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Subject: Agriculture

  • Exporting agri-inputs

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

    Context

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

    1) Seeds

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

    2) Fertilisers

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

    Suggestion on changes in fertiliser subsidies

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

    3) Farm machinery

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

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

    Conclusion

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

  • Godhan Nyay Yojana to boost rural economy

    Chhattisgarh is set to launch ‘Godhan Nyay Yojana’. The scheme aims to put money in the pockets of people living in rural areas and also solve the problem of stray cattle.

    Try this question from CSP 2019:

    Consider the following statements

    1. Agricultural soils release nitrogen oxides into the environment.
    2. Cattle release ammonia into the environment.
    3. Poultry industry releases reactive nitrogen compounds into the environment.

    Which of the statements given above is/are correct?

    (a) 1 and 3 only

    (b) 2 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

    Godhan Nyay Yojana

    • Under the scheme, the Chhattisgarh government will purchase cow dung at the rate of Rs 2 per kg.
    • This scheme will turn cow dung into a profitable commodity.
    • The scheme also aims to make cow rearing economically profitable and to prevent open grazing in the state, as well as help with the problem of stray animals on roads and in urban areas.

    How will the scheme help the rural economy?

    • The scheme will generate additional income and increase employment opportunities.
    • The government will procure cow dung and prepare vermicompost in order to move towards organic farming.
    • There is a huge market for organic farming. Vermicompost will be sold by cooperative societies.
    • Distribution of vermicompost fertilizer to farmers will be done as a commodity loan by cooperative societies, banks.

    Preventing strays in urban areas

    • In urban areas, the scheme will prevent movement of stray animals on roads and highways, and also improve urban sanitation with proper disposal of waste produced by cattle.
    • Cattle will be tagged with the owner’s name, address, mobile number to the neck of each animal after the survey to ensure accountability of cattle owners if their cattle are found in the open.

  • Issue of Food subsidy in India

    Solutions to Problems in Food Subsidy Delivery

    The following solutions will help in addressing problems associated with PDS.

    1. Replacing Targeted Public Distribution System (TPDS) with Direct Benefit Transfer (DBT) of food subsidy. National Food Security Act (NFSA) states that the centre and states should introduce schemes for cash transfers to beneficiaries.Cash transfers seek to increase the choices available with a beneficiary, and provide financial assistance.  It has been argued that the costs of DBT may be lesser than TPDS, owing to lesser costs incurred on transport and storage.  These transfers may also be undertaken electronically. As per a report given by a high level committee of Food Corporation of India, DBT would reduce Government subsidy bills by more than Rs 30,000 crores.
    2. Automation at the Fair Price Shops is another important step taken to address the problem in PDS. Currently more than 4.3 lakh (82%) Fair Price Shops have been automated across the country. Automation involves installation of Point of Sale (PoS) devices, for authentication of beneficiaries and electronic capturing of transactions.
    3. Aadhar and introduction of Biometrics was recommended to plug leakages in PDS. Such transfers could be linked to Jan Dhan accounts, and be indexed to inflation. It  facilitates the removal of bogus ration cards, check leakages and ensure better delivery of food grains. In February 2017, the Ministry made it mandatory for beneficiaries under NFSA to use Aadhaar as proof of identification for receiving food grains.
    4. 100% ration cards had been digitised.
    5. Between 2016 and 2018, seeding of Aadhaar helped in detection of 1.5 crore fake, duplicate and bogus ration cards and these cards were deleted.
    6. Increase the procurement undertaken by states known as Decentralised Procurement (DCP), and reduce the expenditure on centralised procurement by the Food Corporation of India (FCI). This would drastically reduce the transportation cost borne by the government as states would distribute the food grains to the targeted population within their respective states. As of December 2019,17 states have adopted decentralised procurement.
    7. The Fair Price shops operate at very low margins as per findings of the Government. Hence the fair price shops should be allowed to sell even non-PDS items and make it economically viable. This will motivate them to not to resort to unfair practices in the distribution of Government subsidized food grains meant for beneficiaries of Government schemes.
    8. A greater and more active involvement of the panchayats in the PDS can significantly improve access at the village level.
    9. There is also an urgent need to set up a proper and effective grievances redressal system for both the fair price shops as well as beneficiaries

  • [pib] Central Sector Scheme: Agriculture Infrastructure Fund

    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.

  • Aatamnirbhar in Agriculture

    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.

  • Agri reforms and way forward

    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.

  • Issues with the ordinances on agriculture

    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.

  • Getting closer to doubling income of Farmers

    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

  • [Burning Issue] COVID-19 and its Impact on Agriculture

    Farmers in India constantly battle against skewed monsoon and erratic rainfall, extreme natural events, interrupted supply chains and rising inflation. Like this was not enough. These troubles now are supplemented this year by the COVID induced lockdowns and the heralding Locusts Attack!

    God bless our Annadatas!

    Context

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

    Even among the different segments, the impact varies widely among different regions and among producers and agricultural wage labourers. This impact will reverberate across the larger economy and will linger longer than a few months.

    Issues surfaced after COVID pandemic

    In spite of all the measures and in view of continuing restrictions on movements of people and vehicular traffic, concerns have been raised regarding negative implications of COVID19 pandemic on the farm economy. The immediate problems in agriculture at the moment are primarily categorized under two heads:

    A. Impact on Global Agriculture

     

    1) Crop production and availability of seeds

    • For crop production, the largest part of the seeding process will be almost unaffected between now and the summer.
    • So there would be no impact as such on seeds availability for now.
    • But if the same scenario continues till year end, then surely seed availability can be an issue.

    2) Fertilizers shortage

    • Due to global trade disturbance, farmers are facing the shortage of agricultural inputs like fertilizer and pesticides.
    • In a shorter span, there is little shortage to be expected.
    • In the longer term, the delivery of fertilizer via international markets may become a problem since some of the production plants in China have been shut down.

    3) On food production and distribution

    • Most of the countries have taken measures such as home confinement, travel bans and business closure to control the rate of infection.
    • Agriculture produce is mostly perishable in nature, so farmers are compelled to hold their unsold produce for a longer period of time.
    • This has led to a reduction in food quality as well as an increase in the cost of production.

    4) On livestock

    • Different agricultural sector such as  livestock and fishery have been hit hard by the pandemic.
    • In India, COVID-19 has caused a higher impact on livestock farming due to limited access to animal feed and a shortage of labour.
    • For example, the travel ban has affected the delivery of breeding stock of poultry.

    5) On workers

    • Agricultural workers in low and middle-income countries lack proper health services and social protection and due to little saving or no saving.
    • Many informal workers in agriculture are obligate to work for their sustenance despite the self-isolation protocol during COVID-19 pandemic.

    6) Impact on food demand and food security

    • The demand for food has affected due to reduction in income and purchasing capacity.
    • Panicked Consumers are stock piling the foods which in turn has affected the food availability and price.
    • Due to the decline in international trade, disturbance in food supply chain and food production, food insecurity may arise.

    B. Impact on India

    Agriculture contributes about 17 per cent to Indian GDP. Agriculture, with its allied sectors, is the largest source of livelihoods in India. 70 percent of rural households still depend primarily on agriculture for their livelihood.

    1) Peak harvest with no procurement

    • This is the peak of Rabi season in India and crops like wheat, gram, lentil, mustard, etc. (including paddy in irrigated tracts) were at a harvestable stage or almost reaching maturity.
    • This is also the time when the farm harvests reach the mandis for assured procurement operations by designated government agencies.

    2) Labour unavailability due to reverse migration

    • The non-availability of labour has hurt operations in many parts.
    • Consequently, the shortage of migrant labour has resulted in a sharp increase in daily wages for harvesting crops.
    • Some parts of agriculture that have the luxury of deploying technology for harvestings, like Paddy and Wheat, are relatively more insulated since they often do not have to depend on large numbers of manual labour.

    3) Fall in prices

    • Agricultural prices have collapsed due to lack of market access including the stoppage of transportation and closure of borders.
    • The rise in labour costs and lack of access means that farmers are staring at huge losses and hence allowing crops to rot in the fields, a better ‘stop-loss’ mechanism.

    4) Scarcity of public goods

    • Making the food grains, fruits and vegetables and other essential items available to consumers, both in rural and urban areas, is the most critical challenge.
    • Transportation of public distribution system (PDS) items to last-mile delivery agents, by both rail and road, has been severely impacted in the beginning.

    5) Restrictions on Sale

    • There were self-imposed restrictions on the inter- and intra-State movements of farmers/labourers, as well as harvesting and related farm machines.

    6) Disruptions in supply-chain

    • The absence of transport facilities clubbed with vigilant blocking roads has a limiting effect on the movement of migratory harvest labour and agri-machinery.
    • Also, trucks and tractors are not inclusive of ‘farm machinery’ by definition..

    7) Lockdown induced debt and Cash Flow Constraints

    • The most important issue that farmers have to surmount is the problem of repaying their crop loans, gold loans and other informal debts.
    • Crop loans are repaid between April and May and a fresh loan is granted at the onset of a new season.
    • Any failure to do so will mean that they will be forced to borrow money from the informal sector at high rates of interest for the new season.

     

    Impact on Food Security

    • Border closures, quarantines, and market, supply chain and trade disruptions are restricting people’s access to sufficient/diverse and nutritious sources of food, especially in countries hit hard by the virus or already affected by high levels of food insecurity.
    • In slowdown times, as demand for food will decrease over the next months, prices should go down in 2020, and this will have a negative impact on farmers and the agricultural sector.
    • As of now, disruptions have been minimal as food supply has been adequate and markets have been stable so far to meet the ongoing demands (though skewed)..

    Indian response to Covid: Agriculture version

    The Center and State Governments have worked in harmony to redress the grievances of farmers. Both have introduced a series of measures every day such as subsidies, including crop insurance to farmers, free flow of agricultural credit, unemployment allowance to rural landless/migrant workers under MANREGA, etc.

    The govt. is using every arrow in its quiver to ensure the health of farmers by continuously sensitizing the farmers about working in fields with covered faces while maintaining social distancing.

    In order to reinforce a zero hurdle harvest season, the govt has exempted the movement of farm machinery from lockdown.

    1) Reforms in e-NAM

    • The new features of National Agriculture Market platform were introduced as a welcoming move to decongest mandis.
    • They aim to strengthen agriculture marketing by reducing the need for farmers to physically access the wholesale mandis for selling their harvested produce.

    2) Technological support

    • Kisan Sabha App developed by CSIR to connect farmers to supply chain and freight transportation management system was recently launched to support farmers during the lockdown.
    • The app 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.
    • Kisan Rath app was also launched to facilitate farmers & traders in searching for transport vehicles for movement of Agriculture & Horticulture produce.

    3) Boost to Contract farming

    • Various states have promoted innovative model allowing investors and farmers to enter into an agreement for contract farming in view of the continuing uncertainties due to the pandemic.
    • For example, the Consumer-Farmer Compact in Telangana has been ensuring food availability and access in COVID-19 times.
    • In this system, the consumers support farmers with their agricultural needs; in return, farmers ensure consumers are able to access food in a hassle-free manner.

    4) Allocations for direct transfers

    • Increasing the allocations for DBT to farmers through PM KISAN and including everyone who is actively undertaken during the lockdown.
    • This has helped most farming families to be partially compensated for the losses seen in months of March and April.
    • It has provided them with some cushion against the deflationary effect seen on farm-prices due to the prolonged lockdown.

    Future scope of reforms

    1) Focussing on 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 may provide a valuable option against the lockdown when efforts to avoid crowding in the wholesale markets are likely to continue.

    2) Reforming APMC

    • With these reforms, the government has also set in motion plans to dismantle the decades-old monopolies of state-run APMCs, that were often blamed for unfair trading, and had become a barrier for farmers to get a fair price on their produce.
    • 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.

    3) Designating warehouses as markets

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

    4) Logistics transformation

    • To sustain the demand for agricultural commodities, investments in key logistics must be enhanced.
    • Moreover, e-commerce and delivery companies and start-ups need to be encouraged with suitable policies and incentives.
    • The small and medium enterprises, running with raw materials from the agriculture and allied sector or otherwise, also need special attention so that the rural economy doesn’t collapse.

    5) Institutionalizing farm labour

    • To obviate the immediate concerns of the scarcity of farm labour, policies must facilitate easy availability of machinery through state entities, Farmer Producer Organizations (FPOs) or custom hiring centres (CHCs) with suitable incentives.
    • It is also suggested to explore leveraging NREGS funds to pay part of the farm labour (with farmers paying the balance wage amount) to lessen the monetary burden on the farmer while ensuring wage employment to the landless labourers and workers.

    6) Expanding institutional lending

    • As the Kharif (rainy/wet) season is fast approaching, institutional lending of crop loans should be expanded and facilitated for smooth (and sufficient) flow of credit to borrowing farmers.
    • Agri-inputs – seeds, fertilizers, agro-chemicals, etc. – have to be pre-positioned for easy availability. The private sector must play a significant role in necessary policy support.

    Future of Agriculture in India

    Indian agriculture is in a way, a victim of its own past success – especially the green revolution…..

    1) Farming as a Viable Livelihood

    • Agriculture is dying, not as in the production of food but as a desirable profession.
    • One bad yield, whether due to errant rains, pests, etc., and most farmers have no buffer available.
    • The last point worth considering is that food and agriculture are not the same. Expenditures on food span the value-add, including processing, preparation, service in restaurants, etc.
    • Farmers in India merely get paid for their product and not for the food we eat.

    2) Rainbow revolution holds the key

    • The first major barrier to overcome is declining productivity.
    • Data reveals that India’s average yield of cereal per hectare is far less than that of many countries. Further, there is a huge inter-regional variation.
    • In order to cross the declining productivity barrier, there is a need to herald a rainbow revolution by making a shift from the wheat-rice cycle to other cereals and pulses.
    • However, this is not sufficient and has to be complemented with a huge investment in public infrastructure.

    3) Per drop more crop

    • The second major barrier is the scarcity of two major resources for agriculture – cultivable land and water.
    • While the cultivable land per person is declining because of the fragmentation of farms due to the rising population.
    • India also has much less per capita water available  as compared to other leading agrarian countries.
    • Given this scenario, it is time to make a shift to micro-irrigation so that the efficient and judicious use of scarce water resources can be made.

    4) R&D is the future

    • One of the major barriers to boosting farm productivity is the lack of new technologies and major breakthroughs post the green revolution.
    • While the National Agriculture Research System played a major role in the green revolution, in recent years there hasn’t been any major breakthrough in research.
    • One of the main reasons for this is the lack of financial resources.
    • There has also not been any major contribution from the private sector towards research and development.
    • The government should thus woo private players by giving them incentives to play a major role in agricultural research and development.

    Way Forward

    • With a burgeoning population, there is a corresponding rise in food demand in India.
    • A post-COVID situation offers that unique opportunity to repurpose the existing food and agriculture policies for a healthier population.
    • India, being trade-surplus on commodities like rice, meat, milk products, tea, honey, horticultural products, etc. may seize the opportunities by exporting such products with a stable agri-exports policy.
    • Development of export-supportive infrastructure and logistics would need investments and support of the private sector that will be in the long term interests of farmers in boosting their income.
    • This is indeed good news in the COVID scenario, assuming agriculture can practice largely unscathed.
    • Designing agricultural policies, post-COVID scenario, must include these imperatives for a food systems transformation in India.
    • Immediately, the govt. should focus on the coming Kharif cropping season, especially ensuring timely availability of seeds, fertilisers, pesticides, credit and other inputs.

    Conclusion

    Structural reforms such as land leasing, contract farming and private agricultural markets, etc. have long been advocated to bring enhanced investments into the agriculture sector and to push its growth. However, there has not been the uniform implementation of these legislations by State Governments and so the full potential of the sector is unrealized. These reforms need significant political will.

    The end of the lockdown will not end the problems. On the contrary, they are likely to be compounded at the onset of the new agricultural sowing season. There is a greater need for government support in the form of support for other agricultural inputs. Lack of any relief will only make the agricultural crisis worse. The need of the hour is to maximise possibilities of agriculture, which has demonstrated its utility and resilience in trying times.

     

     

     

    References

    https://www.civilsdaily.com/news/alleviating-the-farmers-pain/

    https://www.icrisat.org/containing-covid19-impacts-on-indian-agriculture/

    https://www.deccanherald.com/opinion/covid-19-impact-on-agriculture-varied-and-devastating-828390.html

    https://indianexpress.com/article/opinion/editorials/india-agriculture-sector-crisis-corona-impact-on-farmers-niti-aayog-6392233/

    https://www.civilsdaily.com/story/agricultural-marketing-reforms/

    https://thewire.in/agriculture/what-is-the-future-of-agriculture-in-india

    http://www.fao.org/2019-ncov/q-and-a/impact-on-food-and-agriculture/en/

  • Power Subsidies in Agriculture and Related issues

    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.