Daily Financial News Analysis – 20th July’20

Table of Contents

Atmanirbhar agriculture

Focus will be on key agri-inputs.
Good seeds are a catalyst of change in agriculture.
In mid-1960s, India imported 18,000 tonnes of high-yielding varieties of wheat (Lerma Rojo and Sonora-64) and rice (IR-8) seeds.
With this HYV seeds, India started its Green Revolution
Today, our granaries are full, and India is atmanirbhar in staples.
Now, we are also exporting seeds to neighbouring countries.
Thanks to those seeds and Indian Council of Agricultural Research’s (ICAR) continuous seed improvement.
India has this capacity to become seed capital of the developing world.
1. South and South East Asia as well as Africa
India can produce very competitively-priced seeds for hybrid rice, hybrid corn, hybrid Bt HT cotton, and of several vegetables ranging from tomato and potato to okra, etc.
The big hurdle is our regulatory system.
In March 2002, Atal Behari Vajpayee gave its green signal to Bt cotton.
This decision made India the largest producer of cotton in the world and the second-largest exporter of cotton by 2013-14.
But, since the new government took over in 2014-15, there has been a continuous battle against large seed companies, especially multinationals and their Indian joint ventures, on trait fee, etc.
As a result, they almost closed down their shutters for a new generation of seeds, and now there is “illegal” spread of Bt HT cotton in Maharashtra, covering about 15-20% of the cotton area.
This is partly because our regulatory system is complex, and more because the present government has ideological blinkers against modern science.
No wonder, in 2019-20, India has once again become a net importer of cotton, taking the clock back to 2002-03.
India has been a net importer of fertilisers nutrients (NPK) over nearly the last two decades.
In 2019-20, India imported fertilisers worth $6.7 billion.
1. Urea: $2.9 billion
2. Diammonium phosphate: $2.0 billion
3. Muriate of potash: $1.14 billion
4. Some others: $0.68 billion
We are totally dependent on imports in case of MOP; and in the case of DAP, either we import rock or finished product.
India wants to be atmanirbhar by opening up five new urea plants in the public sector with a total capacity of 6.35 MMT.
Almost 70% of gas being used for urea plants is being imported at a price much higher than the price of domestic gas.
And of these five, one in Talcher is based on coal gasification with Chinese technology!
The costing of many of these is going to be higher than $400/tonne when international price generally hovers between $250-300/tonne.
We know well that, in most cases, our public sector enterprises turn out to be white elephants saddled with high costs, and finally, they will have to be sold to the private sector.
Why did we not allow existing private sector urea plants to expand and produce at a much lower cost?
The best way to achieve atmanirbharta in fertilisers is to change the system of fertiliser subsidies.
Give equivalent cash directly to farmers’ accounts, calculated on a per hectare basis, and free up fertiliser prices.
In 1961-62, before the Green Revolution, India produced only 880 tractor units, which catapulted to about 900,000 units in 2018-19.
India became the largest tractor manufacturer in the world.
India also exported almost 92,000 tractors, largely to African and ASEAN countries.
Tractor companies compete and bring out better products at low cost.
Mahindra & Mahindra leads the pack with almost 40% share.
The new class of entrepreneurs and start-ups are coming up with special apps for ‘Uberisation of tractor services’ so that farmers can avail of these services at low cost, without owning a tractor.
In a smallholder economy, owning a tractor is a high-cost proposition as it is not fully utilised.
This needs to be made more efficient through modern tools of creating a market for tractor services.
Private sector is our strength.
The only thing the government has to do is to unshackle them from chains of controls and webs of unnecessary regulations.