6/6/2019 Agricultural Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

- Civilsdaily

Agricultural Marketing Reforms – eNAM, Model

APMC Act, Eco Survey Reco, etc.
May, 27, 2019
[op-ed snap] Farm price challenge

CONTEXT

A persistent slump in the commodities market despite substantial hikes in the of cial oor 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 xes 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  of cial 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 agship 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 of ce.

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 of oading previously procured stocks and permitting
imports while the domestic crops are still being marketed also seem to have contributed to it.
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Flaws of PMAASHA –

This aside, the PM-AASHA (Pradhan Mantri Annadata Aay Sanrakshan Abhiyan) scheme has
been marred by some basic aws in all the three price support components:
Physical procurement of stocks at MSPs, price de ciency 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 xed-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 con ned 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 de ciency system – The price de ciency 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 chie y 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 in ation management

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Apr, 15, 2019

India to launch coffee consumption drive

News
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 nancial losses on account of falling coffee prices and soaring labour cost.
As a precursor India will kick off a ve-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.

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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%.

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Mar, 05, 2019
[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 de ation.

Background

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Mains level: PM-KISAN and its mandate

News
Farmers who wish to avail themselves of bene ts under PM-KISAN must have Aadhaar
identi cation to get the money from the second installment, which would be paid by July 2019.
However, this would not be compulsory for the rst 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 bene ciary farmers,
in three equal installments of Rs. 2,000 each.
3. Around 12 crore small and marginal farmer families are expected to bene t from this.

Aadhar will be mandatory

1. States have been told to prepare a database of bene ciaries — 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 rst installment, Aadhaar number shall be collected wherever available.
3. An alternate list of identi cation 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 bene ciaries.
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 bene t to the
new land holder for next 5 years.
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Role of States

1. States would be given a maximum of 0.25% of funds transferred to bene ciaries in the rst
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.

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Feb, 02, 2019
[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.
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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 nancial inclusion (2015-16) shows that only about 10 per cent of farmers
are using these cards.
One needs to understand the constraints and nd 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 out t for
sheries 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 bene t to farmers.

Targeting the idea of income support

However, there is a need to know rst how much of India’s population is poor.
There is no robust gure from the government side in the last ve years.
Following the Tendulkar poverty line, the previous government had come up with an estimate of
about 22 per cent poverty in theApp.
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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- fth 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.

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Feb, 02, 2019
Pradhan Mantri Kisan Samman Nidhi

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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 scienti c
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 scienti c 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.
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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 nance of crops.
This will bring equity in the ow 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 at area basis, without linking it to any particular input.
Rather than providing cash transfer on a at basis of the area of landholding, this direct transfer
can be designed to incentivise the desired cropping pattern.
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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 nd out the real tiller of land and it will be possible to extend
the bene ts of various schemes to the real cultivator rather than the landowner.
Today, most sharecroppers are not able to access the various bene ts 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 ef cient 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.

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Jan, 28, 2019

[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

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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, in ation in agriculture was much lower than overall in ation.
The implicit price de ator 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 de ator 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 de ator of 0%.
The consumer price index (CPI) also shows that the rise in prices for agriculture was much lower
than general in ation 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 signi cantly.

(a) Price de ciency 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.
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(c) Limited procurement scheme for price stabilisation:

A ‘price de ciency’ scheme may compensate farmers when prices decrease below a certain
speci ed 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 xed 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 de ciency 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 uni ed national market is needed for farmers to get
better prices.
Agricultural markets have witnessed only limited reforms.
They are characterised by inef cient 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 nal 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

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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 ef ciency

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 ef ciency 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 ef ciency can be improved signi cantly 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 sh.

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
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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 bene ts 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 bene ts of size, can help in reducing
agrarian distress.
However, a long-term policy is needed to tackle the situation.

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Jan, 04, 2019
[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

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