Institutional Change in Indian Agriculture Institutional Change in Edited by Suresh Pal, Mruthyunjaya, P K Joshi and Raka Saxena I n s t Indian Agriculture i t u t i o Globalization, privatization and scientific advancements pose new n challenges and opportunities for the development of Indian a l agriculture. The emerging paradigm shifts focus to creation and C application of new knowledge for agricultural development and h global competitiveness. To facilitate this shift and realize greater a economic efficiency, a new set of responsive institutions should n g emerge. e Edited by i This volume discusses the direction of institutional change in Indian n agriculture. The roles of the state, markets and collective actions are I n Suresh Pal examined for evolving the knowledge-intensive agriculture. The d Mruthyunjaya i contributed papers from a number of leading researchers cover the a institutions for R&D, land and water resources, credit, marketing, n P K Joshi trade and agro-processing. A Raka Saxena g r i c u l t u r e jk"Vªh; d`f"k vkfFkZdh ,oa uhfr vuqla/kku dsUnz NATIONAL CENTRE FOR AGRICULTURAL ECONOMICS AND POLICY RESEARCH (Indian Council of Agricultural Research) HkkÏvuqi POST BOX No. 11305, LIBRARY AVENUE, PUSA, NEW DELHI-110012. ICAR Phone : 91-11-25847628, 25848731 Fax : 91-11-25842684 E-mail : [email protected] http: // www.icar.org.in/ncap/index.htm NATIONAL CENTRE FOR AGRICULTURAL ECONOMICS AND POLICY RESEARCH Institutional Change in Indian Agriculture Editors Suresh Pal Mruthyunjaya P K Joshi Raka Saxena NATIONAL CENTRE FOR AGRICULTURAL ECONOMICS AND POLICY RESEARCH NEW DELHI, INDIA Institutional Change in Indian Agriculture Edited by Suresh Pal, Mruthyunjaya, P K Joshi and Raka Saxena © NCAP 2003 Published by Dr Mruthyunjaya Director, NCAP Printed at Chandu Press D-97, Shakarpur Delhi - 110 092 Contents Foreword v Preface vii Acronyms ix Part I. Overview 1. Keynote Address 1 A. Vaidyanathan 2. Institutional Change in Indian Agriculture: An Overview 5 Suresh Pal, Mruthyunjaya, P. K. Joshi and Raka Saxena 3. Institutional Economics: A Review of Theories and 27 Practices in Agricultural Development P. A. Lakshmi Prasanna Part II. Institutions for Common Pool Resources 4. Institutions for Common Pool Resources 61 Dinesh K. Marothia 5. Impact of Watershed Program and Peoples’ Participation 81 P. K. Joshi, Laxmi Tewari, A. K. Jha and R. L. Shiyani 6. Management of Irrigation: A View of Institutional Arrangements 97 R. S. Deshpande and G. Mini 7. India’s Water Crisis and Institutional Challenges: An Overview 123 Vishwa Ballabh 8. Healthy Water Bodies and Weakening Institutions: 147 A Historical Appraisal B. C. Barah 9. Institutional Aspects of Sustainable Aquaculture Development 163 and Abatement of Conflicts in Resource Sharing N. Rajalakshmi Discussant’s Note 175 R. Maria Saleth i Part III. Agricultural Technology Systems 10. Agricultural R&D Reforms in India: Policy and 181 Institutional Imperatives Suresh Pal and Raka Saxena 11. Institutions and Organizations: Agricultural Policy, Research 205 and Extension Rajeswari S. Raina 12. Restructuring Agricultural Extension in India 229 Rasheed Sulaiman V. 13. Farmer’s Participation in Sub-surface Drainage Project: 255 Experience from Haryana K. K. Datta Discussant’s Note 265 Mruthyunjaya Part IV. Agrarian and Credit Institutions 14. Land Reforms and Agricultural Development: Retrospect 267 and Prospect T. Haque 15. Some Dimensions of the Efficacy of Rural Financial Institutions 285 D. P. Khankhoje 16. Micro-Finance in India: Progress and Perspectives 305 K. J. S. Satyasai Discussants’ Notes V. M. Rao 321 J. P. Mishra 325 Part V. Institutions Affecting Incentives 17. Analytical framework for Review of Agricultural 327 Marketing Institutions S. S. Acharya 18. Institutional Aspects of Agricultural Marketing in India 331 P. G. Chengappa ii 19. Agricultural Marketing and Trade in India: An Institutional 349 Perspective Ramesh Chand 20. Institutional Aspects of Agro-Processing and Value Addition for 369 Rural and Small Farmer Development in India : A Study of the Issues and Lessons Vasant P. Gandhi 21. Institutional Arrangements for Linking Horticultural Production, 393 Marketing and Processing M. Sudha and T. M. Gajanana Discussant’s Note 415 M. S. Bhatia Contributors 421 Subject Index 425 iii Foreword Agriculture will continue to play an important role in the economic development and poverty alleviation in India even in the era of economic liberalization and globalization. Generation of gainful employment and income for the rural poor, strengthening of household food and nutritional security and sustainable use of natural resources shall continue to be the main objectives of agricultural development in the country. However, there would be a paradigm shift in the development strategy. Market forces will now greatly guide agricultural production, and private sector would be a useful ally of public sector in the development process. Knowledge will be the key catalyst of growth, besides the traditional sources of growth like land and other resources. These developments will require significant changes in a majority of the existing institutions to keep them relevant in the present context. In some cases, obsolete institutions may have to be replaced with the new ones. This institutional change will be guided by expected impact in terms of increasing economic efficiency, strengthening incentives like protection of intellectual property, providing level-playing field to development agents, encouraging participation of stakeholders, enhancing accountability, etc. The institutions for management of land, water and other common resources should involve their users and other stakeholders for efficient, sustainable and equitable use of these resources. The institutions dealing with agricultural marketing and credit should reach and protect the interests of small farmers, besides increasing economic efficiency. The most significant change will, however, be witnessed in the institutions dealing with creation, protection, exchange and application of new knowledge and technologies. This is because the governance, management and organizations of public research system will have to change to improve their effectiveness and efficiency. The public system will also be required to encourage private research through appropriate incentives and regulatory mechanisms. In particular, protection of intellectual property will be critical; it will determine the linkages between investment, technology and trade, which shall further reinforce the need for institutional change. A strong intellectual property regime will encourage private investment both domestic and foreign and improve access to internationally competitive technologies and v make an agricultural economy vibrant. The government may have to play a greater role to monitor such developments and respond accordingly. The government has enacted a number of legislations and amended some others to facilitate development and use of technologies. The present volume discusses provisions in and appropriateness of these institutional reforms. It also covers the institutional changes needed for agricultural marketing, credit and management of natural resources. These institutions may not directly affect technology uptake, but facilitate technology adoption, and therefore, are indispensable for evolving knowledge-intensive agriculture in the country. I hope this volume would be immensely useful to policy makers, administrators, researchers and other readers alike. Mangala Rai Secretary Department of Agricultural Research and Education, and Director-General Indian Council of Agricultural Research Ministry of Agriculture New Delhi vi Preface Technological advancements favoring better utilization of land and water resources fueled agricultural growth in India since the mid-1960s. Technologies were generally embedded in inputs (seed, fertilizer, pesticide, etc.), and therefore, were simple in the beginning to disseminate and adopt. However, in future, there will be a paradigm shift—productivity growth would be largely driven by technological advancements, which would be highly knowledge-based and information intensive. This shift requires new approaches to development, management and dissemination of technologies. The need for change is further heightened by evolving incentive system, ownership of intellectual property, restricted flow of research material, international treaties and conventions, globalization, challenges of the World Trade Organization, changing role of the state, etc. Thus, a new set of institutions should emerge to provide the growth impetus and synergy to optimally harness technological advances. In fact, benefits of technological change will be maximum when efficient and responsive institutions are in place. In the wake of economic reforms, the institutional change should involve re-examination of the roles of the state, markets and collective actions in the management of natural resources and provision of goods and services to farmers. The challenging question is that the Indian agriculture has reached a stage where public sector may have to largely focus on the roles of facilitation, guided regulation and social welfare. Honestly put, the baggage of public organizations in their current form, functioning and accountability will be a big liability to the society in future. Thus, there is a need for phasing out, merging, remandating and may be establishing need-based new organizations. Further, active involvement of the private