Indian agriculture post-COVID
At a time when the Indian economy is faltering and welfare systems are buckling under crushing pressure, reforms in the agriculture sector can help put the economy back on track and provide much-needed employment opportunities on a cost-effective and urgent basis; write A Amarender Reddy & Ashwini Darekar
The saying 'all models are wrong but some models are useful' sounds true in the case of the Coronavirus. In all probabilities, the downcast of the economy will last for a year or so. Under these circumstances, after health, food security and sustaining livelihoods should be the priority for the people. As per a United Nations report published in 2019, 69 per cent of India's population lives in rural areas, which comprises more than 700 million people constituting a marginalised section of society. To attain food security, both food availability and universal access is vital. Currently, India has enough food grain in its buffer stocks with about 60 mt (million tonnes) of rice and wheat, on top of it, production of food grains this year is likely to reach record 292 mt coupled with bumper production of horticultural crops (313 mt), indicating a comfortable position in food availability.
The meteorological department projected that the coming monsoon will have increased rainfall. If the supply-demand situation stays constant, demand for export commodities like cotton and other cash crops may likely decline but imported commodities (like oilseeds and pulses) may increase as their imports may be affected by supply chain disruptions under the post-COVID situation. Ensuring a supply of seeds for Kharif sowing coupled with complementary inputs like fertilisers in sufficient quantities is key. The recent boost for infrastructure investment and market reforms like amending Essential Commodities Act, strengthening electronic national agricultural markets, emphasis on faster implementation of Model APMC Acts set a stage for unleashing the potential for the development of agricultural markets. Freeing up of agricultural markets through the elimination of restrictions on the intra and interstate transport for both inputs and outputs can also widen agricultural markets.
Food access and entitlements
Although there is no food shortage, food access at affordable prices for vulnerable sections of society depends not only on food availability but also moving food from production centres to consumers and enhancing purchasing power through employment and income-generating activities. Additionally, effective implementation of welfare schemes like PM Garib Kalyana Yojana (PMGKY), direct money transfer to various vulnerable sections of society is essential. Reports indicate that around 39 crore poor people received financial assistance totalling Rs 34,800 crore under the PMGKY as on May 5, 2020. Most of the migrant workers stranded away from their hometowns without any identity, ration, cash and community support were vulnerable to acute mental stress too, the report said. In this dire situation, India needs to capitalise on the existing social welfare system rather than creating new ones.
reachING THE last mile
Though some of the welfare schemes and policies are formulated by the Central government, most of the implementation is in the hands of state and local governments. For example, in Telangana, civil supply department is overseeing the food distribution through PDS shops to 87.6 lakh BPL cardholders. As per the latest data, about 88.1 per cent of BPL card holders obtained their PDS rice in April 2020 against about 83 per cent in March. Ration card portability seems to be handy for migrant workers, as data suggest that about 13 lakh BPL cardholders obtained PDS rice under ration portability.
The Telangana government also deposited Rs 1,500 each into the bank accounts of 74 lakh families with BPL cards, amounting to a total Rs 1,112 crore as on April 14. The remaining 15 per cent of BPL cardholders have not yet received money due to issues like non-linkage of bank accounts to BPL cards, etc. Some research reports pointed out that the reach of welfare schemes to the marginalised 40 per cent of the population is doubtful in a crisis as many times they don't have proof of residence, permanent address and ration cards. This needs to be addressed with proactive community participation in the identification and reach of beneficiaries. The state governments are closely working at the block level to make sure that the farmers get the inputs and logistic support to send out the harvest to the market. In the recent Lockdown 5.0 guidelines, the Central government is giving more flexibility to states and local authorities to tweak guidelines and modalities to suit their situations, although the base guidelines have been formulated by the Government. The state governments should involve local communities, farmers and vulnerable migrant labourer in development and implementation of such policies as well as decisions.
Private sector support
Most of the Rabi crops are already harvested but some commodity prices declined due to lack of marketing. Some state governments are proactive in procuring food grains, especially paddy and wheat but for some other commodities like oilseeds, pulses and perishable commodities like vegetables and fruits, marketing is a problem. Telangana's paddy production has shot up to 10.5 mt this year from 6.6 mt last year. The State roped in millers to process the additional paddy produce and planning to double the godown space from existing 2.2 mt to 4 mt to store the milled rice. "Procuring paddy, sending it to the mills to make rice and selling that will become a hard task. The existing policy or capacity cannot deal with this situation," the Chief Minister said. The State, which has about 2,200 rice mills, can process 10 mt of rice a year, but generally, they work below capacity. Again, the marketing of processed rice in the open market is an issue. They need to expand their marketing capabilities and find a market for alternative uses of rice to cater to the expanding paddy area in response to the increased irrigated area from new projects such as Kaleshwaram. It was also proposed that the surplus rice available with Food Corporation of India may be converted to ethanol for utilisation in making alcohol-based hand-sanitisers by the private sector. The e-commerce companies functioning in the agricultural sector can play a vital role in these circumstances. The input needs of the farmers are met effectually through e-commerce. For instance, annual FMCG consumption in rural areas was around Rs 2 lakh crore and is projected to reach Rs 8 lakh crore by 2025. As per published reports, in 2018, the Indian farming market was worth Rs 16 lakh crore and growing at a CAGR of 10.8 per cent by 2024, it was projected to reach Rs 30 lakh crore. These e-commerce players can bring the inputs and other essential commodities to the rural households at their doorsteps which has been disinfected at the warehouse level. It is equally important to encourage MSME and SME's to take up alternate income and employment generating activities. In the coming year, the rural sector will drive massive consumption across all categories, while the urban demand will subdue.
Setting supply chains right
Agricultural production is not affected due to the pandemic. The same cannot be said of the supply chains. While the government has issued permits to trucks allowing them to carry groceries, fruits, and cereals, many transporters have not received their permits. This has increased the transaction time and cost for the farm produce to reach the market. Further, there is an impact on the demand side as the restaurants are closed. This is resulting in a substantial decline in farm gate prices and revenue loss to many farmers across the country. As per published reports, the railway ministry suggests that freight loading has dipped from a usual 10,000 cargo rakes per day to just about 3,000-4,000 now.
Due to paranoia and supply chain chokeholds, households are eating more rice and pulses, but less milk, meat and vegetables. This has affected access to food by the urban poor migrants on the one end and demand for farmers at the other end. While it is not possible to anticipate the arrival of global crises, the impact can be mitigated through a higher level of preparedness of the supply chains.
As most of the mandis are shut down, farmers are exploring alternate channels to directly sell to consumers through farmer producer companies (FPOs), farmers groups or linking directly to retailers and wholesalers in urban centres. Procurement of mangos, mandarin and tomato's directly from the farmers and selling to retailers is a hard task which requires storage and transport infrastructure along with arrangements to collect, aggregate and sell the produce.
Working through farmers' organisations
In some places, farmers groups and Farmers Producer Organisations (FPOs) can directly deliver their produce at the doorstep of the consumers. Many FPOs have stepped forward to operate during the lockdowns by procuring and marketing farmers' produce and giving farmers the income in this dire situation. The existing milk supply chain in each village (either operated by private/cooperative/government) needs to be used for the marketing of fruits and vegetables as already demonstrated by Safal which is promoted by Mother-Dairy in Delhi. Some FPOs are arranging trucks to move raw fruits and vegetables to supply the processing industry. However, processing units are not able to pay immediately. Hence, there is a need for short term loans with zero interest to FPOs on liberal terms, so that they can pay farmers without waiting for payment from the buyer. Further, transport and other logistics can be subsidised for weaker FPOs promoted by small and marginal farmers, so that they can jump into food logistics during these hard times. The share of fresh fruits and vegetables sold to food processing industry needs to be increased. This will not only reduce the supply-demand gap across seasons but also curtail imports from China. The FPOs can also meet the needs of online food retailers like Big Basket and Reliance Fresh through unleashing the potential of contract farming Act. FPOs should adopt online-technology platforms to expand alternate channels like FPO-consumer, FPO-wholesale-tech platform and FPOs-retail chain. The FPOs may use the wide network of existing women-SHGs in collecting, grading, sorting and primary processing like making ghee, pickles, dehydrated onion powder, retailing etc. FPOs can exploit synergies by running input shops, door delivery, and provide farm advisory through WhatsApp and other mobile applications. In this way, this crisis can be altered to an opportunity for local development.
Engaging return migrants in building villages
According to the census report, there are about 15 crore urban workers in the country, of which around three crore have now returned to their native villages. On the commencement of monsoon season, many of these unemployed workers can be engaged in agriculture. However, the agricultural sector doesn't have the capacity to absorb this additional labour.
In the villages, it is high time to identify and promote alternate employment opportunities for the returned migrant labourer's to not only use their youthfulness but also exposure to the latest technologies.
The surplus-labour in the villages needs to be engaged fully in MGNREGA works with the availability of experienced reverse-migration workers in creating long-lasting community assets like the construction of a library, market yard, community hall, meeting place, computer centres etc.
The presently stalled agricultural marketing system has created an opportunity to overturn the policy paralysis in agricultural reforms. Such reforms require bold, decisive decision making that can push long-pending reforms like relaxing Essential Commodities Act, pushing Model APMC Act, Contract Farming Act and Land Lease Act. Political backing is also required to overcome the resistance from the market players. It entails a remarkable ability to challenge the dominant economic thinking of huge government support, subsidies and freebies towards investments in infrastructure, empowering farmers through unleashing the power of free markets.
The agricultural sector will play a key role in bringing the economy back on track post-COVID. Unlike, the welfare and development schemes, agricultural reforms/policy shift require no extra funds from the Government, but their impact is many times more than the highly subsidised schemes if implemented efficiently. During the past decade, the Government of India came out with three important model acts to free up agricultural input and output markets with wider implications on efficiency and productivity, viz., (i) Model Contract Farming Act, 2018 which freed up contract farming from all restrictions and better enforcement of the contract between farmer and private firms for mutual benefit with scope for infusion of private/cooperative sector capital, technology and scale; (ii) Model Agricultural Land Leasing Act, 2016 which freed up and strengthened the land lease market without infringing on landowners' right to facilitate tenancy farming (with tenants get all benefits on par with owner farmers from agricultural schemes like avail agricultural loans and crop insurance but without infringing ownership rights of farmers) and cooperative farming, community farming to enhance scale economies; (iii) Agricultural Produce & Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 which freed up agricultural markets to promote farmers markets, FPOs, private markets, infusion of private capital, technology and efficiency in agricultural markets.
If the states adopt these model acts in addition to the effective deregulation of agricultural commodity markets by implementing an amended essential commodities act, it will free up both input and output markets in agriculture and have enormous scope in increasing private sector participation, efficiency and scale, adoption of better technology, easing the transfer of cultivation from low productive users (absentee landlords) to high productive users (tenants/cooperatives) and enhancing backwards and forward linkages in agriculture.
AA Reddy is Principal Scientist, ICAR-Central Research Institute for Dryland Agriculture, Hyderabad. A Darekar is Consultant, National Institute of Agricultural Extension Management, Hyderabad