The response to the column on Agricultural Outsourcing, published a few weeks ago, first in the GP, then on the Net and shared among interested stakeholders has generated a fair amount of interest and speculation. Responses have been varied – from sheer excitement and ‘Do It Now’ – to ethical issues with regard to its impact on domestic producers in India, especially the marginal and small farmers as well as on the ecology of lands where the cultivation will be taken up, for in most cases this outsourcing will take place on virgin lands, or after clearing the natural vegetation, including wildlife, flora and fauna.
In response to the questions and queries, AgriMatters has designed a matrix of eight ‘Can We/Should’ questions to which the response could be in the affirmative, negative or a question mark. This will help stakeholders in getting a clearer perspective on the possible policy options.
First, over 120 million hectares of land is currently on offer for AO operations. Can we/ should we let go of this option at this juncture. This land cannot grow in size, and the prices are only likely to go up with every passing year. The counterfactual is that if all this land goes into production, prices of agricultural commodities will start crashing everywhere, and it may have an adverse impact on the production economies of developing nations.
Second, can we/should we try influencing West Asia, EU and China to evolve some global guidelines/best practices for responsible agriculture which will ensure minimum and fair standards for the workforce engaged in this task. Evolving and enforcing such standards will also take quite some time. There will also be turf issues between the WTO , the FAO and the IFAD. The counterfactual to this is that in most cases(with the exception of China) AO is not labour intensive, but capital intensive.
Third, can we/ should we establish a Sovereign Wealth Fund to go in for direct acquisition of land, as has been done by some countries, especially West Asia to ensure that lands under AO can address issues of domestic Food security. AO has no bearing on the food security issues unless the country financing the AO operation has a direct control over the production system. A corporate entity is free to trade its commodities for the best process globally, and may or not respond to the needs of the country of origin. On the other hand, if nations go into agriculture production themselves, the outcome will be effective, but not efficient. Managing such a fund is also quite contentious.
Fourth, can we/should we extend financial support to corporate/large farmers engaged in this task. Even though many farmer –entrepreneurs are raising this demand, there are basic problems – the most important among them being the prevailing interest rates. India cannot give loans for AO at rates lower than what our banking system offers to the marginal and small farmers- and this is 6% per annum. However, in the global market, funds are available at almost half this rate of interest, thereby making the Indian AO less competitive than their counterparts elsewhere.
The fifth issue relates to extending policy support, documentation of best practices and co-ordination with our Missions abroad and the MEA. There seems to be a fair consensus on this issue that should someone want to take this up on one’s own initiative, this should be encouraged. Several state governments have taken the initiative in this regard, and our Missions abroad are also not very clear about whether we need to have a policy on this issue.
The sixth issue relates to extension of MSP for India –funded AOs in the three commodities that India needs to stabilize prices and PDS , viz pulses, oilseeds and sugar. India is currently seeking these commodities from the world market, and these are likely to be in short supply for the next ten to fifteen years at least. On the contrary, it should be mentioned that the supply – demand gap for these commodities is rising, and there does no seems to be any additional land that India can bring under plough. Whether or not his can be made WTO compatible is an obvious question , but certainly if a PSU could establish a JV, there may be a way out.
The seventh issue relates to whether our major PSUs, especially those which have substantial exposure abroad should venture into AO. ONGC Videsh, PEC and RITES come to mind immediately. These are efficiently run PSUs and have a substantial interest in, and expertise in dealing with government in the countries which are looking for inward investment for AO. When ONGC Videsh is aiming investments in Sudan for oil exploration, why should it not take the next logical step of branching out. This need be done by ONGC /ONGC Videsh directly, but through a JV with IFFCO or Nafed, or a major seeds corporation.
The eighth issue relates to the role of Agriculture Department in taking this forward ? is it best left to Commerce Ministry (which deals with corporate), or Department of Food (which has the responsibility under the proposed Right to Food Act ) or the Ministry of Consumer Affairs ( which should protect the interest of consumers. Should Agriculture Ministries , both at Centre and the states be devoting their quality time on these issues, especially when the general farmer in India is not expected to reap any benefits out of this. There is a far more fundamental issue : should government, including the Indian Missions abroad have anything to do with it. Now that the details of most offers are available on the web sites, why get into this at all. The first movers and pioneers have in any case taken the plunge without any reference from the government. Let others follow suit.
Maybe , its best to let AO follow the BPO route ….