On Food Corporation of India makes suggestions on changing the food policy.
• FCI has failed at all the three fronts – procurement, storage and distribution.
• Committee says avoid the prosperous NW states and those who can procure grains by themselves. Focus more on east and NE India where the MSP regime has not benefitted, small farmers are exploited.
• Only 6% people benefit from MSP
Procurement –
• Warehouse receipt system where farmer can deposit his grains in warehouses and can ask for loans based on the receipt of the warehouse.
• No open ended procurement after the buffer stock is full.
• Strict third part quality check on the grains acquired.
• If market prices fall below MSP, govt should give only compensation of the difference and not procure it, let the farmers sell their produce to private players.
Storage-
• No acquiring more than buffer stocks
• Automatic liquidation mechanism where extra grains would be sold in market.
• States levy bonus over and above MSP that makes the FCI procure more due to it’s open ended procurement policy.
• It has recommended buffer as – 61 MT for FSA, 5 MT as strategic reserve and 5MT as forex currency reserve.
• Outsource the storage to private players on a contract of storage of grains for 20 years. More cold storages for J&K and NE due to volatility.
• Silos instead of godowns
Distribution-
• He says give direct cash subsidies to farmers based on per hectare of land owned. This will help him to choose crop, fertilizers, seeds, etc according to his need.
• The scope of FSA reduced. The number of families coming under food security act reduced to 40% from 67% for better targeting.
• End to end computerisation
• 6 month ration at one go. No monthly.
Drawbacks-
• Poor left out due to reduction in scope of FSA
• Opposition from labour union.
• Privatization wrong as FCI can open branches in different regions and still function
• Diluted India’s stand in WTO
• If open ended procurement is not done, it will result in more distress sales and suicides.
Private means strict quality control which may not be beneficial as crops grown are by bare minimum water and in drought like conditions which might degrade their quality – small farmer bound to suffer, big farmers with better transport facility will sell more quickly than small farmers as capacity will be limited due to no open ended procurement. But it will benefit in terms of storage where private players can build cold chains for better storage and distribution. Procurement under FCI, storage and distribution under private hands will be better.
Was green revolution good?
Ship-to-mouth condition of 60s
• It spread only in Punjab, Haryana and West UP due to availability of plenty water, farm credit and investment in mechanization. It didn’t spread to other areas
• Excess use of groundwater has resulted in depleting water resources. Groundwater pollution is rampant
• Use of excess fertilizers has caused salination of soil
• Focus was only on rice and to some extent wheat. No focus on pulses and millets. It has caused situation of hidden hunger. Deficiency of micronutrients, proteins and vitamins despite getting a calorie rich diet is called hidden hunger
• Many farmers were tenants hence don’t have the money to invest.
The 2nd green revolution – The Greening of the East Next green revolution is aimed in the eastern states. Many new agricultural research institutions have been inaugurated in the north east and even in Bihar and Jharkhand. The entire idea is to have local research so that the principle of lab-to-land is easily achieved. ICAR has a role to play in this. 2nd green revolution also includes better usage of water. Instead of being concentrated in water rich areas, it now will focus on micro irrigation and more crop per drop. It involves not just wheat and rice, but pulses, lentils and horticulture. Instead of unrestrained use of fertilizer, it involves usage of soil heath cards to determine the appropriate quantity.
• Cold storages are now getting converted into cold chains. Cold chain consists of cold storage, cold transport, and value addition and preservation infrastructure to provide an integrated cold chain without any break from the farm gate to the consumer.
• IITians have built a mini cold storage which runs on solar power. Farmers sell produce at throwaway prices due to lack of cold storage.
• The Chaudhari committee of planning commission has estimated the cold storage ideally at 61 MT which now is around 32-35 MT. Grains worth 44000 cr are wasted due to improper storage.
• A report by Research and Markets projects the cold storage industry to reach 8.5 billion $ in 2020.
• Ministry of Railways has come up with innovative idea of establishing cold storages near railway routes where transport can be handled by railways. Such storages exist in cities like Nashik.
• The government aims at creating mega food parks and food processing units for which proper cold storage is needed. The government has approved 138 cold storage projects all over and has also classified lending for cold storage as priority sector lending. The government is providing subsidy up to 50% of the total construction cost of cold storage. 100% FDI through automatic route is allowed in cold chain sector.
Soil Health Card Scheme
Soil Health Card Scheme aims at setting up 100 soil testing labs and also train chemists and staff. Half cost is borne by states. The aim is to give cards to all within 3 years.
• Objectives include to analyze the soil samples from the fields, suggest the appropriate use of fertilizers and to suggest change in cropping pattern if needed.
• Soil health card includes information of organic carbon, pH, potassium, etc and also the agro-climatic zone.
• Usage of ICT by providing the card through internet and to Gram Panchayats and also cards for entire village.
• The success depends on coordination between center, state, agricultural universities and research institutes.
• Govt planning to train youth in soil testing so that soil labs can be established on the lines of pathology labs. Mriduparikshaka developed by ICAR can be converted to soil health card schemes.
• 1.5% Rabi, 2% Kharif and 5% commercial and horticultural crops.
• Premiums have been reduced to a large extent. Rest money will be borne by the center and state govt.
• No cap on govt subsidy. The govt will pay even if balance premium is very high.
• Encourages usage of tech like uploading data on smart phones, remote sensing and drone photography.
• One insurance company for the entire state. Private insurance companies along with Agriculture Insurance Company of India Ltd will also be roped.
• It covers local calamities as well as post-harvest losses
• Risks not covered- nuclear attacks, wars, riots, destruction by wild animals, theft, enmity and grazing.
Disadvantages and Challenges of crop insurance in India
• High burden on govt
• Lack of awareness about crop insurance
• No insurance for farm instruments
• Red tapism in fast settlement due to delay by patwaris.
• 4 PSU non-life insurers who have large coverage not allowed to participate which can seriously hamper success
• Problems related to insurance run far deeper than premium rates. For e.g. In many states where premium rates are low in MNAIS still have very low subscription.
• Subsidies are to be borne in a 50:50 ratio between Centre and State. It is unclear yet if the states have agreed to bear their share of the subsidies
• There does not seem to be anything in this scheme to address the problem of tenant farmers who bear the risk of crop failure but are not entitled for compensation and insurance payments.
National Agricultural Market –
Govt launches National Agricultural Market online portal for online trading of goods. The idea is taken from Karnataka’s Rashtriya e-market services pvt ltd. ReMS offers automated auction and post-auction facilities (weighing, invoicing, market fee collection, accounting), assaying facilities in the markets, facilitation of warehouse-based sale of produce, commodity funding and price dissemination.
• Outlay of 200cr
• Department of Agriculture and Cooperation will implement NAM through Small Farmers Agribusiness Consortium which will act as implementing agency and use Agri-Tech Infrastructure Fund.
• The states/union territories will need to undertake three reforms, namely: (i) a single licence to be valid across the state, (ii) single point levy of market fee, and (iii) provision for electronic auction as a mode for price discovery
• This is an indirect repealing of APMC.
Advantages of National Agriculture Market-
• The farmer will have a choice to sell at mandi or online, wherever he gets a high price.
• Reduced intermediaries and pricing cartels that manipulate prices
• It will reduce the information asymmetry
• Better movement of agro products through usage of warehouse-based sale
• It will go a long way in developing value chains.
Challenges and problems of National Agriculture Market –
• Although the transaction fee will be charged by APMC to the seller and the entire transaction will be through APMC. The running costs will be met by this transaction fee.
• For implementing the NAM services, states have to provide e-infra, same rates at all APMC.
• But who will transport the produce?
• Only if bulk purchase is done, the transport cost can be feasible. If not, it will become a sub regional market than a national market.
• Plus, since food grains have varying qualities, the common market should also have a common accreditation system so that the customer will know the quality of produce he is buying.
• One condition is that the APMC acts of states must have the provision for electronic trading. This might need amendments by respective state governments since there must be a single license within a state.
Need for National Agriculture Market (NAM) –
Income of farmers depends on the yield as well as the price that yield fetches. It will reduce wastage and intermediation costs. Adequate efforts have been made to increase the yield but the pricing of that yield has hitherto been neglected.
Agricultural Produce Market Committee (APMC) –
The biggest irony is that after 1991, we are a liberalised economy but our farmers don’t even have the choice of selecting their customers. Establishment of APMC comes under state governments. The issues of agriculture, intra-state trade and commerce, markets and fairs all lie in the state list of 7th schedule. But for the sake of a common agricultural market, issue of inter-state trade is in central list because of which the centre has been able to pass this law. The two laws- Agriculture Produce Marketing Regulation Act and Essential Commodities Act 1955 have placed restrictions on farmers about supply, distrubution, movement of goods. Model APMC laws have been suggested by center but very few have implemented.
Problems with Agricultural Produce Market Committee(APMC) –
high mandi fees, restriction on movement and choice, opaque price deciding, low usage of technology and poor infrastructure, poor storage facilities and condition of monopoly.
Centre has unveiled a draft model law which will replace the Agriculture Produce Markets Committee Act, 2003. Agriculture is a ‘state’ subject, so it depends on states whether to adopt the provisions partially or in totality
Provisions of DRAFT MODEL LAW ON AGRICULTURAL MARKETING-
• Intra-state trade made available by paying a single fee.
• Traders will be able to sell perishables like fruits and vegetables outside existing mandis (wholesale markets).
• cap market fees and commission charges payable by a farmer after bringing produce to a wholesale market.
• Warehouses and cold storages are to act as regulated markets
• All regulatory powers will lie with the office of the director of agricultural marketing
• Farmers can directly sell their produce to bulk buyers.
Advantages of DRAFT MODEL LAW ON AGRICULTURAL MARKETING-
• It will lead to a barrier-free unified agricultural market with one trader licence (interstate trading licence).
• It will allow private players to set up wholesale markets thereby breaking the monopoly of traditional ‘mandis’.
• Increased competition among buyers will lead to better farm-gate prices.
• Promotion of electronic trading.
• A step towards increasing farmer incomes by 2022.
• Food security is made up of four pillars viz. Availability, Affordability, Nutrition, and Stability.
• PDS is important because it has acted as a tool of price stabilization and also as a counter to hoarding by traders for profits.
• The government was running a universal PDS and not a targeted PDS which caused unnecessary spending. Targeted PDS was introduced and BPL families were given subsidized rates over APL families to discourage them from buying through PDS.
Drawbacks of Public Distribution System-
• Minimal decrease in malnutrition is in a way an indication of a failing PDS.
The leakages were estimated to be as high as 50% in some states.
• More focus has been laid on cereals as a measure of food security.. Another point is that most of the Low Income Groups continued to get only cereals and millets from PDS which has led to less protein intake which has resulted in less reduction in malnutrition. Also, diseases pertaining to iron deficiency (anemia), Vitamin A deficiency are also seen.
• Regional disparity is seen in PDS offtake- Poor states don’t have financial capacity to provide subsidies to lower prices, no mechanism to lift grains from FCI to fair price shops. Thus, the states who were priorities for PDS are the ones where offtake has been the least.
• The food subsidy that we give is 1.34 lakh crore in FY17 but the reduction in poverty or malnutrition has not been commensurate to the money spent. India ranks very low on Global Hunger Index.
• Highly inefficient functioning – Radhakrishna’s study points out that the cost of transferring 1 Rs via PDS is 5.3 Rs while the same for schemes like ICDS or Maharashtra EGS is as low as 2-3 Rs.
• Multiple schemes in same domain.
• Fake ration cards
One Nation One Ration launched proposed for interoperability in states
