Does the agricultural growth achieved last year herald a progressive trend for the future? Last year (2005) saw a revival of agriculture. In contrast to recent experience agriculture performed well with an estimated growth of around 7 per cent in the agriculture sector. Last year saw the highest growth in agricultural output in several key crops in recent years.
There was a peak production of 314.8 million kilograms of tea, paddy production increased by about 17 per cent from a low in 2004, rubber bounced with a growth of 10 per cent taking rubber production to over 100 million kilograms. This was after several decades of declining rubber production. Coconut alone fared badly, but this was mainly a cyclic phenomenon and can be expected to change this year.
However in the interpretation of these growth figures one has to be cautious as they are against poor earlier production figures. Last year’s agricultural growth of 7 per cent was after a decline of nearly 1 per cent the previous year (2004). The exception being in the case of tea that has shown a continuous increasing trend since the privatisation of the estates and more so with the growth in smallholdings tea production. The latter now contributes about two thirds of the country’s tea production and has doubled the yield levels of the estates.
Paradoxically, there is some reason for optimism for the same reason. Since the performance of Agriculture in the last two decades has been disappointing there is potential for its resuscitation and high growth is realistic. Last year’s upsurge and the government’s priority for agricultural development and improvement of rural infrastructure generate expectations for an agricultural revival. However there are serious constraints that have to be removed if this is to be achieved.
First let us look at the performance of the key agricultural crops. Tea, the country’s main agricultural export fared badly since the mid sixties till the mid 1990s. Tea production that reached 225 million kilograms in 1968 declined then onwards till 1990 when it barely exceeded the 1963 production of 233 million kilograms. Since then there has been a trend of increasing production. Yet, even the peak production of 314.8 million kilograms in 2005 was only about 37 per cent more than the production 34 years before. In the intervening period, especially between 1968 and 1990, tea production was sluggish.
The performance in rubber has been particularly bad. Rubber production declined since 1960. Even with the 10 per cent increase in rubber production last year rubber production in 2005 was only 60 per cent of what it was in 1970. Rubber is now not only an export commodity but a significant input into industry. Nearly half (43%) of rubber production is used in local industry.
The increased production of natural rubber and its use in domestic industries for manufactured exports is a useful contribution that the rubber industry could make. The decreased production in recent years has deprived the country of this contribution. Coconut production too has not even kept pace with the increase in domestic consumption resulting in a lower exportable surplus, on the one hand, and higher imports of other edible oils, on the other.
This has meant lower agricultural export earnings as well as higher agricultural imports. Both these have denied the country resources, especially foreign exchange resources. This implies a significant decrease in the exportable surplus of the country’s main agricultural exports. Although the country achieved a high growth in paddy production last year, the performance over the last three decades has been disappointing. Increased rice production contributed significantly to meeting the increased demands of food in the 1950s, 1960s and 1970s when population growth was high. Between 1950 and 1970 paddy production increased by over three-fold (352 per cent) thereby saving funds in the import of rice. In contrast between 1981 and 2000, paddy production increased by only about 32 per cent.
The performance in other food crops has also not been adequate especially in the 1990s. Subsidiary food crops increased four fold between 1960 and 1980. In contrast, between 1990 and 2000 subsidiary food crop production declined by 60 per cent. Had food crop production continued its earlier increasing trend, the import costs of the country would have been reduced significantly. The production trends in minor export crops are also disappointing. Minor export crop production in 2000 was only 43 per cent of the production in 1963.
The position has not improved since then. The yields in most crops are below their potential and in some crops much lower than what the yields were. However to achieve higher yields the constraints require to be removed. Several crops are not grown in the optimum manner. The extension services are ineffective. Consequently farmers practise unsatisfactory methods of land preparation, do not use adequate and appropriate fertiliser, lack credit facilities and cannot market their crops at reasonable prices. Post harvest losses are high due to inadequate storage and processing facilities and unsatisfactory packing that results in damage to produce in transit.
The inability to market produce at reasonable prices has led to farmgate prices sometimes falling below costs of production. Most farmers face a cost price squeeze as costs of cultivation have risen sharply while prices have not risen commensurately. Despite decades of agricultural credit programmes, institutional credit serves only a small proportion of farmers. Agricultural insurance is a farce.
These constraints have to be removed if we are to achieve a sustained revival in agriculture. Is the government willing and able to extend the required assistance for agricultural development?