Why waste a crisis!

Coronanomy — 06

“There are decades where nothing happens; and there are weeks where decades happen”

This quote by Vladimir Lenin succinctly describes the sweeping reforms in the agricultural sector that took place on Day 3 of Atmanirbhar Package. The government pledged a massive amount of money in the form of various funds aimed at different farm activities and for farm infrastructure development. These measures were enormous in terms of doubling farmers’ incomes as promised by BJP in their election manifesto.

Research shows that a sustainable way to double incomes is

• The crop diversification into high value-added ones such as herbal and organic products.
• Increased access to market and removal of trade barriers
• Better access to infrastructures, such as cold storage and warehouses.

Much of the policies for the farm sector in the history of India have been in the form of loan waivers; cash doles, etc. These types of policies have led to the increasing reliance of farmers on the government over time. It is for the first time that an Indian government has taken bold steps towards making the farm sector ‘atmanirbhar’.

There has been a significant change in the national food basket in the last 20–25 years. As society got prosperous, they have started to consume things other than cereals which is evident as there has been a considerable increase in demand for milk, pulses, fruits, etc. Encouraging farmers to produce high-value products leads to their income gains as well as increases consumer access to it.

Some people argue that doubling Minimum Support Price could be a way to do it, but that is an extremely unsustainable way. Think of purchasing wheat at double prices!!

Infrastructure Development

Farm-gate infrastructure

Citing lack of cold storages and post-harvest management infrastructure near aggregation points, the government announced a fund of Rs. 1 lakh crore for agricultural infrastructure projects at farm-gate and aggregation points. This fund will help various aggregators, farm entrepreneurs, and startups to facilitate farmers and global markets and also provides an impetus for infrastructure development.

Formalization of Micro Food Enterprises (MFEs)

“Vocal for Local with global outreach” was the motto behind this scheme. The finance minister said that unorganized MFEs require technical upgradation to attain FSSAI certificates as well as to build their brands and market their products. Thus, Rs. 10000 crores were announced to help MFEs formalize and develop their brands.

A cluster-based approach will be used for selecting MFEs, e.g. mangoes in UP, chilli in Andhra Pradesh, makhana in Bihar etc. It aims to help 2 lakh MFEs. Strengthening this segment will lead to reduced wastage and likely will create 9 lakh off-farm jobs.

Money Bonanza

• Fishermen: The centre allocated Rs. 20000 crores under PMMSY (Pradhan Mantri Matsya Sampada Yojana). The aim is to fill critical supply chain gaps. As much as 11000 crores for inland fisheries, aquaculture etc. and 9000 crores for infrastructure development such as cold chains etc. Several activities such as sea-weed farming and ornamental fisheries will be revived under this. According to the government, over the next five years, an additional 70 lakh tonnes of fish production, employment generation of 55 lakhs, and the doubling of exports to 1 lakh crore are likely to happen under PMMSY.

Aquaculture

• Herbal Cultivation: There has been a surge in global demand for herbs and herbal products over the last five years, and the only significant providers are China and India. Thus, to promote herbal cultivation, the government has proposed a 4000 crore fund intending to cover 10 lakh hectares under herbal cultivation.
  A corridor of 800 hectares of medicinal plants will also be set up along the banks of river Ganga.
• Animal Husbandry: Animal Husbandry Infra Development fund of Rs 15000 crores to incentivize private investment in the dairy sector. “Dairy products capacity will go up by as much as 50% and will generate over 30 lakh rural jobs and significantly increase exports” — said Amul MD, RS Sodhi.
• Vaccination: India boasts of the highest livestock in the world. The government aims 100% vaccination of cattle, sheep, buffalo, goat, and pig to prevent Foot and Mouth Diseases among them that will cost nearly Rs 13343 crores to the government.
• Beekeeping: The government announced a 500 crores fund for beekeeping initiatives that will be directed towards infrastructure development related to Integrated Beekeeping Development Centre, and development of collection, market and storage centres which are estimated to increase the incomes of 2 lakh beekeepers.

Sweeping Reforms

Essential Commodities Act, 1955

“India wastes up to 16% of its agricultural produce” — claims a report by Ministry of Food Processing, and is the primary reason for the ubiquitous hunger problem in the nation.

In the early 1950s, India suffered acute food shortages, and the government had to import the grains to feed its people. In this scenario, the government legislated the Essential Commodities Act to stop black marketing and hoarding. Under this law, the government lists certain commodities such as agri-food, fertilizers, etc. If someone is found to store these commodities over the limits imposed faces criminal charges.
However, the situation has changed substantially over the years, 10x wheat production, 5x rice production, and now India has become an overall exporter of agri-produce. So, the government decided to amend this law to deregulate cereals, pulses, oilseeds, etc. and will only become active in extraordinary circumstances such as war, famine, etc. So, until now, there used to be no comprehensive investment in storage, leading to wastage every year after harvest. Nevertheless, now without limits, it is detrimental to boost private investment in warehouses, cold chains, etc.

Contract Farming

The current APMC (Agricultural Produce Market Committee) system forces farmers to sell their produce to a designated mandi leading to a monopoly and thus, mandis control the prices. This system was established by Allaudin khilji to feed his army cheaply, and it has been in existence since then. On 15th May, the government of India gave the farmers the right to sell their produce to anyone and essentially allowing them to control the prices. It has been cited as the most significant gift of PM Shri Narendra Modi to the farmers. Under contract farming, a buyer can carry out an agreement with a farmer specifying him his needs and in return, assuring him of the fixed income. E.g., ketchup companies can carry out contracts with thousands of tomato farmers. Contract farming can prove to be a boon for the farm sector in the following ways:

• Businesses can give the farmers know-how and high-quality inputs so that they can get the produce of desired quality. In return, it increases the productivity of the farmer.
• Businesses would be willing to invest in post-harvesting management facilities.
• It is like an insurance scheme for the farmers assuring them of fixed prices in the agreement.
• It will create a substantial amount of non-farm jobs.

Conclusion

Farmers were demanding something short-term from the government, such as cash transfers or loan waivers. Instead, the government announced the game-changing reforms and investment strategies and aims to remove farm woes permanently. While these reforms solve the fair price problems, the problems with logistics need to be sorted for the complete realization of the benefits from the reforms. India can become the food basket of the world conditional on the proper implementation of the proposed schemes and reforms which is often not the case with the government. Things move slowly with the government. There was not much political criticism and industry, and economists lauded the reforms. However, the government must spread awareness among farmers regarding these reforms and prevent them from their exploitation at the hands of businesses.