Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Lessons for the success of Operation Green

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Operation Green

Mains level : Paper 3- Expanding Operation Green

The article compares the performance of  Operation Flood with Operation Green and offers several lessons for the success of Operation Green.

Operation Green and its expansion

  • There were three basic objectives when OG was launched.
  • First, that it should contain the wide price volatility in the three largest vegetables of India (TOP).
  • Second, it should build efficient value chains of these from fresh to value-added products with a view to give a larger share of the consumers’ rupee to the farmers.
  • Third, it should reduce the post-harvest losses by building modern warehouses and cold storages wherever needed.
  • The Union budget for the FY 2021-22 proposes the expansion of Operation Green (OG) beyond tomatoes, onions, and potatoes (TOP) to 22 perishable commodities.
  • The move reflects the government’s intentions of creating more efficient value chains for perishables.

Comparing performance of OG with horticulture sector

  • A closer examination of the scheme reveals that it is nowhere near achieving its objectives.
  • ICRIER research reveals that price volatility remains as high as ever.
  • It also reveals that farmers’ share in consumers’ rupee is as low as 26.6 per cent for potatoes, 29.1 per cent in the case of onions, and 32.4 per cent for tomatoes (see graph).
  •  In cooperatives like AMUL, farmers get almost 75-80 per cent of what consumers’ pay.
  • Operation Flood (OF) transformed India’s milk sector, making the country the world’s largest milk producer, crossing almost 200 million tonnes of production by now.
  • Although OG is going to be more challenging than OF there are some important lessons one can learn from OF.

Lessons from operation flood

  • First and foremost is that results are not going to come in three to four years.
  • OF lasted for almost 20 years before milk value chains were put on the track of efficiency and inclusiveness.
  • There has to be a separate board to strategise and implement the OG scheme, more on the lines of the National Dairy Development Board (NDDB) for milk.
  • Second, we need a champion like Verghese Kurien to head this new board of OG.
  • The MoFPI can have its evaluation every six months, but making MoFPI the nodal agency for implementing OG with faceless leaders is not very promising.
  • Third, the criteria for choosing clusters for TOP crops under OG is not very transparent and clear.
  • The reason is while some important districts have been left out from the list of clusters, less important ones have been included.
  • What is needed is quantifiable and transparent criteria for the selection of commodity clusters, keeping politics away.
  • Fourth, the subsidy scheme will have to be made innovative with new generation entrepreneurs, startups and FPOs.
  • The announcement to create an additional 10,000 FPOs along with the Agriculture Infrastructure Fund and the new farm laws are all promising but need to be implemented fast.

Consider the question “What are the objectives of Operation Green? How far has Operation Green succeeded in achieving its objectives?”

Conclusion

These lessons from Operation Flood will help in securing the success of the expanded Operation Green.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Farm lessons from China, Israel

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Agri-marketing reforms and water accounting to solve the problems of agriculture

China and Israel offer two important lessons for India to transform its agriculture: agri-market reforms and water accounting.

Lessons from Israel and China

  • India, China and Israel — started off their new political journey in late 1940s, but today China’s per capita income in dollar terms is almost five times that of India, and Israel’s almost 20 times higher than India.
  • China produces three times more agri-output than India from a smaller arable area.
  • China started off its economic reforms in 1978 by taking up agriculture first.
  • It dismantled its commune system of land holdings and liberated agri-markets that allowed farmers to get much higher prices.
  • As a result, in 1978-84, farmers’ incomes in China increased by almost 14 per cent per annum, more than doubling in six years.
  • Israel cultivates high-value crops for exports (citrus fruits, dates, olives) by using every drop of water and recycling urban waste water for agriculture, by de-salinisation of sea waters.
  • Water accounting in Israel is something exemplary.

Need for agri-reform in India

  • The average holding size in China was just 0.9 ha in 2016-18, smaller than India’s 1.08 ha in 2015-16.
  • So there is no doubt that small holders can do wonders, if they are given the right incentives, good infrastructure and research support, and the right institutional framework to operate.
  • In India, the 1991 reforms did not include agriculture.
  • Indian agri-food policies remained more consumer-oriented with a view to protect the poor.
  • Export controls, stocking limits on traders, movement restrictions, etc all continued at the hint of any price rise.
  • The net result of all this was farmers’ incomes remained low and so did those of landless agri-labourers.

Way forward

  • India needs to change its policy framework from being subsidy-led to investment-driven, from being consumer-oriented to producer-oriented, and from being supply-oriented to demand-driven by linking farms with factories and foreign markets, and, finally, from being business as usual to an innovations-centred system.
  • Until India breaks away from the policy of free power for agriculture, there would be no incentive for farmers to save water.
  • In a state like Punjab where almost 80 per cent of blocks are over-exploited or critical, meaning the withdrawal of water is much more than the recharge.
  • Highly subsidised urea and open-ended procurement have become a deadly cocktail that are eating away the natural wealth of Punjab.
  • Out-of-box thinking is needed to break this regressive cycle for a brighter future for Punjab, for our own children.

Consider the question “What are the implications of subsidy oriented policies for Indian agriculture.”

Conclusion

Lessons from China and Israel suggest that India need reform in agri-food policies and water accounting to address several issues plaguing agriculture.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Laws that have distorted agriculture and labour markets need to go

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Essential Commodities Act

Mains level : Paper 3- Ensuring growth while protecting the farmers

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Bringing transparency in Budget in agri-food sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Union Budget

Mains level : Paper 3- Transparency in the Budget, bias towards subsidies and neglect of RD in allocation to agriculture sector

The article analyses the Union Budget and highlights the emphasis on transparency by showing the borrowing of the FCI and arrears of the fertiliser companies in the Budget.

Transparency in food subsidy and arrears of fertiliser industry

  • Year after year, a substantial part of the food subsidy was being put under the carpet by increasing the Food Corporation of India’s (FCI) borrowings.
  • The amount had crossed Rs 3 lakh crore.
  • The revised estimate (RE) for FY 2020-21 is 3.66 times the budgeted figure, indicating that almost all borrowings of FCI have been cleared.
  • This is indeed a historic step towards introducing transparency in the Union Budget.
  • The Budget also cleared off the fertiliser industry’s arrears.
  • Against the budgeted figure of Rs 71,309 crore for FY 2020-21, the revised estimate is Rs 1,33,947 crore, an increase of Rs 62,638 crore.

Neglect of R&D

  • From a policy perspective one must point to the huge bias towards subsidies as compared to investments, especially research and development.
  • The allocation for agri-R&D is a meagre Rs 8,514 crore in FY 2021-22 against a RE of Rs 7,762 crore in FY 2020-21.
  • The marginal returns in terms of agri-growth from expenditures on agri-R&D are almost five to 10 times higher than through subsidies.
  • India spends not even half of what a private global company like Bayer spends on agri-R&D — almost Rs 20,000 crore every year.
  • This is why growth momentum in agriculture remains subdued and India keeps spending on freebies with sub-optimal results.

Subsidies needs a rethink

1) Food subsidy

  • The FCI’s economic cost of rice is Rs 37/kg and of wheat about Rs 27/kg.
  • This economic cost is roughly 40 per cent higher than the procurement price.
  • This calls for giving the public distribution system’s beneficiaries the choice of direct cash transfers.
  • This could create a more diversified demand which, in turn, will support diversification in agriculture.
  • Further, in food subsidy, it is time to revise the issue prices for beneficiaries except for the antyodaya (most marginal) category.
  • Percentage of population covered by the food subsidy should be brought down to 40 per cent.

2) Fertiliser subsidy

  • Massive subsidisation of urea, to the tune of almost 70 per cent of its cost, is leading to its sub-optimal usage.
  • It is time to move towards direct cash transfers to farmers based on a per hectare basis and free up prices of fertilisers.
  • This will help reduce leakages and imbalance in NPK (nitrogen, phosphorus, potassium) usage and lead to efficiency, equity and environmental sustainability.

Consider the question “If one looks at India’s Union Budget, it is easy to notice huge bias towards subsidies and neglect of the research and development in agriculure in the allocation for agriculture sector. What are the implications of such bias?” 

Conclusion

Overall, the expenditure on agri-R&D needs to be doubled or even tripled in next three years, if growth in agriculture has to provide food security at a national level and subsidies on food and fertilisers need to be contained. At the same time, food subsidy and fertiliser subsidy needs rationalisation.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Agriculture credit

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Agriculture Census

Mains level : Paper 3- Exclusion of small and marginal farmers from agri-credit

India’s agriculture credit increased by 500% in the last decade, however, this increase in the credit has not been reflected in the condition of the farmers. The article deals with the issues with the agri-credit in India.

Impact of credit on agriculture

  • Providing credit to small farmers at a reasonable rate has been the agenda of the Centre, the States, and the Reserve Bank of India (RBI) for decades.
  • However, the volume of credit has improved over the decades, its quality and impact on agriculture have only deteriorated.
  • In 2011-12, the target was ₹4.75-lakh crore; now, agri-credit has reached the target of ₹15-lakh crore in 2020-21 with an allocated subsidy of ₹21,175 crores.
  • Agricultural credit has become less efficient in delivering agricultural growth.

Issues with agri-credit: small farmers left-out

  • In the last 10 years, agriculture credit increased by 500% but has not reached even 20% of the 12.56 crore small and marginal farmers.
  •  95% of tractors and other agri-implements sold in the country are being financed by non-banking financial companies, or NBFCs, at an 18% rate of interest.
  • The RBI has also questioned agricultural households with up to two hectares getting only about 15% of the subsidized outstanding loan from institutional sources (bank, co-operative society).
  •  As per the Agriculture Census, 2015-16, the total number of small and marginal farmers’ households in the country stood at 12.56 crore which makes up 86.1% of the total holdings.
  • As in the Situation Assessment Survey of Agricultural Households by the National Sample Survey Office (NSSO), the share of institutional loans rises with an increase in land possessed.
  • This shows that the bulk of subsidized agri-credit is grabbed by big farmers and agri-business companies.

What are the reasons

  • A loose definition of agri-credit has led to the leakage of loans at subsidized rates to large companies in agri-business.
  • The RBI had set a cap that out of a bank’s overall adjusted net bank credit, 18% must go to the agriculture sector, and within this, 8% must go to small and marginal farmers and 4.5% for indirect loans, bank advances routinely breach the limit.
  • A review by the RBI’s internal working group in 2019 found that in some States, credit disbursal to the farm sector was higher than their agriculture gross domestic product (GDP) and the ratio of crop loans disbursed to input requirement was very unevenly distributed.
  •  This shows the diversion of credit for non-agriculture purposes.
  • One reason for this diversion is that subsidized credit disbursed at a 4%-7% rate of interest is being refinanced to small farmers, and in the open market at a rate of interest of up to 36%.

Way forward

  • The way forward is to empower small and marginal farmers by ‘giving them direct income support on a per hectare basis rather than hugely subsidizing credit.
  • Streamlining the agri-credit system to facilitate higher crop loans to farmer producer organizations, or the FPOs of small farmers against commodity stocks can be a win-win model to spur agriculture growth’.
  • With mobile phone penetration among agricultural households in India being as high as 89.1%, efforts to improve institutional credit delivery through technology-driven solutions can reduce the extent of the financial exclusion of agricultural households
  • There is a need to reforming the land leasing framework and creating a national-level agency to build consensus among States and the Centre concerning agriculture credit reforms.

Consider the question “Growth in the agriculture sector in India has not been commensurate with the growth in the agriculture credit. What are the reasons for this disparity? Suggest the measures to deal with the challenges in agri-credit delivery.”

Conclusion

Improving the access to credit at a reasonable rate will help in increasing their income but to do that reforms in credit delivery is the need of the hour.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Changes needed in India’s agri-food policy

Note4Students

From UPSC perspective, the following things are important :

Prelims level : FCI and MSP

Mains level : Paper 3- Making India's agri-food policies optimal

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

PM-KISAN payout wrongly made to ineligible beneficiaries

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PM-KISAN

Mains level : Not Much

PM-KISAN payments worth ₹1,364 crores have been wrongly made to more than 20 lakh ineligible beneficiaries and income tax payer farmers.

Try this PYQ:

Q.Under the Kisan Credit Card Scheme, short-term credit support is given to farmers for which of the following purposes? (CSP 2020)

  1. Working capital for maintenance of farm assets
  2. Purchase of combine harvesters, tractors and mini trucks
  3. Consumption requirements of farm households
  4. Construction of family house and setting up of village cold storage facility
  5. Construction of family house and setting up of village cold storage facility

Select the correct answer using the code given below:

(a) 1,2 and 5 only

(b) 1,3 and 4 only

(c) 2,3,4 and 5 only

(d) 1, 2, 3 and 4

PM-KISAN

  • The Pradhan Mantri Kisan Samman Nidhi Yojana (PM-Kisan Yojana) is a government scheme through which, all small and marginal farmers will get up to Rs 6,000 per year as minimum income support.
  • Under the PM-KISAN scheme, all landholding farmers’ families shall be provided with the financial benefit of Rs. 6000 per annum per family payable in three equal instalments of Rs. 2000 each, every four months.
  • The definition of the family for the scheme is husband, wife, and minor children.
  • State Government and UT administration will identify the farmer families which are eligible for support as per scheme guidelines.
  • The fund will be directly transferred to the bank accounts of the beneficiaries.

Why in news?

  • When it was launched just before the general election in 2019, it was meant to cover only small and marginal farmers who owned less than two hectares.
  • Later that year, large farmers were included in the scheme as the government removed land size criteria.

Certain exclusions

  • However, certain exclusions remained.
  • If any member of a farming family paid income tax, received a monthly pension above ₹10,000, held a constitutional position, or was a serving or retired government employee, they were not eligible for the scheme.
  • Professionals and institutional landholders were also excluded.

Who are NOT eligible for PM-KISAN?

The following categories of beneficiaries of higher economic status shall not be eligible for benefit under the scheme.

  • All Institutional Landholders.

Farmer families that belong to one or more of the following categories:

  • Former and present holders of constitutional posts
  • Former and present Ministers/ State Ministers and former/present Members of Lok Sabha/ Rajya Sabha/ State Legislative Assemblies/ State Legislative Councils, former and present Mayors of Municipal Corporations, former and present Chairpersons of District Panchayats.
  • All serving or retired officers and employees of Central/ State Government Ministries
  • All superannuated/retired pensioners whose monthly pension is Rs.10,000/-or more. (Excluding Multi-Tasking Staff / Class IV/Group D employees) of the above category
  • All Persons who paid Income Tax in the last assessment year
  • Professionals like Doctors, Engineers, Lawyers, Chartered Accountants, and Architects registered with Professional bodies and carrying out the profession by undertaking practices.

Note: It is not so easy to remember all such exclusions. But one must be able to recognize them by applying pure logic and thumb rule. This can be well understood from the PYQ given.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Misunderstanding the MSP

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MSP, Public Procurement System

Mains level : Paper 3- Reasons for farmers concerns with MSP

The article explains the purpose of Minimum Support Price (MSP) and reasons for insecurity in farmers regarding its continuance.

Relation between MSP and time-bound procurement through PPS

  • MSP, public procurement system (PPS) and a strict time-bound purchase of output brought to the PPS(through APMCs) form a package deal.
  • Take out one aspect, the deal falls apart.
  • For example, if you have MSP but not compulsory PPS, the support price becomes redundant.
  • If you have MSP and PPS/APMC mandi but not strict time-bound purchase of the product brought to the PPS, the deal will fail.

Purpose of MSP

  • At the launch of the Green Revolution, MSP and PPS were designed to assist the country in achieving its goal of food self-sufficiency, which was met by the early Seventies.
  • The purpose of MSP and PPS/APMC is now two-fold.
  • One, to maintain food self-sufficiency because crop diseases and weather conditions such as droughts.
  • The second purpose is to ensure a reasonable, assured income to the farmers.
  • The recommendation to dismantle FCI public procurement, made by the Shanta Kumar Committee in its 2015 report, displayed a lack of recognition of the importance of these two purposes.

Issues with the Farm bills

  • The government’s assurance that MSP/APMC can co-exist with the big agro-business-controlled private markets is not tenable.
  • A farmer who has reached a contract will not be legally allowed to take the product to APMC if the APMC mandi offered him/her a better price.
  • The agro-business entity will take the non-compliant farmer to court, where the dispute resolution mechanism is stacked against the farmer due to the structural inequities of legal resources and social-cultural capital.
  • The proposed dispute resolution mechanism increases the choice of the trader to trade and not of the farmer to sell.
  • The central law will prevail in the private markets, while state laws will prevail in the APMC mandis.
  • Two markets with two regulatory frameworks will create conditions for perpetual Centre-state conflicts.
  • MSPs are announced for 23 crops but compulsory and timely public procurement, are provided mainly for two crops, wheat and rice, the support price does not work for the remaining 21 crops. 

Challenge in defining MSP

  • Farmers’ organisations are insisting on the Swaminathan Committee formula of C2+50 per cent.
  • The MSP announced by the government is based on the A2+Fl+50 per cent formula.
  • Unlike the C2+50 per cent formula, A2+Fl+50  formula does not cover all the costs of farming.

Conclusion

Agrarian reforms that recognise the importance of ecologically and economically sustainable agriculture are an absolute necessity. Such reforms would require more than merely changing the trade emphasis of existing laws. They will involve the creation of inclusive, transparent and well-informed laws compatible with these reforms.


Back2Basics: Understanding the cost formula

  • M S Swaminathan committee recommended minimum support prices (MSP) for crops at levels “at least 50 per cent more than the weighted average cost of production”.
  • The National Commission on Farmers did not elaborate on what really constituted “weighted average cost of production” in its report submitted in October 2006.
  • The Commission for Agricultural Costs and Prices (CACP), on the other hand, gives three definitions of production costs: A2, A2+FL and C2.
  • A2 costs basically cover all paid-out expenses, both in cash and in kind, incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel, irrigation, etc.
  • A2+FL cover actual paid-out costs plus an imputed value of unpaid family labour.
  • C2 costs are more comprehensive, accounting for the rentals and interest forgone on owned land and fixed capital assets respectively, on top of A2+FL.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Agricultural research in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Water usage for agriculture in India

Mains level : Paper 3- Need for RD in agriculture

The article highlight the need for more emphasis on agricultural R&D as a solution to the woes of the farmers.

India needs low-input high-output agriculture

  • Amid farmers protest against farm acts, the current debates focus mainly on MSP, reducing farmers’ debt liabilities, reducing post-harvest losses, cash transfers and marketing reforms.
  • India with entrenched poverty requires low-input, high-output agriculture; low input in terms of both natural resources and monetary inputs.
  • Very little attention is being given to reducing the natural resource inputs — most critical being water —and agricultural R&D.
  • This cannot be achieved without science and technology.

Following are the areas in which Indian agriculture needs R&D to reduce agriculture inputs

1) Water usage for agriculture

  • India receives around 4,000 billion cubic meters (bcm) of rainfall, but a large part of it falls in the east.
  • Moreover, most of the rain is received within 100 hours of torrential downpour, making water storage and irrigation critical for agriculture.
  • India has one of the highest water usages for agriculture in the world — of the total 761 bcm withdrawals of water, 90.5 per cent goes into agriculture.
  • In comparison, China uses 385.2 bcm (64.4 per cent) out of the total withdrawals of 598.1 bcm for agriculture.
  • China’s per-unit land productivity in terms of crop production is almost two to three times more.
  • The total estimated groundwater depletion in India is in the range of 122-199 bcm .
  • The depletion is highest in Punjab, Haryana, and western UP.

2) Increasing the yields of coarse-grain crops and oilseed crops

  • Years of intense research on yield increase and yield protection by breeding varieties and hybrids resistant to pests and pathogens have made wheat, rice and maize stable high yielders.
  • Environmentalists suggest replacing rice with coarse grain crops — millets, sorghum etc.
  • However, the yields of these crops are not comparable to those of wheat and rice even when protective irrigation is available.
  • These crops have a serious R&D deficit leading to low yield potential as well as losses to pests and pathogens.
  • This leaves us with pulses and oilseeds.
  • In the 2017-18 fiscal year, India imported around Rs 76,000 crore worth of edible oils.
  • Three oilseed crops (mustard, soybean, and groundnut) are already grown very extensively.
  • Soybean and groundnut are legume crops and fix their nitrogen.
  • All three crops not only provide edible oils but are also an excellent source of protein-rich seed or seed meal for livestock and poultry.
  • Unfortunately, yields of the three crops are stagnating in India at around 1.1 tons per hectare, significantly lower than the global averages.

3) Genetic improvements of crops

  • Pests and pathogens can be best tackled by agrochemicals or by genetic interventions.
  • A recent global level study on crop losses in the main food security hotspots for five major crops showed significant losses to pests — on average for wheat 21.5 per cent, rice 20 per cent, maize 22.5 per cent, potato 17.2 per cent, and soybean 21.4 per cent.
  • India is one of the lowest users of pesticides.
  • In 2014, comparative use of pesticides in kilograms per hectare in some select countries/regions is as following: Africa 0.30, India 0.36, EU countries 3.09, China 14.82, and Japan 15.93.
  • A more benign method for dealing with pests is through breeding.
  • The Green Revolution technologies were based on the effective use of germplasm and strong phenotypic selections.
  • Recombinant DNA technologies since the 1970s have brought forth unprecedented opportunities for genetic improvement of crops.
  • Since 2000, genomes of all the major crops have been sequenced.
  • The big challenge is in the effective utilisation of the enormous sequence data that is available.
  • India’s efforts in all three areas are half-hearted.

Way forward

  • Over the last 20 years, India has been spending between 0.7 to 0.8 per cent of its GDP on R&D.
  • This is way below the percentage of GDP spent by the developing countries and Asia’s rapidly growing economies.
  • There are structural issues like lack of competent human resources and lack of policy clarity.
  • However, the biggest impediment to agricultural R&D has been overzealous opposition to the new technologies.

Consider the question “India needs low-input, high-output agriculture. This cannot be achieved without science and technology. In light of this, examine how R&D could play a role in the advancement of agriculture in India.”

Conclusion

Maybe the present crisis in agriculture would lead to a greater appreciation of the need for strong public supported R&D in agriculture.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Need for comprehensive agri policy

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Agreement on Agriculture

Mains level : Paper 3- Challenges of farm subsidies and declining farm incomes

The article examines the reasons for declining farm incomes and the contribution of farm subsidies.

Contribution of agriculture

  • India’s agriculture, which also supports the rural workforce, was, forever, living beyond its means.
  • In 1950-51, agriculture’s share in the country’s GDP was 45%, the share of the workforce dependent on it was close to 70%.
  • Today, agriculture’s share in GDP is below 16%, but almost 50% of the country’s workforce depends on this sector.
  • The squeeze on the agricultural sector becomes even more evident from its terms of trade vis-à-vis the non-agricultural sectors.
  • Agriculture has been facing adverse terms of trade over extended periods since the 1980s, and even during the phases when the terms of trade have moved in its favour, for instance in the 1990s and again since 2012-13, there was no distinct upward trend.

Reason for fall in farm incomes: falling investment

  • The decline in farm incomes was triggered by growing inefficiencies.
  • This decline, in turn, was caused by a lack of meaningful investment in agriculture.
  • The share of this sector in the total investment undertaken in the country consistently fell from about 18% in the 1950s to just above 11% in the 1980s.
  • In the most recent quinquennium for which data are available (2014-15 to 2018-19), the average share of agriculture was 7.6%.

India’s dismal performance in term of yields of major crops

  • If one ranks countries in terms of their yields in wheat and rice — India’s two major crops — the country’s ranks were 45 and 59, respectively, in 2019.
  • This ranking would go down sharply if the areas recording high yields, such as Punjab and Haryana, are excluded.
  • In other words, for farmers in most regions of the country, it is an uphill battle for survival amid low yields.

Need for coherent policy for agriculture

  • The lack of a coherent policy for agriculture must surely be regarded among the most remarkable failures of the governments in post-Independence India.
  • Compare this failure with the United States, with less than 2% of its workforce engaged in agriculture, has been enacting farm legislations every four years since the Agricultural Adjustment Act was enacted in 1933.
  • These policies comprehensively address the needs of the farm sector through proactive support from the respective governments.

Issue of the farm subsidies in India

  • The subsidies are the price that the country pays for the failure of the policymakers to comprehensively address the problems of the farm sector.
  • Wanton distribution of subsidies without a proper policy framework has distorted the structure of production and, consequently, undesirable outcomes in terms of excessive food stockpiling.
  • And, yet, the fundamental ills of Indian agriculture are not adequately addressed.
  • Members of the World Trade Organization (WTO) are expected to notify their agricultural subsidies as a part of their commitment under the Agreement on Agriculture (AoA).
  • India’s latest notification, for 2018-19, shows that the subsidies provided were slightly more than $56 billion.
  • In most of the recent years, the largest component of India’s subsidies ($24.2 billion, or 43% of the total) is provided to “low income or resource-poor farmers”, a terminology that the AoA uses.
  • However, the designation of this category of farmers is left to individual members.
  • India has notified that 99.43% of its farmers are low income or resource-poor.
  • According to the agricultural census conducted in 2015-16, these are the farmers whose holdings are 10 hectares or less.
  • Thus, almost the entire farm sector comprises economically weak farmers.

Comparing subsidies given by various countries

  • America provided $131 billion in 2017 and the EU, nearly €80 billion (or $93 billion) in 2017-18.
  • Instead of absolute numbers; the ratios of subsidies to agricultural value addition for the three countries give a much better picture.
  • Thus, for 2017, India’s farm subsidies were 12.4% of agricultural value addition, while for the U.S. and the EU, the figures were 90.8% and 45.3%, respectively.
  • This then is the reality of farm subsidies that India provides.

Consider the question “Indian agriculture has been contributing beyond its means since Indian independence. However, agri incomes have shown a gradual decline. What are the reasons for such a decline? How far has farm subsidies succeeded in solving the low-income problem?” 

Conclusion

India needs a comprehensive Agri policy to deal with the distortion created by the subsidies.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Reforms with the future and farming needs in mind

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Provisions in the act

Mains level : Paper 3- Provisions in the new farm laws and their purpose

Some provisions of the new farm laws are opposed by the farmers. The article explains the utility of these provisions.

Major objections to farm laws

  • The first objection is that the Agricultural Produce Market Committees (APMC) will be eventually closed,
  • The second objection is that Minimum Support Prices (MSP) will be stopped,
  • The third fear is that corporates will take over the agriculture trade, and farmers’ land will be taken over by powerful corporates.

Why reforms were needed

  • The gap between the agri-income of a farmer and that of a non-agriculture worker increased from ₹25,398 in 1993–94 to ₹1.42 lakh in 2011-12.
  • Aggregate food demand has fallen short of domestic production necessitating the export of a large quantity to prevent domestic prices from falling very low.
  • India is sitting on an excess stock of 60 lakh tons of sugar and nearly 72 million tons of extra buffer stock of wheat and rice which is causing a huge drain on fiscal resources.
  • India’s agri-exports are facing difficulty, imports are turning attractive as domestic prices are turning much higher.
  • Rural youth are looking for jobs outside agriculture and there is a serious problem of unemployment in the countryside.
  • There are numerous instances of market failure to the detriment of producers and consumers.
  • This is turning farmers to look at the government for remunerative prices through MSP for most agricultural products.
  • The growth rate in agriculture is driven by heavy support through various kinds of subsidies and output price support.
  • These costs and losses and subsidies will take away most of the tax revenue of the central government.

3 Provisions and their utility

1) Relation between MSP and APMC

  • APMC has nothing to do with the payment of the MSP.
  • The necessary and sufficient conditions for the MSP are procurement by the government, with or without the APMC.
  • Experience shows that even after fruits and vegetables were de-notified from the APMC, they continued to arrive at APMC mandis in large quantities while farmers got additional options.
  • The protesting farmers have raised concerns to keep the level-playing field for the APMC and private players, and the government has shown agreement to address this fully.

2) Criteria for traders

  • Protesting farmers are also opposing the provision of the simple requirement of a PAN card for a trader.
  • After having a PAN card, even a farmer can go for trading, his son can do agri-business and other rural youth can undertake purchases of farm commodities for direct sale to a consumer or other agribusiness firms.
  • If stringent criteria such as bank guarantee, etc. are included in the registration, then the spirit of the new law to facilitate farmers and rural youth to become agribusiness entrepreneurs will be lost.

3) Mistaking contract farming with corporate farming

  • Critics and protesting farmers are mixing contract farming with corporate farming.
  • The new Act intends to insulate interested farmers (especially small farmers), against market and price risks.
  • The Act is voluntary and either party is free to leave it after the expiry of the agreement.
  • It prohibits the transfer, sale, lease, mortgage of the land or premises of the farmer.
  • The Act will promote diversification, quality production for a premium price, export, and direct sale of produce, with desired attributes to interested consumers.
  • It will also bring new capital and knowledge into agriculture and pave the way for farmers’ participation in the value chain.

Conclusion

The policy reforms undertaken by the central government through these Acts are in keeping with the changing times and requirements of farmers and farming. If they are implemented in the right spirit, they will take Indian agriculture to new heights and usher in the transformation of the rural economy.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Government must promote crop diversification by setting MSP for other crops as well

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NA

Mains level : Read the attached story

Farmers’ genuine concerns must be addressed as soon as possible so that they can continue producing food and fibre needed for the ever-increasing population.

Green revolution and farmer’s contribution to the food sufficiency in India

  • In the early 1960s, near-famine conditions prevailed in India and some 10 million tonnes of wheat had to be imported from the US under the PL480 programme. The country’s situation was like“ship-to-mouth” existence.
  • High-yielding dwarf wheat varieties brought from Mexico were provided to Indian agricultural institutes.
  • The consequent miraculous gains in wheat yield and production ushered in the “Green Revolution.”
  • The Green Revolution occurred due to a confluence of favourable government policies, efforts of agricultural scientists and the adoption of new wheat varieties/selections by farmers.
  • Also, the contributions of farmers of Punjab (Haryana included) was also very important and they became the backbone of the revolution.
  • By 1974, the industrious farmers of the “food-bowl” states of Punjab, Haryana, and western UP had brought about self-sufficiency in foodgrain production, ridding the country of the “begging bowl”.

Practice Question: What are the concerns of the farmers after new agriculture reforms and how they can be addressed?

Farmer’s concerns

  • Consultation with farmers is important before drafting policies
  • There will be resistance no matter which organization enact the policies/rules without taking the affected people on board. A proactive approach is always better than a reactive one.
  • From the farmers’ standpoint, the ordinances were unfairly promulgated in June 2020, during the COVID-19 lockdown, without consulting them.
  • Loss of Income in the lockdown – Farmers could not sell their vegetables and fruits because of the lockdown causing the loss of income and then the imposition of the new laws aggravated them.
  • Uncertainty in the minds of farmers about the continuation of MSP
  • Farmers have been selling food grains (mainly wheat and rice) at Minimum Support Price (MSP) since the mid-1960s.
  • This has helped to create a central pool of food grains and the Public Distribution System to help poor people.
  • But MSP has not been guaranteed in the newly enacted farm laws, which is the major bone of contention.
  • The APMCs are under threat from the new farm laws as MSP and APMC go hand-in-hand.

New Middleman –

  • The central government has indicated that the new farm laws are meant to eliminate the “middlemen”.
  • But the farmers feel that a new class of middlemen, that is, lawyers belonging to big companies would emerge.
  • Thus, small farmers would be at a distinct disadvantage — more than 80 per cent of farmers own less than five acres of land.

Contract farming

  • According to the central government, the new laws will ensure contract farming.
  • The farmers fear that big companies might usurp their land and might not pay them an agreed price on the pretext of “poor quality” of produce.
  • They feel that big companies might become monopolies, and exploit both farmers and consumers. Farmers fear being made into labourers.

Way forward

MSP is a must

  • A clause should be added in the law to the effect that no matter who buys the produce (government or a private entity), the farmer must be given an MSP.
  • The National Farmers’ Commission’s recommendation of providing an MSP of 50 per cent over and above a farmer’s input expenses must be implemented.
  • APMCs should be continued – The fees that “Mandi Boards” collect (for example the Rural Development Fund) have helped build link roads. No private organization will do this.
  • MSP should be determined on the basis of grain quality.

Crop diversification is needed

  • The government must promote crop diversification by purchasing crops produced other than wheat and rice at MSP. This could help conserve the dwindling supply of underground water.
  • To encourage farmers to grow high-value crops, such as vegetables and fruits, the government should set up the adequate cold-chain infrastructure.
  • The farmers’ staying power must be improved so that they don’t have to sell all of their produce immediately after the harvest.
  • India has produced a number of World Food Laureates, including M S Swaminathan, Gurdev S Khush, Surinder K Vasal, and Rattan Lal. Such intellectuals should be in the “Agricultural Think Tank.”

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

In agri-reforms, go back to the drawing board

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NA

Mains level : Farmers agitation and the fuss

The intended beneficiaries often understand the realities of the systems better; policymakers need to build trust.

Practice Question: The farmers protest against the new farm laws rises the serious concerns about the policymaking and involvement of citizen in the process by experts. What can be done to improve the trust of the public and how the challenge of agricultural income be solved?

Reassessment is needed

  • The purpose of agriculture reforms is to increase farmers’ incomes. Farmers want the laws repealed.
  • The Supreme Court of India has called for discussions between the government and farmers around the country.
  • It is time to go back to the drawing board about the purpose and the process of agriculture reforms.
  • According to economists, fewer people must work on farms for farm productivity and incomes to be improved. Which begs the question of how the millions displaced from farms will earn incomes.
  • Indian industry is not growing much. There too, according to economists, humans should be replaced by technology for improving productivity.

Flipside of productivity

  • Landholdings are too small for mechanization to improve farm productivity. Their solution is to ‘scale-up’ farms.
  • Mechanization requires standardization of work, hence mechanized farming on scale requires monocropping.
  • Large-scale specialization upsets the ecological balance. Reduced diversity of flora enables pests to spread more easily; soil quality is reduced; water resources get depleted.
  • Solutions to these new problems require more industrial inputs, with more costs for farmers.
  • The harmful side-effects of this approach to improve agriculture productivity are very visible in Punjab nowhere farm incomes have grown at the cost of water resources.

Nature’s self-adaptive system

  • The ecological imbalance out of monocropping made the trees more vulnerable to pests.
  • Nature is a complex ‘self-adaptive’ system. It knows how to take care of itself.
  • When Man tries to overpower Nature with his science and industry, without understanding how Nature functions, he harms Nature — and ultimately himself.
  • Challenges of environmental degradation and increasing inequalities require that the economic calculus shifts from ‘economies of scale with standardization’ to ‘economies of scope for sustainability’.
  • This will make large-scale mechanization more difficult. It will require the use of more ‘flexible’ human labour.
  • In the long run, not only will this be good for the ecology, but it will also increase employment and incomes for people in the lower half of the economic pyramid.

Market access

  • Farm incomes can increase with access to wider markets for farm produce, which is an objective of the agricultural reforms.
  • Indian farmers fear that they will not have adequate pricing power when pushed into large supply systems and less regulated markets.
  • Connections into global supply chains can increase volumes of sales which always favour the larger players in the supply chains who have easier access to capital.
  • Studies show that farmers in developed countries formed collectives which enable their voice to be heard by politicians and they could set the rules of global trade.

Strengthen cooperatives

  • Institutions for cooperative ownership and collective bargaining must be strengthened to give power to small farmers before opening markets to large corporations.
  • A very good example is the Indian dairy sector. It’s ‘per person productivity is much lower than in New Zealand and Australian dairy producers’.
  • Still, it provides millions of tiny producers with reasonable incomes which large-scale industrial dairy producers do not.
  • Moreover, with its cooperative aggregation, the Indian dairy sector has also acquired political clout.
  • It has compelled the Indian government not to join the Regional Comprehensive Economic Partnership to connect the Indian economy with larger supply chains.

Low agriculture income

  • The problem of low incomes in India’s agriculture sector is a complex systems problem which cannot be solved by agriculture experts alone.
  • Experts from many disciplines must collaborate to find systemic solutions.
  • The intended beneficiaries of the new policies must be included in the designing of the new policies right at the beginning as they understand the realities of systems better than experts.
  • When policymakers say ‘the people don’t get it’ after the policy is announced and the intended beneficiaries protest, it is an indication that the experts didn’t get it.

The reforms of the 1990s

  • The stand-off in agriculture reforms has caused a flurry of discussions about democracy, consultation, and processes for economic reforms.
  • The immediate beneficiaries of the 1991 reforms were all Indian consumers, rich and poor, who would benefit from access to better quality products from around the world.
  • The principal opponents of the reforms were a few large industrialists whose products citizens were not satisfied with.
  • Governments have more power over a few industrialists than they have over the masses.
  • The 1991 reforms changed industrial licensing and trade policies — both subjects of the Union government.
  • ‘Factor market’ reforms, inland, agriculture, and labour regulations, which are necessary to realize the full benefits of the 1991 reforms are State subjects.
  • They affect the lives of people on the ground, and differently, around the country. Therefore, the central government, no matter how strong it is, must not force these reforms onto the States.

Conclusion:

Silo experts cannot help

  • India’s policymakers must improve their expertise in solving complex, multi-disciplinary problems.
  • They must apply the discipline of systems thinking, and not rely on siloed domain experts.
  • Citizens around the country must be involved in the policymaking throughout the evolution of policies.
  • The policies of the government should create public value and it satisfies the desire of citizens for a well-ordered society, in which fair, efficient, and accountable public institutions exist.
  • Trust is essential for a well-governed society. The lesson for India’s leaders is- good processes for making public policies build trust between citizens and their governments.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Why Are Most Assam Farmers Not Protesting Against the Farm Laws?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NA

Mains level : Concerns of farmers other than MSP

With most farming land held by only 20% of its cultivators in Assam, there is a perception that agriculture is unimportant. However, the new farm laws are equally detrimental to small and marginal farmers in the state.

Muted response from the state’s farming community

  • With more than 70% of Assam’s population directly or indirectly dependent for their livelihood on the agricultural sector, it is surprising that the state has only seen sporadic protests against the farm laws passed by the Central government.
  • Reformists would like to read this muted response from the state’s farming community as the voice of the silent majority who expect to benefit from the new farm laws.
  • The real answer lies in the political economy of the state’s rural sector, which has its origins in the colonial handling of its agrarian possibilities.

Q. Farmers agitations in India are often region-specific. Discuss

Ungrounded and uncultivated

  • The pre-Independence British administration had invested substantially in the agriculture in what today constitutes Punjab and Haryana, building dams and irrigation facilities and creating conditions that allowed farmers to benefit from the post-independence Green Revolution.
  • This gave rise to the capitalist class among them.
  • However, at the same time, peasants in Assam were arbitrarily taxed by the British Raj to make them voluntarily give up farming in favour of joining the labour forces of the tea industry in the region.
  • Its policies did result in the transfer of land from the peasantry to mid-level revenue officials, leading to a highly unequal land distribution that has persisted since that time.
  • Since the landed class tended to support the Indian National Congress-led freedom struggle, no land reform programme has ever been pursued seriously in the post-independence period.

Unequal land distribution

  • Seven decades after independence, Assam’s agrarian setting is still characterized by a very high level of unequal land distribution.
  • The evidence documented in the Assam Human Development Report, 2014 shows that 20% of farmers hold as much as 70% of the state’s farmland and shows tenancy at a much higher level of 26%.
  • The lack of legal recognition of tenants means most of them have never been beneficiaries of public policies in agriculture in the state.
  • The state’s agriculture is characterized by mono-cropping, with rice accounting for 90% of the land cultivated, but public procurement at the minimum support price (MSP) is conspicuously absent.
  • The latest information from the public information bureau (PIB) shows that the state produces 4.2% of the country’s rice, but only 0.2% of its farmers availed public procurement by the Food Corporation of India (FCI).
  • Most farmers had to bear with the low prices of rice in the open markets, even as the state was flooded with rice sourced from elsewhere through the public distribution system.
  • Frequent floods often ravage the region, reducing farming operations to just one season in most flood-affected districts. Assam’s cropping intensity of 146% is one of the lowest among all major rice-producing states.
  • In such a setting, the landed class takes little interest in farming, even as small and marginal farmers have increasingly been migrating, many even outside the state, to earn their livelihoods.
  • It’s not surprising that the state’s agriculture is still stuck at the subsistence level. The Assam Economic Survey 2017-18 shows only 38% of the state’s land under high yielding variety seeds and 26% of its land under irrigation.

APMC must be strengthened

  • The farmers of Assam might benefit from the breaking down of MSP procurement elsewhere through higher prices in the open market.
  • The new farm laws are more or less meaningless, which are more about APMC markets than about MSP.
  • With just 24 regulated APMC markets, Assam does not have enough marketing infrastructure to justify the argument made by the advocates of the new farm laws that the new Acts will liberate the farmers from the APMC markets’ monopoly and boost private investment in the sector.
  • With the state’s agricultural marketing largely revolving around 700-odd unregulated haats (village markets), the 24 APMC markets are hardly enough to curtail the farmers’ ‘freedom’ to dispose of their produce.
  • The credit deposit ratio (CDR) reported by major national banks in the state in 2017 is still below 40% compared to 72% at the national level, showing that the state is losing much of its savings to better-endowed states instead of receiving investment from outside the state.
  • The APMC market as a public institution still has a large role to play in reviving the state’s agricultural sector. Additionally, it can stop growing inter-state migration that has come to light in the wake of the COVID-19 pandemic.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Punjab, Haryana need to look beyond MSP crops

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Green Revolution

Mains level : Crop diversification issues in Punjab/Haryana belt

In tackling agri-crises, these core Green Revolution States must shift to high-value crops and promote non-farm activities

Early adopters of Green Revolution Technology

  • The region comprising Punjab, Haryana and western Uttar Pradesh, was an early adopter of Green Revolution technology.
  • It was also a major beneficiary of various policies adopted to spread modern agriculture technology in the country.
  • The package of technology and policies produced quick results which enabled India to move from a country facing a severe shortage of staple food to becoming a nation close to self-sufficiency in just 15 years.

Practice Question:

Q. The traditional Green Revolution States of Punjab and Haryana would need to shed “business as usual” approach and embrace an innovative development strategy in agriculture and non-agriculture to secure and improve the future of farming and rural youth. Discuss.

The rice and wheat focus

  • Procurement of marketed surplus of paddy (rice) and wheat at Minimum Support Price (MSP) completely insulated farmers against any price or market risks. It also ensured a reasonably stable flow of income from these two crops.
  • Over time, the technological advantage of rice and wheat over other competing crops further increased as public sector agriculture research and development allocated their best resources and scientific manpower to these two crops.
  • Other public and private investments in water and land and input subsidies were the other favourable factors.
  • Thus, wheat in rabi and paddy in Kharif turned out to be the best in terms of productivity, income, price and yield risk and ease of cultivation among all the field crops (cereals, pulses, oilseeds).
  • It is no surprise then that the area share of rice and wheat in the total cropped area rose drastically in these states.
  • The progress and specialization towards these two crops served the great national goal of securing the food security of the country.

Problems of the Green Revolutionsurfaced during the mid-1980s

  • During the mid-1980s, some inimical trends related to the rice-wheat crop system in general and paddy cultivation, in particular, surfaced followed by serious second-generation problems of the Green Revolution.
  • Some experts foresaw the serious consequences of the continuation of paddy cultivation in the region and suggested diversification away from the rice-wheat system in the mid-1980s.
  • Since then a large number of reports and policy documents have been prepared to develop alternative options to reduce the area under paddy — necessitated by its adverse effect on natural resources, the ecology, the environment, and fiscal resources.
  • Serious concerns have also been expressed about plateauing productivity and stagnant income from rice-wheat cultivation. However, the area under these two crops has only increased rather than fallen.
  • In order to develop viable options to infuse dynamism in the agriculture economy of this Green Revolution belt, there is a need to understand: what attracts farmers to rice-wheat crops, why it needs to be changed, and how it can be changed.

Punjab, Haryana vs. States

  • High productivity, assured MSP which is often above open market price, free power, and fertilizer subsidy underlie the higher income per unit area from wheat and paddy cultivation.
  • Land-labour ratio is also very favourable in Punjab when compared to other States; on an average, a farmer owns and cultivates 2.14 hectares net sown area as against 1.42 hectares in Haryana and 1.17 hectares at the national level.
  • An estimate of income (derived from National Accounts Statistics) shows that all agriculture activities taken together to generate an annual net income of ₹5.31 lakh per cultivator in Punjab; it is ₹3.44 lakh in Haryana while the all-India average is ₹1.7 lakh (reference year, 2017-18).
  • A question often asked is that if per farmer agriculture incomes in Haryana and Punjab are two to three times more than the national average, then why is there so much talk of farmers’ distress in these two States?

Why farmers’ distress in these two States when everything looks good?

  • The reasons seem to be the loss of growth momentum in the income from the agriculture sector, which has fallen to 1% in Haryana and 0.6% in Punjab after 2011-12.
  • This is quite low by any standard and not keeping in pace with an increase in households’ expenditure. The prospects of further growth in agricultural income from the crop sector dominated by rice and wheat are very dim.
  • With the productivity of rice and wheat reaching a plateau, there is pressure to seek an increase in MSP to increase income. However, demand and supply do not favour an increase in MSP in real terms.
  • In India, the per capita intake of rice and wheat is declining and consumers’ preference is shifting towards other foods.
  • The average spending by urban consumers is more on beverage and spices than on all cereals. On the supply side, rice production is rising at the rate of 14% per year in Madhya Pradesh, 10% in Jharkhand and 7% in Bihar.

Issues related to procurement

  • The growing rice production will further increase pressure on the procurement and buffer stock of rice. Rice and wheat procurement in the country has more than doubled after 2006-07 and buffer stocks have swelled to an all-time high.
  • The country does not find an easy way to dispose of such large stocks and they are creating stress on the fiscal resources of the government.
  • The implication of all these changes is that farmers in the region will find it difficult to increase their income from rice-wheat cultivation and they must be provided alternative choices to keep their income growing.
  • Procurement of almost the entire market arrivals of rice and wheat at MSP for more than 50 years has affected the entrepreneurial skills of farmers to sell their produce in a competitive market where prices are determined by demand and supply and competition.
  • Thus, to enable Punjab and Haryana farmers to move toward high-paying horticulture crops requires institutional arrangements on price assurance such as contract farming.

Environmental issues, unemployment

  • The biggest casualty of paddy cultivation and the policy of free power for pumping out groundwater for irrigation is the depletion of groundwater resources.
  • In the last decade, the water table has shown a decline in 84% observation wells in Punjab and 75% in Haryana. It is feared that Punjab and Haryana will run out of groundwater after some years if the current rate of overexploitation of water is not reversed.
  • In the last couple of years, the burning of paddy stubble and straw has become another serious environmental and health hazard in the whole region.
  • Another rather more serious challenge for the two States is to provide attractive employment to rural youths. Most of the farm work in these two States is undertaken by migrant labour.
  • The younger generation is not willing to do manual work in agriculture and looks for better paying salaried jobs in non-farm occupations. Government jobs are few and far less than the number of job seekers.
  • Thus, the option left is to create jobs in the private industry and the services sector. This requires private investments in suitable areas.
  • Punjab has witnessed a flight of private capital from the State during the rise of militancy which hurt the State economy, employment and the revenues of the State.
  • This setback has pushed the rank of the State in per capita income from number one in the 1970s and the early 1980s to number 13 among the major states of the country.
  • For further progress and to meet the aspirations of rural youth to get satisfactory employment, the State needs large-scale private investments in modern industry, services, and commerce besides agriculture.

The solution lies in…

  • The solution to the ecological, environmental and economic challenges facing agriculture in the traditional Green Revolution States is not in legalizing MSP but to shift from MSP crops to high-value crops and in the promotion of non-farm activities.
  • Rather than focusing on a few enterprises, Punjab and Haryana should look at a large number of area-specific enterprises to avoid gluts.
  • This will require a mechanism to cover price and market risks. Farmers’ groups and farmer producer organizations can play a significant role in the direct marketing of their produce.

Agricultural specificities and way forward

  • Both Punjab and Haryana need to promote economic activities with strong links with agriculture tailored to State specificities.
  • Some options for this are: promotion of food processing in formal and informal sectors; a big push to post-harvest value addition and modern value chains; a network of agro- and agri-input industries; high-tech agriculture; and a direct link of production and producers to consumers and consumers without involving intermediaries.
  • The traditional Green Revolution States of Punjab and Haryana would need to shed “business as usual” approach and embrace an innovative development strategy in agriculture and non-agriculture to secure and improve the future of farming and rural youth.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Convergence of agrarian discontent in South

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Farmers agitation and the South Asia connection

With protests becoming catalysts for anti-authoritarian struggle, the air is ripe for new visions of rural emancipation

Recent policy changes and its impacts on agriculture

  • There has been a systematic attack on agriculture in South Asia over the last decades. This can be seen in ongoing protests in India.
  • Similar incidences of protests can be seen in Pakistan, where farmers protesting for support prices were beaten up and arrested in Lahore only a month ago, or Sri Lanka, where shortages of imported fertilizers and declining subsidies have led to farmers’ outcry.
  • In the middle of a long-simmering rural economic crisis pushed over the cliff by the COVID-19 pandemic, efforts by South Asian governments to project corporatization and deregulation as the way forward for agriculture have angered long-suffering farmers.
  • Successive governments have imposed a corporate agenda, seeking profits from food production and distribution by relaxing norms for cheap food imports, and encouraging export-oriented production, price speculation, agribusiness and retail supermarkets.
  • South Asia’s rural landscape has been profoundly reshaped by such ‘reforms’, dispossessing farmers of their land, and pushing them into wage labour and migration as coping mechanisms.
  • This hollowing out of rural livelihoods does not come with any assurance of stable jobs or a decent quality of life in urban areas.

Pandemic opportunism

  • The COVID-19 crisis has increased such efforts and policy changes.
  • India is not the only country to have attempted to seize this moment to deregulate agricultural markets. In Pakistan, the government inked an agreement with the World Bank to further deregulate the country’s wheat market.
  • In Sri Lanka, with the national budget just passed for 2021, there are only meagre allocations towards revitalizing agricultural livelihoods and policies focused on supporting technologies suitable for agribusinesses.
  • Instead of the current crisis sending governments back to the drawing board, South Asia’s authoritarian regimes, complicit with corporate interests, are railroading in anti-farmer agricultural policies.

Practice Question: Do you think there is a common ground between farmers protests in various South Asian countries. Discuss with proper examples.

Menace of the corporatization of Agriculture

  • Corporate agriculture further worsens the existential danger faced by South Asian farmers.
  • The corporate solutions do not address the role of middlemen and traders in denying farmers a fair price for their labour.
  • Instead, opening up markets to large corporations is likely to spark the same sort of race to the bottom that has been seen in the industrial and service sectors.
  • Deregulation makes farmers’ livelihoods even more precarious and threatens food sovereignty through increased dependence on global agricultural trade.
  • It was the collapse of global agricultural commodity prices in the 1970s that had a large role to play in the debt crisis that haunts countries such as Pakistan and Sri Lanka.

Reviving resistance

  • There is a powerful legacy of rural movements in South Asia that have fought for the rights of farmers, peasants and agricultural workers.
  • Rural movements played a crucial role in the anti-colonial struggle and fought for progressive land and agrarian reform after independence.
  • Seventy years on, they continue to fight against the recent waves of anti-farmer policies, while advancing new progressive visions such as peasant agro-ecology and food sovereignty, which put small food producers and the environment at the centre.
  • The current convergence of authoritarianism and corporate capital brings this existential crisis for rural agricultural producers even more sharply in focus.
  • Farmers’ movements have been aware of state connivance with exploitative actors, but they must now also contend with a breakdown of the democratic process and increased repression.
  • These should be ominous signs for regimes across South Asia which continue to act with impunity in the face of demands for economic and social justice.

Voices of movements

  • The COVID-19 pandemic has pushed food sovereignty back into the public imagination. The solution, of course, only begins with making farming a viable livelihood.
  • Dominant assumptions about inevitable rural-urban migration and techno-utopian transformation in agriculture must be challenged.
  • Questions of land redistribution and other rural inequalities must remain a crucial part of the political agenda.
  • The situation of mostly female agricultural workers, the rural landless and Dalits in South Asia remains precarious. Even as rural movements across South Asia fight the ongoing attack on their livelihoods, they must also tackle rural inequality head-on.

Conclusion

  • The air is ripe for new visions of rural emancipation in South Asia.
  • Rural movements are working to transform not just their world but are becoming catalysts for a broader anti-authoritarian struggle in South Asia.
  • The current phase of struggles has revived old questions while raising others about the future of our long-ignored rural world.
  • We must listen to the voices and demands of the rural movements converging across South Asia.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

The roots of the agricultural crisis run deep

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Concerns of farmers other than MSP

The standoff between farmers and the government continues even after a few rounds of discussion.

Un-timely reforms

  • Currently, the country was struggling with novel coronavirus-caused lockdowns, supply disruptions, job losses and falling incomes in an economy.
  • The reforms embedded in the three Acts are unlikely to help resolve the structural issues facing Indian agriculture, even their withdrawal is unlikely to change the ground reality.

Farmers protest continues

  • The immediate trigger for the current protests is the enactment of the three Acts, on agricultural marketing, contract farming and stocking of agricultural produce, which deregulates the existing Acts on these.
  • Farmer unions have rejected the proposal and continue to demand complete withdrawal of the three Acts along with making MSP a guarantee.

Government for negotiations

  • The latest proposal by the government indicates its willingness to amend the three agriculture-related Acts passed in September.
  • The government has proposed amendments which will empower the States to frame rules the contentious issues of registration of private traders, levy of taxes on trade outside the Agricultural Produce Market Committee (APMC) mandis.
  • Similar assurances have been given on access to the judiciary for dispute resolution and continuation of the Minimum Support Price (MSP) mechanism.

Many protests, one thread

  • The last four years have seen a series of large protests in most of the States.
  • For example, a group of farmers from Tamil Nadu camped in Delhi for over 100 days, Maharashtra was witness to the ‘Kisan Long March’ of farmers on more than one occasion, protests erupted in Rajasthan, UP, Haryana and MP.
  • The latest round of protests may have seen spirited protests from farmers from Punjab and Haryana but has found the support of farmers from the other States as well.
  • The common thread in all these protests — of declining agricultural incomes, stagnant wages and withdrawal of state support to agriculture.

Changing faces of agriculture

  • The real issue is the lack of remunerative prices for a majority of agricultural commodities, a sharp increase in price variability in recent years, and an unpredictable and arbitrary government policy regime.
  • The other major problem is the changing nature of agriculture which has seen increased dependence on markets, increasing mechanization along with increasing monetization of the agrarian economy.
  • The increased dependence on markets has contributed to increasing variability in output prices.
  • Limited government intervention in protecting farmers’ income and stabilizing prices through MSP-led procurement operations made the increased variability in frequency as well as its spread.
  • Other than rice and wheat — and to some sporadic instances, of pulses — most crops suffer from inadequate intervention from MSP operations.
  • Even these procurement operations are unable to stabilize prices with falling demand and a slowing economy. For example, wheat has seen a steady decline in year-on-year inflation based on Wholesale Price Index (WPI).
  • Uneven nature of procurement in some states is also responsible to arrest the decline in prices. Crops like paddy, maize have seen in many States significantly lower market prices than the MSP.

Factors behind vulnerability

  • Increasing mechanization and monetization have led to an increase in the cash requirement.
  • Most of these are met by non-institutional sources including middlemen which have contributed to the rising cost of cultivation and an increase in loan defaults.
  • The demand for loan waivers is unlikely to subside with the rising cost of inputs.
  • These trends have accentuated after 2010-11 when the Nutrient Based Subsidy (NBS) for fertilizers regime led to an increase in fertilizer prices.
  • The withdrawal of diesel subsidy and a rise in electricity prices also contributed to making agriculture unviable.
  • The government has declined the agricultural investment in the first four years which resulted in rising input costs and falling output prices.
  • The shocks of demonetization and the lockdown only increased the uncertainty and vulnerability in the agricultural sector both on input and output prices.

What lies ahead?

  • The demand for making MSP a guarantee for private trade is meaningless if the government is unable to ensure procurement for a majority of the 23 crops for which it announces MSP.
  • Thus, the withdrawal of the three Acts by the government will only seem to offer a temporary truce.

Policy overhaul needed

  • The existing policy framework with an excessive focus on inflation management and obsession with the fiscal deficit will likely lead to lower support from the government either in price stabilization or reduction in the cost of cultivation through fiscal spending.
  • The agricultural sector needs a comprehensive policy overhaul to recognize the new challenges of agriculture which are diversifying and getting integrated with the non-agricultural sector.
  • This not only entails a better understanding of the structural issues but also innovative thinking to protect farmers’ livelihood from the uncertainty of these changes.
  • Above all, it requires financial support and institutional structures to support the agricultural sector and protect it. Only this can lead to the government’s dream of doubling the farmers’ income.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Diversification of output to overcome the MSP trap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MSP

Mains level : Paper 3- Problems faced by the Punjab farmers and issue of MSP

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

The many layers to agricultural discontent

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act

Mains level : Paper 3- Farmers protest against Farms Acts

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

In farmers’ protests, the core is procurement

Note4Students

From UPSC perspective, the following things are important :

Prelims level : National Food Security Act 2013

Mains level : Paper 3- Farmers apprehension over MSP

 

Context

  • Farmers’ protests have erupted once again in north India, their main worry is about a possible withdrawal of the Minimum Support Price (MSP) and a dismantling of the public procurement of grains.

Why farmers in Punjab and Haryana are protesting

  • Farmers in Punjab and Haryana are heavily dependent on public procurement and assured price through MSP.
  • Nearly 88% of the paddy production and 70% of the wheat production in Punjab and Haryana (in 2017-18 and 2018-19) has been absorbed through public procurement [Food Grains Bulletin and Agricultural Statistics at a Glance, Government of India].
  • In contrast, in the other major paddy States such as Andhra Pradesh, Telangana, Odisha and Uttar Pradesh, only 44% of the rice production is procured by public agencies.
  •  In the major wheat States of Madhya Pradesh and Uttar Pradesh, only 23% of the production is procured by public agencies.

Government needs to continue procurement

  • If farmers of Punjab and Haryana need the procurement system, the government needs it even more.
  • This is because of its obligations under the PDS and the National Food Security Act (NFSA).
  • Support under the NFSA is a legal and rights-based entitlement.
  • There are nearly 80 crore NFSA beneficiaries and an additional eight crore migrants who need to be supported under the PDS.
  • In the last three years, nearly 40% of the total paddy production in the country and 32% of wheat production has been procured by public agencies to supply the PDS.
  • Thus, the government has little option but to continue its procurement from these States in the foreseeable future.

Way forward

  • Therefore, it is imperative that the government reaches out to the farmer groups and assures them of the indispensability of MSP-procurement system.
  • The government needs to start this initiative immediately to allay their legitimate concerns.
  • Two of the major limitations in the laws that need to be addressed immediately:
  • 1) The absence of a regulatory mechanism to ensure fair play by private players vis-à-vis farmers.
  • 2) The lack of transparency in trade area transactions.

Conclusion

The severe trust deficit that resulted from the way the Farm Bills have been rushed through needs to be addressed by adopting a conciliatory approach towards farmers and the States.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Closing the communication gap with the farmers

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Farmers protest against farm laws

The article suggests the policy options with the government to deal with the protest of the farmers against the recently enacted farm laws.

Context

  • Farmers have protested against the recently enacted farm laws by converging on Delhi’s highways connected to neighbouring states.

Why farmers are protesting

  • There is a gross communication failure on the part of the central government to explain to farmers what these laws are, and how they are intended to benefit them.
  • Neither do the laws say anything about it, nor is the MSP/APMC system going to disappear with these laws.
  • Nothing can be further from the truth.

1) Should government  repeal the laws

  • Punjab farmer leaders, including two major political parties, demand repeal of these laws.
  • However, repealing would mean bringing back controls, licence raj and the resultant rent-seeking.
  • Milk, poultry, fishery, etc. don’t go through the mandi system and their growth rates are 3 to 5 times higher than that of wheat and rice.
  • Overall, almost 90 per cent of the agri-produce is sold to the private sector.

2) Should the government make MSP legally binding

  • Another demand is making the MSP statutory and legally binding even on the private sector.
  • This is impractical as there are 23 commodities for which MSPs are announced, but in actual practice only wheat and rice enjoy MSPs in any meaningful manner, and that too only in 6-7 states.
  • Punjab is the biggest gainer as its 95-98 per cent of market arrivals of wheat and paddy are procured at MSP by state agencies on behalf of the Food Corporation of India (FCI).
  • The FCI is overloaded with grain stocks that are more than 2.5 times the buffer stock norms.
  • Such high stock indicates massive economic inefficiency in the grain management system.
  • If the government cannot cope up with excess production of just wheat and rice in any meaningful way, think of how it will handle 23 commodities under MSP.
  • In case of excess production the government will not have the wherewithal to buy all and stock them without any viable outlet.
  • It will massively distort markets, make Indian agriculture non-competitive and stocking of these will be financially unsustainable.
  • And then, why only 23 commodities, why not 40?
  • This type of state socialism is a sure path to financial disaster.

3) Optio of the Price Stabilisation Scheme

  • The third policy option is to use the Price Stabilisation Scheme to give a lift to market prices by pro-actively buying a part of the surplus whenever market prices crash.
  • It can be done directly by NAFED-type agencies that are already active in the case of pulses and oilseeds.
  • Farmers can use Commodity Derivatives Exchanges where farmers can buy “put options” at MSP before they even sow their crops, and if the market prices at the time of harvest turn out to be below MSP, government can compensate them partly for lower market prices.

4) Decentralise MSP: Let the states decide it

  • The fourth option is to totally decentralise the MSP, procurement, stocking, and public distribution system (PDS).
  • MSP and procurement exist basically to support farmers for supplying grains to the FCI to feed into the PDS.
  • So, the whole money on food subsidy can be allocated to states on the basis of their share in all-India poverty/proportion of vulnerable population, all-India wheat and rice production, all-India procurement of wheat and rice, etc.
  • A step further could include another Rs 1,00,000 crore of fertiliser subsidy and free up fertiliser prices from any controls.
  • Still further, even include another Rs 1,00,000, say, of MNREGA.
  • Let the Finance Commission work out a formula for distribution of this Rs 3,00,000 crore amongst states based on some tangible performance indicators.
  • And the Centre should get off from MSP, PDS, fertiliser subsidy, and MNREGA.

Conclusion

This would be true decentralisation, and can be accomplished provided enough ground work is done well in advance. But will this be acceptable to farmer leaders/opposing states/activists? Only time will tell.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Need to address farmers’ apprehensions

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act

Mains level : Paper 3- Addressing the farmers apprehension about MSP

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

The perils of deregulated imperfect agrimarkets

Note4Students

From UPSC perspective, the following things are important :

Prelims level : FPTC Act 2020

Mains level : Paper 3- Agri marketing and related issues.

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Farmers’ protest

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Recent Agricultural bills, MSP

Mains level : Concerns of farmers over this bill

Farmers all across the Punjab and Haryana have marched to New Delhi over the new legislations.

 Major cause of Farmers’ protest

  • Much of the opposition really is just to one of the three laws. It is the Farmers’ Produce Trade and Commerce (Promotion and Facilitation)  Act and its provisions that are seen as weakening the APMC mandis.
  • Even in that one — the act — there are only some contentious provisions, which, although key, can still leave doors open for negotiation.

A fight for privilege

  • Farmers, if anything, would gain from removal of stocking restrictions on the trade, as it potentially translates into unlimited buying and demand for their produce.

The contentious one: FPTC Act

  • The FPTC Act is a bone of contention. It permits sale and purchase of farm produce outside the premises of APMC mandis.
  • Such trades (including on electronic platforms) shall attract no market fee, cess or levy “under any State APMC Act or any other State law”.
  • An issue here is the very right of the Centre to enact legislation on agricultural marketing.
  • Article 246 of the Constitution places “agriculture” and “markets and fairs” in the State List.
  • But entry 42 of the Union List empowers the Centre to regulate “inter-State trade and commerce”.

An example of Central hegemony

  • While trade and commerce “within the State” is under entry 26 of the State List, it is subject to the provisions of entry 33 of the Concurrent List.
  • Under this, the Centre can make laws that would prevail over those enacted by the states.
  • Entry 33 of the Concurrent List covers trade and commerce in “foodstuffs, including edible oilseeds and oils”, fodder, cotton and jute.
  • The Centre, in other words, can very pass any law that removes all impediments to both inter- and intra-state trade in farm produce, while also overriding the existing state APMC Acts. The FPTC Act does precisely that.

Farmers question

  • Some experts make a distinction between agricultural “marketing” and “trade”.
  • Agriculture per se would deal with everything that a farmer does — right from field preparation and cultivation to also sale of his/her own produce.
  • The act of primary sale at a mandi by the farmer is as much “agriculture” as production in the field.
  • “Trade” begins only after the produce has been “marketed” by the farmer.

The centre’s overriding logic behind

  • Going by this interpretation, the Centre is within its rights to frame laws that promote barrier-free trade of farm produce (inter- as well as intra-state) and do not allow stockholding or export restrictions.
  • But these can be only after the farmer has sold.
  • Regulation of first sale of agricultural produce is a “marketing” responsibility of the states, not the Centre.

What do farmers’ want?

  • Farmers would want no restrictions on the movement, stocking and export of their produce.
  • For example, Maharashtra’s onion growers have vehemently opposed the Centre’s resort to ban on exports and imposition of stock limits whenever retail prices have tended to go up.
  • But these restrictions relate to “trade”.
  • When it comes to “marketing” — especially dismantling of the monopoly of APMCs — farmers, especially in Punjab and Haryana, aren’t very convinced about the “freedom of choice to sell to anyone and anywhere” argument.

Where lies the major issue?

  • Much of government procurement at minimum support prices (MSP) — of paddy, wheat and increasingly pulses, cotton, groundnut and mustard — happens in APMC mandis
  •  In a scenario where more and more trading moves out of the APMCs, these regulated market yards will lose revenues.
  • They may not formally shut, but it would become like BSNL versus Jio.
  • And if the government stops buying, farmers will be left with only the big corporates to sell to.

What could be negotiated?

  • If the protesting farmer union leaders were to sit down at the negotiating table, the government can possibly get them to agree to drop the demand on repealing all the three laws.
  • Their problem is essentially about the FPTC Act and its provisions that they see as weakening the APMC mandis.
  • These may be just fears, but they aren’t small.
  • From the government’s standpoint, the elephant in the room would be if the farmers insist on an additional demand: Making MSP a legal right.
  • This  would be still impossible to meet, even if the three farm laws were to be put on hold.

 

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Understanding the interplay between subsidies and agri-pollution

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Ground level pollution and its impact on agriculture

Mains level : Paper 3- Interplay between agri-subsidies and pollution

Agriculture’s contribution to air pollution

  • Agriculture’s contribution to air pollution runs deeper than what happens between crop seasons.
  • The Indo-Gangetic plain is also one of the world’s largest and rapidly-growing ammonia hotspots.
  • Atmospheric ammonia, which comes from fertiliser use, animal husbandry, and other agricultural practices, combines with emissions from power plants, transportation and other fossil-fuel burning to form fine particles.

Impact of pollution on agriculture

  • It is important to note that agriculture is a victim of pollution as well as its perpetrator.
  • Particulate matter and ground-level ozone formed from industrial, power plant, and transportation emissions among other ingredients cause double-digit losses in crop yields.
  • Ozone damages plant cells, handicapping photosynthesis, while particulate matter dims the sunlight that reaches crops.
  • Agriculture scientist Tony Fischer’s 2019 estimates of the two pollutants’ combined effect suggest that as much as 30 per cent of India’s wheat yield is missing (Sage Journals, Outlook on Agriculture).
  • Earlier, B Sinha et al (2015), in Atmospheric Chemistry and Physics Discussions, found that high ozone levels in parts of Haryana and Punjab could diminish rice yields by a quarter and cotton by half.

Role played by subsidies

  • The current system of subsidies is a big reason that there is stubble on these fields in the first place.
  • Free power — and consequently, “free” water, pumped from the ground — is a big part of what makes growing rice in these areas attractive.
  • Open-ended procurement of paddy, despite the bulging stocks of grains with the Food Corporation of India, adds to the incentives.
  • Subsidies account for almost 15 per cent of the value of rice being produced in Punjab-Haryana belt.
  • Fertiliser, particularly urea in granular form, is highly subsidised.
  • It is one of the cheapest forms of nitrogen-based fertiliser, easy to store and easy to transport, but it is also one of the first to “volatilise,” or release ammonia into the air.
  • This loss of nitrogen then leads to a cycle of more and more fertiliser being applied to get the intended benefits for crops.

Way forward

  • We need to shift the nature of support to farmers from input subsidies to investment subsidies.
  • This could involve the conversion of paddy areas in this belt to orchards with drip irrigation, vegetables, corn, cotton, pulses and oilseeds.
  • All of the above consume much less water, much less power and fertilisers and don’t create stubble to burn.
  • A diversification package of, say, Rs 10,000 crore spread over the next five years, equally contributed by the Centre and states, may be the best way to move forward in reducing agriculture-related pollution.
  • The approach to diversification has to be demand-led, with a holistic framework of the value chain, from farm to fork and not just focused on production.
  • On the fertiliser front, it would be better to give farmers input subsidy in cash on per hectare basis, and free up the prices of fertilisers completely.

Conclusion

Taken together, these measures could double farmers’ incomes, promote efficiency in resource use, and reduce pollution — a win-win solution for all.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

What is NAFED?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NAFED

Mains level : Food procurement

The central cooperative NAFED will soon begin importing onions in a bid to tame soaring prices before the festive season.

UPSC can frame statements based MCQ over the functions of NAFED.

NAFED

  • National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) is an apex organization of marketing cooperatives for agricultural produce in India.
  • It was founded on 2 October 1958 to promote the trade of agricultural produce and forest resources across the nation.
  • It is registered under the Multi-State Co-operative Societies Act.
  • NAFED is now one of the largest procurement as well as marketing agencies for agricultural products in India.
  • With its headquarters in New Delhi, NAFED has four regional offices at Delhi, Mumbai, Chennai and Kolkata, apart from 28 zonal offices in capitals of states and important cities.

Functions of the NAFED

  • To facilitate, coordinate and promote the marketing and trading activities of the cooperative institutions, partners and associates in agricultural, other commodities, articles and goods
  • To undertake purchase, sale and supply of agricultural, marketing and processing requisites, such as manure, seeds, fertilizer, agricultural implements and machinery etc.
  • To act as a warehouseman under the Warehousing Act and own and construct its own godowns and cold storages
  • To act as agent of any Government agency or cooperative institution, for the purchase, sale, storage and distribution of agricultural, horticultural, forest and animal husbandry produce, wool, agricultural requisites and other consumer goods
  • To act as an insurance agent and to undertake all such work which is incidental to the same
  • To collaborate with any international agency or a foreign body for the development of cooperative marketing, processing and other activities for mutual advantage in India or abroad

Now try this PYQ:

Q.In, India, markets in agricultural products are regulated under the:

(a) Essential Commodities Act, 1955

(b) Agricultural Produce Market Committee Act enacted by States.

(c) Agricultural Produce (Grading and Marking) Act, 1937

(d) Food Products Order, 1956 and Meat and Food Products Order, 1973

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Allaying the fears of farmers over MSP regime

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MSP

Mains level : Paper 3- Agri bills and issue of MSP

Question of MSP regime while arguing in favour of recently passed agri bills has made the farmers apprehensive of the purpose of the bill. The article argues for allaying the fears of the farmers and explains the salience of the MSP.

Flawed argument over MSP

  • The recently enacted farm bills have triggered debate on the desirability of the MSP regime.
  • But, the bills do not facilitate a policy to do away with Minimum Support Prices (MSPs).
  • The bills allow free entry to agents who wish to set up markets — whether they be private individuals, producer collectives or cooperatives.
  • This means that the Food Corporation of India (FCI) and other associated agencies can procure in the traditional mandis, or in a new market established under this law — or in their own backyard.
  • So, the argument that if the mandis cease to exist, the procurement will also cease is, in fact, flawed.
  • Supporters of the bills have quoted the Shanta Kumar committee’s figures to argue that MSPs are anyway irrelevant for most of the farmers in the country.
  • This linkage of the farm bills with the MSP only adds to the apprehension that farmers have about the bills.

Significance of MSP

  • It is true that the procurement has remained confined to only a few crops.
  • But the benefits to the farmers even beyond Punjab and Haryana are certainly not negligible.
  • It is true that only a small fraction benefits directly from the procurement.
  • But one cannot ignore the indirect benefit of this to all foodgrain producers in the country.
  • As the procurement significantly exceeds the PDS requirement, this creates additional demand in the foodgrain market, pushing up the prices.
  • This has been a great help for all the grain producers in the country, especially when the international prices have remained low for a long time now.
  • The RBI’s annual report of 2017-18 on impact of MSP on the food prices conclusively shows that MSP is a leading factor influencing the output prices of the farm produce in the entire country.
  • The issue of MSP is all the more important for rain-fed agriculturists, being deprived of irrigation, they don’t derive benefit from subsidies on electricity and fertiliser as their use is limited.
  • So, at the moment, the only state support these farmers (primarily cotton and pulse producers) have is that of MSPs.

Conclusion

The debate on whom and how the state should support is an issue that should be addressed independently of the farm acts. Presenting these acts as an alternative to MSPs will not persuade farmers.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Give reforms a chance

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act

Mains level : Paper 3- Agri bills and their implications for the farmers.

Agri-bill passed by the Parliament resulted in the protest from farmers from several states. The bills have also been challenged on the legal footing as well. This article explains how the bills will benefit the farmers and also examines the legal basis used for their passage.

States trying to nullify the agri bills passed by Parliament

  • Parliament has passed three bills on agriculture reform. This has evoked protests, largely in Punjab and Haryana.
  • Taking recourse to Article 254 of the Constitution, the Punjab government has passed its own bills to nullify some provisions of the central acts.
  • Similar action by the Chhattisgarh and Rajasthan governments seems to be on the anvil.

Legal justification for Parliament passing the laws related to agriculture

  • The Constitution has placed agriculture on the state list.
  • Various petitions have also been filed in the Supreme Court claiming that the central laws infringe upon the jurisdiction of state governments.
  • However, it is the Centre which decides and announces support prices for major crops for the entire country.
  • It also decides issues such as bank loan waivers.
  • International agreements and multilateral trade in agricultural products also fall in the Union government’s domain.
  • Agricultural and dairy products, in fact, had a prominent role in India not joining the Regional Comprehensive Economic Partnership (RCEP).
  • Entry 33 in the concurrent list limits the power of states in agriculture, by empowering both governments to legislate on production, trade and supply of a range of agricultural foodstuffs and raw material.

Use of Article 254 to bypass Central law

  • The Punjab bill has set in motion the process of states taking refuge under Article 254 to pass their own pieces of legislation.
  • All state bills that seek to nullify central acts have to be approved by the President after they have received the consent of the governor of the state.

Way forward

  • Reformist chief ministers and astute policy planners should grab this opportunity and encourage investment in private infrastructure to create supply chains and give the farmer the benefit of demand-led prices.
  • They should also take appropriate action to create institutional mechanisms, such as farmer producer organisations or aggregators, to ensure greater farmer participation.

Conclusion

It would be in the interests of the farming community and state governments to give the much-delayed reform measures a fair chance by giving them access to competitive purchases, affording better prices.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Politics and economics of farm bills

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MSP

Mains level : Paper 3- Delay in agri-reforms and politics

Reforms in agriculture have been overdue. But the passage of farm bills by the Parliament has evoked opposition from several stakeholders. However, the passage of bills by the Punjab Assembly is the first from any State Assembly. The article explains how politics dominates agriculture reforms and its implications for economic growth.

States trying the negate the farm bill passed by Parliament

  • By passing its farm bills, Punjab has become the first state to legislate to negate impact of legislation enacted by Parliament last month.
  • Other states like Rajasthan and Chhattisgarh, could follow suit soon.
  • Notwithstanding whether President Ram Nath Kovind gives his assent to the state bills that undermine the central ones, the important issue is to determine how much of this conflict is about economics aimed at helping farmers and how much sheer politics.

Issues with Punjab’s farm bills

  • Punjab’s farm bills prohibit private players from buying wheat and paddy below the MSP even outside the APMC markets.
  • It doesn’t apply to other crops, say maize, cotton, pulses and oilseeds that are under the ambit of the central MSP system.
  • The point is that this pertains only to wheat and paddy.
  • The bill could even have been extended to milk and vegetables by declaring local MSPs for them, but it didn’t do that.
  • Because the state government knows full well that it will create a fiasco in agri-markets, which might boomerang on it politically.
  • Law for wheat and paddy will not help farmers as the Centre already buys more than 95 per cent of Punjab’s wheat and paddy at MSP through the Food Corporation of India (FCI) and state procurement agencies.

Economic roots of politics over MSP: Lessons from the past

  • Demand that MSP be made a legal instrument (rather than indicative) actually exhibit deep distrust of the private sector and markets.
  • In1972 government announced that the wholesale trade in wheat and rice (paddy) will be taken over by the government as traders were being unscrupulous in not giving farmers their due MSP and manipulating prices.
  • The first marketing season of the government takeover of wholesale wheat trade, in 1973-74, saw a major fiasco.
  • Market arrivals dropped, and wheat prices shot up by more than 50 per cent. It was a bitter lesson.

Long overdue reforms in agriculture

  • Economic reforms in 1991 took some time to yield results, but, by the 2000s, India was taking 7 per cent.
  • But even the 1991 economic reforms bypassed agriculture marketing reforms.
  • It was only in 2003, a model act on agri-marketing was circulated to the states.
  • But that model act did not go far enough.
  • From 2004 to 2014 government did not pursue any major agri-marketing reforms.
  • In food government enacted the National Food Security Act in 2013, giving 5 kg wheat or rice to 67 per cent of the population at Rs 2/kg and Rs 3/kg.
  • A high-level committee (HLC) under Shanta Kumar was formed in 2014 to restructure the grain management system.
  • The committee suggested major changes, including cash transfers in the public distribution system, and overhauling the FCI’s operations and free markets to make the system more efficient.
  • But the government could not undertake bold reforms, except some marginal tinkering of labour rules in the FCI.

Conclusion

The COVID-19 crisis opened a window of opportunity to reform the agri-marketing system. The government grabbed it — this is somewhat akin to the crisis of 1991 leading to de-licensing of industry. Patience and professionalism will bring rich rewards in due course, not noisy politics.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Promotion of nutri-cereals(Millet crop) in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Cereals producer states in India

Mains level : Paper 3- Encouraging cereals production in India to deal with the health issue

Promotion of millet crops serves the dual purpose of securing health and supporting farmers. This article explains the strategy adopted by the government to achieve the same.

Millet crops in India

  • The three major millet crops currently growing in India are jowar (sorghum), bajra (pearl millet) and ragi (finger millet).
  • India also grows a rich array of bio-genetically diverse and indigenous varieties of “small millets” like kodo, kutki, chenna and sanwa.
  • Major producers include Rajasthan, Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, Maharashtra, Gujarat and Haryana.

Advantages of millet cultivation

  • Millets are good for the soil, have shorter cultivation cycles and require less cost-intensive cultivation.
  • These unique features make millets suited for and resilient to India’s varied agro-climatic conditions.
  • Millets are not water or input-intensive, making them a sustainable strategy for addressing climate change and building resilient agri-food systems.

Reasons for decline in millet production in India

  • In the 1960s before the Green Revolution, millets were extensively grown and consumed in India.
  • With the Green Revolution, the focus, rightly so, shifted to food security and high-yielding varieties of wheat and rice.
  • An unintended consequence of this policy was the gradual decline in the production of millets.
  • Millets were increasingly seen as “poor person’s food”.
  • The cost incentives provided via MSPs also favoured a handful of staple grains.

Health issues related to refined food

  • Along with declining millet production, India saw a jump in consumer demand for ultra-processed and ready-to-eat products, which are high in sodium, sugar, trans-fats and even some carcinogens.
  • This demand was again met by highly-refined grains.
  • With the intense marketing of processed foods, even the rural population started perceiving mill-processed rice and wheat as more aspirational.
  • This has lead us to the double burden of mothers and children suffering from micronutrient deficiencies and the astounding prevalence of diabetes and obesity.

Strategy for promotion of nutri-cereals

1) Rebranding the cereals as nutri-cereals

  • The first strategy from a consumption and trade point of view was to re-brand coarse cereals/millets as nutri-cereals.
  • As of 2018-19, millet production had been extended to over 112 districts across 14 states.

2) Incentive through hiking MSP

  • Second, the government hiked the MSP of nutri-cereals, which came as a big price incentive for farmers.
  • From 2014-15 to 2020 MSPs for ragi has jumped by 113 per cent, by 72 per cent for bajra and by 71 per cent for jowar.
  • MSPs have been calculated so that the farmer is ensured at least a 50 per cent return on their cost of production.

3) Providing steady markets through inclusion in PDS

  • To provide a steady market for the produce, the Modi government included millets in the public distribution system.

4) Increasing area, production and yield

  • The Ministry of Agriculture & Farmers’ Welfare is running a Rs 600-crore scheme to increase the area, production and yield of nutri-cereals.
  • With a goal to match the cultivation of nutri-cereals with local topography and natural resources, the government is encouraging farmers to align their local cropping patterns to India’s diverse 127 agro-climatic zones.
  • Provision of seed kits and inputs to farmers, building value chains through Farmer Producer Organisations and supporting the marketability of nutri-cereals are some of the key interventions that have been put in place.

5) Intersection of agriculture and nutrition

  • The Ministry of Women and Child Development has been working at the intersection of agriculture and nutrition by -1) setting up nutri-gardens, 2) promoting research on the interlinkages between crop diversity and dietary diversity 3) running a behaviour change campaign to generate consumer demand for nutri-cereals.

Consider the question “What are the reasons for decline in the millet production in India? What are the steps taken by the government to encourage its production?”

Conclusion

As the government sets to achieve its agenda of a malnutrition-free India and doubling of farmers’ incomes, the promotion of the production and consumption of nutri-cereals seems to be a policy shift in the right direction.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Asafoetida (Heeng) cultivation in Himalayan Region

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Cultivation of heeng

Mains level : Paper 3- Heeng cultivation in India

Farmers of the remote Lahaul valley in Himachal Pradesh are taking up cultivation of asafoetida (Heeng) to utilize vast expanses of waste land in the cold desert conditions of the region.

Try this PYQ:
Q.Which one of the following reflects back more sunlight as compared to other three?
(a) Sand desert
(b) Paddy crop land
(c) Land covered with fresh snow
(d) Prairie land

Asafoetida cultivation in India

  • Asafoetida is one of the top condiments and is a high-value spice crop in India.
  • Raw asafoetida is extracted from the fleshy roots of Ferula assafoetida as an oleo-gum resin.
  • Although, there are about 130 species of Ferula found in the world, but only Ferula asafoetidais the economically important species used for the production of asafoetida.

Why cultivate it?

  • Heeng is not cultivated in India.
  • Government data states that India imports about 1,200 tonnes of raw heeng worth Rs 600 crore from Iran, Afghanistan and Uzbekistan.

Regions for its cultivation

  • Asafoetida best grows in dry and cold conditions.
  • The plant can withstand a maximum temperature between 35 and 40 degree, whereas during winters, it can survive in temperatures up to minus 4 degree.
  • During extreme weather, the plant can get dormant.
  • Regions with sandy soil, very little moisture and annual rainfall of not more than 200mm are considered conducive for heeng cultivation in India.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Farm Bills latest step in sequential freeing up of farm sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act

Mains level : Paper 3- Need for agri reforms

The recently passed agri bills seek to expand the choices and opportunities available with the farmers and will help in increasing their income.

Diversified product segment

  • The Minimum Support Price (MSP) evolved as a mechanism to guard farmers against supply and demand shocks in the cereals segment. 
  •  Now, however, farmers and agricultural producers have diversified their product segments, cereals no longer dominate production.
  • In the last decade itself, India has witnessed tremendous change in the GVA composition of the agri-sector.
  • The share of crops has decreased from 65.4% in 2011-12 to 55.3% in 2018-19, projected to further fall to 45.6% in 2024-25.
  •  In the same period, value add of livestock and fishing & aquaculture is steadily increasing, as are the total value outputs of sub-segments like horticulture, milk and meat.
  • With differentiated production strategies that are less reliant on cereals and more on other segments, farmers are accruing better incomes.
  • By diversifying their produce, they are moving away from one-crop risks.

Government schemes and policies

  • Keeping farmers dependent on subsidies and restricted by APMCs, and acts like the Essential Commodities Act wasn’t in the nation’s long-term interests.
  • Recognising this, the government has been making sequential changes in the system.
  • It started with the introduction of the National Agriculture Market (e-NAM) to facilitate online trading of agri-produce.
  • Then PM-KISAN was introduced to provide minimum income support to nine crore marginal farmers, at Rs 6,000 annually.
  • The KISAN credit card with an allotment of a total of Rs 2 lakh crore credit to maintain larger workforces and implements during harvest season is helping farmers plan and organise their harvests better.
  • The Rs 1 lakh crore Agri Infrastructure Fund as part of Atmanirbhar Bharat Abhiyan will help by the creation of agri-infrastructure.

Need for structural changes

  • The government recently passed three agri-bills, these are:-
  • 1) The Farmers’ Produce Trade and Commerce Bill.
  • 2) Farmers Agreement on Price Assurance and Farm Services Bill.
  • 3) Essential Commodities (Amendment) Bill.
  • They enable farmers the freedom to diversify their crops and produce, which reduces mono-crop dependence and increases income avenues.
  • They can also now sell their produce anywhere, to the highest bidder across the country.
  • The farmers are no longer are they required to go to the mandis where they are subject to middlemen and layers of bureaucracy.
  • Contract farming enable farmers them to boost the value-add of their products via contracts and assured procurement by the food processing industries.
  • Retaining the MSP system means the government is underwriting the whole network for certain crops to ensure farmers receive assured income for those crops.

Focusing on the export market

  • The passage of agri bills gives India the long-awaited opportunity to orient its agriculture sector towards export markets.
  • By catering to just the Indian economy, the exposure is hardly $3 trillion ; instead, export-orientation caters to an $82 trillion global economy —a 27x expansion.
  • India’s agri exports in 2018 were at $38.5 billion.
  • India can comfortably triple this by providing infrastructure for grading, sorting, and supply chain distribution.

Conclusion

The farm Bills are liberating farmers at a pivotal juncture, the nation and farmers have a generational opportunity here to break out of a 70-year sectoral stagnation and aim bigger.


Source:-

https://www.financialexpress.com/opinion/agri-reforms-farm-bills-latest-step-in-sequential-freeing-up-of-farm-sector/2107611/

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Issues with the MSP in the age of surplus production

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MSP. SAP

Mains level : Paper 3- Issues with the MSP regime

The author analyses the inefficiencies in the MSP regime while comparing it with the sugar sector and the milk sector. The recent agri-reform in the opinion of the author could help to make the Indian agriculture more efficient.

MSP system Vs. Market-driven system

  • MSP regime was the creation of the era of scarcity in the mid-1960s.
  • Indian agriculture has, since then, turned the corner from scarcity to surplus.
  • In a surplus economy, unless we make agriculture demand-driven, the MSP route can spell financial disaster.
  • This transition is about changing the pricing mix — how much of it should be state-supported and how much market-driven.
  • The new laws are trying to increase the relative role of markets without dismantling the MSP system.
  • Currently, no system is perfect, be it the one based on MSP or that led by the markets, but the MSP system is much more costly and inefficient.
  • The market-led system will be more sustainable provided we can “get the markets right”.

Issues with the MSP

  • A perusal of the MSP dominated system of rice and wheat shows that the stocks with the government are way above the buffer stock norms.
  • The economic cost (to FCI) of procured rice comes to about Rs 37/kg and that of wheat is around Rs 27/kg.
  • No wonder, market prices of rice and wheat are much lower than the economic cost incurred by the FCI.
  • So, grain stocks with the FCI cannot be exported without a subsidy[i.e. export below the cost], which invites WTO’s objections.
  • The FCI’s burden is touching Rs 3 lakh crore which is not reflected in the Central budget as the FCI is asked to borrow more and more.
  • The FCI can reduce costs if it uses policy instruments like “put options”.

2 Lessons: from sugarcane and milk pricing

1) Populism resulted in making sugar industry globally non-competitive

  • In the case of sugarcane, the government announces a “fair and remunerative price” (FRP) [not MSP]to be paid by sugar factories [not paid by the Government].
  • While some states like Uttar Pradesh announces its own “state advised price” (SAP).
  • The sheer populism of SAP has resulted in cane arrears amounting to more than Rs 8,000 crore, with large surpluses of sugar that can’t be exported.
  • This sector has, consequently, become globally non-competitive.
  • Unless sugarcane pricing follows the C Rangarajan Committee’s recommendations the problems of the sugar sector will not go away.

2) Success story of milk sector

  • In the case of milk co-operatives, pricing is done by the company in consultation with milk federations.
  • It is more in the nature of a contract price.
  • It competes with private companies, be it Nestle, Hatsun or Schreiber Dynamix dairies.
  • The milk sector has been growing at a rate two to three times higher than rice, wheat and sugarcane.
  • Today, India is the largest producer of milk — 187 million tonnes annually.

So, how the recent reforms will help the farmers

  •  As a result of changes in farm laws in the next three to five years companies will be encouraged to build efficient supply lines somewhat on the lines of milk.
  • These supply lines — be it with farmers producer organisations (FPOs) or through aggregators — will, of course, be created in states where these companies find the right investment climate.
  • These companies will help raise productivity, similar to what has happened in the poultry sector.
  • Milk and poultry don’t have MSP and farmers do not have to go through the mandi system paying high commissions, market fees and cess.

Conclusion

The pricing system has its limits in raising farmers’ incomes. More sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere, the recent reforms are the steps in this direction.


Back2Basic: What is MSP

  • Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
  • The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
  • The minimum support prices are a guarantee price for their produce from the Government.
  • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
  • In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.

What are ‘put options’

  • Put options give holders of the option the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
  • Put options are available on a wide range of assets, including stocks, indexes, commodities, and currencies.
  • Put option prices are impacted by changes in the price of the underlying asset, the option strike price, time decay, interest rates, and volatility.
  • Put options increase in value as the underlying asset falls in price, as volatility of the underlying asset price increases, and as interest rates decline.
  • They lose value as the underlying asset increases in price, as volatility of the underlying asset price decreases, as interest rates rise, and as the time to expiration nears.

 

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Kasturi Cotton

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Kasturi Cotton Brand

Mains level : Not Much

Now India’s premium Cotton would be known as ‘Kasturi Cotton’ in the world cotton trade.

Kasturi Cotton

  • It is the first-ever Brand and Logo for Indian Cotton on Second World Cotton Day.
  • The Kasturi Cotton brand will represent Whiteness, Brightness, Softness, Purity, Luster, Uniqueness and Indianness.

Do you know?

  1. Cotton is one of the principal commercial crops of India and it provides livelihood to about 6.00 million cotton farmers.
  2. India is the 2nd largest cotton producer and the largest consumer of cotton in the world.
  3. India produces about 6.00 Million tons of cotton every year which is about 23% of the world cotton.
  4. India produces about 51% of the total organic cotton production of the world, which demonstrates India’s effort towards sustainability.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Reform is about giving farmers choice

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Agriculture reforms

The article analyses the regional variation in the problems and issues of the farmer and how it has implications for the reforms in agriculture.

An issue of estimating the number of farmers in India

  • Almost 111 million are registered for the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan).
  • Other than some categories being barred from PM-Kisan benefits, not every eligible farmer has necessarily registered for PM-Kisan.
  • The last Agriculture Census in 2015-16 gave us 146 million holdings.
  • If the agricultural landholding is conditional on being a farmer, apart from a possible further increase since 2015-16, 146 million is possibly the upper bound.
  • Every definition of “farmer” is not contingent on the ownership of land.
  • The Protection of Plant Varieties and Farmers’ Rights Act of 2001 is an example where status as a farmer depends on cultivating land (or supervising cultivation), not owning it.
  • That issue was also flagged by the National Commission on Farmers, such as in the Draft National Policy for Farmers (2006), where “farmers” included agricultural labourers, sharecroppers, tenants and so on.

Issues with making landholding prerequisite for being a farmer

  • The Committee on State Agrarian Relations and the Unfinished Task in Land Reforms (2009) noted that “the Survey and Settlement Operations in the Permanently Settled Areas have not been taken up and where they have been taken up, for instance in Bihar, they tend to never conclude”
  • The last extensive survey and settlement in India was conducted two to three decades prior to Independence.
  • Post-Independence, some states have not undertaken a revisional survey and settlement so far.
  • There have been improvements since 2009 and the Department of Land Resources has a Digital India Land Records Modernisation Programme (DILRMP).
  • Punjab and Haryana rank 16th and 18th respectively in Records and Services Index (LRSI).
  • Gujarat, West Bengal and Tripura score high on this Index (over 90 per cent).

Variation across the States

  • If land records are in this condition, some farmers will conceivably be excluded from the farmer definition.
  • With diverse and heterogenous agriculture, all farmers will not have identical views.
  •  2015-16 Agricultural Census tells us that most operational holdings are in UP, Bihar, Maharashtra and MP, in that order.
  • The highest operated areas are in Rajasthan, Maharashtra, UP and MP, in that order.
  • 86.1 per cent of holdings are small and marginal (less than 2 hectares) and only 0.6 per cent are large (more than 10 hectares).

Conclusion

The face of Indian agriculture has changed and is no longer what it was in the Green Revolution days, centred on Punjab, Haryana and western UP. Farmers, and governments, in Bihar and Kerala, don’t want APMCs, nor do UP, MP, Gujarat and Karnataka. There is no evidence that this has made those farmers worse off.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Lessons from Bihar’s abolition of its APMC system for farmers

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Agri marketing and related issue

The article analyses the results of complete abolition of APMC in Bihar in the context of current protest against the agri bills.

Context

  • Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 has been a source of anger among farmers.
  • By allowing unregulated trading areas beyond APMC mandis, the law seeks to remove intermediaries from agricultural trade and raise price realization for farmers.

Excessive politicization of APMCs

  • APMC’s excessive politicization has resulted in cartelization and price-fixing.
  • For this reason, there have been several attempts at reforming their functioning.
  • Easier licensing norms, the removal of entry and exit barriers and computerization and transparency have been introduced in most APMC markets.
  • However, the Bihar government decided to abolish the APMC system altogether in 2006.

Analysing the impact of abolition of APMC in Bihar

  • It was hoped that abolition would ensure better prices for farmers of the state and attract large sums of private investment.
  • Before their abolition, Bihar had 95 market yards, of which 54 had infrastructure such as covered yards, godowns and administrative buildings, weighbridges, and processing as well as grading units.
  •  With no revenue to maintain it, that infrastructure is now in a dilapidated condition.
  •  A study by the National Council for Applied Economic Research reported increased volatility in grain prices after 2006.
  • Most of the farmers surveyed reported high storage costs at private warehouses.
  • Farmers this year in Bihar received lower price for maize compared to the farmers in states with APMC.

Lessons from Bihar

  • The Bihar experiment has important lessons for future marketing reforms in agriculture.
  • The benefits of these reforms will only accrue to farmers if they are accompanied by private investment in creating the physical infrastructure and institutional mechanisms needed to allow for greater participation of farmers.
  • The record of states on attracting private investment isn’t much better.

Conclusion

By only attempting to shift trade away from APMC to non-APMC areas, without a regulatory framework, the new law is unlikely to ensure better price realization for farmers.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Explained: How remunerative is farming in India?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Debate over profitability of farming in India

The government’s push to reform India’s agriculture sector has divided opinions and triggered a debate about the state of Indian agriculture.

Try this PYQ:

Q.In view of the declining average size of land holdings in India which has made agriculture nonviable for a majority of farmers, should contract farming and land leasing be promoted in agriculture? Critically evaluate the pros and cons. (UPSC 2015)

Features of Indian Agriculture

In the context of this debate, two long-standing characteristics of Indian agriculture are noteworthy:

  1. Indian agriculture is highly unremunerative
  2. It has been heavily regulated by the government and protected from the free play of market forces

Why are the new legislation introduced?

  • According to the government, the new Bills passed by Parliament attempt to make it easier for farmers to sell to and produce for the private sector.
  • The hope is that liberalizing the sector and allowing greater play for market forces will make Indian agriculture more efficient and more remunerative for the farmers.
  • In this context, it is important to understand some of the basics of Indian agriculture.

Basics of Indian agriculture

(1) Workforce engaged

  • At the time of Independence, about 70% of India’s workforce (a little less than 100 million) was employed in the agriculture sector.
  • Even at that time, agriculture and allied activities accounted for around 54% of India’s national income.
  • Over the years, agriculture’s contribution to national output declined sharply. As of 2019-20, it was less than 17% (in gross value added terms).
  • And yet, the proportion of Indians engaged in agriculture has fallen from 70% to just 55% (Chart 1).
  • As the Committee on Doubling Farmers’ Income (2017) observes, “the dependence of the rural workforce on agriculture for employment has not declined in proportion to the falling contribution of agriculture to GDP”.

(2) Land holdings

  • While the number of people dependent on agriculture has been burgeoning over the years, the average size of landholdings has become reduced sharply — even to the extent of being unviable for efficient production.
  • Data shows that 86% of all landholdings in India are small (between 1 and 2 hectares) and marginal (less than 1 hectare — roughly half a football field).
  • The average size among marginal holdings is just 0.37 ha which hardly provides enough income to stay above the poverty line.

(3) Debts

  • The combined result of several such inefficiencies is that most Indian farmers are heavily indebted (Chart 2).
  • The data shows that 40% of the 24 lakh households that operate on landholdings smaller than 0.01 ha are indebted. The average amount is Rs 31,000.
  • A good reason why such a high proportion of farmers is so indebted is that Indian agriculture — for the most part — is unremunerative.
  • Chart 3 provides the monthly income estimates for an agriculture household in four very different states as well as the all-India number.
  • Some of the most populous states like Bihar, West Bengal and Uttar Pradesh have very low levels of income and very high proportions of indebtedness.

(4) Buying & selling

  • Another way of understanding the plight of the farmers relative to the rest of the economy is to look at the Terms of Trade between farmers and non-farmers.
  • Terms of Trade is the ratio between the prices paid by the farmers for their inputs and the prices received by the farmers for their output.
  • As such, 100 is the benchmark. If the ToT is less than 100, it means farmers are worse off.
  • As Chart 4 shows, ToT rapidly improved between 2004-05 and 2010-11 to breach the 100-mark but since then it has worsened for farmers.

(5) MSP

  • A key variable in the debate is the role of minimum support prices. Many protesters fear governments will roll back the system of MSPs.
  • MSPs provide “guaranteed prices” and an “assured market” to farmers, and save them from price fluctuations. This is crucial because most farmers are not adequately informed.
  • But although MSPs are announced for around 23 crops, actual procurement happens for very few crops such as wheat and rice.
  • Moreover, the percentage of procurement varies sharply across states (Chart 5). As a result, actual market prices — what the farmers get — are often below MSPs.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Putting farmers first

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Agri bills related to agri markets and contract farming

The faremers have been protesting against the agri bill. This article explains the rationale behind the bill and how it could help the farmers.

Challenges Indian agriculture face

  • Indian agriculture has been characterised by fragmentation due to small holding sizes, weather dependence, production uncertainties, huge wastage and market unpredictability.
  • This makes agriculture risky and inefficient with respect to both input and output management.

Recent steps to help farmers

  • The  government has taken various steps in this direction, for example-
  • The implementation of the Swaminathan committee’s recommendation regarding fixing MSP at least 50 per cent profits on the cost of production.
  • Increasing the agri budget by more than 11 times in the past 10 years.
  • Establishing e-NAM mandis.
  • An Agriculture Infrastructure Fund of Rs 1 lakh crore under the Atmanirbhar Bharat Package, the scheme for the formation of 10,000 FPOs, etc.

What the agri bills seek to achieve

  • The bills will create an ecosystem where farmers and traders enjoy the freedom of choice of sale and purchase of farming produce.
  • This freedom of choice will help to facilitate remunerative prices to farmers through competitive alternative trading channels.
  • This will promote barrier-free inter-state and intra-state trade and commerce of farming produce outside the physical premises of markets notified under state agricultural produce marketing legislation.
  • The farm bills also lay the ground of a legal framework for fair and transparent farming agreements between farmers and sponsors.
  • This framework will facilitate greater certainty in quality and price, adoption of quality and grading standards, linkage of farming agreements with insurance and credit instruments and also enable the farmer to access modern technology and better inputs.
  • These recommendations have been made by the Swaminathan Committee, which suggested the removal of the mandi tax, creation of a single market and facilitating contract farming.

Safeguard in the bill

  • The bill have several safeguards such as the prohibition of sale, lease or mortgage of farmers’ land and farmers’ land is also protected against any recovery.
  • Farming agreements cannot be entered into, if they are in derogation of the rights of a sharecropper.
  • Farmers will have access to flexible prices subject to a guaranteed price in agreements.
  • The sponsor has to ensure the timely acceptance of delivery and payment of produce to farmers and farmers’ liability is limited to only the advance received and cost of inputs provided by the sponsor.
  • Disputes will be resolved through a Conciliation Board, to be constituted by the sub-divisional magistrate (SDM), failing which an aggrieved party may approach the concerned SDM for the settlement of the dispute.

Consider the question “What are the changes introduced by the two recent bills passed by the government related to agri markets and contract farming how will these changes be helpful to the farmers?”

Conclusion

These farm bills will bring transformative changes in our agricultural sector and reduce wastage, increase efficiency, unlock value for our farmers and increase farmers’ incomes.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Understanding the opposition of farmers to agriculture Bills

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Issues with the agriculture bill

The article analyses the issue of farmers opposition to the three agricultural bills.

Context

  • Farmers have been protesting against the three bills related to agriculture.
  • These three Bills are-
  • 1) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
  • 2) The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020.
  • 3) The Essential Commodities (Amendment) Bill, 2020.

What are the aims of the bills?

  • The Bills aim to do away with government interference in agricultural trade by creating trading areas outside the structure of Agricultural Produce Market Committees (APMCs).
  • One of the bills aims at removing restrictions of private stockholding (under Essential Commodities Act 1955) of agricultural produce.
  • One of the bills deals with the regulation of contract farming.

Issues with the Bills

  • The government has failed to hold any discussion with the various stakeholders including farmers and middlemen.
  • The attempt to pass the Bills without proper consultation adds to the mistrust among various stakeholders including State governments.
  • Farmer organisations see these Bills as an attempt to weaken the APMCs and eventual withdrawal of the Minimum Support Prices (MSP).
  • Farmers in Punjab and Haryana have genuine concern about the continuance of the MSP-based public procurement given the large-scale procurement operations in these States.

Understanding the role of APMC

  • APMCs do play an important role of price discovery essential for agricultural trade and production choices.
  • The middlemen are a part of the larger ecosystem of agricultural trade, with deep links between farmers and traders.
  • The preference for corporate interests at the cost of farmers’ interests and a lack of regulation in these non-APMC mandis are cause for concern.
  • To understand the role of APMC, consider the example of Bihar.
  • After Bihar abolished APMCs in 2006, farmers in Bihar on average received lower prices compared to the MSP for most crops.
  • Despite the shortcomings and regional variations, farmers still see the APMC mandis as essential to ensuring the survival of MSP regime.

Conclusion

The protests by farmers are essentially a reflection of the mistrust between farmers and the stated objective of these reforms.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Agricultural reform bills introduced in Parliament

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : APMC reforms

Farmers in Punjab and Haryana have been protesting against three ordinances promulgated by the Centre back in June this year.  After the Monsoon Session of Parliament began this week, the government has introduced three Bills to replace these ordinances.

Try this PYQ:

The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus:

(a) Transportation cost only

(b) Interest cost only

(c) Procurement incidentals and distribution cost

(d) Procurement incidentals and charges for godowns

What are these ordinances?

The ordinances included:

  • The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020;
  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020; and
  • The Essential Commodities (Amendment) Ordinance, 2020 (It is the Bill replacing the third that has been passed in Lok Sabha)

The cause of discontent

  • While farmers are protesting against all three ordinances, their objections are mostly against the provisions of the first.
  • Their concerns are mainly about sections relating to “trade area”, “trader”, “dispute resolution” and “market fee” in the first ordinance.

What is a ‘trade area’, as mentioned in the Bill?

  • Section 2(m) of The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 defines “trade area” as any area or location, place of production, collection and aggregation.
  • It includes (a) farm gates; (b) factory premises; (c) warehouses; (d) silos; (e) cold storages; or (f) any other structures or places, from where the trade of farmers’ produce may be undertaken in the territory of India.
  • In effect, existing mandis established under APMC Acts have been excluded from the definition of trade area under the new legislation.
  • The government says the creation of an additional trade area outside of mandis will provide farmers with the freedom of choice to conduct trade in their produce.

Why are farmers protesting?

  • The protesters say this provision will confine APMC mandis to their physical boundaries and give a free hand to big corporate buyers.
  • The APMC mandi system has developed very well as every mandi caters to 200-300 villages.
  • But the new ordinance has confined the mandis to their physical boundaries.

What is ‘trader’ and how is it linked to the protests?

  • Section 2(n) of the first ordinance defines a “trader” as “a person who buys farmers’ produce by way of inter-State trade or intra-State trade or a combination thereof.
  • Thus, it includes processor, exporter, wholesaler, miller, and retailer.
  • According to the Ministry of the Agriculture and Farmers’ Welfare, “Any trader with a PAN card can buy the farmers’ produce in the trade area.”
  • In the present mandi system, arhatiyas (commission agents) have to get a licence to trade in a mandi.
  • The protesters say arhatiyas have credibility as their financial status is verified during the licence approval process.

Why does the provision on ‘market fee’ worry protesters?

  • Section 6 states that no market fee or cess or levy, by whatever name called, under any State APMC Act or any other State law, shall be levied in a trade area.
  • Government officials say this provision will reduce the cost of the transaction and will benefit both the farmers and the traders.
  • Under the existing system, such charges in states like Punjab come to around 8.5% — a market fee of 3%, a rural development charge of 3% and the arhatiya’s commission of about 2.5%.
  • By removing the fee on trade, the government is indirectly incentivizing big corporates.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Redefining a farmer

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Defining a farmer

The article analyses the issues of multiple definitions of a farmer. The issues of ownership as a criterion for being a farmer and its impact on tenant farmers in discussed.

Is land ownership right criterion

  • Traditionally, land ownership is a mandatory criterion for availing benefits under various agricultural schemes in India.
  • Laws governing land leasing operate at different levels across India.
  • The Model Agricultural Land Leasing Act, 2016 was introduced to formalise land leasing.
  • However, except a few States, a majority of State governments have not extended the scope of the Act to farmers.
  • According to the 2015-16 agricultural census, about 2.65 million operational holdings are either partially or wholly leased.

How this impact tenants

  • The impact of agrarian distress is felt disproportionately by tenant farmers.
  • The tenant farmer incurs the costs and faces the risks, while the owner receives the rent, subsidies and other support.
  • The lessees do not benefit from loan waivers, moratorium and institutional credit, and are forced to be at the mercy of moneylenders.
  • The distress is reflected in the fact that tenant farmers account for a majority of farmer suicides reported in the NCRB data.

Multiple definitions of farmers

  • There are multiple definitions for a ‘farmer’ in official data published by the Government of India.
  • The population census defines ‘cultivators’ as a person engaged in cultivation of land either ‘owned’ or held in kind or share.
  • The 59th round of the Situation Assessment Survey (SAS) of farmers also stresses on ‘possession of land’ either owned or leased or otherwise possessed for defining ‘farmers’.
  • Delinking of land as the defining criterion for a ‘farmer’ was done in the 70th round of SAS carried out by the NSSO.
  • The 70th Round of NSSO refined the definition of a farmer as one who earns a major part of the income from farming. 

Conclusion

Access to land as a policy instrument in bringing about equitable growth of rural economies needs no further emphasis. However, until the time ‘land to the tiller’ remains just wishful thinking, adopting a broader definition of a ‘farmer’ is a short-term solution to ensure inclusive and sustainable growth.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Making agricultural reforms successful

Note4Students

From UPSC perspective, the following things are important :

Prelims level : e-NAM,PM-KISAN, PM-AASHA

Mains level : Paper 3- Issues with agriculture market reforms.

The article analyses the issues with the reforms in the agricultural marketing policies.

Recent reforms in agricultural marketing

  • The 3 recent reforms in agricultural marketing bring major changes in policy.
  • The removal of restrictions under the Essential Commodities Act (ECA) should help attract private investment in agriculture.
  • The two new ordinances are expected to enable inter-State trade and promote contract farming, thereby providing a large number of options to farmers.

Concerns that need to be addressed

1) Policy credibility problem

  • The first problem is ‘time-inconsistency’ problem or the policy credibility problem.
  • This situation arises when a decision maker’s preferences change over time in such a way that the preferences are inconsistent at different points in time.
  • Because the policy signals are not very clear in the last few years as relates to agricultural marketing, as we will see below.
  • This clarity of clear signal is reflected in rollout of multiple schemes: e-NAM, PM-AASHA, PM-KISAN.
  • In 2016, the electronic national agricultural market (e-NAM) was launched with a lot of fanfare.
  • States needed to amend their respective Agricultural Produce Market Committee (APMC) Acts.
  • Several States could not or did not carry out these amendments and the e-NAM proved to be far less effective than desired.
  • As a result, the government reverted back to public price support by launching an ambitious programme, PM-AASHA, in September 2018.
  • The programme was confined to pulses and oilseeds to limit the fiscal costs.
  • However, the initial budgetary outlay did not match the level of ambition of the programme.
  • In addition to the PM-AASHA programme, two Model Acts were formulated by the Central government in 2017 and 2018 to promote agricultural marketing and contract farming in States.
  • States were required to legislate these Model Acts.
  • However, progress has been tardy and many States have not adopted the Model Acts.
  • This uninspiring performance of PM-AASHA necessitated a more radical and direct approach.
  • Thus evolved the PM-KISAN, a direct cash transfer programme, in the interim Budget of 2019-2020 (February 2019).
  • This programme involved a fixed payment of ₹6,000 per annum to each farm household with a budgetary outlay of ₹75,000 crore.
  • The frequent flip-flops in farm policy — from a market-based e-NAM to a public funded PM-AASHA and now back to market-based measures — may not inspire much confidence in the minds of private investors about the continuance of the present policies.

2) Centre-State and State-State relations

  • Recent Ordinances were passed by the Central Government using the constitutional provisions but the implementation of the same vests with the States.
  • Also, inter-State trade involves movement of goods across the State boundaries.
  • Thus, coordination between the Central and the State governments, and also among various States becomes crucial.
  • Also, the States must have faced several problems in legislating and implementing the earlier Model Acts.
  • Thus, the Centre must engage with the States about these constraints in order to iron out the potential problems in the implementation of the ordinances.

3) Multiple market failures and the resultant inter-linkage of rural markets

  • Absence or failure of credit and insurance markets may lead a farmer to depend upon the local input dealer.
  • This, in turn, may tie him to these intermediaries and constrain his choice of output markets.
  • Similarly, the widespread restrictions on land leasing in many States lead to an inefficient scale of production.
  • Thus, reforms in the output market alone are not sufficient.
  • Reforms in output must be supplemented and complemented with the liberalisation of the lease market and better access to credit and insurance markets.

Consider the question “What are the reform measures taken by the government to deal with the issues in the agricultural marketing by farmers? What are the concerns with such measures?”

Conclusion

In conclusion, consistency in policy, collaborative approach and complementary reforms are necessary for the success of the recent agricultural market reforms.


Back2Basics: Agricultural reform

Read in detail about the 3 reforms form here-

Agri reforms and way forward

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Correcting the agri market

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Agriculture Infrastructure Fund

Mains level : Paper 3- Measures to achieve better price realisation for agri commodities.

The article analyses the highlights the importance of post harvest infrastructure for the better price realisation of agri-commodities. It also suggests the two areal which could help the farmers in this regard.

Purpose of Agriculture Infrastructure Fund

  • Creating post-harvest physical infrastructure is as important as the changes in the legal framework (like the recent ordinances).
  • The recently announced Rs 1 lakh crore Agriculture Infrastructure Fund (AIF) will be used over the next four years.
  • This fund will be used to build post-harvest storage and processing facilities.
  • NABARD will steer this initiative in association with the Ministry of Agriculture and Farmers Welfare, largely anchored at FPOs.
  • The creation of the AIF presumes that there is already large demand for storage facilities and other post harvest infrastructure.

 Reforms in 2 areas which could help farmers get better price realisation

1) Negotiable warehouse receipt

  • More and better storage facilities can help farmers avoid distress sellingimmediately after the harvest.
  • But small farmers cannot hold stocks for long as they have urgent cash needs to meet family expenditures.
  • Therefore, the value of the storage facilities at the FPO level could be enhanced by a negotiable warehouse receipt system.
  • FPOs can give an advance to farmers, say 75-80 per cent of the value of their produce at the current market price.

How NABARD can play an important role

  • Since NABARD is also responsible for the creation of 10,000 more FPOs, it can create a package that will help these outfits realise better prices
  • FPOs will need large working capital to give advances to farmers against their produce as collateral.
  • NABARD can ensure that FPOs get their working capital at interest rates of 4 to 7 per cent.
  • Currently, most FPOs get capital from microfinance institutions at rates ranging from 18-22 per cent per annum which is not economically viable unless the off-season prices are substantially higher than the prices at harvest time.

2)Improving Agri-futures markets

  • A vibrant futures market is a standard way of reducing risks in a market economy.
  • Several countries — be it China or the US — have agri-futures markets that are multiple times the size of those in India.

Way forward

  • 1) NABARD  should devise a compulsory module that trains FPOs to use the negotiable warehouse receipt system and navigate the realm of agri-futures to hedge their market risks.
  • 2) Government agencies dealing in commodity markets — the FCI, NAFED, State Trading Corporation (STC) — should increase their participation in agri-futures.
  • That is how China deepened its agri-futures markets.
  • 3) The banks that give loans to FPOs and traders should also participate in commodity futures as “re-insurers” for the healthy growth of agri-markets.
  • 4)  Government policy has to be more stable and market friendly.
  • In the past, it has been too restrictive and unpredictable.

Consider the question “Creating post-harvest physical infrastructure is as important as the changes in the legal framework. In light of this, highlight the importance of recently announced Agriculture Infrastructure Fund and suggest the measures to increase the price realisation of agri-products by farmers.” 

Conclusion

India needs to not only spatially integrate its agri-markets (one nation, one market) but also integrate them temporally — spot and futures markets have to converge. Only then will Indian farmers realise the best price for their produce and hedge market risks.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Agriculture Infrastructure Fund (AIF) Scheme

Note4Students

From UPSC perspective, the following things are important :

Prelims level : AIF

Mains level : Economic stimulus for Agri sector

PM has launched a new financing scheme under the ₹1 lakh crore AIF.

Note the following things about AIF:

1) It is a Central Sector Scheme

2) Duration of the scheme

3)Target beneficiaries

Agriculture Infrastructure Fund (AIF)

  • It is a Central Sector Scheme meant for setting up storage and processing facilities, which will help farmers, get higher prices for their crops.
  • It will support farmers, PACS, FPOs, Agri-entrepreneurs, etc. in building community farming assets and post-harvest agriculture infrastructure.
  • These assets will enable farmers to get greater value for their produce as they will be able to store and sell at higher prices, reduce wastage and increase processing and value addition.

What exactly is the AIF?

  • The AIF is a medium – long term debt financing facility for investment in viable projects for post-harvest management infrastructure and community farming assets through interest subvention and credit guarantee.
  • The duration of the scheme shall be from FY2020 to FY2029 (10 years).
  • Under the scheme, Rs. 1 Lakh Crore will be provided by banks and financial institutions as loans with interest subvention of 3% per annum.
  • It will provide credit guarantee coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for loans up to Rs. 2 Crore.

Target beneficiaries

The beneficiaries will include farmers:

  • PACS, Marketing Cooperative Societies, FPOs, SHGs, Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Agri-entrepreneurs, Startups, and Central/State agency or Local Body sponsored Public-Private Partnership Projects

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] First “Kisan Rail” flagged off

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Kisan Rail

Mains level : Doubling farmers income by 2022

Indian Railways introduced the first “Kisan Rail” from Devlali (Maharashtra) to Danapur (Bihar).

Try this question for mains:

Q.Discuss the role of agricultural marketing and logistics for doubling farmer’s income by 2022.

Kisan Rail

  • From Maharashtra’s Devlali to Bihar’s Danapur, the train will cover the journey of 1,519 kilometres in over 31 hours.
  • It will take stops at Nasik Road, Manmad, Jalgaon, Bhusaval, Burhanpur, Khandwa, Itarsi, Jabalpur, Satna, Katni, Manikpur, Prayagraj Chheoki, Pt. Deendayal Upadhyay Nagar and Buxar.
  • This train will help in bringing perishable agricultural products like vegetables, fruits to the market in a short period of time.
  • The train with frozen containers is expected to build a seamless national cold supply chain for perishables, inclusive of fish, meat and milk.
  • It is a step towards realizing the goal of doubling farmers’ incomes by 2022.

Other facts

  • Indian Railways have earlier run single commodity special trains like Banana Specials etc.
  • But this will be the first-ever multi-commodity trains and will carry fruits like Pomegranate, Banana, Grapes etc and vegetables like Capsicum, Cauliflower, Drumsticks, Cabbage, Onion, Chilies etc.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Private: Agriculture exports in India

The High-Level Group on Agricultural Exports set up by the Fifteenth Finance Commission has submitted its report to the Commission.

Why focus on Agri-exports?

  • India’s agricultural export has the potential to grow from USD 40 billion to USD 70 billion in a few years.
  • The estimated investment in agricultural export could be in the tune to USD 8-10 billion across inputs, infrastructure, and processing and demand enablers.
  • Additional exports are likely to create an estimated 7-10 million jobs.
  • It will lead to higher farm productivity and farmer income.
  • The government has committed to double the farmers’ income by 2022 and promoting agricultural exports will give an impetus to achieving the goal
  • Low share in high-value products: The share of India’s high-value and value-added agriculture produce in its agriculture export basket is less than 15 percent compared to 25 percent in the US and 49 percent in China.

Impediments in growth of agriculture export:

Domestic Reasons:

1.Flawed Policies:

  • A major reason for decline in export is frequent change in government policy for products like rice, pulses, wheat and sugar. Sometimes, export has been banned and at other times, duties have been raised or lowered.
  • Exports of many agricultural commodities, sugar for instance, are regulated by arbitrary quota fixation in India. 
  • Such executive actions make India an unreliable supplier. That in turn leads to low net realisation from export.

2.Role of MSP:

  • Instead of global demand and supply factors, Indian farmers are guided by minimum support and procurement prices fixed arbitrarily by the government.
  • Keeping domestic prices of farm goods artificially high disincentives export. 
  • Minimum support and procurement prices also over-incentivise cultivation of cereals vis-à-vis commercial and horticultural crops. This affects India’s ability to capture export markets.

3.Poor Infrastructure and Quality Issues:

  • Like any other merchandise export, India’s farm produce suffers from poor customs and port infrastructure, and high logistics cost that cut into the exporters’ margins.
  • Then, there are quality related issues with instances of pesticides often being found above permissible limits, leading to rejection of export consignments.

4.GM crops

  1. The cultivation of genetically modified (GM) crops is quite common in the US and Latin American countries like Brazil. India’s hesitation on whether to allow cultivation of GM crops or not affects its ability to capture global market share.

International Reasons:

  1. Commodity Prices and Low Global Demands: Another primary reason for decline in export of agricultural commodities are low commodity prices in the international market, which has made our exports uncompetitive
  2.  Increased shale gas production :in the US has led to lower demand for crude oil. Low priced crude in turn has reduced the demand for biofuel, especially ethanol, thereby reducing the demand for soya, corn, mustard, sunflower, palm, sugarcane and sugar beet.
  3. Non Tariff Barriers and Prohibitive Import Duties: India’s farm exports also face prohibitive import duties in overseas markets. For example, dairy products attract peak import duties of 511 per cent in the EU, 93 per cent in the US, and 692 per cent in Japan. 
  4. India’s farm exports also have to face a series of non-tariff barriers in top consuming markets – for example, a ban on import of mangoes by EU that was lifted in January 2015.
  5. Subsidies of foreign nations: India’s farm exports also have to compete with highly subsidised farm products supplied by other countries.

Highlights of the report

(A) The HLEG has made its recommendations, major among which are:

  • Focus on 22 crop value chains – demand-driven approach.
  • Solve Value Chain Clusters (VCC) holistically with a focus on value addition.
  • Create a State-led export plan with participation from stakeholders.
  • Private Sector should play an anchor role.
  • The centre should be an enabler.
  • The robust institutional mechanism to fund and support implementation.

(B) State-led Agri Exports

The Group has recommended a State-led Export Plan –  a business plan for a crop value chain cluster. It will lay out the opportunity, initiatives and investment required to meet the desired value chain export aspiration.

The Group has also said that for its success, the following factors needed to be considered:-

  • Plans should be collaboratively prepared with private sector players and Commodity Boards.
  • Leveraging of state plan guide and value chain deep dives.
  • The private sector should play an anchor role in driving outcomes and execution.
  • The centre should enable state-led plans.
  • Institutional governance should be promoted across the state and centre.
  • Funding through the convergence of existing schemes, Finance Commission allocation and private sector investment.

B2BASICS

Agriculture Export Policy 2018

The Union Cabinet has approved the Agriculture Export Policy, 2018.

Elements of Agriculture Export Policy

The Agriculture Export Policy encompasses Strategic and Operational elements. These are:

Strategic Operational
  • Policy measures
  • Infrastructure and logistics support
  • Holistic approach to boost exports
  • Greater involvement of State Governments in agri exports
  • Focus on Clusters
  • Promoting value-added exports
  • Marketing and promotion of “Brand India
  • Attract private investments into production and processing
  • Establishment of a strong quality regimen
  • Research & Development
  • Miscellaneous

What are the key recommendations?

Infrastructure – The policy stresses on improving the infrastructure, and storage and exit point logistics.

  • It suggested a comprehensive need-gap analysis of existing export-oriented infrastructure across the value chain for this.

R&D – The policy emphasized promoting R&D activities for new product development for the upcoming markets.

  • Increased focus on R&D, new varieties and state of the art lab for effective accreditation and monitoring are called for.
  • This will be part of the efforts towards establishing a strong quality regime.
  • Besides, the policy stressed the need to ensure greater interaction between the various research organizations and industry bodies.

Exports – The policy aims to boost high value and value-added agricultural exports, focusing on perishables.

  • Improving the institutional mechanism for tackling market access barriers is suggested as a measure.
  • Dealing with sanitary and phytosanitary issues are also the priorities.
  • Processed agricultural products and all kinds of organic products will not be brought under any kind of export restriction.

APMC – Monopoly of the Agricultural Produce Market Committee (APMC) is a long existing concern.

  • It prevents private players from setting up markets and investing in market infrastructure.
  • APMC across states have not been able to achieve farmers’ welfare envisaged in these acts.
  • The policy hinted at continuing the efforts with state governments to remove perishables from their APMC Acts.
  • It also suggested better coordination between central ministries that are now working at cross-purposes.

Mandi – State governments would also be urged to standardize/ rationalize mandi taxes for largely exported agricultural products.

  • Simplification or uniformity of mandi/agricultural fee across states will create a transparent supply chain.
  • This will empower the farmers, providing wider access to markets and enabling free trade across the country.

Products – It is proposed that the agricultural export policy must focus on the promotion of value-added, indigenous and tribal products.

  • Development of organic export zones/organic Food park with an integrated approach is suggested to help promote shipments.

Agency – Global bodies like US FDA and the European Food Safety Authority are empowered to frame, regulate and implement policies related to both agricultural production and trade.

  • The draft policy considered working towards bringing in similar agencies in India.

Besides the policy made a case for promoting contract farming as it would help in attracting investments.

  • Some of the other notable recommendations include:
  1. promotion of region-specific clusters for lucrative crops
  2. coordinated branding efforts
  3. a shared database for exporters on market intelligence and export rejects
  4. quality assurance at the farm
  5. wider adoption of land leases

B2BASICS

 

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

What is Green-Ag Project?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Green-Ag Project

Mains level : Sustainable agriculture and its significance

The Union government has launched the Green-Ag Project in Mizoram, to reduce emissions from agriculture and ensure sustainable agricultural practices.

Note the following things about Green-Ag Project:

1)Core objective

2)Implementing agencies

3)Regions of Implementation

Green-Ag Project

  • The Green-Ag project is designed to achieve multiple global environmental benefits in at least 1.8 million hectares (ha) of land in five landscapes, with mixed land-use systems.
  • It aims to bring at least 104,070 ha of farms under sustainable land and water management.
  • The project will also ensure 49 million Carbon dioxide equivalent (CO2eq) sequestered or reduced through sustainable land use and agricultural practices.

Implementing agencies

  • The project is funded by the Global Environment Facility, while the Department of Agriculture, Cooperation, and Farmers’ Welfare (DAC&FW) is the national executing agency.
  • Other key players involved in its implementation are the Food and Agriculture Organization (FAO) and the Environment Ministry (MoEF&CC).

Regions of implementation

The project has been launched in high-conservation-value landscapes of five States namely

  • Madhya Pradesh: Chambal Landscape
  • Mizoram: Dampa Landscape
  • Odisha: Similipal Landscape
  • Rajasthan: Desert National Park Landscape
  • Uttarakhand: Corbett-Rajaji Landscape

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

APMC Act is not the main problem

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act

Mains level : Paper 3- Issues with the APMC Act

The APMC Act, which is often blamed for the woes of the farmers is not the main problem. This article argues that the root of the problems of Indian agriculture lies somewhere else.

Agriculture post-1991

  • The priority post-1991 has been given to industry as well as services.
  • Middle-class consumers have been favoured by at the expense of farmers.
  • This neglect of agriculture resulted in an equally unprecedented gap between the standard of living in the rural and urban parts of the country.
  • As a result, the urban/rural ratio, in terms of monthly per capita expenditures, has jumped from 1.84 to 2.42 between 2012 and 2018.
  • This means that an average urban-dweller today can consume almost 2.5 times more than an average person in a village.

Reforms by the government

  • Government has decided to liberalise India’s agriculture by amending the APMC Act and the Essential Commodities Act.
  • Contract farming will also be introduced in such a way that the buyer can assure a price to the farmer at the time of sowing.

 APMC Act in the context of Shanta Kumar Committee report

  • The argument against the APMC Act is that it does not allow the free market to function due to government intervention.
  •  It denies farmers the opportunity to determine the prices of crops in the marketplace.
  • In theory, this is a valid argument.
  • But, Shanta Kumar Committee observed in 2015 that only 6 per cent of farmers get the Minimum Support Price (MSP).
  • This is because of barriers to access for farmers as only 22 crops are procured under MSP.
  • Infrastructure is also inadequate as there are only an estimated 7,000 APMC mandis across India.
  • Procurement depends on the stocks required by the state.

Why the APMC Act is not the problem

1) Farm Pricing is the problem

  • The living costs of farmers was considered while determining agricultural pricing by the Agricultural Prices Commission (APC).
  • CACP that replaced the APC in 1985 added a 10 per cent mark-up over the MSP to account for entrepreneurial costs.
  • Such practices have been gradually eroded post-1991.
  • The problem, therefore, is not state intervention but the way the government deals with agriculture.

2) APMC Act helped India build up food stocks

  • India managed to weather the 2008 global food crisis only because it had enough food stocks as Indian agriculture was not linked to the international futures market.
  • This was possible due to the procurement done through the APMC Act.

3) APMC Act reformed already by States

  • Since agriculture is a state subject, the Act has been modified in 17 states.
  •  On the contrary, the condition of peasants has often been affected when the APMC Act has been diluted.
  • Bihar is a case in point.
  • The APMC Act was revoked in 2006 with the same rationale that further deregulation will attract private investment in infrastructure.
  • Not only has that not materialised, but the existing APMC market infrastructure was also dismantled.

Reforms that Indian Agriculture needs

1) Subsidy Reforms

  • Indian Agriculture is still too heavily subsidised in favour of the big players.
  • In the Union Budget 2019-20, the allocation for the Ministry of Agriculture was Rs 1,30,485 crore and the fertiliser subsidy alone was estimated at Rs 79,996 crore.
  • But these subsidies are concentrated on a few crops.
  • Agriculture economist Bruno Dorin has shown, only three crops receive more than 60 per cent of the so-called “non-product-specific” support to agriculture — rice, wheat and sugarcane.
  • This has led to environmental degradation like the depletion of groundwater levels and monocultures which are a threat to biodiversity.
  • It has also led to the industrialisation of agriculture, that results in the strengthening of a handful of multinational companies, which supply chemical inputs.
  • Liberalisation would only strengthen the role of large companies — including those in the agri-food sector.

2) Agriculture needs to be ecologically viable

  • Structurally, farming needs to be made economically and ecologically viable in India.
  • State intervention for better pricing, investments in water harvesting and an agroecological transition could ensure a more resilient system to weather shocks like the current one.
  • The government could draw inspiration from the Andhra Pradesh Community Managed Farming model.
  • It promotes agroecological principles with the use of locally-produced, ecologically-sustainable inputs focusing on soil health..
  • Since the agro-ecological system of farming is more biodiverse in nature, it will make the system more resilient overall.
  • It will provide a safety net for farmers in case of crop damage due to various factors such as climate change or droughts.

Consider the question “Though the APMC Act has been blamed for the farmers’ issues, it has historically been part of the solution. Critically analyse.”

Conclusion

By investing again in agriculture and following, at last, the recommendations of the M S Swaminathan Committee, the Government of India would also help bridge the drastic urban-rural divide.

To read more about the issue:

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

Original article:

https://indianexpress.com/article/opinion/columns/rural-india-coronavirus-farm-trade-ordinance-apmc-act-6515414/

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Exporting agri-inputs

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Urea import and export by India

Mains level : Paper 3- Self reliance in agri-inputs

Some changes could make India exporter of agri-inputs. The article examines bottlenecks that holds India back and suggests the policy changes in key agri-inputs-seeds, fertilisers and machinery.

Context

In the following 3 key agri-inputs India has the untapped potential. What is needed is policy changes.

1) Seeds

  • India can emerge as an important seed producer and a large exporter of seeds to many developing countries in South and South-east Asia as well as Africa.
  • The country can produce very competitively-priced seeds for hybrid rice, hybrid corn, hybrid Bt HT cotton, and several vegetables including tomato, potato and okra.
  • For this to happen, we have to set our regulatory system right.
  • Let’s use the case of cotton.
  • India’s decision in March 2002 to allow Bt cotton made India the largest producer of cotton in the world and the second-largest exporter of cotton by 2013-14.
  • But due to policy changes since 2014-15 and issues such as trait fees companies stopped the introduction of new generation of seeds
  • Now there is an “illegal” spread of Bt HT cotton in Maharashtra.
  • This is partly because our regulatory system is complex.
  • And more so because the present government has ideological blinkers against modern science.
  • This is the biggest bottleneck holding India back from becoming the seed capital of the developing world.

2) Fertilisers

  • India has been a net importer of fertiliser nutrients (NPK) for almost two decades.
  • In 2019-20, India imported fertilisers worth $6.7 billion, topping the list is urea $2.9 billion.
  • We are totally dependent on imports and likely to remain so in case of MOP and in the case of DAP.
  •  In the case of urea, India wants to be atmanirbhar by opening up five new urea plants in the public sector with a total capacity of 6.35 MMT.
  • Almost 70 per cent of the gas being used in urea plants is imported at a price much higher than the price of domestic gas.
  • The cost is going to be more than $400/tonne when the international price generally hovers between $250-300/tonne.
  • The government should allow existing private sector urea plants to expand and produce at a much lower cost.
  • The best way to achieve self-reliance in fertilisers is to change the system of fertiliser subsidies.

Suggestion on changes in fertiliser subsidies

  • 1) Deposit equivalent cash directly into farmers’ accounts, calculated on a per hectare basis.
  • 2) Free up fertiliser prices.
  • 3) Allow the private sector plants to compete and expand urea production in a cost-competitive manner.

3) Farm machinery

  • Before the Green Revolution, India produced only 880 tractor units.
  • It increased to about 9,00,000 units in 2018-19.
  • So, India is the largest tractor manufacturer in the world.
  • India also exported almost 92,000 tractors, largely to African and ASEAN countries.
  • Though Green Revolution gave tractor production a push, the real break-through came after de-licensing in 1991.
  • The new class of entrepreneurs and start-ups are coming up with special apps for “Uberisation of tractor services”.
  • In an economy of small landholders, owning a tractor is a high-cost proposition as it is not fully utilised.
  • This needs to be made more efficient by creating a market for tractor services.

Consider the question “Despite having the potential to transform itself into the exporter of agri-inputs, India ends up being the importer of some of them. In light of this examine India’s potential to become the exporter of agri-input products and suggest the measures to achieve this.”

Conclusion

The private sector is our strength. The only thing the government has to do is to unshackle them from the chains of controls and webs of unnecessary regulations. They will make an Atmanirbhar Bharat.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Central Sector Scheme: Agriculture Infrastructure Fund

Note4Students

From UPSC perspective, the following things are important :

Prelims level : CSS-AIF

Mains level : AIF

The Union Cabinet has given its approval to a new pan India Central Sector Scheme-Agriculture Infrastructure Fund (CSS-AIF).

Try this question from CSP 2018:

Q.Increase in absolute and per capita real GNP does not connote a higher level of economic development, if:

(a) Industrial output fails to keep pace with agriculture output.

(b) Agriculture output fails to keep pace with industrial output.

(c) Poverty and unemployment increase.

(d) Imports grow faster than exports.

Agriculture Infrastructure Fund

  • AIF aims to provide a medium – long term debt financing facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through interest subvention and financial support.
  • Under the scheme, Rs. One Lakh Crore will be provided by banks and financial institutions as loans.
  • The beneficiaries will include Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, Farmer Producers Organizations (FPOs), SHGs, Farmers etc among others.
  • The moratorium for repayment under this financing facility may vary subject to a minimum of 6 months and maximum of 2 years.

Management of AIF

  • Agri Infra fund will be managed and monitored through an online Management Information System (MIS) platform.
  • The National, State and District level Monitoring Committees will be set up to ensure real-time monitoring and effective feedback.
  • The duration of the Scheme shall be from FY2020 to FY2029 (10 years).

Benefits of the scheme

  • The Project by way of facilitating formal credit to farm and farm processing-based activities is expected to create numerous job opportunities in rural areas.
  • It will enable all the qualified entities to apply for a loan under the fund.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Aatamnirbhar in Agriculture

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Export of India's agricultural products

Mains level : Paper 3- Increasing India's net agri-exports

India has been the net exporter of agricultural commodities since 1991, however, there is scope for increasing its net export. This article suggests the strategy to achieve this.

Foreign exchange reserve: then and now in terms of grains

  • In the mid-1960s the country had about $400 million.
  • If India had spent all its foreign currency reserves just on wheat imports, it could have imported about seven million tonnes (mt) of wheat.
  • Today, India has foreign exchange reserves of more than $500 billion.
  • Even if the country has to buy 20 mt of wheat at a landed cost of $250/tonne, it will spend just $5 billion it is just one per cent of its foreign exchange reserves.
  • In that sense, the biggest reform in the last three decades that has led to “aatma nirbharta” in food is the correction of the exchange rate.
  • Another factor is coupling and the gradual integration of India with the world economy.
  • This has helped India increase its foreign exchange reserves from $1.1 billion in 1991 to more than $500 billion today.

India: Net exporter of agricultural products

  • India has been the net exporter of agricultural products ever since the economic reforms began in 1991.
  • The golden year of agri-trade was 2013-14 when net agricultural trade surplus was $24.7 billion.
  • In 2019-20, agri-exports were just $36 billion, and the net agri-trade surplus at $11.2 billion.
  • With this dull performance doubling agri-exports by 2022 looks almost impossible.

Let’s look at what India exports

  • Marine products with $6.7 billion exports top the list.
  • The second is rice at $6.4 billion of which basmati is at $4.6 billion and common rice at $2.0 billion.
  • Next is spices at $3.6 billion.
  • Other items are buffalo meat at $3.2 billion, sugar at $2.0 billion, tea and coffee at $1.5 billion, fresh fruits and vegetables at $1.4 billion, and cotton at $1 billion.

Strategy to increase export

  • If one chalks out a strategy we would need to keep in mind the principle of “comparative advantage”.
  • That means exporting more where we have a competitive edge, and importing where we lack competitiveness.
  • Together power and fertiliser subsidies account for about 10-15 per cent of the value of rice and sugar produced on a per hectare basis.
  • So, we should offer similar incentives for exports of high-value agri-produce like fruits and vegetables, spices, tea and coffee, or even cotton, as we do for rice and sugar?

Decreasing the edible oil imports

  • On the agri-imports front, the biggest item is edible oils — worth about $10 billion i.e. more than 15 MT.
  • India needs to decrease imports through augmenting productivity and increasing the recovery ratio of oil from oilseeds and in case of palm oil, from fresh fruit bunches.
  • The maximum potential of increasing production lies in oil palm.
  • This is the only plant that can give about four tonnes of oil on a per hectare basis.
  • India has about 2 million hectares that are suitable for oil palm cultivation — this can yield 8 mt of palm oil.
  • But it needs a long term vision and strategy.

Issue of subsidy to rice and sugar

  • Rice and sugar cultivation are subsidised through free power and highly subsidised fertilisers, especially urea.
  • It is leading to the virtual export of water because of their high water requirements.
  • One kg of rice requires 3,500-5,000 litres of water for irrigation, and one kg of sugar consumes about 2,000 litres of water.
  • This leads to increased pressure on scarce water and highly inefficient use of fertilisers.
  • It may be worth noting that almost 75 per cent of the nitrogen in urea is not absorbed by plants.
  • It either evaporates into the environment or leaches into groundwater making it unfit for drinking.

Consider the question “While India has been the net exporter of agricultural products ever since the economic reforms of 1991, it is far from realising its potential to become the leading agri-produce exporter. In light of this, suggest the strategy that India should follow to increase India’s net agri-exports.”

Conclusion

The government must focus on augmenting export and decrease import dependence in agricultural products which will further its goal of aatmanirbharta and doubling the farmers’ income.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Agri reforms and way forward

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Buffer stock limits

Mains level : Paper 3-PDS, food subsidy

At a time when the economy is going through the crisis, anything that could provide revenue to the government will be a real godsend. This article suggests two such areas to tap into. It also examines the effects of recently issued 3 ordinances related to agriculture.

Rs. 1,50,000 crore: Value of excessive grain stock

  • There is one area which the government can tap to raise more than Rs 1,00,000 crore.
  • As on June 1, FCI had unprecedented grain stocks of 97 million metric tonnes (MMT) in the Central Pool (see Figure).
  • Even on July 1, when the procurement of rabi ends, FCI is likely to have grain stocks of about 91-92 MMT.
  • This will be against a buffer stock norm of 41.12 MMT that are required for the Public Distribution system (PDS), and some strategic reserves.
  • So, compared to this norm, on July 1, FCI will have “excess stocks” of at least 50 MMT.
  • Even if one takes a conservative and lower ballpark figure of Rs 30,000/tonne  as the combined economic cost of rice and wheat, the value of this “excessive stock”, beyond the buffer norm, is Rs 1,50,000 crore.
  • This is unproductive capital locked-up in the Central pool of FCI.
  • Unlock this by liquidating “excess stocks” through open market operations.
  • It will not recover its full economic cost, as they are much higher than the prevailing market prices, but by not liquidating it.
  • But FCI will keep incurring unnecessary interest costs of about Rs 8,000-10,000 crore per annum.
  • This is simply not a good food policy.

How will amendment to ECA 1955 will help

  •  Amendment of the Essential Commodities Act, via the ordinance route, can instil confidence in the private sector for building large scale storage.
  • Now, stocking limits will not be imposed on the private sector, except under exceptional circumstances.
  • The government, however, delete the clause of “extraordinary price rise”.
  • Removing it will lead to private sector building large and modern storage facilities (silos).
  • It will propel investments in building more efficient food supply lines.
  • The only condition could be to register large storage facilities under the Warehousing Development and Regulatory Authority (WDRA) to know how much stock is there with the private sector, and where.

How will amendment to APMC Act will help

  • The ordinance on APMC creates multiple channels for farmers to sell their produce outside the APMC mandi system.
  • It also helps towards an unrestricted all India market for agri-produce.
  • Of course, it will be resisted by many states that are taking undue advantage of the APMC mandis’ virtual monopoly power.
  • But if the central ordinance is implemented in its true spirit, it will be a game-changer.

How will the ordinance on contract farming will help

  • It aims to encourage contract farming.
  • The basic idea behind this is that farmers’ sowing decisions should be made in view of the expected prices of those crops at the time of harvest.
  • It is forward looking and more aligned to the likely demand and supply situation.
  • The current practice, where farmers’ sowing decisions are more influenced by last year’s price, often leads to the problem of boom and bust.
  • Although honouring an assured price remains a challenge when actual market conditions differ widely at the time of the harvest.

Relook at food subsidy is needed

  •  In the Union budget of 2020-21, a sum of Rs 1,15,570 crore has been provisioned for food subsidy.
  • This number is highly misleading as FCI has been asked to borrow from the National Small Savings Fund (NSSF).
  • As on March 31, 2020, borrowings from the NSSF were Rs 2,54,600 crore, on which FCI pays an interest rate of 8.4 to 8.8 per cent per annum.
  • So, the real food subsidy bill for 2020-21 amounts to Rs 3,70,170 crore.
  • The Economic Survey has suggested- 1) reducing the coverage under PDS; 2) linking issue price to at least half of the procurement price; 3) move gradually towards cash transfers.
  • These steps will save a minimum of Rs 50,000 crore annually.

Consider the question “There was a mention of reforms related to agri-sector in the recently announced stimulus package. Examine the issues with segments of agri-sector which necessitated these reforms.”

Conclusion

Liquidating the excess grain stock and rationalising the PDS could provide the government with much needed resources at a time when it needs it the most. Also, reforms in the related to agriculture could remove the stumbling blocks in the way towards the prosperity of farmers.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Issues with the ordinances on agriculture

Note4Students

From UPSC perspective, the following things are important :

Prelims level : ECA, APMC Act

Mains level : Paper 3- Agri-marketing and issues with it

Following the announcement of reforms in the agri-sector, the government issued ordinances to make good on its promise. These ordinances deal with- ECA-1955, APMC Act and Contract farming. The author in this article examines whether these ordinances deliver on the promises made or not.

1) Ordinance for amendment of APMC Act

  • ‘Farming Produce Trade and Commerce (Promotion & Facilitation) Ordinance 2020.’ seek to address the problems farmers face in selling their produce.
  • Due to the unionisation of middlemen (arhatias) and their financial clout, politicians in the states have been reluctant to amend agriculture marketing laws which are exploitative and don’t allow farmers to receive a fair price.
  • Rather than coax the states financially to correct the markets, an unregulated marketplace has been created where 15 crore farmers will be exposed to the skulduggery of traders.
  • Imagine the mayhem in stock markets if ROC and SEBI were similarly made redundant.

Issues and benefits

  • Rather than replicate Punjab’s successful agriculture mandi model, now states will lose vital revenue to even upgrade and repair rural infrastructure.
  • The ordinance may be challenged by the states for its constitutional overreach.
  •  But, on the flip side, over time, the largest informal sector in the country will begin to get formalised and new business models will develop.
  • A different breed of aggregators will create the much-needed competition to the existing monopoly of local traders.
  • Additionally, henceforth, when farmers sell agricultural produce outside of APMC market yards, they cannot legally be charged commission on the sale of farm produce.
  • To survive, the APMCs across the nation will have to radically standardise and rationalise their mandi fee structure and limit the commission charged by traders on sale of farmers’ produce.

2) ECA 1955: Not enough has been done

  • Here, the amendment was supposed to allay the genuine fears of traders emitting from the bureaucracy’s draconian powers to arbitrarily evoke stockholding limits etc.
  • Rather than forego its own powers for the larger good, the amendment’s fine print makes it ambiguous and leaves space for whimsical interpretations as before.
  • The trader’s uncertainty is compounded by the arbitrary import-export policy decisions which dilute the purpose of the amendment itself.

3) Ordinance on Contract farming

  •  “The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020” tries to placate the fears of both the farmer and the contractor when they sign an agreement.
  • For the farmer, the legal recourse is never a practical choice as the persuasive powers of the aggregators’ deep pockets cast a dark shadow over the redressal process.
  • Likewise, the tediously stretched legal proceedings are dissuasion enough to either not seek redressal or settle for unfavourable terms.
  • That produce derived from contract farming operations will not be subject to any obstructionist laws is a very good step.
  • Farmer-producer organisations and new aggregators will get a boost with these laws, and become harbingers of prosperity in some small corners of the countryside.
  • There are green shoots in the ordinances, but the downside dwarfs the upside.

So, what are the implications of these 3 reforms?

  • The union of the three ordinances appears to be a precursor to implementing the Shanta Kumar Committee recommendations to dilute and dismantle FCI, MSP & PDS which will push farmers from the frying into the fire.
  • It may also be interpreted to mean that now the sugar industry needn’t pay farmers the central government FRP or the state government SAP price for sugarcane.

Consider the question ” There was a mention of reforms related to agri-sector in the recently announced stimulus package. Examine the issues with segments of agri-sector which necessitated these reforms.”

Conclusion

The reforms in these 3 areas if carried out earnestly could go a long way in helping the farmers get out of the misery and help achieve the goal of doubling of farmers income in the set time frame.


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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Getting closer to doubling income of Farmers

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PM-KISAN

Mains level : Paper 3- Agri-marketing reforms

agriculture plays an important role in decreasing rural poverty in developing countries. Improved irrigation methods, seeds, and fertilizers have led to increased agricultural production in rural areas. 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

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Power Subsidies in Agriculture and Related issues

Note4Students

From UPSC perspective, the following things are important :

Prelims level : ATC losses.

Mains level : Paper 3- Subsidy on electricity and problem with it

tSometimes solutions that are meant to solve one problem results in the creation of another problem. Nowhere is this more evident than in the subsidies given on urea and electricity to the farmers. This article deals with the perils of the subsidy on electricity bills of farmers. However, there is an equally substantive argument in favour of the subsidies as well. So, what is the way out? Read to know…

Replacing free power supply scheme with DBT

  • The Centre has prescribed that the free power supply scheme should be replaced with the direct benefits transfer (DBT) as a condition to allow States to increase their borrowing limit.
  • It is not the first time that the Union government has recommended DBT with regard to electricity.
  • But what is new is setting the time frame for implementing it.
  • By December this year, the DBT should be introduced at least in one district of a State and from the next financial year, a full roll-out should be made.

Resistance from the states

  • Tamil Nadu, which was the first State to introduce free power in September 1984, is strongly resisting the Centre’s stipulation.
  • Tamil Nadu Chief Minister has taken a categorical stand against the proposal.
  • Though Chief Ministers of Andhra Pradesh, Telangana and Punjab, where free power scheme is in vogue, are yet to express their views.
  • But it is not difficult to predict their response.
  • After all, Punjab Chief Minister who had abolished the scheme during his first innings is now a strong votary of the scheme.

Let’s get the overview of the power subsidy bill

  • In the last 15 years, Maharashtra has been the only State that scrapped the scheme within a year of introducing it.
  • Karnataka, which has been implementing it since 2008, may become the first southern State to have DBT in power supply if the hint dropped by Chief Minister in early March is any indication.
  • The power subsidy bills in the four southern States and Punjab are at least ₹33,000 crore, an amount the State governments will struggle to meet due to resource crunch in the light of the COVID-19 pandemic.

But, why the Central government want to scrap the scheme?

It is because of the following issues-

1. Wastage of water and electricity

  • The financial stress apart, the universal application of the scheme has had deleterious consequences.
  • Primarily, the scheme has led to widespread wastage of water and electricity.
  • It is inherently against incentivising even a conscientious farmer to conserve the two precious resources.
  • It may be pertinent to point out that India is the largest user of groundwater at 251 billion cubic meters, exceeding the combined withdrawal by China and the U.S., as pointed out by Bharat Ramaswami of the Indian Statistical Institute last year.

2. Worrying rate of the groundwater table depletion

  • Be it parts of the Cauvery delta in Tamil Nadu or Sangrur district of Punjab, the story about the groundwater table is the same — a worrying rate of depletion.
  • There is one more attendant problem.
  • To sustain their activity, farmers need to go for submersible or high-capacity pumpsets. [Consider the fact that to draw same quantity of water you have to use more power if your water table is low]

3. It encourages the installation of more pump sets

  • Third, the extension of the scheme to different States over the years has only encouraged the installation of more pumpsets. Karnataka is a classic example, The number of irrigation pumpsets, which was around 17 lakh 12 years ago, is now around 30 lakh.

4. Misuse of scheme

  • There is misuse of the scheme for which not just a section of farmers but also field officials have to be blamed.

5. AT & C losses clubbed as consumption by farmers

  • In the absence of meters for these connections or segregation of feeders or metering of distribution transformers, accurate measurement of consumption becomes tricky.
  • Those in charge of power distribution companies find it convenient to reduce their aggregate technical and commercial (AT&C) losses by clubbing a portion of the losses with energy consumption by the farm sector.

What is the argument of the supporter of the scheme?

  • Proponents of the free power scheme have a couple of valid points in their support.
  • Apart from ensuring food security, free power provides livelihood opportunities to landless workers.
  • When farmers dependent on supplies through canals get water almost free of cost, it is but fair that those not covered by canal irrigation should be given free electricity.
  • Though there is substance in the argument, it is not difficult to arrive at a fair pricing mechanism.
  • Small and marginal farmers and those who are outside the canal supply deserve free power, albeit with restrictions.
  • But there is no justification for continuing with the scheme perpetually to other farmers.
  • However, those enjoying free power need to be told about the need for judicious use of groundwater and how to conserve it.

Consider the question-“Subsidies given to farmers on electricity has become an albatross around the States neck. However, such subsidies could also be termed as a necessary evil. Critically examine.”

Conclusion

Making use of the situation created by the COVID-19 pandemic, the Centre is trying to make lasting changes in areas where such measures are long overdue. At least in the area of power sector, its attempt can yield meaningful results only if there is a change in the mindset of agriculturists and political parties towards the concept of free power.

 

 

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Alleviating the farmers’ pain

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act, ECA

Mains level : Paper 3- Reforms in agri-marketing and amendment in ECA and APMC Acts.

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Hardly the 1991 moment for agriculture

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act

Mains level : Paper 3- The issues with APMC reforms

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Structural issues in agri-marketing

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act

Mains level : Paper 3- 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.

 

 

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Explained: Contract Farming and its benefits

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Contract Farming

Mains level : Contract Farming and its feasibilty

The Odisha government has promulgated an ordinance allowing investors and farmers to enter into an agreement for contract farming in view of the continuing uncertainties due to the pandemic.

Practice question for mains:

Q. What is Contract Farming? Examine its potentials and feasibility from the perspective of farmers’ interests.

Moving on with Odisha’s law

  • The Odisha ordinance is aimed at facilitating both farmers and sponsors to develop mutually beneficial and efficient contract farming system.
  • It is argued that the new system will lead to improved production and marketing of agricultural produce and livestock while promoting farmers’ interest.
  • The agreement will be entered into between the contract farming sponsor, who offers to participate in any component or entire value chain including preproduction, and the contract farming producer (farmers), who agree to produce the crop or rear the livestock.
  • Both the loans and advances given by the sponsor to the producer can be recovered from the sale proceeds of the produce.
  • And in no case realized, recovery can be through the sale or mortgage or lease of the land in respect of which the agreement has been entered into.

What is Contract Farming?

  • Contract farming (CF) can be defined as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products.
  • Typically, the farmer agrees to provide agreed quantities of a specific agricultural product.
  • These should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser.
  • In turn, the buyer commits to purchase the product and, in some cases, to support production through, for example, the supply of farm inputs, land preparation and the provision of technical advice.

Some business models in CF

1) Informal model – This model is the most transient and speculative of all contract farming models, with a risk of default by both the promoter and the farmer. However, this depends on the situation: interdependence of contract parties or long-term trustful relationships may reduce the risk of opportunistic behaviour.

2) Intermediary model – In this model, the buyer subcontracts an intermediary (collector, aggregator or farmer organisation) who formally or informally contracts farmers (a combination of the centralised/ informal models).

3) Multipartite model – This model can develop from the centralised or nucleus estate models. It involves various organisations such as governmental statutory bodies alongside private companies and sometimes financial institutions.

4) Centralized model – In this model, the buyers’ involvement may vary from minimal input provision (e.g. specific varieties) to control of most production aspects (e.g. from land preparation to harvesting). This is the most common CF model.

Advantages of Contract Farming:

To the farmers:

  • It helps in skilling of farmers as they learn to use various resources efficiently like fertilizer, pesticides and get in touch with new technology in some cases.
  • Farmers get the opportunity for diversification of crops.
  • Price risk is drastically reduced as many contracts specify prices in advance.
  • Contract farming can open up new markets which would otherwise have been unavailable to small farmers. The farmers can also get easy credit from the Bank under contractual agreements.
  • In the case of agri-processing level, it ensures a consistent supply of agricultural produce with quality, at the right time and lesser cost.

To the Client:

  • They get uninterrupted & regular flow of raw material of high quality which helps in protection from fluctuation in market pricing.
  • Long term planning of business is possible as they have a dedicated supplier base of raw material.
  • Concept of contract farming can be extended to other crops also which helps to generate goodwill for the organisation.

Limitations

  • Contract farming arrangements are often criticized for being biased in favour of firms or large farmers while exploiting the poor bargaining power of small farmers.
  • Problems faced by growers like an undue quality cut on produce by firms delayed deliveries at the factory, delayed payments, low price and pest attack on the contract crop which raised the cost of production.
  • Contracting agreements are often verbal or informal in nature, and even written contracts often do not provide legal protection in India that may be observed in other countries. Lack of enforceability of contractual provisions can result in a breach of contracts by either party.
  • Single Buyer – Multiple Sellers (Monopsony).
  • Adverse gender effects – Women have less access to contract farming than men.

Also read

What is contract farming? Critically analyze the features of the draft “Model Contract Farming Act – 2018”. (150 W)

With inputs from Vikaspedia

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Rajiv Gandhi Kisan Nyaya Yojana in Chhattisgarh

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Rajiv Gandhi Kisan Nyaya Yojana

Mains level : Various income support mechanisms for farmer

The Rajiv Gandhi Kisan Nyaya Yojana has been approved by the Chhattisgarh state govt. on 19th death anniversary of the former Prime Minister, yesterday.

Practice question for Mains:

Q. Various income support mechanisms for farmers are more of a populist measure with no impact on ground zero. Critically examine.

Rajiv Gandhi Kisan Nyaya Yojana

  • It is a new income support programme under which Farmers in Chhattisgarh would get up to ₹13,000 an acre a year.
  • Rice and maize farmers would get ₹10,000 an acre while sugarcane farmers would get ₹13,000. The money would be distributed in four instalments.
  • In the first instalment, ₹1,500 crores would be distributed among 18 lakh farmers, more than 80% of the small and marginal.
  • The scheme would cover rice, maize and sugarcane farmers to begin with, and would expand to other crops later.

Benefits of the scheme

  • This will help farmers through the agricultural cycle and hopefully help with extension activities.
  • The injection of cash among the rural population would generate a demand that shielded Chhattisgarh from the economic slowdown last year.
  • This will reduce distress migration, and enhance food security for the State.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

New Possibilities for Agriculture Sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act, ECA-1955

Mains level : Paper 3- Reforms in agri-marketing.

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

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

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC, e-NAM

Mains level : Paper 3- Agri-marketing and PDS, scope for improvement

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

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

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Kisan Sabha App and its purpose

Mains level : Technology intervention for supply-chain dynamics of farm produces in India

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).

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

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

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Kisan Rath

Mains level : Supply-chain dynamics of Agricultural produce and its bottlenecks

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

ConFarm model of agricultural market

Note4Students

From UPSC perspective, the following things are important :

Prelims level : ConFarm Model

Mains level : Alternative Market Channels for Farmers, Limitations of e-NAM

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Use the COVID crisis to transform the agri-marketing system

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- What are the issues in agri-marketing and suggestions to deal with them.

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.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Alternative Market Channel: Bypassing the Farmer Mandis

Note4Students

From UPSC perspective, the following things are important :

Prelims level : e-NAM

Mains level : Alternative Market Channels for Farmers, Limitations of e-NAM

The start of the coronavirus pandemic coincided with the peak vegetable harvesting season. As the markets were locked down, there was a threat to the crop in over 100 lakh hectares in the country.

Alternative Market Channels

  • The alternative market channel works on the principles of decentralisation and direct-to-home delivery.
  • The idea is to create smaller, less congested markets in urban areas with the participation of farmers’ groups and Farmer Producer Companies (FPCs) so that farmers have direct access to consumers.
  • It is providing a valuable option against the lockdown when efforts to avoid crowding in the wholesale markets are likely to continue.

Success in Maharashtra

  • Maharashtra is one of a handful of states where FPCs are robust.
  • The model, implemented by the state Agriculture Department and Maharashtra State Agri Marketing Board (MSAMB), requires urban and rural local bodies and other stakeholders to buy into the agricultural marketing chain.

Innovations in food supply chain management are always a hot topic in mains answers. Talk about decentralization and give examples of a successful implementation and you are all set for a good answer.

How does it work?

  • The government and MSAMB identify farmer groups and FPCs, and form clusters; local bodies choose the market sites and link the markets for direct delivery to cooperative housing societies.
  • The FPCs and farmers’ groups are allotted space for weekly markets in municipal wards or localities.
  • Some producers group park pick-up trucks loaded with fruits and vegetables at the gates of housing societies.

Why need such a mechanism?

  • The traffic of both buyers and sellers in these decentralized markets can be controlled more effectively than in wholesale mandis — a key advantage when social distancing is critical.
  • Most FPCs have minimized contact, and have taken to selling pre-packed, customised packets of vegetables.
  • This will likely help create alternative market chains that could continue even after more normal times return.

Conclusion: A boon for the farmer

  • The practices of rudimentary packing, sorting and branding are being inculcated in farmers, as they pack and send pre-ordered packets to housing societies.
  • With this, a larger numbers of vegetable growers in Maharashtra have got into direct selling to consumers thus bypassing middlemen.

Also read:

Is e-NAM portal capable of supporting farmers?

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Is e-NAM portal capable of supporting farmers?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : e-NAM

Mains level : Read the attached story

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.

 

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Bio-fortified wheat variety- MACS 4028

Note4Students

From UPSC perspective, the following things are important :

Prelims level :  MACS 4028

Mains level : Bio-fortification and its benefits

Scientists from Agharkar Research Institute (ARI), Pune, an autonomous institute under the Department of Science & Technology have developed a biofortified durum wheat variety MACS 4028, which shows the high protein content.

 MACS 4028

  • MACS 4028 is a semi-dwarf variety, which matures in 102 days and has shown the superior and stable yielding ability of 19.3 quintals per hectare.
  • It is resistant to stem rust, leaf rust, foliar aphids, root aphids, and brown wheat mite.
  • It has a high protein content of about 14.7%, better nutritional quality having zinc 40.3 ppm, and iron content of 40.3ppm and 46.1ppm respectively, good milling quality and overall acceptability.
  • The MACS 4028 variety is also included by the Krishi Vigyan Kendra (KVK) programme for  UNICEF to alleviate malnutrition.

Back2Basics

Biofortification is the idea of breeding crops to increase their nutritional value. This can be done either through conventional selective breeding, or through genetic engineering.

 

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Growth and the farmer

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- Role of agri-growth in inclusive growth and reforms in PDS.

Context

Last month, Montek Singh Ahluwalia’s book, Backstage: The Story Behind India’s High Growth Years, was released. Which tilt in favour of consumer in food policy reduces incentives for farmers, makes it difficult to unlock resources for growth.

What is covered in the book

  • Besides some very interesting episodes pertaining to author’s personal and professional life, the book is full of useful insights into policy debates and their complexities.
  • At many places, it provides evidence of the impact of these policies.
  • This can be extremely useful as we try to rejuvenate the country’s sluggish economy and abolish poverty.

Inclusive growth and agriculture

  • Growth in agriculture must for inclusive growth: During the UPA period, from 2004-05 to 2013-14, it was believed that inclusive growth is not feasible unless agriculture grows at about 4 per cent per year while the overall economy grows at about 8 per cent annually.
  • The reason was simple: More than half of the working force at that time was engaged in agriculture and much of their income was derived from agriculture.
    • But many political heavyweights, did not believe that agri-growth could reduce poverty fast enough.
  • Main instrument of agricultural strategy: The main instrument of agricultural strategy was the Rashtriya Krishi Vikas Yojana (RKVY), which gave more leverage to states to allocate resources within agriculture-related schemes.

What was the impact of strategy?

  • Agri-growth increased: The agricultural strategy, along with other infrastructure investments in rural areas, had a beneficial impact on agri-growth.
    • Agri-growth increased from 2.9 per cent during the Vajpayee period (1998-99 to 2003-04) to 3.1 per cent during the UPA-1 period (2004-05 to 2008-09) and further to 4.3 per cent during UPA-2 (2009-10 to 2013-14).
    • The agri-GDP growth during UPA-2 was driven not as much by RKVY as it was by high agri-prices in the wake of the global economic crisis of 2007-08.
  • Impact on poverty reduction: Agri-GDP growth had a significant impact on poverty reduction, whichever way it was measured — the Lakdawala poverty line or Tendulkar poverty line, which is higher.
    • At what rate poverty reduced? The rate of decline in poverty (headcount ratio), about 0.8 per cent per year during 1993-94 to 2004-05, accelerated to 2.1 per cent per year, and for the first time, the absolute number of the poor declined by a whopping 138 million during 2004-05 to 2013-14.
    • Interestingly, this holds even on the basis of the international poverty line of $1.9 per capita per day (on 2011 purchasing power parity, PPP, also see graphs).

Right to food and debate around it

  • Scepticism over the success of agriculture support to food subsidy: Instead of celebrating this success of the growth strategy in alleviation of poverty, several NGOs and even Congress stalwarts remained sceptical.
    • They advocated food subsidy under the Right to Food Campaign.
    • National Advisory Council (NAC) came up with a proposal to subsidise 90 per cent of people by giving them rice and wheat at Rs 3/kg and Rs 2/kg.

What were the arguments put forward by Montek Singh Ahluwalia?

  • Burden on exchequer: He tried to convince them that this was likely to create an unsustainable burden on the exchequer.
  • India could end up importing food: He also argued that India could end up importing grains to the tune of 13-15 million tonnes per year.
  • Cap the population coverage at 40%: He favoured a cap at 40 per cent of the population to be covered under the Food Security Act as the poverty ratio (HCR) in 2011-12 was 22 per cent.
  • Smart card to beneficiaries: He also favoured providing smart cards to the beneficiaries so that they could opt for buying more nutritious food rather than just relying on rice and wheat.
  • Chance for diversification of agriculture: Smart card with beneficiaries would have also allowed diversification of agriculture and augmented farmers’ incomes.
    • But he could not win over the NAC — although the coverage for food subsidy was reduced from the original proposal of 90 per cent to 67 per cent of the population.
  • Against the ban on agri. export: Montek also argued against export bans on agricultural commodities as these impacted farmers’ incomes adversely.
    • Government siding with consumers: But the government of the day often ended up taking the consumer’s side, as that was considered pro-poor.
    • This reduced the incentives for farmers, who then had to be compensated by increasing input subsidies.

What are the result of this strategy adopted by the government?

  • Negative PSE: No wonder, years later, when we estimated the producer support estimates (PSEs), as per the OECD methodology — used by countries that produce more than 70 per cent of the global agri-output — we found a deeply negative PSE.
    • What negative PSE indicates? This indicates implicit taxation of agriculture through trade and marketing policies, even when one has accounted for large input subsidies going to farmers (see graph on PSE).
  • Consumer bias in the system: Today, the food subsidy is the biggest item in the Union budget’s agri-food space. In the current budget, it is provisioned at Rs 1,15,570 crore.
    • Borrowing by FCI not factored in: But this factor hides more than it reveals. Lately, the government has been asking the Food Corporation of India (FCI) to borrow from myriad sources, and not fully funding the food subsidy, which should logically be a budgetary item.
    • The outstanding dues of the FCI are more than the provisioned subsidy, and if one adds these dues to the budgeted food subsidy, the effective amount of food subsidy comes to Rs 3,57,688 crore.
    • This displays the consumer bias in the system.

Conclusion

  • Restrict the population coverage of food subsidy: The Economic Survey of 2019-20 makes a case for restricting food subsidy to 20 per cent of the population — the headcount poverty in 2015 as per the World Bank’s $1.9/per capita per day (PPP) definition was only 13.4 per cent.
    • For the others, the issue prices of rice and wheat need to be linked to at least 50 per cent of the procurement price or, even better, 50 per cent of the FCI’s economic cost.
  • Unless we make progress on this front, it is difficult to unlock resources for the growth of agriculture, which slumped from 4.3 per cent during UPA-2 to 3.1 per cent during Modi 1.0.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Is the worst really over for the country’s agricultural sector?

Note4Students

From UPSC perspective, the following things are important :

Mains level : Paper 3- Performance of agriculture sector, is the worst over for it?

Context

Estimates of gross domestic product (GDP) released on 28 February confirmed that India’s economy is decelerating. The silver lining was growth in agriculture, which accelerated for the third quarter in a row to 3.5%.

How agriculture sector has performed in the last few years?

  • Robust growth in the last 5 years: A look at the national accounts for a longer period shows robust agricultural growth during the first five years.
    • With agriculture growing at 3.17% per annum between 2013-14 and 2019-20.
    • This is remarkable, given that the broader economy is witnessing a slowdown.
  • Rural economy seen from the other indicators: A variety of other indicators show that the rural economy has been going through possibly its worst phase, with declining wage growth and farmer incomes causing serious distress.

Crop sector growth rate at lowest

  • A clue to this disconnect between the national accounts and other indicators lies in a breakdown of the national accounts.
  • Crop sector growing at lowest in two decades: The GDP data for the agricultural sector shows that the crop sector, which accounts for 56% of total agricultural output and employs a majority of the farmers, has been growing at only 0.3%, the lowest in two decades.
    • By comparison, the sector grew 3.3% per annum during the 10 years under United Progressive Alliance governments.
  • Which sector of agri. is growing at a high rate? The agricultural sub-sectors that showed high growth between 2013-14 and 2018-19 were livestock (8.1%), forestry (3.1%) and fisheries (10.9%).
    • It is a puzzle what drove the high growth of livestock at a time when the crop sector was experiencing negligible growth.
    • The trend defies the logic: This defies past trends and is also difficult to believe, given contrasting trends in other indicators of livestock
  • The declining income of farmers and a decline in wages: The poor performance of the crop sector confirms the declining income of farmers, the majority of whom depend on crops for subsistence. Not surprisingly, even real rural wages are declining.
  • Inflationary pressure and hopes of growth in income of farmers: Hopes were kindled in the last three months as agricultural commodities showed signs of inflationary pressures, with food inflation hitting double-digit rates.
    • Increase in rural demand not the cause of inflation: A careful analysis of the data rules out rising rural demand as the cause of that inflationary trend.
    • Many price pressures were due to the mismanagement of cereal supplies by the government and supply shocks in vegetables.
    • In such circumstances, farmer income could not have risen. Some of this was also a result of food prices rising internationally.

Trend pointing to the fall in agri. prices

  • Softening of food prices: Recent trends in international markets suggest a softening of food prices led by an overproduction of cereals and easing edible oil inflation. Following 3 factors may contribute to its fall.
  • Impact of fall in crude oil price: This trend will gain strength in the wake of the recent slide in crude oil prices.
    • With the global economy displaying signs of a slowdown, prices of agricultural commodities are likely to fall sharply.
    • Relation of food prices with oil prices: They tend to follow movements in crude oil prices, as was seen during the latter’s collapse in August 2014. In all likelihood, a similar decline in agricultural prices is upon us.
  • Food-grain stock with FCI: A second factor that may exacerbate the income troubles in agriculture is the presence of massive food-grain stocks with the Food Corporation of India.
    • This may slow the procurement of farm produce and lower price realizations, particularly cereals but also other crops.
  • The coronavirus outbreak: Lastly, the global slowdown due to the coronavirus outbreak is likely to dampen demand in the economy, and in turn hurt the agricultural sector.

Conclusion

  • Limited room to improve the situation: These factors are likely to worsen agricultural incomes, and domestic policy has limited room to manoeuvre.
  • Opportunity to revive the demand: This situation is also an opportune time to revive rural demand The government could pass on some of the windfalls from the drop in oil prices to rural consumers. This could help lift rural incomes.
    • The government could also increase spending in rural areas to help boost demand and prevent a collapse in agricultural prices.
  • Worst for agriculture is not yet over: Whether the government uses the opportunity or fritters it away again will be known in the coming months. What appears certain for now, though, is that the worst of the rural slowdown is far from over.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Private: Formation and Promotion of Farmer Producer Organizations (FPOs)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Farmer Producer Organizations (FPOs)

Mains level : Role of FPOs

Hon’ble PM is set to launch 10,000 Farmer Producer Organisations (FPOs) all over the country today.

What are FPOs?

  • To support farmers in various aspects ranging from input procurement to market linkages, Government of India through Small Farmers’ Agribusiness Consortium (SFAC), a registered society is promoting Farmer Producer Organizations (FPOs) by mobilizing the farmers and helping them in registering as companies.
  • PO is a generic name for an organization of producers of any produce, e.g., agricultural, non-farm products, artisan products, etc.

The concept of Producers Organisation (PO)

  • A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen.
  • A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members.
  • In some forms like producer companies, institutions of primary producers can also become member of PO.

What is the need for PO?

  • The main aim of PO is to ensure better income for the producers through an organization of their own.
  • Small producers do not have the volume individually (both inputs and produce) to get the benefit of economies of scale.
  • Besides, in agricultural marketing, there is a long chain of intermediaries who very often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays.
  • Through aggregation, the primary producers can avail the benefit of economies of scale. They will also have better bargaining power vis-à-vis the bulk buyers of produce and bulk suppliers of inputs.

Why need FPO?

  • Nearly 86% of farmers are small and marginal with average land holdings in the country being less than 1.1 hectares.
  • These small, marginal and landless farmers face tremendous challenges during agriculture production phase such as for access to technology, quality seed, fertilizers and pesticides including requisite finances.
  • They also face tremendous challenges in marketing their produce due to lack of economic strength.
  • FPOs help in the collectivization of such small, marginal and landless farmers in order to give them the collective strength to deal with such issues.
  • Members of the FPO will manage their activities together in the organization to get better access to technology, input, finance and market for faster enhancement of their income.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Tilhan Mission

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Tilhan Mission, Oilseed production in India

Mains level : Not Much

The government will launch Tilhan Mission to make the country self-reliant in oilseed production.

Why such mission?

  • India is the fourth largest vegetable oil economy in the world after the USA, China and Brazil.
  • Today, the oilseeds account for 13% of the cropped area in the country.
  • Still, India is the largest importer of palm oil in the world.

Oilseed production in India

  • Total Oilseeds production in the country during 2019-20 is estimated at 34.19 million tonnes which is higher by 2.67 million tonnes than the production of 31.52 million tonnes during 2018-19.
  • Further, the production of oilseeds during 2019-20 is higher by 4.54 million tonnes than the average oilseeds production.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Scheme for formation and promotion of Farmer Producer Organizations (FPOs)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Farmer Producer Organizations (FPOs)

Mains level : Role of FPOs

The Cabinet Committee has given its approval for 10,000 FPOs to be formed in five years period from 2019-20 to 2023-24 to ensure economies of scale for farmers.

What are Farmer Producer Organizations?

  • A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen.
  • A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members.
  • In some forms like producer companies, institutions of primary producers can also become member of PO.
  • FPO is one type of PO where the members are farmers. Small Farmers’ Agribusiness Consortium (SFAC) is providing support forthe promotion of FPOs.

About the Scheme

  • It would be a new Central Sector Scheme titled “Formation and Promotion of Farmer Produce Organizations (FPOs)” to form and promote 10,000 new FPOs.
  • Initially there will be three implementing Agencies to form and promote FPOs, namely Small Farmers Agri-business Consortium (SFAC), National Cooperative Development Corporation (NCDC) and National Bank for Agriculture and Rural Development (NABARD).
  • States may also, if so desire, nominate their Implementing Agency in consultation with DAC&FW.
  • DAC&FW will allocate Cluster/States to Implementing Agencies which in turn will form the Cluster-Based Business Organization in the States.

Modes for promotion

  • FPOs will be promoted under “One District One Product” cluster to promote specialization and better processing, marketing, branding & export by FPOs.
  • There will be a provision of Equity Grant for strengthening equity base of FPOs.
  • There will be a Credit Guarantee Fund of up to Rs. 1,000.00 crore in NABARD.

Benefits

  • Small and marginal farmers do not have the economic strength to apply production technology, services and marketing including value addition.
  • Through the formation of FPOs, farmers will have better collective strength for better access to quality input, technology, credit and better marketing access through economies of scale for better realization of income.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Protected Special Agriculture Zone

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PSAZ

Mains level : PSAZ and its benefits

The Cauvery delta region in Tamil Nadu will be declared as ‘Protected Special Agricultural Zone’ (PSAZ) by the TN govt.

Cauvery delta PSAZ

  • Declaring PSAZ ensures that particular region will not be granted permission for any new projects like those related to hydrocarbons.
  • Only Agro based Industries would be given permission to be built.
  • The special protection will be bestowed on Cauvery Delta districts such as Thanjavur, Tiruvarur, Nagappattinam, Pudukottai, Cuddalore, Ariyalur, Karur and Tiruchirappalli districts.

Significance of the move

  • The Cauvery Delta Region is Tamil Nadu’s rice bowl comprising above eight districts.
  • It is just and reasonable that projects like hydrocarbon exploration have raised concerns among farmers and other agriculture-based labourers.
  • Drilling for extraction of oil and gas in these regions that hampers agriculture and posing much environmental impact or health hazards will be stopped immediately.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op ed of the day] Stay with stimulus

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- Provisions in the budget to revive the economy-need for the fiscal stimulus, policies of the Government with respect to agriculture.

Context

The stimulus needs to continue and the reforms will help to keep the economy going. If gross savings and investment rates keep on falling it is difficult to revive the economy.

What was expected in the last budget?

  • Increase in pubic investment: The first thing, it said, was to increase public investment and not play statistical or token announcement games.
  • The upswing in manufacturing growth, from negative to slightly less than 3 per cent (not industrial growth, because that includes mining and electricity), needed consolidation.
  • Real outlays in infra did not go up: Real outlays on the infrastructure needed to go up, but they did not.
    • So the push to private demand and a virtuous cycle of growth was missed.
    • The implicit numbers in the Budget math comprise growth of around 7 per cent, assuming a 5 per cent inflation rate.

Prospects of the Agri-sector

  • A good sign in Agri in midterm: For agriculture, in the medium-term, we are alright. Kharif grain production was 6.4 per cent higher than the previous five-year average output.
    • Kharif oilseeds output around eleven lakh tonnes above the earlier year.
    • This was, however, based on a delayed monsoon which caused problems and anxieties in the second quarter of this year.
  • Nightmare of government unloading grain in the market: Foodgrains are doing well and we have huge food stocks.
    • But, instead of a blessing, the government turned public operations in grain into a nightmare by announcing that FCI will unload grain at a reserve price less than MSP.
    • Rabi acreage recovered and is now 8 per cent more than last year, but the policy of government operations to reduce the market price of grain by its intervention is a nightmare.
  • This is bound to affect input growth in the expanded acreage in the winter crops.

Wrong policy in Agriculture

  • Terms of trade against agriculture: The terms of trade are going against agriculture, according to CACP (Commission for Agricultural Costs & Prices) estimates, and selling of the grain will make it worse.
  • While the fundamentals are alright, to wallop the farmer with a “cut in the reserve price” would harm the farmers.
  • The rabi report of CACP will say that the terms of trade have gone down more.

Conclusion

The Government should continue with the stimulus and opt for the reforms in the economy only to keep the economy going. If the gross savings and investment rates keep falling it would be difficult to revive the economy. If savings keep up, the government will have actual space to divert some real resources to infrastructure investment.

 

 

 

 

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] A farm wish list for the budget

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3-Rationalization of subsidies on food in PDS and Fertilizers and need to reform them.

Context

As finance minister presents the budget the FM need to ensure transparency and to fully account for the food subsidy.

The excess buffer stock and need to reform

  • A buffer stock norm and actual stock: A buffer stock norm is at 21.4 million tonnes (mt).
    • Actual stock far exceeds the norm: The actual stocks of grains with the central pool stood at 75.5 mt.
    • Which is 3.5 times what the government needs to hold.
  • The economic cost of the excess stock: At its economic cost, the value of the excess stocks with the government stands at Rs 1.6 lakh crore.
    • Potential for revenue: There is no better place to find revenue for the FM than to liquidate these stocks.
    • Need for the reform in grain management system: Unless the grain management system is reformed, the inefficiency of the grain management system will keep on increasing and the nation will suffer.

Food subsidy reforms

  • Link food prices to procurement price: It is the time to revise the central issue of price and link it to the procurement price-say at half the procurement price.
    • Limit the population coverage: There is a need to limit this highly subsidised food of Rs 3/kg for rice and Rs 2/kg of wheat to say 40 per cent of the population.
    • Move to DBT: The real fundamental reform would be to move towards direct cash transfers for the intended beneficiaries of food subsidy.

Fertiliser subsidy reforms

  • Imbalance in the subsidisation: The real problem of this sector is the imbalance in the policy of fertiliser subsidisation.
    • While urea (N) is subsidised to the extent of 75 per cent of its cost, phosphatic (P) and potassic (K) fertilisers are subsidised only to the tune of about 25 per cent of their cost.
  • Consequences of this imbalance: The result is the highly imbalanced use of N, P and K on farmers’ fields. Which results in
    • Giving a very low fertiliser-to-grain response ratio.
    • Degrading the soil.
    • Degrading underground water.
    • Degrading the environment with excessive nitrogen use.
    • Discouragement to natural farming: The current fertiliser subsidy discourages those who want to pursue natural farming as they don’t get subsidy anywhere near the amount chemical-based fertilisers do.
  • Reforms: There are two ways in which the fertiliser subsidy regime can be reformed.
    • Bring nitrogenous fertiliser under NBS: The solution to the imbalance in use is to bring nitrogenous fertilisers under the Nutrient Based Subsidy (NBS) scheme.
    • Cash transfer based on per hectare basis: The second option is to move towards direct cash transfers for fertilisers on a per hectare basis, with some adjustment for irrigated tracts.
    • 50,000 Crore saving: The above-mentioned reforms could result in the saving of Rs. 50,000 crores to the public exchequer.

Way forward

  • Investing the savings where it matters the most: The savings from the reforms could be invested in-
    • Better water management, especially drip irrigation.
    • Infrastructure for agri-markets.
    • Solar trees: The investments could also be made in setting up the solar trees in the farm to harvest solar power on farmer’s fields with buyback agreements for surplus production.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Antibiotics in Crops

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Read the attached story

Mains level : Not Much

The Union Minister of Agriculture and Farmers Welfare has informed about certain registered pesticides/antibiotics.

Registered Antibiotics in Crops

  • Aureofungin, Kasugamycin, Validamycin and Streptomycin+ Tetracycline combination are antibiotics which are registered under the Insecticide Act 1968 for use as pesticides to combat certain fungal and bacterial diseases in plants.
  • Use of the above pesticides is regulated under the Insecticide Act 1968 and the rules framed thereunder.
  • While registering the pesticide, the label and leaflets are also approved which contains the details of crop, disease/pest against which it is recommended, dose rate, directions about use, chemical composition, toxicity triangle, precautions to use and packaging specifications.
  • They are registered for use in the country by the Registration Committee only after satisfying about their efficacy and safety to human health, animal and environment.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Farmers Clubs (FCs)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Farmers Club

Mains level : Easy credit facilities for Farmers

  • Till date, there are 24321 active FCs existing in different States/UTs.

Farmers’ Clubs (FCs)

  • FCs promoted by National Bank for Agriculture and Rural Development (NABARD) are grass root level informal fora organized by the rural branches of banks, NGOs, Krishi Vigyan Kendras (KVKs), etc.
  • The programme is being implemented for the mutual benefit of the banks and the farmers.
  • The major objective is to promote “Development through credit, technology transfer, awareness and capacity building” of the farmers.
  • The clubs are beneficial for banks as well as line departments of the State Government for convergence of the programmes / schemes sponsored / implemented by them.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[oped of the day] Farm lessons from China

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Agriculture lessons from China

Context

India and China have limited arable land — China has about 120 million hectares (mha) and India 156 mha. The challenge before the two countries is to produce enough food, fodder, and fiber for their population. 

Similar story

  • Both have adopted modern technologies in agriculture, starting with high yield variety (HYV) seeds, increasing irrigation cover and using more chemical fertilisers to produce more food. 
  • Irrigation cover – China’s irrigation cover is 41% of the country’s cultivated area, while India’s irrigation cover is 48%. 
  • Total sown area – China’s total sown area is 166 mha, compared to India’s gross cropped area of 198 mha. 

Differed on output

  • Even though China has less land under cultivation, its agriculture output is valued at $1,367 billion, more than three times that of India’s agriculture output, $407 billion.

Reasons for the difference in output – R&D

  • China spends a lot more on agriculture knowledge and innovation system (AKIS), which includes agri R&D and extension. 
  • China invested $7.8 billion on AKIS in 2018-19, 5.6 times the amount spent by India — $1.4 billion. 
  • More impact than subsidies – A study on the impact of investment and subsidies on agri-GDP growth and poverty alleviation revealed that the highest impact is from investments in agriculture research and education (R&E). 
  • Poverty alleviation – For every rupee invested in R&E, agriculture GDP increases by Rs 11.2; and for every million rupees spent on agri-R&E, 328 people are brought out of poverty. 
  • Impact on other sectors of agriculture – Better seeds that result from higher R&D expenditures generally require more fertiliser. As per World Bank estimates, China’s fertiliser consumption in 2016 was 503 kg/ha of the arable area compared to just 166 kgs/ha for India.

Indian investment in R&D

  • India invests just about 0.35% of its agri-GVA while China spends 0.8%.
  • India needs to increase expenditure on agri-R&D. It should make the Indian Council for Agricultural Research (ICAR) accountable for targeted deliveries.

Better investment – Incentives: PSEs

  • The incentive structure, measured by producer support estimates (PSEs) is much better for Chinese farmers than Indian farmers. 
  • The PSE concept measures the output prices that farmers get in a free trade scenario. It also measures the input subsidies received by them. 
  • For Chinese farmers, the PSE was 15.3% of the gross farm receipts during the triennium average ending (TE) 2018-19. Indian farmers had a PSE of -5.7%
  • It shows – that Indian farmers had been taxed much more than they have been subsidised — despite high amounts of input subsidies. 
  • Reasons for negative PSE – This negative PSE is a fallout of restrictive marketing and trade policies that do not allow Indian farmers to get free trade prices for their output.
  • Impact – This negative market price support exceeds the input subsidy support the government gives to farmers through low prices of fertilisers, power, irrigation, agri-credit, and crop insurance. 

Chinese MSP experience

  • Chinese gave procurement prices to farmers that were much higher than international prices. 
  • The result was a massive accumulation of stocks of wheat, rice, and corn. 
  • In 2016, such stocks touched almost 300 million metric tonnes (MMT). 
  • China had to incur a large expenditure as a result. 
  • Having burnt their fingers, China dropped the price support scheme for corn and has been gradually reducing the support prices of wheat and rice. 
  • India’s stock situation in July 2019 was 81 MMT as against a buffer stock norm of 41 MMT. 

Direct Income support

  • China has combined its major input subsidies in a single scheme, which allows direct payment to farmers on a per hectare basis and has spent $20.7 billion for this purpose in 2018-19. 
  • This gives the farmers the freedom to produce any crop rather than incentivising them to produce specific crops. 
  • Inputs are priced at market prices giving right signals to farmers to use resources optimally. 
  • India spent only 3 billion dollars under its direct income scheme, PM-KISAN in 2018-19, but the country has spent $27 billion on heavily subsidising fertilisers, power, irrigation, insurance, and credit. 
  • This leads to large inefficiency in their use and also creates environmental problems.

Way ahead

  • Large scale agri-marketing reforms (APMC and Essential Commodities Act). 
  • Instead, the Indian government has been trying to jack up MSPs for 23 crops for farmers. 
  • India needs to reduce the gamut of commodities under the MSP system and keep MSPs below international prices.
  • India should consolidate all its input subsidies and give them directly to farmers on a per hectare basis and free up prices from all controls.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[oped of the day] Sustainable Solution For Price Stabilisation of Tomatoes-Onions-Potatoes

Note4Students

From UPSC perspective, the following things are important :

Prelims level : TOP scheme

Mains level : Food processing; TOP; rise in prices

Op-ed of the day is the most important editorial of the day. This will cover a key issue that came in the news and for which students must pay attention. This will also take care of certain key issues students have to cover in respective GS papers.

Context

Last month, onion retail prices crossed Rs 40/kg in Delhi. 

Government response

    • The government imposed a minimum export price (MEP) of $850/tonne. 
    • Later on, as prices went further up to Rs 50-60/kg, stocking limits were imposed on traders and exports of onions were banned. 
    • It created problems in neighboring countries, especially Bangladesh.
    • These knee jerk reactions like export bans or stocking limits on traders only show the hollowness of our policies. 
    • A lot can be improved in addressing large price volatility of basic vegetables.

TOP

    • Tomatoes-onions-potatoes (TOP) are the three basic vegetables that face extreme price volatility.
    • The government is often on the edge in fulfilling dual objectives of ensuring remunerative prices for farmers and affordable prices for consumers
    • Onion is the most volatile, followed by tomatoes and potatoes. 
    • Potato is the least volatile because of higher processing-to-production share than onions and tomatoes. Also, there are large storage facilities for potatoes.
    • Of the total 8,000 plus cold storages in India, 90% are used for storing potatoes. Tomatoes can’t be stored for long. 
    • The current spike in tomato prices is due to lower supply from major tomato producing states like Maharashtra and Karnataka owing to heavy rains.

Operation Green-TOP 

    • It was started with an allocation of Rs 500 crore in the budget of 2018. 
    • The idea was to build value chains of TOP on the lines of “Operation Flood” (AMUL model) for milk.
    • The aim is to ensure a higher share of consumer’s rupee goes to farmers and stabilises their prices

AMUL model

    • The AMUL model is based on large procurement of milk from farmers’ cooperatives, processing, storing of excess milk in skimmed milk powder form during the flush season and using it during the lean season, and distributing milk through an organised retail network. 
    • Milk does not pass through any APMC, involves no commissions, and farmers normally get 75-80% of the consumer’s rupee, as per AMUL’s claims.

TOP – success

    • TOP is mostly traded in APMC markets, with layers of mandi fees and commissions, and farmers get less than one-third of the consumer’s rupee. 
    • An ICRIER-NABARD study on “Deconstructing Value Chains of Tomatoes, Onions, and Potatoes”, the farmer’s share is found to be 32.1%, 29.1% and 26.6% of a consumer’s rupee for TOP respectively. 

Way ahead

    • Massive reforms in APMC.
    • Ample storage for buffer stocks has to be created. Potatoes and onions can be stored. But, repeated stocking limits on onion traders discourages private investments in modern cold storages. 
    • For inviting large private investment in storages, the Essential Commodities Act has to go. If the traders are colluding to rig the market, then the Competition Commission of India should look into it. 
    • The government banning exports or imposing stocking limits is not a solution.
    • Increase processing capacities for TOP. Buffer stocking for tomatoes is not possible. Processing remains the only solution. 
    • GST for tomato puree and juice should be reduced from 12% to 5%. Milk and most milk products attract 0 to 5% GST.
    • To propagate the use of processed products (tomato puree, onion flakes, powder) among urban and bulk consumers (hospitals, schools, armed forces), the government should run campaigns in association with industry organisations, as was done for eggs. 
    • India needs to have time bound targets to process and export at least 10-15% of TOP production. India exports 10-12% of onion production in fresh and dehydrated form, it exports less than 1% of tomatoes and potatoes production.
    • Direct buying by organised retailers from farmer producer organisations (FPOs) through contract farming, bypassing the mandi system, should be encouraged. 
    • TOP cooperatives and retail outlets like Safal across the country should be opened. With over 400 Safal outlets across Delhi-NCR, onions are being sold at Rs 25/Kg when retail prices are hovering between Rs 50-60/Kg. 
    • Need for value chain development starting with market reforms along with overhauling the infrastructure of existing APMC mandis in the country. 
    • Kolar mandi, one of the largest tomato mandi in the country, revealed that the operations of the mandi have spread to adjoining areas. It requires at least two to three times more land and much better infrastructure. 
    • These reforms and investments can be undertaken on a public-private partnership (PPP) basis, commissions can be reduced, contract farming can be encouraged, along with setting up of private mandis for better efficiency.

Conclusion

The government needs to find a sustainable solution for price stabilisation of TOP, rather than taking temporary ad hoc measures. It is time to TOP up.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] A bad policy choice

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Storage facilities for farm produce

Context

  • Ever since the Delhi government was ousted in 1998 by popular outrage over a spurt in onion prices, politicians have been wary of this vegetable.
  • The political response should solve, not structurally worsen, the problem that lies at the root of the occasional shortage of the vegetable.

Ban on onions export

  • The ban on export of onions that the central government has imposed follows in a traditional route and ignores the need for the farmer to get better terms of trade, paving the way for future shortage.
  • Onion is a relatively small crop, a little over 15 million tonnes in India.
  • China cultivates a lower area, but is the world’s largest producer, because its yield is about half as much higher than in India.

Hurting many

  • Bangladesh is very unhappy with India’s export ban,because that has worsened the shortage there.
  • Sudden export bans shut off the possibility of the farmer getting a bumper price for his crop, something that he feels he is entitled to, as the obverse of the distress sale he often has to undertake.
  • The sensible course is proper storage at times of harvest and steady decumulation of stocks over the year.
  • This will not help, however, in case of a sudden shortfall in output, thanks to flooding or unseasonal rains, as has happened this year.

Conclusion

  • Instead of banning exports, the government should encourage export of onion in its raw and processed forms.
  • The govt. must invest in food technology that would permit farmers to increase output without fear of distress sales, onion offtake assured because of its storage in a processed state.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] Let prices rise

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Need for deregulating Agricultural prices

CONTEXT

Current consumer price index (CPI) inflation levels allow enough “room” for continued monetary easing. Policy rate reductions beyond the 110 basis points are already affected this year.

Food inflation

  • The credit for the going down of overall retail inflation to an average of  3.50% goes mainly to food items, which have a 45.86% in the CPI. 
  • Average consumer food inflation has been even lower, at 1.38%. 
  • If CPI inflation has to remain within the RBI’s target of 4%, it would hinge upon sustained low food prices.

Problem 

  • This leads to a temptation to engage in “supply management” to contain food inflation at any cost. 
  • Recently, the commerce ministry imposed a minimum export price of $850 per tonne of onions. The state-run MMTC Ltd has been asked to import the bulb in order to control retail prices, which have crossed Rs 50/kg in major metros. 
  • These moves have angered onion growers, who say that the government showed no such enthusiasm when prices were consistently low for much of the last three years. 
  • Suppressing food prices through artificial means is not the way to meet the RBI’s inflation target. 
  • Between December 2018 and August 2019, annual WPI inflation for food articles has moved up from -0.42% to 7.67%. Retail food inflation is still only 2.99%. It should catch up with the trend in wholesale prices. ‘
  • The supply disruptions and crop loss from excess monsoon rains — could lead to some rising prices. This is seen in pulses, maize, jowar, and soybean. 
  • The prices are recovering from lows and some are trading below their official minimum support prices. 
  • The government should not invoke the Essential Commodities Act or ban exports or permit duty-free imports. 

Conclusion

Boosting farm incomes is more likely to guarantee an economic recovery than the slashing of interest rates.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Market Intervention Price Scheme

Note4Students

From UPSC perspective, the following things are important :

Prelims level : About the scheme

Mains level : Read the attached story

  • Kashmir’s famed apple is battling to get exported outside the State this year as militants are campaigning against the fruit’s trade.
  • The government is planning to procure almost 12 lakh metric tonnes of apple this season, under the MISP, with the help of the National Agriculture Cooperative Marketing Federation of India (NAFED).

About the Market Intervention Price Scheme

  • MIP is a price support mechanism implemented on the request of State Governments for procurement of perishable and horticultural commodities in the event of a fall in market prices.
  • The Scheme is implemented when there is at least 10% increase in production or 10% decrease in the ruling rates over the previous normal year.
  • MIP works in a similar fashion to Minimum Support Price based procurement mechanism for food grains, but is an adhoc mechanism.
  • Its objective is to protect the growers of these horticultural/agricultural commodities from making distress sale in the event of bumper crop during the peak arrival period when prices fall to very low level.
  • Thus it provides remunerative prices to the farmers in case of glut in production and fall in prices.

Working

  • Proposal of MIP is approved on the specific request of State/UT Government, if the State/UT Government is 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

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

Procurement

  • Under the Scheme, a pre-determined quantity at a fixed Market Intervention Price (MIP) is procured by NAFED as the Central agency and the 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.
  • The MIS has been implemented in case of commodities like apples, kinnoo/malta, garlic, oranges, galgal, grapes, mushrooms, clove, black pepper, pineapple, ginger, red-chillies, coriander seed etc.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Why India is vulnerable to attacks by alien species

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Read the attached story

Mains level : Alien invasive species in India


  • In the past 15 years, India has faced at least 10 major invasive pest and weed attacks.
  • When pests, weeds, viruses and bacteria invade, they can wipe out food crops, alter the ecology, deplete water levels and cause diseases.

Most recent: Fall Armyworm

  • The most recent was the fall armyworm that destroyed almost the entire maize crop in the country in 2018.
  • India had to import maize in 2019 due to the damage caused by the pest in 2018.

Why India gets such invasions?

  • It is difficult to establish how pests and weeds are entering India.
  • What’s inexplicable is that there is no institutional mechanism to even probe these invasions.
  • The Union Ministry of Agriculture and Farmers Welfare (MAFW), which is responsible for the control of invasive pests and weeds, has not investigated any invasions till date.

Checking their entry

  • Invasive pests and weeds can enter a country by flying over the border or by simply growing gratuitously. In such cases, checking their entry is difficult.
  • But when they land up at airports and dockyards in cargos of imported grain or with items carried by tourists, the authorities should be able to weed them out.
  • For this reason countries have animal, plant and health quarantine facilities at all transborder entry points.
  • India, however, seems to have let its guard down of late, especially with regards to agricultural products, which form the bulk of its imports.

How is entry regulated?

  • When an agricultural product arrives, customs officials check if it has a phytosanitary certificate or not.
  • This certificate, showing that the product is without any pest or weed infestation, is issued by the government of the exporting country.
  • If the product is certified, it is cleared by Quarantine system after a sample test.
  • If the product has not been given a phytosanitary certificate, the foreign government is obliged to inform India, in which case Quarantine system fumigates the product with methyl bromide and issues a phytosanitary certificate.
  • The fumigation is for two to 48 hours and depends upon the volume and quality of the product, and the country of origin. The company is charged for the fumigation.

Check on agri imports

  • Import of agricultural products is governed by the Destructive Insects and Pests Act, 1914.
  • The country has 108 plant quarantine centres located at major airports, seaports and transborder railway stations.
  • The check posts at these quarantine centres are under the control of the Central Board of Indirect Taxes and Customs (CBITC), which works in close coordination with DPPQS.

What needs to be done?

  • There should be a war room-like cell to catalogue, monitor and investigate the influx of exotic pests and weeds.
  • In fact, India’s quarantine system needs an overhaul.
  • Nepal, for instance, stopped the entry of agriculture products from India without a phytosanitary certificate in June after the outbreak of acute encephalitis syndrome in Bihar earlier this year.

Way forward

  • With increasing global trade and movement, countries worldwide are becoming serious about alien pests and microbes.
  • At a time when bioterrorism is a global reality, it is imperative that we get our quarantine system in order.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] From Plate to Plough: A win-win deal

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Agricultural subsidy reforms

Note- Op-ed of the day is the most important editorial of the day. Aspirants should try to cover at least this editorial on a daily basis to have command over most important issues in news. It will help in enhancing and enriching the content in mains answers. Please do not miss at any cost.

CONTEXT

In her budget speech, the Union finance minister (FM) said: “At the centre of everything that we do, we keep gaon, garib aur kisan in mind.”

Background

  • Here then is a small mantra for her to transform the lives of the kisan and the poor in rural areas.
  • Just streamline the food and fertiliser subsidies by converting them to direct cash transfers to identified beneficiaries.
  • This can be done through the JAM trinity (Jan Dhan, Aadhaar and Mobile). Such a measure would not only empower the poor and farmers but also usher in a policy shift that can save the exchequer least Rs 50,000 crore every year.
  • The government can invest this in agri-R&D and better water management, in measures to ensure the country’s food security for the next 25 years and to augment farmers’ incomes.
  • The food subsidy allocation in the budget is Rs 1,84, 220 crore — let us say Rs 1.84 lakh crore.
  •  Pending Dues – The pending dues of the Food Corporation of India (FCI) stand at Rs 1.86 lakh crore.
  • Under-provisioning of the food subsidy- Year after year, there is under-provisioning of the food subsidy in the budget and the FCI is being asked to borrow from the banks so that the fiscal deficit can be shown under control.
  • The FCI’s loans from the banks have now crossed Rs 2.48 lakh crore (see figure).
(Illustration by Suvajit Dey)

 

2.Efficiency, equity and sustainability

  •  Does 67 per cent of the population covered under the NFSA cannot afford basic food?
  • There is more than 90 per cent subsidy on rice and wheat under the PDS — the economic cost of rice hovers around Rs 35 per kg and that of wheat is about Rs 25 per kg, while rice is being sold via the PDS at Rs 3 per kg and wheat at Rs 2 per kg

Selling price is less than MSP  –

  • Interestingly, in rural areas in a majority of states, rice (paddy) is sold at less than the minimum support price (MSP).
  • The landless labourers and small and marginal farmers, most of whom are covered under PDS, produce these staples.
  • The government first buys paddy and wheat from rural areas and, after adding almost 50 per cent cost for procurement, stocking and distribution on top of the MSP price, sells the back most of this grain to people in rural areas.

Benefits of cash transfer to beneficiary

  • The government can achieve its ends in a much more cost-effective way if it transfers an equivalent amount of food subsidy in the form of cash to the beneficiary’s accounts.
  • More Choices – The beneficiary will have the freedom to buy anything — rice, wheat, coarse cereals, pulses or even milk and eggs, which are more nutritious. Diversified diets will signal the need for diversification in farms.
  • Environmentally Sound – The government can keep some stocks for strategic purposes but gradually reduce procurement and shrink the size and operations of FCI, especially in areas where the water table is depleting fast — the northwest of the country, for example.

Coverage under FSA

  • Further, the government has to think whether the coverage under PDS should be 67 per cent of the population or if it should be brought down to, say, 40 or even 30 per cent.
  • Why should the price of rice be kept at Rs 3 per kg and that of wheat at Rs 2 per kg?
  • This leads to massive diversion of PDS supplies to the open market.
  • Leakages – The Shanta Kumar Panel had estimated the leakages in PDS at 46 per cent.

Fertiliser Subsidy

  • The FM has allocated Rs 80,000 crore for fertilisers in the budget.
  •  Under Provisioning – The fertiliser industry says that there is massive under-provisioning.
  • Pending Dues- The industry also claims that Rs 38,000 crore of its dues are pending with the government.

 

  • The problem is that the government does not have the will to revise the urea price, which at roughly $80 per tonne, is the lowest in the world.
  • The average cost of production of the industry is around $250 per tonne, import parity hovers around $300 per tonne and keeps fluctuating, depending on global prices.
  • The government has revived some almost dead plants (for example at Gorakhpur and Ramgundam) that produce urea at more than $400 per tonne.

Lack of economic rationale –

  • It seems there is no economic rationale either in the pricing of urea for the farmers at $80 per tonne or producing urea, at the margin, at $400 per tonne.
  • This is leading to large leakages and inefficient use, besides polluting the groundwater table — in fact, the environment at large.
  • Interestingly, crops do not absorb more than 25 per cent of the urea being applied in India.
  • So, basically, we are subsidising the pollution of the environment.

Conclusion

Can the Modi government rationalise these subsidies by converting them into direct cash transfers on a per hectare basis?  Back-of-the-envelope calculations show that the government can save about Rs 50,000 crore every year through such measures. The money can be invested in agri-R&D and water management. That would be the biggest reform in agri-food space

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed of the day] Green shoots of economic growth

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Investment in primary sector will be main driver of growth

Note- Op-ed of the day is the most important editorial of the day. Aspirants should try to cover at least this editorial on a daily basis to have command over most important issues in news. It will help in enhancing and enriching the content in mains answers. Please do not miss at any cost.

CONTEXT

India’s dream of becoming a $5-trillion economy by 2024 is now in the open with a ‘blue sky’ vision envisaged in the Economic Survey this year. T. However, unless there are adequate investment reforms in primary sectors, steps taken to augment growth in other sectors would be futile.

Investment is the key

1.Insufficient investment in the agriculture sector –

According to the Food and Agriculture Organisation (FAO), insufficient investment in the agriculture sector in most developing countries over the past 30 years has resulted in low productivity and stagnant production.

2.India’s Situation – In India, with a steadily decreasing share of 14.4% in Gross Value Added since 2015-16, the sector’s contribution to a $5-trillion economy would be around $1 trillion — assuming a positive annual growth rate hereafter.

 

1.Agri-tourism

  • First, the wave of investment should touch segments such as agro-processing, and exports, agri-startups and agri-tourism, where the potential for job creation and capacity utilisation is far less.
  • Integrating the existing tourism circuit with a relatively new area of agri-tourism (as a hub-and-spoke model), where glimpses of farm staff and farm operations are displayed to attract tourists, would help in boosting the investment cycle and generate in-situ employment.

2. Education and research in agriculture

  • Second, investment needs to be driven to strengthen both public and private extension advisory systems and the quality of agri-education and research through collaboration and convergence.
  • It would also serve as a stage to demonstrate resource conservation and sustainable use through organic, natural and green methods, and also zero budget natural farming.

3. Investment in livestock

  • Third, given that India has the highest livestock population in the world, investment should be made to utilise this surplus by employing next-generation livestock technology with a strong emphasis not only on productivity enhancement but also on conservation of indigenous germplasm, disease surveillance, quality control, waste utilisation and value addition.
  • This would lead to a sustained increase in farm income and savings with an export-oriented growth model.

4. Renewable energy data

Fourth, investment in renewable energy generation (using small wind mill and solar pumps) on fallow farmland and in hilly terrain would help reduce the burden of debt-ridden electricity distribution companies and State governments, besides enabling energy security in rural areas.

5. Private entities

  • Fifth, a farm business organisation is another source of routing private investment to agriculture.
  • Linking these organisations with commodity exchanges would provide agriculture commodities more space on international trading platforms and reduce the burden of markets in a glut season, with certain policy/procedural modifications.

Pivotal role for data

  • Currently, there are issues of enumeration, maintenance and accessibility to help maintain agri-data on various fronts.
  • There also needs to be a centralised institutional mechanism to help maintain farm level-data available for real time (virtual) assessment, while also helping plug the loopholes in subsidy distribution, funding and unrealistic assumption in production estimation.
  • This will help in effectively implementing and monitoring various schemes for a pragmatic food system.

Trickle-down effect

Though economic transition has seen significant growth contribution from services and industry, agriculture remains the most trusted sector in helping alleviate poverty, hunger and malnutrition and ensuring better income distribution.

Effect of agricultural Growth on the economy –

  • An earlier experience of BRIC (Brazil, Russia, India and China) nations has shown that a 1% growth in agriculture is at least two to three times more effective in reducing poverty than similar growth in non-agricultural sectors.
  • Public investment in agriculture research and development in terms of percentage share in agri GVA stands at 0.37%, which is fairly low in comparison to between 3% and 5% in developed countries.

Conclusion

  • Agriculture and its allied sectors are believed to be one of the most fertile grounds to help achieve the ambitious Sustainable Developmental Goals (SDGs).
  • However, with the current pace of agriculture growth, India requires ‘patient capital’, as financial returns to investment are unlikely to materialise in the initial years.
  • An inclusive business model facilitating strong investor-farmer relations should be created, with a legal and institutional framework for governance.
  • Expanding institutions is essential to accommodate the developmental impacts of foreign agricultural investment.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Kisan Credit Cards for Fishermen

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Kisan Credit Card Scheme

Mains level : Easy credit facilities for Farmers

  • The GoI has extended the facility of Kisan Credit Card (KCC) to fisheries and animal husbandry farmers to help them meet their working capital needs.

KCC facility for Fishermen

  • The KCC facility will help fisheries and animal husbandry farmers to meet their short term credit requirements of rearing of animals, poultry birds, fish, shrimp, other aquatic organisms and capture of fish.
  • Under this, for the existing KCC holders the credit limit is Rs. 3 lakh including animal husbandry and fisheries activities whereas the KCC holders for animal husbandry and fisheries have the credit limit of Rs. 2 lakh.
  • It would help them to meet their working capital requirements for animal husbandry and fisheries activities.
  • Under KCC facility, Interest subvention is available for animal husbandry and fisheries farmers @ 2% per annum at the time of disbursal of loan and additional interest subvention @ 3 % per annum in case of prompt repayment as Prompt Repayment Incentive.

Back2Basics

Kisan Credit Card Scheme

  • The Kisan Credit Card (KCC) scheme is a credit scheme introduced in August 1998 by Indian banks.
  • This model scheme was prepared by the National Bank for Agriculture and Rural Development (NABARD) on the recommendations of RV Gupta to provide term loans and agricultural needs.
  • Its objective is to meet the comprehensive credit requirements of the agriculture sector by giving financial support to farmers.
  • Participating institutions include all commercial banks, Regional Rural Banks, and state co-operative banks.
  • The scheme has short term credit limits for crops, and term loans.
  • Kisan Credit Card (KCC) offering credit to the farmers in two types viz, 1. Cash Credit 2. Term Credit ( for allied activities such as pump sets, land development, plantation, drip irrigation).

For additional reading, navigate to the page:

http://vikaspedia.in/agriculture/agri-credit/kisan-credit-card-scheme

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] Farm price challenge

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PM- AASHA

Mains level : Farm prices should be boosted to protect farmers interest.

CONTEXT

A persistent slump in the commodities market despite substantial hikes in the official floor prices of major crops to  50 per cent above their production cost is among the issues the new government would need to address urgently.

Background

  • Most of the commodities for which the government fixes minimum support prices (MSPs) are being traded at 10 to 30 per cent below these rates in the ongoing rabi marketing season.
  • The situation in the last kharif season was no different. The only exceptions are wheat and rice in select areas where these  are procured by  official agencies and a few others like barley, tur (pigeonpea) and cotton, whose  demand outstrips supplies.
  • Though pulses and oilseeds are also purchased in some areas by government-designated agencies, the quantities picked up by them are too meagre to impact the market.
  • The government’s flagship price support scheme, PM-AASHA (Annadata Aay Sanrakshan Abhiyan), has remained virtually a non-starter.
  • The losers in the process are the farmers who, it is feared, might resume their protests once the new government settles down in office.

Reasons for price meltdown

  • The present commodity price meltdown can, indeed, be  attributed largely to factors such as consistent surplus production in the last couple of years, subdued global commodity prices and unfavourable domestic and external trade policies concerning agri-commodities.
  • Besides, some imprudent moves such as offloading previously procured stocks and permitting imports while the domestic crops are still being marketed also seem to have contributed to it.

Flaws of PMAASHA –

  • This aside, the PM-AASHA (Pradhan Mantri Annadata Aay Sanrakshan Abhiyan) scheme has been marred by some basic flaws in all the three price support components:
  • Physical procurement of stocks at MSPs, price deficiency payment of the kind tried out in Madhya Pradesh, and a few other states, and the participation of private  trade in the procurement and management of farm produce on a fixed-commission basis.
  • The system of open-ended procurement of staple cereals, notably rice and wheat, has been in operation for decades and has served well to  run the world’s largest public distribution system but at a huge cost to  the exchequer.
  • Open-ended procurement limited to few states – It has, however,  remained confined primarily to  parts of a handful of states  where the procurement infrastructure exists.
  • Elsewhere,  even rice and wheat are traded at sub-MSP rates. Universalising this system to  cover all crops all over the country is unthinkable.
  • Failure of price deficiency system – The price deficiency payment system, too,  has failed to  deliver the results because of a cumbersome registration procedure; mandatory sale through the regulated mandis dominated by  manipulative  middlemen; and capping total purchases at 25 per cent of production.
  • Less participation by private traders – The third option of roping in private traders in price support operations has found no takers chiefly because the proposed commission of 15 per cent of the MSP for the operation involving buying, bagging, transporting, storing and disposing of the stocks is too meagre for the task.

Way Forward

  • Apart from addressing these issues, several other measures may be needed to prop up agri-commodities prices.
  • An export window as an outlet for surplus stocks is a must.
  • This can be created by modifying import-export tariffs with an eye on boosting agri-exports.
  • Besides, the farmers need to be incentivised to diversify their production by growing high-value crops, which could yield better returns without the government’s intervention.
  • The overarching objective  of the policy regime has to  be  to  strike a balance between the farmers’  interests and inflation management

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

India to launch coffee consumption drive

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Coffee Cultivation in India

  • To bring world coffee producers, including Indian growers, out of this appalling situation, The World Coffee Producers Forum has decided to reach out to the coffee consuming countries around the world.

Coffee consumption drive

  • India, which has a domestic consumption of more than 5 million bags (of 60 kg each)
  • India will plan and roll out a coffee consumption campaign on behalf of global coffee growers who suffered huge financial losses on account of falling coffee prices and soaring labour cost.
  • As a precursor India will kick off a five-year coffee consumption campaign in collaboration with top global roasters including Nestle and Starbucks, cafe chains, other stakeholders and the GoI.
  • A special entity would be formed to execute this country-wide coffee campaign.
  • The plan is to get most of the funding from international roasters while ICO will play a catalyst’s role.
  • The campaign will address a population of 450 million, mostly school and college students, in India. C

Why this move?

  • The context is that coffee growers around the globe are going paupers and turning poverty stricken.
  • As per International Coffee Organization (ICO), 25 million farmers, including more than 3,00,000 in India, produce coffee in 60 counties.
  • Over 90% of these growers are smallholders and are forced to sell their coffees at a price much below the cost of production.
  • This scenario has led to socio-economic issues. These growers and their families have gone deeper into debts. Many even have abandoned their farms and migrated to cities.

Addressing demand-supply issue

  • There is a huge demand-supply imbalance that currently exists in the global coffee markets.
  • That’s the root cause for price fall. Increasing the consumption is the only way to counter this and therefore demand for the commodity in the global markets will increase.
  • The plan is to import excess coffees from Brazil, Colombia and Vietnam, provided the government of India waives off the import duty on coffee which is 105%.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap]Unmet farm challenge

Note4students

Mains Paper 3: Economic Development| Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers

From UPSC perspective, the following things are important:

Prelims level: Nothing as such.

Mains level: The news-card analyses decline in farm incomes and policy failure in reviving growth.


NEWS

CONTEXT

Policy still hasn’t adjusted itself to address the crisis of agricultural produce deflation.

Background

  • India’s agricultural output grew by hardly 2.7 per cent during the last October-December quarter.
  • That isn’t bad, if one takes the corresponding year-on-year increases for the preceding 10 quarters; these have ranged between 4.2 per cent and 7.5 per cent.

Reason for concerns

  •  The cause for concern is that these reasonably good production growth rates in “real” terms haven’t translated into higher farm incomes, which are a product of output multiplied by current prices.
  • According to the Central Statistics Office, the annual growth in “nominal” gross value added (GVA) from agriculture at current prices for October-December was 2.04 per cent.
  • Worse, we now have seven consecutive quarters of single-digit nominal growth rates — the target of doubling farmers’ income in five years requires an annual increase of 14.4 per cent.

Agriculture and deflation

  • The above data is reflective of a phenomenon rarely seen in India: Agricultural produce deflation.
  • That this isn’t a one-off thing is established by consumer food price inflation, too, ruling below overall retail inflation now for 29 consecutive months since September 2016.

Implications of deflation

  •  The implications are not just economic — low food prices, among other things, have allowed the RBI to soften its monetary policy stance and cut interest rates — but also political.
  • If farmers find incomes not rising or even falling despite bumper harvests, they are bound to vent their anger.
  • Managing agrarian unrest has, indeed, been the single biggest challenge for the government, especially after prices of the rabi crop planted after demonetisation crashed at the time of market arrivals in April-June 2017.
  • Prices haven’t looked up since.

Need for review

  • If prices aren’t rising because of a general economic slowdown and stagnant incomes — particularly among lower-decile households, whose elasticity of demand for food is the highest — this might be more episodic than structural. But even if that is so, agricultural policy needs a fundamental review.
  • The supply response of Indian farmers — their ability to increase production when prices go up — has improved significantly over the past two decades.
  • It has rendered the old approach of looking at the sector through the prism of shortages redundant.

Way Forward

  • Shortages are better left to be managed by market forces than imposing stockholding limits and export restrictions. Farmers suffer when their produce prices are low.
  • The next government, irrespective of the party heading it, should ensure that they aren’t denied the opportunity to make money when prices shoot up.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] Agriculture can alleviate employment woes

Note4students

Mains Paper 3: Economy | Development & employment

From the UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Need of focusing on the farming reforms for job growth and sustainable income opportunities for farmers


NEWS

CONTEXT

If only agriculture can be turned economically viable and ecologically sustainable, it can easily take away much of the pressure the country faces in creating additional employment.

Worsening Employment Situation in India

  • IN March 2018, an estimated 2.5 crore people, more than the population of Australia, applied for about 90,000 positions in the Indian Railways.
  • In 2015, over 23 lakh candidates, including 22 lakh engineers and 255 PhD holders, had applied for 368 posts of peon in the Uttar Pradesh state secretariat.
  • This is borne by the fact that India’s unemployment rate rose to a 45-year high during 2017-18.

Divergence in Economic Growth and Employment

  • India’s economy has been on a growth trajectory in the past four years – growing at an average exceeding 7 per cent per annum — the failure to provide jobs to millions of people is a clear-cut pointer that relying on a higher GDP is not the answer to creating more jobs.
  • A higher GDP does not translate into more employment opportunities.

Is migration from agriculture area to cities good?

  • Many economists term the migration from agriculture to be a welcome sign.
  • Going by the World Bank prescription,which was doled out back in 1996, India was directed to go for a population shift, translocating 40 crore people from rural to urban areas in the next 20 years, by 2015.
  • However, these 40 crore people being forced to migrate from the villages are ‘agricultural refugees’.
  • In the absence of alternative employment opportunities, these millions are swarming into the cities looking for menial jobs.
  • The general understanding is that those moving out of agriculture will be automatically absorbed by the manufacturing sector.
  • It was primarily for this consideration that the National Skill Development Policy aimed at reducing the population involved in agriculture from 52 per cent to 38 per cent by 2022.
  • But the reality is that during the period, agriculture saw an unprecedented rate of migration; manufacturing, too, slumped, causing a loss of 5.3 crore jobs.

The solution lies in agricultural reforms

  • Agriculture is the biggest employer, employing 52 per cent of the population as per the 2011 Census.
  • The resolution of the monumental employment crisis that India faces actually lies in the crop fields.
  • If only agriculture can be turned economically viable and ecologically sustainable, it can easily take away much of the pressure the country faces in creating additional employment.
  • it requires is a paradigm shift in economic thinking, which begins by first treating agriculture as an economic activity.
  • Making farm livelihoods economically sustainable should be the first step towards achieving the objective of ensuring gainful employment for marginalised communities.
  • Once agriculture becomes economically viable, it will reignite the rural-based industry, and in the process trigger a reverse migration.

Way Forward

  • Only agriculture has the ability to reboot the economy. The increased demand a refurbished agriculture will create will be phenomenal, leading to a spurt in industrial production.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Cabinet nod to setting up Agri-Market Infrastructure Fund

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: AMIF

Mains level: Expected outcomes from the AMIF


News

  • The Cabinet Committee of Economic Affairs Chaired gave its approval for the creation of Agri-Market Infrastructure Fund (AMIF).

Agri-Market Infrastructure Fund (AMIF)

  1. AMIF  is a corpus of Rs. 2000 crore to be created with NABARD for development and up-gradation of agricultural marketing infrastructure in Gramin Agricultural Markets and Regulated Wholesale Markets.
  2. It will provide the State/UT Governments subsidized loan for their proposal for developing marketing infrastructure in 585 Agriculture Produce Market Committees (APMCs) and 10,000 Grameen Agricultural Markets (GrAMs).
  3. States may also access AMIF for innovative integrated market infrastructure projects including Hub and Spoke mode and in PPP mode.
  4. In these GrAMs, physical and basic infrastructure will be strengthened using MGNREGA and other Government Schemes.
  5. The Scheme being demand driven, its progress is subject to the demands from the States and proposals received from them.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

PM Kisan scheme: Aadhaar optional for first installment; compulsory from second one

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: PM-KISAN

Mains level: PM-KISAN and its mandate


News

  • Farmers who wish to avail themselves of benefits under PM-KISAN must have Aadhaar identification to get the money from the second installment, which would be paid by July 2019.
  • However, this would not be compulsory for the first installment expected to be disbursed by March 31.

Pradhan Mantri Kisan Samman Nidhi

  1. Under this programme, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs. 6,000 per year.
  2. This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal installments of Rs. 2,000 each.
  3. Around 12 crore small and marginal farmer families are expected to benefit from this.

Aadhar will be mandatory

  1. States have been told to prepare a database of beneficiaries — small and marginal landholder farmer families in all villages — including whether they belong to SC/ST, bank account, mobile and Aadhaar details.
  2. For transfer of the first installment, Aadhaar number shall be collected wherever available.
  3. An alternate list of identification documents has also been provided, as options.
  4. However, for transfer of subsequent installments, Aadhaar number shall have to be compulsorily captured.

Land records

  1. States have also been told to update their land records, as that would serve as the basis for determination of landholding for beneficiaries.
  2. However, the secretary also said that the cut-off date for determination of ownership of land (as per land records) under the scheme was already over; the cut-off date was February 1, 2019.
  3. Changes thereafter in land records shall not be considered for eligibility of the benefit to the new land holder for next 5 years.
  4. Transfer of ownership on account of succession would, however, be allowed.

Role of States

  1. States would be given a maximum of 0.25% of funds transferred to beneficiaries in the first instalment to pay for their administrative expenses in the implementation of the scheme.
  2. That amount would drop to 0.125% for all further installments.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] No budget for farmers

Note4students

Mains Paper 3: Economic Development| Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers

From UPSC perspective, the following things are important:

Prelims level: Nothing as such.

Mains level: The news-card analyses the direct income support scheme for farmers as proposed in budget 2019, in a brief manner.


Context

  • According to some experts, the proposed Rs 6,000 annual direct income support to small and marginal farmers in Budget 2019 is a drop in the ocean.
  • States like Telangana and Odisha have done much better with their Rythu Bandhu and Kalia schemes respectively.

Issue

Major reforms needs to be undertaken

  • It must be seen that this Rs 72,000 crore as direct income support to farmers is nowhere near the annual loss of about Rs 2,65,000 crore that farmers have been suffering in recent years because of the low prices they have received due to restrictive marketing and trade policies.
  • Until major marketing reforms are initiated, there is no hope of doubling farmers’ real incomes by 2022-23.
  • The enhanced interest subvention only leads to diversion of funds from agriculture to non-agriculture uses.
  • There is ample evidence that in some states agri-credit is even more than the value of agri-output.
  • So, this scheme of interest subvention needs to be reviewed.

Expanding the reach of farmers to institutional credit

  • The real need is to expand the reach of farmers to institutional credit.
  • The Kisan Credit Card (KCC) was an innovative policy of the Vajpayee government, but the latest survey of NABARD on financial inclusion (2015-16) shows that only about 10 per cent of farmers are using these cards.
  • One needs to understand the constraints and find solutions to expand and deepen its coverage.

Making the price competitive and remunerative

  • The schemes for cow protection and upgrading their breeds and having a separate outfit for fisheries are steps in the right direction, but they cannot make any difference to the current problems faced by farmers.
  • It will take years before any of these schemes can deliver.
  • Increasing milk production, without its pricing being competitive and remunerative to farmers, may not do much benefit to farmers.

Targeting the idea of income support

  • However, there is a need to know first how much of India’s population is poor.
  • There is no robust figure from the government side in the last five years.
  • Following the Tendulkar poverty line, the previous government had come up with an estimate of about 22 per cent poverty in the country in 2011.
  • It was contested by many and later, the Rangarajan Committee had put it at 30 per cent.
  • The World Bank’s poverty clock puts it at 5.5 per cent.
  • Even if one thinks that roughly one-fifth of India needs income support — say Rs 5,000 per month — the bill will amount to about Rs 3.5 lakh crore.

Way Forward

  • The income support scheme is doable if the food subsidies and MGNREGA are drastically pruned and targeted to this bottom 20 per cent of population.
  • Food subsidies and MGNREGA are costing the government more than 2.2 lakh crore, and a sizeable part of this is either lost in leakages or is not utilised productively.
  • Similarly, fertiliser subsidies can also be made through direct income support to farmers even those with holdings up to the size of four hectares.
  • Gradually, the states can be encouraged to put even power subsidy through direct income transfer and charge the market price for power, recovering at least its cost of supply.
  • These can then be fundamental reforms, switching from the price policy approach to income policy approach, for helping the small and marginal farmers and poor consumers.
  • The current problems of the peasantry are not on the supply, but on the demand side; it is about low prices.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Pradhan Mantri Kisan Samman Nidhi

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: PM-KISAN

Mains level: PM-KISAN and its mandate


News

  • To provide an assured income support to the small and marginal farmers, the Government is launching the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN).

Pradhan Mantri Kisan Samman Nidhi

  1. Under this programme, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs. 6,000 per year.
  2. This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal installments of Rs. 2,000 each.
  3. This programme will be funded by Government of India.
  4. Around 12 crore small and marginal farmer families are expected to benefit from this.
  5. The programme would be made effective from 1st December 2018 and the first installment for the period upto 31st March 2019 would be paid during this year itself.
  6. It will entail an annual expenditure of Rs.75, 000 crore.

Expected Outcome

  1. It would not only provide assured supplemental income to the most vulnerable farmer families, but would also meet their emergent needs especially before the harvest season.
  2. It would pave the way for the farmers to earn and live a respectable living.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] For the farmer, things to do

Note4students

Mains Paper 3: Economic Development| Agriculture| Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers.

From UPSC perspective, the following things are important:

Prelims level: Nothing as such.

Mains level: The news-card analyses what are some of the urgent requirements for increasing the prosperity of India’s small and marginal farmers, in a brief manner.


Context

  • According to Agriculture Census 2015-16, though more than 86 per cent farmers are small and marginal in India, they have belied the general assumption that farm size and productivity have an inverse relationship.

Issue

  • Despite small farm sizes, with better quality inputs and hard work combined with the scientific management of farming, productivity and production have gone up.
  • However, ensuring food security for the country through their hard work and increased production has not meant greater income and prosperity for the farmers.
  • There are several possible solutions being discussed in the policy circles as to how to increase the income of farmers.

Three fundamental sutras for a farmer’s prosperity

  • Reduction in cost of cultivation,
  • increase in productivity and production, and
  • remunerative price for produce

Important determinants/factors that can help increase Farmer’s income

  1. Price of seeds
  • The price of seeds is of critical importance in agriculture
  • Seed is the most important input as it is the carrier of scientific research and advancement in agriculture.
  • Newer varieties are high yielding and also pest and disease resistant.
  • Therefore, it is necessary that the newer seeds are affordable and accessible for the farmers.
  • Farmers go for hybrid seeds of fruit and vegetables and many cereals like paddy, jowar, bajra, maize, etc as these give better yield than the open-pollinated varieties.
  • The price of hybrid seeds has been going up and in the case of vegetables, it is actually prohibitive.
  • This is where the role of research becomes important.
  • Scientists must develop open pollinated varieties with better yields.
  • Farmers can grow seeds for their own use from the open-pollinated varieties whereas they have to buy hybrid seeds every year as these are terminal in nature.

2. Hybrid varieties developed through public-funded research should be available to the public sector institutions without paying any royalty amount on a non-exclusive basis.

  • Currently, the public sector units also have to pay a royalty for new discoveries by scientists of public sector institutions, achieved through public-funded research.
  • Scientists can be allowed to get a royalty from the private sector in order to incentivise them to continue doing high-end research but for the public sector, it should come free in order to make the fruits of science available to the farmers at a reasonable and affordable price.
  • In fact, this principle should apply to all public-funded research.

3. Access to formal credit should be made available to all farmers

  • Presently, the distribution of agricultural credit is severely skewed.
  • In 2017-18, with 18.68 per cent of the gross cropped area, the southern region took 42.53 per cent of agriculture credit.
  • Whereas the central and eastern regions got just 14.43 per cent and 8.10 per cent of agriculture credit with 27.26 per cent and 14.65 per cent of the gross cropped area, respectively.
  • Experts have been arguing that agricultural credit should be based on land holding rather than the scale of finance of crops.
  • This will bring equity in the flow of agri-credit and infuse capital in the backward regions in the agriculture sector.
  • This will also result in better uptake of the crop insurance scheme.
  • Farmers who have to access credit from the informal sector at usurious rates or fettering conditions can hardly become self-sustainable.
  • Even with the current provisioning by the central government for agriculture credit, it should be possible to provide Rs 1 lakh per hectare as crop loan to all farmers at a reduced rate of interest.
  • Beyond this, one can take credit on normal bank rates.

4. Direct investment subsidy to the farmers

  • Many states have recently opted for direct investment subsidy to the farmers.
  • This has been done on a flat area basis, without linking it to any particular input.
  • Rather than providing cash transfer on a flat basis of the area of landholding, this direct transfer can be designed to incentivise the desired cropping pattern.
  • While agricultural credit can be linked to the landholding and made crop neutral, direct investment subsidy can be linked to the cropping pattern to ensure demand-led cultivation and the judicious usage of natural resources.
  • Through direct subsidy transfer, it should be possible to motivate the farmer to grow millets in a water-scarce area rather than paddy or sugarcane, which further deplete the water table.
  • Thus, through deft manipulation of credit and subsidy, it should be possible to make cultivation environmentally sustainable and demand-led based on forecasts of consumption pattern.
  • This will help farmers to obtain better and remunerative prices.

5. Allowing the leasing of land

  • Allowing the leasing of land will help find out the real tiller of land and it will be possible to extend the benefits of various schemes to the real cultivator rather than the landowner.
  • Today, most sharecroppers are not able to access the various benefits extended by the government whether it is crop insurance, accident insurance or different input subsidies.
  • This will also make the scheme of direct investment subsidy more efficient and effective.

6. The unviable size of landholdings in most states

  • As per Agriculture Census data, the average landholding size in India came down from 2.28 ha in 1970-71 to 1.08 ha in 2015-16.
  • In some of the densely populated states like Uttar Pradesh and Bihar, the average landholding size is 0.73 ha and 0.39 ha, respectively.
  • This implies that more than 50 per cent of farmers have less than 0.73 hectares of land in UP and less than 0.39 hectares of land in Bihar respectively.
  • If we take out the large farmers, then it will become obvious that most of the farmers in UP and Bihar own less than one and a half acres of land.
  • With this landholding size, it is simply not possible to have a decent standard of living unless there are other avenues of additional income for the family.

Conclusion

  • Therefore, affordable inputs, access to credit and formal land-leasing are some of the urgent requirements for increasing the prosperity of India’s small and marginal farmers.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] Removing the roots of farmers’ distress

Note4students

Mains Paper 3: Economic Development| Agriculture| Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers.

From UPSC perspective, the following things are important:

Prelims level: Basic knowledge of Farmer’s distress.

Mains level: The news-card analyses the farmer’s distress issues and their possible solutions, in a brief manner.


Context

  • Recently, there has been active discussion on the strategies addressing farm distress.
  • There are reports that the ‘interim Budget’ may focus on the farm sector among other things.

Background

  • In the present context, agrarian distress is mainly in terms of low agricultural prices and, consequently, poor farm incomes.
  • Low productivity in agriculture and related supply side factors are equally important.
  • An issue that is connected is the declining average size of farm holdings and the viability of this size for raising farm incomes.

Issues and Possible solutions

  1. Prices and incomes
  • Prices play a key role in affecting the incomes of farmers.
  • Even during the Green Revolution, along with technology and associated packages, price factor was considered important.
  • In the last two years, inflation in agriculture was much lower than overall inflation.
  • The implicit price deflator for Gross Value Added (GVA) in agriculture was 1.1% while it was 3.2% for total GVA in 2017-18.
  • The advance estimates for 2018-19 show that the implicit deflator for GVA in agriculture is 0%, and 4.8% for total GVA.
  • Agriculture GVA growth was at 3.8% for both nominal prices and constant prices in 2018-19, giving the price deflator of 0%.
  • The consumer price index (CPI) also shows that the rise in prices for agriculture was much lower than general inflation in recent years.
  • Market prices for several agricultural commodities have been lower than those of minimum support prices (MSP).
  • All these trends show that the terms of trade to be moving against agriculture in the last two years.

Declining market price

  • When output increases well beyond the market demand at a price remunerative to producers, market prices decline.
  • In the absence of an effective price support policy, farmers are faced with a loss in income, depending on how much the price decline is.
  • The ‘farm distress’ in recent years has been partly on account of this situation, as the loss of income is beyond the ability, particularly of small farmers, to absorb.
  • It is the success in increasing production that has resulted in this adverse consequence.

Schemes to address this problem

  • A few schemes have been suggested to address the problem of managing declining output prices when output increases significantly.

(a) Price deficiency compensation scheme: It is one such mechanism which amounts to paying the difference between market price and the MSP.

(b) Open procurement system scheme: It has been in vogue quite effectively in the case of rice and wheat, where procurement is open ended at the MSP.

(c) Limited procurement scheme for price stabilisation:

  • A ‘price deficiency’ scheme may compensate farmers when prices decrease below a certain specified level. However, market prices may continue to fall as supply exceeds ‘normal demand’.
  • Under this scheme, the government will procure the ‘excess’, leaving the normal production level to clear the market at a remunerative price.
  • Thus, procurement will continue until the market price rises to touch the MSP.
  • The suggested ‘limited procurement system’ will not work if the MSP is fixed at a level to which the market price will never rise.
  • There are costs involved which will go up as production increases above the average level.
  • The government can sell the procured grain in later years or use them in welfare programmes.

(d) Rythu Bandhu and KALIA scheme

  • Some States have introduced farm support schemes, examples being the Rythu Bandhu Scheme (Telangana) and the Krushak Assistance for Livelihood and Income Augmentation (KALIA) scheme (Odisha).
  • One problem with the Telangana model is that it does not cover tenants, who are the actual cultivators.
  • These schemes are income support schemes which will be in operation year after year.
  • Thus, raising the MSP, price deficiency payments or income support schemes can only be a partial solution to the problem of providing remunerative returns to farmers.

Sustainable solution: Reforming Agricultural Markets

  • A sustainable solution is market reforms to enable better price discovery combined with long-term trade policies favourable to exports.
  • The creation of a competitive, stable and unified national market is needed for farmers to get better prices.
  • Agricultural markets have witnessed only limited reforms.
  • They are characterised by inefficient physical operations, excessive crowding of intermediaries, and fragmented market chains.
  • Due to this, farmers are deprived of a fair share of the price paid by final consumers.
  • For better price for farmers, agriculture has to go beyond farming and develop a value chain comprising farming, wholesaling, warehousing, logistics, processing and retailing.

2. Low productivity of Indian agriculture

  • Basics such as seeds, fertilizers, credit, land and water management and technology are important and should not be forgotten.
  • Similarly, investment in infrastructure and research and development are needed.

Improving Water use efficiency

  • Water is the leading input in agriculture.
  • More than 60% of irrigation water is consumed by two crops: rice and sugar cane.
  • It is not investment alone but efficiency in water management in both canal and groundwater that is important.
  • India uses upto three times the water used to produce one tonne of grain in countries such as Brazil, China and the U.S.
  • This implies that water-use efficiency can be improved significantly with better use of technologies that include drip irrigation.
  • Yields of several crops are lower in India when compared to several other countries.
  • Technology can help to reduce ‘yield gaps’ and thus improve productivity.
  • Government policies have been biased towards cereals particularly rice and wheat.
  • There is a need to make a shift from rice and wheat-centric policies to millets, pulses, fruits, vegetables, livestock and fish.

3. Land size: shrinking size of farms

  • Another major issue relates to the shrinking size of farms which is also responsible for low incomes and farmers’ distress.
  • The average size of farm holdings declined from 2.3 hectares in 1970-71 to 1.08 hectares in 2015-16.
  • The share of small and marginal farmers increased from 70% in 1980-81 to 86% in 2015-16.
  • The average size of marginal holdings is only 0.38 hectares (less than one acre) in 2015-16.
  • The monthly income of small and marginal farmers from all sources is only around ₹4,000 and ₹5,000 as compared to ₹41,000 for large farmers.
  • Thus, the viability of marginal and small farmers is a major challenge for Indian agriculture.

Lack of opportunities in the non-farm sector

  • Many small farmers cannot leave agriculture because of a lack of opportunities in the non-farm sector.
  • They can get only partial income from the non-farm sector.
  • In this context, a consolidation of land holdings becomes important to raise farmer incomes.

Consolidation of land holdings

  • Experts had argued that compulsory consolidation of land holdings alongside land development activities could enhance the incomes/livelihoods of the poor in rural areas.
  • Unfortunately, there is little discussion now on land fragmentation and consolidation of farm holdings.
  • We need to have policies for land consolidation along with land development activities in order to tackle the challenge of the low average size of holdings.
  • Farmers can voluntarily come together and pool land to gain the benefits of size.
  • Through consolidation, farmers can reap the economies of scale both in input procurement and output marketing.

Conclusion

  • Farmers’ distress is due to low prices and low productivity.
  • The suggestions made above, such as limited procurement, measures to improve low productivity, and consolidation of land holdings to gain the benefits of size, can help in reducing agrarian distress.
  • However, a long-term policy is needed to tackle the situation.

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] A look at how the poorest fared under the present government

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: APMC Act, Economic survey

Mains level: Rural distress and ways to resolve it


Context

Data Paradox on Rural distress-

  1. The data on wages/incomes of manual casual workers clearly suggests that not only have they seen a secular deceleration in growth rates of wages since this government took over, but also that there does not appear to be any sign of these improving, despite the signs of recovery suggested by the aggregate gross domestic product (GDP) numbers.
  2. The data on wages from the Labour Bureau based on the Wage Rates In Rural India series, it provides wage data for various occupations, it is safe to assume that general agriculture labour and general non-agricultural labour occupational groups are representative of the two categories of casual workers.

Real wage growth of various categories of rural workers since 2014

  1. Since May 2014, real wages of agricultural labourers have grown at the rate of 0.77% per annum until October 2018, whereas it has grown only at 0.02% per annum for non-agricultural labourers.
  2. For construction workers, who form among the largest group of workers outside agriculture, real wages during the same period has declined by 0.24% per annum.
  3. For all agricultural occupations together, the growth rate of real wages during this period is 0.55% per annum.
  4. Since November 2016, real wages of casual workers are almost stagnant with almost no growth.
  5. It is important to note that the current spell of stagnation in real wages is the longest and the worst in the past three decades.
  6. Clearly, the crisis in the countryside is not just for the farmers who cultivate but also for wage workers who depend on availability of jobs in agriculture and outside agriculture.

Why does rural India continue to witness stagnant and declining real wages?

  1. Primarily because the agrarian economy, which drives the rural economy, has been under severe stress.
  2. Declining crop prices continue to remain a worry for agricultural income, with wholesale and retail prices for most crops showing a declining trend in the past five months.
  3. Even non-food crops have gone through a price collapse.
  4. Non-agricultural sector of the rural economy is doing worse than the agricultural economy.
  5. A large part of it is also because of the after-effects of demonetization and goods and services tax, which continue to affect the rural non-farm economy.

Contrary to the rosy picture

  1. The trends in wage growth are clearly contrary to the rosy picture of a recovering and buoyant economy projected by the government and suggests a far more serious crisis in rural areas than reflected by the agrarian crisis.
  2. For instance, Farmers from different parts of the country are knocking at the doors of Parliament in Delhi.

How to reconcile two diverging trends?

  1. While it is possible that wages continue to decline as overall growth rates continue to rise, it does imply that the growth rate is not inclusive and has bypassed the poorest sections.
  2. It certainly points towards a trend of increasing impoverishment and rising inequality, both of which are not good for the economy.
  3. However, it is also a strong indicator that the underlying factors, which caused demand deflation in rural areas leading to rural distress, continue to remain strong and relevant.

Way Forward

  1. Clearly, there is very little to suggest that either the growth has benefited the rural economy or that recent growth has reduced the extent of rural distress.
  2. This is not just a statistical issue, but is at the core of the promises made by this government to bring in improvements in the lives and livelihoods of the poorest.
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