SPECIAL SECTION: TRANSGENIC CROPS
Policy and technological options to deal with
India’s food surpluses and shortages
Ramesh Chand* and Suresh Pal
National Centre for Agricultural Economics and Policy Research, P.O. Box No. 11305, Library Avenue, Pusa, New Delhi 110 012, India
Indian agriculture at the beginning of the 21st century
faces major challenges and serious contradictions. On
one hand, the country has more than 60 million tons of
foodgrains in public stock and on the other hand, every
fourth Indian is reported to be underfed and does not get
even a minimum calorie intake. The country faces a
massive shortage of edible oils and pulses, which is being
met through imports. As these crops are grown mainly in
dryland areas, their continued low productivity and
adverse impact of import on their prices are detrimental
to the interests of producers. One option for the country
to meet the import bills of edible oils and pulses is to
earn from the export of rice and wheat. However, recent
trends show that India finds it difficult to sell surplus
wheat and rice stocks to other countries even at sixty per
cent of the domestic price. The increasing burden of edible
oil imports and poor earnings from export of surplus
grain is a matter of serious concern and adjusting these
imbalances though trade is not proving beneficial (see
endnote 1).
The demand and supply imbalances in Indian agriculture are due to both technological and policy factors.
The technological breakthrough of the green revolution
has been highly biased towards cereals. It led to a sharp
increase in productivity of cereals while pulses and oilseeds witnessed a very small increase. This can be seen
from Figure 1, which shows trends in productivity of
cereals, oilseeds and pulses during the last 30 years assuming year 1970–71 as the common base. The technological
advantage in cereal cultivation has been further reinforced by strong policy support as the Government of
India provided remunerative and assured prices for the
two cereals. Therefore, cultivation of cereals, particularly
rice and wheat, not only enjoyed productivity advantages
but also ensured stable and assured economic returns
which raised their relative profitability. Consequently,
there was a large shift in land and other resources towards
cultivation of these two cereal crops.
The combination of technological breakthroughs and
strong policy support has served the important purpose of
achieving food security for the country. However, current
levels of rice and wheat production cannot be absorbed
either within the country or exported for profit at existing
*For correspondence. (e-mail: [email protected])
388
price levels. Meanwhile there is a massive shortage of
edible oils and pulses. How can these imbalances be
corrected? What are the technological and policy options
to change the existing production patterns in the desired
direction? Do new innovations in the area of transgenics
and biotechnology hold promise for pulses and oilseed
crops? What kind of input–output pricing policy related
to subsidies and price intervention is required to restore
balance in the structure of agricultural produc-tion? This
article is an attempt to address some of these questions.
Food demand and requirements
There is a lot of debate on future requirement of food in
India and this stems from the following causes. The
estimates on demand projections by various experts show
large divergence. Secondly, demand for food is often considered synonymous with demand for foodgrains or even
cereals. At times, a very narrow view of food security is
taken by looking at the availability of only rice and
wheat, which creates an erroneous impression about food
security. If the concept of food is taken in a proper and
broad sense, including fruits, vegetables, animal products, etc., the demand scenario may be entirely different
compared to the one which equates food to grains alone.
Figure 1. Trend in index of yield of cereals, pulses and oilseeds,
1970–71 to 1999–2000.
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
SPECIAL SECTION: TRANSGENIC CROPS
Demand projections
Two sets of estimates giving demand projections for food
towards the year 2020 have been widely discussed in
recent years. One estimate is based on the study published
by the Washington-based International Food Policy Research
Institute (IFPRI)1 and the other is based on a study published by the Indian Agricultural Research Institute, New
Delhi2. The two studies basically differ on two counts, viz.
estimates of expenditure elasticity (see endnote 2), which is
at the core of demand projection, and estimates of demand
for animal feed. These estimates as used by the two studies
are presented in Table 1; they reveal the per cent change
in demand of the given commodity or commodity group
in response to a unit per cent increase in income represented by expenditure. The IFPRI study is designed to
include changes in elasticity parameter over time, whereas
the IARI study assumes the same elasticity throughout.
As can be seen from Table 1, there is wide divergence
in elasticity estimates used by the two studies in making
demand projection. For example, assuming 3% growth
rate in per capita income during the period 2000 to 2020,
the IFPRI study would imply about 8% growth in per
person cereal demand, whereas the IARI study implies
1.6% decline in per capita cereal demand. Thus, according
to the IARI study, direct demand for cereals would rise
only on account of increase in population, whereas, Bhalla,
Hazell and Kerr (hereafter referred as BHK, IFPRI study)
report a large increase in demand due to growth in
income in addition to the impact of population growth.
According to Kumar2, any increase in per capita income
of Indian population would result in a small decline in
Table 1.
direct consumption of cereals and a modest-to-high growth
in demand for livestock products, fruits and vegetables.
BHK projects that income growth would raise demand
for livestock products at a much higher rate than that
projected by Kumar. The BHK report is also not in agreement with that of Kumar on negative income elasticity of
cereal demand – implying reduction in demand for cereals
with increase in income. However, some of the researchers working in demand projections3,4 have observed
decline in per capita foodgrain consumption in rural India
in recent times which lends credence to a negative, albeit
small, expenditure elasticity of cereals reported by Kumar.
The second divergence between the estimates of Kumar
and BHK is due to estimates for feed demand. BHK
assumes that expansion in livestock production would
entail increase in feed coefficient to a level of 1.2 kg of
cereal per kg of meat and egg and 0.72 kg of cereal per
kg of milk as they observed that traditional sources of
feed like grazing areas are shrinking. They also assumed
higher growth in demand for livestock products compared to Kumar, which further increases the difference in
feed demand estimates of the two studies. The demand
projections made by the two studies are presented in
Table 2. According to BHK, domestic demand for cereals
would grow at a rate of 2.53% corresponding to 3.5%
annual growth rate in per capita income. According to
Kumar, the rate of growth in cereal demand would be
1.88%.
An important question is – which growth rate is likely to
hold for India? The two estimates have been widely
discussed in various seminars where the consensus is that
actual demand growth would be between these two
Estimates of expenditure elasticities based on IFPRI and IARI studies
Source
Bhalla, Hazel and Kerr (IFPRI)
Rural
Urban
Kumar (IARI)
Rural
Urban
Year
Cereals
Meat and
egg
Milk and milk
product
1993
2001
1993
2001
0.29
0.10
0.18
0.10
1.01
1.25
0.71
0.74
1.53
1.53
0.94
1.05
1993–94
1993–94
– 0.007
– 0.037
0.848
0.633
0.458
0.372
Source: 1. Bhalla et al.1, 2. Kumar2.
Table 2.
Source
Demand projection for cereals towards 2020 (million ton)
Year
Food
Feed
Subtotal
All uses
Growth rate (%)
1993
2020
147.12
246.08
3.71
50.11
150.83
296.19
–
–
2.53
1995
2020
150.6
237.6
6.54
15.19
156.60
252.25
166.67
265.8
1.88
Bhalla et al.
Kumar*
*Kumar’s projections correspond to 5% growth rate in GDP.
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
389
SPECIAL SECTION: TRANSGENIC CROPS
estimates as the higher side estimate of BHK is believed
to be an overestimate and the lower one is believed to
underestimate the cereal demand. The average of the two
comes to a 2.20% increase in cereal demand per annum,
which can be taken as a reasonable estimate to reflect
growth in cereal demand in India.
As against the growth rate of demand, Kumar has
projected a somewhat higher growth in supply of cereals,
which would leave positive surplus in total cereal output
till the year 2020 even under deceleration in total factor
productivity growth. Further, Kumar has noted significant changes in composition of food basket which has
implications for domestic production and resources allocation to various sub-sectors of food production in the
future. To understand this further, the growth rate in
demand for other food commodities along with the recent
growth rates in their output is presented in Table 3.
Table 3.
Projected growth rates (%) in demand for major foods
towards 2020 AD and recent growth in supply
Commodity
Demand growth rate
1995–2020*
Output growth rate in
the last 10 years†
Cereals
Pulses
Edible oil
Oilseeds
Milk
Fruit
Vegetables
Eggs
Fish
1.88
2.98
2.91‡
–
3.26
3.20
2.91
3.76
3.75
2.16
0.63
2.06
2.29
4.14
5.75
4.79
4.59
4.28
*Taken from Kumar2 for 5% growth in GDP.
Our own estimates based on official data on production.
‡
Derived by us using the elasticity reported by Kumar2.
†
Table 4.
1988–89
1989–90
1990–91
1991–92
1992–93
1993–94
1994–95
1995–96
1996–97
1997–98
1998–99
1999–00
2000–01
Crop diversification: role of price policy
and subsidies
It has been shown in the previous section that growth in
supply of edible oils and pulses has not been keeping pace
with the growth in demand. This has resulted into a rapid
increase in the import of edible oils while pulse deficit is
reflected in both imports as well as in increase in
domestic prices of pulses. It is seen from Table 4 that in
the beginning of 1990s India imported very small quantities of edible oil which further declined to around 100
thousand tons by 1993–94 following which edible oil
imports witnessed a sharp increase. India has emerged as
the largest importer of edible oils in the world with
imports exceeding 4 million tons. Currently, India meets
about 40% of its edible oil demand from imports.
A sharp increase in edible oil imports as a result of
liberalization has depressed domestic prices considerably. Table 5 shows changes in wholesale price index of
select agricultural commodities taking 1993–94 as the
base year. Though palm oil imports contribute a predominant share of the imported edible oil, the impact of the
Import dependence of edible oils and pulses and cereal stocks with the Central Government
Import (000 ton)
Year
Table 3 shows that the demand for non-cereal foods
would grow by 50% more than the growth in cereal
demand. Demand for pulses, edible oils and vegetables
would increase in the range of 2.9–3.0% and that of fruits
and livestock products by more than 3.20%. The growth
rates achieved in supply in the recent past are higher than
the growth rate in demand for all commodities except pulses and oilseeds. In case the growth in supply of deficit
commodities fails to keep pace with the trend in demand,
the gap has to be filled either through imports or it would
increase in relative prices of the concerned commodities.
Production (000 ton)
Rapeseed/mustard
and soybean oil
All edible
oils
Pulses
218
31
25
25
62
30
41
123
22
52
667
880
411
1083
324
525
226
103
114
347
1062
1416
1265
2622
4196
4268
756
470
1273
313
383
628
554
486
692
1084
629
269
352
Edible
oils
4980
4811
4877
5022
5247
5397
5531
5611
6170
5041
5685
4603
Buffer stock of cereals
(million ton)
Pulses
Minimum
Maximum
1385
1286
1426
1202
1282
1330
1404
1231
1425
1298
1490
1340
1070
8.2
6.2
10.4
13.9
11.1
12.7
20.5
26.8
19.8
15.3
18.2
21.9
21.7
12.4
12.8
18.9
20.9
13.8
24.2
30.7
35.6
27.0
22.4
28.5
33.1
45.7
Sources of basic data:
1. Monthly Statistics of Foreign Trade of India, Volume I and II; Annual Number, DGCIS, Ministry of
Commerce, Kolkata, Various issues.
2. Food Statistics, Ministry of PDS and Consumer Affairs, GOI, New Delhi.
3. Agricultural Statistics at a Glance, Ministry of Agriculture, GOI, New Delhi.
390
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
SPECIAL SECTION: TRANSGENIC CROPS
import occurs on all edible oilseeds due to close substitution among different edible oils. Table 5 also shows that
from 1993–94 to 2000–01, prices of edible oil have increased
merely by 3% whereas prices of rice, wheat and pulses in
the same period have increased by 68, 78 and 79%, respectively. Thus, relative prices and profitability of edible
oils have sharply declined during the last eight years, causing adverse impact on farmers growing oilseed crops.
The requirement of pulses in the country is also met
through imports. Average imports during the last three
years were around 416,000 tons, which constitutes 3.4% of
total domestic demand for pulses. Despite the imports,
the per capita consumption of pulses is declining. During
the year 2000 per capita per day net availability of pulses
in India dropped to 31.2 g, which is less than half of the
consumption level that existed during early 1960s, before
the onset of the green revolution.
While the country is facing a massive shortage of
edible oils and pulses, there is a concomitant problem of
selling excess cereal produce. Buffer stocks of rice and
wheat before the arrival of wheat crop of rabi 2000–2001
Table 5. Changes in wholesale prices of selected agricultural
commodities as revealed by wholesale price index (WPI)
with base 1993–94 = 100
Year
Primary food
Rice
Wheat
Pulses
Edible oil
113
122
137
141
159
165
171
111
117
128
134
146
171
168
109
112
137
138
151
175
178
122
135
151
145
160
166
179
111
117
115
113
139
122
103
1994–95
1995–96
1996–97
1997–98
1998–99
1999–00
2000–01
Source: Economic Survey, Ministry of Finance, GOI, New Delhi.
Table 6.
was reported to be 46 million tons and after the procurement of rabi season of the year 2001, the buffer stock
with central agencies has exceeded 60 million tons. During
the agricultural year 2000–01, more than one fourth of
rice and wheat output of the country has remained in
public sector stocks, causing serious strain on the state exchequer due to cost of storage, interest on blocked capital
and deterioration in quality and value of stored produce.
How can these imbalances be addressed? What are the
hindrances and constraints in diversifying some of the
area under cereals, particularly rice and wheat, to pulses
and oilseeds to achieve balance in domestic need and
production? We look for answers to these questions by
examining the differences in net return to farmers over
paid out cost (see endnote 3) for various crops. These
estimates of net return refer to triennium average ending
1996–97 for kharif crops and 1997–98 for rabi crops.
This is the latest triennium for which published data are
available from ‘Cost of Cultivation Scheme’ of Directorate
of Economics and Statistics, Ministry of Agriculture, GOI –
the only set of data which is comprehensive, comparable
and representative for the major states producing cereals,
pulses and oilseeds. The estimates are available only for
the major crops grown in different states (Table 6).
Cotton (among kharif crops) and wheat (in rabi season)
are found to be the most remunerative in most states. In
Andhra Pradesh, urad was the highest paying pulse crop
but its net return was only Rs 6790 compared to Rs 10,098
from paddy. Similarly, net return from groundnut (oilseed) was quite low compared to paddy. Net income from
rapeseed/mustard cultivation in Punjab is less than one
fifth of the net income from wheat. In Rajasthan, chickpea requires a 130% increase and rapeseed/mustard needs
72% increase in net income to compete with wheat.
Net return from selected crops grown in different states (Rupees/hectare)
Andhra
Pradesh
Gujarat
Haryana
Madhya
Pradesh
Maharashtra
Orissa
Rajasthan
Punjab
Tamil Nadu
UP
Kharif crops
Paddy
Jowar
Bajra
Maize
Urad
Moong
Arhar
Groundnut
Sesamum
Soybean
Nigerseed
Sunflower
Cotton
10098
2144
–
3352
6790
3620
–
4203
–
–
–
–
12159
–
–
3814
–
–
–
9468
7444
–
–
–
–
9702
10105
–
3836
–
–
–
–
–
–
–
–
–
20885
5567
3070
–
2715
3690
–
8157
–
–
5516
–
–
6135
–
4239
2075
–
2861
2356
–
6176
–
6397
–
2832
7231
6926
–
–
–
4022
2583
3156
8888
–
–
1945
–
–
–
–
2551
5657
–
–
–
–
2197
6214
–
–
17315
11337
–
–
–
–
–
–
–
–
–
–
–
15778
–
2447
2173
–
6145
–
–
5636
3477
–
–
–
11496
9510
–
4231
3806
3914
–
13838
–
3034
–
–
–
–
Rabi crops
Wheat
Barley
Chickpea
R/Mustard
Sugarcane
9957
–
–
3551
32460
–
–
–
9486
–
14262
–
7666
8980
33110
6722
–
5544
5923
20671
–
–
–
–
20302
–
–
–
–
–
13663
8809
5923
7934
–
12717
–
–
–
–
–
–
10241
8351
8129
10137
25534
Crop
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
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39680
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SPECIAL SECTION: TRANSGENIC CROPS
Table 7.
Productivity/price increase (%) required to raise level of profitability of
oilseeds and pulses at par with rice and wheat
Scenario
Paddy v/s groundnut
Paddy v/s urad
Wheat v/s chickpea
Wheat v/s R/mustard
Andhra
Pradesh
62.0
37.0
Madhya
Pradesh
Rajasthan
Haryana
Punjab
34.1
15.0
9.4
104.3
49.7
71.6
41.3
84.6
Source of basic data: Cost of Cultivation of Principal Crops, Ministry of Agriculture,
GOI, New Delhi.
A further exercise was done to estimate the required
increase in price or productivity of the highest paying
oilseed and pulse crop to raise their profitability at par
with paddy in kharif and wheat in rabi season for a few
states where complete data on all these crops were available (Table 7). For Andhra Pradesh, either productivity
or price of the highest paying pulse and oilseed must rise
by 62 and 37% respectively to compete with paddy. In
rabi season, price or productivity of pulses and rapeseed/
mustard in the state of Haryana needs to increase by 72
and 41% respectively to arrive at par with the net income
from wheat. In Madhya Pradesh, the required increase is
of the order of 15 and 9% only. In Punjab and Rajasthan,
price or productivity of rapeseed/mustard needs to be
raised by 85 and 50% respectively to compete with profitability of wheat crop.
Relatively low returns is one of the key factors for production of oilseed and pulses not keeping pace with the
domestic demand. The other factors are high uncertainty
and risk associated with their yields and prices. Table 8
shows that prices of rice and wheat in representative
markets of the country deviated around the trend by less
than 9%. Compared to this, instability in prices of pulses,
as indicated by chickpea, was 28.75%. Similarly, instability in prices of rapeseed/mustard was more than double
the instability in rice and wheat prices.
The above results show that cultivation of pulses and
oilseeds in India is characterized by low returns and a
high degree of yield and price risks. Therefore, diversification towards these crops would require increase in
their yield and prices along with stability in them.
Price policy
Stable and remunerative prices are the foremost factor to
encourage the adoption of new technologies. To this end,
the Government of India had set up the Agricultural
Prices Commission in 1965 to advise the government on
a regular basis for evolving a balanced and integrated
price structure. Another institution, the Food Corporation
of India, was also established in the same year for direct
intervention and price administration through procurements and release/sale of foodgrains. The most signi392
Table 8.
Crop
Wheat
Rice
Sorghum
Maize
Cotton
Chickpea
Tur
Groundnut
R/Mustard
Instability (%) in domestic prices and productivity of
selected crops 1980–81 to 1998–99
Market
Price instability
Yield instability
Hapur
Delhi
Nagpur
Kanpur
Broach
Jabalpur
Aurangabad
Rajkot
Kanpur
8.82
6.64
23.30
19.87
26.88
28.75
19.94
14.09
19.41
5.62
6.64
18.83
13.76
14.51
11.89
15.76
17.80
15.67
Source: Agricultural Prices in India, Ministry of Agriculture, GOI.
Indian Agriculture in Brief, Ministry of Agriculture, GOI.
ficant instrument of agricultural price policy has been
assurance of minimum support prices which serve as a
surety to farmers that bumper harvests, market malpractices or any other factor cannot force the prices to fall
below the floor level5. Looking at the achievement of
policy of administered prices in relation to the set target,
the following conclusions can be made: (a) the price
policy has been very successful in providing incentive for
adoption of new technology for rice and wheat envisaged, (b) the price policy failed to induce changes in
production pattern consistent with overall needs of the
economy. This was due to the fact that both price policy
and technological change remained biased towards rice
and wheat.
Due to changes in the consumption basket of food,
there is a need to develop technologies that promote diversification of agriculture sector. Thus price interventions
in future should be such that agricultural diversification
is encouraged. There is also a need to discuss criteria on
which minimum support price (MSP) should be based in
the changing context. As is the popular perception, MSP
is determined mainly on the basis of cost of production.
When the emphasis of production is shifting from food
security to market-led production, is it justified to base
MSP on cost of production? A serious limitation of fixing
support price or procurement price on the basis of cost
criterion is that it completely ignores demand side
factors. Thus, if producers are getting a price corresponding to cost of production, the commodity would be
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
SPECIAL SECTION: TRANSGENIC CROPS
produced whether it has a demand or not. This is exactly
what is happening to wheat and rice presently. A large
part of the produce is getting accumulated in government
stocks as it cannot be sold at the price corresponding to
procurement price plus cost of marketing, handling, etc.
For instance, economic cost of wheat to Food Corporation of India in the middle of 2001 was reported to be
Rs 8300/ton whereas the open market price was Rs 7000/
ton – even this price would crash if the stock with the
government is released in the open market. Export could
be another avenue for disposing mounting stock but recent
experiences with wheat exports have been quite depressing. Wheat has been offered for export at Rs 4300 per ton
for May 2001 (ref. 6) which amounts to an implicit
subsidy or loss of Rs 4000 per ton of exported wheat.
There are also reports of government trying to sell rice
for export at a much lower price than the cost to government and also compared to prevailing domestic price.
Thus, dealing with the present situation of wheat and rice
surplus poses a major challenge to the government and
requires bold policy initiatives. The solution seems to be
an ‘adjustment in crop pattern consistent mainly with
domestic requirements’. This requires price policy to
accord priority to deficit crops and to leave price of surplus crop to be determined by factors on demand side.
Distortions due to input subsidies
Subsidies on farm inputs were initially meant to induce
farmers to adopt new technologies. It was with this intention that since mid-1970s the central and state governments
have followed a policy of supplying fertilizer, irrigation
water and power at prices which do not fully cover costs.
Table 9.
No doubt input subsidies have helped in large scale adoption of new technologies and growth in output. However,
their levels have risen to such proportions which cannot
be sustained and their beneficial effects are said to be
outweighed by the adverse effects in terms of macroeconomic imbalances, slowing down of public investments
in agriculture, inefficient use of resources, degradation of
environment and reduction of employment7. Since input
intensity differs from crop to crop, subsidy on inputs has
favoured crops requiring higher doses of subsidised inputs
like water and fertilizer. This has distorted the crop pattern by artificially raising profitability of some crops.
As input subsidies are available on purchased inputs,
this has led to regional imbalances as well as imbalances
in cropping system within different regions. Regional
dimension in input subsidy is particularly important
because the major burden of subsidies is borne by the
central government, which results, in a pervasive way, in
uneven distribution of the benefits by the federal government to states. Similarly, input subsidies have produced
distortion in cropping pattern elbowing out crops which
use more of traditional inputs and less of purchased inputs.
Traditional farm technologies which are sustainable in
the long run and do not require external subsidization,
have fallen victim to subsidy-based farm technologies.
Variation in use level of subsidized inputs is the main
source of variation in cost of production of important
crops across states. The market price based on such costs
is generally remunerative for regions which make higher
use of subsidized inputs and less or unremunerative to the
regions which use lower level of subsidized inputs. The
impact of subsidy on cost of production and crop income
can be seen from Table 9 which provides estimates of
Cost and returns from rice, wheat, pulses and oilseeds with and without input subsidy
in Punjab and Haryana, 1995–96 (Rupees/hectare)
Punjab
Haryana
Paddy
Wheat
R/mustard
Paddy
Wheat
Chickpea
R/mustard
3474
705
4179
848
914
1762
403
393
796
5040
833
5873
1560
784
2344
118
3
121
424
360
784
8426
12605
49.6
7443
9205
23.7
4556
5352
17.5
11435
17307
51.4
7587
9932
30.9
2848
2969
4.3
4384
5167
17.9
Net return over operational cost
Without subsidy
9372
With subsidy
13551
Change in NR (%)
– 30.8
8383
10145
– 17.4
4465
5261
– 15.1
8624
14497
– 40.5
10360
12704
– 18.5
4458
4579
– 2.7
8260
9044
– 8.7
1437
7309
– 80.3
4292
6637
– 35.3
1670
1791
– 6.8
3867
4651
– 16.8
Input subsidy
Water and electricity
Fertilizer
Subtotal
Operational cost
With subsidy
Without subsidy
Change in cost (%)
Net return over total cost
Without subsidy
With subsidy
Change in NR (%)
2272
6451
– 64.8
1514
3277
– 53.8
– 21
775
–
Total cost includes fixed cost like depreciation, interest on fixed capital and rent on own and leased land.
Source: See endnote 4.
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
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SPECIAL SECTION: TRANSGENIC CROPS
cost and return for selected crops with and without input
subsidies (see endnote 4).
Input subsidy in paddy cultivation during the year
1995–96 was Rs 4179/ha in Punjab and Rs 5873/ha in
Haryana. The subsidy was less than Rs 800 for rapeseed
mustard and only Rs 121 for chickpea. If there is no input
subsidy, the operational cost of paddy would increase by
about 50%. The increase in operational cost of wheat
would be 24 and 30% in Punjab and Haryana respectively. Due to low subsidy content, rapeseed/mustard and
chickpea would experience only 17 and 4% rise in the
cost in complete absence of input subsidy.
The impact of withdrawal of input subsidy is very strong
on net return over total cost which includes operational
and fixed costs and paid out and imputed costs. Withdrawal of subsidy on irrigation, water and fertilizer pulls
down profitability of paddy by 65% in Punjab and by
80% in Haryana. Net income from wheat production is
squeezed by more than half in Punjab and by more than
one third in Haryana. The decline is only 17% for rapeseed/
mustard and 7% for chickpea.
Reduction in the subsidies and pegging input prices at
realistic levels may initially cause a small reduction in
the use of inputs but it would be beneficial for the
agriculture sector in the long run. This would improve
the quality of inputs and delivery, promote input use
efficiency, reduce degradation of land and water
resources and induce changes in cropping pattern to
reduce imbalances in demand and supply.
Role of biotechnology in crop diversification
Broadly speaking, molecular biology and biotechnology
approaches can be defined as research methods to address
production needs. These research methods of biotechnology are more advanced, accurate and perhaps more efficient than the conventional methods. As social scientists,
we believe that benefits of biotechnology would accrue
through (i) better understanding and utilization of genetic
resources, (ii) achieving success in areas where conventional breeding has failed or has limited scope, and
(iii) reducing research and development lag, particularly
in those commodities where breeding cycle is long. Assessing different commodities against these benefits and probability of research success will help prioritize research
portfolio. But these parameters of research prioritization
need to be juxtaposed with demand considerations and
economic significance of a commodity. Using these
broad criteria, we outline some of the areas of immediate
concern for biotechnology research.
A large number of studies have shown significant yield
and production losses due to various biotic and abiotic
stresses. These losses are particularly high in pulses and
oilseeds besides rice, cotton and horticultural crops. A
reduction in these losses would not only improve pro394
fitability of these crops but also contribute to food and
nutritional security. Increase in the yield of pulses and
oilseeds would reduce cost per unit of production which,
in turn, would lower domestic prices, which is essential
for checking imports under the new trade regime.
Biotechnology methods can help understand tolerance
mechanism of plants to various stresses, identify gene(s)
responsible for tolerance and transfer of genes for developing tolerant varieties. Early efforts in this direction are
found encouraging8. Any further breakthrough in this
direction, particularly for tolerance to moisture stress,
would provide the much-needed impetus to dryland agriculture dominated by pulses, oilseeds and coarse cereals.
Investments in crop R&D and biotechnology
Historically, crop improvement research in India, as part
of agricultural research, has been in the public domain.
At the national level there is the Indian Council of Agricultural Research (ICAR) to plan, co-ordinate and undertake research programmes for agriculture. The ICAR has
established a vast network of research institutions and programmes. All these institutions and programmes can
broadly be classified into three groups: first, national or
central research institutes to undertake basic and strategic
research in a disciplinary set-up; second, research centres
and project directorates to undertake applied research in a
mission-mode approach; and third, all-India coordinated
research projects (AICRPs) for applied research in a multiinstitutional and multidisciplinary approach. Most of the
programmes are crop-based, covering all major crops
grown in the country. There are a few institutions like the
Indian Agricultural Research Institute, the National
Bureau of Plant Genetic Resources and the National
Research Centre on Plant Biotechnology, which undertake research on more than one crop. Research institutes
dealing with horticultural crops usually cover multiple
targets – vegetables, fruits or flowers. As of now, there
are 42 research institutes under the ICAR conducting
crop improvement research for field and horticultural
crops, besides a number of AICRPs. It may be noted here
that these institutions do not exclusively work for crop
improvement and a significant amount of their activities
focus on other supporting research like management and
protection of crops. There are also other institutions supporting crop improvement research directly or indirectly.
In addition, there are 31 state agricultural universities
(SAUs) catering to research needs of the respective states
besides education. In addition, there is one central university for the north-eastern states.
In addition to the ICAR and SAU systems, other public
research organizations (such as Department of Biotechnology, Department of Science and Technology and
Council for Scientific and Industrial Research) and some
non-agricultural universities also support or conduct reCURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
SPECIAL SECTION: TRANSGENIC CROPS
search on field crops. Their expenditure on crop research
is not readily available because of multiplicity of mandates, institutions and mode of funding. The same is true
for private (profit and non-profit) research organisations –
information on their number, activities and investments is
not readily available. However, it is widely documented
that most of these private institutions are involved in the
seed business and derive strength from breeding lines
developed by public research programmes.
Funding
As noted in the previous section, agricultural research in
India is conducted largely in government funded and
administered organisations. The Central Government
funds the ICAR while the State Governments fund the
SAU(s) of their respective states. Trends in expenditure
on agricultural research and education in the country and
the three discernible patterns were analysed9. First,
unlike in other countries, the real public expenditure
showed a consistent upward trend. Second, both Central
and State Government funding contributed to this growth
in overall expenditure. The share of the centre and states
is now almost equal. The contribution of private funds is
rather nominal (15%). Thirdly, intensity of expenditure
is about 0.42% of agricultural gross domestic product
(AgGDP), which is much less in comparison to that in
developed countries (2.5%). The trend in government
expenditure on agricultural research and education and its
intensity in terms of per cent of GDP agriculture are
presented in Table 10.
On an average, about one-fourth of the total expenditure is spent on crop research (in ICAR this share is
about 30%)9. It is rather difficult to estimate the share of
crop improvement research in this expenditure because of
paucity of data. One approximation could be apportioning of the total expenditure based on the share of crop
improvement scientists in the total scientific manpower.
This gives an estimate of 43% of the total expenditure on
crop research or about 11% of the total agricultural research expenditure.
The low proportion of agricultural research in agricultural GDP in India needs immediate attention because of
two reasons. First, India and in fact the whole Asian
region is not a priority region for most traditional donor
countries contributing to agricultural development. Secondly, research expenditure of the Consultative Group on
International Agricultural Research (CGIAR) has also
witnessed stagnancy because of decline in funding from
the US government and private foundations which were
traditional dominant sources of funds for CGIAR Institutions. The total expenditure of CGIAR increased from
244 million in the early eighties to 316 million (in equivalence to 1993 dollar value) in the mid-nineties10. Moreover, priority of CG Centres seems to be shifting from
Asia to Africa.
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
Investments in crop biotechnology
Assessment of research expenditure on crop biotechnology is complicated because of several reasons. This is
because biotechnology research is being conducted in a
number of institutions and most of them have multiple
mandates and research activities. The funding agencies
like ICAR, DBT, DST, etc. have core as well as competitive funding for various research activities including biotechnology. All this makes assessment of their efforts on
crop biotechnology difficult. No data are available for
private research expenditure. One way to address this issue
is to conduct a survey for assessing the expenditure and
scientific manpower. But this requires heavy investment
of resources and time, and could be an independent
research programme in itself. We however provide an
estimate of the expenditure on crop biotechnology using
available information with some assumptions. Our estimates refer only to the public expenditure on crop biotechnology made/supported by DBT and ICAR. It may be
noted here that these are the main agencies dealing with
crop biotechnology and they support significant proportion of biotechnology programmes currently underway.
Nevertheless, this could be an underestimation of research
expenditure on crop biotechnology to some extent.
As seen from Table 11, the real expenditure on biotechnology by the government (at 1993–94 prices) increased
by 22% during the last one decade. The corresponding
increase in real expenditure on agricultural biotechnology
is 40%; and most of the increase took place in 1999–2000
because of additional support provided to biotechnology
research under the National Agricultural Technology Project (NATP of ICAR) funded by the World Bank. It may be
Table 10.
Years
1970–71
1975–76
1980–81
1985–86
1990–91
1995–96
1998–99
Government expenditure on agriculture research and
education (Rs crore)
At current prices
At 1981–82 prices
Per cent of AgGDP
37.06
88.52
162.36
319.72
713.70
1,202.00
1,966.00
87.13
127.20
183.60
238.42
355.78
358.06
445.80
0.207
0.307
0.348
0.414
0.482
0.434
0.419
Source: Pal and Singh9 with further updates by Suresh Pal for recent
years.
Table 11.
Year
1989–90
1994–95
1999–00
Annual public expenditure on crop biotechnology in India,
at 1993 prices (million Rs)
All biotechnology
programmes
Agricultural
biotechnology
951
985
1167
544
574
761
Source: Compiled from various publications/records.
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SPECIAL SECTION: TRANSGENIC CROPS
noted here that the expenditure on agricultural biotechnology is arrived by taking into account the entire
expenditure of ICAR on biotechnology and 50% of DBT
expenditure. The ICAR expenditure is taken in proportion to the number of scientists in biotechnology to the
total number of scientists. Most of the expenditure on
agricultural biotechnology is for crops and only a small
proportion is spent on animal and fish biotechnology. A
study by Qaim11 arrived at an estimate of US$ 6.8 million
expenditure on agricultural biotechnology in India, using
similar assumptions, which grossly underestimates agricultural biotechnology efforts. This perhaps could be because
of underestimation of biotechnology research expenditure
in ICAR institutes.
It is important to note here that, although the real expenditure on biotechnology has increased in India, this may
be much lower than in other developed countries. Within
India also, the expenditure is a small proportion of the
total research expenditure in the country. It is therefore
essential that the government expenditure on biotechnology should increase, especially when the private sector
is yet to make a noticeable presence. At the same time, it
is also important to achieve a working co-ordination between DBT and other scientific institutions. One strategy
could be that the DBT focuses on capacity building and
basic research while other organizations such as the
ICAR take strategic and applied research in priority areas
of their mandate.
Seed, IPR, GMO and related issues
Provision of seed in India has remained largely in the hands
of government agencies. Besides the National Seeds Corporation, there are a number of state seeds corporations (all
major states have one each) for multiplication, conditioning and distribution of seeds. For quality control, there
are state seed certification agencies and seed testing
laboratories. These public seed agencies in co-ordination
with ICAR, SAUs and state-line departments ushered the
green revolution in the country. However, there is considerable change in the seed system with the emergence of
private seed sector which gained momentum with the
implementation of the New Seed Policy in 1988 allowing
import of seed and planting material and tie-up with
foreign firms for accessing source seed. This was further
encouraged by the liberalization of industrial licensing
policy leading to the entry of transnational seed companies. These developments have no doubt made the Indian
seed industry more competitive and efficient12. At the
same time, it has also raised a number of concerns, which
are further complicated by issues relating to genetically
modified seed and intellectual property rights. These
concerns are: will transnational seed companies dominate
the seed industry? Can the private sector cater to needs of
resource-poor farmers? What are the health and environ396
mental implications of genetically modified seed? These
concerns are discussed below in further detail.
Seed industry: competition v/s concentration
The fear of dominance of transnational companies in the
Indian seed sector was also raised at the time of implementation of the new seed policy in 1988. However, the
fear was unfounded because of the presence of a number
of national seed companies and public seed agencies. The
public plant breeding programmes have a very high rate
of return and their material can be accessed by any
agency. A significant proportion of private seed companies are engaged in multiplication and sale of public
material and thus maintain competitiveness in the seed
market13. This is a typical case of private delivery of
public material. This situation may alter in future because
of two reasons: (a) there could be restricted flow of material (germplasm) in the wake of IPR, and (b) private seed
companies may find it more attractive to develop and sell
proprietary material to capture a significant proportion of
seed market (this has led to diversification of some seed
companies into research). This change coupled with technology-led dominance of seed sector could create some
degree of concentration in the seed market. What are
the policy options to address this problem? First is the
strengthening of public breeding programmes for developing improved varieties which can be delivered by
public and private seed agencies. Second, the public material can be used to bargain access to proprietary material,
which can be marketed by public seed agencies. Lastly,
the government can use the option of compulsory licensing in the interest of public welfare (see endnote 5).
Impact of IPR
The experience of developed countries has shown that a
credible system of protection of proprietary material
enhances appropriability of research benefits, promoting
private investment in research. In fact, about half of the
total investment in agricultural research in developed
countries is contributed by private sector10. There are no
reasons to believe that this will not be repeated in India.
However, response may vary depending upon the mechanisms of plant variety protection and its credibility. The
effective implementation of the Plant Variety Protection
and Farmers’ Rights Act is expected to promote private plant
breeding in the country in the long run. The immediate
effect would be in terms of increased access to seeds
developed by transnational seed companies. These companies may sell seed on their own or tie-up with national
companies for multiplication and marketing of their
material. It is also likely that transnational seed companies establish joint research ventures with national
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
SPECIAL SECTION: TRANSGENIC CROPS
companies, such as the joint venture of Monsanto and
Mahyco on Bt cotton. These developments may provide
Indian farmers multiple choices and increased access to
improved seed, which can have positive effects on crop
productivity.
Implementation of the IPR regime will increase activities of private seed companies which would not serve
the cause of resource-poor farmers in marginal areas.
Involvement of private seed companies may also increase
seed prices beyond the reach of small Indian farmers.
There is some element of truth in this argument. But
evidence also indicates that farmers are willing to pay for
seed if economic gains are commensurate with the cost,
and private seed companies can serve farmers in marginal
areas provided there is demand for fresh seed13,14.
This implies that the government should closely monitor
the seed sector and should effectively intervene if the
market fails to serve the farmers. This requires more
decentralization and flexibility in operations of public seed
agencies.
Ethical, health and environmental concerns
Ethical, human health and environmental safety issues
have constrained the progress of research on transgenics
in both developed and developing countries and India is
no exception to this. There is no easy solution to resolve
these issues. Ethical issues relating to alteration of
biological system and protection of material conserved
by past generations are crucial and India has allowed
commercial cultivation of transgenics with some riders.
Complying with the WTO requirements, India has decided to enact legislation to protect plant varieties and the
bill has been passed by Parliament. We need to take a
collective judgement on transgenics, which is possible
when adequate information is passed on to all concerned
and debate is encouraged. Lack of information and
debate breeds confusion and delays decision-making. It is
rather unfortunate that sometimes individuals (mostly
activists) take extreme positions and claim to represent
public opinion. Information on the health and environmental effects of transgenics is available with research
organizations. This information should be disseminated
and used for debate, discussion and decision-making. As
of now, scientists see no major adverse effects of GMOs
(see endnote 6). There is a need for a systematic mechanism to assess the costs and benefits of transgenics including health and environmental effects to provide for
objective assessment of these potential technologies.
Conclusions
• Currently there is overproduction of two cereal crops,
i.e. wheat and rice.
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003
• The ‘minimum support price’ safety net coupled with
subsidies on power and fertilizer are leading to over
production of these crops.
• It is difficult to export wheat and rice surplus at remunerative prices and domestic prices are higher than international prices. Meanwhile, India is importing huge
amounts of edible oil and legumes.
• Diversification of crops holds the key to national food
and nutritional security.
• The diversification towards oilseeds, legumes, fruits,
vegetables, milk and milk products, poultry and pisciculture is essential.
• Diversification can be supplemented by economic policies and by new tools of biotechnology.
• Dryland crops require biotechnology inputs for yield
increase and for stabilization of yield by breeding for
resistance to biotic and abiotic stresses.
• Although India has a large public research system
working on crops and other agricultural activities, the
impact of this system on enhanced crop productivity
has not been assessed properly.
• Impact of biotechnology research is yet to be seen in
India as most of the crop improvement programmes
are relying upon conventional breeding methodologies.
• The role of seed industry in improvement of crop
yields in India is critical. Will the new plant variety
protection spur investment in the private sector and
ensure the competitiveness?
• To meet the requirement of the growing population both
in terms of quantity and diversity would require imaginative and bold policy decisions and correct identification of priorities for research and development.
End notes
1. Meeting a deficit of edible oil and pulses through imports is causing
an adverse impact on domestic producers who are concentrated in
dryland and unfavourable regions. There are no alternatives available for producers of such regions and there is a strong case based
on equity consideration to protect and promote pulse and edible oil
production in India15.
2. Expenditure elasticity is the coefficient which measures the per cent
change in quantity demanded in response to one per cent change in
overall expenditure by consumer. This coefficient is also taken as a
proxy for income elasticity of demand and captures the impact of
increase in income on demand of a given commodity. It indicates
how much (%) demand of a given commodity would change when
income of consumer increases by one per cent.
3. This cost includes cost of inputs like seed, fertilizer, insecticides
and pesticides, charges for hired human labour, hired and own
bullock and machine labour, charges for irrigation and interest on
working capital. These costs were deducted from value of the
main and by products to arrive at net return.
4. Per hectare input subsidy for different crops was computed by using
statewise estimates of input subsidy taken from Acharya16 as under:
For water and electricity: Total
(IrrAj†Nij/ΣIrrAj†Nij) * (IrrAj/TotAj).
subsidy
in
the
state†
397
SPECIAL SECTION: TRANSGENIC CROPS
For fertilizer: (Total subsidy in the state/Total consumption of
NPK)†NPKj, where IrrAj is irrigated area under jth crop, Nij is
number of irrigations applied to jth crop, TotAj is total area under
the jth crop and NPKj is per hectare use of plant nutrients in jth
crop.
Number of irrigations for each crop was taken from enterprise
budgets prepared by Departments of Agricultural Economics,
Punjab Agricultural University, Ludhiana and Haryana Agricultural
University, Hissar. Fertilizer use and data on cost and returns were
used from Cost of Cultivation of Principal Crops published by
Directorate of Economics and Statistics, MOA.
5. For detailed discussion on these issues, see Byerlee and Fischer17.
6. This was pointed out by some scientists in their presentation
during 88th session of the Indian Science Congress held at IARI
New Delhi, 3–7 January 2001.
1. Bhalla, G. S., Hazell, Peter and Kerr, John, Prospects for
India’s Cereal supply and Demand to 2020, Food, Agriculture,
and Environment Discussion Paper 29, International Food
Policy Research Institute, Washington, 1999.
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India, Agricultural Economics Policy Paper 98–01, Indian
Agricultural Research Institute, New Delhi, 1998.
3. Murty, K. N., Econ. Pol. Weekly, 1998, 33, 2943–2944.
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206.
5. Acharya, S. S., Indian J. Agric. Econ., 1998, 53, 311–332.
6. Economic Times, 16 May 2001, Commodity Compass, Delhi
edition.
7. Rao, C. H. Hanumantha, Agricultural Growth, Rural Poverty
and Environmental Degradation in India, Oxford University
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8. Chopra, V. L., Biotechnology and its impact on Asian
agriculture production structure, Keynote address delivered at
398
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the 3rd Conference of Asian Society of Agricultural
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Qaim, M., The situation of agricultural biotechnology in India,
Centre for Development Research, University of Bonn, Bonn
(draft paper), 2001.
Pal, Suresh, Singh, R. P. and Morris, M. L., in Maize Seed
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Rienner Publishers and CIMMYT, 1998, pp. 251–267.
Pal, Suresh, Tripp, R. and Janaiah, A., Public–private interface
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Tripp, R. and Pal Suresh, J. Int. Dev., 2000, 12, 133–144.
Chand, Ramesh and Jha, D., in Indian Agricultural Policy at
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ACKNOWLEDGEMENTS. We thank referees for critical comments
on the earlier draft of the paper. We have benefited immensely from
the meticulous comments and suggestions of Professor Deepak Pental
on the paper.
CURRENT SCIENCE, VOL. 84, NO. 3, 10 FEBRUARY 2003