7. Performance of Agriculture in Uttar Pradesh

One of the most important variables that has positively influenced agriculture in UP is irrigation. The state is well-endowed with a rich irrigation system with a gross irrigated area of 80.2% in 2014–15 (Fig. 7.6). It ranks relatively higher than most Indian states and stands next only to Punjab (98.7%) and Haryana (89.1%).UP has about 74,659 km of canals, 28 major and medium-lift canals, 249 minor lift canals, 69 reservoirs/budhis and about 32,000 running tube wells operated by the government. The major source of irrigation is wells (80.2%) followed by canal irrigation (17.9%).

Within the state, however, there are wide variations in irrigation coverage. While regions like Western UP, Central and Eastern UP have a high irrigation ratio of 90%, 83% and 77% respectively; Bundelkhand has less than half its area (48%) under irrigation.

The GoI had identified 99 ongoing major/medium irrigation projects under the Pradhan Mantri Krishi Sinchayee Yojana (PMKS) for completion by December 2019. These projects were sanctioned under the Accelerated Irrigation Benefits Programme (AIBP) and had been under implementation for several years.¹

Up to March 2014, 33.59 million hectares has been created through major, medium and minor irrigation projects (Ministry of River Development and Ganga Rejuvenation). Several canal systems are more than fifty years old. These include the upper Ganga canal, eastern Yamuna canal, Agra canal, lower Ganga canal, Sharda canal, etc. Sedimentation of dams and canals has affected their efficiency. Repair works have not been taken up on time, farm development works below the outlets have not been done and average water use efficiency is in the range of 30–40% only. Moreover, cropping patterns have changed and several crops requiring large quantities of water, e.g. paddy and sugar cane, now occupy a much larger area. Cutting of distributaries and minor canals is very common, leading to farmers at the tail end of canals suffering from water shortages.

In August 2013, the World Bank sanctioned the second phase of the USD 515-million water sector restructuring project in UP to improve water use and agricultural productivity and ensure a proper policy framework for more efficient use of water resources. Modernisation and rehabilitation of irrigation and drainage systems are also covered in the project. It seeks to promote participatory irrigation management.

As of March 2018, the progress of the water restructuring project was quite satisfactory on many parameters but there are a number of other important deliverables on which progress has been rather slow. Figure 7.7 portrays source-wise irrigation in Uttar Pradesh in TE. 2002–03 and TE. 2013–14.

Until 2018, the area under micro-irrigation in UP was only 82,546 hectares, comprising less than one per cent of the total area under micro-irrigation in the country as compared to 1.8 million hectares in Rajasthan or 1.6 million hectares in Maharashtra. It is clear that there is enormous scope for expanding the area under micro-irrigation, not only in Bundelkhand but also in the cane growing region of western UP, which is increasingly faced with deficient rainfall.

Of the 75 districts in UP, 34 are in the category of overexploited, with fast depleting levels of groundwater. According to the Central Ground Water Board, out of 822 blocks, 37 blocks are overexploited, 13 are critical and 88 are semi-critical. Therefore, micro-irrigation practices need to be promoted in all these blocks, especially in districts having a low irrigation ratio like Bundelkhand.

The development of roads plays a significant role in the growth of the rural economy. It helps farmers realise better prices for their produce through better connectivity with urban areas. A good road network system helps reduce transportation costs, accelerates the movement of farm inputs and opens up opportunities for agricultural trade. Thus, roads are found to have a powerful impact on poverty alleviation and in accelerating agricultural growth. In UP, the total road density increased from 690 km per 1000 km² in TE 2002–03 to 1711 km per 1000 km² in TE 2015–16. The surfaced road density went up from 337 km per 1000 km² to 1410 km per 1000 km² in the same period (Fig. 7.8).

In the absence of a robust procurement system, a large number of farmers in UP are forced to sell their produce below the market price or MSP. Although UP is the largest producer of wheat in the country, the share of total procurement of wheat as a percentage of production in the state is only 8% as compared to 65% in Punjab in TE 2017–18 (Fig. 7.9). Similarly, in the case of rice, the share of rice procured in UP is 21% of total production as compared to 88% in Punjab (Fig. 7.11). Moreover, there are large fluctuations in the quantity of wheat or paddy that is being procured by the government at MSP as seen in Figs. 7.10 and 7.12.

Taking this into account, the government in Uttar Pradesh decided to purchase wheat at a minimum support price (MSP) of Rs. 1735 per quintal, with an additional Rs. 10 per quintal as transport charges in March 2018, for rabi marketing season 2018–19. It was further directed that the policy would be totally transparent and the farmers would be paid online within 72 hours of their sale. The government would purchase wheat from farmers between April 1 to June 15 and all purchase centres would be linked online.

Uttar Pradesh requires a sustainable power sector to augment agricultural growth and productivity. Figure 7.13 shows the share of agriculture in total power sales and the trend in power intensity in the agriculture sector. The share of agriculture in total power sales in UP remained stagnant from 2004–05 to 2015–16. However, power intensity in the state’s agricultural sector has increased from 199 kwh/ha in 2004–05 to 483 kwh/ha in 2015–16. The power sector in Uttar Pradesh suffers from high transmission and distribution losses, which amounted to 24.5% in 2015–16. Due to erratic and inadequate power supply to the agriculture sector, most small and marginal farmers depend on diesel pump sets for irrigation. The state government needs to address power shortages, which often lead to inadequate irrigation. UP government can improve power supply to the agricultural sector by replacing diesel pumps with solar pumps, especially in the case of small and marginal farmers.

One of the perennial problems confronting farmers has been their inability to realise the minimum support prices even for wheat and paddy. The procurement of wheat and rice has fluctuated widely over the years. In 2012–13, 50.62 lakh tonnes of wheat was procured but the very next year, procurement fell to 6.82 lakh tonnes. In 2018–19, 50.87 lakh tonnes of wheat has been procured but it is still to be seen whether this level will endure in the future years. One of the major reasons for such fluctuation is that the arrivals are not meticulously recorded in mandis. For instance, the arrival of paddy in mandis was 32.37 lakh tonnes between October 2015 and January 2016. It fell the next year to 25.99 lakh tonnes. In 2016–17, it rose to 45.20 lakh tonnes. There are large variations across districts. It means that a substantial quantity of agricultural produce is sold outside the mandis. It is possible that small and marginal farmers prefer to sell their produce in the village itself since the cost involved in transporting produce to the mandis may make it less remunerative.

Madhya Pradesh has successfully erected an elaborate system for procurement by using information technology in the last ten years. For procurement operations in MP, the crop sown area and production of each farmer are registered. Their mobile numbers are also taken. At the time of procurement, farmers are sent advisories through SMS and they are asked to bring their produce to mandis on specified dates. It prevents crowding in mandis and enables small farmers to hire tractors for taking their produce to the market.

The guidelines for procurement also provide that any farmer can sell his produce at the procurement centre situated in mandis, but in the centre located outside mandis, farmers of only the village tagged to that centre can offer their produce for procurement. Such a complex procurement system is not conducive for delivering MSP to small and marginal farmers, who would rather sell to village traders than bring their produce to mandis.

In any case, farmers growing crops other than wheat and paddy have no recourse to MSP operations. Under the price support scheme and price stabilisation fund, the National Agricultural Cooperative Marketing Federation of India Ltd (NAFED), the Small Farmers’ Agri-Business Consortium (SFAC) and the Food Corporation of India (FCI) have been procuring pulses and oilseeds at MSP in various states. Under the price support scheme (PSS), 48.68 lakh tonnes of pulses have been procured in the country in 2016–17 and 2017–18 (up to July 23, 2018). Under the price stabilisation fund, 16.70 lakh tonnes of pulses have been procured. Most of the procurement was in Maharashtra, Karnataka and Madhya Pradesh but UP farmers, especially in Bundelkhand where pulses are predominantly grown, have not benefitted as UP’s procurement agencies have not been proactive in undertaking these operations. The marketing infrastructure has been created in Bundelkhand out of the funds received by the state under the Bundelkhand package but actual procurement has not seen much of an upward trend.

Since its launch by the GoI on April 14, 2016, e-NAM has provided an opportunity to farmers to sell their produce in any mandi in states that are integrated under eNAM. UP already meets the three conditions for joining eNAM platform, i.e. provision for e-trading in mandi regulations, single-point levy of market fee and unified licence for trading in the state. Out of 1.1 crore farmers registered across India, about 29 lakh farmers are from UP alone. Out of the 585 markets linked to the platform, 100 are from UP alone. The actual progress of auctions through eNAM and the benefit flowing to farmers in the form of better prices, however, is not known. Auctioning through the eNAM platform can bring transparency to mandi operations as the bids quoted by commission agents will then be known to the farmer, who will decide what price is acceptable to him. It can address the problems of collusion in mandi operations.

India is the largest producer of milk in the world. In 2016–17, India produced 165.4 million tonnes of milk, of which UP contributed 27 million tonnes, which is the highest in the country. However, the milk trade in UP is dominated by the unorganised sector and only 12% of milk is processed by the organised sector.

UP has a poor reputation for the quality of milk and the media carries reports of adulteration from time to time. The FSSAI conducted a national milk quality survey in 2018 under which 6432 samples were analysed in the whole country. About 10% of the samples were found adulterated with contaminants that made milk unsafe for human consumption. This could be due to deliberate adulteration as well as poor quality of feed, unregulated use of antibiotics and poor farm practices. The FSSAI has not released state-wise data of adulteration and safety but in the public mind, milk supplied in UP is associated with deliberate adulteration. The major task for the UP government is to organise regular analysis of samples and take strict action against adulteration. Adulteration of milk with pesticides, antibiotics and veterinary drugs shakes the confidence of public in the use of an important commodity like milk, which is consumed largely by children. A number of such events of failure to meet the safety norms of the FSSAI could be due to lack of knowledge among farmers, who may be using unsafe practices resulting in adulteration. Procurement of milk by the organised sector can improve these practices and testing of milk at collection centres needs to substantially improve.

In the last two years, due to a slump in the global prices of SMP, milk prices have fallen in India too and UP farmers have also been adversely affected. They get just about Rs. 18–20 per litre of milk while in Gujarat and Maharashtra, farmers are being paid Rs. 25 per litre, which includes a subsidy of Rs. 5 per litre promised by the state government. Banas Dairy, a member of Gujarat Co-operative Milk Marketing Federation that owns the Amul brand, has set up two processing units of 5 lakh tonnes/day at Kanpur and Lucknow, and is likely to provide a fillip to milk processing in the state. By raising the standard of processing and providing better prices to farmers, the private sector may find UP an attractive destination for investment in milk processing. NABARD has sanctioned a project of Rs. 1225.01 crore to PCDF to set up eight new diary plants and refurbish four others in the state. UP has taken a loan of Rs. 983.22 crore from NABARD under Rural Infrastructure Development Fund (RIDF). The new processing plants under this project will add a daily capacity of 16 lakh litres. Timely implementation of this project will add to the milk processing capacity in the co-operative sector. The state government must provide stable leadership to the PCDF by appointing a professional as its chief executive officer.

The development of inland fisheries can provide additional rural employment through aquaculture. As fish is a source of high-quality protein, the government would do well to promote the development of fisheries to address the challenge of malnutrition in the state. This can be achieved by leasing all major rural ponds to fishermen communities. For the production of quality fish seed, it may be appropriate for the government to incentivise the private sector. There is a case for privatisation of government-run fish seed farms as they have not been able to run optimally and 48 of them have been closed.

The state government already has a scheme of providing 30% grant to mobile fish parlours but the budget allocation is very meagre (Rs. 16.50 lakh in 2016–17 for ten such parlours). The main objective of the scheme is to provide hygienically prepared fish in large urban centres in UP. The demand for inland fish can easily be given a fillip by aggressively promoting the consumption of fish and fish products in cities and towns.

With its varied climate and large population, UP is both the source of production and market for horticulture crops. The state government has actively participated in the national horticulture mission and the production of fruits and vegetables has increased substantially in the last ten years. The state came out with a potato policy in 2014 and a food processing policy in 2013 and 2017.

Payment of sugarcane price remains an important issue in the agricultural economy in UP. Every few years, sugar prices collapse and sugar mills start defaulting on payments to farmers. On October 29, 2018, the farmers were yet to be paid Rs. 7649 crore of cane dues, which was 21.57% of the total SAP of Rs. 35,463 crore. Cane price for 2018–19 is yet to be declared and the UP Sugar Mills Association has gone to the high court against any increase in SAP.

The Rangarajan Committee on Sugar (2012) made several recommendations to address the problem of sugarcane dues. First, it recommended that over a period of time, states should encourage contractual arrangements between mills and farmers for sugarcane. It will result in phasing out of cane reservation area⁴ and bonding of farmers with sugar mills. Farmers would then be able to decide the mill to which they want to sell their sugarcane. The second recommendation of the committee was that the current norm of a minimum radial distance of 15 km between two sugar mills should be abolished. It was expected that this would ensure a better price for farmers and the mills would be forced to pay cane dues on time. The third recommendation was the sharing of revenue created in the sugarcane production chain in the ratio of 70:30 between cane growers and sugar mills. This ratio was also to apply to primary by-products of sugar. Mills would pay FRP to farmers in the first instalment and the balance of cane dues will depend on the final price of sugar realised by sugar mills. The fourth recommendation was the abolition of levy sugar quota and the system of monthly quota release by the Ministry of Food and Public Distribution, GoI. Lastly, the committee recommended that all restrictions on the sale of by-products and prices may be removed.

If the recommendation on payment of cane dues was accepted by GoUP, the situation in UP would have been as follows (see Table 7.4).

It may be observed that in years of low sugar prices, even the FRP cannot be paid by sugar mills as it will be higher than 75% of sugar prices. For meeting such situations, the sugar development fund has to be augmented in years of high prices of sugar. Since the recovery of sugar cane has increased in UP, the farmers would have to be paid a higher price if the Rangarajan formula had been accepted. In certain years (2017–18 for example), the payment by sugar mills under this formula would be lower than FRP. In such a situation, the state government would have to come forward and pay the difference between FRP and price derived from the Rangarajan formula.

In the new molasses policy of 2017–18 notified on January 27, 2018, the reservation of molasses for liquor has been reduced from 25% to 12% and mills are now required to maintain a ratio of 1:7.3 for the sale of molasses to the liquor industry and in the open market. Due to record-high production of sugar, the price of molasses crashed from Rs. 800 per tonne in October 2017 to about Rs. 1 per tonne in June 2018. The sale of molasses by sugar mills outside the state of UP is also tightly regulated by state governments and sugar mills are required to seek permission for the sale of molasses from excise commissioner on a case-to-case basis. The state government must take action soon and reduce these restrictions so that fair prices could be realised by both farmers and millers.

In May 2018, the GoI announced a national policy on biofuels. The policy permits manufacture of ethanol from sugarcane, corn, bagasse, etc. The sugar industry has also been permitted to manufacture ethanol directly from sugarcane juice.

Oil marketing companies have already started blending gasoline with up to 5% ethanol in twenty notified states and four union territories. For the sugar year 2017–18, 313 crore litres of ethanol was required to blend petrol with 10% of ethanol. To meet the target of 20% blending by 2030, India needs 1000 crore litres of ethanol. UP is in a position to take the lead in producing ethanol to meet this requirement. Now that the GoI has permitted direct manufacturing of ethanol from sugarcane juice, it is necessary to promote the establishment of ethanol manufacturing units by sugar mills that do not yet have the facility.

There is wide regional variation in the irrigation coverage among various regions of the state. While the western, central and eastern zones have made satisfactory progress in irrigation, Bundelkhand lags behind with less than half (48%) coverage under irrigation. Farmers in water-scarce regions like Bundelkhand and western UP should be encouraged to adopt drip irrigation and watershed-based programmes to ensure better utilisation of available water.