Drought will drain coffers by Rs 6.5 lakh crore: Assocham

Drought clouds have started hovering over the government. And they are raining some harsh numbers in terms of cost to the economy even as the Supreme Court (SC) on Wednesday rapped on its knuckles directing it assess and prepare a plan, along with the affected states, to tackle the drought-like situation in many areas of the country.

What has set the alarm bells ringing is the industry body Assocham's estimated Rs6.5 lakh crore cost to the economy due to some states experiencing dry spell.

A study, released by it on Wednesday, expects 33 crore people across 256 districts in 10 states to be hit by drought this year. It said with 25% of the population at risk, it could cost the economy about Rs 1 lakh crore per month, assuming that the government spent Rs3000 per person to meet their water, food, and health expenses for one or two months.

It further added, "the loss of subsidies on power, fertiliser and other inputs due to loss of crop (will) multiply the impact".

DS Rawat, secretary general of Assocham feels the drought will also create inflationary pressures, making the food management a challenge for the government and the policy makers.

Ranen Banerjee, leader, public finance, PricewaterhouseCoopers (PwC) India, said if a drought is declared then the stress in the agricultural sector could spill over to the industrial sector.

"There is a forecast that demand for water will outstrip supply. Today, 80% of the total water is consumed by the agricultural sector and the balance goes for industry and domestic consumption. Now, the challenge is that when drought occurs and the agricultural sector comes under stress, then the allocation issues for industry will also become very serious. Water shortage will impact businesses too," he said.

On Wednesday, the Centre had to swallow not just the Assocham's unpalatable figures on cost of drought, but also the apex court's direction to create a disaster mitigation fund to tackle drought-like situation. The SC made the comment in relation to the state governments taking an "ostrich-like attitude" towards disasters like drought.

"It (Centre) cannot totally wash its hands off on issues pertaining to Article 21 of the Constitution but at the same time, we do not suggest that the authority of the state to declare a drought or any other similar power be diluted," said a bench comprising Justices MB Lokur and NV Ramana.

The SC court also asked the agriculture ministry to hold a meeting with affected states like Bihar, Gujarat and Haryana in a week to assess the conditions.

It also directed the Centre to implement the provisions of Disaster Management Act and fix a time limit for declaration of drought on scientific grounds. It also asked the government to revise the drought management manual to provide effective relief to calamity-hit farmers and prepare a national plan to tackle the crisis.

The court also ordered for the National Disaster Response Force to be trained and equipped to tackle the drought-like situation.

Banerjee said there was already a National Water Policy and the government just needed to take steps on it and give guidance to affected states.

"There is a lot awareness in the government about the water issues. The focus has to be on implementation. Moreover, water is a state subject. Centre can only come out with policies and guidelines; implementation has to be done at the state level," he said adding that if court has ordered for an assessment of situation, then that "needs to be taken cognizance of".

On Tuesday, rural development minister Birender Singh had informed the Lok Sabha that over one lakh villages in 313 districts of 13 states had been affected by drought. The minister said all drought-hit states collectively had at their disposal a total of Rs 3,800 crore for relief, including Central contribution of 50%.