Institutional and Policy Related Research Gaps for Climate Resilient Farming System Intensification: A Study in Eastern Indo-Gangetic Plain

Abstract

This chapter analyzes research and capacity gaps in policies, institutions and markets in Eastern Indo-Gangetic Plain (Eastern IGP), including the states of Bihar and West Bengal in India, Nepal and Bangladesh. The analysis is based on a review of existing policies, institutional framework and farmers group discussion (FGD) from selected villages in identified districts located across the Eastern IGP. A review of the existing policies and institutions indicated that a good number of required policies and institutional framework were in place, but the informal transaction cost of availing benefits of those policies by the smallholders from formal channels (banks, government departments, insurance companies, etc.) was very high. This reflected poorly on the level of governance, as the global percentile ranking of Eastern IGP states in respect of governance was in the range of 15–45%. Therefore, major reforms are required for promoting equitable access to technology and financial services; public resources management (reducing leakages) and addressing gender issues.

Appendix 1: Summary of Existing Policies Supporting Agricultural Intensification in Eastern IGP (Bihar, West Bengal, Nepal and Bangladesh)

Policy issue, policy statement, program and practice	Implications/problemsa
Bihar and West Bengal
Inputs price (1) Seed-National Seed Policy 2002: establishment of seed banks, seed villages, national seed grid, training in seed production Price of certified seeds is fixed by the government, distribution by state agencies (national seed corporation, state seed corporations) No price control on private suppliers/multinational agencies There is a new scheme in Bihar for seed supply—Mukhyamantri Tivra Beej Vistar Yojana (2008–09) for the supply of seed at 50% subsidy in Bihar (2) Fertilizers: Fertilizer Pricing Policy-1977: Retention Price Scheme setting an ex-factory price for fertilizer specific to each unit and allowed a 12% after tax return Nutrient Based Subsidy (NBS) (2008): Decontrol of non-urea fertilizer price Government supplies urea fertilizer at issue price, which is highly subsidized; non-urea fertilizers are now only partially subsidized Irrigation Water: Canal water supply is priced on area basis and is highly subsidized Groundwater supply is a private business, but electricity for tube wells is highly subsidized. Electricity is charged on motor horse power basis Subsidized supply of diesel in drought-prone area of Bihar Mechanization: Several programs like National Food Security Mission and Krishi Yantrikaran Yojana or the Farm Mechanization scheme (2010) in Bihar, under which farm implements are supplied at subsidized cost	Limited supply, timely distribution is a problem Informal sources cover larger space Complaints of spurious seeds Private companies charge high cost High subsidy burden. Benefits inefficient. Imbalanced fertilizer use leads to soil health problems. Impure supply reported Poorly maintained canal system meets demands partially Electricity supply is poor in Bihar. Diesel-based pumping increases cost of production Good initiative to reduce production cost and facilitate intensification
Output price As of date, some 27 commodities including jute and cotton enjoy the Minimum Support Price (MSP). However, there is no MSP for fruit, vegetables, dairy, meat, and other perishable commodities and output price is controlled by market forces Pricing-Farm Gate Pricing liberalized. Private traders sell and buy Pricing-Retail: Pricing liberalized and is controlled by private importers and traders Futures: Needs clear policy and institutional capacity building	Implementation of MSP in Bihar and West Bengal is not as efficient as in Punjab and Haryana Traders manipulate output price, form cartel and this increases producer’s vulnerability Market not yet mature to use futures
Credit Agricultural credit is disbursed through a multi-agency network of commercial banks, Regional Rural Banks (RRBs) and Cooperative banks, Primary Agricultural Credit Societies (PACS). Credit Card (KCC) is another important medium to increase agricultural credit. The National Bank for Agriculture and Rural Development (NABARD) plays a major role in increasing credit for agricultural inputs PACS have been more active in West Bengal and Bihar; commercial banks did brisk business through KCC Cooperative Act and Warehousing Act prohibit cooperatives and central and state warehousing from banking with private sector banks Interest rates: interest rates are regulated by the government in formal credit sector. These rates are low Microfinance institutions (MFIs) and private lenders decide their interest rates, which are high	Only land owners can get a loan. Share croppers, who are more common in Bihar and West Bengal are not eligible for a loan from the formal system Owners of flooded land also do not get a bank loan High servicing cost Increasing non-performing assets (NPA) Government loan waivers impact sustainability High informal transaction cost (bribe) may be 10–12% loan in formal credit system
Land tenures Rural India, particularly Bihar and West Bengal, have significant portion of land (about 25%) under tenancy cultivation. Concealed tenancy has no protection of law. Land tenures are not secure	Without land ownership, access to credit from formal sources is denied
Output markets The Agricultural Produce Market Committee Act (APMC), which made agricultural markets a state subject, was repealed in 2006 by the Bihar government, thus allowing the influx of private markets. The West Bengal government on the other hand, is presently trying to amend the APMC act, to promote agricultural reforms Most small and marginal farmers do business with local traders or in village hats	Poor transportation facility. Low volumes make transportation expensive. Farmers unable to receive remunerative prices, compelled to sell produce to the local traders visiting villages
Insurance National Agricultural Insurance Scheme (NAIS) (1999) Weather Based Crop Insurance Scheme (WBCIS) (2007) Private companies—such as ICICI-Lombard, IFFCO-Tokio, HDFC-Ergo NAIS enabled to reach the small and marginal farmers in Bihar and West Bengal	Settlements in NAIS were fast and attained the level of 83% in Bihar and 99% West Bengal Insurance penetration is low. Mostly those taking loan from banks go for insurance
Safety nets: Food security bill-2014, Mahatma Gandhi National Rural Employment Guarantee (MNREGA) program	Mostly do not lead to assets creation Malpractices on large scale
Extension service Extension Reforms (2005) to provide decentralized and demand-driven extension service through: Agricultural Technology Management Agency (ATMA), Krishi Vigyan Kendras (KVKs), Kisan Call Centres with toll free number, Farmers’ Fields Schools, NGOs, etc. Bihar Agricultural Management and Extension Training Institute (BAMETI), state agricultural universities	KVKs and Kisan call centres are quite popular The basic data on soil and water quality in GPS system at micro-scale is missing
Disaster management Indian Meteorological Department (IMD) provides forecast and warning against drought, flood, cyclones, etc. Flood management program to provide central assistance to the flood-prone states like Bihar and West Bengal in operation. Bihar government launched a portal the Flood Management Information System (FMIS) in 2006. West Bengal government State Disaster Management Policy (2009–10)	Inadequate capacity to deal with the problem. Interagency coordination is an issue. Policy not tuned to the needs of the agricultural sector
Nepal
Inputs price Seeds: Seed sector in Nepal is regulated under the Seed Act (1988) and the National Seed Policy (2000). More than 90% seed supply is through informal sector. No government price support Fertilizers: National Fertilizer Policy (2002) lays down the guiding principles. The country has been following varying subsidy regimes. A revised policy with new guidelines is under consideration Irrigation: National water Policy (NWP) (2003) and Agriculture Perspective Plan (APP) (1997–2017) lay down the guiding policies. NWP requires the users to pay not only irrigation water charges but also a share in construction cost by the users (GoN - Ministry of Agricultural Development 2012). Tube wells are private, and farmers pay for water Mechanization: Government plans are silent on mechanization. No clear policy on mechanization	Availability of quality seed is a problem. Many times, private traders supply spurious seeds The fertilizers are in short supply and there are cases of spurious supply Groundwater development has helped the farmers to raise high-value crops in study locations—Morang and Rautahat Legal/institutional reforms are planned slow progress
Output price Agribusiness Promotion and Marketing Development Directorate (ABP and MDD) is the primary government agency responsible for policy and regulation of agricultural marketing in the country. The policy of MSP has been discontinued. Wheat, paddy, and other food grains are procured at market prices from traders and open markets	The traders buy cheap from producers and sell at higher price. Unorganized small and marginal farmers suffer
Credit Commercial banks, development banks, and government agencies, MFIs provide saving and loan products. There is rapid growth in formal sector and regulated financial institutions (Nepal Rastra Bank, 2012). Private money lenders operate in rural areas Developmental aid from international agencies	Low access to formal credit by small farmers The situation is not very satisfactory. It is mostly dependent on international aid/development support
Interest rates Private lenders may charge 20–30% annual interest. Formal credit sector rates are reasonable	Small and marginal farmers face problems
Output markets No government procurement from famers. Market information availability is poor. Bilateral trade with India. Traders play major role	Connectivity is better in Terai and poor in the hills. Better grain markets in Morang
Insurance There is no well-organized program. No private sector involvement. Some MFIs run pilot project. Farmers demand it	Farmers suffer huge losses as climate situation is very volatile
Extension service Implementation of the Local Self Governance Act (LSGA) in 1999 was a major institutional change with respect to extension services. Departments of Agriculture, Livestock Services, Food Technology and Quality Control and Cooperatives are responsible for providing service	Poor linkage with research institution. Lack of training Insufficient funds Interdepartmental coordination is weak. Consequently, poor service
Disaster management Natural Calamities (Relief) Act, 1982 with provision of institutional framework necessary for managing disaster Nepal Disaster Risk Reduction Consortium (NDRRC) Steering Committee (2010), a National Emergency Operations Centre under Ministry of Home Affairs, Ministry of Irrigation for mitigation of water-induced disasters. Department of Water Induced Disaster Management for mitigation of the impacts of water-induced disasters	Operational preparedness is an issue. Financial allocations need up scaling. Coordination between the agencies is missing There is lack of comprehensive legal and policy instruments
Bangladesh
Inputs price (1) Seeds: National Agricultural Policy (NAP) (1999) of Bangladesh identifies seeds and mechanization as two of the 18 areas of interventions. Seed Rules of 1998 liberalized seed import. Bangladesh Agricultural Development Corporation (BADC), various NGOs and the private sector are involved in seed production, procurement, and distribution No controls. Price is determined by market (2) Fertilizers: Fluctuating policy regime. Open market sale re-introduction in 2010, and substantial subsidy on non-urea fertilizers in 2012. Fertilizer distribution often a problem/lacks information dissemination (3) Water: National Agriculture Policy of Bangladesh (1999) prioritizes irrigation through surface water rather than groundwater. Barind Rain Water Conservation and Irrigation Project (2011–14) specifically at the Barind tract Irrigation water is priced. Charges vary according to the source of energy. Higher for diesel driven pumps. Rates are competitive (4) Mechanization: Imports liberalized. No subsidy. Mostly imported. Irrigation water pumping is mechanized	State agencies meet only 5–6% seed demand Private dealers hike import cost. Reports of spurious seed supply Limited availability and too high price of inputs in remote areas Supply is monopolized by a few. Surface water in the excavated canals gets polluted due to breaking of barriers by influential people Mechanization of operations other than irrigation is slow
Output price (1) Pricing liberalized. No MSP. Private traders sell and buy, Government Task Force sometimes sets price for major commodity like rice, jute, and wheat (2) Farm gate pricing, retail pricing—Liberalized (3) Futures: Needs clear policy and institutional capacity building	Traders are reluctant to buy at government price, increases producers vulnerability Same as for India
Credit Credit provision identified as one of most important areas of intervention The important institutions are: Bangladesh Krishi Bank (BKB), Private commercial banks and state-owned commercial banks. They provide loans to farmers/landowners and to traders, food importers, MFIs like Bangladesh Rural Advance Committee (BRAC) and Grameen Bank provide collateral free loans to the poorer sections	Hard core poor are often left out of the formal credit service Bureaucrats make national commercial banks’ credit service inaccessible to the rural poor/small farmers
Interest rates Interest rates liberalized, banks and MFIs determine their own rates. Interest rate moderate; repayment pressure for MFI credit is very high Private lenders-high interest rate	NAP with commercial banks Poor farmers suffer
Output markets Department of Agriculture and Marketing (DAM) oversees marketing of the agricultural products in local and international markets. Cash incentive of 15–20% for export of agro-processing products Export liberalized—no export duty No price support in domestic market. Sometimes government intervenes in case of market failure. Farm produce in study locations are mostly disposed	Cash support in export has brought in resilience Private traders syndicate controls market, market behavior is unpredictable
Insurance Programmes initiated by Sadharan Bima Corporation (SBC) were abolished for lack of government intervention. Currently, crop insurance and livestock insurance is under consideration to be reintroduced. Asian Development Bank (ADB) has introduced a pilot project on Weather Based Crop Insurance in 2012	In Bangladesh, agriculture is a high-risk venture. Insurance for small and marginal farmers is essential for bringing in sustainability
Extension service New Agricultural Extension Policy (NAEP) (1996) to encourage various agencies to provide efficient and effective services. DAE has initiated ICT-based extension and agricultural marketing services Farmers Field Schools to bring awareness among farmers about climate change and adaptation strategies	Access to technology information remains deficient. This is corroborated by FGD report
Disaster management Vital policies and frameworks including the Disaster Management Act, Disaster Management Policy (Draft), Standing Order on Disasters (SOD) are in place. A Comprehensive Disaster Management Plan (CDMP) is in operation to strengthen national capacity to manage risks related to disasters. Institutionalizing of risk reduction framework is underway. Forty most vulnerable districts developed adaptive agriculture measures to be more resilient in the face of climate change. Early warning generation, institutional capacity and the dissemination mechanism developed and operationalized by Bangladesh Water Development Board (BWDB), implements the flood control, drainage and irrigation (FCDI) programs	The institutionalization of disaster risk reduction and climate change adaptation beyond the Ministry of Food and Disaster Management is slow The government has a well-developed model of flood management

1. ^aThe comments in this column are based on: synthesized reports, focus group discussion reports and consultation workshop reports from the collaborating partners in India, Nepal, and Bangladesh, which have been referred to elsewhere in this paper