Indian Agriculture Overview

Description
Indian Agriculture sector with its history,reforms & challenges. It includes progams and initiatives by government to support agriculture.

Indian Agricultural reforms & policies :Past Policies & Reforms: Way ahead… Agriculture in 2007 Allied Sectors Banking initiatives Commodity trading – Agri products Issues and challenges Debt Waiver Conclusion

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India is the third largest economy in Asia after Japan and China, as measured in terms of its Gross Domestic Product (GDP) Agriculture is the key employer with around 60% of the labour force, down from 70% in the early nineties In India, agricultural value added per worker has grown by only 15% in real terms from 1990 to 2004. By comparison productivity in China rose by over 60% and more than doubled in Brazil

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1950-60: Pre green revolution period
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Period of tremendous agrarian reforms, institutional changes and development of major irrigation projects The intermediary landlordism was abolished Land ceiling acts were imposed Cooperative credit institutions were strengthened

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The country faced severe food shortage and crisis in early 1960s Desperate need of a quick breakthrough in agricultural production

Green revolution period 70s
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Significant acceleration in yield growth

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Source of productivity increase was technological breakthrough
Increase in productively became the main source of growth in crop output

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Early 1980s
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Change in economic policy towards delicensing and deregulation in Industry sector

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But agriculture policy lacked direction and was marked by confusion
Increase in real farm incomes led to emergence of interest groups and lobbies Public sector spending in agriculture for infrastructure development started showing decline

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The rural economy started witnessing process of diversification

1991:
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Government initiated process of economic reforms in 1991 LPG

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Not much of the reforms were not initiated to directly affect agriculture sector
Sector was affected indirectly by devaluation of exchange rate liberalization of external trade disprotection to industry But agriculture was seen as playing second to industry

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1994:
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New international trade accord and WTO, requiring opening up of domestic market Initial strong apprehensions about the impact of trade liberalisation on Indian agriculture Later on turned out to be real threat for several commodities produced in the country

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2000:
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Government introduced new agricultural policy

National Agricultural Policy (NAP) aims to
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Attain output growth rate in excess of 4 percent per annum in agriculture Promote technically sound, economically viable, environmentally non – degrading use of country?s natural resources High priority to evolving location specific and economically viable improved varieties of agricultural and horticultural crops, livestock species and aquaculture Provide favorable economic environment through Removal of distortions in the incentives Improvement in terms of trade with manufacturing External and domestic market reforms

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Minimum Support Price
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The Commission for Agricultural Costs & Prices (CACP) recommends the Minimum Support Prices (MSPs) for 24 important crops

Farm Credit Package 2004
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Aimed for doubling the flow of institutional credit for agriculture in the ensuing three years credit flow to the farm sector got doubled during two years as against the stipulated time period

Indian Seed Program
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Seed is a critical input for sustained growth of agriculture Engages the Central and State Governments, Indian Council of Agricultural Research (ICAR), State agricultural universities, and the cooperative and private sectors

Agricultural Produce Marketing Committees (APMC)
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APMC act prohibits transaction outside the regulated mandis Do not allow direct marketing and direct procurement of agricultural produce from farmer?s fields

National Spot Exchange for Farm Produce
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Setting up of the National Spot Exchange for Agriculture Produce (NSEAP), which will link all agri-produce marketing committees with consumers and producers

Accelerated Irrigation Benefit Program (AIBP)
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Responding to the continuous decline in the rate of creation in irrigation potential

National Agricultural Insurance Scheme (NAIS)
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Started with objective of providing insurance coverage in the event of failure of any of the notified crops as a result of natural calamities, pests and diseases

Weather-based Crop Insurance Scheme (WBCIS)
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Intends to provide insurance protection to farmers against adverse incidence, such as deficit and excess rainfall

National Food Security Mission (NFSM)
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Aim to increase the production of rice, wheat and pulses by 10, 8 and 2 million tonnes respectively, by the end of the Eleventh Five Year Plan period Improved production technology, distribution of quality seeds of HYVs and hybrids, popularization of newly released varieties, support for micronutrients, and training and mass media campaign

Rashtriya Krishi Vikas Yojana (RKVY)
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Aims at achieving the 4 per cent annual growth in the agriculture sector during the Eleventh Five Year Plan period

National Policy for farmers
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(Based on recommendation of National commission on farmers headed by M S Swaminathan)

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Focus will be on the economic wellbeing of the farmers in addition to production and productivity

Objectives
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Access to a productive asset or marketable skill for farmer Water use efficiency Use of new technologies Seeds and Soil Health Support services for women Credit & Insurance Gyan Chaupals at village level

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Promote pro-poor rural and agricultural development by increasing investments in rural infrastructure and agricultural research and development (R&D) Create more employment in rural areas; help strengthen the human resource base through education, nutrition, and empowerment of women Water management and institutions and design water pricing systems on the basis of water rights to cope with increasingly scarce water supplies for agriculture

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Work toward establishing and strengthening a rulesbased multilateral trading system through World Trade Organization (WTO) negotiations Educate farmers on the need to meet the standards required in the export markets
Industry-to-agriculture linkages Encouraging micro credit for farmers The must need for today is the public private partnership, not only in investment but also in the research, extension and policy implementation

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Turning agriculture into an organised business with the farmer as the entrepreneur can be the key to the second green revolution rather EVERGREEN revolution Besides basic food grain production, other agricultural activities like livestock, fisheries, horticulture, organic farming commercial crops, agro processing are the new avenues in the agricultural sector which will lead us in the next phase of agricultural development

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India with its favorable agro-climatic conditions and rich natural resource base has become the world's largest producer across a range of commodities. India is the largest producer of coconuts, mango, banana, milk and dairy products, cashew nuts, pulses, ginger, turmeric and black pepper. It is also the second largest producer of rice, wheat, sugar, cotton, fruits and vegetables.

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The year 2007-08 promises to be a bumper year for Indian agriculture, with a host of crops clocking record output levels. Some of the highlights of the third advance estimates of the production of major crops, released by the Agriculture Ministry for 2007-08, are: Some of the highlights of the third advance estimates of the production of major crops, released by the Agriculture Ministry for 2007-08, are: Food grain production is estimated to be at an all time record level of 227.32 million tonnes (MT). Wheat production is projected to be at a record 76.78 MT. Rice production likewise is estimated at an all time record of 95.68 MT.

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Coarse Cereals are also estimated to produce an all time record 39.67 MT. Cotton production is estimated to be 23.19 million bales of 170 kg, the best ever production level. Pulses production is estimated at the highest ever production level of 15.19 MT. Apart from these, other crops which are likely to record highest ever production levels in 2007-08 include Maize (18.54 MT), Tur (3.03 MT), Urad (1.56 MT), Oilseeds (28.21 MT) and Soyabean (9.43 MT) Also, according to the US Department of Agriculture, India will register the highest increase in rice production (16.3 million tonne) globally in the next 10 years.

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Simultaneously, with the changing lifestyle and dietary pattern of the consumers along with the increasing brand and variety consciousness of farmers, the demand for certified high quality seeds has been growing rapidly. Already, a billion-dollar industry, the Indian seed industry is the eight largest in the world and has been growing annually at 12 per cent growth rate. Consequently, several transnational players like Bayer, DuPont, Monsanto, Syngenta and Advanta among others have been stepping up their operations in the country

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Along with the impressive production growth rates, exports of agriculture and allied products have been increasing steadily. For example, India's share in the world cotton trade has increased from 8 per cent in 2005-06 to 12 per cent in 2006-07. Further the government has prepared a plan to increase India's share in processed food trade from the current 1.6 per cent to 3 per cent in 2015. Agriculture and allied product exports increased by 20.5 per cent during April-October 2007 to total US$ 11.9 billion as against US$ 9.87 billion in the corresponding period in 2006. "Indian spices saw a 20 per cent rise in export volumes in AprilMay, totalling up to 98,570 tonnes as against 82,210 tonnes a year back." Coir exports rose sharply by 20.47 per cent to 118,158 tonnes during April-November.

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Indian sugar exports are expected to more than double in 2007-08, on the back of 1.1 million tonnes exports in 200607. Cotton exports stood at 6 million bales during the 2007-08 fiscal year. Rice exports grew by a whopping 61 per cent during AprilOctober 2007 over the corresponding period in 2006.

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With the global demand for organic food rising at a feverish pace, India is well placed to raise its share in the US$ 30 billion global market of organic products, given its wealth of natural resources Currently, India ranks 33 in the world in terms of total land under organic cultivation and 88 in terms of the ratio of agricultural land under organic crops to total farming area. But this is set to improve with increasing interest shown by many states. Nine state including Haryana, Maharashtra and Tamil Nadu among others have already submitted proposals for accreditation to APEDA, which will allow them to certify produce of their farmers as organic. In fact, Kerala is set to turn "organically" green, with the government plans to convert 20 per cent of agricultural land to organic farming each year, with total conversion in five years.

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With the accelerating interest shown in organic cultivation, the area under such crops is estimated grow almost four-fold to cross the 2 million mark, says National Centre for Organic Farming (NCOF). Currently, land under organic cultivation is 528,000 (including 312,000 hectares of certified land). Already, India is the second largest producer of organic cotton in the world with a production of 10,365 tonnes a year. Simultaneously, exports from organic farm produce have been growing at a frenetic pace to total US$ 83.08 million in 2006-07 against US$ 26.4 million in 2005-06, and are well on way to surpass US$ 125.88 million this year. In 2002, exports were US$ 15.5 million.

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With the accelerating interest shown in organic cultivation, the area under such crops is estimated grow almost four-fold to cross the 2 million mark, says National Centre for Organic Farming (NCOF). Currently, land under organic cultivation is 528,000 (including 312,000 hectares of certified land). Already, India is the second largest producer of organic cotton in the world with a production of 10,365 tonnes a year. Simultaneously, exports from organic farm produce have been growing at a frenetic pace to total US$ 83.08 million in 2006-07 against US$ 26.4 million in 2005-06, and are well on way to surpass US$ 125.88 million this year. In 2002, exports were US$ 15.5 million.

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India has also been making rapid strides to fully utilise the advances in the biotechnology industry for accelerating the growth of its agricultural sector. According to a report by Rabobank, the Indian agri-biotech sector has been growing at a blistering 30 per cent growth rate in the last five years and is likely to maintain this growth well into the future. In fact, since 2002, when India made its entry in the agribiotech segment, this segment has been the fastest growing segment among all the biotech industries in the country.

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The agri-botech industry's sales have been growing at a tremendous growth: from US$ 82.37 million in 2004-05 to US$ 149.14 million in 2005-06 and US$ 230.9 million in 2006-07. It accounted for about 10.84 per cent of total biotech industry's sales in 2006-07. The growth of this segment can also be seen in the continuous increase in the area under cultivation of such crops. For example, within six years, area grown under genetically modified (GM) cotton variety, Bt cotton, rose sharply to account for 70 per cent of the total area under cotton cultivation. According to Rabobank, India has the potential to emerge as the major producer of transgenic rice and several GM vegetables by 2010. Already research work is being carried in 19 crops like rice, wheat, cotton, potato, banana, tomato, rapeseed, mustard and coffee among others

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Aimed essentially at improving food self sufficiency and alleviating hunger through food distribution Also to protect producers from sharp price falls, to stabilise prices and to ensure adequate food stocks for public distribution Aside from investing in agricultural infrastructure, the government supports agriculture through measures including minimum support prices (MSP) for the major agricultural crops, farm input subsidies and preferential credit schemes The subsidies on farm inputs including fertilisers, electrical power and irrigation water have led to inefficient use of inputs

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The livestock sector contributes over 4 % to the total GDP

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The 17th Livestock Census (2003) has placed the total livestock population at 485 millions and that of poultry birds at 489 millions
This sector is a main source of family income in the arid and semi-arid regions India ranks first in the world in milk production, which increased from 17 million tonnes (MT) in 1950-51 to about 102 MT by 2007-08 The per capita availability of milk has increased from 112 grams per day in 1968-69 to 246 grams during 2006-07. But it is still low compared to the world average of 265 grams/day Over 1.2 lakh village-level dairy cooperative societies, spread over 265 districts in the country, collect about 21 million litres of milk per day and market about 18 million litres

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The poultry sector, undeterred by isolated occurrence of bird flu in 2007, is sustaining the level of production The per capita availability of the poultry products, however, has an immense scope of improvement with present consumption of only 42 eggs and 1.6 kg of chicken meat per person per year

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The exports of poultry products in 2006-07 were to the tune of Rs. 316 crore
The availability and cost of maize are the deterrent factors in scaling up production at a sustainable pace The industry is gearing up through contract farming of maize, etc., to cope with any shortfall

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Fish production increased by 4.4 per cent and reached 6.9 million tonnes in 2006-07 Provided livelihood to over 14 million people in 2005-06 apart from being a major foreign exchange earner

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The role of both types of banks is very significant in Indian agriculture Cooperative banks were considered as the major source of credit flow to agriculture, but with the time, commercial banks too have come forward to extend credit to agriculture New roles that banks have adopted are: Marketing, training and consultancy, insurance and financing for infrastructure via privatepublic participation

Kisan Credit Card Scheme
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The Kisan credit card scheme was first introduced in India by Andhra Bank in 1998. The scheme aims to facilitate access to short-term credit to farmers and to simplify the credit mechanism

Training and Consultancy
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It is very difficult for the government to provide timely information to farmers. It is praise worthy that many banks have volunteered to train their officers regarding farm practices, which in turn help farmers. For example, SBI Rural Development, Hyderabad

Agri-Clinics
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The Government of India has formulated a scheme to help agriculture graduates establish "agri-clinics" to provide assistance to farmers regarding soil testing, post harvest management and technology. NABARD has come forward in this regard and will facilitate bank credit on priority sector lending terms

Insurance
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Indian agriculture depends heavily on the monsoon. Crops often get damaged because of abrupt changes in the weather The suicide cases of cotton growing farmers in Andhra Pradesh and Maharashtra are an everyday thing now To overcome all these problems, microfinance and general insurance companies have come up with crop and weather policies which can be helpful to poor farmers Example: Basix, one of the largest microfinance companies in India at Hyderabad, announced India?s first rainfall insurance program in July 2003 with Krishna Bhima Samruddi Local Area Bank.

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Helps in price discovery and price risk management Beneficial to farmers But lack of education does not enable farmers to take benefit Over 30 agri commodities traded in India NCDEX – largest exchange in India for Agri commodity trading Government of the view that Futures trading result in price increases and inflation Recently banned trading in rice, wheat, potato, etc.

Flattening of net sown area

Source: Economic Survey 2007-08

Low GCF

Source: Economic Survey 2007-08

Micronutrient deficiency
• • Urea vs Micronutrient N vs P,K



Natural gas vs naphta

Yield not improving

Source: Agricultural Statistics At A Glance 2006-2007

Yield not improving

Source: website of Food and agriculture Organization, UN

Poor irrigation
• • State of large scale systems Drylands



Water seepage

Credit from informal sources
• High interest rate

MSP
• Subsistence earning ? profit

Inter-state variations
• Wheat: Maharashtra vs Punjab

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Government has been taking various progressive measures to accelerate the growth of this sector. Some of the recent initiatives taken by the government include:
? Allowing private sector companies engaged in business of warehousing or transport of food grains in procurement operations on behalf of the Food Corporation of India (FCI) ? A weather-based agricultural insurance scheme is to be rolled out across select districts in 12 states for the forthcoming rabi season. ? Construction of seven Modern Terminal Markets with modern infrastructure facilities that will help farmers realize maximum returns for their produce, remove middlemen and ensure lower prices for endconsumer. ? In addition, the government has already approved 60 agricultural export zones (AEZs). Besides, four zones have been identified to provide US$ 12.1 million worth of funds under a scheme called Assistance to States for Infrastructure Development of Exports. Further the Government will provide an additional US$ 6.17 billion for new farm initiatives launched by states to double the growth rate in agriculture to 4 per cent over the 11th Plan period

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The government has hiked the provisions for debt waiver for farmers by a hefty about 20 per cent to Rs 71,680 crore, a move that would enlarge the scope for relief for peasants. The decision to increase the debt waiver amount from Rs 60,000 crore, announced in the Union Budget for 2008-09

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The Scheme will cover direct agricultural loans extended to „marginal and small farmers? and „other farmers? by Scheduled Commercial Banks, Regional Rural Banks, Cooperative Credit Institutions (including Urban Cooperative Banks) and Local Area Banks (hereinafter referred to compendiously as “lending institutions”)

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„Marginal Farmer? means a farmer cultivating (as owner or tenant

or share cropper) agricultural land up to 1 hectare (2.5 acres).

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„Small Farmer? means a farmer cultivating (as owner or tenant or

share cropper) agricultural land of more than 1 hectare and up to 2 hectares (5 acres).
„Other Farmer? means a farmer cultivating (as owner or tenant or

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share cropper) agricultural land of more than 2 hectares (more than 5 acres).

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(a) in the case of a short-term production loan, the amount of such loan (together with applicable interest): ? (i) disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008; ? (ii) restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government, whether overdue or not; and ? (iii) restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities, whether overdue or not.

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in the case of an investment loan, the installments of such loan that are over due (together with applicable interest on such installments) if the loan was: (i) disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008; (ii) restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government; and (iii) restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities.

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Debt Relief In the case of „other farmers?, there will be a one time settlement (OTS) Scheme under which the farmer will be given a rebate of 25 per cent of the „eligible amount? subject to the condition that the farmer pays the balance of 75 per cent of the „eligible amount?; „other farmers? will be given OTS rebate of 25 per cent of the „eligible amount? or Rs.20,000, whichever is higher, subject to the condition that the farmer pays the balance of the „eligible amount?.

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India is forecast to consolidate its position among the world?s leading exporters of rice (its top export) For sugar a big change is expected with India forecast to switch from being a net importer to a net exporter (over 2 million tonnes) Its world market share is expected to rise from 4% to 6% over the coming decade, thanks to robust growth in production (second only to Brazil?s) and a slowdown in consumption growth in 2006/07 India became a net importer of wheat having been a net exporter for the 5 years previously. However it is not expected to be a big net exporter in the coming decade India is projected to remain a leading vegetable oils importer, absorbing one quarter of world soybean oil imports and 14% of palm oil imports Combined with the recent hike in prices, this could lead to a doubling of India?s vegetable oil import bill in 10 years

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A number of corporate players have entered into agreement with the farmers with major investment plans to tap the huge potential in this sector.
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PepsiCo after introducing farmers to high-yielding basmati rice, mangoes, potatoes, chillies, peanuts and barley, has launched a five-year program with the Punjab Government to provide four million sweet-orange trees. Cadbury India Ltd has entered into an agreement with the Tamil Nadu Horticulture Department to promote cocoa farming in 50,000 acres. Reliance Retail plans to establish links with farms in Punjab, West Bengal and Maharashtra with an US$ 5.6 billion investment. Skol Breweries India Ltd, the wholly owned subsidiary of SABMiller India, has entered into a contract farming agreement with barley farmers in Haryana. Himalaya Drugs plans to associate with farmers across southern Indian states for sourcing at least 70 per cent of its herbs

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Agriculture -- across the expanse of India -- is heralding the country's second Green Revolution. A progressively larger number of states have been amending their Agricultural Produce Marketing Committee (APMC) Act, along the lines of the Model APMC Act, to allow farmers to directly sell their produce to the buyers. Several agricultural sectors like horticulture, floriculture, development of seeds, animal husbandry, pisciculture, aqua culture, cultivation of vegetables, mushroom under cultivated conditions and services related to agro and allied sectors have been thrown open to 100 per cent foreign direct investment (FDI) through the automatic route Already agriculture is one of the most important sectors of the economy contributing 18.5 per cent of national income, about 15 per cent of total exports and supporting two-thirds of the work force. And with recent developments, it is set to play a more dynamic role in the economy.



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