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

  • Alleviating the farmers’ pain

    The article discusses the recently announced reforms in the agri-marketing. The legal changes promised are expected to deal with problems farmer face in selling their products and a law dealing with contract farming. These legal reforms are expected to increase farmers’ income.

    Some of the issues faced by the farmers

    • If any class of economic agents of our country has been denied the constitutional right of freedom of trade, it is farmers.
    • They don’t have the freedom of selling their produce even in their neighbourhood.
    • Remunerative price is still a mirage for them.
    • Their farm incomes are at the mercy of markets, middlemen and money lenders.
    • For every rupee that a farmer makes, others in the supply chain get much more.
    • Both farmers and consumers are the sufferers of the exploitative procurement and marketing of farm produce.
    • The public investments in irrigation and other infrastructure has increased.
    • The institutional credit and minimum support price given over the years has been increasing.
    • Yet, farmers are shackled when it comes to selling their produce.

    Restriction on the farmers: Echoes from the past

    • This exploitation of farmers has its roots in the Bengal famine of 1943, World War II, and the droughts and food shortages of the 1960s.
    • The Essential Commodities Act, 1955, and the Agricultural Produce Market Committee (APMC) Acts of the States are the principle sources of violation of the rights of farmers to sell their produce at a price of their choice.
    • These two laws severely restrict the options of farmers to sell their produce.
    • Farmers continue to be the victims of a buyers’ market.
    • This is the principal cause of their exploitation.
    • Renowned farm scientist M.S. Swaminathan has for long argued for the right of farmers to sell their produce as they deem fit.

    Balancing the interest of consumers and the farmers

    • Given the economic disparities in the country, the interests of consumers need to be protected.
    • But that should not happen at the cost of the producers of the very commodities that the consumers need.
    • For various reasons, a balance in this regard could not be struck.
    • The restrictive trade and marketing policies being practised with respect to agricultural prices have substantially eroded the incomes of farmers.

    Let’s have a look at a study on agricultural policies in India

    • A study on agricultural policies in India by the Indian Council for Research on International Economic Relations-Organisation for Economic Co-operation and Development (2018), co-authored by the renowned farm economist Ashok Gulati, was published with startling revelations.
    • It concluded that the restrictions on agricultural marketing amounted to ‘implicit taxation’ on farmers to the tune of ₹45 lakh crore from 2000-01 to 2016-17.
    • This comes to ₹2.56 lakh crore per year.
    • No other country does this.

    Reforms to remove the hurdles in farmer getting remunerative price

    • Recently announced package has approximately ₹4 lakh crore support for farming and allied sectors, aimed at improving infrastructure and enhancing credit support.
    • But the most welcome feature of this package is the firm commitment to rewriting the Essential Commodities Act and the APMC laws.
    • The revision of these restrictive laws is long overdue and will remove the hurdles that farmers face in getting a remunerative price for their produce by giving them more options to sell.
    • This long-awaited revision needs to be undertaken with care and responsibility so that no space or scope is left for farmers to be exploited yet again.
    • While allowing several buyers to directly access the produce from the farmers, a strong and effective network of Farm Producers’ Organisations should be created to enhance the bargaining power of farmers.
    • This will ensure that individual farmers are not exploited.
    • An effective law on contract farming is also the need of the hour.
    • Law on contract farming will secure incomes of farmers besides enabling private investments.
    • Yet another unique feature of this package has been its comprehensiveness towards improving the incomes of farmers through a range of activities.
    • A study by the National Institute of Agricultural Extension Management has revealed that of the 3,500 farmers’ suicides examined, there was no farmer who had supplementary incomes from dairy or poultry.
    • The huge support to animal husbandry and fisheries in the stimulus package underlines the need for diversifying the income sources of farmers.

    Consider the question “The APMC Acts of the has been blamed for poor price realisation by the farmers. Recently announced reforms promise to do away with such issues in the APMC Act. In light of this, examine the issues with APMC Acts and how the promised reforms are expected to resolve such issues.”

    Conclusion

    It is time to allow our farmers to sell their produce anywhere for their benefit. All stakeholders should be taken on board while revising restrictive agri-marketing laws.

  • Hardly the 1991 moment for agriculture

    Reforms in agri-marketing has been long overdue. So, the government recently announced three reforms in this regard. This article examines the problems of agri-marketing. And it concludes that the said reforms are far from being the silver bullet for these problems. So, why these reforms are not going to be effective? Does demand play any role in the problems agriculture is facing currently? Read to know about these issues.

    Announcement of reforms regarding agricultural marketing

    • The announcement of reforms in agricultural marketing by Finance Minister in May, has been hailed by some as the “1991” moment for agriculture.
    • The three reforms regarding agricultural marketing were the reforms in the 1) Agricultural Produce Marketing Committee (APMC) Act, 2) the Essential Commodities Act, 3) Contract farming.
    • All of these have been in discussion for almost two decades, with the APMC Act having already seen substantial reforms in many States.
    • The first comprehensive model act on APMC was proposed during 2003, and since then, similar efforts to push for more reforms have been proposed in 2007, 2013, and as late as 2017 by the present government.

    So, let’s a look at provisions of APMC Act and issues with it

    What is the main argument against APMC Act?

    • Two main arguments against the APMC Act are-
    • 1) It creates barriers to the entry and exit of traders.
    • 2) Makes the sale and purchase of agricultural produce compulsory for farmers as well as traders.

    Different steps taken by the state governments to address the issues

    • So, as many as 17 State governments have amended the APMC Act to make it more liberal.
    • In fact, the regulations and the functioning of mandis vary a great deal across States.
    • Kerala does not have an APMC Act.
    • Bihar repealed it in 2006.
    • But several others such as Maharashtra, West Bengal, Odisha, Gujarat, and Andhra Pradesh deregulated fruits and vegetables trade, allowed private markets, introduced a unified trading licence and have introduced a single-point levy of market fee.
    • Tamil Nadu has already reformed its APMC with no market fee.
    • Several others such as Jharkhand, Himachal Pradesh, Uttarakhand, Haryana and Rajasthan have undertaken one or more of these reforms.
    • Many States have introduced direct marketing of farm produce, examples being the Uzhavar Sandhai (Tamil Nadu), the Rythu Bazaar (Andhra Pradesh and Telangana), the Raitha Santhe (Karnataka), the Apni Mandi (Punjab) and the Krushak Bazaar – (Odisha).

    So, why the mandis are still blamed for farmers’ problems?

    • Despite the above-stated reforms, APMC mandis continue to be vilified for-1)  all the ills plaguing marketing infrastructure 2) the low prices received by the farmers for their produce.
    • What is the problem? The problem with mandis is not the regulation per se and the structure of mandis but the political interference in the functioning of the markets.
    • These are more obvious in case of large mandis specialising in commercial crops and fruits and vegetables, where production is regionally concentrated.
    • But even with these deficiencies, APMC mandis continue to play an important role in providing access to the market for farmers.

    What the Bihar example teaches us?

    • Bihar repealed the APMC Act in 2006.
    • The general argument in favour of reforms is that 1) it will allow private investment in marketing infrastructure and 2) provide more choices to farmers, leading to better prices received by farmers.
    • But in the case of Bihar,  no investment came in building market infrastructure.
    • The loss of revenue due to the repeal of the APMC also led to deterioration of existing infrastructure in the State.
    • The revenue collected from the APMC earlier was used not only for the modernisation of these market yards but also for the laying of roads and construction of other infrastructure to provide farmers better access to markets.
    • But after the repeal, there have been no takers for these market yards, with no investment in creating private mandis.
    • On the other hand, it has led to proliferation of private unregulated markets which charge a market fee from traders as well as farmers, and without any infrastructure for weighing, sorting, grading and storage.
    • Even in other States where there is deregulation to allow private traders, there is hardly any investment to create market spaces let alone provide other facilities.
    • There is also no evidence that farmers have received better prices in private mandis outside the APMC.
    • While there have been instances of collusion and corruption in the running of the APMC, they continue to provide essential services to farmers.

    Inadequacies of the regulated market

    • As against the recommendation that a regulated market should be available to farmers within a radius of 5 km currently regulated markets is in the radius of 12 km.
    • There are more than 7,000 regulated markets and 20,000 rural markets when the need is at least twice these figures.
    • Most of the existing ones require investment in upgradation of infrastructure.

    Price received is more a function of demand than access to market

    • The argument that the only bottleneck for farmers not receiving remunerative prices is due to the APMC Act is flawed.
    • More than 80% of farmers, most of whom are small and marginal farmers, do not sell their produce in the APMC mandis.
    • For a majority of farmers, prices received are more a function of the demand for agricultural commodities than access to markets.

    So, let’s come to decline in demand for agriculture produce

    • For much of the period during the last two years, terms of trade have moved against agriculture.
    • Agricultural commodity price inflation had been negative for a large part of the last two years.
    • With underlying weakness in demand and obsession with inflation targeting through fiscal and monetary policies, most agricultural commodities have seen a sharp decline in demand and, consequently, prices received by farmers.
    • The argument for choice of markets is only valid as long as there are buyers with purchasing power in the market.
    • No amount of marketing reforms will lead to higher price realisation for farmers if the underlying macroeconomic conditions are unfavourable to agriculture and farmers.

    What is solution to decline in demand?

    • The primary task of the government should have been to increase fiscal spending to revive demand in the economy.
    • This has become even more necessary after the sharp decline in incomes, job losses and decline in demand following the lockdown and expected contraction in economic activity for the year ahead.
    • With international prices also showing declining trend, the urgency is to protect the farmers from the decline in commodity prices.

    Consider the question “Though the APMC Act has often been blamed for the woes of the farmers in price realisation, the act is not the sole reason for price realisation problems faced by the farmers. Critically examine.

    Conclusion

    The announced reforms are less likely to be effective if carried out without consulting the states. And on the demand side, government needs to increase fiscal spending to create demand in the economy. These two steps will go a long way in ensuring higher incomes to farmers.

    Back2Basics: Agriculture Produce Marketing Committee Regulation (APMC) Act.

    • All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) are termed as “regulated markets”.
    • With the exception of Kerala, J & K, and Manipur, all other states have enacted the APMC Act.
    • It mandates that the sale/purchase of agricultural commodities notified under it are to be carried out in specified market areas, yards or sub-yards. These markets are required to have the proper infrastructure for the sale of farmers’ produce.
    • Prices in them are to be determined by open auction, conducted in a transparent manner in the presence of an official of the market committee.
    • Market charges for various agencies, such as commissions for commission agents (arhtiyas); statutory charges, such as market fees and taxes; and produce-handling charges, such as for cleaning of produce, and loading and unloading, are clearly defined, and no other deduction can be made from the sale proceeds of farmers.
    • Market charges, costs, and taxes vary across states and commodities.

    Essential Commodities Act 1955

    • The ECA is an act which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people.
    • The ECA was enacted in 1955. This includes foodstuff, drugs, fuel (petroleum products) etc.
    • It has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
    • Additionally, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
    • The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products.
    • The Centre can include new commodities as and when the need arises, and takes them off the list once the situation improves.

    How ECA works?

    • If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period.
    • The States act on this notification to specify limits and take steps to ensure that these are adhered to.
    • Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
    • A State can, however, choose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity.
    • This improves supplies and brings down prices. As not all shopkeepers and traders comply, State agencies conduct raids to get everyone to toe the line and the errant are punished.
    • The excess stocks are auctioned or sold through fair price shops.

  • Structural issues in agri-marketing

    The article discusses the structural issues that may not go away with the reforms announced by the government recently. Issues like inadequacies in APMC infrastructure, regulation of APMCs need are discussed in detail.

    What is the issue?

    • The Union government signalled the intention to enact a new central law.
    • The new law would override existing state regulations that restrict the farmer from legally selling to anyone other than a buyer licensed by the local Agricultural Produce Marketing Committee (APMC).
    • The decision to push for a central law comes after dissatisfaction with two decades of partial and uneven reforms by different states.

    So, will the change in the law solve the marketing problem?

    •  This will be overstating the power of legal reform in guaranteeing economic freedom and outcomes.
    • The problems farmers face are of two type-
    • 1) Problems that are a result of vested, monopolistic interests.
    • 2) Problems that are rooted in larger structural conditions that significantly weaken their terms of engagement in agricultural markets.
    • Type 1 may be addressed by regulatory intervention.
    • But type 2 will need location-specific policies, well-directed investment, and well-functioning agricultural institutions.
    • So, solving either of these problems require consensus, coordination and capacity in which the states will need to play a major role.

    Why do farmers sell their produce outside APMC mandis?

    • The dominant narrative is that farmers are forced to sell their produce only to licensed APMC traders.
    • But the reality is that even today the majority of Indian farmers sell their produce to small-scale and largely unlicensed traders and intermediaries.
    • This is true, especially of small and marginal cultivators.
    • But, if farmers are bound by law to sell in APMC mandis, why are so many of them selling outside?

    But, do we have enough mandis?

    • At least part of the answer to the question of why farmers sell outside mandis is that India still doesn’t have enough mandis.
    • Over the decades, most states in general, and specific regions in particular, have hugely under-invested in the basic infrastructure required to create viable, primary wholesale markets within easy physical reach of farmers.
    • The 2017 Doubling Farmers Income Report estimates that in addition to the current 6,676 principal and sub-market yards under APMCs India needs over 3,500 additional wholesale markets.
    • Approximately 23,000 rural periodic markets (or haats) have also suffered long-standing neglect.
    • So, the new allocation towards market infrastructure must be fully utilised to build up an appropriately designed physical marketing ecosystem, especially in remote regions.
    • Most importantly, unlike in the past, this process should engage deeply with farmers and traders in each location to avoid misdirected and misplaced infrastructure and assets.

    Regulatory reforms in mandis needed

    • Where APMC mandis do exist and have established themselves as dominant market sites, mandi committees have typically done everything in their power to restrict competition.
    • Obtaining a licence for a new entrant — has most often proved to be a bureaucratic nightmare and a costly affair.
    • This is where regulatory reform to remove conflicts of interests, enable the entry of new buyers, and facilitate the flow of trade both within and outside the mandi system is absolutely crucial.
    • No state has done enough in this direction, but here too there are cautionary lessons.

    Perils of complete deregulation: Example of Bihar

    • Complete deregulation, as we have seen in the decade following Bihar’s repeal of its APMC Act in 2006, does not necessarily transform agricultural markets and spur competition.
    • Even after all restrictions were lifted, there was little uptake in direct procurement by formal players in the state.
    • When corporations entered the maize market in a big way, they chose to buy from larger traders and aggregators and not from farmers.
    • Most farmers have seen little change in marketing practice and continue to sell to village traders as they had done before the repeal.
    • Where private markets have emerged — mainly for horticultural produce — they are constituted and run by local traders and commission agents.
    • But across the system, traders complain about deteriorating infrastructure.
    • And the regulatory vacuum has led to the proliferation of brokers to deal with counter-party risk in growing and dynamic commodity markets such as maize.

    Benefits of limited degree of regulation: MP and Karnataka example

    • Madhya Pradesh and Karnataka have undertaken some degree of regulatory reform instead of repeal.
    • In these states, we do observe, at least to some extent, the fruits of competition.
    • In the early 2000s, MP granted ITC a licence to set up procurement hubs outside mandi yards.
    • Establishment of ITC procurement hubs not only resulted in price competition, but also from electronic weighing and quick payments, as mandis upgraded in response.
    • But ITC’s procurement channel was understandably restricted to select commodities (and qualities), seasons and farms within its own commercial strategy.
    • These limitations revealed the mandi’s comparative advantage as a permanent multi-buyer, multi-commodity market for all local producers.
    • The key lesson to draw from studies of direct procurement and contracting is the need for a regulatory architecture that enables both new and existing systems to respond, adapt, and compete.

    Issue of intermediation

    •  Small traders and intermediaries exist — and persist — because they are able to respond — in cash, credit, time and place — to the multiple needs of farmers and firms across the interconnected domains of production, marketing, processing and consumption.
    • This is not to say that they do not exploit farmers when the opportunity arises.
    • So, the organised and technologically driven procurement and marketing systems will only work if they manage to address the real constraints that farmers face on the ground, especially access to credit, inputs, storage, transport, and timely payments.
    • Most of these constraints originate in the relations of land ownership and access and the limits and exclusions they impose on smallholding farmers and landless cultivators.
    • Simply put, farmers will not be in a position to exercise any newly granted regulatory freedom in the market if they cannot overcome these constraints.
    • Equally, while increasing competition for intermediaries is desirable, their elimination is a misguided — and indeed dangerous — objective if one does not respect or replace the roles and risks that they cover.

    Issue of re-regulation and new barriers to entry

    • Agriculture is at the very heart of the essential economy and our food system runs on the backs of small-scale producers, traders, commission agents, processors, wholesalers, retailers, and labourers.
    • Regulatory reform to increase competition must not degenerate into re-regulation that unduly favours large-scale consolidation and channel control by erecting new barriers to entry and operation for agro-commercial MSMEs.

    The UPSC asked a direct question about the APMC Act in 2014- ” There is also a point of view that Agriculture Produce Market Committees (APMCs) set up under the State Acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.”

    Conclusion

    While going for the reforms government must consider the issues underlying the problems and try to address them. We must recognise and strengthen the diversity, dynamism, enterprise, and resilience of India’s agricultural markets.

     

     

  • New Possibilities for Agriculture Sector

    The finance minister proposed package for the farmers. The package has 11 points. But this article discusses only 3 points which the author hopes would be the game-changer for agri-marketing. The three points pertain to the ECA, APMC Acts and contract farming. So, how can these three proposed laws transform agri-marketing and be a boon to farmers and consumers at the same time? Read the article.

    1. Amending the Essential Commodities Act 1955

    • Background of the ECA: The ECA of 1955 has its roots in the Defence of India Rules of 1943.
    • At that time, India was ravaged by famine and was facing the effects of World War II.
    • It was a scarcity-era legislation.
    • By the mid-1960s, hit by back-to-back droughts, India had to fall back on PL480 imports of wheat from the US and the country was labelled as a “ship to mouth” economy.
    • Importer to exporter:  Today, India is the largest exporter of rice in the world and the second-largest producer of both wheat and rice, after China.
    • Our granaries are overflowing.

    So, how ECA hurts farmers as well as consumers?

    • Our legal framework is of the 1950s, which discourages private sector investment in storage.
    • How ECA discourage investment?  The ECA can put stock limits on any trader, processor or exporter at the drop of a hat.
    • Such limits discourage investments in storage facilities. As a result, the country lacks storage facilities.
    • When farmers bring their produce to the market after the harvest, there is often a glut, and prices plummet. All this hurts the farmer.
    • In the lean season, prices start flaring up for the consumers.
    • So, both lose out because of the lack of storage facilities.

    How the amendment will help?

    • The amendment announced last week, if implemented in the right spirit, will remove roadblocks in investment and help both farmers and consumers.
    • It will bring relative price stability.
    • It will also prevent the wastage of agri-produce that happens due to lack of storage facilities.

    2. Central law to allow farmers to sell outside APMC

    • Issues with APMC Acts: Our farmers suffer more in marketing their produce than during the production process.
    • APMC markets have become monopsonistic with high intermediation costs.

    How the proposed Central law to allow farmers to sell to anyone outside the APMC yard will help?

    • 1. It will bring greater competition amongst buyers.
    • 2. It will lower the mandi fee and the commission for arhatiyas (commission agents).
    • 3. It will reduce other cesses that many state governments have been imposing on APMC markets.
    • 4. The proposed law will open more choices for the farmers and help them in getting better prices. So their incomes should improve.
    • 5. By removing barriers in inter-state trade and facilitating the movement of agri-goods, the law could lead to better spatial integration of prices.
    • 6. This will help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.
    • 7. India will have one common market for agri-produce, finally.

    3. Legal framework for contract farming

    • The legal environment for contract farming, with the assurance of a price to the farmers at the time of sowing, is a step in the right direction.
    • It will help them take cropping decisions based on forward prices.
    • Normally, our farmers look back at last year’s prices and take sowing decisions accordingly.
    • The new system will minimise their market risks.

    2 Supplementary notes for success of above 3 measures

    •  Big buyers like processors, exporters, and organised retailers going to individual farmers is not a very efficient proposition.
    • They need to create a scale.
    • 1. And for that, building farmer producer organisations (FPOs), based on local commodity interests, is a must.
    • How FPOs will help? This will help ensure uniform quality, lower transaction costs, and also improve the bargaining power of farmers vis-à-vis large buyers.
    • NABARD has to ensure that all FPOs get their working capital at 7 per cent interest rate — a rate that the farmers pay on their crop loans.
    • Currently most of them depend on microfinance institutions and get loans at 18-22 per cent interest rates.
    • This makes the entire business high-cost.
    • 2. Another thing to watch out for is the fine print of the legislation.
    • Certain conditions to reimpose the ECA restrictions if the prices of commodity go up in the proposed legislation could be counterproductive.
    • That would be unreasonable and all the reforms would be undone.
    • One needs to understand how much is the “extra burden” inflicted by the price increase on the food budget of a household.

    The UPSC asked a direct question about the APMC Act in 2014- ” There is also a point of view that Agriculture Produce Market Committees (APMCs) set up under the State Acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.”

    Conclusion

    The reforms, announced last week could be a harbinger of major change in agri-marketing, a 1991 moment of economic reforms for agriculture. But before one celebrates it, let us wait for the fine print to come.

    Back2Basics: Agriculture Produce Marketing Committee Regulation (APMC) Act.

    • All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) are termed as “regulated markets”.
    • With the exception of Kerala, J & K, and Manipur, all other states have enacted the APMC Act.
    • It mandates that the sale/purchase of agricultural commodities notified under it are to be carried out in specified market areas, yards or sub-yards. These markets are required to have the proper infrastructure for the sale of farmers’ produce.
    • Prices in them are to be determined by open auction, conducted in a transparent manner in the presence of an official of the market committee.
    • Market charges for various agencies, such as commissions for commission agents (arhtiyas); statutory charges, such as market fees and taxes; and produce-handling charges, such as for cleaning of produce, and loading and unloading, are clearly defined, and no other deduction can be made from the sale proceeds of farmers.
    • Market charges, costs, and taxes vary across states and commodities.

    Essential Commodities Act 1955

    • The ECA is an act which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people.
    • The ECA was enacted in 1955. This includes foodstuff, drugs, fuel (petroleum products) etc.
    • It has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
    • Additionally, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
    • The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products.
    • The Centre can include new commodities as and when the need arises, and takes them off the list once the situation improves.

    How ECA works?

    • If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period.
    • The States act on this notification to specify limits and take steps to ensure that these are adhered to.
    • Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
    • A State can, however, choose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity.
    • This improves supplies and brings down prices. As not all shopkeepers and traders comply, State agencies conduct raids to get everyone to toe the line and the errant are punished.
    • The excess stocks are auctioned or sold through fair price shops.

    PL-480

    • The US President Dwight D. Eisenhower signed into law the Agricultural Trade Development and Assistance Act of 1954, commonly known as PL–480 or Food for Peace.
    • Prior to that, the United States had extended food aid to countries experiencing natural disasters and provided aid in times of war, but no permanent program existed within the United States Government for the coordination and distribution of commodities.
    • Public Law 480, administered at that time by the Departments of State and Agriculture and the International Cooperation Administration, permitted the president to authorize the shipment of surplus commodities to “friendly” nations, either on concessional or grant terms.
    • It also allowed the federal government to donate stocks to religious and voluntary organizations for use in their overseas humanitarian programs.
    • Public Law 480 established a broad basis for U.S. distribution of foreign food aid, although reduction of agricultural surpluses remained the key objective for the duration of the Eisenhower administration.

  • Economic stimulus package for Agriculture

    FM has announced plans to enact a central law to permit barrier-free inter-State trade of farm commodities and ensure a legal framework to facilitate contract farming under the third tranche of the Atmanirbhar Bharat Abhiyan economic stimulus package.

    Try this question:

    ‘Doubling Farmer’s Income’ and ‘USD 5 trillion economy’  seems more like slogans today in wake of COVID pandemic. Comment on the statement with keeping in view the Atmanirbhar Bharat Abhiyan of the government.

    Details of the package

    • The third tranche included plans to invest ₹1.5 lakh crore to build farm-gate infrastructure and support logistics needs for fishworkers, livestock farmers, vegetable growers, beekeepers and related activities.
    • The Centre will deregulate the sale of six types of agricultural produce, including cereals, edible oils, oilseeds, pulses, onions and potatoes, by amending the Essential Commodities Act, 1955.
    • Stock limits will not be imposed on these commodities except in case of national calamity or famine or an extraordinary surge in prices.
    • The Centre is considering introducing a law on contract farming under the Contract Act of 1872 to enable farmers to directly engage with processors, aggregators, large retailers and exporters in a fair and transparent manner.
    • It would allow private players to invest in inputs and technology in the agricultural sector.

    Must read:

    [pib] Atmanirbhar Bharat Abhiyan (Self-reliant India Mission)

  • Taking India’s agri-marketing and PDS system on a more efficient path

    Agriculture is still the mainstay of Indian economy. There are certain problems that persist in the agri-marketing and PDS. The author suggests to use the present corona crisis to embark on the path of the reform in these areas.

     Supply lines maintained during the lockdown

    • India seems to have contained the mortality rate from Covid-19 to 3.3% which is lower than the global average of about 7 per cent.
    • On the food front too, India has done reasonably well.
    • Despite initial disruptions in supply lines, India has somehow managed to feed its large population of 1.37 billion.
    • In fact, if there is any complaint, it is from the producer’s side that the prices of perishables have collapsed in some parts of the country.
    • But, from the consumer’s point of view, even for perishables like milk and vegetables, supply lines were quickly restored and food is easily available in the markets at reasonable prices.
    • On keeping supply lines for essential food alive and running, those in the government managing the food logistics surely deserve to be complimented.

    Reforms in agri-marketing and PDS

    • Agriculture still engages India’s largest workforce.
    • And it may be the only sector that registers a respectable growth this year as almost all other major sectors may plummet into negative territory.
    • Agriculture sector is in urgent need of the reforms that can help farmers get a better price for their produce with consumers still paying a reasonable price for their food.
    • Following ways are suggested for agri-marketing:
    • While the APMC markets can keep doing their business as usual, it is time to open channels for direct buying from farmers/farmer producer organisations (FPOs).
    • Any registered large buyer, be it processors or retail groups or exporters must be encouraged by providing them with a license, that is valid all over India.
    • They should be exempted from any market fee and other cesses as they will not be using the services of the APMC market yards.
    • E-NAM can flourish if grading and dispute settlement mechanisms are put in place.
    • Private mandis with modern infrastructure need to be promoted in competition with APMCs.
    • On the PDS front, we need to move towards cash transfers that can be withdrawn from anywhere in the country.
    • Some initiative has already been taken by the Madhya Pradesh and even Uttar Pradesh is now moving along these lines.
    • But much more can be done to put India’s agri-marketing and PDS system on a more efficient path.

    Consider the question asked by the UPSC in 2014 “There is also a point of view that Agricultural Produce Marketing Committees set up under the State Acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.”

    Conclusion

    The recovery of the economy, whether it will be V-shape or J-shape, depends upon the package that the government announces. The mega reforms need to be built in this recovery package.

    Agriculture Produce Marketing Committee Regulation (APMC) Act.

    • All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) are termed as “regulated markets”.
    • With the exception of Kerala, J & K, and Manipur, all other states have enacted the APMC Act.
    • It mandates that the sale/purchase of agricultural commodities notified under it are to be carried out in specified market areas, yards or sub-yards. These markets are required to have the proper infrastructure for the sale of farmers’ produce.
    • Prices in them are to be determined by open auction, conducted in a transparent manner in the presence of an official of the market committee.
    • Market charges for various agencies, such as commissions for commission agents (arhtiyas); statutory charges, such as market fees and taxes; and produce-handling charges, such as for cleaning of produce, and loading and unloading, are clearly defined, and no other deduction can be made from the sale proceeds of farmers.
    • Market charges, costs, and taxes vary across states and commodities.

  • [pib] Kisan Sabha App to Connect Farmers to Supply Chain and Freight Transportation

    Kisan Sabha App developed by CSIR to connect farmers to supply chain and freight transportation management system was recently launched.

    Initiatives as such are less likely to be asked in the prelims as the name and purpose create no different analogy. But for the sake of information and mains perspective, it is vital to remember such technology interventions while emphasizing on Agricultural marketing reforms.

    Kisan Sabha App

    • Kisan Sabha aims to provide the most economical and timely logistics support to the farmers and increase their profit margins by minimizing the interference of middlemen and directly connecting with the institutional buyers.
    • It will also help in providing the best market rates of crops by comparing nearest mandis, booking of freight vehicle at the cheapest cost thereby giving maximum benefit to the farmers.
    • The portal connects the farmers, transporters, Service providers (like pesticides/ fertilizer/ dealers, cold store and warehouse owner), mandi dealers, customers and other related entities for a timely and effective solution.
    • The app has 6 major modules taking care of Farmers/Mandi Dealers/Transporters/Mandi Board Members/ Service Providers/Consumers.

    Facilities provided by the app

    • The portal acts as a single stop for every entity related to agriculture, be they a farmer who needs better price for the crops or mandi dealer who wants to connect to more farmers or truckers who invariably go empty from the mandis.
    • It provides a platform for people who want to buy directly from the farmers.
    • It would also prove to be useful for those associated with cold store(s) or godown(s).

  • [pib] “Kisan Rath” mobile app to facilitate transportation of farm produce

    The Union Ministry of Agriculture & Farmers’ Welfare has launched a mobile application to facilitate farmers & traders in searching for transport vehicles for movement of Agriculture & Horticulture produce.

    Initiatives as such are less likely to be asked in the prelims as the name and purpose create no different analogy. But for the sake of information and mains perspective, it is vital to remember ‘Kisan Rath’ while emphasizing on Agricultural marketing reforms.

    “Kisan Rath” mobile app

    • The app aims to facilitate Farmers and Traders in identifying the right mode of transportation for movement of farm produce ranging from foodgrains, fruits & vegetables, oilseeds, spices, fibre crops etc.
    • Primary transportation would include movement from Farm to Mandis, FPO Collection Centre and Warehouses etc.
    • Secondary Transportation would include movement from Mandis to Intra-state & Inter-state mandis, Processing units, Railway station, Warehouses and Wholesalers etc.
    • It also facilitates traders in transportation of perishable commodities by Reefer (Refrigerated) vehicles.

    Utility of the app

    • Transportation of Agri produce is a critical and indispensable component of the supply chain.
    • Kisan Rath will ensure smooth and seamless supply linkages between farmers and the market.

  • ConFarm model of agricultural market

    A unique initiative titled Consumer-Farmer Compact in Telangana is ensuring food availability and access in COVID-19 times.

    Such innovative models of agricultural marketing are very crucial while highlighting the limitations of APMCs and eNAM. Make personal notes of such initiatives.

    Consumer-Farmer Compact

    • The initiative is kicked off by some NGOs in June 2018 and has been endeavoring to bring farmers and consumers on the same platform for their benefit.
    • The consumers support farmers with their agricultural needs; in return, farmers ensure consumers are able to access food in a hassle-free manner.

    What does the initiative do?

    • The initiative requires consumers to support farmers at the beginning of a farming season.
    • Each consumer supports a group of farmers with about Rs 12,500 per acre for their farming needs.
    • In return, at the time of harvest, consumers are given products according to the value they invested, leaving the middlemen out.
    • They are provided with millets, pulses, oil, jaggery and other necessary items produced organically — either in bulk or on a monthly basis.
    • The initiative also aims to give millets a push in the urban market, enabling consumers to move beyond the commonly consumed grains such as rice and wheat.

    Significance

    • This model of sharing economy in the village has helped alleviate hunger and ensured their nutritional needs are met.
    • The farmers who are part of the initiative practice traditional ecological farming with an emphasis on biodiverse cultivation.
    • It helps them have dietary diversity in their food choices and control over their land and food production that is not dictated by the vagaries of the market.
    • The practice has brought them closer to a group of consumers who have been keen on trying an alternative route.

    Conclusion

    • At this juncture in crisis — when the free-market system and global trade are staring at an uncertain future — local solutions such as ‘Confarm’ hold greater prominence.
    • Such supply chains such are the need of the hour. Farmers and consumers must come together to face crisis moments in the future as well.

  • Use the COVID crisis to transform the agri-marketing system

    This article discusses the impact of lockdown on farmers and how the disruption of the supply chain is adding to their difficulties in selling their produce in the markets.

    In the last two weeks or so, we have been reading about farmers and issues around the agri-marketing supply chain. If you have been following the story on Agriculture Marketing Reforms, you would remember us talking about it in the op-ed titled “A smarter supply line”

    There are 6 suggestions to overhaul our agri-marketing system. These are-

    1. Abolish/reframe the APMC Act

    • There is an urgent need for abolishing or reframing the APMC Act and encourage direct buying of agri-produce from farmers/farmer producer organisations (FPOs).
    • The companies, processors, organised retailers, exporters, consumer groups, that buy directly from FPOs need not pay any market fee as they do not avail the facilities of APMC yards.

    APMC Act restrict the farmers from selling their produce outside the market yard, so in the present context of Covid-19 this is a counterproductive restrictions. UPSC asked question on in in 2014.

    2. The warehouses can also be designated as markets.

    • The warehouse receipt system can be scaled up.
    • The private sector should be encouraged to open mandis with modern infrastructure, capping commissions.

    3. The futures trading should be encouraged by allowing banking finance to hedge for commodity price risks.

    A futures contract is a standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, encouraging this would help farmers assurance of price and help in making decion for the sowing based on price signal from he markets.

    4. Promote e-NAM through proper assaying and grading the produce and setting up dispute settlement mechanism; rope in major logistics players for delivery of goods.

    5. Avoiding rush in the markets: Procurement must be staggered through coupons and incentives that give farmers an additional bonus for bringing the produce to the market after May 10, or so.

    6. The amount provided under PM Kisan should be increased from Rs 6,000 to at least Rs 10,000 per farming family to partially compensate them for their losses.

    Way forward

    • Besides these, Prime Minister would benefit by taking a leaf out of the book of President Donald Trump. Modi should lead from the front by holding daily press briefings and announce a country-wide relief package amounting to around 8-10 per cent of GDP.
    • Whatever the causes of this disaster are, it is clear that the WHO failed in its duty to raise the alarm in time. India must ask for fundamental reforms in the UN System, including the WHO, making it more transparent, competent, and accountable.