Where Telangana Government went wrong?
a. Any crop planning exercise need to be done based on soil type, weather conditions and local needs. After making a good excercise of all these state decided to go for increasing area under paddy and cotton substantially which is a wrong decision. The assumption that centre will buy or there is a open market demand both were wrong. We were raising this issue with the meetings and outside in media. Paddy and Cotton have significant impact on water resources and environment too. So export dependency is also not wise.
b. When state had a robust procurement system as women self groups, PACS, FPOs, State decided to buy through Rytu Samanvay Samithis which were neither a legally registered body (so no access to loans, infrastructure etc), nor a elected body (to have equitable representation to all people). Government should have planned to procure the extent of produce required for its PDS instead of trying to buy everything. If the crop planning was effectively done to produce based on the state needs all the crops would have got the market.
c. to be competitive in the market we need to be cost effective and have better quality. Telangana has the highest per quintal cost of cultivation. It is Rs. 2529/q compared to Rs. 1902/q in neighboring AP, Rs. 1868/q in Punjab, Rs. 1735/TN. This comes from high input use, higher labor costs and variance in subsidies between states. The minimum support price is Rs. 1868/q.
d. Rytu Bandu was a good scheme Telangana tried to support farmers directly. Biggest mistake made was making land ownership as a criteria than the cultivation. Rs. 5000/acre/season would have compensated to an extent of Rs. 400/q for farmer for paddy for much more for other crops so it would have helped the cultivators.
Apart from the mistakes at the state level, Telangana States decision also shows what is wrong with the current support systems and procurement system followed by the centre.
a. Out of the total purchase of 356.18 LMT by the FCI , Punjab alone has contributed 202.77 LMT which is 56.93% of total procurement. (https://pib.gov.in/PressReleasePage.aspx?PRID=1679407). Procurement from Telangana was only 23 LMT against the production of nearly 250 LMT (120 LMt in Kharif and 130 in rabi). Nearly 100 LMT is the local consumption (including PDS).
b. in the open market the prices are low as there is more supply than demand. Cheaper produce is available in the market from other states. Nearly 50 LMT of rice is sold at the base price of Rs. 2250/quintal.
c. State and Central subsidies on power and fertilisers amounts to Rs. 1,58,864 Crore in 2015-16 which might have significantly increased now. these are not equally distributed across the states. for eg punjab and haryana gets Rs. 29,674/ha and Rs. 30,357/ha respectively while farmers in Telangana gets Rs. 24,195 (this will increase significantly with the lift irrigation dams coming into operation) this causes distortion between states, crops and farmers who use more of these inputs vs crops and farmers who dont.
So in terms of going forward these are our suggestions
a. Telangana state should review the decision on the crop planning excercise and use it as a tool to drive better cropping patterns. dont make tall promised on paddy and cotton but support other crops. for eg. area under fruits and vegetables can be increased significantly. Area under paddy and cotton can be brought down and increase area under oilseeds (not oil palm), pulses and millets.
b. One of the problem as a state we face is the high input use. per acre fertiliser use is one of the highest in the country. pesticide use is on rise. Both need to be cut down and promote organic/natural farming practices so that the quality of produce can get better demand.
c. Instead of withdrawing from procurement completely, state should play a facilitating role to help SHG groups, PACS, FPOs to procure the produce and link to FCI/NAFED/open markets. State should invest on building the infrastructure, access to credit to these community institutions.
d. Two main demands State should put before the centre are 1. centre should equitably procure from the states for its central pool and also support procurement for local consumption. to make it happen we should have decentralised procurement which should be based on local consumption, farmers income levels and cropping patterns rather centrally deciding to buy more from few states and distributing to other states. 2. The dumping into open market has a significant impact on the market prices and big foodgrain merchants/retailers are getting major benefits. State should take a view and possibly impose additional CESS on them or get protection to avoid this dumping. as it is the same story with all the crops where procurement operations are there.
Hope state take a better decision.