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GS Paper: GS3-06.Storage, transport and marketing of Agricultural produce and issues and related constraints

  • Elaborate the scope and significance of supply chain management of agricultural commodities in India.

    The agricultural supply chain refers to activities involved in moving agricultural produce from farm to consumers.

    Scope of Supply Chain Management of Agricultural Commodities

    Post-Harvest Management- Handling, cleaning, grading, drying to reduce losses.

    Storage & Warehousing – Scientific storage, packhouses, warehouses, silos.

    Cold Chain for Perishables – Pre-cooling, refrigerated transport, cold storages.

    Transportation & Logistics – Efficient transport, aggregation, multimodal connectivity. Eg- Kisan Rail.

    Organised Retail & Export Integration: Connecting farmers with supermarkets, processors, exporters, and e-commerce channels. Eg- e-NAM

    Value Addition & Processing – packaging, branding, food processing.

    Export & Quality Compliance – Eg- SPS standards, AGMARK, FSSAI certification

    Significance of Supply Chain Management

    Reduces Post-Harvest Losses: India loses nearly (FAO).

    Enhances Farmer Income due to reduced intermediaries. Eg- FPOs increase farmer income by 20-25% (SFAC).

    Price Stability: Better logistics reduce volatility and transaction costs.

    Boosts Agri-Exports due to better quality products & cold chain infrastructure. Eg- $53 billion in 2022-23.

    Promotes Crop Diversification: Encourages high-value crops like horticulture, dairy, spices, and fisheries.

    Strengthens Food & Nutritional Security: Efficient supply chains ensure timely availability and safe, hygienic food across regions.

    Supports Rural Employment & Agri-Processing: Creates jobs in storage, logistics, milling, packaging, and retail.

    Challenges to Agricultural Supply Chain Management

    High Post-Harvest Losses: 6-18% losses due to poor handling, storage gaps, and weak cold chain.

    Inadequate Infrastructure: Limited cold storages, packhouses, rural warehouses, and multimodal logistics.

    Fragmented Supply Chains: Small landholdings (0.74 Hectare) and inefficient APMCs

    Low Digital Adoption: Eg- only around 1500 APMCs integrated with APMCs

    Strengthening supply chain management is key to ‘Doubling Farmers Income’. This can be done through

    Expand modern storage

    Promote FPO-led aggregation

    Reform APMC laws

    Promote value addition and FPIs.

    Develop export-oriented supply chains with SPS labs and certification.

    Enhance multimodal logistics

  • [pib] National Programme for Organic Production (NPOP)

    Why in the News?

    The Ministry of Commerce & Industry has inaugurated the 8th edition of the National Programme for Organic Production (NPOP) emphasizing India’s goal to enhance organic farming and achieve ₹20,000 crore in organic exports within the next 3 years.

    About the National Programme for Organic Production (NPOP):

    Details
    About
    • Launched in 2001.
    • Implemented by the Agricultural and Processed Food Products Export Development Authority (APEDA) under the Ministry of Commerce & Industries.
    • Focuses on accreditation, organic production standards, and promoting organic farming.
    • Enhances India’s global competitiveness in organic farming and supports eco-friendly and viable practices.
    Features of the 8th Edition
    • Recognition for Organic Grower Groups: Simplified certification requirements for grower groups, granting them legal status and replacing the Internal Control System (ICS), a previous quality assurance system for group certification.
    • NPOP Portal: Provides visibility and streamlines operations for organic stakeholders.
    • Organic Promotion Portal: Connects farmers, Farmer Producer Organisations (FPOs), and exporters with global buyers, offering trade leads, training, and events.
    • TraceNet 2.0: Upgraded system ensuring farm-to-market transparency, traceability, and compliance with global standards.
    • AgriXchange Portal: Facilitates data analysis and connects international buyers and sellers to strengthen India’s position in the global organic market.
    • 6. Technological Advancements: Boosts organic farming operations through innovative systems and tools, enhancing India’s organic production ecosystem.
    Significance
    • Sets standards for organic production and accreditation, recognized by the European Commission and Switzerland, enabling acceptance of Indian organic products internationally.
    • Facilitates India’s integration into the global organic market.

     

    Do you know?

    • India ranks 2nd globally in terms of organic agricultural land.
    • Sikkim is the world’s first fully organic state, and North East India has a tradition of organic farming with minimal chemical use.
    • India has the highest number of organic producers worldwide, with 2.3 million farmers.
    • By 2023-24, approximately 4.5 million hectares (2.5% of total agricultural land) were under organic certification.
    • Madhya Pradesh (26%), Maharashtra (22%), Gujarat (15%), and Rajasthan (13%) together contribute 76% of India’s total organic farming area.

     

    PYQ:

    [2021] How is permaculture farming different from conventional chemical farming?

    1. Permaculture farming discourages mono-cultural practices but in conventional chemical farming, monoculture practices are predominant.
    2. Conventional chemical farming can cause an increase in soil salinity but the occurrence of such phenomenon is not observed in permaculture farming.
    3. Conventional chemical farming is easily possible in semi-arid regions but permaculture farming is not so easily possible in such regions.
    4. Practice of mulching is very important in permaculture farming but not necessarily so in conventional chemical farming.

    Select the correct answer using the code given below.

    (a) 1 and 3
    (b) 1, 2 and 4
    (c) 4 only
    (d) 2 and 3

  • India-UAE Food Security Partnership Stands to Benefit From Multiple Points of Convergence

    Food Security

    Central Idea

    • The UAE, heavily dependent on food imports, has set the goal of achieving food access and supply chain crisis readiness. India is a key partner in the UAE’s efforts to strengthen food security, given India’s status as the world’s second-largest food producer. The India-UAE food security partnership stands to benefit from multiple points of convergence.

    India’s Capabilities in the Global Agri-Export Market

    • Global agri-export powerhouse: India has become a global agri-export powerhouse thanks to its vast arable land, favourable climate, and growing food production and processing sector
    • India’s role in global food security: India has demonstrated its evolving role in advancing regional and global food security by serving as a humanitarian provider of food to developing countries
    • Global food marketplace: India has invested in massive food parks and placed its food sector to benefit from bilateral trade agreements, reflecting a strong and sustained intent to make the most of its agri-capabilities in the global food marketplace

    India’s Domestic Food Security Measures

    • World’s largest food subsidy programme: India runs the world’s largest food subsidy programme, the Public Distribution System, providing nearly 800 million citizens with subsidised grains for daily, affordable meals
    • POSHAN Abhiyaan: India’s Prime Minister’s Overarching Scheme for Holistic Nutrition (POSHAN) Abhiyaan is the world’s largest nutrition programme for children and women
    • 3 C’s for instance: India promotes the consumption and farming of millets as part of its G-20 presidency, demonstrating its resilience focus to address the three Cs of Covid, Conflict, and Climate issues pernicious to food security in India and across the globe

    Facts for prelims: Food security measures

    Scheme Description Target Beneficiaries
    Public Distribution System (PDS) World’s largest food subsidy program providing subsidized grains to nearly 800 million citizens BPL (Below Poverty Line) and APL (Above Poverty Line) families
    National Food Security Act (NFSA) Provides legal entitlement to subsidized food grains to two-thirds of India’s population Priority households and Antyodaya Anna Yojana (AAY) households
    Mid-Day Meal Scheme (MDMS) Provides cooked meals to children in primary and upper primary schools Children in primary and upper primary schools
    Integrated Child Development Services (ICDS) Scheme Provides supplementary nutrition to children under six years of age, pregnant women, and lactating mothers Children under six years of age, pregnant women, and lactating mothers
    Annapurna Scheme Provides 10 kg of food grains per month free of cost to senior citizens who are not covered under the NFSA or PDS Senior citizens who are not covered under the NFSA or PDS
    Prime Minister’s Overarching Scheme for Holistic Nutrition (POSHAN) Abhiyaan World’s largest nutrition program for children and women Children under six years of age, pregnant women, and lactating mothers
    Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) Provides free food grains to around 80 crore beneficiaries for a period of 8 months to mitigate the impact of COVID-19 Migrant workers, urban and rural poor, and other vulnerable groups
    Antyodaya Anna Yojana (AAY) Provides highly subsidized food grains to the poorest of the poor families identified by the government Poorest of the poor families identified by the government

    Food Security

    The India-UAE Food Security Partnership

    • UAE’s Commitment to Food Security: The UAE is focusing on the twin objectives of food access and readiness to confront supply chain crises
    • Food corridor: The food corridor could potentially commence a route for foods made and processed in India, beginning their outbound journey on the Indian coast of the Arabian Sea, passing through the UAE, and towards major international markets
    • Agri-trade for India: The corridor stands to emerge as a world-class template of successful agri-trade for India, while also unlocking greater productivity, efficiency, and growth for its millions of workers and employees
    • Boost to food processing sector: The UAE’s private sector projects spanning its agricultural and food processing sector will generate lakhs of non-farm agri-jobs while enabling farmers to discover better prices for their products.
    • Diversified pathways to the global marketplace: Bolstered by the UAE’s infrastructural capabilities, India’s agricultural products will have more resilient and diversified pathways to the global marketplace

    Food Security

    Facts for prelims

    Millet production and food security

    • Largest producer: India is the largest producer of millet in the world with a share of 41% in 2020, as per FAO. Nine types are grown as kharif crops in over 20 States in the country.
    • Major millets include: finger millet (ragi or mandua), pearl millet (bajra) and sorghum (jowar) and minor millets include foxtail millet (kangani or kakun), barnyard millet (sawa or sanwa, jhangora), little millet (kutki), kodo millet (kodon), proso millet (cheena) and browntop millet.
    • Leading producers: Rajasthan, Karnataka, Maharashtra and Andhra Pradesh are leading producers.
    • India is also among the top five exporters: India exported millets worth $64.28 million in 2021-22 and $59.75 million in 2020-21, according to the Agricultural and Processed Food Products Export Development Authority.

    In depth: The Benefits of India-UAE food security partnership for India and the UAE

    For India

    • Investment in Food Parks: During the I2U2 summit in July 2020, the UAE committed $2 billion in investment towards constructing food parks in India. This investment will generate lakhs of non-farm agri-jobs, while enabling farmers to discover better prices for their products.
    • Access to Global Markets: The food security corridor established on the sidelines of the Comprehensive Economic Partnership Agreement (CEPA) with logistics partner DP World takes forward India’s envisioned presence on the global food value chain, beyond the UAE. The corridor has the potential to establish a route for foods made and processed in India, beginning their outbound journey on the Indian coast of the Arabian Sea, passing through the UAE, and towards major international markets.
    • Direct Access to UAE’s Food Ecosystem: The Dubai Multi Commodities Centre, the UAE’s largest free trade zone, launched Agriota, an agri-trading and commodity platform to link Indian farmers to food companies in the UAE. This platform will give millions of Indian farmers the opportunity to directly reach out to the entirety of the UAE’s food ecosystem (processing companies, traders, wholesalers) and stock their products in Emirati stores.
    • Infrastructure Development: Several UAE-based companies have expressed interest in constructing a supporting logistics and infrastructure pipeline to accelerate trade and reinforce the food corridor. A consortium of UAE-based entities are investing up to $7 billion in mega food parks, contract farming, and the sourcing of agro-commodities in India. This initiative will include mega food parks, logistics and warehouse hubs, and fruits and vegetable hubs, which will bolster India’s agricultural products’ resilient and diversified pathways to the global marketplace.

    For UAE

    • Diversification of food reserves: UAE heavily relies on food imports to feed its population. The partnership with India will help UAE diversify its food reserves and reduce its dependence on a few countries for its food security.
    • Strategic location: UAE’s strategic location between Asia and Europe can be leveraged to serve as India’s food export gateway to West Asia and Africa region, and beyond. This could enhance the UAE’s position as a hub for food trade in the region.
    • Investment opportunities: The partnership could open up investment opportunities for UAE-based companies to invest in India’s food and agriculture sector, including mega food parks, contract farming, and sourcing of agro-commodities.
    • Better access to Indian products: The partnership could give UAE better access to India’s diversified agri-produce, enabling them to benefit from India’s large and growing food production and processing sector.
    • Infrastructural capabilities: The UAE’s infrastructural capabilities could strengthen India’s agricultural products’ pathways to the global marketplace, providing more resilient and diversified routes to the global food value chain.

    Value addition box

    India’s efforts to promote millet:

    • The Union government promoted millets under the Initiative for Nutritional Security through Intensive Millets Promotion (INSIMP), as a sub-scheme of Rashtriya Krishi Vikas Yojana (RKVY) between 2011 and 2014.
    • In the following years, NITI Aayog worked on a framework to introduce millets under the public distribution system for nutritional support.
    • The government declared 2018 as the ‘national year of millets’ to trigger an increase in demand.
    • The programme under INSIMP was merged with the National Food Security Mission (NFSM) as NFSM-Coarse Cereals and implemented in 14 States. Several States led separate missions to promote millets.
    • In 2021, the Centre approved the Pradhan Mantri Poshan Shakti Nirman (PM POSHAN) and advised State governments to include millets in the midday meal menu to enhance the nutritional outcome.
    • India’s efforts to promote the consumption and production of millet got a boost when the UNGA accepted the country’s proposal and dedicated 2023 to spreading awareness about these grains. It is instrumental for PM’s vision to make IYM 2023 a people’s movement and positioning India as the ‘global hub for millets’.

    Conclusion

    • The India-UAE food security partnership stands to benefit both countries, and the collaboration between the two nations can offer solutions to address food security issues in the Global South. With the UAE’s infrastructural capabilities and India’s agricultural capabilities, the partnership can create diversified pathways to the global marketplace, generate non-farm agri-jobs, and enable farmers to receive better prices for their products.

    Mains Question

    Q. Explain the India-UAE food security partnership and enumerate the mutual benefit of the food security partnership.

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  • What is ‘Storage Gain’ in Wheat?

    Punjab’s state procurement agencies (SPAs) are seeking a waiver of ‘storage gain’.

    What is ‘storage gain’ in wheat?

    • Wheat, considered a ‘living grain’, tends to gain some weight during storage.
    • This is known as ‘storage gain’ and it mostly happens due to absorption of moisture.
    • There are three parts of the grain — bran (outer layer rich in fibre), germ (inner layer rich in nutrients) and endosperm (bulk of the kernel which contains minerals and vitamins).
    • The moisture is mostly absorbed by the endosperm.

    Who compensates whom for ‘storage gain’?

    • State procurement agencies, which purchase and store wheat at their facilities, are required to give one kg wheat extra per quintal to the Food Corporation of India (FCI).
    • While 20% of wheat, procured by the FCI and the SPAs, is moved immediately after procurement.
    • It is usually on the remaining 80%, which is moved out after July 1 every year that storage gain has to be accounted for due to longer storage duration.

     

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  • Krishi UDAN 2.0 Scheme

    The Union Minister of Civil Aviation has launched Krishi UDAN 2.0.

    Krishi UDAN 2.0

    • The scheme proposes to facilitating and incentivizing movement of Agri-produce by air transportation.
    • It lays out the vision of improving value realization through better integration and optimization of Agri-harvesting and air transportation.
    • It works by contributing to Agri-value chain sustainability and resilience under different and dynamic conditions.
    • It will be implemented at 53 airports across the country mainly focusing on Northeast and tribal regions and is likely to benefit farmer, freight forwarders and Airlines.

    Key highlights of the scheme

    • Facilitating and incentivizing movement of Agri-produce by air transportation: Full waiver of Landing, Parking, TNLC and RNFC charges for Indian freighters and P2C at selected Airports. Primarily, focusing on NER, Hilly, and tribal regions.
    • Strengthening cargo-related infrastructure at airports and off airports: Facilitating the development of a hub and spoke model and a freight grid.
    • Concessions sought from other bodies: Seek support and encourage States to reduce Sales Tax to 1% on aviation fuels for freighters / P2C aircraft as extended in UDAN flights.
    • Resources-Pooling through establishing Convergence mechanism: Collaboration with other government departments and regulatory bodies.
    • Technological convergence: Development of E-KUSHAL (Krishi UDAN for Sustainable Holistic Agri-Logistics).

    What is E-KAUSHAL?

    • It is a platform to be developed to facilitate information dissemination to all the stakeholders.
    • This will be a single platform that will provide relevant information at the same time will also assist in coordination, monitoring and evaluation of the scheme.
    • Furthermore, integration of E-KUSHAL with the National Agriculture Market (e-NAM) is proposed.

    Airports under the scheme

    Proposed timeline Locations
    2021 – 2022 Agartala, Srinagar, Dibrugarh, Dimapur, Hubballi, Imphal, Jorhat, Lilabari, Lucknow, Silchar, Tezpur, Tirupati, Tuticorin
    2022 – 2023 Ahmedabad, Bhavnagar, Jharsuguda, Kozhikode, Mysuru, Puducherry, Rajkot, Vijayawada
    2023 – 2024 Agra, Darbhanga, Gaya, Gwalior, Pakyong, Pantnagar, Shillong, Shimla, Udaipur, Vadodara
    2024 – 2025 Holangi, Salem

    7 focus routes & products

    Routes Products
    Amritsar – Dubai Babycorn
    Darbhanga – Rest of India Lichis
    Sikkim – Rest of India Organic produce
    Chennai, Vizag, Kolkata – Far East Seafood
    Agartala – Delhi & Dubai Pineapple
    Dibrugarh – Delhi & Dubai Mandarin & Oranges
    Guwahati  – Hong Kong Pulses, fruits & vegetables

     

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  • Laws that have distorted agriculture and labour markets need to go

    The article suggests the two steps to ensure growth while protecting the poor. The first is the creation of social safety net and next is factor market reforms.

    Issue of farmers’ income

    • An Indian engaged in industry or any aspect of the services sector (this includes a waiter in a restaurant) earns more than an average farmer.
    • This is an anomaly.
    • So, despite all the pro-farmer laws and protection, why do farmers in India earn less?
    • A recent study by RBI showed that across all crops, the farmgate price is 40-60 per cent less than the consumer price.
    • The real challenge is how to encourage growth while protecting the poor.

    Encouraging growth while protecting the poor: 2 steps

    • 1) A social safety net needs to be created to provide direct income transfers to the vulnerable.
    • 2) Factor markets involving labour and agricultural land need to be reformed to ensure productivity-enhancing growth.
    • Only way to ensure growth which benefits the poor is through employment creating in the manufacturing and services sector.

    1) Social safety nets in India

    • Despite a narrow tax base, India has created a comprehensive social safety net, which can cushion growth-enabling market reforms.
    • Accurate targeting under India’s Food Security Act to the bottom 67 per cent through Aadhaar identification and digital ration cards paired with E-POS machines has considerably reduced the leakage of subsidised grains.
    • The National Social Assistance programme intends to provide direct income support to over 40 million elderly landless agricultural workers, poor women-headed households and families with physically-challenged children.
    • India also provides income support annually to 145 million farmers, paying out Rs 75,000 crore.
    • This benefits all farmers while MSP benefits only 6 per cent of farm produce.

    2) Factor market reforms

    • If state support for social safety net has to become sustainable, wide-ranging growth, which will broaden the tax base, is essential.
    • India’s growth itself can be designed to reduce the number of people who need state support.
    • The agriculture and labour reforms recently passed create the conditions for productivity-enhancing growth, benefiting millions of small farmers and unorganised workers.

    Let us take a look at what the farm laws achieve and how they will change the status quo

    1) Amendment to Essential Commodities Act

    • The stock limits under the Essential Commodities Act do not enable large tur or moong and rice processors to procure in bulk for their entire season’s processing requirements.
    • This restricts large-scale processing units which can run throughout the non-harvest season.
    • This draconian anti-farmer rule has now been done away with.
    • This will enable the expansion of agro-processing and supply chains.
    • A larger share of the produce procured for agro-processing increases its shelf life, enabling the farmer to retain a greater value.
    •  30-40 per cent of the post-harvest value, particularly in vegetables and fruits, is lost due to inadequate storage, processing and transportation facilities.
    • Removal of stock limits and the accompanying contract farming act will bring in investments to tap the wasted resource.

    2) APMC regulation

    • The second law, removes another distortion: Only traders registered in APMCs can buy farmers produce.
    • Even though conditions for perfect markets exist, the APMC regulation creates this bottleneck.
    • Intermediaries extract a greater share of value as they are price makers while farmers are price takers.
    • This situation is further aggravated as farmers are restricted to selling within the taluka boundaries or limits of the APMC, and if they have to sell in other APMC, they have to pay the APMC tax.
    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020 confines the authority of the APMC to levy fees and give trader licences within the boundary of the market yard.
    • Farmers will continue to have the option to sell in APMCs but any private market/non-APMCs registered trader can also set up an agricultural market and compete with APMCs to buy the same produce.
    • Karnataka implemented the Uniform Market portal in 2014, enabling trade across taluka APMC limits without APMC fees.
    • An analysis by researchers at the MIT Sloan School of Management has shown that prices of many agricultural goods increased by 3.5 to 5.1 per cent.
    • Significantly, profit margins of small farmers increased by more than 36 per cent.

    Labour reforms

    • Apart from agriculture, the abundance of labour is the second greatest comparative advantage of India.
    • However, multiple labour laws instead of encouraging employment, have created disincentives for job creation due to high costs of compliance.
    • While India’s employment elasticity with respect to GDP growth is only 0.2, China’s is at 0.44. Even for Bangladesh, the elasticity is 0.38.
    • India’s path-breaking labour reforms leverage the true comparative advantage of the country’s factor endowments to promote growth with higher employment elasticity.
    • The old labour laws protected existing jobs at the cost of preventing new job creation through creative destruction.
    • Bangladesh has shown the way to increase formal jobs by legalising fixed-term employment and banning union activity in FDI industries.
    • Raising the threshold for seeking prior permission for laying off workers will enable capital and land locked in sunset industries to move freely to new sunrise industries.

    Consider the question “An Indian engaged in industry or any aspect of the services sector earns more than an average farmer. What are the factors responsible for this anomaly? Suggest ways to achieve growth that could ensure sustainable safety net?”

    Conclusion

    The need of the hour is to continuously communicate with those unhappy with the reforms to explain how the current status quo is hurting farmers and informal workers.

  • Diversification of output to overcome the MSP trap

    The article analyses the state of agriculture in Punjab and the its dependace on the MSP regime and suggest the diversification as a solution to the MSP trap.

    Punjab’s role in Green Revolution

    • India was desperately short of grains in 1965, and heavily dependent on PL 480 imports from the US against rupee payments, as the country did not have enough foreign exchange to buy wheat at global markets.
    • The entire foreign exchange reserves of the country at the time could not help it purchase more than 7 MMT of grains.
    • It is against this backdrop that the minimum support price (MSP) system was devised in 1965.

     India’s current grains management system: Issue of excess grains

    • Today, the Food Corporation of India (FCI) stocks grains touched 97 MMT in June this year against a buffer stock norm of 41.2 MMT.
    • The economic cost of that excess grain, beyond the buffer stock norm, was more than Rs 1,80,000 crore, a dead capital locked in without much purpose.
    • That’s the situation of the current grain management system based on MSP and open ended procurement.

    Decline in Punjab’s economic level

    •  In 1966 Punjab had the highest per capita income.
    • Punjab’s position fell to 13th in 2018-19.
    • There are several reasons behind this deterioration, ranging from lack of industrialisation to not catching up even with respect to the modern services sector like IT, financial services.

    What explains Punjab’s prosperity

    • Punjab’s agriculture is blessed with almost 99 per cent irrigation against an all-India average of little less than 50 per cent.
    • The average landholding in Punjab is 3.62 hectare (ha) as against an all-India average of 1.08 ha.
    • Punjab’s fertiliser consumption per ha is about 212 kg vis-à-vis an all-India level of 135 kg/ha.
    • The productivity levels of wheat and rice in Punjab stand at 5 tonnes/ha and 4 tonnes/ha respectively, against an all-India average of 3.5t/ha and 2.6t/ha.

    Assesing Punjab’s real contribution to income and agriculture

    • In Punjab, the total farm families are just 1.09 million, a fraction of the all-India total of 146.45 million.
    •  The overall subsidy, from just power and fertilisers would amount to roughly Rs 13,275 crores.
    • That means each farm household in Punjab got a subsidy of about Rs 1.22 lakh in 2019-20.
    • This is the highest subsidy for a farm household in India.
    • Let’s not forget that the average income of the Punjab farm household is the highest in India.[2.5 time’s the India’s average].
    • But to assess the real contribution of farmers/states to agriculture and incomes, the metric is the agri-GDP per ha of gross cropped area of the state in question.
    • This is an important catch-all indicator, as it captures the impact of productivity, diversification, prices of outputs and inputs and subsidies.
    • On that indicator, unfortunately, Punjab has the 11th rank amongst major agri-states.

    Way forward: Diversification of crops

    • States in south India like Andhra Pradesh, Tamil Nadu and Kerala have a much more diversified crop pattern tending towards high-value crops/livestock — poultry, dairy, fruits, vegetables, spices, fisheries.
    •  If Punjab farmers want to increase their incomes significantly, double or even triple, they need to gradually move away from MSP-based wheat and rice to high-value crops and livestock, the demand for which is increasing at three to five times that of cereals.
    • Punjab needs a package to diversify its agriculture — say a Rs 10,000 crore package spread over five years.

    Conclusion

    Once farmers diversify their farm output and double their incomes, they will not be stuck in the MSP trap.

  • The many layers to agricultural discontent

    Farmers protest against the Farm laws is based on the multiple reasons. The article analyses these concerns of the protesting farmers.

    Three farm laws and response to it

    • Three Farm Bills were passed by the Central government in September 2020.
    • In the process, the regulatory role the state played hitherto with regard to these issues was watered down to a great extent.
    • Apart from complex challenges that rural India confronts today, there is a substantial body of studies that demonstrates how the vagaries of the market and the role of the middlemen reinforce agrarian distress in India.
    • However, organised farmers’ bodies are not in sync with the reasoning of the government.

    Role of the states

    • There is a debate around the constitutional provisions with regard to the respective domains of the State and the Union with regard to agricultural marketing,
    • However, issues affecting the farming community have a far greater bearing on the States relative to the Centre.
    • Ideally, given its immediacy, the States are the apt agencies to respond to a host of concerns faced by the farming community, which includes agricultural marketing.
    • While enacting the Farm Bills, the Centre extended little consideration to the sensitivity of the States.

    Role of APMC

    • In Punjab and Haryana, tweaking the APMC system and its resultant bearing on Minimum Support Price (MSP) is seen by the farmers as a threat to an assured sale of their produce at a price.
    • MSP system provides a cushion, wherein the farmer can anticipate the cost of opting for these crops and tap the necessary supports through channels he has been familiar with.
    • Farmers are apprehensive of the vagaries of a competitive market where he would eventually be beholden to the large players including monopolies.
    • There is widespread apprehension that the measures proposed by the Farm Acts in addition to the existing agrarian distress, are only going to make the lot of the farmer even more precarious.
    • All across the country, the farming community is prone to sympathise with the demand to scrap the new laws, as they have little to offer to them in a positive sense.

    Conclusion

    Those with large holdings and produce for the market — are spearheading the present stand-off against the Farm Bills, as it affects them very deeply. But farming distress is shared in common by the different strata within the farming community, even though it has a differential impact on them.

  • Need to address farmers’ apprehensions

    Farmers are protesting the farm laws which brought changes in the agri-produce marketing and the contract farming. Farmers are also demanding the legal backing of MSP. The article analyses the issues and suggests the measures to address them.

    Analysing merits and feasibility of demands of protesting farmers

    1) The Farmer Produce Trade and Commerce (Promotion and Facilitation) Act

    • The Act creates a new “trade area” outside the APMC market yards/sub-yards.
    • Any buyer with a Permanent Account Number (PAN) can buy directly from farmer sellers outside APMC market.
    • The state government can’t impose any taxes on such a transaction.
    • Therefore, it is expected that this would lower buying costs for buyers and that would automatically mean higher prices for farmers.

    Concerns with the law

    • Buyers buying at lower cost does not necessarily mean they would pass on the cost saved on procurement to selling farmers.
    • The claim is also made that now farmers would have a choice of channels.
    • However, the majority of the farm produce across India with the exception of states like Punjab and Haryana does not go through APMCs.
    • Anybody with a PAN card allowed to buy agricultural produce could mean a free-for-all situation, which is not desirable.

    2) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act

    What necessitated law on contract farming?

    • Contract farming has shown that marginal and small farmers are generally excluded.
    • The problems they face include the following-
    • Highly one-sided i.e. pro-contracting agency contracts.
    • Delayed payments.
    • Undue rejections and outright cheating.
    • Poor enforcement of contract farming regulation by the state governments.

    Concerns with the law

    • The Act defined FPOs (farmer producer organisations) as farmers, which restricts them to the supply side.
    • But there is hardly any FPO in farm production.
    • Further, the contract farming Act does not provide for remedies when companies cancel contracts or there is delay in taking delivery of produce.
    • The Act says that sponsor would also pay, besides the minimum guaranteed price, a premium or bonus which will be linked to APMC or e-trading price.
    • This goes against the very concept of contract farming.
    • The contract price should be left to the contracting parties to decide.
    • Further, if the understanding is that mandis are not discovering prices well, then why peg the contract price to such mandi price?

    Lessons from 2003 APMC Act

    • The government must go back to the 2003 Model APMC Act, which also had model contract agreement with mandatory and optional provisions in a contract.
    • In the 2003 Model APMC Act, the APMC was supposed to resolve the disputes.
    • Further under 2003 APMC Act when a licence is given to a trader or commission agent, there is a counterparty risk assurance.

    Apprehensions about MSP

    • The Shanta Kumar Committee report and the CACP reports had suggested reducing procurement and an end to open-ended procurement from states like Punjab to cut down costs of FCI.
    • It is feared that FCI itself may start procuring directly from the new trade area to cut down buying costs like market fees and arhtiya commission.
    • It is more about the changes in the “social contract” between the state’s farmers and the Union government.
    • The demand for legal backing to MSP also arises from the fact that the government has been announcing MSP for 23 crops, but procurement is limited to a few crops.
    • Also, CACP in one of its reports in 2017-18 (kharif) suggested that “to instil confidence among farmers for procurement of their produce, a legislation conferring on farmers ‘the right to sell at MSP’ may be brought out.”
    • Punjab’s amendments to farm Acts — making MSP mandatory for wheat and paddy are ill-advised as this law will discourage private buyers from buying.
    • It is difficult to enforce such a law. Private agricultural markets cannot be run through such diktats.
    •  By creating stringent rules (fine or imprisonment), the government may create a situation where farmers would not be able to sell at all.
    • Maharashtra attempted this legality in 2018 in its APMC Act but had to reverse it after protests by traders.

    Consider the question “What are the factors that necessitated the robust contract farming Act? What are the issues related to the Act? Suggest the measures to address these issues.”

    Conclusion

    Apprehension among the farmers related to the farm laws needs to be addressed and the concern in the laws need to be addressed.

  • The perils of deregulated imperfect agrimarkets

    The article examine issue of agriculture produce marketing. The passage of FPTC Act 2020 sought to address the challenges faced by the farmers. However, these are several issues the Act fails to resolve. These issues are discussed here.

    Why do farmers sell outside mandis?

    • Official data show that even for paddy and wheat, respectively, only 29% and 44% of the harvest is sold in a mandi.
    • In other words a large proportion of Indian harvest is not directly sold in a mandi.
    • Farmers are forced to sell outside the mandis for two reasons.

    1) There are not enough mandis

    • The National Commission on Agriculture (NCA) had recommended that every Indian farmer should be able to reach a mandi in one hour by a cart.
    • Thus, the average area served by a mandi was to be reduced to 80 km2.
    • For this, the number of mandis was to increase to at least 41,000.
    • But there were only 6,630 mandis in 2019 with an average area served of 463 km2.
    • Using another set of criteria, a government committee in 2017 had recommended that India should have at least 10,130 mandis.
    • So, by all counts, India needs not less but more mandis.

    2) Transport cost

    • Most small and marginal farmers, do not find it economical to bear the transport costs to take their harvests to mandis.
    • Thus, they end up selling their harvest to a village trader even if at a lower price.
    • Even if private markets replace mandis, small and marginal farmers will continue to sell to traders in the village itself.
    • The situation will change only if economies of scale rise substantially at the farm-level.

    Why there is poor private investment in markets?

    • Already, 18 States have allowed the establishment of private markets outside the APMC; 19 States have allowed the direct purchase of agricultural produce from farmers; and 13 States have allowed the establishment of farmer’s markets outside the APMC.
    • Despite such legislative changes, no significant private investment has flowed in to establish private markets in these States.
    • The reason for poor private investment in markets is the presence of high transaction costs in produce collection and aggregation.
    • When private players try to take over the role of mandis and the village trader, they incur considerable costs in opening collection centres and for salaries, grading, storage and transport.
    • Corporate retail chains face additional costs in urban sales and storage, as well as the risk of perishability.
    • This is why many retail chains prefer purchasing from mandis rather than directly from farmers.

    Issue of mandi tax

    • Many commentaries treat taxes in mandis as wasteful. This assertion is not fully true for two reasons:
    • 1) Much of the mandi taxes are reinvested by APMCs to improve market infrastructure.
    • A fall in mandi taxes would reduce the surplus available with APMCs for such investment.
    • 2) In States such as Punjab, the government charges a market committee fee and a rural development fee.
    • The Punjab Mandi Board uses these revenues to construct rural roads, run medical and veterinary dispensaries, supply drinking wate etc.
    • Such rural investments will also be adversely affected if mandis are weakened.

    Weakening of MSP regime

    • Many policy signals point to a strategic design to weaken the MSPs.
    • 1) Rising input and labour costs necessitates a regular upward revision of MSPs to keep pace with costs of living.
    • However, MSPs are rising at a far slower rate over the past five to six years than in the past.
    • 2) The government has not yet agreed to fix MSPs at 50% above the C2 cost of production.
    • As a result, farmers continue to suffer a price loss of ₹200 to ₹500 per quintal in many crops.
    • 3) The Commission for Agricultural Costs and Prices (CACP) has been recommending to the government that open-ended procurement of food grains should end.
    • These policy stances have set alarm bells ringing among farmers.
    • The farmers Punjab, Haryana and western Uttar Pradesh feel that if mandis weaken and private markets with no commitment to MSPs expand, they fear a gradual erosion of their entitlement to a remunerative price.

    Steps to be taken

    • 1) India needs an increase in the density of mandis, expansion of investment in mandi infrastructure and a spread of the MSP system to more regions and crops.
    • 2) This increase in density should happen hand-in-hand with a universalisation of the Public Distribution System.
    • 3) APMCs need internal reform to ease the entry of new players, reduce trader collusion and link them up with national e-trading platforms.
    • The introduction of unified national licences for traders and a single point levy of market fees are also steps in the right direction.

    Consider the question “The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 was passed with a view to address the challenges faced by the farmers in selling their produce. However, there are concerns with the provision of the Act and its efficacy to addresss these challenges. What are the issues with the Act? Suggest the measures to address these issues.” 

    Conclusion

    The government’s must try to allay the fears of farmers over the Farm Bills and it is never too late to rethink. Unconditional talks with farmers would be an appropriate starting point.