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Click2know about SIP | Samanvaya, Samachar Manthan, Static subject coverage & Prelims Mock tests

[op-ed snap] From Plate to Plough: Freeing the farm

Note4students

Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Dalwai Committee Report, draft Agricultural Export Policy, ICRIER

Mains level: Problems related to the export competitiveness of agriculture sector and their resolution


Context

India’s agri export target

  1. Union agriculture minister recently informed about government’s resolve to increase the value of the country’s agricultural exports to $100 billion by 2022-23
  2. The Dalwai Committee Report on doubling farmers’ incomes also talked of a similar target
  3. The draft Agricultural Export Policy, put in the public domain by the Ministry of Commerce, has a much more modest target — $60 billion by 2022-23

Strategy to double or triple Indian agri-exports

  1. The draft Agri-Exports Policy rightly identifies two steps:
  • Identify commodities in which India holds a global comparative advantage
  • Develop clusters in states to create value chains for these commodities

How this can be achieved

  1. Research conducted at ICRIER can be of help if the government decides to take the first step enunciated in the draft policy
  2. Eleven commodities — marine products, rice, meat, spices, cotton, fresh fruits and vegetables, sugar, coffee, groundnut, oilmeals, and cashews — comprised more than 80 percent of the country’s agri-export basket in 2016-17
  3. Most crops were globally price-competitive in most years but many of these commodities lost out on competitiveness, due to a fall in global prices

Hurdles in increasing exports

  1. The biggest hurdle comes from uncertain domestic marketing and trade policies
  2. The inherent “consumer bias” in these policies makes the trading environment unstable and unpredictable
  3. Exports are restricted through the use of minimum export prices and bans while the Essential Commodities Act is used to regulate private participation
  4. This harms India’s image of a reliable supplier of agri-products and ensures that the country does not get the best price for its exports

Required changes

  1. The first change that is required pertains to mindsets
  • Instead of suppressing market prices for farmers to support consumers, the government should protect them through targeted unconditional income transfers
  • Restricting markets and compensating farmers through higher MSPs based on the new formula (cost A2+FL+50 percent) will be an inflationary and unsustainable solution to the woes of the country’s agriculturists
  • It is likely to hit agri-exports adversely, especially rice and cotton. The exports will become uncompetitive

2. Policymakers should support agri-exports while ensuring environmental sustainability

  • Exports of rice must be properly assessed
  • Cultivating one kg of rice in Punjab or Haryana needs about 5,000 litres of irrigation water
  • This is drawn from underground and has led to a drastic fall in the groundwater table
  • Exporting large quantities of common rice from this region is akin to exporting billions of cubic meters of water
  • The best way to correct this would be to gradually phase-out power and irrigation subsidies and replace them with a direct income support to farmers while letting the prices of power and water reflect its true value

3. The government must develop efficient global value chains and liberalize land lease markets across all states

  • It should encourage contract farming on a medium- to long-term basis
  • Exporters and processors must be encouraged to buy directly from farmer-producer organizations (FPOs), bypassing the inefficient APMCs
  • Major investments are needed at the back-end to create infrastructure for global and domestic value chains, ranging from produce aggregation to its sorting and grading, packaging, storing and linking the hinterlands to ports for export markets

Way forward

  1. Agri investments could have a multiplier effect on the rural economy
  2. A consumer bias in policy must be redressed and a balance should be struck between meeting the needs of food-insecure consumers and income-insecure farmers

Modi govt’s Crop MSP plan may stoke inflation: NITI Aayog

Image source

Note4students

Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Minimum support price, model Agricultural Produce and Livestock Marketing Act, Market Assurance Scheme, Price Deficiency Payment scheme, private procurement and stockist scheme

Mains level: Pros and cons of MSP system


News

Effect of new Crop MSP policy

  1. The twin budget promises of fixing minimum support price (MSP) of crops at cost plus 50% and ensuring MSP to farmers for all crops will lift farm-gate prices by 15% and raise rural incomes
  2. The transmission of this price rise to wholesale and retail levels will have strong implications for inflation

Tackling the inflation problem

  1. NITI Aayog has recommended that states reform their agriculture markets by creating efficient supply chains, competitive markets and application of modern logistics and commerce in agriculture marketing
  2. To counter the effect of the increase in farm-level prices, states should adopt the model Agricultural Produce and Livestock Marketing Act
  3. Financial support to states for MSP operations should be linked to the satisfactory adoption of major provisions of the model APLM Act

Three models proposed to the government to ensure MSP to farmers

  1. Under the Market Assurance Scheme (MAS), states will directly procure crops at MSP and pay farmers when prices dip below support prices, a part of which will be compensated by the centre
  2. Under the Price Deficiency Payment scheme (PDPS) based on a pilot rolled out by Madhya Pradesh last year, farmers will be paid the difference between sale price and MSP—this scheme does not involve any physical procurement of grains
  3. In the private procurement and stockist scheme (PPSS), empanelled private traders will procure crops at MSP prompted by incentives like exemption from export restrictions, income tax benefits, credit access, exemption of market fees, and a maximum of 5% commission on the value of procured crops

[pib] NAFED signs the debt settlement agreement with its eight lender banks

Note4Students

From UPSC perspective, the following things are important:

Prelims level: NAFED

Mains level: Agriculture credit in India


News

  • National Agricultural Cooperative Federation of India Ltd. (NAFED) signed the Debt Settlement Agreement with its eight lender banks at its Headquarter, New Delhi
  • The One Time Settlement with the lender banks has been made
  • It is hoped that with this settlement, the Price Support Scheme operations will be more smooth and effective.

Back2Basics

NAFED

  • NAFED is the national level marketing agency for agricultural products in the Cooperative Sector
  • The organization serves the farmers throughout the country by implementing the Price Support Scheme of Govt. of India for Oilseeds, Pulses, Copra & Cotton.
  • It will also provide remunerative prices to encourage higher investment and production.
  • It will also provide to safeguard interest of consumer by making available supplies at reasonable price with low cost of intermediation.

[op-ed snap] Learning from the ‘long march’

Image Source

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The newscard briefly discusses ‘Why is the Loan waiver schemes not a good solution to farm crisis?’


News

Acceptance of farmers’ demands by the Maharashtra Government

  1. Government extended his previous loan waiver scheme to yet more farmers for an even longer period,
  2. And also promised to transfer land to Adivasi farmers as guaranteed by the Forest Rights Act of 2006
    (Recently, adivasi farmers descended on Mumbai earlier this month)

Is it the right thing to do?: The Loan Waiver

  1. According to M.S. Swaminathan, loan waivers provide at best temporary relief but actually work against the creation of a reliable farm credit system in the long run
  2. Worse, because of the large sums of money that is required for things farmers actually need and will benefit from, like crop and seed research, soil improvement or pest protection, is eaten up by such futile gestures
  3. In the Union Budget for 2018-19, only 12% of the spend is for investments — the rest was eaten up by subsidies, crop insurance schemes and the like
  4. Worse, most of the direct beneficiaries of farm subsidies are in the organised sector — fertiliser companies, tractor manufacturers and so on
  5. The actual farmer gets to see little of the money

Bad record of Loan waiver schemes

  1. In Maharashtra, of the Rs. 34,000 crore loan waiver announced in 2017 (prior to the latest announcement), only Rs. 13,580 crore was actually disbursed
    (according to data given to Maharashtra legislators by the State government)

What farmers actually need is a

  1. robust and reliable credit infrastructure which allows them to access credit when they require it,
  2. better infrastructure to prevent yield loss,
    (The PM himself said in a speech last year that agri products worth Rs. 1 lakh crore are ruined annually due to insufficient infrastructure in the agricultural sector)
  3. better market access for their output,
  4. access to better information on crop prices and,
  5. reliable weather-proofing and yield loss insurance

Political interference: The reality

  1.  Political parties across the spectrum have prevented the flawed agricultural market yard system from being revamped, because it is the basis for exercising political power and influence in rural areas

[op-ed snap] New Farmer, Old Paradigm

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The newscard briefly discusses some issues related to the farming situation in the western India.


News

Agriculture in western India is different from that in the Gangetic Plain

  1. Here, Wheat is much less important than rice, bajra and jowar. Cotton is grown in Maharashtra
  2. The farmer has been taking on biotech seeds, moving over from the earlier desi varieties to long-staple cotton A
  3. And now seeds which give a good crop with shorter growing periods, saving on pesticides and nutrients. A larger area is being devoted to pulses and oilseeds
  4. The typical middle farmer in Western Maharashtra and Vidarbha makes his sowing decision knowing that the price he will get will be lower than the price he sees
    Example
  5. Recently, the pulse price was around Rs 190/kilo
  6. The kisan knows this will go down. But by how much? It went down to almost the MSP levels(That’s ridiculous)

MSP plus 50 per cent will not solve the problem(declared in the budget 2018-19)

  1. It is a nice round number
  2. But even if this is declared, who will buy?
  3. Wheat and rice have the Food Corporation of India (FCI)
  4. But pulses, oilseed and inferior cereals have so-called procurement agencies, which are broke and do only ceremonial purchases
  5. Fruits and vegetables don’t even have those

Some other issues

  1. The price of milk can vary by 10 per cent in markets around the farm
  2. The milk co-ops are not that efficient. Some farmer-producer companies are coming up but shifting them from the Company Affairs Department to the good old Agriculture Department will bureaucratise their governance, given the history of the latter
  3. An increasingly complex agriculture is crying for new paradigms

Some important questions on agriculture of western India

  1. The kisan is on the road
  2. Can we at least protect the costs of say, the top two-thirds of farmers ranked by productivity?
  3. Will we meet their capital and land costs?
  4. Will they get help for infrastructure for first-stage processing and transport in Census towns, which mai bap sarkar still calls villages?
  5. These abound in western India

[op-ed snap] Read the distress signals

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Swaminathan report, APMC, etc.

Mains level: The newscard comprehensively discusses some issues related to Agriculture Sector in India.


News

Recent farmers’ agitation in Maharashtra

  1. The week-long farmers’ march which reached Mumbai earlier this month, on the anniversary of Gandhi’s Dandi March of 1930, was unprecedented in many ways
  2. The most remarkable thing about the march was that it was successful
  3. The State government agreed to all the demands, including pending transfer of forest land to Adivasis, expanding the scope of the loan waiver and ensuring higher prices for farm produce
  4. These agitations implies that the Government policies and reforms are not working and need a paradigm change

M.S. Swaminathan is not fully implemented

  1. The most comprehensive recent blueprint for reforms and rehabilitation of the farm sector is the report of the National Commission on Farmers, chaired by M.S. Swaminathan
  2. That report is already over 10 years old
  3. Several of its ideas are yet to be implemented
  4. For instance, decentralising public procurement of food grain to the lowest level possible, and setting up of grain banks at the district level

What is the most important priority of the government?

  1.  The biggest priority is to reduce the workforce which depends on agriculture for its livelihood
  2. There is considerable underemployment and low productivity but farmers are unable to exit to other livelihood options
    What is needed?
  3. This points to the obvious conclusion, that the solution to the farm crisis lies largely outside the farm sector
  4. If job opportunities abound elsewhere, then we should see an exodus out of farming
  5. That points to the urgency of accelerating industrial growth and improving the ease of doing business

Subsidies don’t help poor farmers

  1. Historically, farm prices were kept suppressed to keep industrial wages low
  2. This meant monopoly procurement laws and the intermediation through the Agriculture Produce Market Committees (APMC)
  3. But that was compensated by providing the farmer with highly subsidised inputs — water, electricity, fertilizer, credit and seeds
  4. But this did not benefit the really needy, subsistence farmers
  5. Nor did it alter the terms of trade which to this day remain tilted against agriculture

What are the main issues?

  1. The APMC is not discontinued. Monopoly procurement continues
  2. There is little progress in direct link between farmer and buyer. Foreign direct investment in farm to fork chain is very restricted
  3. Half the farmers don’t have access to formal credit, since most of them don’t own the land that they till
  4. Contract farming remains virtually banned. Land leasing is not possible (but done informally)
  5. Moneylenders are taboo, even though they might be in the best position to address credit needs, albeit with proper regulation

Issues with loan waiver schemes

  1. Loan waivers punish those who worked hard and repaid, and the cash anyway goes to banks, not to farmers
  2. Banks don’t issue fresh loans out of their own risk aversion
  3. Hence, loan waivers are a bad economic idea but often a political compulsion
  4. The same is true of rewarding farmers with 50% more minimum support price (MSP), no matter what the cost. This paradigm of cost plus pricing is bad economics

Some positive steps taken by the government

  1. Neem-coated fertilizer has reduced leakage, and direct benefit transfer to the farmer-buyer will reduce subsidy further
  2. Soil cards ensure appropriate matching of inputs to soil conditions
  3. Giving tax holiday to the farmer producer companies is also the right fiscal incentive
  4. The government’s aim to double farm income in the next four years is a near impossible feat, but signals the right intention

The way forward

  1. The big agenda is to unshackle agriculture
    (1) to make it a truly commercial market-based enterprise;
    (2) to create opportunities outside farming for large scale exit of the workforce; to connect farmers to the value chain of farm to fork, including agribusiness;
    (3) to remove restrictions on movement and exports of farm produce and let them tap into international market, to also allow easier land transfers including leasing;
    (4) to encourage crop diversification and land consolidation that reverses fragmentation

FDA-like agency needed for agriculture: commerce ministry

Note4students

Mains Paper 3: Agriculture | Transport & marketing of agricultural produce & issues & related constraints

From UPSC perspective, the following things are important:

Prelims level: Draft agri-export policy

Mains level: Interventions by the government to make agriculture profitable


News

Draft agri-export policy

  1. The commerce ministry has released the draft agri-export policy
  2. It proposes that India needs to form a US Food and Drug Administration (FDA)-like agency to have an integrated approach to both agricultural production and trade
  3. The draft policy also advocated promoting export-oriented clusters and agriculture export zones (AEZs) in partnership with private exporters who will have a natural incentive to promote such clusters

Agriculture policies in India

  1. India’s domestic agricultural policies are largely aimed at food security and price stabilization and often put export restrictions to control food inflation

Agricultural exports by India

  1. India’s agricultural exports basket is a diversified mix led by marine products, meat and rice, which together constitute around 52% of its total agricultural exports
  2. India’s share in global exports of agriculture products has increased from 1% a few years ago to 2.2 % in 2016

Export promotion

  1. The commerce ministry has provisionally identified 50 unique product-district clusters for export promotion
  2. It has also shortlisted 10 commodities as focus items for specific farm, infrastructure and market intervention

Providing relief to producers

  1. The commerce ministry has also sought to provide policy assurance to producers that processed agricultural and organic products will not be put under export restrictions
  2. These restrictions include minimum export price, export duty

[op-ed snap] The centre’s failure to steer agriculture right

Note4students

Mains Paper 3: Agriculture | Transport and marketing of agricultural produce and issues and related constraints

From UPSC perspective, the following things are important:

Prelims level: The APMC act, E-NAM, etc.

Mains level: The newscard primarily discusses the issue related to agricultural marketing.(specially mentioned in the mains syllabus)


News

Important issues related to agricultural sector: Failure of the government
FIRST: incomplete implementations of schemes

  1. Ongoing schemes in agriculture have acquired the status of railway projects sanctioned over the years
  2. New ones keep getting added but no one can shut down any of the existing ones

SECOND: Agricultural finance

  1. The challenge of connecting millions of small and marginal farmers to institutional finance has remained unaddressed for the last two decades
  2. With informal sector interest rates starting at 24% (compared to 0-7% from banks and cooperatives),
  3. there is likely to be no breakthrough in investments on small farms, where the maximum unutilized productivity potential waits to be tapped

THIRD: Agricultural marketing

  1. The critical issue of agriculture marketing reform has again been sidestepped
  2. Rural marketing hubs will benefit from some infrastructure upgrade, which is welcome
  3. But the real issue in marketing is rearranging the institutional arrangements under the agriculture produce marketing committee (APMC) legislation
  4. This challenge has been ducked, yet again
    What is needed?
  5. There is an urgent need to introduce competition, transparency and technology-enabled transactions in the 7,000-plus mandis in the country
  6. Even e-NAM remains stunted and has failed to provide an alternative and efficient marketing platform to farmers
    (e-NAM is a electronic trading portal for agricultural commodities launched by Prime Minister Narendra Modi)
  7. To be fair, the political economy of agriculture marketing is complicated and does not lend itself to easy solutions

What should be done? : The solution

  1. Farmers are not likely to be incentivised to make investments in land improvement, machinery and technology unless the prospects of better prices materialize
  2. This can only happen by treating the entire country as a unified market for agricultural goods, as is the case for industrial products
    Other essential reforms
  3. Supportive policies for allowing direct purchase at the farm gate, portal-based trading, reform of antiquated storage and movement restrictions, and a more liberal external trade stance
  4. will be among the other essential components of a marketing reform package

The way forward

  1. Most of these measures are within the power of the Central government, though the states will have to be brought around to play their role

Back2basics

Marketing of Agricultural Produce in India: Definition; Role; APMC Act, Model APMC Act, 2003

[op-ed snap] Stemming the tide of agrarian distress

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Operation green, Prime Minister Krishi Sinchayee Yojana — Har Khet ko Pani, etc.

Mains level: The newscard comprehensively discusses some important issues related to Indian Agriculture.


News

Three main challenges infront of the Indian Agricultural System
FIRST

  1. The first is to raise the minimum support price (MSP) by at least 50% above the cost of production
  2. While a workable formula for fixing MSP in consonance with the States will take time, the government must extend immediate help to farmers from rampant price volatility
  3. The States can implement the ‘price deficiency payment scheme’ (difference between MSP and price received) a
  4. The scheme has been started in Haryana for some vegetables, and the Bhavantar Bhugtan Yojana in Madhya Pradesh for select oilseeds
  5. A hike in MSP should be supplemented with irrigation, and reduction in fertilizer cost

SECOND

  1. The second measure is to develop and upgrade the existing 22,000 rural haats into Gramin Agricultural Markets
  2. A corpus of Rs. 2,000 crore has been allocated(in this year’s budget) in the name of the Agri-Market Infrastructure Fund for developing and upgrading marketing infrastructure
  3. The hard truth is that farmers sell their produce mainly through village traders or government-run Primary Agricultural Credit Societies (for wheat and paddy at MSP) and often get exploited
  4. Operation Green Another interrelated initiative is the launching of ‘Operation Green’ with an outlay of Rs. 500 crore to address the challenge of price volatility of perishable commodities
  5. This again makes it necessary for State governments to bring various programmes under one roof, perhaps within the Agricultural Produce and Livestock Market Committee 2017, to help farmers

THIRD

  1. The third important step is to increase institutional credit from Rs. 10 lakh crore in 2017-18 to Rs. 11 lakh crore in 2018-19
  2. The share of agricultural credit in gross domestic product in agriculture and allied activities has increased from 10% in 1999-2000 to 41% in 2015-16

Other Issues that need attention

  1. There are certain pressing issues not considered in this Budget that must be given closer attention
  2. Irrigation: Close to 52% of net sown area (73.2 million hectares out of 141.4 million hectares) is still unirrigated and rainfed
  3. Despite its presence in the Economic Survey 2017-18, the subject has not received due attention in this Budget
  4. The plan is to take up 96 districts deprived of irrigation with an allocation of Rs. 2,600 crore under the Prime Minister Krishi Sinchayee Yojana — Har Khet ko Pani
  5. Decline in Ground water: The Minor Irrigation Census 2013-14, published in 2017, warns of a tremendous increase in deep tube wells to more than 2.6 million in 2013-14, from 1.45 million in 2006-07, and the resultant decline in the ground water table
  6. It is ironic that the government aims to install more tube wells while being worried about depleting groundwater
  7. Investment in agricultural research and development (Ag R&D): This is a serious concern in view of the low annual rate of growth in agriculture in the last four years. More drought and pest-resistant crops are needed, along with better irrigation technology
  8. Farmers also require interventions in the seed sector to raise production and diversify to alternate crops to induce higher growth
  9. The most disquieting aspect is that India spends almost Rs. 6,500 crore on Ag R&D, which is not even 0.4 % of GDP from agriculture and allied activities

The way forward

  1. Rather than enticing farmers with compensation and increased budgetary outlays, the government should assure doable action plans that quickly rescue them from price or crop failure

Agriculture 2022: will the dream come true?

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

The following things are important from the UPSC perspective:

Prelims Level: Not much

Mains Level: Recommendations by the NITI Aayog’s task force and other related issues discussed in the newscard.


News

“Agriculture-2022: Doubling Farmers’ Incomes” conference

  1. It was a conference organized by the ministry of agriculture and farmers welfare on 19-20 February 2018 to prepare a strategy for doubling farm income by 2022

Main subjects concerning agriculture(pointed out by the PM)

  1. Reducing the cost of inputs
  2. Ensuring remunerative prices
  3. Reducing wastage at the farm level and
  4. Creating alternative sources of income

A different strategy is needed for every state

  1. The requirements of Punjab’s agriculture may have little in common with agriculture in Maharashtra or Bihar
  2. Therefore, the strategy for doubling farmer incomes will differ from state to state, and from one region to another even within a state
  3. The annual income of a farm household in Punjab in 2013 (70th-round National Sample Survey) was Rs2,17,450 while in Bihar it was only Rs44,172
  4. It is clear that doubling farmer incomes in Punjab is not only much more difficult but will also require a completely different strategy than in Bihar

Raising Agricultural Productivity And Making Farming Remunerative For Farmers: A paper by a NITI Aayog member

  1. Due to repeated announcements of the government’s intention to double farmer incomes by 2022, expectations have gone up everywhere, without any realistic assessment of what is possible in the short term in each state
  2. In March 2015, the government had set up a task force under Arvind Panagariya, which submitted its report that year itself
  3. Based on this report a paper was published, Raising Agricultural Productivity And Making Farming Remunerative For Farmers, in which several useful recommendations were made

THREE MAIN RECOMMENDATIONS
(by the NITI Aayog’s task force)

  1. First, the very first point in the paper was the wasteful use of water for irrigation
  2. The micro-irrigation fund of Rs5,000 crore announced in the 2017 budget has not yet taken off and wasteful practices in the use of water continue in most areas, especially in the northern states
  3. Second, the task force recommended that a model land leasing law be prepared by NITI Aayog
  4. Third, Another important recommendation made by the task force was to consider price deficiency payment (PDP) to ensure that farmers receive remunerative prices
  5. This has been tried in Madhya Pradesh (MP) in kharif 2017 and the results have not been very encouraging
  6. The market price of some crops, particularly urad, continued to be much lower than the minimum support price (MSP) in MP, yet only 42% of urad production was brought to the mandis to avail of the benefit
  7. Government has announced that NITI Aayog will examine various alternatives to ensure MSP to farmers

[op-ed snap] Budget 2018: A good beginning for reviving agriculture

Note4students

Mains Paper 3: Economy | Government Budgeting

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The newscard discusses some important measures announced by the government in the recent budget, for reviving the agricultural sector.


News

Agriculture is not in a good condition

  1. Recent estimates of the CSO show that growth of GVA in agriculture declined from 6.3% in 2016-17 to 2.1% in 2017-18
  2. In fact, the average growth rate of agricultural GDP in the last four years (2014-15 to 2017-18) was only 2.2% per annum
  3. The Economic Survey, 2017-18 also indicates that the level of agricultural GDP and real agricultural revenue has remained constant in the last four years

Government’s focus on Income

  1. the government is focusing on farmer incomes rather than production
  2. In this context, a minimum support price of 1.5 times the input cost of farmers for all the unannounced kharif crops, announced in the budget, can help increase their income

 Difference between minimum support price and market price: Solution

  1. The government also wants to help farmers in case there is a difference between minimum support price and market price
  2. At the state level, Madhya Pradesh and Karnataka are experimenting with these payment systems for farmers
  3. Under the Bhavantar Bhugtan Yojana, Madhya Pradesh pays farmers the difference between the official minimum support price and the average modal or most quoted rate in markets for any crop
  4. Similarly, Karnataka gives a Rs5 per litre incentive to milk farmers, over and above the rate that dairies are paying
  5. Central government should also consider these measures

Sector specific efforts: Budget 2018

  1. An important announcement is the setting up of a fisheries and aquaculture infrastructure development fund (FAIDF) and animal husbandry infrastructure development fund (AHIDF)
    (with a corpus of Rs10,000 crore)
  2. Similarly, doubling the allocation for the food processing sector is welcome, although it is not enough
  3. India processes only 10% of its fruits and vegetables, as compared to 40-70% in many other countries
  4. Small and marginal farmers constitute 85% of all farmers
  5. Farmer producer companies can help them achieve economies of scale
  6. Therefore, the budget announcement of 100% tax deduction for them would help in the better functioning of these institutions

Are these measures enough for doubling farmer incomes?

  1. The measures announced in the budget may not be enough to double farmer incomes by 2022
  2. The growth rate of farmer incomes between 2003 and 2013 was only 3.1% per annum
  3. If you want to double farmer incomes, growth should be more than 10%
  4. The measures mentioned above may not be enough to achieve such high income growth

Declining investments

  1. The budget has not talked about reducing subsidies and increasing investments
  2. Investment in agriculture, as a share of gross value added in agriculture, declined from 18.2% in 2011-12 to 16.4% in 2015-16. This was due to a decline in private investment in agriculture
  3. Investment is necessary for providing better facilities to farmers; like drip and sprinkler technologies

[op-ed snap] Framing the farming issue

Image source

Note4students

Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: National agricultural policy (NAP), 2000, Green Revolution, Pradhan Mantri Kisan Bima Yojana

Mains level: Hurdles in agricultural growth and ways to remove them


Context

Agriculture needs extra focus

  1. Our Agri growth has been suffering for a long time and the trend continues
  2. The need of the hour is to evolve a well-articulated framework to advance agriculture and farming
  3. Agriculture is a state subject; so, the onus for reform and implementing new ideas lies on the states

National agricultural policy (NAP), 2000

  1. The Green Revolution phase ran its course until 2000 when a new national agricultural policy (NAP) was announced
  2. NAP was targeted to:
  • achieve an agricultural growth of four percent per annum
  • to strengthen the rural infrastructure
  • to offer a decent standard of living to farmers and
  • to speed up value-added agricultural growth

Need for a framework

  1. Even though farming is a pressing issue in the country, the country does not currently have a holistic framework to advance agriculture, farming, animal husbandry and allied subjects
  2. National agricultural policy framework can energize and unify fissiparous efforts being done for agriculture growth

How can it be done?

  1. A holistic national framework to address agricultural problems could derive structural lessons from the way India industrialized
  2. There were four pillars on which the industrialization strategy was based
  3. Putting together a similar set of pillars for agriculture is essential

What can a holistic plan be like?

The holistic plan should encompass technology, risk, institutions, policy and skills

  1. Technology incubation: outcome-based technology policy encouraging research, innovation and incubation
  2. Risk institutions and financing: Banks and financial institutions to help promote technology infusion, insurance and mechanization
  3. Institutions of governance: Promote farmer-producer organizations to be agri micro, small and medium enterprises
  4. Policy for farming: Focus on improving human and farm productivity
  5. Skilling: Agricultural technical training institutes

Way forward

  1. Pradhan Mantri Kisan Bima Yojana and other schemes must be followed up with steps in the national budget
  2. This will bring a new focus on agriculture as a key part of our growth story

[op-ed snap] Problem of plenty

Image Source

Note4students

Mains Paper 3: Agriculture | Transport and marketing of agricultural produce and issues and related constraints

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The Coweb phenomenon and the possible solutions of the issue of price-fluctuations in agriculture.


News

 Cycle of boom and bust in the prices of agricultural goods

  1. Over the last few weeks, across India the price of potatoes has fallen sharply after a year of bumper production
  2. Many distressed farmers have left their produce to rot on the roads, and in cold storage facilities
  3. Curiously, potato prices were many times higher just months ago amid scarce supply
  4. Last year, the price of other produce like red chilli, tur dal and tomato witnessed a similar trend of steep falls compared to the previous season

Explanation behind this trend

  1. The sharp swing in prices has been explained by the Cobweb phenomenon
  2. Farmers tend to increase the production of certain crops in response to their high prices during the previous season, which in turn leads to a supply glut that causes prices to crash
  3. The cycle repeats each passing year, with the lag between price and production causing a huge mismatch between supply and demand
  4. The boom-and-bust cycle is the result of a broken supply chain that is over-regulated

Temporary measures by the government

  1. These measures can come in the form of fiscal measures such as farm loan waivers, a higher minimum support price for farm produce, or some combination of the two
  2. Such relief measures that temporarily ease the pain on farmers, however, will fail to make a significant difference to their lives in the long run

Permanent solution

  1. Any permanent solution to the problem of agricultural distress will have to deal with the challenge of price fluctuations
  2. In the absence of a robust market for buying and selling forward-looking contracts, farmers are left to fend for themselves against severe fluctuations

The way forward

  1. The government must resolve to address these structural issues, and not limit itself to ad hoc policy measures in firefighting mode.
  2. There is a need to give farmers not just a better, but also more stable, return on their crops

Panel sets out an action plan to make agriculture profitable

Image source

Note4students

Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Rashtriya Krishi Vikas Yojana

Mains level: Target of doubling farmers’ incomes in India and measures being taken to achieve it


News

Action plan for doubling farmers’ incomes

  1. A top government panel has proposed major reforms to the existing administrative structure
  2. This is a part of detailed action plan for doubling farmers’ incomes

Important suggestions

  1. Overhaul of the Union agriculture ministry
  2. Setting up a three-tier planning and review mechanism through district, state and national level committees
  3. Conducting an annual ease of doing agribusiness survey

About the committee

  1. The committee on doubling farmers’ incomes (DFI), was set up in April 2016
  2. The DFI committee is tasked to formulate the strategy to double real income of farmers between 2015-16 and 2022-23

Restructuring agriculture ministry

  1. The committee suggested revamping the marketing division of the agriculture ministry into a division of marketing and agri-logistics
  2. It suggested upgrading the Rashtriya Krishi Vikas Yojana (RKVY) division to a ‘division of investment in agriculture’ to promote strategic investments in production and post-production facilities
  3. To capture value from agri-commodities, the committee has suggested that the crops division be restructured as the ‘division of crops and primary processing’ to focus on primary processing of harvested produce at the farm gate

Other policy suggestions

  1. The report suggested liberalizing the definition of a ‘farmer’ to include cultivators, lessee farmers and sharecroppers
  2. The report also suggested a national level policy and planning committee represented by ministers of agriculture, commerce, rural development, water resources, food and consumer affairs, and food processing, among others
  3. Its proposed task would be to review the policy framework and progress in doubling farmer’s incomes, review trade policy, budgetary allocations and status of farmers’ welfare

Back2Basics

Rashtriya Krishi Vikas Yojana

  1. It was started to incentivize the states in order to increase their investment in Agriculture and allied sectors
  2. It is a State Plan scheme
  3. The eligibility of a state for the RKVY is contingent upon the state maintaining or increasing the State Plan expenditure for Agricultural and Allied Sectors
  4. The baseline expenditure is determined based on the average expenditure incurred by the State Government during the three years prior to the previous year
  5. The preparation of the district and State Agriculture Plans is mandatory
  6. The scheme encourages convergence with other programmes such as NREGS
  7. The pattern of funding is 100% Central Government Grant
  8. It is an incentive scheme, hence allocations are not automatic

[op-ed snap] Agriculture needs a reforms package

Image Source

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Basics of the MSP. procurement, etc.

Mains level: The issues related to the MSP are specially mentioned in the Mains Syllabus.


News

Why are farm incomes unattractive?

  1. Due to the absurdity of policies features among them
  2. The overriding objective of price stability, over time, has tilted farm policy in favour of the consumer, the numerically larger vote bank.
  3. Trade and price controls are highly restrictive, and mostly anti-farmer
  4. The farmer is forced to sell in the domestic market where prices tend to be lower than global agricultural prices
  5. Incompetence and politics have ensured that policies are failing to serve even consumers

Government’s control on prices in agri-market

  1. Agri-markets are not free
  2. Governments seek to influence prices, to smoothen them out. In the absence of state intervention, prices soar in bad weather years and plunge in good weather years, hurting consumers and farmers
  3. The tools in governments’ hands are import and export controls, buffer stocks management and minimum support prices (MSPs)

What should be the MSP policy of government?

  1. The MSP, the price at which the government offers to procure from farmers, is an economic policy tool which requires technical acumen
  2. A sensible policy would be to
    (1) buy from farmers when market prices are depressed and
    (2) sell stocks in the open market when prices are elevated
  3. In the first scenario, if the MSP is pegged higher than the market price, the procurement will raise the market price, boosting farm incomes
  4. In the latter, by offloading its stocks at a price lower than the market price, government can cushion consumers against excessive inflation
  5. The buyers of the subsidised sales (an efficient Public Distribution System) are directly benefitted, but as the sales also lead to lower prices in the open market, all consumers gain

Issues related to procurement(2016-2017)

  1. Procurement works effectively only if trade controls and stocks management are aligned with it
  2. How these tools tend to be deployed in a counterproductive manner was evident in the example of pulses in 2016-17
  3. Despite a bumper harvest, after a steep MSP hike and good rains, export controls and stocking limits for private traders were retained
  4. And a record volume of imports allowed to be shipped in
  5. The resulting glut sent the market price down, below the MSPs, rendering it pointless
  6. The looming losses set off farmer protests seeking even higher MSPs

Comparison with other countries

  1. Even after four years of systematically aggressive hikes, Indian MSPs of rice and wheat are less than support prices in China and other Asian countries

What should be done?

  1. The bulk of agriculture is not sufficiently productive to be able to gainfully engage young rural Indians and so policy attention must be on building industry
  2. The upcoming Budget presents an opportunity to revisit strategic choices

Back2basics

Issues related to direct and indirect farm subsidies and minimum support prices

[op-ed snap] A law for the farmer

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The newscard comprehensively discusses the need of forthcoming Pesticide Management Bill 2017. As, current laws are not effective enough to deal with the issues.


News

What is the issue?

  1. Recently, about 50 farmers have died due to the use of pesticides in Maharashtra and over 1,000 have suffered critical ailments
  2. The current Insecticides Act, 1968 is archaic
  3. The agriculture ministry during UPA rule had prepared a Pesticide Management Bill 2008, which was scuttled in Parliament
  4. The forthcoming Pesticide Management Bill 2017 can address the many anomalies

Sale of misbranded pesticide

  1. Farmers continue to commit suicide in large numbers and one primary cause, not even discussed in hushed tones, is the sale of misbranded (substandard, spurious, expired) pesticides
  2. Along with pesticide misuse (use, timing and quantity), the inordinate use of antibiotics in the poultry and dairy industry is a major reason for human diseases, monumental species loss and environmental damage
  3. The value of failing crops and the costs borne by farmers as a result of excessive farm inputs cannot even be properly assessed

Ineffective Laws

  1. The larger pesticide companies (brand owners and marketing agents) generally outsource production to smaller manufacturers
  2. But they can’t be prosecuted because the Central law only stipulates prosecution of the manufacturer
  3. When the licence to sell pesticides is issued, applicants declare a “responsible person” to be held accountable for violations
  4. The person is usually a low-paid employee, who over time becomes unreachable. So, even serving the prosecution notice becomes difficult

Testing of Pesticides 

  1. Most pesticide samples simply don’t fail the test
  2. This is not only because conniving officers don’t follow procedures
  3. But for a “sample failure” to be legally valid, samples have to fail consecutively
  4. The cumbersome documentation procedure allows the second sample to expire before it’s tested, rendering the process invalid. Thus, the crime cannot be established

What should be done?
Two simple notifications can result in a giant leap

  1. One, the Centre should make it mandatory for all agriculture-input packaging to have a bar code giving product information
  2. The bar code will sync with the GST and the e-way bill
  3. Second, states should make retailers log all agriculture input sales onto state government servers, allowing for traceability from the factory floor to farmer’s field and for regulation enforcement

Digitisation at the ground-level can help

  1. A data bank of agriculture input sales will give unparalleled benefits
  2. The ensuing machine-learning revolution on farms will allow for evidence-based interventions, officer promotion evaluation and better governance
  3. Digitisation at the ground-level will drive personalised and data-driven farm extension, realistic crop loss compensation and insurance
  4. Most importantly, it will facilitate a farmer grievance redressal mechanism to make the system accountable

Modi govt plans bold move to fix rural distress

Image source

Note4students

Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: minimum support price (MSP), market assurance scheme

Mains level: Farm distress across country and ways to resolve it


News

Scheme to prevent distress sales by farmers

  1. The central government, in consultation with states, proposes to launch a new price support scheme for farmers to prevent distress sales at prices below the minimum support price (MSP)
  2. Under the proposed “market assurance scheme”, states will be free to procure all crops from farmers for which MSPs are announced
  3. This will be except rice and wheat, which are already being procured by the centre for the public distribution system

Working of the scheme

  1. Under the new scheme, the centre will compensate states for any losses capped at 30% of the procurement cost
  2. It will be the states’ responsibility to dispose of the procured crops
  3. The proposed scheme will ensure an assured price for the farmer, mitigating the price risks faced by farmers after harvest

States have discretion

  1. States will take ownership of the scheme, including which crop to procure and in what quantities when wholesale prices drop below MSPs
  2. State governments will be free to use the procured crops for targeted nutrition-support programmes such as mid-day meals for schoolchildren or sell them in the open market 

Why this scheme?

  1. The proposed scheme comes against the backdrop of a record harvest of cereals and pulses in 2016-17, which led to wholesale prices plunging below MSPs
  2. The price crash has led to protests by farmer groups across the country since June, with demands for remunerative crop prices and loan waivers

 Back2Basics

Minimum Support Price (MSP)

  1. Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices
  2. The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops
  3. This is done on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP)
  4. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, govt. agencies purchase the entire quantity offered by the farmers at the announced minimum price
  5. Minimum support prices are currently announced for 24 commodities including seven cereals (paddy, wheat, barley, jowar, bajra, maize and ragi); five pulses (gram, arhar/tur, moong, urad and lentil); eight oilseeds (groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed); copra, raw cotton, raw jute and virginia flu cured (VFC) tobacco

[op-ed snap] From Plate to Plough: Agri-futures, like China

Note4students

Mains Paper 3: marketing of agricultural produce and issues and related constraints
Prelims level: not much
Mains level: Steps Needed for developing agri-futures to ensure price discovery and thus, raise farmer’s income.

News

Context
  1. In November, prices of most major kharif crops crashed below their respective minimum support prices (MSPs), triggering farm distress.
  2. One of the main reasons: planting decisions of our farmers are based on last year’s prices, rather than the prices expected at the time of harvest.
  3.  Signals indicating future prices are largely absent as agri-futures have been decimated by excessive controls and regulation.
  4. It is time to think afresh and resurrect agri-futures in India.
Agri-futures: India 
  1. In 2003, the Atal Bihari Vajpayee government’s decisions to allow futures markets in India.
  2. In the initial years — 2003-2007 — agri-futures did show promising growth.
  3. Around 2007-08, hit by global food crisis, but gained momentum again and peaked in 2011-12.
  4. However, since then, there has been heavy government intervention in agri-futures resulting in their near collapse.
  5. Government intervention: higher margin requirements and absolute suspensions.
Agri Futures: China
  1. The agri-futures market was introduced in the early 1990s in China.
  2. It struggled for a decade, but thereafter Chinese agri-futures had a robust growth.
  3. By 2016, it was at the top of global chart, crossing the 1,000 million mark, dwarfing India’s 20 million contracts in the process.
pasted1
Image Source
Issues in India’s Agri-futures
  1. Abrupt interventions, with frequent changes in stocking restrictions on private trade.
  2. Suspensions of agri-futures, as well as high margins, have been targeted more towards sensitive commodities in the common man’s food. Eg. Tur, Urad.
  3. High margins for sensitive commodities like 100% for potato, reflect the government’s intention of blocking their futures trade.
Lessons from China: Steps Needed

No Sensitive Commodities

  1. Stay away from sensitive commodities (for example, common rice, wheat), till futures gain momentum and some depth.
  2. Focus on less sensitive commodities like oilseed complex (oilseeds, meals, and oils), feed (maize), cotton, basmati rice and spices.
  3. Once markets are developed and the regulator has a higher degree of comfort, the country can diversify to other commodities
Only Delivery-based contracts
  1. The regulator should allow only delivery-based contracts, at least till markets deepen.
  2. This will assure government that speculators are not rigging markets.
Encourage State Trading Enterprises
  1. The government of India should encourage state trading enterprises (STEs) to trade on the agri-futures platform.
  2. This will boost the government’s confidence in agri-futures as it will have ample information from its STEs.
  3. India’s STEs like the MMTC, STC, PEC or even the FCI can participate on the agri-futures platform, helping it to deepen.
Conclusion
  1. Lastly, it has to be recognised that developing agri-futures is as much the responsibility of the regulator as that of commodity exchanges.
  2. Both need to work in harmony for the benefit of various stakeholders.

[op-ed snap] From Plate to Plough: What Gujarat did yesterday

Image Source

Note4students

Mains Paper 3: Agriculture | Transport and marketing of agricultural produce and issues and related constraints

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The possible solutions given in the article can be mentioned in the Mains paper.


News

Context

  1. The article talks about the Gujarat agricultural model from 2003 to 2014, and how it can help the current bad situation of agriculture situation in country.

Agriculture Growth of Gujarat from 2003 to 2014

  1. Gujarat’s agri-GDP registered an unprecedented growth of 8 per cent per annum during 2002-03 to 2013-14, way more than the all-India figure of 3.3 per cent per annum 
  2. Gujarat’s agri-growth was even higher than that achieved by Punjab during the Green Revolution’s

Expectations from the Gujarat model

  1. When Modi became the prime minister in May 2014, one was expecting that the “Gujarat model” would be extended to many states, with the fine-tuning to suit each state’s requirements
  2. But the growth of all-India agri-GDP in the first three years of NDA rule has come down to 1.8 per cent

Is deficient rain the reason behind this situation?

  1. Deficient rain in 2014-15 and 2015-16 is of course one factor behind this poor performance
  2. But there were bumper harvests in 2016-17, yet farmers suffered due to a collapse in agri-prices
  3. The advance estimates of 2017-18 do not indicate much recovery

Reasons behind Gujarat’s excellent agri-performance during 2003 to 2014
First

  1. The Atal Bihari Vajpayee government’s bold decision to allow the commercial use of Bt cotton became a catalyst for change, from which Gujarat benefited the most
  2. From nowhere in 2002, Bt cotton spread to more than 90 per cent of the area under cotton in Gujarat by 2014

Second

  1. China is taking over Syngenta for $43 billion to access the best technologies for its farmers
  2. While the Centre is creating conditions that may force companies like Monsanto to quit
  3. This government is literally reversing the benefits that the Atal Bihari Vajpayee government bestowed to farmers

Third

  1. Gujarat government at that time provided basic infrastructure to farmers — irrigation, power and roads enabled the easy adoption of Bt cotton, and benefited other crops and the livestock sector as well
  2. Currently, Gujarat has one of the best road-network in the country, of which 89 per cent are pucca/surfaced roads

Fourth

  1. Good marketing institutions propelled Gujarat agriculture, especially its dairy industry
  2. The AMUL model of directly buying milk from farmers’ cooperatives and processing and distributing it through millions of outlets ensures that farmers receive 75-80 per cent of the consumers’ price
  3. This model is worth extending to other commodities, especially fruits and vegetables, bypassing the mandi system

The way forward

  1. Enable farmers to access best technologies and best markets at home or abroad
  2. Invest in basic infrastructure that can give access to water for irrigation, power and rural roads
  3. Create AMUL type institutions for other commodities to enable farmers to access high share of consumers’ price
  4. Export bans or high minimum export prices for agri-products are anti-farmer

[op-ed snap] From plate to plough: Plan for the agri-futures

Image result for agri-futures

Image source

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

Op-ed discusses about the India’s poor performance in Agri-future trading and lessons we can learn from Chinese success in Agri-future trading.

Once you are done reading this op-ed, you will be able to attempt the below.

“The futures market is one way to ensure that farmers’ planting and selling decisions are forward-looking.” Examine reasons for India’s poor performance in Agri-futures trading and give suggestions?

From UPSC perspective, the following things are important:

Prelims level: Futures market, e-NAM

Mains level: Agri-trading in India-problems ,solutions


News

Context

  1. Even after 70 years of Independence, the marketing system for agri-products remains un-supportive to farmers.
  2. The e-NAM aims to create an all-India spot market by creating an electronic platform.

e-NAM, what is required?

  1. For transactions to take place across mandis and states, one has to do much more than installing a simple software.
  2. It needs assaying, grading, sorting, storing, delivering and settling disputes with respect to each transaction.

Agri-futures market

  1. The agri-futures market is one way to ensure that farmers’ planting and selling decisions are forward-looking, and not based on past prices.
  2. This can help smoothen the typical boom and bust problem in agri-prices.

India’s agri-futures trading experience

  1. India recorded the first trade in futures in 1875 in cotton in the Bombay Cotton Exchange, just 10 years after the first trade was consummated in USA.
  2. But India’s agri-futures could not develop much due to a series of suspensions around the Second World War in view of the shortage of essential commodities.
  3. This mind-set continued post-Independence, and only pepper and turmeric were allowed to trade in 1977
  4. In 2003 three national exchanges were set up and all commodities were allowed to be traded in futures markets. But since 2003, 15 commodity futures were suspended, leading to uncertainty in the market.

Problems with Indian agri-futures trading

  1. They are often disrupted by sudden bans or suspensions by the government as many policy-makers have a deep mistrust in the functioning of these markets
  2. Very few farmers or farmer producer organisations (FPOs) trade on futures, which in turn reinforces the mistrust of policymakers.
  3. The overall size of agri-futures in India remains trapped at low levels, and since 2012, it has been tumbling down

Lessons from the Chinese success

  1. China, which started in the early 1990s, and by 2016, it was the largest player in global agri-futures contracts with a whopping share of 69 per cent.
  2. State participation in the futures markets through the State Trading Enterprises
  3. No abrupt suspensions of commodities
  4. Focus on choice of commodities, which are not very sensitive from the food security point of view

Way forward

  1. Well thought-out strategy to pick the right commodities is a better way to develop agri-futures rather than a frequent stop-go policy
  2. India being now the largest importer of edible oils, especially palm and soya oils, these are promising candidates for agri-futures provided global players are allowed to trade in these.
  3. The trust in commodity futures will enhance once more FPOs start trading on agri-futures, and they start gaining directly or indirectly from agri-futures.
  4. SEBI can help incentivise the participation of FPOs on the futures trading platform, but the real onus lies with agri-commodity exchanges, and it is here that the progress has been extremely slow.

 

[op-ed snap] Missing stock is harming our food security

  1. Theme: Spoilage and pilferage of foodgrains.
  2. Background: During April this year, missing stock worth around Rs 20,000 crore was discovered in Punjab’s food purchases.
  3. Concerns: According to the Food and Agriculture Organization, around 40% of the food produced in India is wasted.
  4. Wastage from the public distribution system, which is meant for ensuring food security in the country, makes up almost half of the total.
  5. Considering that India ranked a lowly 97th of 118 nations in the recently released Global Hunger Index, spoilage and pilferage are not things the country can afford.
  6. The way ahead: The concept of a Negotiable Warehouse Receipts system, as proposed by the Shanta Kumar Committee for restructuring FCI, is one way to break the monopoly of state agencies and incentivize farmers. It allows farmers to deposit their produce in registered warehouses for an advance and sell it later when market prices are high.
  7. Strict adherence to quality standards and norms should be made mandatory for the registered warehouses, private or otherwise.
  8. A combination of private and public agencies is essential to handle the vast and diverse agricultural output in the country.
  9. Meanwhile, the FCI should be streamlined and allowed to focus on states’ surplus produce meant for distribution in other states.
  10. Most of the produce meant for a state’s own consumption should be left to the state agencies.
  11. Provisions must also be made to liquidate stocks as and when they exceed buffer stocks to minimize wastage.
  12. Efforts should be made to revamp the food processing sector in India to reduce the perishability of food items.
  13. The setting up of mega food parks and cold storage chains as part of the Make In India project, and 100% foreign direct investment through the Foreign Investment Promotion Board route in the marketing of food produced and manufactured in India is welcome in this context.
  14. Conclusion: A robust food-supply chain, which can make value additions through better storage, distribution and processing, will ensure that the agricultural sector remains competitive, transparent and profitable.
  15. This may also change banks’ negative perceptions of the sector.

250 agri markets integrated with online platform surpassing target: Minister

  1. Centre has integrated 250 regulated agricultural markets across 10 States to the online trading platform for agriculture produce, e-NAM, surpassing the target of 200 set for the period
  2. Most states and agriculture mandi boards have cooperated well
  3. At this pace, we can meet our goal of connecting all 585 regulated mandis by December 2017 instead of March 2018

Discuss: ‘Though e-NAM will improve competitiveness in market through larger participation of buyers and more transparent system of bidding, it should not be considered a panacea for all deficiencies in agricultural markets.’ Discuss

[op-ed snap] An APMC tale: Why market design matters

  1. Theme: The APMC legislation has in effect created fragmented markets—small trading zones that can quite easily be captured by trader cartels
  2. The op-ed highlights issues with good intentions but bad implementation. Case in point are the Agricultural produce market committees
  3. Issue 1: Even institutions that are set up with the best of intentions are often captured by the special interest groups
  4. Issue 2: These interest groups then have a strong vested interest in maintaining the existing way of doing things rather than support reform
  5. Issue 3: Only good intentions don’t work out in long run, we need to have a deep understanding of the incentive structure that is being put in place
  6. Challenge: The APMC legislation has in effect created fragmented markets – small trading zones that can quite easily be captured by trader cartels.

Farmers’ e-market platform could be a game changer

  1. News: The govt’s decision to create a common e-market platform for farmers could benefit them
  2. How? It will remove inter-state barriers in moving farm produce
  3. Challenge: An amendment of the state Agricultural Produce Marketing Committee Act and physical logistic support to enable the farmer to move his crop
  4. Impact: It empowers state govts to notify the commodities, and designate markets and market areas where the regulated wholesale trade takes place

The need for unifying agricultural markets

A unified market will bring uniformity in prices across states

Lessons from Karnataka APMC model

  • First, to ensure ease of doing business, it integrated 51 of the 155 main market yards and 354 sub-yards into a single licensing system.
  • Second, for improving efficiency and transparency, it introduced automated auction and post-auction facilities (weighing, invoicing, market fee collection and accounting).
  • Third, to guarantee quality, assaying facilities were made available in the markets.
  • Finally, It linked all APMCs in the state electronically, and enabled the discovery of a single state price for every commodity on a single platform.

How does integration with the national e-platform is possible by reforms?

  • A single licence valid across the state,
  • A single-point levy of market fee
  • A provision for electronic auction as a mode for price discovery.

Way forward

  • As agriculture is a state subject, the states have already taken the lead in policy innovation.
  • Be it labour laws in Rajasthan, land acquisition reforms in Tamil Nadu or land pooling for urbanization in Andhra Pradesh.
  • The Karnataka model of agricultural markets reforms should be seen as a similar case, a state innovation that can guide New Delhi.

Will the unified national agricultural market help to rein in food inflation?

National e-market for agricultural commodities



:( We are working on most probable questions. Do check back this section.







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