Economy-The Madhya Pradesh Agriculture Revolution !!!

The farmers in MP have seen their cumulative income rise by 32 per cent in the past one year mainly due to diversification of farm activities to high value crops from cereals, and better road infrastructure.

This drastic change in one sector – agriculture – is propelling the entire economy of the state so much so that from the per capita net state domestic product of Rs 15,400 in 2004-05, MP finally breached the Rs 50,000 mark in 2014-15 at current prices, registering a three-and-a-half times higher growth on the key economic metric.

Given this tremendous record, Chief Minister Shivraj Singh Chouhan was asked to give a presentation during the governing council meet of NITI Aayog which was held recently. He presented a road map to achieve Prime Minister Narendra Modi’s goal of doubling farmers’ income by 2022.

In his presentation, Chouhan mentioned five areas where the governments need to focus on: decreasing the cost of cultivation; increasing productivity, shift in farm activities towards high value crops; better prices for farm produce; and risk mitigation through a comprehensive system of insurance and timely compensation.

An excellent paper , authored by India’s preeminent agriculture scientist Ashok Gulati and his team came in handy for us to understand the key drivers of agricultural growth in Madhya Pradesh and the lessons that it holds for other major states of India with somewhat similar characteristics.

Diversification

Diversification from cereals and pulses towards high value crops, livestock and fisheries is one of the major factors behind the agricultural growth in MP. In the last five years alone, the state’s gross state domestic product (GSDP) in animal husbandry has grown from Rs 8,976 crore to Rs 33,751 crore and in fisheries from Rs 650 crore to 1,805 crore.

Apart from this, milk production recorded an increase from 6.4 million tonnes in 2006-07 to 10.8 million tonnes in 2014-15. Vegetable production increased from 3.6 million tonnes in 2010-11 to 14.2 million tonnes in 2013-14, taking the state from thirteenth to fourth place in vegetable production. Meat production tripled from 20,000 tonnes to 60,000 tonnes.

The following charts from the ICRIER paper illustrate the success of MP in diversifying farm produce.

Fruits and Vegetables

Milk production

Meat Production

Fish Production

Irrigation

Irrigation has played a pivotal role in scripting the spectacular success story of agriculture in the state. Gross irrigated area increased from a meager 4.3 million hectares in 2000-01 to an impressive 10.3 million hectares in 2014-15. In 2000-01, the irrigation ratio in MP was 24 per cent, was 17.2 percentage points lower than the all India average. By 2013-14, the ratio dramatically increased to 41.2 per cent, reducing the gap with the all India average to just 6.2 per cent, which is a pointer to impressive irrigation infrastructure the state has developed. By 2014-15, the irrigation ratio in MP reached 42.8 per cent.

The MP government managed to establish an impressive network of irrigation infrastructure comprising dug wells, tube wells, tanks/ponds and government canals, through a combination of public investment and incentivising private sector investment. Area covered under tube well irrigation increased from 0.9 million hectares in 2000-01 to 3.2 million hectares in 2013-14, dug wells from 1.9 million hectares to 3.3 million hectares, irrigation facilities though government canals increased from 0.9 million hectares in 2000-01 to 1.8 million hectares in 2013-14, and irrigation through tanks increased from 0.1 million hectares to 0.3 million hectares.

Electricity

The government made the following interventions to improve the electricity situation for agriculture use in the state:

• Ensured 24 hour power supply in the state, out of which eight hours was exclusively for agriculture purpose.
• Provided power to agriculture on a flat rate of Rs 1,200 per year, with the provision to pay in two installments.
• Provided separate rural feeders for agriculture; 43,517 villages have been provided with a separate feeder of 11 KW line comprising 71,688 Km and 1,516 transformers of 21 KW.
• Aggressively implementing Deen Dayal Upadhaya Gram Jyoti Yojana (DDUGJY) a centrally sponsored scheme, which was initiated in 2014 with separation of feeders for agricultural and non-agricultural consumers.

The share of agriculture in total power consumption in MP is around 33.7 per cent, which is much higher than the national average of 20.8 per cent and higher than in states like Karnataka (33.7 per cent), Punjab (30 per cent), Gujarat (23.6 per cent), and Maharashtra (22 per cent).

Roads

The third important factor that has contributed to agricultural growth was the building of all-weather roads. Road density in MP had increased from 526.8 per thousand sq km in 2000-01 to around 742.3 per thousand sq km in 2012-13.

The surfaced roads as a percentage of total roads have increased from 49 per cent to 68 per cent during same period. This enabled farmers to access markets over a larger area, and thereby reducing their market risk.

Procurement

Due to availability of better roads, more power and increased irrigation, the productivity of farms increased. This was especially true for wheat production as shown in the chart below. This was mainly because the state government gave a bonus of Rs 100 per quintal on the minimum support prices (MSP) for wheat over and above the centre’s MSP between 2007-08 and 2012-13 and Rs 150 per quintal in 2013-14 and 2014-15.

The result of this was that once a paltry contributor to the procurement pool, the state became the second largest contributor in just one decade.

However, this was achieved through various steps taken by the government.

1. Compared to two other big contributors to wheat procurement pool, Haryana and Punjab, MP kept taxes on MSP low which meant private players bought more from MP than Haryana and Punjab.
2. Unlike Haryana and Punjab, MP decentralised its procurement process. It chose to do procurement through co-operative societies instead of arhatiyas.
3. More production meant more wheat started coming into mandis choking the roads. Manual payments to farmers was a slow and corruption-prone process. MP digitised the process through ‘e-Uparajan’ initiative with an aim to enable a smooth and efficient procurement.
4. Increase in production and procurement meant that the state needed more storage facilities. It has greatly expanded its capacity. The government is also focusing on opening more cold storages for perishable produce.

Mechanisation and farm credit

Mechanisation enhances productivity. However, small land holdings have proved to be a lacuna in universalisation of mechanisation. To make it more affordable to small farmers, MP launched yantradoot scheme under which farmers can rent farm equipment instead of paying big buck to buy them. The government also encouraged youth to open custom hiring centres by giving subsidy and lucrative bank loans. The government has also provided some small equipment to farmers free of cost.

This has resulted in a spurt in use of agriculture machinery as the charts below show.

Non-availability of credit is a big problem for farmers. In 2012-13, MP launched a new loan scheme through state owned co-operative banks, bringing the interest rate from a high of 16-17 per cent in 2006-07 to zero. As a result, disbursement increased from Rs.33.3 billion in 2006-017 to Rs.112.1 billion in 2013-14.

Madhya Pradesh’s agriculture success story is a lesson worth learning for many states of India who are struggling to get their agriculture moving. The literally central state of India has many lessons which may prove central to the country’s agricultural story in the twenty-first century.