Basic parameters to design optimal agri-food policy

• UN population projections (2019) indicate that India is likely to be the most populous country by 2027.
• By 2030, the country is likely to have almost 600 million people living in urban areas, who would need safe food.
• Indian agriculture has an average holding size of 1.08 hectares (2015-16 data) while engaging 42 percent of the country’s workforce.
• Cultivable land and water for agriculture are limited and already under severe pressure.

What should be the basic features of agri-policy

• 1) It should be able to produce enough food, feed, and fibre for its large population.
• 2) It should do so in a manner that protects the environment — soil, water, air, and biodiversity and achieves higher production with global competitiveness.
• 3) It should enable seamless movement of food, keeping marketing costs low, save on food losses in supply chains and provide safe and fresh food to consumers.
• 4) Consumers should get safe and nutritious food at affordable prices.

Need to change from sub-optimal to optimal policies

• Free electricity and highly subsidized fertilizers, especially urea, are damaging groundwater levels, especially in the Green Revolution states.
• Sugar and wheat are being produced at prices higher than global prices, and these crops can’t be exported unless they are heavily subsidized.
• Excessive stocks of wheat and rice with the Food Corporation of India (FCI) are putting pressure on the agency’s finances.
• Rice remains globally competitive, but it should be remembered that in exporting rice we are also exporting massive amounts of precious water — almost 25-30 billion cubic meters, annually.
• This is the water that is pumped for rice cultivation, enabled by the subsidized power supply.
• In the marketing segment also, for most of our agri-commodities, our costs remain high compared to several other developing countries due to poor logistics, low investments in supply lines, and high margins of intermediaries.
• All these are signs of sub-optimal agri-food policies.

Policy changes required: On the production level

• Green Revolution states of Punjab, Haryana, and western Uttar Pradesh require crop diversification.
• This can be done by switching from the highly subsidized input price policy (power, water, fertilizers) and MSP/FRP policy for paddy, wheat, and sugarcane, to more income support policies linked to saving water, soil, and air quality.
• The Agri-marketing segment is also in the need of reforms especially with respect to bringing about efficiency in agri-marketing and lowering transaction costs.
• It is believed that developing countries should invest at least one percent of their agri-GDP in agri-R&D and extension.
• India invests about half.
• It needs to double with commensurate accountability of R&D organizations, especially the ICAR and state agriculture universities to deliver.

Policy changes required: On the consumption level

• The biggest challenge for the next 10 years is that of malnutrition, especially amongst children.
• The public distribution of food, through PDS, that relies on rice and wheat, and that too at more than 90 percent subsidy over costs of procurement, stocking, and distribution, is not helping much.
• It is increasing the finances of FCI, whose borrowings have touched Rs 3 lakh crore.
• To address that, beneficiaries of subsidized rice and wheat need to be given a choice to opt for cash equivalent to MSP plus 25 percent.
• The FCI adds about 40 percent cost over the MSP while procuring, storing, and distributing food.
• This cash option will save some money and also lead to supplies of more diversified and nutritious food to the beneficiaries.

Consider the question “What are the issues with India’s agri-food policies? Suggest the changes in agri-food policies so as to make them optimal.

Conclusion

What we need is to set agri-food policies on a demand-driven approach, protecting sustainability and efficiency in production and marketing, and giving consumers more choices for nutritious food at affordable prices.

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