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

  • 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.

  • What is Market Intervention Scheme (MIS)? How does it compare with MSP

    Fruit and vegetable farmers are facing major losses due to obstacles in harvesting and marketing their perishable produce. The Centre has now directed all the States and UTs to implement the Market Intervention Scheme to ensure remunerative prices for perishable crops.

    Market Intervention Scheme

    • MIS is a price support mechanism implemented on the request of State Governments for the procurement of perishable and horticultural commodities in the event of a fall in market prices.
    • It is implemented when there is at least a 10% increase in production or a 10% decrease in the ruling rates over the previous normal year.
    • MIS works in a similar fashion to Minimum Support Price based procurement mechanism for food grains but is an ad-hoc mechanism.
    • Its objective is to protect the growers of these horticultural/agricultural commodities from making distress sale in the event of the bumper crop.
    • Under MIS, support can be provided in some years, for a limited but defined period, in specified critical markets and by purchasing specified quantities. The initiative has to emerge from the concerned state.

    UPSC Prelims can ask a question on the difference between MSP and MIP. All the agricultural and horticultural commodities for which Minimum Support Price (MSP) are not fixed and are generally perishable in nature are covered under Market Intervention Scheme (MIS).

    Commodities covered

    • The MIS has been implemented in case of commodities like apples, garlic, oranges, grapes, mushrooms, clove, black pepper, pineapple, ginger, red-chillies, coriander seed, chicory, onions, potatoes, cabbage, mustard seed, castor seed, copra, palm oil etc.

    Remuneration under MIS

    • MIS provides remunerative prices to the farmers in case of glut in production and fall in prices.
    • Proposal of MIS is approved on the specific request of State/UT Government, if they are ready to bear 50% loss (25% in case of North-Eastern States), if any, incurred on its implementation.
    • Further, the extent of total amount of loss shared is restricted to 25% of the total procurement value which includes cost of the commodity procured plus permitted overhead expenses.

    Implementation of MIS

    1) Market Intervention Price (MIP)

    • The Department of Agriculture & Cooperation is implementing the scheme.
    • Under the MIS, a pre-determined quantity at a fixed MIP is procured by NAFED as the Central agency.
    • There are other agencies designated by the state government for a fixed period or till the prices are stabilized above the MIP whichever is earlier.
    • The area of operation is restricted to the concerned state only.

    2) Funds transfer

    • Under MIS, funds are not allocated to the States.
    • Instead, central share of losses as per the guidelines of MIS is released to the State Governments/UTs, for which MIS has been approved, based on specific proposals received from them.

    The last 2 heads that you just read, Renumeration & Implementation, they have a lot of information on which you can be quizzed by UPSC Prelims. Make a note of the agency, %age share, state vs. center responsibility

    Back2Basics: Minimum Support Price

    • Minimum support price (MSP) is one of the instruments of Agricultural Price Policy (APP).
    • The basic intent of announcing MSP before the sowing season is to help farmers take a sowing decision keeping in mind that if they are not able to get a reasonable price by selling in the market, at least they will be able to get the MSP.
    • In that sense, MSP is an assured or guaranteed price (insured price).

    For additional reading on MSP, navigate to:

    Price Support Mechanism under MSP Operations

  • Is e-NAM portal capable of supporting farmers?

    Context

    • The union government has launched new features in electronic agriculture market platform (e-NAM), to decongest wholesale markets amid coronavirus threat.
    • Whether these features would solve the problems of farmers is a matter of question.

    What is e-NAM?

    • eNAM platform is an online trading platform for agricultural commodities in India.
    • It was launched on April 14, 2016 as a pan-India electronic trade portal linking agricultural produce market committees (APMCs) across all states.
    • It facilitates farmers, traders and buyers with online trading in commodities.
    • It helps in better price discovery and provides facilities for smooth marketing of their produce.

    Trading on e-NAM

    • Over 90 commodities including staple food grains, vegetables and fruits are currently listed in its list of commodities available for trade.
    • The farmer needs to upload details of his produce and a photo of the harvest on the platform.
    • It actually provided for evaluation and grading of produce.

    Why farmers don’t prefer e-NAM?

    • Lack of internet connectivity is another issue impeding progress.
    • Farmers feel more comfortable with physical trading rather than going online as they face issues with transportation for their produce.
    • Only 8.42 per cent of the total mandis are connected through the e-NAM platform.

    Issues with grading

    • There are no scientific sorting/grading facilities or quality testing machines.
    • The grading process makes farmers bring a sample of their produce that is evaluated and graded by agricultural assessors.
    • A report on the sample can be accessed by any buyer in any state before making the purchase, once graded by assessors.
    • The government realized the complexities allowed for gradation from a warehouse nearest to them and farmers need not commute to a mandi from remote areas.
    • It is, however, still not clear whether produce can be graded at the warehouse or not.

     

  • Farmers are at their wits’ end

    Context

    As global trade falls and supply disruptions persist, a prolonged lockdown will adversely affect food security.

    Fears of food crisis and impact of COVID-19 on agriculture

    • The COVID-19 pandemic has led to global concerns on the state of agriculture and food security.
    • Warning of food crisis: On the one hand, the Food and Agriculture Organization (FAO) has warned of a “food crisis” if countries do not protect vulnerable people from hunger and malnourishment.
    • On the other, farmers face a stalemate as they are unable to work on their land, earn remunerative prices and gain access to markets.

    We can try to understand the impact of COVID-19 on agriculture with three questions.

    • One, does the world have enough food to feed its people?
    • Two, is food available at affordable prices?
    • Three, how are farmers coping with the lockdown?

    Food stocks and prices in the world

    • Cereal stock in the world: According to the FAO, as on April 2, 2020, the total stock of cereals in the world was about 861 million tonnes. This translates to a stocks-to-use ratio (SUR) — i.e., the proportion of consumption available as stocks — of 30.7%.
    • The FAO considers this “comfortable”. The SURs for wheat, rice and coarse grains were 35.3%, 35.1% and 26.9%, respectively.
    • Variation among nations: World stocks are different from national stocks. About 52% of the global wheat stocks is held by China, and about 20% of the global rice stocks is held by India.
    • Rice importers may suffer: If the major holders of global stocks decide to turn precautionary and stop exporting, and if the lockdown is prolonged, countries dependent on rice imports will suffer.
    • Restriction on wheat export: Kazakhstan, a major wheat exporter, has banned exports. Russia, the largest wheat exporter, is expected to restrict its exports.
    • Restriction on rice export: Vietnam, the third-largest rice exporter, has stopped its exports, which will reduce the global rice exports by 15%.
    • If India and Thailand too ban exports, the world supply of rice will sharply fall.
    • In March 2020, the Philippines and the European Union, major rice importers, had inventories of rice enough to feed their populations for about three months.
    • Others, however, had inventories to hold on for about one month only. If the lockdown continues beyond a month, these countries will face food shortages.

    Stocks with India and output projections

    • India’s foodgrain output is projected to be about 292 MMT in 2019-20.
    • Stock with FCI: On March 1, 2020, the total stock of wheat and rice with the Food Corporation of India (FCI) was 77.5 MT.
    • Buffer stock norms: The buffer norms for foodgrain stocks — i.e., operational stock plus strategic reserves — is 21.04 MT.
    • Similarly, for pulses, India had a stock of 2.25 MT in mid-March 2020.
    • In both cases, the rabi harvest is slated to arrive in April 2020, and the situation is expected to ease further.

    Price fluctuation of food in the world

    • Fall in demand and supply and price fluctuation: There is always an element of uncertainty on how prices will behave if both demand and supply fall together.
    • Prices in different markets fluctuate considerably given differences in the extent of production, stocks, arrivals and supply disruptions.
    • According to the FAO, the world food price index fell by 4.3% and world cereal price index fell by 1.9% between February and March 2020 due to the weakening demand for food and the sharp fall in maize prices owing to poor demand for biofuels.
    • Price rise in Western economies: Retail prices of rice and wheat have been rising in the Western economies in March 2020.
    • The major reasons identified are panic buying by households, export restrictions by countries and continuing supply chain disruptions.
    • Retail prices of beef and eggs have also been rising.

    Demand and price fluctuation in India

    • WPI and CPI for food in India were rising from mid-2019 onwards, reflecting a rise in vegetable prices, especially onion prices.
    • January and February 2020 saw a moderate fall in these indices, but vegetable prices have remained high.
    • If food prices rise due to the lockdown, it will be on top of an already rising price curve.
    • However, unlike in the West, food prices in India have not risen after the lockdown.
    • While supplies have declined, demand has fallen too. This is because there has been a sharp fall in the consumption of foodgrains and vegetables. Similarly, the consumption of milk has fallen by 10-12%.

    The crisis in the harvesting and marketing of the crops

    Harvesting and marketing of crops are in crisis across India, because of-

    • Disruptions in the procurement of foodgrains by government agencies.
    • Disruptions in the collection of harvests from the farms by traders.
    • Shortage of workers to harvest the rabi crops.
    • Shortage of truck drivers.
    • Blockades in the transport of commodities.
    • Limited operations of APMC mandis; and
    • Shutdowns in the retail markets.

    Conclusion

    The world and India have adequate food stocks. But as global trade shrinks and supply disruptions persist, a prolonged lockdown will adversely affect food security in many countries. Concurrently, farmers face acute labour shortages, falling farmgate prices and lack of access to input/output markets. It is unclear who is benefiting, but farmers, workers and the poor are at their wits’ end.