Agriculture: Is low Productivity The Problem?

Low agriculture productivity may not be the real problem in this sector that built and sustained the nation for millennia

King Parakramabahu I taxed paddy production at three distinct points, says Prof. K. M. de Silva in ‘A History of Sri Lanka’. Land Tax from those who cultivated royal lands was a major source of state revenue. Then came ‘diyadada’ – a tax on water. Finally, a share from any bumper harvest automatically went to the treasury. Peasants had no additional storage facilities. How could one triple-tax a single product? It is possible only with super profits. It could not be for nothing that the island was called the ‘granary of Asia’. Some historians, including Prof. Senarath Paranavitana, believed it could be more because we were a trade point and not necessarily a major rice producing nation. But, then why develop a stateof-the-art irrigation system if agriculture were not the priority of ancient rulers?

Fast-forward a few centuries. By independence too we were primarily an agricultural economy. The subsistence agriculture sector was complemented by the newly created export agriculture sector established by the colonial rulers. Railways, postal and telecommunication services, banks and insurance services – all came in support of the plantation economy. There was little business apart from agriculture in 1948, which employed 85% of the then population. Export crops contributed to one third of the gross national income. The first Prime Minister of independent Ceylon thought nothing but agriculture. He, with the grandfather of the current PM – a prominent civil servant of the time – probably spent more time in the North Central province than at his desk.

This landscape has drastically changed since. As a percentage, agriculture’s contribution has gradually declined, though output has increased. In 2014, it was just a few decimal points above 10%. The paddy and rubber sub-sectors, says the Central Bank annual report, have contracted drastically during the last year, while the tea sub-sector too fell marginally. The decline in paddy was due to the prolonged drought, but even otherwise the numbers wouldn’t have been too different. Despite a fertilizer subsidy of 2% of government expenditure and boom harvests in recent times the real contribution of the agriculture sector to the economy remains low in monetary terms.

Agricultural economists are quick to blame low productivity in the sector. Yes, we produce less for the same input. Take paddy, for example. The average world yield for rice is 4,300 kg per hectare. We were below average at 4,264 kg per hectare, last year. Australians, the most productive in 2010, produced more than 10,000 kg of rice per hectare. We are far behind. In that sense, yes, we have a problem. Great if we can boost agriproductivity. The question is why it does not happen. Didn’t somebody say that need is the mother of all innovations? If so, why still wait for innovative ways to solve the critical issues of the local agriculture sector?

We need a better solution. Increasing productivity per se, will not help. If we were to increase productivity and production drop to match demand, the excess workforce could then be absorbed by either industry or service sectors

Some background first. The turning point of Asian agri-productivity was the Green Revolution. It was a series of R&D and technology transfer initiatives, started before WWII but carried on most markedly in the late 1960s, that increased agricultural production worldwide, particularly in the developing world. Led by Norman Borlaug, who won the Nobel Peace Prize in 1970 and is credited with saving over a billion people from starvation, it involved the development of high-yielding varieties of cereal grains, expansion of irrigation infrastructure, modernization of management techniques, and distribution of hybridized seeds, synthetic fertilizers and pesticides to farmers.

Before the Green Revolution, famines were common in South Asia. Millions died. Famine in the Deccan in 1702 killed at least 2 million people within two years. The infamous Bengal famine of 1770 was worse, taking around 10 million lives — a third of Bengal’s then population. These disasters struck even in relatively recent times. The Bengal famine of 1943 took three million lives out of a 60 million population. It wasn’t until the 1970s that South Asia became free of famine. This was primarily achieved with the introduction of high yielding crop varieties, which followed the Green Revolution, with a far greater emphasis on agricultural investment.

No surprise then that rice was given a unique position by Asian governments. It was the staple diet, as the key source of carbohydrates. Those who grew rice were treated with more social respect. In traditional Asian societies one cultivated other crops only if something prevented one from growing rice. The dry zone farmers in Sri Lanka did so because they didn’t have enough rain. Taking the cue, governments offered more subsidies for rice farmers. What they didn’t expect was overproduction. It was unthinkable in a society that toppled governments for about two kilograms of free rice.

In India it was IR8 – a semi-dwarf rice variety developed by the International Rice Research Institute (IRRI) that could produce more grains of rice per plant when grown with certain fertilizers and irrigation – that was responsible for the transformation. Dubbed the ‘Miracle Rice’, IR8 rice yielded about 5,000 kg per hectare with no fertilizer – ten times over traditional varieties. In the 1970s, rice was about $550 a tonne. It came down to $200 by 2001. Harvest has increased three-fold. The governments initially welcomed the increased production. A bigger worry was the population expansion. More mouths need more food. So, increased productivity and production were not seen as problems. Anyway, most Asian economies did not know the issues of overproduction. They have rarely overproduced anything.

Now, agri production has inflated beyond consumable levels. It is visible mostly in, but not confined to, paddy. Once in a while we see milk farmers publicly destroy their produce, for not getting a fair price. Nearly 40% of the vegetable production goes waste and not all because of the damage in transportation. Neither farmers nor wholesale buyers have extensive storage facilities. They have no option than selling the produce offhand – at whatever the price they get in the competitive market. The governments respond in an ad-hoc manner. Taxes are imposed and removed depending on the circumstances. Fertilizer subsidies are offered. (If not for the subsidy many farmers may not use fertilizers. It is the single largest investment they make in a crop cycle.) The worst is price control. Governments purchase overproduction with public money. They may do this to keep the one third of the workforce involved in the agriculture content. Overall it is a bad practice. Neither could it be practiced forever.

We need a better solution. Increasing productivity per se will not help. If we were to increase productivity and production drop to match demand, the excess workforce could then be absorbed by either industry or service sectors. But that will not happen if those two sectors do not expand extensively. That is why the issues within the agriculture sector are simply not a matter of increasing productivity. The solution should be the transformation of the economy holistically. Fixing nuts and bolts within the sector per se does not take us far. We have to look beyond that.