Market Reforms in Agriculture
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General Studies 3:
- Issues related to direct and indirect farm subsidies and minimum support prices
- Inclusive growth and issues arising from it.
General Studies 2:
- Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
- Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections
It is the need of the hour to ensure that our farmers get fair price. MSP is to be 1.5 times the cost of production which includes a whole stock of reforms.
Earlier the focus was on food security and nutritional security. But now the government is also thinking about livelihood security and has taken various initiatives.
Just ensuring that the farmer gets the MSP is not enough. Farmers should not be dependent on government’s help on providing them the MSP. It has to be earned in the market place. When we talk about market places, there are various challenges that the farmer faces –
- Travelling to sell the produce to faraway places i.e., long distance with higher transportation costs
- Not getting a good price in the market leading to distress sale
- Produce being sold at throwaway prices
- No assurance of the buyer of the produce
- The produce getting spoilt if they are perishable
This has led the government to come up with the concept of 20,000 rural markets – Grameen Hats, with minimum infrastructure to reduce losses. These local markets will be linked to the wholesale markets, largely to avoid middlemen. There are also plans to link it to the global market.
The Dalwai Committee on Doubling Farmers’ Income has pointed out that the share of farmers in consumer’s price is very low; it generally varies from 15 to 40 per cent. Studies conducted by the International Food Policy Research Institute and World Bank have confirmed this. The dominant role of middlemen among others is primarily responsible for farmers not realising a reasonable price for their produce, lowering farm income and profitability. This was recognised by the 12th Plan’s Working Group on Agriculture Marketing (2011).
The agriculture markets are crowded with middlemen and commission agents. As pointed out by Ramesh Chand, in Punjab, there are as many as 22,000 commission agents and innumerable middlemen in each market. According to Ashok Gulati, former chairman of the Commission for Agricultural Costs and Prices, commission agents in Delhi charge exorbitant fees ranging from 6 per cent to 15 per cent.
Operation Green: The idea behind Operation Greens is to double the income of farmers by end of 2022. Operation is essentially a price fixation scheme that aims to ensure farmers are given the right price for their produce. It aims to promote farmer producers organisations, agri-logistics, processing facilities and professional management. The operation aims to aid farmers and help control and limit the erratic fluctuations in the prices of onions, potatoes and tomatoes. Focus is also on cluster based production and from those clusters how a farmer should be linked with it via SPOs.
There is a need to do away with the middlemen. States play an extremely important role here as agriculture is a State subject. Unless they make some crucial legislature changes, no change is going to happen. There is a need to adopt the APMC Act. 502 markets have been linked with eNAM with very good results.
Different kind of systems, storage model should be devised according to their characteristics. Farmers need to explore all the options – right from processing to ensuring diversification while growing crops. He/She should be able to do primary processing at the farm – grading, sorting will fetch a better price.
The real challenge is to change the nature of the market – a single unified pan-India market. We need to devise a set procurement model along with the States but we also need to link it to the public distribution system. With better prices, what is also important is better access to the market. States need to support some of the reforms and be a part of the e-NAM initiative.
e-NAM could help to break this logjam – it is a virtual market.
- All the markets will be linked through the platform
- Infrastructure facilities like quality testing
- Storage facilities if the produce are not sold at that time
- Can get a loan even on the produce stored
- Can choose where he sells his products, in a different state where he might get better returns
The Way Forward
- Production and marketing should march together in order to benefit farmers and consumers.
- Farmers need to be empowered to decide when, where, to whom and at what price to sell.
- There is a need to scrape the culture of adjusting middlemen in agriculture
- Market reforms need to be designed to control the food inflation due to the seasonal spike in prices of perishable commodities
- Centre needs to empower states in revamping the agricultural marketing sector. Almost 40 per cent of all fruits and vegetables are lost annually in India between the grower and the consumer mainly due to lack of storage facilities, a weak transportation system and bad roads. Climate change is expected to make the situation worse. States alone cannot revamp the agricultural marketing sector, primarily due to paucity of funds and technology.
- Private investment on a massive scale needs to be invited to upgrade and build large storage and warehousing systems that are climate resilient.
PM Krishi Sampada Yojana: To create world class food processing infrastructure. This will leverage investment of 5 billion dollar investment, benefit 2 million farmers and create more than half a million jobs. It incorporates ongoing schemes such as Mega Food Parks, Integrated Cold Chain and Value Addition Infrastructure, etc. and also new schemes like Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages, Creation / Expansion of Food Processing & Preservation Capacities.
Mission for Integrated Development of Horticulture (MIDH): For the holistic growth of the horticulture sector covering fruits, vegetables, root & tuber crops, mushrooms, spices, flowers, aromatic plants, coconut, cashew, cocoa and bamboo.
- Promote holistic growth of horticulture sector, including bamboo and coconut through area based regionally differentiated strategies, which includes research, technology promotion, extension, post-harvest management, processing and marketing, in consonance with comparative advantage of each State/region and its diverse agro-climatic features;
- Encourage aggregation of farmers into farmer groups like FIGs/FPOs and FPCs to bring economy of scale and scope.
- Enhance horticulture production, augment farmers, income and strengthen nutritional security;
- Improve productivity by way of quality germplasm, planting material and water use efficiency through Micro Irrigation.
- Support skill development and create employment generation opportunities for rural youth in horticulture and post harvest management, especially in the cold chain sector
Connecting the Dots:
- Examine the factors behind the ongoing agrarian crisis in India. Discuss the reforms required to address it.
- Agricultural reforms need to see the light of the day. Discuss.