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Tuesday, September 28, 2021

Agriculture policy: Strengthening agri-food value chains for farmer welfare

The old output-centric approach must give way to demand-driven production that focuses on raising farmers’ income and consumer interest.

Written by Alka Bhargava | New Delhi |
December 5, 2019 12:27:43 am
Cooperative dairies are a good example of what food value chains can do. (Express photo by Bhupendra Rana)

Development of robust agri-food value chains (FVC) are extremely important in India to capitalise on the gains made in production in recent years. It is the key to ensuring that our small and marginal farmers also partake in the spin-off benefits from the country transitioning from a subsistence ship-to-mouth importer of food, to one that is self-sufficient and output-surplus. This has also led to a paradigm shift, from a production-centric to an income-centric agri-system approach, a thinking that is reflected in the national commitment of Doubling Farmers Income by 2022.

Central to the new approach is the focus on post-harvest management and introduction of progressive agri-market reforms. The primary requirement here is to have demand-driven production of agricultural produce, rather than production-propelled marketing. This would entail developing more farm-level storage and primary processing facilities, aggregation hubs, and marketing and cold chain infrastructure for produce. These will further be linked to electronic negotiable warehouse receipts, enabling farmers to access bank credit through pledge finance and not resort to distress sale of produce. The government is also working on upgrading 22,000 rural haats into Gramin Agricultural Markets and connecting them to the pan-India e-NAM electronic trading portal, just as the 585 larger APMC (agricultural produce market committee) mandis already connected to this platform.

Market imperfections and inadequate infrastructure for handling harvested produce are now resulting in extended supply chains — from the farmer, commission agent, wholesale trader and retailer, to the consumer. This is deleterious both for the farmer, who gets a lower share of the consumer rupee, and the latter, who has to pay more because of the higher marketing costs as well as post-harvest losses, especially for perishable produce.

States are, therefore, being encouraged to undertake reforms through replacement of their existing APMC laws with the Model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017, besides adoption of the Model Contract Farming and Services Act, 2018. The provisions of freedom to the farmer to sell directly to any buyer and single-point levy of market fee across a State, along with the creation of a unified national market through e-NAM, can change the entire dynamics of agricultural produce marketing in India.

The objective behind the above reforms is to expand the horizontal reach of farmers, by disseminating transparent price information beyond their nearest mandis and giving them a wider choice of where, when and whom to sell. Contract farming can promote FVCs through creation of an assured market and ensuring price stability, apart from leading farmers to tailor the quantity as well as quality of their produce to the pre-decided demand of buyers. Linked to FCVs is also access to institutional credit and customised financial products; the Interest Subvention Scheme and the recent Kisan Credit Card (KCC) saturation campaign of banks are steps in this direction. At the “tail” of the chain is a robust system of marketing intelligence to provide demand-led decision-making through forecasting of agricultural produce demand-and-supply and better crop selection. These would further aid price stabilisation and risk management.

We have an already successful FVC model in the dairy sector, which was facilitated by an enabling institutional and policy environment focussing on farmers’ access to markets as much as animal productivity. The “Amul” model — of a three-tier cooperative structure of village societies collecting milk, processing it at district union dairies and entrusting marketing to a state-level federation — was evolved in Gujarat and replicated in other states through the Operation Flood programme. This model is testimony to how farmers can benefit from access not only to markets, but also inputs, technology, information and financial products. Commercial banks, until recently, weren’t inclined to lend to small and marginal dairy farmers, who outnumber large farmers in dairy cooperatives, though their share in milk procurement per se may be less. Moreover, loans to dairy farmers were being treated as investment credit, primarily meant for purchase of animals, construction of sheds, etc. However, a value chain with product market orientation could serve as collateral for financing even small dairy farmers, with the lead firms — in this case, cooperatives — facilitating access to credit. In 2018, the KCC facility was extended to livestock and fisheries farmers for meeting their working capital requirements, along with the benefits of the existing 2% interest subvention and 3% prompt repayment incentive.

Promoting FVCs will, in addition to boosting farmers’ incomes, also provide impetus to rural employment, skills and entrepreneur development — whether in primary processing services or movement of produce. The industry can strategically deploy vendor development budgets to train village communities for taking up such skilling activities that would enhance local employability beyond the traditional occupation of agriculture, thereby reducing rural–urban migration. It is necessary in this context to also underline the importance of “waste to wealth” conversion, by making use of every kg of produce from the farm that can be an additional source of income. The farmer can capture more value from his/her produce, both through “addition” (primary processing at village level, paste and powder making, pickling, etc.) and “recovery” from by-products (converting paddy straw to fibreboard, briquetting, biodegradable substitutes for plastic, cow dung logs, urea-enriched fodder, biogas, etc.). Besides, there are possibilities for “diversification” via allied rural vocations such as bee-keeping, venom farming, breeding, sericulture, agro-forestry and agri-tourism.

India houses 18% of the world’s human and 15% of livestock population, while subsisting on just 2.2% of its geographical area, 4.2% of freshwater resources, 1% of forest and 0.5% of pasture land. On top of these are the challenges of climate change, shrinking holding size (more than 80% of the farmers are small and marginal) and nearly 52% of the agricultural land being un-irrigated. Even in the face of such adversities, our farmers — by marrying their traditional knowledge with adoption of technology, high-yielding and climate-resilient varieties/hybrids and modern inputs — have made India largely self-sufficient through record production of 285 million tonnes of foodgrains and 311 million tonnes of fruits and vegetables. Now is the time for us to return the favour — by converting all this output into more value and income for the farmer.

The writer is Additional Secretary, Ministry of Agriculture & Farmers Welfare, Government of India

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