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Saturday, March 1, 2008

[vinnomot] SUGAR SUBSIDY + R&D in GMOs + Farmers' Loans Waived + UNION BUDGET + ECON SURVEY

NEWS Bulletin from Indian Society For Sustainable Agriculture And Rural Development
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1.  India to wind up sugar export subsidy under pressure
 
2. More funds for GM crop R&D sought
 
RUN UP TO UNION BUDGET 2008-09
3. Agri allocation may go up 50%, package for farmers likely
4. Farm ministry to take up fert transportation issue with railways
5. Micro-finance client base to reach 400 million: survey
 
UNION BUDGET 2008-09- ECON SURVEY 2007-08, WORLD BANK Report
6. Budget offers loan waiver to farmers 
7. World Bank proposes new farm model for India
8. (Govt's) Economic Survey calls for farm sector reform
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India to wind up sugar export subsidy under pressure
 
 
ASHOK B SHARMA
Posted online: Tuesday , February 26, 2008 at 2048 hrs IST
 
New Delhi, Feb 26 India, succumbing to the pressures from Australia and Thailand, has decided to wind up its subsidy on sugar exports.
 
The subsidy programme of the government on inland movement of sugar to the ports for exports will be terminated on September 31, this year. The government has been compensating inland movement in coastal areas to the extent of Rs 1,350 a tonne and Rs 1,450 a tonne for movement of sugar for exports by mills located in the interior. Earlier on October 9, 2007 the Cabinet Committee on Economic Affairs (CCEA) had decided to extend this subsidy programme to April 1. 2009.
 
World's two major exporters, Australia and Thailand, had threatened to drag India to the WTO dispute settlement body on the issue of sugar export subsidy.
The Union food and agriculture minister, Sharad Pawar on Tuesday convened a meeting of the sugar industry and told them that the government can no longer support their exports beyond September 31, 2008.
 
The minister when contacted said : "We are facing some problems regarding our sugar export subsidy in the WTO. I think beyond September 31, 2008, our sugar industry will not need any assistance as the global prices are gradually appreciating."
 
The director-general of Indian Sugar Mills Association (ISMA), SL Jain, however, alleged that both Australia and Thailand were guilty of subsidizing their sugar sector. Thailand has set up Cane and Sugar Fund (CSF) and according to records 20,286 million baht had been disbursed to cane growers as interest free long-term loan in the 1998-2004. Most of the loan has not yet been recovered, which practically amounts to making "direct payments." Even till date, despite no recovery, CSF continues to extend loan. The then deputy secretary general of Thai Cane and Sugar Board, Nattaphon Nattasomboon at the 10th Asia International Sugar Conference in May 2004 in Kaula Lampur in Malaysia had admitted that the outstanding loan amount was 15,598 million bhat. The loan was extended to growers to keep them in cultivation as they were severely affected due to low prices for both sugar and cane, he said.
 
Australia is guilty of veiled subsidization. It may be noted in the context that Australia and Thailand which are guilty of veiled subsidization had successfully challenged EU's cross subsidization of sugar sector alongwith Brazil. Australia exports about 95% of its sugar and Queensland produces 95% of the sugar produced in the country. The Queensland Sugar Ltd has monopoly rights over procurement of raw sugar from growers for export, a measure which is contrary to the WTO provisions.
 
Although the applied tariffs on raw and refined sugar in Australia have been scaled down to zero since 1997, domestic prices of refined sugar are regulated through a complicated internal mechanism of distribution thereby discouraging imports. Australia has introduced support regimes like emergency income support, interest rate subsidy and outright grants. About 444 million Australian dollar assistance was approved by the federal and state governments on April 28, 2004 under Sugar Reform Bill.
 
The Australian support package programme includes, sustainability grant to growers and millers (Aus $ 146 million), re-establishment grant to producers who wish to leave the industry (Aus $ 96 million), grower restructuring grant (Aus $ 40 million), income support (Aus $ 21 million), business planning for growers, harvesters and mills (Aus $ 15.5 million), re-training (Aus 7 million), inter-generational transfers (Aus $23 million) and regional and community development projects (Aus $ 75 million).
 
Funding was initially designed for a 3-year period and some of the components of programme have been completed. The regional community and development projects are slated to continue till June, 2008. This is designed to fund development of food grade low glycernic index sugar and molasses extracts, establishment of a sugarcane mulching facility and improvement of cane transport and management systems....
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RUN UP TO UNION BUDGET 2008-09
 
More funds for GM crop R&D sought
 
 
ASHOK B SHARMA
Posted online: Wednesday, February 27, 2008 at 2310 hrs IST
 
New Delhi , Feb 27 International Services for the Acquisition of Agri-biotech Applications (ISAAA), the global promoter agency for transgenic crops, has urged the government to increase its budgetary allocation in R&D for genetically modified (GM) crops.
 
Speaking to FE, ISAAA chair Clive James said, " India needs to increase R&D support for development of transgenic crops in the interest of food security, health and environment. The extensive use of chemical pesticides has created health problems leading to dangerous diseases and has also degraded the environment. The Bt cotton experiment in India has successfully demonstrated a marked reduction in chemical pesticide use and creating a healthy farm environment. The outdated practice of use of chemical pesticides should be replaced by use of most modern technology—biotechnology—for containment of pests."
 
He said that India need to follow China in boosting investment in transgenic crops. China invests more than half of the crop biotech budget of the developing countries estimated at $ 180 million in 2001. He said that among the industrial countries US was the leader in investment in crop biotechnology.
 
James said that the current global R&D expenditure in private and public sectors was over $ 4.4 billion with over 95% of the total in the industrial countries, led by the US. He said that in industrial countries a number of second generation transgenic food crops ensuring nutritional security and resistances to drought and abiotic and biotic stresses were in the pipeline.
 
The science and technology advisor to the US Adminstration, Nina Fedoroff was recently in India . She had urged the industry to boost their R&D for transgenic crops. She also met senior government officials and ministers.
 
However, the apex body of the pesticide industry, Agrochemicals Policy Group has said that the annual crop loss worth Rs 90,000 crore can be reduced by application of chemical pesticides. They have demanded that the government policy document acknowledge crop protection chemicals as part of the technology package.
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Agri allocation may go up 50%, package for farmers likely
 
 
ASHOK B SHARMA
 
New Delhi , Feb 26 The allocation for agriculture and cooperation is likely to be increased by about 50% in the forth coming Union Budget 2008-09 with a view to fund some flagship programmes like Rashtriya Krishi Vikas Yojana (RKVY), National Food Security Mission (NFSM), and a new credit package for farmers.
 
According to sources, the budgetary allocation for the ministry of agriculture and cooperation is likely to be hiked to Rs 12,865 crore in 2008-09 from Rs 8090 crore in 2007-08.
 
Funds will also be deployed to implement the National Policy on Farmers. According to sources a new package on credit-cum-capacity building will be launched to help farmers in difficult situation. "Rising global prices of food, rising input costs and low purchasing power of the people are issue which need to be dealt with effectively," said a senior official.
 
A part of the allocation would be for developing improved variety of cotton seeds and for seeds of other crops. Adequate attention would also be paid to the National Horticulture Mission in view setting up of 30 mega food parks and integrated cold chains across the country. A National Institute of Food Technology Entrepreneurship and Management would be set up in Kundli.
 
The government feels that National Food Security Mission and Rashtriya Krishi Vikas Yojana would be crucial for agriculture to achieve 4% growth rate. NFSM was set up to enhance the production of rice by 10 million tonne, wheat by 8 million and pulses by 2 million tonne in the 11 th Plan period. The RKVY had an outlay of Rs 25,000 crore in the 11 th Plan period.
 
The government will make some provisions for the Bio-fuel programme in the forthcoming Budget.
 
The government intends to increase the minimum support prices (MSPs) of different crops. But worrying issue for the government is to strike a balance between the MSPs of crops and issue price of subsidized grains to the poor. The issue prices of subsidized grains have remained unchanged since 2001. The government is planning to increase the issue prices of subsidized grains with a view to cut the growing food subsidy bill.
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Farm ministry to take up fert transportation issue with railways
 
 
ASHOK B SHARMA
Posted online: Thursday , February 28, 2008 at 2212 hrs IST
 
New Delhi, Feb 27 Lalu's Railway Budget has not solved all the problems for agriculture sector. The problem of availability of wagons in time for transportation of chemical fertilizers and food grains and agro produces still remains. The agriculture ministry has decided to take up this issue with the railway ministry.
 
In the current rabi (winter) crop season there was problem of transportation imported DAP and MoP fertilizers due to non-availability of railway wagons. "The availability of all major fertilizers like urea, DAP and MoP at the macro level was adequate. However some wheat growing states faced tight supply of DAP in the peak consuming months and some states in south India also faced tight availability of MoP and complex fertilizers. We will take up this issue with the railway ministry," said a senior official in the agriculture ministry.
 
The total requirement of urea in the current rabi season was estimated at 140.03 lakh tonne against which 95.39 lakh tonne was supplied to farmers. The requirement of DAP was estimated at 49.13 lakh tonne against which 33.15 lakh tonne was supplied to farmers. Similarly in the rabi season the requirement of MoP was estimated at 19.61 lakh tonne against which only 9.33 lakh tonne was supplied to farmers.
 
For the forthcoming kharif season the total requirement of urea is estimated at 137.64 lakh tonne, that of DAP at 42.07 lakh tonne and that of MoP at 17.86 lakh tonne.
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Micro-finance client base to reach 400 million: survey
 
 
ASHOK B SHARMA
Posted online: Wednesday, February 27, 2008 at 2352 hrs IST
 
New Delhi, Feb 27 In the coming decade the potential micro-finance client base in India is likely to be at 300 to 400 million, according to a survey done by Sa-Dhan, the apex body of micro-finance institutions in the country.
 
The estimates of rising micro-credit demand, however, differ in assumed client-numbers (respective households) and time horizons.
 
By 2012, an annual demand of at least Rs 250,000 million can be expected, the survey said, and added that based on the current growth trends, micro-finance institutions may be able to meet funding needs along with lenders, investors, and savers, through a four-pronged strategy.
 
Defining the strategies, Sa-Dhan said that it should provide for transparency and sound governance, materialise significant material gains, demonstrate relevant social performance, and identify and apply technologies that leverage towards better performance.
 
The survey said that India has demonstrated to the world an impressive success story about the growth and profitability of micro-finance institutions and by providing over 100 million people with access to micro-credit, many to thrift, some to insurance, and a few so far to remittance transfers.
 
"Sa-Dhan members are stressing on 200 of the poorest districts in the country identified for implementation of the National Rural Employment Guarantee Scheme," said Sa-Dhan's executive director, Mathew Titus.
 
Analysing the audited reports of 83 micro-finance institutions, the survey said that in the financial year 2006-07, Sa-Dhan members served over 15 million clients, mostly women. One out of three clients, was from the scheduled caste or tribe.
 
Sa-Dhan members' services have reached two out of three of the poorest districts. The micro-finance institutions have strengthened their asset and liability structures with institutional debt, the prime source of funding for expansion of gross loan portfolios. The interest income from these portfolios account for Rs 4 out of Rs 5 of revenue earned.
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Budget offers loan waiver to farmers
 
 
ASHOK B SHARMA
Posted online: Friday , February 29, 2008 at 2025 hrs IST
 
New Delhi, February 29: With polls round the corner, the Government on Friday announced a Rs 60,000 crore package for waiving off of loans of three crore debt-trapped small and marginal farmers and one time settlement of dues for one crore farmers. There are about 750 million (75 crore) farmers in the country.
 
Presenting the Union Budget for the year 2008-09, the finance minister P Chidambaram said that all agriculture loans of three crore small and marginal farmers that were disbursed by banks till March 31, 2007 and were overdue on December 31, 2007 and remained unpaid till February 29, 2008 would be waived off. According to government's estimate these unpaid loans would aggregate to Rs 50,000 crore. For another one crore farmers, the government has decided to offer a one time settlement package for clearance of their outstanding loans relating to these dates. The package would offer a 25% rebate to farmers for payment of the balance 75%.
 
Farmers, whose loans were restructured and rescheduled in 2004 and 2006, will also be eligible for benefits of a waiver or one time settlement package. The package implementation is expected to be completed by June 30, this year. But in the meantime the farmers who gets the assurance for waiving of his loans or who enter into a one-time settlement of loans can avail fresh loans from banks. Marginal farmer has been defined as having holding up to one hectare and small farmer as having holding up to two hectare.
 
The bankers have also welcomed the finance minister's decision to waive off farmers' loans. The chairman of Punjab National Bank, KC Chakravarty told FE : "The government has taken up the responsibility to clear some outstanding loans of farmers. This will help the banks to reduce their NPAs and extend fresh credit. It is also good for the farmers and agriculture."
 
The president of Bharatiya Krishak Samaj, Krishan Bir Chaudhary when contacted welcomed the finance minister's decision but said : "the government need to understand the real cause of farmers' indebtedness and suicides. Unless the imposed model of capital-intensive farming is not changed the situation would not improve and the government would have to come out with another loan waiver package. The present capital-intensive farming largely benefits the Companies supplying seeds, fertilizers, pesticides and less the farmers who invest more and get low returns."
 
According to the government farm credit has doubled in the first two years since may 2004 and is poised to reach a level of Rs 240,000 crore by March 2008. The government has proposed to provide Rs 644 crore in 2008-09 to the ongoing National Agriculture Insurance Scheme (NAIS). The NAIS is proposed to restructured to better cater to the needs of farmers and the insurer. The government has also proposed to provide Rs 50 crore for the Weather Based Crop Insurance Scheme which is being implemented as a pilot scheme in five select states.
 
The Special Purpose Tea Fund for re-plantation and rejuvenation, which was set up last year, will get Rs 40 crore as budgetary allocation. Similar funds for rendering similar support to other plantation crops have also been proposed for other plantation crops – cardamom (Rs 10.68 crore), rubber (Rs 19.41 crore) and coffee (Rs 18 crore). The National Horticulture Mission will get Rs 1,100 crore.
 
The government has also proposed to raise the corpus of the Rural Infrastructure Development Fund- XIV to Rs 14,000 crore. The Budget has proposed a fund of Rs 5,000 crore to Nabard to enhance its refinance operations to short-term cooperative credit institutions.
 
Chidambaram also announced Rs 32,667 crore as food subsidy for procuring grains against minimum support prices and its distribution to the poor. He informed that pilot project of using smart cards for delivery of ration to the poor would begin in Haryana and Chandigarh. In 2007-08 the food subsidy bill aggregated to Rs 31,545.59 crore.
 
Customs duty on project imports have been reduced from 7.5% to 5%. With a view to support domestic fertilizer production, customs duty on crude and unrefined sulphur has been reduced from 5% to 2%. Fertiliser units are allowed to import naphtha against zero duty. "Though this benefit is fringe, we welcome it," said the deputy director of Fertiliser Association of India, RC Gupta.
 
The subsidies on urea produced in the country and on DAP and MoP remain unchanged for 2008-09, while that on imported urea has been raised from Rs 6,753.54 crore to Rs 7,238.89 crore.
 
Agricultural income is exempted from income tax, a move that would benefits corporate farms and saplings and seedlings raised in nurseries are also exempted from income tax. A weighted deduction of 125% is allowed on any payment made to Companies engaged in research and development. "We welcome this move. But we had asked for 150% weighted deduction in income tax on payments made to seed and crop biotech Companies and infrastructure status for seed Companies," said the executive director of National Seeds Association of India, RK Sinha.
 
The corporate income tax rate and surcharge rate remain unchanged.
 
With a view to reduce the cost of manufacture of cattle and poultry feeds, the duty on vitamin premixes and mineral mixtures has been reduced from 30% to 20% and on phosphoric acid from 7.5% to 5%. The duty on bactofuges has been reduced to zero to benefit the dairy industry in increasing the shelf life of milk. With a view to encourage cold chain facilities, excise duty exemption has been proposed on end-use basis refrigeration equipment (consisting of compressor, condenser units, evaporator) above 2 TR (tonne refrigeration) utilizing power of 50 KW and above.
 
Coir Board has been granted exemption from payment of income tax, while commodity futures exchanges have been brought under service tax net and commodities transaction tax on options and futures.
 
Excise duty on paper, paper board and articles manufactured out of non-conventional raw materials by units not having captive bamboo/wood pulp making plant has been reduced from 12% to 8%.. Same level of taxation has been imposed on filter and non-filter cigarettes.
 
Government has increased allocations Accelerated Irrigation Benefit Programme to Rs 20,000 crore with grant component of Rs 5,500 crore. The Rainfed Area Development Programme will be implement in 2008-09 with a corpus of Rs 348 crore The centrally sponsored scheme on micro irrigation will get an allocation of Rs 500 crore with a target of covering 400,000 hectare. Irrigation and Water Resources Finance Corporation will be set up with an initial corpus of Rs 100 crore. State governments and financial institutions would also be invited to contribute to its equity. The president of the Confederation of Indian Horticulture, Sopan Kanchan said : "the proposal to increase allocation for irrigation is a welcome move. But canal water should be exclusively used for agriculture and not diverted to cities."...
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World Bank proposes new farm model for India
 
 
ASHOK B SHARMA
Posted online: Friday , February 15, 2008 at 2036 hrs IST
 
New Delhi, February 15: Just a few days before the upcoming Union Budget, the World Bank has suggested that India should address the political Economy of farm subsidies and set up investments in rural infrastructure.
 
The bank says in its latest report that subsidies on fertilisers, electricity, water, and credit have caused high fiscal cost. It even criticised over-regulation in agriculture like public grain procurement and land Markets. It also says that subsidies can be used but with attention to market development, equity and exit strategy.
 
The World Development Report-2008 with the theme Agriculture for Development released on Friday notes: "public investment on agriculture in countries like India is heavily skewed towards providing subsidies rather than investments. In fact, subsidies are more than four times that of public investments in agriculture."
 
The Bank's report called for moving towards a "new agriculture" with dynamic demand for high value crops, non-traditional exports, horticulture, poultry, livestock, fish and dairy products which can increase farmer's income when the share of cultivatable land per household was shrinking.
 
The report also says that reduced taxes on agriculture coupled with high international prices can induce investments in the farm sector.
It urged for reduced taxes on agriculture and extension of multiple institutional and technological innovations like IT for financial services and extension and genomics for new seeds. It advocated the role of private sector, producer organisations and greater public-private partnership.
 
Releasing the report, the World Bank Country Director, Isabel Guerro said : "The challenge on Friday is to recast agriculture in the new environment of globalisation, rising prices, growing demand and greater private sector involvement."
 
"But this will require greater investments to increase farmer's yields and profitability and in rural infrastructure such as irrigation, roads, power and markets," he added.
 
The report also pointed out that genetically modified crops and organisms have unrealised potential for the poor, but attention should be paid to biosafety norms.
 
It expressed concerns over the slowdown in crop yield growth and large crop yield gapsa in many states. Crop production has been insufficient to create gains per worker, the report says.
 
It said that the "new agriculture model" would be able to combat climate change and reduce the competition for water. It advocated bio-fuel programme as a potential source of renewable energy and possible large market for agricultural producers.
 
"But few current bio-fuels programmes are economically viable and most have social and environmental costs," it said.
 
On WTO issues, the report felt the need for completion of the Doha Round, but attention should be paid to transitional issues and supply response in developing countries. The economies in transition should be givenaid to cope with the emerging situation....
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(Govt's) Economic Survey calls for farm sector reform
 
 
ASHOK B SHARMA
Posted online: Thursday , February 28, 2008 at 1950 hrs IST
 
New Delhi, February 28: The Economic Survey 2007-08, expressing concerns over the deceleration in the growth rate in agriculture and allied sector, has called for appropriate reforms, including targeting of food and fertilizer subsidies.
 
Agruculture, forestry and fishery together is expected to grow at 2.6% in 2007-08 as against the previous year's growth of 3.8%. due to the lower production of winter crops. In the period 1950-2007 foodgrains output increased at an average annual rate of 2.5% compared to the population growth which averaged 2.1% during the period. But in 1990-2007 foodgrains output growth rate decelerated to 1.2%, lower than the annual population growth rate averaging 1.9%.
 
"Any deceleration in the growth rate of this sector is translated into a lower overall GDP growth rate. Acceleration of growth of this sector will not only push the overall GDP growth upwards, it would also make the growth more inclusive and biased in favour of women. Increasing farm incomes is also necessary for an equitable growth," the survey said.
 
The overall GDP growth in 2007-08 is expected at 8.7%. The share of agriculture in the GDP has registered a steady decline from 36.4% in 1982-83 to 18.5% in 2006-07. Yet this sector continues to support more than half a billion people, providing employment to 52% of the workforce, according to the survey. "Raising overall economic growth to double digit will therefore require additional reforms," it said.
 
It expressed concerns over the global warming and climate change and also noted that climate variability caused by erratic rainfall pattern and increase in the severity of droughts, floods and cyclones and rising temperatures have been the causes of uncertainty and risks resulting in huge losses in agricultural production and livestock population. "A gradual degradation of natural resources through overuse and inappropriate use chemical fertilizers have affected the soil quality resulting in stagnation in the yield levels," it said.
 
At part of the suggestion for reforms, the survey called for better targeting food and fertilizer subsidies with a view to optimizing the resource allocation and better returns. It said that the economic cost of government procurement agencies have gone up due to rise in the minimum support prices for grains and the issue prices of grains for public distribution remaining unchanged at 2002 level, It noted that a large portion of fertilizer subsidy goes to fertilizer companies and has allowed the inefficient units to persist. The current fertilizer pricing mechanism has encouraged nutrient imbalance – excessive use of urea and a bias against micronutrients.
 
The survey also called for long-term policy framework focused on improving inter and intra sectoral linkages and outcome-oriented perspective in public sector programmes in irrigation, development and use of high yielding seeds, extension services and for facilitating market access. It categorized rural electrification, construction of dams and canals, rural telephony as 'quasi-public good' requiring right policy framework and regulators that encourage competition in expanding supply at low cost. It also called for the rule of law, all weather road connectivity, knowledge and information on appropriate technologies, farming practices and marketing, inter-basin water transfers, recharging of ground water table and active participation of beneficiaries through water users associations and appropriate water pricing.
 
"The synergies between between telecom connectivity, internet access, e-governance, e-learning and e-marketing must be explored," it said
 
"Agricultural tariffs remain relatively high and stable, isolating this segment of the Economy from both the benefits and costs of globalization," the survey said.
 
It said that the interaction between high tariffs on agricultural products coupled with the large share of food in the consumption basket and the slow modernization of Indian agriculture and agro-processing, coupled with high dependence of the population on agriculture may play a role in future inflation in prices.
 
The survey, however, said : "Global prices are having a more pronounced impact on domestic prices as the ability to meet shortfalls at affordable prices is being eroded by global shortages and rising prices. Thus we will continue to depend on enhancement of supplies through higher productivity and efficient supply management to eliminate wastage."
 
Noting that the commodity futures market in the country recorded higher volumes in trade notwithstanding the suspension of trading in wheat, rice black gram and tur, the survey said the major share of the turnover was accounted for by spices, crude oil and natural gas.
 
"Direct participation of the farmers in the commodity futures Markets is somewhat difficult at this stage as the large lot size, daily margining, high membership fees work as deterrent for farmers' participation in these Markets. Farmers can directly benefit if institutions are allowed to act as aggregators on behalf of farmers."
 
The survey informed that the government was considering various options for addressing the indebtedness of farmers. It did not approve the concept of government-funded price stabilization fund to deal with the situation saying
that global practice showed disappointing results. "Prolonged slumps in prices may make the fund bankrupt and sustained high prices may erode the incentives for being associated with the fund, as transaction costs of operation are considered avoidable," it said.
 
The survey informed that the government would soon come out with a revival package for the long-term cooperative credit structure on basis of the expert panel report in consultations with the state governments, National Agricultural Insurance Scheme would be modified, an inter-ministerial committee would be set up to operationalise the National Policy for Farmers, the Price Stabilisation Fund Scheme for tea, coffee, rubber and tobacco growers would be restructured....
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