Table of Contents
Issue with Agriculture in India
• Highly rain dependent. Erratic monsoon, droughts, floods and hailstorms.
• Improper use of seeds and fertilizers.
• Low Productivity: India’s average yield in 2013 of 3 ton/ha is lower than the world average of 3.2 ton/ha. Inter-regional variations also exist. Punjab and Haryana have nearly 4.5 tons/ha produce
• Cereal Centric – MSP was always focused on rice and wheat and not much scope for pulses and horticulture produce which could fetch higher prices.
• Irrigation methods – belief in flood irrigation than micro irrigation leads to more utilization of water than required.
• Lack of R&D– the policy of lab to land not implemented. Agri research institutes like ICAR and private collaborations are weak.
• Improper warehouses
• Lack of grading and standardization
• Inadequate transport facilities
• Presence of a large number of middlemen
• Malpractices in unregulated markets and segmentation of formal markets
• Inadequate market information
• Inadequate credit facilities
• Forced and distress sales
• Poor handling, packing, packaging, and processing facilities
The way forward for Indian Agriculture
• Reforming APMC Act, ECA, abolishing levies
• Freeing up land lease markets
• Aggregating the produce at farmers’ level through farmer producer organizations (FPOs) under section 25 of companies act and linking them to modern retailers
• According infrastructure status to irrigation technologies to promote investment in micro-irrigation, drip irrigation, etc
• Favourable MSP regime signaling preference to pulses and horticulture.
• Usage of technology like GM crops, improved seeds, drought resilient crops, organic farming, etc
• Use technology and research.
Ashok Dalwai Committee on doubling farmer income by 2022
• 6 lakh crore investment by public and private sector annually
• Focus on backward states of east India
• Reduce input costs like seeds, fertilizers
• Reduction in post harvest losses using better storages
• Focus on value addition through food processing industry
• It says growth in rural roads, infra and connectivity should be at 10% from base year 2015-16
• Govt spending is 80% of total investment. It must grow at 22% per annum to fulfil DFI.
• Liberalize the definition of a ‘farmer’ to include cultivators, lessee farmers and sharecroppers and developing an online and annually authenticated database to identify a farmer and render him/her eligible to avail benefits of agriculture related support-system of government.
• India amounts of paltry 2% of world agri exports
• Need- no value addition, infra, lack of quality and rejections
• Draft Agricultural Export Policy released
• Policy reforms, infra focus, whole government approach, focus on food processing, focus on FPO, quality and standardization
Agriculture Export Policy
• Aim of 60 billion by 2022 and 100 billion by 2025
• Mega Food Parks and Dedicated cold chain infra
• At ports, dedicated agri product handling infrastructure
• Prioirity protocol in sea trade since agri products are perishable
• Trade restrictions- evolving a strategy to tackle Sanitary and Phytosanitary restrictions
• Involvement of state govts
• Setup Agri Export Zones since 2002 as dedicated zones of agri export
• Promoting organic exports and Indian brands through GI
Are MSP good?
• Only big farmers benefit who can mobilize their produce and sell it to government. 6% benefit according to shanta Kumar commitee.
• In east India, government does not procure and the prices often fall below MSP. Connect to Shanta Kumar committee.
• MSP are declared late which loses the effectiveness of signaling the preference of crop for farmers.
• High MSP and open ended procurements combined have led to government buying more than three times of grains needed leading to inflation in the open market.
• Biased towards cereals.
• Procurement centers are far away from villages leading to transportation costs. NITI aayog report on MSP has suggested village procurement centers.
• Same NITI Aayog survey in states showed that 79% people are dissatisfied with MSP implementation but almost all wanted MSP to continue.
• Swaminathan committee recommendation – MSP should be cost of production + 50% profit
• Niti Aayog has mooted an idea of Price Deficiency Payment where a percentage of difference between MSP and market prices be paid to the farmers.
• A committee by CEA suggested that MSP should not just recover input costs but should also cover risk and social externalities. But all the above methods will set off inflationary pressure
• Need to reduce bias of MSP towards wheat and rice. Focus on pulses and agriculture. Annual Horticulture Survey says Area under horticulture rose by 18% , whereas, it is 5% for food grains
Some crops covered under MSP includes
• seven cereals (paddy, wheat, barley, jowar, bajra, maize and ragi);
• five pulses (gram, arhar/tur, moong, urad and lentil);
• eight oilseeds (groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed);
• cash crops: copra, raw cotton, raw jute and virginia flue cured (VFC) tobacco.
MSPs is calculated after taking into account the cost of production, overall demand-supply, domestic and international prices, inter-crop price parity, terms of trade between agricultural and non-agricultural sectors, the likely effect of the Price Policy on the rest of economy, besides ensuring rational utilization of production resources like land and water, while recommending MSPs.
Newer ways of payment to farmers
• MSP, procurement by private sector and price deficiency payment like Bhavantar Bhugtaan Yojana of MP
• Telangana govt’s Input Support Scheme for 4000rs per acre for kharif and rabi crops- Rythu Bandhu.