Can agri-exports be made more sustainable?

News: In the fiscal year 2021-22 (FY22), agri-exports scaled an all-time high of $50.3 billion with registering a growth of 20% over the preceding year. For example, India’s exports constituted 41% of a global rice market of 51.3 MMT.

What were the driving forces?
This was made possible largely by rising global commodity prices. In addition, there were other driving forces like favourable and aggressive export policy of the Ministry of Commerce and its various export promotion agencies like APEDA, MPEDA, and commodity boards.

The composition of India’s Agri-exports

Among the several agri-commodities exported in FY22, rice ranks first, followed by marine products, sugar, spices and bovine (buffalo) meat.

How sustainable is this growth in agri-exports?

Given India’s resource endowments and the country’s domestic needs, the government has already banned wheat exports.

Of the Agri-export commodities, two commodities, rice and sugar, are water guzzlers. This issue poses a challenge to their global competitiveness as well as their environmental sustainability.

The case of rice:

When most of the other commodity prices were surging in global markets, the price of rice collapsed by about 13%, largely due to India’s massive exports. This means that India had to export a greater quantity of rice to get the same amount of dollars. This is not in India’s economic interest.

Another concern is that a substantial part of its global competitiveness comes from highly subsidised water, power and fertilisers that go into its production.

The rice export led to a virtual export of India’s water because rice crop is another water guzzler crop.

The Case of Sugar

The sugar export led to a virtual export of India’s water because Sugar crop is another water guzzler crop.

The sugar industry receives a number of subsidies (including export subsidy). These subsidies have crossed the 10% limit mandated by the WTO. Therefore, India lost the sugar case in the WTO.

Others

The non-basmati rice was exported at a price which was lower than the MSP of rice. This might have been the result of leakages and divergence in the PDS and PM Garib Kalyan Anna Yojana (PMGKAY).

India exported at least 62 billion cubic meters of virtual water. Much of this water is extracted from groundwater in Punjab and Haryana belt (for rice), and in Maharashtra and Uttar Pradesh for sugar. This can lead to a water disaster.

The rice production systems contribute to 17.5% of GHG emissions generated from agriculture (2021). This is among the most important sources of anthropogenic methane emissions,

Way Forward

In accordance with trade theory, the optimal export tax of 5 to 1% must be levied. Further, India should optimally not go beyond 12 to 15 MMT of rice exports, else the marginal revenue from exports will keep falling.

The upcoming environmental disaster can be tackled if farmers are supported smartly. They should be given aggregate input subsidy support on a per hectare basis and the input prices of fertilisers and power should be allowed to be determined by market forces and their costs of production.

Innovative farming practices such as alternate wetting drying (AWD), direct seeded rice (DSR), and micro-irrigation should be promoted. They can save up water and reduce the crop’s carbon footprint.

The farmers should be incentivised to switch some of the area under rice and sugar cultivation to other less water-guzzling crops. For example, Haryana has launched Mera Pani, Meri Virasat for incentive farmers to switch from paddy to alternate crops and Kheti Khaali, Fir Bhi Khushali Scheme to give money to farmers if they  do not grow any crop during the kharif season.

It is high time that the government can introduce the option of direct cash transfers in lieu of almost free grains under the PDS and PMGKAY. This will help plug leakages as well as save costs. The savings can be used for better diversification of our food systems, better use of scarce water and other practices that lower GHG emissions, and saving on burgeoning food and fertiliser subsidies.

Source: The post is based on an article “Can Agri-exports be made more sustainable” published in the Indian Express on 23^rd May 2022.