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.

[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.

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

[Explained] Why do farmers need more than loan waivers

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Alternatives to farm loan waivers


News

Farm Loan Waivers: A business usual with elections

  1. After the recent Assembly elections, the new governments in Rajasthan, Madhya Pradesh and Chhattisgarh announced farm loan waivers, a key promise.
  2. Last year, Uttar Pradesh, Maharashtra, Karnataka and Tamil Nadu announced waivers as farmers were in distress.
  3. Andhra Pradesh, Odisha and Haryana are likely to announce sops ahead of elections.

A populist measure yet ineffective

  1. According to SBI Research, around ₹70,000 crore will be spent on farm debt waivers till May 2019.
  2. The clamor for farm loan waivers has been growing, but this “’populist” measure alone cannot be a permanent solution to mounting agrarian distress.
  3. Since the post-reforms policy regime in 1991, agriculture has been facing multiple crises.
  4. The rising pressure of population on land and agriculture, besides sluggishness in the shifting of workforce away from agriculture, has adversely affected small and marginal farmers.

Waiver: Not an electioneering tool

  1. Rising costs drop in income and increasing incidence of indebtedness among small and marginal farmers manifested in a spate of suicides over the years.
  2. Experts believe it is the responsibility of the Union government to waive farm loans, but insist that it is only a “stop-gap” arrangement.
  3. Until policies are not tweaked in favour of farmers to address their risks related to production, weather-disaster, price, credit and market, the loan waiver will become a periodical instrument for temporary relief.
  4. A large number of small and marginal farmers are distressed as the current system of market institution doubly squeezes them, in input as well as output.

Govt stand on Farm Loan Waivers

  1. The NITI Aayog recently pointed out that waiving loan is not a lasting answer to the problem of agrarian distress as this step only helps a small number of farmers.
  2. The number of farmers, especially the small and marginal who avail themselves of institutional loans, are very few.
  3. This is the reason that even after spending huge sums of money on loan waivers not even half the farmers are benefiting.
  4. In some of the States, not even 25% of farmers get loans from institutional sources.
  5. A NITI Aayog study had also highlighted the fact that in some States, about three-fourths of the farm loans were being used for consumption instead of meeting agricultural needs.
  6. The RBI’s study concluded that debt relief helps in reducing household debt but there appears to be no evidence of increase in investment and productivity of beneficiary households.

Policy Measures needed at the moment

  1. As a short-term measure, farmers need to be freed of the tyranny of the middlemen by reforming the rent-seeking, anti-farmer commission agent (arthiya) system.
  2. The inter-locking of the credit and the output markets is a major factor for the crises of indebtedness.
  3. The system of making payments through the commission agent needs to be dismantled to break the credit-crop nexus.
  4. For a permanent solution to agrarian distress, the government should give agro-processing industry a policy push to pull rural people out of agriculture.
  5. The subsidies and tax concessions which have been offered or given to the corporate sector should be given to rural entrepreneurs who are willing to start manufacturing firms that will process local raw materials and employ rural labour.

Way Forward

  1. In the long run, there’s an urgent need for integration of agriculture with industry, and that too with the involvement of the local workforce in such a manner that surpluses should be invested locally.
  2. The transformation is possible if primary producers are integrated with both manufacturing and marketing activities for reaping surpluses generated by them.

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

[op-ed snap] The shackled Indian farmer

Note4students

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

From the UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Problems in Indian agricultural setup and solutions for these problems


Context

Woes of farmers rising

  1. Farming in India, mostly done on a small scale, without much technology, or insurance, is one of the most difficult jobs
  2. Farmers deal with tens, if not hundreds, of variables and uncertainty, and still manage
  3. The problem is that farmers are not allowed to use all their resources and engage with global markets

Ways in which Indian farmers are shackled

  • Market limitations
  1. The government has over the years, under the guise of protecting farmers, severely limited the market for their produce
  2. This is institutionalized through the agriculture produce market committee (APMC)
  3. It is obvious that a larger market for any farmer means that more consumers can compete for the produce enabling better prices
  4. However, the APMC prevents this, by dividing the market geographically into different regions and insisting that a farmer can only sell to the mandi in his region
  5. Further, traders in a mandi need a licence
  6. This prevents consumers, wholesale and retail food companies from buying directly from the farmer
  7. Mandi licences are naturally given only to those with political patronage, often used as a side business for politicians
  8. The farmer receives depressed prices, while the final consumer pays a high price for the same produce
  • Minimum support price (MSP)
  1. MSP has been impoverishing farmers and consumers for decades
  2. The government promises high prices, to “help” farmers, but is not able to deliver on those promises by actually buying all the produce
  3. Farmers produce more expecting a high MSP and are forced to dump their produce when MSPs are not delivered
  4. Indian farmers lament when they have a bumper crop as prices and MSP fall
  5. One reason for this is also that India has either heavily regulated or banned futures trading in agriculture
  6. Futures trading helps smooth cycles in the market
  7. However, Indian farmers are not allowed to participate in this kind of market and so they cannot use the bumper crop in a given year to prevent the downside from bad crops in other years
  • The absence of land market
  1. Farmers have been denied a market for land, their biggest asset
  2. In several cases, farmers are not allowed to sell their land to non-farmers, and they cannot themselves easily change the use of their land
  3. This has limited and depressed the market for agricultural land, and the price agricultural land can fetch
  4. Farmers, thus, are unable to exit farming
  • Land titling
  1. Land titling records are such a mess and farmers face additional uncertainty
  2. Goons may possess land illegally in areas where there are no good records
  3. Worse, without good land records, the ability to raise credit using land as collateral is limited
  4. The government has also, with good intention, regulated local moneylenders by limiting the interest rates, further reducing access to credit
  5. This means farmers essentially only have state-owned banks and cooperatives to turn to for credit and are at the mercy of government policies to avail farm loans
  • Controlled inputs
  1. The inputs used by farmers are severely controlled
  2. Farmers are prevented from buying most of their inputs in market settings, because of statutes such as the Essential Commodities Act
  3. The government, having killed the private market for any of these inputs, forces the farmers to now beg for and rely on subsidies
  4. The government, in turn, promises free electricity and water, which are unreliable because of the massive shortages caused without a price system
  5. Farmers would rather pay for the reliable supply of water and electricity than a free subsidy, but in most input areas, private players cannot enter and sell to farmers
  • No experiments in new technologies
  1. Farmers are not allowed to experiment with new technologies used across the world
  2. Whether this is technology in fertilizer, machinery, or pesticides, the Indian government does not allow it
  3. So, farmers must wait for a state-ordained “green revolution”, where new technology is introduced once a century
  4. On the other hand, farmers could be creating their own mini-revolutions every season if they could experiment with global technologies
  5. The most problematic is the partial ban on genetically modified (GM) seeds
  6. A lot of the new GM seeds are more resistant to pests and bacteria, and reduce the need for other inputs such as pesticides, water and fertilizer, with potential for huge gains for farmers
  7. Any experimentation is done illegally and a black market has emerged for GM seeds, harming both farmers and produce

Way forward

  1. Farmers don’t need the help the government has provided over seven decades
  2. The government’s “help” is the cause of the distress
  3. Farmers actually need the government to get out of their way

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

[pib] FAO Council approves India’s proposal to observe International Year of Millets in 2023

Note4students

Mains Paper 3: Agriculture | Major crops cropping patterns in various parts of the country

From UPSC perspective, the following things are important:

Prelims level: Importance of Millets, FAO

Mains level: Agronomics of Millets


News

  • The 160th session of the Food and Agriculture Organisation (FAO) Council, currently underway in Rome, approved India’s proposal to observe an International Year of Millets in 2023.

What are Millets?

  1. Millets are a group of highly variable small-seeded grasses, widely grown around the world as cereal crops or grains for fodder and human food.
  2. They are important crops in the semiarid tropics of Asia and Africa.
  3. The crop is favored due to its productivity and short growing season under dry, high-temperature conditions.
  4. They are highly tolerant of drought and other extreme weather conditions and have a similar nutrient content to other major cereals.

Benefits of Millets consumption

  1. Millets are nutritionally superior to wheat and rice owing to their higher levels of protein with more balanced amino acid profile, crude fibre and minerals such as Iron, Zinc, and Phosphorous.
  2. It provides nutritional security and act as shield against nutritional deficiency, especially among children and women.
  3. Pellagra (niacin deficiency), Anaemia (iron deficiency), B-complex vitamin deficiency can be effectively tackled with intake of less expensive but nutritionally rich food grains like millets.
  4. It can also help tackle health challenges such as obesity, diabetes and lifestyle problems as they are gluten free and also have low glycemic index and are high in dietary fibre and antioxidants.

International Year of Millets in 2023

  • This will enhance global awareness to bring back these nutri-cereals to the plate, for food and nutrition security and hence increase production for resilience to challenges posed globally by climate change.
  • This international endorsement comes in the backdrop of India celebrating 2018 as the National Year of Millets for promoting cultivation and consumption of these nutri-cereals.
  • This is further supported by increase in Minimum Support Prices (MSP) of millets.

Other approvals by FAO

  1. The FAO Council also approved India’s membership to the Executive Board of the United Nations World Food Program (WFP) for 2020 and 2021.
  2. The World Food Programme is the food-assistance branch of the United Nations and the world’s largest humanitarian organization addressing hunger and promoting food security.
  3. According to the WFP, it provides food assistance to an average of 91.4 million people in 83 countries each year

With inputs from:

[pib] India proposes UNs FAO to declare an upcoming year as “International Year of Millets”

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

[pib] Agriculture Export Policy, 2018

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy

From UPSC perspective, the following things are important:

Prelims level: Particulars of Agriculture Export Policy, 2018

Mains level: Measures towards doubling farmer’s income


News

  • The Union Cabinet has approved the Agriculture Export Policy, 2018 along with establishment of Monitoring Framework at Centre with Commerce as the nodal Department to oversee the implementation of Agriculture Export Policy.

Agriculture Export Policy, 2018

  1. In order to provide an impetus to agricultural exports, the Government has come out with this policy which is aimed at doubling the agricultural exports and integrating Indian farmers and agricultural products with the global value chains.
  2. The Policy has the vision to harness export potential of Indian agriculture, through suitable policy instruments, to make India global power in agriculture and raise farmers ‘income.

Objectives

  1. To double agricultural exports from present ~US$ 30+ Billion to ~US$ 60+ Billion by 2022 and reach US$ 100 Billion in the next few years thereafter, with a stable trade policy regime.
  2. To diversify our export basket, destinations and boost high value and value added agricultural exports including focus on perishables.
  3. To promote novel, indigenous, organic, ethnic, traditional and non-traditional Agri products exports.
  4. To provide an institutional mechanism for pursuing market access, tackling barriers and deal with sanitary and phyto-sanitary issues.
  5. To strive to double India’s share in world agri exports by integrating with global value chain at the earliest.
  6. Enable farmers to get benefit of export opportunities in overseas market.

Elements of Agriculture Export Policy

The recommendations in the Agriculture Export Policy have been organised in two categories – Strategic and Operational – as detailed below:

I. Strategic

  • 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 export
  • Marketing and promotion of “Brand India

II. Operational

  • Attract private investments into production and processing
  • Establishment of strong quality regimen
  • Research & Development
  • Miscellaneous

Other Provisions

  1. The policy has been designed with extensive consultations with states that have agreed to remove a lot of restrictions, including mandi taxes, and APMC (Agricultural Produce Market Committee)-related conditions.
  2. Policy for sensitive farm goods such as onions will be reviewed from time to time.

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

[op-ed snap] Making commodity options work for farmers

Note4students

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

From the UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The flaws in options trading instruments introduced in India and the need for American styled market development


Context

Options trading for commodities introduced in India

  1. Recently introduced options trading instruments on commodity trading platforms are expected to be low-risk hedging tools for traders and farmers while helping improve overall growth in trading volumes in the derivatives market
  2. However, the type of options contracts introduced are European in style, which allows “right to exercise” only on the day of expiry
  3. This is strikingly at variance compared with options contracts traded on global commodity exchanges, which are American in nature, allowing an option holder to exercise his right to buy or sell the underlying commodity instrument anytime during the option’s life term

Flaws and their effects

  1. The distant month contracts are not well integrated with spot market prices, leaving farmers with price forecasts for only one month
  2. But crops sown in India are of longer duration
  3. For instance, in Punjab and Haryana, wheat sowing starts in October and harvest commences in April, meaning farmers need at least five to six month of active futures month contracts with fairly high volumes in September/October itself so that they can have reliable price forecasts
  4. For processors, too, having advance price forecasts helps in the better planning of procurement and sales operations, while reducing uncertainty in income

How does price volatility work?

  1. The volatility of the underlying asset price, which helps in measuring the speed of achieving a certain targeted price, is a key factor in deciding premium values for options contracts
  2. When volatility is high, options premiums are relatively expensive as there is a high chance of underlying asset prices going through the exercise price; and when volatility is low, options premiums are relatively cheap

Impact on futures contracts

  1. Commodity prices that are determined by the pure interaction of supply-demand dynamics can exhibit different levels of volatility in different years due to differences in supply-demand balances
  2. Inter-annual volatility may also differ due to seasonal differences in supplies and demand, which might cause different commodity futures contracts even within a calendar year to have different volatility levels
  3. Once an investor decides to buy or write an option on a futures contract, he may need to have an appropriate, volume-driven volatility value to arrive at a premium price for the option, which can be calculated if we have enough high-volume traded data for that particular futures contract
  4. However, due to the short life of existing futures contracts, appropriate premiums values may not be calculated

Way forward for India

  1. Introduction of long-maturity futures contracts, with a life anywhere between 24 and 36 months, and eliminating all contracts that face expiry during the respective crop growing season while reducing total contracts to less than four per commodity per calendar year may help
  2. It is American options that provide greater flexibility to farmers, processors and other hedgers who need to take long-term risk decisions, by allowing the early exercise of option contracts
  3. American options are also found to better reflect market conditions like high volatility in underlying asset prices, the requirement of a longer duration for the maturity of the contracts, compared with currently traded European-style option contracts

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

[pib] Network for Development of Agricultural Cooperatives in Asia and the Pacific (NEDAC) sets agenda for Cooperatives Trade

Note4students

Mains Paper 2: IR | Important International institutions, agencies & fora, their structure, mandate

From UPSC perspective, the following things are important:

Prelims level: WCO and its mandate

Mains level: Increasing farmers income through cooperative trade


News

  • The General Assembly of Network for Development of Agricultural Cooperatives in Asia and the Pacific (NEDAC) was held in New Delhi.

 ‘Cooperatives to Cooperative Trade’ partnership in NEDAC

  1. The general assembly of 22 prominent cooperative organizations from eight countries hasdecided to focus on C2C and capacity development to meet challenges of climate change as transformative cooperatives.
  2. Its aim would be to bring about an increase in farmers income and raise their economic standard by bringing cooperative trade in the mainstream and enhance cooperative professionalism.

About NEDAC

  1. NEDAC was set up in 1991 by the United Nations’ Food and Agriculture Organisation (FAO), the International Cooperative Alliance (ICA) and the International Labour Organisation (ILO).
  2. NEDAC is a unique organization encompassing mix of Government and non Government organizations created by FAO for synergizing policies and programmes of government and cooperative institutions at country level.
  3. NEDAC sensitizes Governments in the region on the role of agricultural cooperatives in promoting agricultural and rural development to ensure rural food and livelihood security for millions of people in Asia and Pacific.

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

New index to check ease of doing agri-business

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: Particulars of the Ease of Doing Agri-Business Index

Mains level: Read the attached story


News

Rewarding high-performing States

  1. States may soon start receiving extra funding for the Agri Ministry’s flagship schemes on the basis of their performance in encouraging agri-business
  2. This is especially with regard to marketing, land and governance reforms.
  3. An online dashboard to track State performances will be developed by the year-end, and a national level workshop to roll out the Index will be held in January 2019, according to the concept note’s timelines.

Ease of Doing Agri-Business Index

  1. The Centre expects to roll out a new Ease of Doing Agri-Business Index which will rank the States on the basis of such reforms, as well as their investment in agriculture, increased productivity, reduction of input costs, and risk mitigation measures.
  2. The Agri Ministry will consider rewarding the higher performing States both in absolute and incremental terms by linking the performance with allocation from flexi funds made available in various flagship.
  3. NITI Aayog already brings out a Agricultural Marketing and Farm Friendly Reforms Index, rating States on their implementation of such reforms.
  4. In the initial edition of that Index in 2016, Maharashtra stood first in the rankings, followed by Gujarat.
  5. The proposed index has a wider ambit, but the focus is still on reforms, with marketing reforms (25%) and governance and land reforms (20%) carrying almost half of the weight of the parameters in its scoring system.

Process-oriented Parameters

  1. The parameters are process-oriented, and are meant to evolve as and when new reforms or initiatives are proposed, says the concept note.
  2. As agriculture is a State subject, the success of policies and reform initiatives proposed at the Centre is dependent on implementation by the States.
  3. To ensure that reform agenda of the government is implemented at a desired pace by all State governments, there is a need to develop a competitive spirit between the States.

Other Parameters: Soil health cards

  1. Another major parameter which States will be rated on is their success in reducing the cost of farm inputs (20%) by distributing soil health cards and encouraging organic farming and micro-irrigation.
  2. Risk mitigation measures such as crop and livestock insurance carry a 15% weightage, while increased productivity and investment in agriculture carry a 10% weight each.

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

[pib] Global Agriculture Leadership Summit 2018

Note4students

From UPSC perspective, the following things are important:

Prelims level: 11th Global Agriculture Summit 2018

Mains level: Not Much


News

11th Global Agriculture Summit 2018

  1. It aims to provide the platform towards facilitating farmers connect with the technologies, markets, industry, institutions and the Governmental programs.
  2. It is organised by Indian Council of Food and Agriculture (ICFA).
  3. The event takes the opportunity to discuss the constraints and opportunities for a global momentum towards making agriculture high-tech, market linked and value added for best returns to farmers.
  4. ICFA is bringing together eminent personalities of Indian and global agriculture, food and agribusiness sectors on one platform on the event of 11th Global Agriculture Summit 2018.
  5. The experience will be combined with the presentation of 11th Global Leadership Awards and the launch of Agriculture Year Book 2018.

World Agriculture Prize 2018

  1. Indian Council of Food and Agricultureorganises World Agriculture Prize, to be presented annually to an individual or institution.
  2. It is awarded to a person for seminal role in transforming agriculture globally and saving the humanity from the curse of hunger.
  3. The World Agriculture Prize will be a single prize of $100,000 and will be launched with a special session, named “Swaminathan Global Dialogue on Climate Change and Food Security”.
  4. M S Swaminathan was awarded the 1st World Agriculture Prize this year .

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

[pib] Agmark Online System

Note4students

Mains Paper 3: Agriculture | E-technology in the aid of farmers

From UPSC perspective, the following things are important:

Prelims level: Agmark Online System

Mains level: Read the attached story.


News

Agmark Online System

  1. Minister of Agriculture and Farmers’ Welfare has launched the online software for Agmark.
  2. The application processes related to Agmark certification are being done online by the Directorate of Marketing & Inspection (DMI).
  3. The process of application will be simple, quick, transparent and 24×7.
  4. The Agmark online system is being implemented across the country to conduct quality control functions.
  5. Through the Agmark online system, certificate of authorisation (domestic), permission of printing press, permission of laboratories (domestic) and services related to laboratory information management system will be provided online.

Move for speedy certification

  1. The existing procedures for Agmark certification were in physical form and time consuming.
  2. The use of modern technologies by the National Informatics Center has made these processes easy, reliable and cost effective by providing online electronic mode.
  3. In the new online application system, there are provisions for online receipt of fees from the applicants.
  4. Payment will be received in digital mode through bharatkosh.gov.in website.

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

Andhra launches e-Rythu to boost cashless farm ecosystem

Image Source

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: Particulars and utility of the app.

Mains level: AP and Telangana have always led the way for welfare of its farmers through various first-of-its kind initiatives in India.


News

e-Rythu App

  1. The government of Andhra Pradesh has launched a mobile platform, e-Rythu (e-farmer in Telugu) which will enable small-scale farmers to market their produce at reasonable prices.
  2. It aims to digitize agriculture marketplaces, payments, workflows, and provide farmers an easy and secure way to buy, sell and receive payments for agricultural products via their feature phones.
  3. The platform has been developed by MasterCard Labs for Financial Inclusion in Nairobi, Kenya, and has been customized for India use by the Labs team based at Pune.

Utility of the App

  1. The app will help farmers looking to sell their produce to connect with the right buyers more efficiently in local language and receive the best possible prices.
  2. Due to the small scale, and long travel distance from the places where they sell, most small and medium farmers in Andhra Pradesh suffer income losses.
  3. Additionally, since these farmers do not have a formal credit history, it is difficult for them to access any formal financial services.
  4. It will make horticulture markets more transparent for sellers, buyers, and other stakeholders, and pave the way for financial inclusion of millions of small and medium farmers in the state.

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

[pib] Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA)

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: PM – AASHA and its components

Mains level: Various support schemes for farmers and their effectiveness


News

Context

Giving a major boost to the pro-farmer initiatives of the Government and in keeping with its commitment and dedication for the Annadata, the Union Cabinet has approved a new Umbrella Scheme “Pradhan Mantri Annadata Aay Sanrakshan Abhiyan’ (PM-AASHA).

Why such Scheme?

  1. Increasing MSP is not adequate and it is more important that farmers should get full benefit of the announced MSP.
  2. For this, government realizes that it is essential that if price of the agriculture produce market is less than MSP, then govt. should purchase either at MSP or work in a manner to provide MSP for the farmers through some other mechanism.

PM-AASHA

  1. The Scheme is aimed at ensuring remunerative prices to the farmers for their produce as announced in the Union Budget for 2018.
  2. Government has already increased the MSP of kharif crops by following the principle of 1.5 times the cost of production.
  3. It is expected that the increase in MSP will be translated to farmer’s income by way of robust procurement mechanism in coordination with the State Governments.
  4. The new Umbrella Scheme includes the mechanism of ensuring remunerative prices to the farmers and is comprised of-
  • Price Support Scheme (PSS),
  • Price Deficiency Payment Scheme (PDPS)
  • Pilot of Private Procurement & Stockist Scheme (PPPS).
  1. The other existing schemes of Department of Food and Public Distribution (DFPD) for procurement of paddy, wheat and nutri-cereals/coarse grains and of Ministry of Textile for cotton and jute will be continued for providing MSP to farmers for these crops.

Pilot of Private Procurement & Stockist Scheme (PPPS)

  1. Cabinet has decided that for oilseeds, states have the option to roll out Private Procurement Stockist Scheme (PPSS) on pilot basis in selected district/APMC(s) of district involving the participation of private stockiest.
  2. The pilots district/selected APMC(s) of district will cover one or more crop of oilseeds for which MSP is notified.
  3. Since this is akin to PSS, in that in involves physical procurement of the notified commodity, it shall substitute PSS/PDPS in the pilot districts.
  4. The selected private agency shall procure the commodity at MSP in the notified markets during the notified period from the registered farmers in consonance with the PPSS Guidelines.
  5. But whenever the prices in the market fall below the notified MSP maximum service charges up to 15% of the notified MSP will be payable.

Price Support Scheme (PSS)

  1. In Price Support Scheme (PSS), physical procurement of pulses, oilseeds and Copra will be done by Central Nodal Agencies with proactive role of State governments.
  2. It is also decided that in addition to NAFED, Food Cooperation of India (FCI) will take up PSS operations in states /districts.
  3. The procurement expenditure and losses due to procurement will be borne by Central Government as per norms.

Price Deficiency Payment Scheme (PDPS)

  1. Under PDPS it is proposed to cover all oilseeds for which MSP is notified.
  2. In this direct payment of the difference between the MSP and the selling/modal price will be made to pre-registered farmers selling his produce in the notified market yard through a transparent auction process.
  3. All payment will be done directly into registered bank account of the farmer.
  4. This scheme does not involve any physical procurement of crops as farmers are paid the difference between the MSP price and Sale/modal price on disposal in notified market.

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

[op-ed snap] Solutions beyond farm loan waivers

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Alternatives to farm loan waivers


Context

Study on farm loan waiver coverage

  1. A new research commissioned by Tata Trusts and Copenhagen Consensus for the India Consensus project  shows that loan waivers are extremely expensive while having a limited impact
  2. Other policies could help many more farmers for every rupee spent

Status of loan availability to farmers

  1. Only 15% of the marginal farmers (with less than 2 hectares of landholding) have access to formal credit
  2. Loan waiver schemes typically cater to farmers who have availed of formal loans
  3. Previous waivers have led to banks reducing credit outlay for small farmers during their next loan cycle, thereby diminishing their chances of getting formal loans
  4. With the small farmers receiving less money from banks, this incremental loan is actually made available for the big farmers who use it to buy farm equipment such as tractors and combine harvesters
  5. Loan waivers actually do harm to the small farmers, as with less credit outlay from the formal sector, the small farmers increasingly have to depend upon the informal sector

Usage of loan waiver amount

  1. Studies also point out small farmers use money saved from loan waiver for consumption activities and not to augment investment to increase agricultural productivity
  2. This results in lower agricultural produce for small farmers during next loan cycles

Alternate interventions to reduce loan waivers

The government can spend money on

  • Building more canals and warehouses
  1. It makes economic sense to build more warehouses and storage facilities
  2. This will reduce waste of perishable fruits, vegetables and milk that command a higher market price than staple crops
  3. Nearly 20% of India’s fresh produce is wasted because of storage problems
  4. Most small farmers do not risk growing perishable crops and because of the lack of adequate storage facilities, often sell their output forward to the village-level aggregators (arthiya) from whom they typically take loans for growing crops at a higher rate
  • On rural electrification
  1. This will help farmers with more equipment and irrigation facilities
  • To operate more e-markets
  1. Regulated markets have problems associated with lower market size, lack of price discovery because of buyer cartelization, and lack of information related to product standards
  2. The research suggests that e-markets could result in better prices
  3. Farmers would realize better prices with reduced information asymmetry and direct market access

Way Forward

  1. Last year’s farmer protests highlighted the extent of India’s nationwide agrarian distress
  2. Farmer distress requires a serious response
  3. The government should spend each additional rupee to alleviate farm distress in a way where the impact is more, with a higher benefit-to-cost ratio

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

[pib] India proposes UNs FAO to declare an upcoming year as “International Year of Millets”

Note4students

Mains Paper 3: Agriculture | Major crops cropping patterns in various parts of the country

From UPSC perspective, the following things are important:

Prelims level: Importance of Millets, FAO

Mains level: Agronomics of Millets


News

Context

  1. The Union Minister of Agriculture and Farmers’ Welfare has written to the United Nations Food & Agriculture Organization (FAO) and proposed the declaration of an upcoming year as “International Year of Millets”.
  2. India is celebrating 2018 as the National Year of Millets and is promoting cultivation by amending cropping pattern of areas which are especially susceptible to climate change.
  3. The Ministry has requested the inclusion of this proposal in the agenda of the 26th session of the Committee on Agriculture (COAG) meeting, scheduled in October 2018 in Rome.

Why Millets?

  1. Millets are highly nutritious and useful in various lifestyle diseases, enhancing resilience and risk management in face of climate change especially for small and marginal farmers.
  2. The government recently increased the MSP of millets by more than 50 per cent of cost of production which is an important component of efforts to achieve the national commitment of doubling farmers’ income by 2022.

Importance of Millets

  1. Millet is a common term to categorize small-seeded grasses that are often termed nutri-cereals or dryland-cereals, and includes sorghum, pearl millet, ragi, small millet, foxtail millet, proso millet, barnyard millet, kodo millet and other millets.
  2. An important staple cereal crop for millions of small holder dryland farmers across sub-saharan Africa and Asia, millets offer nutrition, resilience, income and livelihood for farmers even in difficult times.
  3. They have multiple untapped uses such as food, feed, fodder, biofuels and brewing.
  4. Photo-insensitive & resilient to climate change, millets are hardy, resilient crops that have a low carbon and water footprint, can withstand high temperatures and grow on poor soils with little or no external inputs.
  5. In times of climate change they are often the last crop standing and, thus, are a good risk management strategy for resource-poor marginal farmers.

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

[pib] E-Pashudhan Haat Scheme

Note4students

Mains Paper 3: Agriculture | Economics of animal-rearing

From UPSC perspective, the following things are important:

Prelims level: Particulars of the Scheme

Mains level: Read the attached story


News

E-Pashu Haat portal

  1. Nodal Agency: Department of Animal Husbandry Dairying & Fisheries (DADF), Ministry of Agriculture
  2. Aim: To connect breeders and farmers regarding availability of bovine germplasm.
  3. Government has launched e-Pashu Haat portal (www.epashuhaat.gov.in) for connecting breeders and farmers of indigenous breeds.
  4. The portal has been launched under the scheme “National Mission on Bovine Productivity.”
  5. This provides direct access to the farmers/ breeders to various organizations/sources wherein frozen semen, embryos and livestock certifications are available.
  6. This portal is playing crucial role in development and conservation of indigenous breeds.

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

[pib] Re-structuring of the Agricultural Scientists’ Recruitment Board (ASRB)

Note4students

Mains Paper 2: Governance |Ministries & Departments Of The Government

From UPSC perspective, the following things are important:

Prelims level: ASRB

Mains level:  Not Much


News

Context

The Union Cabinet has approved the proposal for restructuring of Agricultural Scientists’ Recruitment Board (ASRB).

Background

  1. In November 1973, the Cabinet approved inter alia setting up of Agricultural Scientists’ Recruitment Board with a whole-time Chairman.
  2. It was aimed to function as an independent recruitment agency in recruitment to various scientific positions in Agricultural Research Service and Research Management Positions of ICAR/DARE.
  3. In view of the significant increase in work load of ASRB the membership was increased from one to three of ASRB.

Details

  1. The ASRB will now be a 4 Member body instead of 3 Members. It will have a Chairperson and 3 Members.
  2. ASRB would be for a period of three years or till attainment of 65 years of age, whichever is earlier.
  3. For the purpose of autonomy, secrecy, accountability and efficient functioning ASRB shall be delinked from ICAR and to be attached with Dept. of Agricultural Research & Education (DARE) under Ministry of Agriculture & Farmers’ Welfare.
  4. The budget head for ASRB may also be delinked from ICAR and be created under DARE, and the ASRB may have its own cadre of administrative staff in the secretariat and have independent administrative control.

How will this impact?

  1. The four Member body comprising of one Chairperson and three Members would help in expediting the work and functioning of ASRB.
  2. It would support in expediting the recruitment process which would be beneficial for the agrarian community and agriculture at large.
  3. Moreover, it will ensure more transparency and efficiency in recruitment of meritorious scientists to various scientific positions in lCAR, the premier agency for agricultural research and education in the country.

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

[pib] Reconstitution of National Bamboo Mission

Note4Students

From UPSC perspective, the following things are important:

Prelims level: National Bamboo Mission (NBM), National Mission for Sustainable Agriculture (NMSA)

Mains level: Various schemes for promoting plantation sector


News

The restructured National Bamboo Mission (NBM) has been launched this year with the approval of Cabinet Committee on Economic Affairs (CCEA) under the National Mission for Sustainable Agriculture (NMSA) for implementation.

Background:

  1. National Bamboo Mission (NBM) started as a Centrally Sponsored Scheme in 2006-07, was mainly emphasizing on propagation and cultivation of bamboo, with limited efforts on processing, product development and value addition.
  2. There was a weak linkage between the producers (farmers) and the industry.
  3. The restructured proposal gives simultaneous emphasis to the propagation of quality plantations of bamboo, product development and value addition including primary processing and treatment; micro, small & medium enterprises as well as high-value products

Objectives of the restructured NBM

  1. To increase the area under bamboo plantation in non forest Government and private lands to supplement farm income and contribute towards resilience to climate change as well as availability of quality raw material requirement of industries. The bamboo plantations will be promoted predominantly in farmers’ fields, homesteads, community lands, arable wastelands, and along irrigation canals, water bodies etc.
  2. To improve post-harvest management through establishment of innovative primary processing units near the source of production, primary treatment and seasoning plants, preservation technologies and market infrastructure.
  3. To promote product development keeping in view market demand, by assisting R&D, entrepreneurship & business models at micro, small and medium levels and feed bigger industry.
  4. To rejuvenate the under developed bamboo industry in India.
  5. To promote skill development, capacity building, awareness generation for development of bamboo sector from production to market demand.

Further readings:

National Mission for Sustainable Agriculture — Vikaspedia

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

Farm policies off target: study

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Particulars of the study

Mains level: The newscard gives the insight of present Income of Farmers in India


News

Consumers benefited more than Farmers: OECD Researchers

  1. The general perception is that Indian farmers are beneficiaries of major subsidies.
  2. But a new report says the overall effect of policy interventions between 2014 and 2016 is, in fact, a 6% annual reduction of gross farm revenues.
  3. Consumers, on the other hand, pay an average 25% less for commodities as a result of policy interventions.
  4. According to researchers at the Organisation for Economic Cooperation and Development (OECD) and the Indian think tank ICRIER, government interventions were more consumer-centric than producer-centric.

Particulars of the Report

  1. The report “Agriculture Policies in India”, points that Indian farmers face regulations and restrictions both in the domestic market and international markets — which often lead to producer prices lower than comparable international levels.
  2. While consumers have benefited from the government’s efforts to keep prices low, a poorly targeted, inefficient and wasteful public distribution system means that malnutrition and food insecurity continue to persist, says the report.
  3. The report has several suggestions for policymakers, including reform of market regulations, strengthening initiatives such as eNAM and allowing private players to play a larger role in the sector.

Key Recommendations

  1. It also recommends a strengthening of the regulatory environment governing land issues, strengthening access to credit, especially long-term loans.
  2. It also emphasized for collective-action on groundwater and watershed management and correcting measures such as including electricity pricing, which incentivizes the overuse of water.
  3. With regard to the PDS, the report suggests gradual reduction and a move towards cash transfers and allowing the private sector to manage remaining stock operations.
  4. To make trade work for Indian agriculture, import tariffs must be reduced and export restrictions relaxed to create a more stable and predictable market environment.

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

[op-ed snap] Target incomes, not prices

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Not Much

Mains level: The newscard highlights the drawbacks in MSP policies


Context

Bumper harvest last year- a no mean achievement

  1. Good rains, excessive sowing and the bumper harvest last year produced gluts in the market that sent the prices of many crops, and therefore farm incomes, crashing.
  2. None of the economic tools available for protecting farm incomes — the price support scheme, the price stabilisation fund and the market intervention scheme — was employed to the best advantage.
  3. Quick and precise adjustments to the export and import rules could have arrested the price fall by diverting the excess supplies to overseas markets.
  4. But the changes required were not carried out in time. Instead, inflows of imports were allowed to go on, which worsened the price situation.

MSP issue

  1. This year’s Budget promised that the Minimum Support Prices (MSPs) would be at least 150% of production costs, a longstanding demand of farmers and recommendation of experts.
  2. Even if the market prices fall below the MSP, as they did for major Kharif crops in 2017, the government will procure the produce on MSP.
  3. And if it does not procure, it will provide a mechanism to ensure payments, equal to the gap between the MSP and the market price, would reach farmers.
  4. The intention of assuring 50% profit margin over the cost of production is to make farming remunerative.
  5. On the formula for calculating production costs for plugging into the MSP formula, farmer groups and the government are not as yet on the same page.
  6. But howsoever production costs are calculated, simply announcing higher MSPs will not raise farmer incomes. The system is not geared for scaling up procurement.

Procurement Issue

  1. For several crops last year, the quantities procured were small portions of the total produce.
  2. Although MSPs are announced for more than 20 crops, noteworthy procurement is conducted for three: paddy, wheat and sugarcane.
  3. Further, procurement frequently takes places at prices below the MSP, as is happening this year, according to reports.
  4. Finally, small and vulnerable farmers usually do not get paid MSPs at all, as they sell their produce to aggregators, not directly in mandis.

Ignoring Economics as a whole

  1. In these circumstances, and given an imminent general election, the government is likely to take recourse to payments compensating for the difference between market prices and the MSP to appear farmer-friendly.
  2. In principle, it is only right and fair that the government pay reparations to farmers. The gluts, depressed market prices and mounting farmer losses are a direct consequence of the malfunction in agri-pricing policies.
  3. But price differential payments, no matter what mechanism is used for calculating and distributing them, would be yet another example of economic policies that get drafted purely on political appeal, without full grasp of the underlying economic principle, and backfire badly.

Ground situation: a Demand-supply mismatch

  1. The MSP of paddy for the 2018-19 kharif season will have to be raised 11-14%, cotton 19-28%, and jowar 42-44% if the MSP pricing formula of 1.5 times the cost is employed.
  2. A rational response of farmers looking at this menu of MSPs would be to sow more jowar in the next season. The promise of profits is greatest for jowar and it will unwittingly lead to increased jowar production.
  3. There’s no reason the demand for jowar would also rise.
  4. A demand-supply mismatch would be inevitable which would send the market prices for jowar way below the announced MSP, calling for significantly expanded jowar procurement at MSP.
  5. The trouble is, pricing policies distort market prices and send the wrong signal to farmers on what to produce and how much. Our inept policy system fails to correct such situations, which then spiral out of control.
  6. But if the problem is volatile incomes, the solution must target incomes, not prices.

Way Forward

  1. The impression was that the farmers’ long march to Mumbai a few months back forced urban India to reassess its position on the severity of the agrarian distress.
  2. But advantaged Indians have begun questioning the logic of fiscal support for farmers on the grounds that it is unfair to make the majority pay to keep afloat a high-cost, low productivity, income-tax exempt sector that contributes just 17-18% of the country’s GDP.
  3. They forget that the agriculture sector engages more than 50% of the total workforce, and that agri-prices, and therefore farm incomes, are not free-market driven.
  4. The current farm crisis is purely because of policy failure. Fiscal space must be found for providing income support this year to the most vulnerable farmers at least.

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

[op-ed snap] The wait for deep agricultural reforms

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: Read the attached story

Mains level: The newscard discusses some successful steps taken by the present government in last four years(in the agricultural sector)


News

Four years of Government: Performance in Agricultural sector

  1. Out of the government’s four years , FY15 and FY16 were affected by drought and it did well to manage the crisis
  2. A number of welcome initiatives have been launched in the last four years, including
    (1) schemes for crop insurance, irrigation, soil testing, electronic national agricultural market (e-NAM), and (2) use of Aadhaar for the public distribution system (PDS) and purchase of fertilizer
  3. While there are several creditable achievements, it is the deeper structural reforms where expectations from a “strong” government have not been met

Controlling food inflation

  1. Helped by a downturn in the global prices of petroleum and commodities, the government took pro-active measures to rein in food inflation
    (which was 6.64% during United Progressive Alliance (UPA) I and 12.2% in UPA II)
  2. These included
    (1) release of wheat and rice from government stocks,
    (2) restrictions on exports,
    (3) small increases in MSP ,
    (4) raids on traders under the Essential Commodities Act, and
    (5) even income-tax investigations
  3. The states giving bonus on wheat and paddy were told to discontinue it
  4. In order to reduce excessive procurement of rice, the 50% levy on rice mills was also abolished

Some issues related to non-implementation of Schemes through the DBT

  1. There was no effort to deregulate urea prices and transfer subsidy to farmers directly
  2. Aadhaar-based sale of foodgrains and fertilizer is only a small step towards reform of the subsidy regime
  3. Similarly, free electricity continues to cause excessive drawal of underground water in several states
  4. No serious effort was made to persuade states to transfer electricity subsidy through DBT

Price stabilization fund

  1. To check food inflation, a price stabilization fund was set up with a corpus of Rs500 crore and onion
  2. And potato were bought by the National Agricultural Cooperative Marketing Federation and Small Farmers’ Agribusiness Consortium for release in the market when prices rose(which was a crucial issue in past)

Dependence on imported pulses has almost ended

  1. Another successful policy intervention was to offer a handsome increase in the MSP of pulses and create a buffer stock of two million tonnes
  2. Our dependence on imported pulses has almost ended and domestic production has increased from 17.20 million tonnes in FY15 to 24.51 million tonnes in FY18

e-NAM has a great potential

  1. e-NAM is another initiative by government, has the potential of freeing up the agricultural markets. It was expected to bring transparency to auctions in mandis
  2. However, we did not see the real intent of e-NAM being achieved and some states even showed procurement under MSP as e-NAM turnover

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

[op-ed snap] From Plate to Plough: Freeing the farm

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Dalwai Committee Report, draft Agricultural Export Policy, ICRIER

Mains level: Problems related to the export competitiveness of agriculture sector and their resolution


Context

India’s agri export target

  1. Union agriculture minister recently informed about government’s resolve to increase the value of the country’s agricultural exports to $100 billion by 2022-23
  2. The Dalwai Committee Report on doubling farmers’ incomes also talked of a similar target
  3. The draft Agricultural Export Policy, put in the public domain by the Ministry of Commerce, has a much more modest target — $60 billion by 2022-23

Strategy to double or triple Indian agri-exports

  1. The draft Agri-Exports Policy rightly identifies two steps:
  • Identify commodities in which India holds a global comparative advantage
  • Develop clusters in states to create value chains for these commodities

How this can be achieved

  1. Research conducted at ICRIER can be of help if the government decides to take the first step enunciated in the draft policy
  2. Eleven commodities — marine products, rice, meat, spices, cotton, fresh fruits and vegetables, sugar, coffee, groundnut, oilmeals, and cashews — comprised more than 80 percent of the country’s agri-export basket in 2016-17
  3. Most crops were globally price-competitive in most years but many of these commodities lost out on competitiveness, due to a fall in global prices

Hurdles in increasing exports

  1. The biggest hurdle comes from uncertain domestic marketing and trade policies
  2. The inherent “consumer bias” in these policies makes the trading environment unstable and unpredictable
  3. Exports are restricted through the use of minimum export prices and bans while the Essential Commodities Act is used to regulate private participation
  4. This harms India’s image of a reliable supplier of agri-products and ensures that the country does not get the best price for its exports

Required changes

  1. The first change that is required pertains to mindsets
  • Instead of suppressing market prices for farmers to support consumers, the government should protect them through targeted unconditional income transfers
  • Restricting markets and compensating farmers through higher MSPs based on the new formula (cost A2+FL+50 percent) will be an inflationary and unsustainable solution to the woes of the country’s agriculturists
  • It is likely to hit agri-exports adversely, especially rice and cotton. The exports will become uncompetitive

2. Policymakers should support agri-exports while ensuring environmental sustainability

  • Exports of rice must be properly assessed
  • Cultivating one kg of rice in Punjab or Haryana needs about 5,000 litres of irrigation water
  • This is drawn from underground and has led to a drastic fall in the groundwater table
  • Exporting large quantities of common rice from this region is akin to exporting billions of cubic meters of water
  • The best way to correct this would be to gradually phase-out power and irrigation subsidies and replace them with a direct income support to farmers while letting the prices of power and water reflect its true value

3. The government must develop efficient global value chains and liberalize land lease markets across all states

  • It should encourage contract farming on a medium- to long-term basis
  • Exporters and processors must be encouraged to buy directly from farmer-producer organizations (FPOs), bypassing the inefficient APMCs
  • Major investments are needed at the back-end to create infrastructure for global and domestic value chains, ranging from produce aggregation to its sorting and grading, packaging, storing and linking the hinterlands to ports for export markets

Way forward

  1. Agri investments could have a multiplier effect on the rural economy
  2. A consumer bias in policy must be redressed and a balance should be struck between meeting the needs of food-insecure consumers and income-insecure farmers

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

Modi govt’s Crop MSP plan may stoke inflation: NITI Aayog

Image source

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Minimum support price, model Agricultural Produce and Livestock Marketing Act, Market Assurance Scheme, Price Deficiency Payment scheme, private procurement and stockist scheme

Mains level: Pros and cons of MSP system


Effect of new Crop MSP policy

  1. The twin budget promises of fixing minimum support price (MSP) of crops at cost plus 50% and ensuring MSP to farmers for all crops will lift farm-gate prices by 15% and raise rural incomes
  2. The transmission of this price rise to wholesale and retail levels will have strong implications for inflation

Tackling the inflation problem

  1. NITI Aayog has recommended that states reform their agriculture markets by creating efficient supply chains, competitive markets and application of modern logistics and commerce in agriculture marketing
  2. To counter the effect of the increase in farm-level prices, states should adopt the model Agricultural Produce and Livestock Marketing Act
  3. Financial support to states for MSP operations should be linked to the satisfactory adoption of major provisions of the model APLM Act

Three models proposed to the government to ensure MSP to farmers

  1. Under the Market Assurance Scheme (MAS), states will directly procure crops at MSP and pay farmers when prices dip below support prices, a part of which will be compensated by the centre
  2. Under the Price Deficiency Payment scheme (PDPS) based on a pilot rolled out by Madhya Pradesh last year, farmers will be paid the difference between sale price and MSP—this scheme does not involve any physical procurement of grains
  3. In the private procurement and stockist scheme (PPSS), empanelled private traders will procure crops at MSP prompted by incentives like exemption from export restrictions, income tax benefits, credit access, exemption of market fees, and a maximum of 5% commission on the value of procured crops

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

[pib] NAFED signs the debt settlement agreement with its eight lender banks

Note4Students

From UPSC perspective, the following things are important:

Prelims level: NAFED

Mains level: Agriculture credit in India


News

  • National Agricultural Cooperative Federation of India Ltd. (NAFED) signed the Debt Settlement Agreement with its eight lender banks at its Headquarter, New Delhi
  • The One Time Settlement with the lender banks has been made
  • It is hoped that with this settlement, the Price Support Scheme operations will be more smooth and effective.

Back2Basics

NAFED

  • NAFED is the national level marketing agency for agricultural products in the Cooperative Sector
  • The organization serves the farmers throughout the country by implementing the Price Support Scheme of Govt. of India for Oilseeds, Pulses, Copra & Cotton.
  • It will also provide remunerative prices to encourage higher investment and production.
  • It will also provide to safeguard interest of consumer by making available supplies at reasonable price with low cost of intermediation.

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

[op-ed snap] Learning from the ‘long march’

Image Source

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The newscard briefly discusses ‘Why is the Loan waiver schemes not a good solution to farm crisis?’


News

Acceptance of farmers’ demands by the Maharashtra Government

  1. Government extended his previous loan waiver scheme to yet more farmers for an even longer period,
  2. And also promised to transfer land to Adivasi farmers as guaranteed by the Forest Rights Act of 2006
    (Recently, adivasi farmers descended on Mumbai earlier this month)

Is it the right thing to do?: The Loan Waiver

  1. According to M.S. Swaminathan, loan waivers provide at best temporary relief but actually work against the creation of a reliable farm credit system in the long run
  2. Worse, because of the large sums of money that is required for things farmers actually need and will benefit from, like crop and seed research, soil improvement or pest protection, is eaten up by such futile gestures
  3. In the Union Budget for 2018-19, only 12% of the spend is for investments — the rest was eaten up by subsidies, crop insurance schemes and the like
  4. Worse, most of the direct beneficiaries of farm subsidies are in the organised sector — fertiliser companies, tractor manufacturers and so on
  5. The actual farmer gets to see little of the money

Bad record of Loan waiver schemes

  1. In Maharashtra, of the Rs. 34,000 crore loan waiver announced in 2017 (prior to the latest announcement), only Rs. 13,580 crore was actually disbursed
    (according to data given to Maharashtra legislators by the State government)

What farmers actually need is a

  1. robust and reliable credit infrastructure which allows them to access credit when they require it,
  2. better infrastructure to prevent yield loss,
    (The PM himself said in a speech last year that agri products worth Rs. 1 lakh crore are ruined annually due to insufficient infrastructure in the agricultural sector)
  3. better market access for their output,
  4. access to better information on crop prices and,
  5. reliable weather-proofing and yield loss insurance

Political interference: The reality

  1.  Political parties across the spectrum have prevented the flawed agricultural market yard system from being revamped, because it is the basis for exercising political power and influence in rural areas

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

[op-ed snap] New Farmer, Old Paradigm

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: Not much

Mains level: The newscard briefly discusses some issues related to the farming situation in the western India.


Agriculture in western India is different from that in the Gangetic Plain

  1. Here, Wheat is much less important than rice, bajra and jowar. Cotton is grown in Maharashtra
  2. The farmer has been taking on biotech seeds, moving over from the earlier desi varieties to long-staple cotton A
  3. And now seeds which give a good crop with shorter growing periods, saving on pesticides and nutrients. A larger area is being devoted to pulses and oilseeds
  4. The typical middle farmer in Western Maharashtra and Vidarbha makes his sowing decision knowing that the price he will get will be lower than the price he sees
    Example
  5. Recently, the pulse price was around Rs 190/kilo
  6. The kisan knows this will go down. But by how much? It went down to almost the MSP levels(That’s ridiculous)

MSP plus 50 per cent will not solve the problem(declared in the budget 2018-19)

  1. It is a nice round number
  2. But even if this is declared, who will buy?
  3. Wheat and rice have the Food Corporation of India (FCI)
  4. But pulses, oilseed and inferior cereals have so-called procurement agencies, which are broke and do only ceremonial purchases
  5. Fruits and vegetables don’t even have those

Some other issues

  1. The price of milk can vary by 10 per cent in markets around the farm
  2. The milk co-ops are not that efficient. Some farmer-producer companies are coming up but shifting them from the Company Affairs Department to the good old Agriculture Department will bureaucratise their governance, given the history of the latter
  3. An increasingly complex agriculture is crying for new paradigms

Some important questions on agriculture of western India

  1. The kisan is on the road
  2. Can we at least protect the costs of say, the top two-thirds of farmers ranked by productivity?
  3. Will we meet their capital and land costs?
  4. Will they get help for infrastructure for first-stage processing and transport in Census towns, which mai bap sarkar still calls villages?
  5. These abound in western India

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

[op-ed snap] Read the distress signals

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Swaminathan report, APMC, etc.

Mains level: The newscard comprehensively discusses some issues related to Agriculture Sector in India.


Recent farmers’ agitation in Maharashtra

  1. The week-long farmers’ march which reached Mumbai earlier this month, on the anniversary of Gandhi’s Dandi March of 1930, was unprecedented in many ways
  2. The most remarkable thing about the march was that it was successful
  3. The State government agreed to all the demands, including pending transfer of forest land to Adivasis, expanding the scope of the loan waiver and ensuring higher prices for farm produce
  4. These agitations implies that the Government policies and reforms are not working and need a paradigm change

M.S. Swaminathan is not fully implemented

  1. The most comprehensive recent blueprint for reforms and rehabilitation of the farm sector is the report of the National Commission on Farmers, chaired by M.S. Swaminathan
  2. That report is already over 10 years old
  3. Several of its ideas are yet to be implemented
  4. For instance, decentralising public procurement of food grain to the lowest level possible, and setting up of grain banks at the district level

What is the most important priority of the government?

  1.  The biggest priority is to reduce the workforce which depends on agriculture for its livelihood
  2. There is considerable underemployment and low productivity but farmers are unable to exit to other livelihood options
    What is needed?
  3. This points to the obvious conclusion, that the solution to the farm crisis lies largely outside the farm sector
  4. If job opportunities abound elsewhere, then we should see an exodus out of farming
  5. That points to the urgency of accelerating industrial growth and improving the ease of doing business

Subsidies don’t help poor farmers

  1. Historically, farm prices were kept suppressed to keep industrial wages low
  2. This meant monopoly procurement laws and the intermediation through the Agriculture Produce Market Committees (APMC)
  3. But that was compensated by providing the farmer with highly subsidised inputs — water, electricity, fertilizer, credit and seeds
  4. But this did not benefit the really needy, subsistence farmers
  5. Nor did it alter the terms of trade which to this day remain tilted against agriculture

What are the main issues?

  1. The APMC is not discontinued. Monopoly procurement continues
  2. There is little progress in direct link between farmer and buyer. Foreign direct investment in farm to fork chain is very restricted
  3. Half the farmers don’t have access to formal credit, since most of them don’t own the land that they till
  4. Contract farming remains virtually banned. Land leasing is not possible (but done informally)
  5. Moneylenders are taboo, even though they might be in the best position to address credit needs, albeit with proper regulation

Issues with loan waiver schemes

  1. Loan waivers punish those who worked hard and repaid, and the cash anyway goes to banks, not to farmers
  2. Banks don’t issue fresh loans out of their own risk aversion
  3. Hence, loan waivers are a bad economic idea but often a political compulsion
  4. The same is true of rewarding farmers with 50% more minimum support price (MSP), no matter what the cost. This paradigm of cost plus pricing is bad economics

Some positive steps taken by the government

  1. Neem-coated fertilizer has reduced leakage, and direct benefit transfer to the farmer-buyer will reduce subsidy further
  2. Soil cards ensure appropriate matching of inputs to soil conditions
  3. Giving tax holiday to the farmer producer companies is also the right fiscal incentive
  4. The government’s aim to double farm income in the next four years is a near impossible feat, but signals the right intention

The way forward

  1. The big agenda is to unshackle agriculture
    (1) to make it a truly commercial market-based enterprise;
    (2) to create opportunities outside farming for large scale exit of the workforce; to connect farmers to the value chain of farm to fork, including agribusiness;
    (3) to remove restrictions on movement and exports of farm produce and let them tap into international market, to also allow easier land transfers including leasing;
    (4) to encourage crop diversification and land consolidation that reverses fragmentation

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

FDA-like agency needed for agriculture: commerce ministry

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Draft agri-export policy

Mains level: Interventions by the government to make agriculture profitable


Draft agri-export policy

  1. The commerce ministry has released the draft agri-export policy
  2. It proposes that India needs to form a US Food and Drug Administration (FDA)-like agency to have an integrated approach to both agricultural production and trade
  3. The draft policy also advocated promoting export-oriented clusters and agriculture export zones (AEZs) in partnership with private exporters who will have a natural incentive to promote such clusters

Agriculture policies in India

  1. India’s domestic agricultural policies are largely aimed at food security and price stabilization and often put export restrictions to control food inflation

Agricultural exports by India

  1. India’s agricultural exports basket is a diversified mix led by marine products, meat and rice, which together constitute around 52% of its total agricultural exports
  2. India’s share in global exports of agriculture products has increased from 1% a few years ago to 2.2 % in 2016

Export promotion

  1. The commerce ministry has provisionally identified 50 unique product-district clusters for export promotion
  2. It has also shortlisted 10 commodities as focus items for specific farm, infrastructure and market intervention

Providing relief to producers

  1. The commerce ministry has also sought to provide policy assurance to producers that processed agricultural and organic products will not be put under export restrictions
  2. These restrictions include minimum export price, export duty

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

[op-ed snap] The centre’s failure to steer agriculture right

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: The APMC act, E-NAM, etc.

Mains level: The newscard primarily discusses the issue related to agricultural marketing.(specially mentioned in the mains syllabus)


News

Important issues related to agricultural sector: Failure of the government
FIRST: incomplete implementations of schemes

  1. Ongoing schemes in agriculture have acquired the status of railway projects sanctioned over the years
  2. New ones keep getting added but no one can shut down any of the existing ones

SECOND: Agricultural finance

  1. The challenge of connecting millions of small and marginal farmers to institutional finance has remained unaddressed for the last two decades
  2. With informal sector interest rates starting at 24% (compared to 0-7% from banks and cooperatives),
  3. there is likely to be no breakthrough in investments on small farms, where the maximum unutilized productivity potential waits to be tapped

THIRD: Agricultural marketing

  1. The critical issue of agriculture marketing reform has again been sidestepped
  2. Rural marketing hubs will benefit from some infrastructure upgrade, which is welcome
  3. But the real issue in marketing is rearranging the institutional arrangements under the agriculture produce marketing committee (APMC) legislation
  4. This challenge has been ducked, yet again
    What is needed?
  5. There is an urgent need to introduce competition, transparency and technology-enabled transactions in the 7,000-plus mandis in the country
  6. Even e-NAM remains stunted and has failed to provide an alternative and efficient marketing platform to farmers
    (e-NAM is a electronic trading portal for agricultural commodities launched by Prime Minister Narendra Modi)
  7. To be fair, the political economy of agriculture marketing is complicated and does not lend itself to easy solutions

What should be done? : The solution

  1. Farmers are not likely to be incentivised to make investments in land improvement, machinery and technology unless the prospects of better prices materialize
  2. This can only happen by treating the entire country as a unified market for agricultural goods, as is the case for industrial products
    Other essential reforms
  3. Supportive policies for allowing direct purchase at the farm gate, portal-based trading, reform of antiquated storage and movement restrictions, and a more liberal external trade stance
  4. will be among the other essential components of a marketing reform package

The way forward

  1. Most of these measures are within the power of the Central government, though the states will have to be brought around to play their role

Back2basics

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

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

[op-ed snap] Stemming the tide of agrarian distress

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: Operation green, Prime Minister Krishi Sinchayee Yojana — Har Khet ko Pani, etc.

Mains level: The newscard comprehensively discusses some important issues related to Indian Agriculture.


Three main challenges infront of the Indian Agricultural System
FIRST

  1. The first is to raise the minimum support price (MSP) by at least 50% above the cost of production
  2. While a workable formula for fixing MSP in consonance with the States will take time, the government must extend immediate help to farmers from rampant price volatility
  3. The States can implement the ‘price deficiency payment scheme’ (difference between MSP and price received) a
  4. The scheme has been started in Haryana for some vegetables, and the Bhavantar Bhugtan Yojana in Madhya Pradesh for select oilseeds
  5. A hike in MSP should be supplemented with irrigation, and reduction in fertilizer cost

SECOND

  1. The second measure is to develop and upgrade the existing 22,000 rural haats into Gramin Agricultural Markets
  2. A corpus of Rs. 2,000 crore has been allocated(in this year’s budget) in the name of the Agri-Market Infrastructure Fund for developing and upgrading marketing infrastructure
  3. The hard truth is that farmers sell their produce mainly through village traders or government-run Primary Agricultural Credit Societies (for wheat and paddy at MSP) and often get exploited
  4. Operation Green Another interrelated initiative is the launching of ‘Operation Green’ with an outlay of Rs. 500 crore to address the challenge of price volatility of perishable commodities
  5. This again makes it necessary for State governments to bring various programmes under one roof, perhaps within the Agricultural Produce and Livestock Market Committee 2017, to help farmers

THIRD

  1. The third important step is to increase institutional credit from Rs. 10 lakh crore in 2017-18 to Rs. 11 lakh crore in 2018-19
  2. The share of agricultural credit in gross domestic product in agriculture and allied activities has increased from 10% in 1999-2000 to 41% in 2015-16

Other Issues that need attention

  1. There are certain pressing issues not considered in this Budget that must be given closer attention
  2. Irrigation: Close to 52% of net sown area (73.2 million hectares out of 141.4 million hectares) is still unirrigated and rainfed
  3. Despite its presence in the Economic Survey 2017-18, the subject has not received due attention in this Budget
  4. The plan is to take up 96 districts deprived of irrigation with an allocation of Rs. 2,600 crore under the Prime Minister Krishi Sinchayee Yojana — Har Khet ko Pani
  5. Decline in Ground water: The Minor Irrigation Census 2013-14, published in 2017, warns of a tremendous increase in deep tube wells to more than 2.6 million in 2013-14, from 1.45 million in 2006-07, and the resultant decline in the ground water table
  6. It is ironic that the government aims to install more tube wells while being worried about depleting groundwater
  7. Investment in agricultural research and development (Ag R&D): This is a serious concern in view of the low annual rate of growth in agriculture in the last four years. More drought and pest-resistant crops are needed, along with better irrigation technology
  8. Farmers also require interventions in the seed sector to raise production and diversify to alternate crops to induce higher growth
  9. The most disquieting aspect is that India spends almost Rs. 6,500 crore on Ag R&D, which is not even 0.4 % of GDP from agriculture and allied activities

The way forward

  1. Rather than enticing farmers with compensation and increased budgetary outlays, the government should assure doable action plans that quickly rescue them from price or crop failure

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

Agriculture 2022: will the dream come true?

Note4students

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

The following things are important from the UPSC perspective:

Prelims Level: Not much

Mains Level: Recommendations by the NITI Aayog’s task force and other related issues discussed in the newscard.


News

“Agriculture-2022: Doubling Farmers’ Incomes” conference

  1. It was a conference organized by the ministry of agriculture and farmers welfare on 19-20 February 2018 to prepare a strategy for doubling farm income by 2022

Main subjects concerning agriculture(pointed out by the PM)

  1. Reducing the cost of inputs
  2. Ensuring remunerative prices
  3. Reducing wastage at the farm level and
  4. Creating alternative sources of income

A different strategy is needed for every state

  1. The requirements of Punjab’s agriculture may have little in common with agriculture in Maharashtra or Bihar
  2. Therefore, the strategy for doubling farmer incomes will differ from state to state, and from one region to another even within a state
  3. The annual income of a farm household in Punjab in 2013 (70th-round National Sample Survey) was Rs2,17,450 while in Bihar it was only Rs44,172
  4. It is clear that doubling farmer incomes in Punjab is not only much more difficult but will also require a completely different strategy than in Bihar

Raising Agricultural Productivity And Making Farming Remunerative For Farmers: A paper by a NITI Aayog member

  1. Due to repeated announcements of the government’s intention to double farmer incomes by 2022, expectations have gone up everywhere, without any realistic assessment of what is possible in the short term in each state
  2. In March 2015, the government had set up a task force under Arvind Panagariya, which submitted its report that year itself
  3. Based on this report a paper was published, Raising Agricultural Productivity And Making Farming Remunerative For Farmers, in which several useful recommendations were made

THREE MAIN RECOMMENDATIONS
(by the NITI Aayog’s task force)

  1. First, the very first point in the paper was the wasteful use of water for irrigation
  2. The micro-irrigation fund of Rs5,000 crore announced in the 2017 budget has not yet taken off and wasteful practices in the use of water continue in most areas, especially in the northern states
  3. Second, the task force recommended that a model land leasing law be prepared by NITI Aayog
  4. Third, Another important recommendation made by the task force was to consider price deficiency payment (PDP) to ensure that farmers receive remunerative prices
  5. This has been tried in Madhya Pradesh (MP) in kharif 2017 and the results have not been very encouraging
  6. The market price of some crops, particularly urad, continued to be much lower than the minimum support price (MSP) in MP, yet only 42% of urad production was brought to the mandis to avail of the benefit
  7. Government has announced that NITI Aayog will examine various alternatives to ensure MSP to farmers

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

[op-ed snap] Budget 2018: A good beginning for reviving agriculture

Note4students

Mains Paper 3: Economy | Government Budgeting

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The newscard discusses some important measures announced by the government in the recent budget, for reviving the agricultural sector.


News

Agriculture is not in a good condition

  1. Recent estimates of the CSO show that growth of GVA in agriculture declined from 6.3% in 2016-17 to 2.1% in 2017-18
  2. In fact, the average growth rate of agricultural GDP in the last four years (2014-15 to 2017-18) was only 2.2% per annum
  3. The Economic Survey, 2017-18 also indicates that the level of agricultural GDP and real agricultural revenue has remained constant in the last four years

Government’s focus on Income

  1. the government is focusing on farmer incomes rather than production
  2. In this context, a minimum support price of 1.5 times the input cost of farmers for all the unannounced kharif crops, announced in the budget, can help increase their income

 Difference between minimum support price and market price: Solution

  1. The government also wants to help farmers in case there is a difference between minimum support price and market price
  2. At the state level, Madhya Pradesh and Karnataka are experimenting with these payment systems for farmers
  3. Under the Bhavantar Bhugtan Yojana, Madhya Pradesh pays farmers the difference between the official minimum support price and the average modal or most quoted rate in markets for any crop
  4. Similarly, Karnataka gives a Rs5 per litre incentive to milk farmers, over and above the rate that dairies are paying
  5. Central government should also consider these measures

Sector specific efforts: Budget 2018

  1. An important announcement is the setting up of a fisheries and aquaculture infrastructure development fund (FAIDF) and animal husbandry infrastructure development fund (AHIDF)
    (with a corpus of Rs10,000 crore)
  2. Similarly, doubling the allocation for the food processing sector is welcome, although it is not enough
  3. India processes only 10% of its fruits and vegetables, as compared to 40-70% in many other countries
  4. Small and marginal farmers constitute 85% of all farmers
  5. Farmer producer companies can help them achieve economies of scale
  6. Therefore, the budget announcement of 100% tax deduction for them would help in the better functioning of these institutions

Are these measures enough for doubling farmer incomes?

  1. The measures announced in the budget may not be enough to double farmer incomes by 2022
  2. The growth rate of farmer incomes between 2003 and 2013 was only 3.1% per annum
  3. If you want to double farmer incomes, growth should be more than 10%
  4. The measures mentioned above may not be enough to achieve such high income growth

Declining investments

  1. The budget has not talked about reducing subsidies and increasing investments
  2. Investment in agriculture, as a share of gross value added in agriculture, declined from 18.2% in 2011-12 to 16.4% in 2015-16. This was due to a decline in private investment in agriculture
  3. Investment is necessary for providing better facilities to farmers; like drip and sprinkler technologies

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

[op-ed snap] Framing the farming issue

Image source

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: National agricultural policy (NAP), 2000, Green Revolution, Pradhan Mantri Kisan Bima Yojana

Mains level: Hurdles in agricultural growth and ways to remove them


Context

Agriculture needs extra focus

  1. Our Agri growth has been suffering for a long time and the trend continues
  2. The need of the hour is to evolve a well-articulated framework to advance agriculture and farming
  3. Agriculture is a state subject; so, the onus for reform and implementing new ideas lies on the states

National agricultural policy (NAP), 2000

  1. The Green Revolution phase ran its course until 2000 when a new national agricultural policy (NAP) was announced
  2. NAP was targeted to:
  • achieve an agricultural growth of four percent per annum
  • to strengthen the rural infrastructure
  • to offer a decent standard of living to farmers and
  • to speed up value-added agricultural growth

Need for a framework

  1. Even though farming is a pressing issue in the country, the country does not currently have a holistic framework to advance agriculture, farming, animal husbandry and allied subjects
  2. National agricultural policy framework can energize and unify fissiparous efforts being done for agriculture growth

How can it be done?

  1. A holistic national framework to address agricultural problems could derive structural lessons from the way India industrialized
  2. There were four pillars on which the industrialization strategy was based
  3. Putting together a similar set of pillars for agriculture is essential

What can a holistic plan be like?

The holistic plan should encompass technology, risk, institutions, policy and skills

  1. Technology incubation: outcome-based technology policy encouraging research, innovation and incubation
  2. Risk institutions and financing: Banks and financial institutions to help promote technology infusion, insurance and mechanization
  3. Institutions of governance: Promote farmer-producer organizations to be agri micro, small and medium enterprises
  4. Policy for farming: Focus on improving human and farm productivity
  5. Skilling: Agricultural technical training institutes

Way forward

  1. Pradhan Mantri Kisan Bima Yojana and other schemes must be followed up with steps in the national budget
  2. This will bring a new focus on agriculture as a key part of our growth story

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

[op-ed snap] Problem of plenty

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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: Not much

Mains level: The Coweb phenomenon and the possible solutions of the issue of price-fluctuations in agriculture.


News

 Cycle of boom and bust in the prices of agricultural goods

  1. Over the last few weeks, across India the price of potatoes has fallen sharply after a year of bumper production
  2. Many distressed farmers have left their produce to rot on the roads, and in cold storage facilities
  3. Curiously, potato prices were many times higher just months ago amid scarce supply
  4. Last year, the price of other produce like red chilli, tur dal and tomato witnessed a similar trend of steep falls compared to the previous season

Explanation behind this trend

  1. The sharp swing in prices has been explained by the Cobweb phenomenon
  2. Farmers tend to increase the production of certain crops in response to their high prices during the previous season, which in turn leads to a supply glut that causes prices to crash
  3. The cycle repeats each passing year, with the lag between price and production causing a huge mismatch between supply and demand
  4. The boom-and-bust cycle is the result of a broken supply chain that is over-regulated

Temporary measures by the government

  1. These measures can come in the form of fiscal measures such as farm loan waivers, a higher minimum support price for farm produce, or some combination of the two
  2. Such relief measures that temporarily ease the pain on farmers, however, will fail to make a significant difference to their lives in the long run

Permanent solution

  1. Any permanent solution to the problem of agricultural distress will have to deal with the challenge of price fluctuations
  2. In the absence of a robust market for buying and selling forward-looking contracts, farmers are left to fend for themselves against severe fluctuations

The way forward

  1. The government must resolve to address these structural issues, and not limit itself to ad hoc policy measures in firefighting mode.
  2. There is a need to give farmers not just a better, but also more stable, return on their crops

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

Panel sets out an action plan to make agriculture profitable

Image source

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Rashtriya Krishi Vikas Yojana

Mains level: Target of doubling farmers’ incomes in India and measures being taken to achieve it


Action plan for doubling farmers’ incomes

  1. A top government panel has proposed major reforms to the existing administrative structure
  2. This is a part of detailed action plan for doubling farmers’ incomes

Important suggestions

  1. Overhaul of the Union agriculture ministry
  2. Setting up a three-tier planning and review mechanism through district, state and national level committees
  3. Conducting an annual ease of doing agribusiness survey

About the committee

  1. The committee on doubling farmers’ incomes (DFI), was set up in April 2016
  2. The DFI committee is tasked to formulate the strategy to double real income of farmers between 2015-16 and 2022-23

Restructuring agriculture ministry

  1. The committee suggested revamping the marketing division of the agriculture ministry into a division of marketing and agri-logistics
  2. It suggested upgrading the Rashtriya Krishi Vikas Yojana (RKVY) division to a ‘division of investment in agriculture’ to promote strategic investments in production and post-production facilities
  3. To capture value from agri-commodities, the committee has suggested that the crops division be restructured as the ‘division of crops and primary processing’ to focus on primary processing of harvested produce at the farm gate

Other policy suggestions

  1. The report suggested liberalizing the definition of a ‘farmer’ to include cultivators, lessee farmers and sharecroppers
  2. The report also suggested a national level policy and planning committee represented by ministers of agriculture, commerce, rural development, water resources, food and consumer affairs, and food processing, among others
  3. Its proposed task would be to review the policy framework and progress in doubling farmer’s incomes, review trade policy, budgetary allocations and status of farmers’ welfare

Back2Basics

Rashtriya Krishi Vikas Yojana

  1. It was started to incentivize the states in order to increase their investment in Agriculture and allied sectors
  2. It is a State Plan scheme
  3. The eligibility of a state for the RKVY is contingent upon the state maintaining or increasing the State Plan expenditure for Agricultural and Allied Sectors
  4. The baseline expenditure is determined based on the average expenditure incurred by the State Government during the three years prior to the previous year
  5. The preparation of the district and State Agriculture Plans is mandatory
  6. The scheme encourages convergence with other programmes such as NREGS
  7. The pattern of funding is 100% Central Government Grant
  8. It is an incentive scheme, hence allocations are not automatic

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

[op-ed snap] Agriculture needs a reforms package

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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: Basics of the MSP. procurement, etc.

Mains level: The issues related to the MSP are specially mentioned in the Mains Syllabus.


News

Why are farm incomes unattractive?

  1. Due to the absurdity of policies features among them
  2. The overriding objective of price stability, over time, has tilted farm policy in favour of the consumer, the numerically larger vote bank.
  3. Trade and price controls are highly restrictive, and mostly anti-farmer
  4. The farmer is forced to sell in the domestic market where prices tend to be lower than global agricultural prices
  5. Incompetence and politics have ensured that policies are failing to serve even consumers

Government’s control on prices in agri-market

  1. Agri-markets are not free
  2. Governments seek to influence prices, to smoothen them out. In the absence of state intervention, prices soar in bad weather years and plunge in good weather years, hurting consumers and farmers
  3. The tools in governments’ hands are import and export controls, buffer stocks management and minimum support prices (MSPs)

What should be the MSP policy of government?

  1. The MSP, the price at which the government offers to procure from farmers, is an economic policy tool which requires technical acumen
  2. A sensible policy would be to
    (1) buy from farmers when market prices are depressed and
    (2) sell stocks in the open market when prices are elevated
  3. In the first scenario, if the MSP is pegged higher than the market price, the procurement will raise the market price, boosting farm incomes
  4. In the latter, by offloading its stocks at a price lower than the market price, government can cushion consumers against excessive inflation
  5. The buyers of the subsidised sales (an efficient Public Distribution System) are directly benefitted, but as the sales also lead to lower prices in the open market, all consumers gain

Issues related to procurement(2016-2017)

  1. Procurement works effectively only if trade controls and stocks management are aligned with it
  2. How these tools tend to be deployed in a counterproductive manner was evident in the example of pulses in 2016-17
  3. Despite a bumper harvest, after a steep MSP hike and good rains, export controls and stocking limits for private traders were retained
  4. And a record volume of imports allowed to be shipped in
  5. The resulting glut sent the market price down, below the MSPs, rendering it pointless
  6. The looming losses set off farmer protests seeking even higher MSPs

Comparison with other countries

  1. Even after four years of systematically aggressive hikes, Indian MSPs of rice and wheat are less than support prices in China and other Asian countries

What should be done?

  1. The bulk of agriculture is not sufficiently productive to be able to gainfully engage young rural Indians and so policy attention must be on building industry
  2. The upcoming Budget presents an opportunity to revisit strategic choices

Back2basics

Issues related to direct and indirect farm subsidies and minimum support prices

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

[op-ed snap] A law for the farmer

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The newscard comprehensively discusses the need of forthcoming Pesticide Management Bill 2017. As, current laws are not effective enough to deal with the issues.


News

What is the issue?

  1. Recently, about 50 farmers have died due to the use of pesticides in Maharashtra and over 1,000 have suffered critical ailments
  2. The current Insecticides Act, 1968 is archaic
  3. The agriculture ministry during UPA rule had prepared a Pesticide Management Bill 2008, which was scuttled in Parliament
  4. The forthcoming Pesticide Management Bill 2017 can address the many anomalies

Sale of misbranded pesticide

  1. Farmers continue to commit suicide in large numbers and one primary cause, not even discussed in hushed tones, is the sale of misbranded (substandard, spurious, expired) pesticides
  2. Along with pesticide misuse (use, timing and quantity), the inordinate use of antibiotics in the poultry and dairy industry is a major reason for human diseases, monumental species loss and environmental damage
  3. The value of failing crops and the costs borne by farmers as a result of excessive farm inputs cannot even be properly assessed

Ineffective Laws

  1. The larger pesticide companies (brand owners and marketing agents) generally outsource production to smaller manufacturers
  2. But they can’t be prosecuted because the Central law only stipulates prosecution of the manufacturer
  3. When the licence to sell pesticides is issued, applicants declare a “responsible person” to be held accountable for violations
  4. The person is usually a low-paid employee, who over time becomes unreachable. So, even serving the prosecution notice becomes difficult

Testing of Pesticides 

  1. Most pesticide samples simply don’t fail the test
  2. This is not only because conniving officers don’t follow procedures
  3. But for a “sample failure” to be legally valid, samples have to fail consecutively
  4. The cumbersome documentation procedure allows the second sample to expire before it’s tested, rendering the process invalid. Thus, the crime cannot be established

What should be done?
Two simple notifications can result in a giant leap

  1. One, the Centre should make it mandatory for all agriculture-input packaging to have a bar code giving product information
  2. The bar code will sync with the GST and the e-way bill
  3. Second, states should make retailers log all agriculture input sales onto state government servers, allowing for traceability from the factory floor to farmer’s field and for regulation enforcement

Digitisation at the ground-level can help

  1. A data bank of agriculture input sales will give unparalleled benefits
  2. The ensuing machine-learning revolution on farms will allow for evidence-based interventions, officer promotion evaluation and better governance
  3. Digitisation at the ground-level will drive personalised and data-driven farm extension, realistic crop loss compensation and insurance
  4. Most importantly, it will facilitate a farmer grievance redressal mechanism to make the system accountable

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

Modi govt plans bold move to fix rural distress

Image source

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: minimum support price (MSP), market assurance scheme

Mains level: Farm distress across country and ways to resolve it


Scheme to prevent distress sales by farmers

  1. The central government, in consultation with states, proposes to launch a new price support scheme for farmers to prevent distress sales at prices below the minimum support price (MSP)
  2. Under the proposed “market assurance scheme”, states will be free to procure all crops from farmers for which MSPs are announced
  3. This will be except rice and wheat, which are already being procured by the centre for the public distribution system

Working of the scheme

  1. Under the new scheme, the centre will compensate states for any losses capped at 30% of the procurement cost
  2. It will be the states’ responsibility to dispose of the procured crops
  3. The proposed scheme will ensure an assured price for the farmer, mitigating the price risks faced by farmers after harvest

States have discretion

  1. States will take ownership of the scheme, including which crop to procure and in what quantities when wholesale prices drop below MSPs
  2. State governments will be free to use the procured crops for targeted nutrition-support programmes such as mid-day meals for schoolchildren or sell them in the open market 

Why this scheme?

  1. The proposed scheme comes against the backdrop of a record harvest of cereals and pulses in 2016-17, which led to wholesale prices plunging below MSPs
  2. The price crash has led to protests by farmer groups across the country since June, with demands for remunerative crop prices and loan waivers

 Back2Basics

Minimum Support Price (MSP)

  1. 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
  2. The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops
  3. This is done on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP)
  4. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, govt. agencies purchase the entire quantity offered by the farmers at the announced minimum price
  5. Minimum support prices are currently announced for 24 commodities including seven cereals (paddy, wheat, barley, jowar, bajra, maize and ragi); five pulses (gram, arhar/tur, moong, urad and lentil); eight oilseeds (groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed); copra, raw cotton, raw jute and virginia flu cured (VFC) tobacco

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

[op-ed snap] From Plate to Plough: Agri-futures, like China

Note4students

Mains Paper 3: marketing of agricultural produce and issues and related constraints
Prelims level: not much
Mains level: Steps Needed for developing agri-futures to ensure price discovery and thus, raise farmer’s income.

News

Context
  1. In November, prices of most major kharif crops crashed below their respective minimum support prices (MSPs), triggering farm distress.
  2. One of the main reasons: planting decisions of our farmers are based on last year’s prices, rather than the prices expected at the time of harvest.
  3.  Signals indicating future prices are largely absent as agri-futures have been decimated by excessive controls and regulation.
  4. It is time to think afresh and resurrect agri-futures in India.
Agri-futures: India 
  1. In 2003, the Atal Bihari Vajpayee government’s decisions to allow futures markets in India.
  2. In the initial years — 2003-2007 — agri-futures did show promising growth.
  3. Around 2007-08, hit by global food crisis, but gained momentum again and peaked in 2011-12.
  4. However, since then, there has been heavy government intervention in agri-futures resulting in their near collapse.
  5. Government intervention: higher margin requirements and absolute suspensions.
Agri Futures: China
  1. The agri-futures market was introduced in the early 1990s in China.
  2. It struggled for a decade, but thereafter Chinese agri-futures had a robust growth.
  3. By 2016, it was at the top of global chart, crossing the 1,000 million mark, dwarfing India’s 20 million contracts in the process.
pasted1
Image Source
Issues in India’s Agri-futures
  1. Abrupt interventions, with frequent changes in stocking restrictions on private trade.
  2. Suspensions of agri-futures, as well as high margins, have been targeted more towards sensitive commodities in the common man’s food. Eg. Tur, Urad.
  3. High margins for sensitive commodities like 100% for potato, reflect the government’s intention of blocking their futures trade.
Lessons from China: Steps Needed

No Sensitive Commodities

  1. Stay away from sensitive commodities (for example, common rice, wheat), till futures gain momentum and some depth.
  2. Focus on less sensitive commodities like oilseed complex (oilseeds, meals, and oils), feed (maize), cotton, basmati rice and spices.
  3. Once markets are developed and the regulator has a higher degree of comfort, the country can diversify to other commodities
Only Delivery-based contracts
  1. The regulator should allow only delivery-based contracts, at least till markets deepen.
  2. This will assure government that speculators are not rigging markets.
Encourage State Trading Enterprises
  1. The government of India should encourage state trading enterprises (STEs) to trade on the agri-futures platform.
  2. This will boost the government’s confidence in agri-futures as it will have ample information from its STEs.
  3. India’s STEs like the MMTC, STC, PEC or even the FCI can participate on the agri-futures platform, helping it to deepen.
Conclusion
  1. Lastly, it has to be recognised that developing agri-futures is as much the responsibility of the regulator as that of commodity exchanges.
  2. Both need to work in harmony for the benefit of various stakeholders.

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

[op-ed snap] From Plate to Plough: What Gujarat did yesterday

Image Source

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: Not much

Mains level: The possible solutions given in the article can be mentioned in the Mains paper.


News

Context

  1. The article talks about the Gujarat agricultural model from 2003 to 2014, and how it can help the current bad situation of agriculture situation in country.

Agriculture Growth of Gujarat from 2003 to 2014

  1. Gujarat’s agri-GDP registered an unprecedented growth of 8 per cent per annum during 2002-03 to 2013-14, way more than the all-India figure of 3.3 per cent per annum 
  2. Gujarat’s agri-growth was even higher than that achieved by Punjab during the Green Revolution’s

Expectations from the Gujarat model

  1. When Modi became the prime minister in May 2014, one was expecting that the “Gujarat model” would be extended to many states, with the fine-tuning to suit each state’s requirements
  2. But the growth of all-India agri-GDP in the first three years of NDA rule has come down to 1.8 per cent

Is deficient rain the reason behind this situation?

  1. Deficient rain in 2014-15 and 2015-16 is of course one factor behind this poor performance
  2. But there were bumper harvests in 2016-17, yet farmers suffered due to a collapse in agri-prices
  3. The advance estimates of 2017-18 do not indicate much recovery

Reasons behind Gujarat’s excellent agri-performance during 2003 to 2014
First

  1. The Atal Bihari Vajpayee government’s bold decision to allow the commercial use of Bt cotton became a catalyst for change, from which Gujarat benefited the most
  2. From nowhere in 2002, Bt cotton spread to more than 90 per cent of the area under cotton in Gujarat by 2014

Second

  1. China is taking over Syngenta for $43 billion to access the best technologies for its farmers
  2. While the Centre is creating conditions that may force companies like Monsanto to quit
  3. This government is literally reversing the benefits that the Atal Bihari Vajpayee government bestowed to farmers

Third

  1. Gujarat government at that time provided basic infrastructure to farmers — irrigation, power and roads enabled the easy adoption of Bt cotton, and benefited other crops and the livestock sector as well
  2. Currently, Gujarat has one of the best road-network in the country, of which 89 per cent are pucca/surfaced roads

Fourth

  1. Good marketing institutions propelled Gujarat agriculture, especially its dairy industry
  2. The AMUL model of directly buying milk from farmers’ cooperatives and processing and distributing it through millions of outlets ensures that farmers receive 75-80 per cent of the consumers’ price
  3. This model is worth extending to other commodities, especially fruits and vegetables, bypassing the mandi system

The way forward

  1. Enable farmers to access best technologies and best markets at home or abroad
  2. Invest in basic infrastructure that can give access to water for irrigation, power and rural roads
  3. Create AMUL type institutions for other commodities to enable farmers to access high share of consumers’ price
  4. Export bans or high minimum export prices for agri-products are anti-farmer

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

[op-ed snap] From plate to plough: Plan for the agri-futures

Image result for agri-futures

Image source

Note4students

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

Op-ed discusses about the India’s poor performance in Agri-future trading and lessons we can learn from Chinese success in Agri-future trading.

Once you are done reading this op-ed, you will be able to attempt the below.

“The futures market is one way to ensure that farmers’ planting and selling decisions are forward-looking.” Examine reasons for India’s poor performance in Agri-futures trading and give suggestions?

From UPSC perspective, the following things are important:

Prelims level: Futures market, e-NAM

Mains level: Agri-trading in India-problems ,solutions


News

Context

  1. Even after 70 years of Independence, the marketing system for agri-products remains un-supportive to farmers.
  2. The e-NAM aims to create an all-India spot market by creating an electronic platform.

e-NAM, what is required?

  1. For transactions to take place across mandis and states, one has to do much more than installing a simple software.
  2. It needs assaying, grading, sorting, storing, delivering and settling disputes with respect to each transaction.

Agri-futures market

  1. The agri-futures market is one way to ensure that farmers’ planting and selling decisions are forward-looking, and not based on past prices.
  2. This can help smoothen the typical boom and bust problem in agri-prices.

India’s agri-futures trading experience

  1. India recorded the first trade in futures in 1875 in cotton in the Bombay Cotton Exchange, just 10 years after the first trade was consummated in USA.
  2. But India’s agri-futures could not develop much due to a series of suspensions around the Second World War in view of the shortage of essential commodities.
  3. This mind-set continued post-Independence, and only pepper and turmeric were allowed to trade in 1977
  4. In 2003 three national exchanges were set up and all commodities were allowed to be traded in futures markets. But since 2003, 15 commodity futures were suspended, leading to uncertainty in the market.

Problems with Indian agri-futures trading

  1. They are often disrupted by sudden bans or suspensions by the government as many policy-makers have a deep mistrust in the functioning of these markets
  2. Very few farmers or farmer producer organisations (FPOs) trade on futures, which in turn reinforces the mistrust of policymakers.
  3. The overall size of agri-futures in India remains trapped at low levels, and since 2012, it has been tumbling down

Lessons from the Chinese success

  1. China, which started in the early 1990s, and by 2016, it was the largest player in global agri-futures contracts with a whopping share of 69 per cent.
  2. State participation in the futures markets through the State Trading Enterprises
  3. No abrupt suspensions of commodities
  4. Focus on choice of commodities, which are not very sensitive from the food security point of view

Way forward

  1. Well thought-out strategy to pick the right commodities is a better way to develop agri-futures rather than a frequent stop-go policy
  2. India being now the largest importer of edible oils, especially palm and soya oils, these are promising candidates for agri-futures provided global players are allowed to trade in these.
  3. The trust in commodity futures will enhance once more FPOs start trading on agri-futures, and they start gaining directly or indirectly from agri-futures.
  4. SEBI can help incentivise the participation of FPOs on the futures trading platform, but the real onus lies with agri-commodity exchanges, and it is here that the progress has been extremely slow.

 

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

[op-ed snap] Missing stock is harming our food security

  1. Theme: Spoilage and pilferage of foodgrains.
  2. Background: During April this year, missing stock worth around Rs 20,000 crore was discovered in Punjab’s food purchases.
  3. Concerns: According to the Food and Agriculture Organization, around 40% of the food produced in India is wasted.
  4. Wastage from the public distribution system, which is meant for ensuring food security in the country, makes up almost half of the total.
  5. Considering that India ranked a lowly 97th of 118 nations in the recently released Global Hunger Index, spoilage and pilferage are not things the country can afford.
  6. The way ahead: The concept of a Negotiable Warehouse Receipts system, as proposed by the Shanta Kumar Committee for restructuring FCI, is one way to break the monopoly of state agencies and incentivize farmers. It allows farmers to deposit their produce in registered warehouses for an advance and sell it later when market prices are high.
  7. Strict adherence to quality standards and norms should be made mandatory for the registered warehouses, private or otherwise.
  8. A combination of private and public agencies is essential to handle the vast and diverse agricultural output in the country.
  9. Meanwhile, the FCI should be streamlined and allowed to focus on states’ surplus produce meant for distribution in other states.
  10. Most of the produce meant for a state’s own consumption should be left to the state agencies.
  11. Provisions must also be made to liquidate stocks as and when they exceed buffer stocks to minimize wastage.
  12. Efforts should be made to revamp the food processing sector in India to reduce the perishability of food items.
  13. The setting up of mega food parks and cold storage chains as part of the Make In India project, and 100% foreign direct investment through the Foreign Investment Promotion Board route in the marketing of food produced and manufactured in India is welcome in this context.
  14. Conclusion: A robust food-supply chain, which can make value additions through better storage, distribution and processing, will ensure that the agricultural sector remains competitive, transparent and profitable.
  15. This may also change banks’ negative perceptions of the sector.

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

250 agri markets integrated with online platform surpassing target: Minister

  1. Centre has integrated 250 regulated agricultural markets across 10 States to the online trading platform for agriculture produce, e-NAM, surpassing the target of 200 set for the period
  2. Most states and agriculture mandi boards have cooperated well
  3. At this pace, we can meet our goal of connecting all 585 regulated mandis by December 2017 instead of March 2018

Discuss: ‘Though e-NAM will improve competitiveness in market through larger participation of buyers and more transparent system of bidding, it should not be considered a panacea for all deficiencies in agricultural markets.’ Discuss

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

[op-ed snap] An APMC tale: Why market design matters

  1. Theme: The APMC legislation has in effect created fragmented markets—small trading zones that can quite easily be captured by trader cartels
  2. The op-ed highlights issues with good intentions but bad implementation. Case in point are the Agricultural produce market committees
  3. Issue 1: Even institutions that are set up with the best of intentions are often captured by the special interest groups
  4. Issue 2: These interest groups then have a strong vested interest in maintaining the existing way of doing things rather than support reform
  5. Issue 3: Only good intentions don’t work out in long run, we need to have a deep understanding of the incentive structure that is being put in place
  6. Challenge: The APMC legislation has in effect created fragmented markets – small trading zones that can quite easily be captured by trader cartels.

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

Farmers’ e-market platform could be a game changer

  1. News: The govt’s decision to create a common e-market platform for farmers could benefit them
  2. How? It will remove inter-state barriers in moving farm produce
  3. Challenge: An amendment of the state Agricultural Produce Marketing Committee Act and physical logistic support to enable the farmer to move his crop
  4. Impact: It empowers state govts to notify the commodities, and designate markets and market areas where the regulated wholesale trade takes place
  1. News: The govt’s decision to create a common e-market platform for farmers could benefit them
  2. How? It will remove inter-state barriers in moving farm produce
  3. Challenge: An amendment of the state Agricultural Produce Marketing Committee Act and physical logistic support to enable the farmer to move his crop
  4. Impact: It empowers state govts to notify the commodities, and designate markets and market areas where the regulated wholesale trade takes place

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

The need for unifying agricultural markets

  1. First, to ensure ease of doing business, it integrated 51 of the 155 main market yards and 354 sub-yards into a single licensing system.
  2. Second, for improving efficiency and transparency, it introduced automated auction and post-auction facilities.
  3. Third, to guarantee quality, assaying facilities were made available in the markets.
  4. Finally, It linked all APMCs in the state electronically, and enabled the discovery of a single state price for every commodity on a single platform.

A unified market will bring uniformity in prices across states

Lessons from Karnataka APMC model

  • First, to ensure ease of doing business, it integrated 51 of the 155 main market yards and 354 sub-yards into a single licensing system.
  • Second, for improving efficiency and transparency, it introduced automated auction and post-auction facilities (weighing, invoicing, market fee collection and accounting).
  • Third, to guarantee quality, assaying facilities were made available in the markets.
  • Finally, It linked all APMCs in the state electronically, and enabled the discovery of a single state price for every commodity on a single platform.

How does integration with the national e-platform is possible by reforms?

  • A single licence valid across the state,
  • A single-point levy of market fee
  • A provision for electronic auction as a mode for price discovery.

Way forward

  • As agriculture is a state subject, the states have already taken the lead in policy innovation.
  • Be it labour laws in Rajasthan, land acquisition reforms in Tamil Nadu or land pooling for urbanization in Andhra Pradesh.
  • The Karnataka model of agricultural markets reforms should be seen as a similar case, a state innovation that can guide New Delhi.

Will the unified national agricultural market help to rein in food inflation?

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

National e-market for agricultural commodities

  1. The Department of Agriculture and Cooperation (DAC) has mandated Small Farmers’ Agri Business Consortium (SFAC) to act as the lead promoter of National Agriculture Market (NAM).
  2. NAM is envisaged as a pan-India electronic trading portal.
  3. It will primarily network 585 Agriculture Produce Market Committee (APMC) market yards to create a national e-market for agricultural commodities.
  4. Big private markets will also be allowed access to the software to enable better price discovery.
  5. It will provide the software free of cost to the states for setting up of NAM.
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