El Nino puts ₹1 lakh crore worth of farm output at risk; Rabi season faces bigger risk: SBI Research

The El Nino weather phenomenon could put agricultural production worth around ₹1 lakh crore at risk in India, according to an SBI Research report.

The report said the impact of El Nino, which was initially expected during the Kharif season, has been postponed to the Rabi season.

"Our estimates suggest that combined agricultural production losses could be at approximately 3.86 crore tonnes," SBI Research said in its report.

Of the estimated losses, Kharif production could decline by 89 lakh tonnes, while Rabi losses are projected at 2.97 crore tonnes.

"Valued using indicative market-arrival-weighted commodity prices, the estimated gross value of production at risk is around Rs 1 lakh crore," it said.

The report's district-level analysis suggests that approximately 13.5 million hectares, or 1.35 crore hectares, of seasonal cropped area could face production-equivalent impact across the two seasons.

The assessment is based on a scenario-based simulation using district-level Kharif and Rabi rainfall deviations and agricultural production data.

"The district-level assessment reveals that the potential agricultural production losses are geographically dispersed across both Kharif and Rabi seasons," the report said.

During the Kharif season, the highest production losses are concentrated in districts across Rajasthan, Punjab, Uttar Pradesh and Maharashtra, particularly Barmer, Jalore, Bathinda, Muktsar, Ferozepur and Ludhiana.

The assessment for the Rabi season points to substantial exposure in Madhya Pradesh, Uttar Pradesh and West Bengal.

Madhya Pradesh accounts for nine of the 20 districts identified under SBI Research's Rabi Climate-Credit-Production Exposure Index.

The report said these districts combine a substantial share of national Rabi production with severe rainfall deviations, making them important areas for monitoring potential production disruptions.

SBI Research said El Nino could also affect agricultural credit, though the exposure was estimated at only 2.8%.

"The impact of El Nino though larger than FY16 would still be contained but will be visible in select pockets," the report said.

"States must desist from loan waivers," SBI Research said.

The report noted that the impact of two back-to-back dry years in 2014 and 2015, along with El Nino in 2018, had pushed agricultural non-performing assets at the systemic level to 10.1% in FY20 from 5.4% in FY17.

It suggested that the bank should rather be approached for restructuring of loans, with part of the cost borne by state governments.