4 min read.Updated: 19 Nov 2021, 06:01 AM ISTSudhir Mehta
Price controls and bureaucratic delays in scheme enrolment, field reviews and the reimbursement of subsidies, etc, have pushed this industry to the brink of collapse despite its importance
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India’s per capita water availability is estimated at 1,428 kilolitres per year. A nation with annual water availability of below 1,700 kilolitres per head is considered water deficient. India first entered the league of water-deficient countries in 2011. Unfortunately, the country still has one of the fastest shrinking water pools among G-20 economies. An equally worrisome fact is that we use 80% of our freshwater for agricultural purposes, mostly by deploying the flood irrigation method. To ensure the judicious use of water in farming, the Union and state governments are actively promoting micro irrigation in the farm sector. An impact-evaluation study of our micro irrigation scheme was carried out by the department of agriculture cooperation and farmers welfare. It found the following:
First, water savings in comparison with flood irrigation are to the tune of 30-50%, with an average of 32.3%. Second, electricity consumption falls by about 31%. Third, the adoption of micro irrigation results in savings on fertilizers in a range of 7% to 42%. Fourth, the average productivity of fruits and vegetables increased by about 42.3% and 52.8%, respectively. And fifth, the overall enhancement of farmers’ income was in the range of 20% to 68%, with an average of 48.5%.
Despite these demonstrated benefits and widespread acknowledgement of the critical role of micro irrigation in the sustainability of Indian agriculture, the industry that provides the wherewithal for it is currently struggling to survive.
In most Indian states (with Gujarat and Tamil Nadu being the major exceptions), the scheme is operational only for a few months in a year. Delays in notifications and guidelines by state governments tend to dissuade farmers from availing the benefits offered under this scheme. Despite the availability of funds, as claimed by state governments, scheme applications are processed only at the end of a financial year, done typically to achieve pre-set targets in what is famously known as the ‘March rush’.
As a result of this narrow window, only a handful of farmers can apply. After the execution of a work order, inspection and approval is carried out. Thus, for a farmer or equipment vendor, the scheme is effectively operational for just 6-8 months in a year. Recently, the Maharashtra government introduced a lottery system to select beneficiary farmers, with no schedule for a draw. This has only augmented the problems. A farmer or vendor is unsure of the draw’s outcome even after having fulfilled all the eligibility criteria. If the state government claims to have a sufficient budget, it must adopt a first-come-first-serve approach, instead of prolonging the selection process and extending delays. Also, farmers should be able to avail the scheme in accordance with their crop cycles or sowing patterns.
Delays in the reimbursement of subsidies to industries or vendors is an especially acute problem. Unlike other subsidies that are directly transferred to beneficiaries, those for installing drip irrigation systems are transferred to vendors only after due diligence. The farmer bears only 10-20% of the actual cost, whereas the rest (the subsidy amount) is borne by the supplier. This industry buys everything on cash, but sells it on credit. Unfortunately, there is no fixed timeline for the inspection and testing of an installed system. Field inspections are not carried out for months, resulting in a long pendency of disbursement against bills. The upshot is that this industry is on the brink of collapse.
There are 200 entities operating in this field and the industry’s size is placed at about ₹6,000 crore. The top 10 companies command a market share of 70%. Barring a few firms (2-3%), all others are micro, small and medium enterprises. It is difficult for this industry to sustain itself if governments continue to dishonour their commitments of support.
Under the scheme, the prices of equipment and installation services are fixed by the government and these have not been revised in the past five years. Raw material costs, however, have risen by at least 50%. Sadly, this has left manufacturers and vendors in India’s irrigation equipment industry caught between a rock and hard place. As manufacturers and suppliers of drip irrigation systems are key stakeholders in the promotion of micro irrigation for water conservation, the Union and state governments should take action. They could undertake following reforms:
One, set a timeline for each stage, from an application by a farmer to the execution and payment disbursement.
Two, strengthen the Centre’s monitoring mechanism by insisting on a periodic review of applications, approvals, work orders and actual installations.
Three, establish a central information system to monitor the scheme’s progress.
Four, deploy direct benefit transfers for subsidy sums to go straight into the bank accounts of farmers.
Five, ask state administrations to operate the scheme throughout the year on a first- come-first-serve basis.
Six, link equipment prices to either inflation or underlying input costs.
‘Per drop more crop’ can only be achieved by deploying advanced and efficient irrigation technologies, and these can only be developed if we ensure a wholesome business environment by eliminating delays, discretion and red tape.
Sudhir Mehta is chairman & managing director, Pinnacle Industries Limited, Pune; director, Rivulis Irrigation Limited, Israel; and president, Mahratta Chamber of Commerce, Industries and Agriculture (MCCIA), Pune. These are the author’s personal views.
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