equipment. Mobile technology can bring more efficiency to these models which will be profitable for both the owner and the hirer of machinery.

Also read: Soaring Pulses: Is the Spike in Retail Price of Moong in 2020 a Cause for Concern?

The Expert Group has recommended that export of agricultural machinery should be encouraged. For multi crop combine harvesters, Punjab is already the leader and John Deere, CLAAS, KARTAR, PREET and DASHMESH are already there. The state needs to engage with them and find out how other agricultural machinery manufacturers can be attracted to the state.

Rotavators, mould board ploughs and tractor trailers are other items which are exported from India, largely to Africa. With its strength in SMEs, these items of machinery can be manufactured and exported from the state.

Calcium boost

Livestock and dairy is another sector for which the Expert Group has made important recommendations. However, it has not been mentioned in the Report that income from dairy is not exempted from income tax. As a result, herd size remains small.

At present, Punjab processes only about 20% of milk produced in the state. As per the livestock census 2019, the buffalo population has decreased from 5.2 million in 2012 to four million in 2019. In the same period, the population of cows (indigenous and exotic breeds) has gone up only slightly from 2.4 million to 2.5 million. Since the 1980s, the state government has been promoting exotic breeds, including Holstein Friesian. In the last decade, desi breeds like Sahiwal, Hariana, Rathi, Nagori and Tharparkar have also received attention of the government but their yield remains low. Anand-based Kaira District Milk Producers Union Ltd (Amul) has been expanding its operations in Punjab. Verka, Nestle,  Nutricia, True Milk and Metro Dairy are other players in milk sector.

During the COVID-19 lockdown, milk prices crashed, further hitting the income of farmers. Moreover, in tier II and tier III towns and villages, the consumer preference is for milking in front of the purchaser (“saamne ka doodh“).  The low level of milk processing could well be due to lower consumer preference and thus lower demand for packaged milk. That is why the private sector may be reluctant to invest. The situation may improve once the hotel, restaurant and catering demand is restored and milk prices recover.

The Expert Group’s recommendation of reducing the GST on ghee from 12% to 5% will help in some moderation of  prices. Ideally, no food product should have GST of more than 5%.

Eradication of foot and mouth disease (FMD) and burcellosis is critical for increasing milk production. The Expert Group has rightly observed that Punjab has a large scope to increase export of buffalo meat. There are seven export-oriented abattoirs in Dera Bassi alone. Since the trading of animals and transportation in Uttar Pradesh is severely restricted, Punjab has a good opportunity to fill the void. For this, investment in modern abattoirs is needed. Punjab must use the interest subvention scheme under Agriculture Infrastructure Fund for setting up small abattoirs, which can check pollution of underground water, drains and rivers. It is unfortunate that most states are not investing in setting up modern abattoirs and the ones that were set up by municipalities are in bad shape. Local residents are thus deprived of hygienic meat.

Out of milk cows, owners of calves and bulls have no market now and many of the animals are released as keeping them is too expensive. Such stray cattle, mostly crossbred, are also damaging crops. The Expert Group is silent on this, while farmers have to incur additional expenditure in securing their standing crops. In September 2019, the state government had announced a cabinet sub-committee to check the threat from stray cattle. It is not clear if the Commission for Agriculture Cost and Prices (CACP) is considering this extra expenditure in the cost of cultivation of various crops.

Also read: Punjab: Montek-Led Panel’s Prescription for Agri Reform ‘Is the Only Way Out’, Says Member

The Expert Group has rightly advocated promotion of poultry, fisheries and goatery. In Punjab and Haryana, more than three-fourths of the population is vegetarian so the market will have to be found outside these states. Since January 2020, fake news has caused enormous damage to the poultry industry by linking it to the spread of COVID-19. The Expert Group has recommended introduction of eggs in the mid-day meal scheme. Despite Punjab’s reputation of being a rich state, the National Family Health Survey 2015-16 found that 21.6% of children under five were underweight and 25.7% were stunted.

Finally, the Expert Group has noted that the food processing industry has not made much headway in Punjab. The Group recommends that Punjab should allow food companies to procure directly from farmers at a price agreed with them. As per the latest Annual Survey Industries (2016-17), Andhra Pradesh, Telangana and Tamil Nadu have highest number of registered factories in food processing sector.

The Ministry of Food Processing has sanctioned a grant of up to Rs 10 crore for 19 projects in Punjab. The total investment in these projects is Rs 443.5 crore. Meanwhile, the total investment in Maharashtra was 1,801.7 crore.

It must be said that many recommendations of the Expert Group, consisting of leading economists, captains of industry, professionals from private sector and retired IAS officers, actually fall in the Centre’s domain and the Centre should not ignore the same.

Looking ten years ahead, Punjab (and Haryana too) should prepare for a time when the area under paddy would be lower, many rice mills will have little paddy to mill and there will be intense competition to APMCs from ‘trade area’. It is only a matter of time before high taxes in mandis persuade the existing players to set up businesses outside APMC’s physical jurisdiction.

Punjab will do well to prepare itself for that future.

Siraj Hussain retired as Union Agriculture Secretary. Now he is Visiting Senior Fellow ICRIER.