The term AGRICULTURE, formed of two words ‘AGER’ and ‘CULTURE’ meaning soil and cultivation respectively – is the largest and primary source of livelihood for about 58% of India’s population, along with its allied sectors. India is blessed with sizeable arable land with fifteen agro-climatic zones, comprising almost all soil types and weather conditions suitable for growing a variety of crops. India is the 2nd largest producer of wheat, rice, oilseeds, fruits and vegetables and a top producer of milk, spices, pulses, tea, cashew, and jute. Although adoption of strategies like Green Revolution post-independence has made India self-sufficient in food grains and also as an exporter yet productivity of certain crops remains low in India. Increasing demand for quality and nutritious food, quantity and variety will increase over time even more due to the increase in population, average income and globalisation effects in India. In the coming decade, it is estimated that India’s population might become the largest, and hence providing sufficient food might become a prime issue then. The department of Agriculture and cooperation under the Ministry of agriculture is responsible for the development of the agricultural sector in India.
The Green Revolution (1960-80s) was a period that brought India out of stagnation and gave a significant boost to agriculture – the main aim being the increase of food production, alleviating poverty and malnourishment in the country. The pioneering work of agricultural scientists along with immense efforts from the farmers led to this Green Revolution. High Yield Variety (HYV) seeds of wheat and rice, increased use of fertilizers, and improved irrigation resulted in significant growth in agricultural production. Overall, there was a reduction in food grain imports and India gradually transitioned from being a nation having just food security to having surplus production – emerging as a net exporter of agricultural products. Introduction of better technologies, supporting reforms and government initiatives, improved agricultural conditions further – where the growth rates accelerated in 80s, 90s and during 2000s. Although some years later, a decline was noticed, the growth of the agricultural sector yet remained higher than the population growth rate in the country; hence, there was a substantial increase in per capita production in agricultural commodities. However, per capita food availability was not met with the increase in per capita production. The faster-growing non-agricultural sector increased the burden of disparity.
After World Health Organisation declared the Covid-19 pandemic in the year 2020, the nationwide lockdown was declared by India for the containment of the virus, which took a toll on the lives of many individuals. Restrictions on the movement of people, vehicular traffic, border closures, and trade restrictions raised concerns about the negative implications of the Covid-19 pandemic on the agricultural economy. There was disruption in the domestic food supply chain that prevented farmers and agricultural workers from accessing markets and harvest crops. The first wave of the pandemic had coincided with the harvesting season of Rabi crops such as wheat, lentil, gram, mustard, etc. These harvests were to reach the mandis or market yards for assured procurement operations designated by government agencies. However, there was a fear of irreparable damage of the supply chain as there was uncertainty whether the supply of perishable fruits, vegetables, dairy products, fishes, etc. would be able to meet the increasing demands of the consumers. Due to the shortage of workforce and transportation unavailability to the organised industries, poultry, fishes and dairy products were primarily affected. Despite all the challenges faced, for the first time in the last 17 years, the share of agriculture in GDP had touched almost 20%, prior to which it had not happened.
Other challenges, prior pandemic also raise serious concerns and must be dealt with for the growth of the agricultural sector in the future and to improve the livelihood of the people affected by it.
- Declining Productivity: The per unit area productivity of Indian agriculture has been low compared to other major crop producing countries like Brazil, the USA, France, etc. Rice productivity has been less than half that of China’s, while wheat production per hectare per year is about one-third of France’s. Productivity of other staple foods also remained similarly low. Thus, India would only be able to address its issues of malnutrition and hunger if productivity levels could be achieved compared to the other nations.
What Causes Low Productivity?
Indian monsoon: Rainfall is crucial for India as 60% of net agricultural area is still dependent on rainfall for irrigation. This dependence on rainfall in addition to vagaries of monsoon causes uncertainty in terms of agricultural productivity in India.
Land Ownership: Despite ownership of land being widely and fairly distributed, a degree of concentration of landholding can be seen. Land distribution inequality is due to the fact that there are frequent changes in the ownership of land in India – where it is believed that there are vast lands owned by a small section of wealthy farmers, landlords, whereas majority of farmers hold little land or no land at all. As a result, many agricultural households have no access to land, which is an important asset for agricultural production.
Irrigation: A certain amount of water is required for the nourishment of crops, and in case of failure in rainfall, the deficiency of water is counterbalanced by various methods of irrigation adopted by the farmers.
The above issue can be addressed by improving irrigation management, which can increase agricultural productivity and reduce water demand. For instance, the states can adopt Micro-irrigation to reduce the cost of irrigation and electricity consumption, increase fertilizer saving, and enhance farmer income. Currently, 27 states have less than 30% of their farmland watered by micro- irrigation. Some ambitious projects undertaken by the government in this regard are:
– ‘More Crop, Per Drop’
– ‘Catch the Rain’ campaign (under Jal Shakti Abhiyaan)
– Solar Powered Irrigation System
Subsidy: Government subsidies on fertilizers, electricity, and irrigation have led to an unmindful use of resources such as water and power, and overuse of nitrogenous fertilizers. All these have resulted in the depletion of useful resources like soil health, power and groundwater. The consequence of such imprudent use did more harm than benefit to agricultural productivity in India.
Infrastructure: The majority of Indian farmers are still using inefficient techniques and methods of production that have ultimately led to a decrease in agricultural productivity in the country. Modern agricultural technology has spread a little and, with its limited knowledge, its applicability has also been limited and, therefore, productivity varies from region to region.
Farm holdings: It has been defined as all lands used wholly or partly for agricultural production and is operated as one technical unit by one person alone or with others, without regard to title, legal form, size, or location. The arable land size has been decreasing with each successive generation. The land owned by a person is divided into fragments among his wards. Land fragmentation is an issue because it decreases agricultural productivity and also the economic opportunities available. A small piece of land produces only for a farmer and his family. To sell the produces in the market, the farmer needs to produce in excess of it, which requires investment in proper infrastructure to reap the benefits. The return on such investment is usually insufficient and farmer of such landholding may incur a loss. The small farmland does not have sufficient time to recover from the ongoing crop season, leaving very little scope to harvest after each cycle. These small lands limit farmers from producing a variety of crops. Some effective cultivation methods such as inter-cropping, livestock farming and commercial plantations cannot be practiced by marginalised farmers due to small land holding, which might have proved beneficial otherwise.
- Unemployment: Despite various challenges faced by the Indian farmers, they continued agricultural activities that assisted them in earning a living. The major contributors of the rural economy being agriculture, horticulture, handicrafts, fisheries, poultry and dairy, have been dwindling that created inequalities. There were various factors that led to unemployment among rural youth in India. The types of unemployment that are seen in the agricultural sector are Seasonal Unemploymentand Disguised Unemployment.
The reason behind falling employment can be due to some exogenous shocks such as drought, floods, and cyclones. These natural calamities cause extensive damage to crops, which discourages farmers and forces them to give up farming.
Gender-wise employment can also be observed in the agricultural sector – where the male workers in the agricultural sector declined, and an increase in the non-agricultural rural sector was observed. Men have diversified in rural non-farm sectors or migrated to urban areas for better employment opportunities, leading to the feminization of agriculture. Rural Women are engaged mostly as labourers and cultivators in farming sectors.
- Storage Facilities: Storage is considered a major cause of post-harvest losses for all kinds of food in India. A significant portion of perishable items like fruits and vegetables along with cereals and pulses, are wasted due to poor cold storage facilities. For instance- almost 10% of wheat is lost every year due to improper storage methods where the associated reasons for such losses are rodent attacks, spillage, bird droppings, theft/ pilferage, etc. Some farmers have insufficient or no storage facilities in their area, for which they sell their produce immediately once ready, at market prices that are often very low.
- Farmer Suicides: Farmers and farm labourers’ suicides have been increasing almost every year due to various monetary, social or health reasons which include crop failures due to immense unpredictable monsoon nature (droughts/floods), lack of assured water, and pest attacks and diseases, etc. Most of the suicides take place due to farm distress caused by crop failures and the consequent debt burden. Framers are the only section of people who take a risk every time they sow a seed. They nurture them for months, not knowing if, at the end, the crop will survive or not and whether the farmer will receive a remunerative price for the crop grown.
- Scarcity of Capital: Capital is required in the agriculture industry as is required in all other industries. In addition, with the advancement of farm technologies, more and more capital input is becoming necessary. In small villages, farmers sell their produce to the money lenders from whom they usually borrow money. Lack of sufficient capital is a major hindrance for the farmers as it prohibits them from purchasing lands or tools and equipment necessary for expansion.
- Dealing with local traders or Middlemen: In an effort to boost up the agricultural production, farmers incur high production costs but they hardly receive fair pricing of their products from the middlemen. The middlemen purchase the farm products at lower prices from farmers and sell consumers at higher prices, thus, receiving profits by depriving the farmers.
Agricultural marketing comprises of all operations which are basically involved in the movement of agricultural produce from producers to the final consumers. These operations include Assembling, Grading, Processing, Preservation, Transportation and Distribution. Other than the stimulation of production and consumption of farm products, agricultural marketing also helps accelerate the pace of economic development – outcomes of Agricultural marketing are monetizing the produce, market growth, capital formation, investment in technology, and acting as a demand signal platform.
Agricultural Marketing has been considered a very important aspect for the progress of not only the agricultural sector and economic development of the country but also in paving an easier way for the farmers to earn a good living. Some importance of it are as follows:
- Agricultural marketing has a direct bearing on the prosperity of cultivators.
- The surplus of food grain and nearly all cash crops such as cotton, sugarcane, oilseeds, etc., are marketed after meeting the consumption needs of farmers. Quick means of communications, development of technology and transportation have introduced specialization in agriculture.
- Agriculture supplies raw material to various industries and marketing of such commercial crops assumes great importance.
- An increase in the marketing process efficiency results in lower-cost distribution and lower costs to the consumers, which ultimately increases national income. A reduction in the cost of marketing is a direct benefit to society.
- Agricultural marketing brings new varieties, qualities and beneficial goods to consumers, and hence, it is a line between production and consumption.
- Scientific and systematic marketing brings price stabilization.
- Farmers will be induced to adopt up-to-date scientific cultivation methods with improved and advanced technical knowledge.
- Agro-based industries in the field of processing will be developing with an improved agricultural marketing system.
With the above-mentioned importance of agricultural marketing, it has some ISSUES that pose a significant threat to the marketing system and with it, the farmers, consumers and economy as a whole:
- Long chain of middlemen taking away profits of farmers.
- Unavailability of proper storage facilities to protect the agricultural produce.
- Inadequate Transportation facilities affect the movement of agricultural produce which results in farmers being unable to reach the nearby mandis to sell their produce at a fair price.
- Faulty methods of weighing/measuring the agricultural crops.
- Farmers forced to sell their produce at lower prices due to a lack of proper information about the price.
- Manipulation of accounts
- Adulteration of commercial crops, i.e., mixing of inferior produce with superior produce like barley and other grains when mixed with wheat or stones and pebbles when mixed with rice.
In this backdrop, the government has taken several steps to improve the agricultural marketing –
1. Market Surveys – Market surveys are conducted by the government where prices of different agricultural produce in the different markets are collected and published, and problems with appropriate remedies are suggested.
2. Development and Strengthening of The Grading and Standardization System
Setting up grading stations under Agricultural produce (Grading and Marketing) Act, 1937 for products like ghee, flour, eggs, etc.
Assigning AGMARK to the graded products ensures good quality and commands a better price in the market.
Central Quality Control Laboratory was set up at Nagpur along with 11 regional laboratories to test products applying AGMARK.
3. Strengthening Provisions of Storage and Warehouse Facilities –
For the prevention of wastage and distress sale of farmers, Central Warehousing Corporation was set up in 1957 to construct and run godowns and warehouses. Warehouse corporations have been set up by the states for the same purpose.
Food Corporation Of India, set up under Food Corporation Act 1964 , is a statutory body – the storage function of which assumes great importance because of its requirement to hold massive inventory of foodgrains over a significant period of time. It distributes foodgrains throughout the country for PDS. To ensure National food Security, it maintains a satisfactory level of operational and buffer stocks.
Grameen Bhandaran Yojana was launched for the scientific storage capacity.
4. Organisation of Co-Operative Marketing System- National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) is an apex body for the marketing of cooperatives for agricultural produce in India. It implements a price stabilisation measure under “Operation Greens,” which aims to double farmers’ income by 2022.
5. Setting Up of Special Boards and Organisations – Setting up of several boards by the government for unique commodities such as rice, millets, oilseeds, sugarcane, jute, cotton, tobacco, etc. In addition, boards have been set up for providing training in agricultural marketing, promotion of grading and standards of agricultural and allied products, promotion of agricultural business for small and marginal farmers.
6. Appointment of Inter-Ministerial Task Force – which aims to promote direct marketing and contract farming, expand future trading to cover agricultural products, introduce negotiable warehousing receipts system, usage of IT, and develop agricultural marketing in private and co-operative sectors.
7. E-NAM – National Agricultural Marketing (eNAM) is a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities. Lead agency for implementing it is the Small Farmers Agribusiness Consortium (SFAC) under the Ministry of Agriculture and Farmers’ Welfare (GOI).
8. Setting Up of Regulated Markets – Regulated markets were established by the government to eliminate unhealthy practices in the agricultural markets and protect the interest of the farmers. Post-independence, most states had enacted the APMR Acts, which ensured farmers get their fair price of produce.
India’s Agrimarket is presently regulated by Agriculture Produce Market Committee (APMC) Act enacted by the state governments which is almost 50 years old. Almost every state has one APMC for itself. This act notifies agricultural commodities produced in the region and provides that the first sale in such commodities can be conducted under the aegis of the APMC through commission agents licensed by the APMCs set up under the act.
- APMC is basically a platform for the farmers to sell their produce within its limits. Market yards were developed by APMC so that both the sellers (farmers) and buyers (middlemen/ traders) can earn profit.
- Any particular state is divided into many agricultural markets (mandis) where farmers are allowed to sell their produce through auctions. The State Government elects or nominates members of APMCs who are responsible for regulating and controlling APMCs.
- Although APMCs have been formed keeping in mind the benefits of the farmers and proper functioning of the marketing system, there have been debates among various experts and policymakers – major issues being the following:
1. Charging of market fee from buyers and licensing fee from the commissioning agents (who mediate between buyers and farmers) and small licensing fee from the whole range of functionaries (loading agents warehousing, etc.).
2. Charging commission fees by the commissioning agents from transactions between buyers and traders – are exorbitant as the commission is charged on the entire product sold.
3. High taxes at initial levels have a cascading effect on commodity prices as they pass through the supply chain.
4. Though the market fee is collected just as tax, the revenue earned by the APMCs does not go to the state exchequer and hence, does not require approval of state legislatures to utilise funds thus collected. APMC operations are independent of scrutiny.
It has been said that the states have partially adopted the reforms of APMC, on a pick-and-choose basis which has defeated the main objective of creating a uniform trade environment across the country. As a result, no noticeable improvements were observed and desired results were not achieved – not many changes in the agricultural marketing system happened as expected. Surplus production in the market region requires physical connectivity to the far-away demand – which was basically absent. Direct marketing, which was direct sourcing from big processors and allowed farmers to skip multiple layers of intermediaries, was not taken up by many states. Contract Farming which could have been a channel to boost up farmers’ income was also taken up by very few.
To tackle these issues, Central Government proposed MODEL APMC ACT, 2003.
MODEL APMC ACT, 2003
As the state APMCs created fragment markets for agricultural commodities and curtailed freedom of farmers to sell their produce other than the commission agents and other functionaries licensed by the APMCs, the Ministry of Agriculture(GOI) developed a Model APMC Act,2003 which provides the following –
- Direct sale of farm produces by farmers to contract farming sponsors.
- Setting up ‘special markets’ for specified agricultural commodities’ – mostly perishable.
- Establishment of new markets for agricultural produce in any area.
- A single levy of market fee on the sale of notified agricultural commodities in any market area.
- Establishment of consumers’ and farmers’ market for direct sale to consumers.
- Creation of market infrastructure by the revenue earned by APMCs.
- Freedom to farmers to sell their produce directly to the contract- sponsors or in the market set up by private individuals, consumers or producers.
At the request of the central government, a number of state governments have exempted the marketing of fruits and vegetables from the purview of the APMC Act.
The reforms in APMC have undoubtedly brought improvements from the preceding village trader dominated exploitative system but somewhat failed in price discovery in fair and transparent manner. The APMCs have caused fragments in the markets, thereby inducing inefficiency over space and time. It is in this backdrop that the Model APLM Act 2017 was prepared by the union government. The Model Agricultural produce and Livestock Marketing (promotion and facilitation) Act, 2017 was passed to aid the farmers in better price realisation as they are allowed to sell their produce to the buyers of their choice. With this, the consumers will also be benefitted as the prices of agricultural commodities would come down. In addition, the prospects of food processing industries will be boosted up as the raw materials price decrease.
The Model Agricultural Produce & Livestock Contract Farming and Services (promotion & facilitation) Act 2018 [The Model Contract Farming Act 2018] released by the government in 2018 to enhance India’s agricultural production along with securing remunerative income for the farmers, considering them as weaker in contract farming. It integrates farmers with bulk buyers to agro-industries. It covers not only contract farming but also service contracts where the Farmer’s Producer Organisation has a major role to play in its promotion.
Covid-19 & Agricultural Reforms
The Coronavirus pandemic has brought severe economic consequences and had led to multiple disruptions. In this backdrop, the government initiated a major push towards self-reliant India by announcing Atmanirbhar Bharat Abhiyan. To transform agriculture in the country and raise farmers’ income, the government passed three crucial legislations from the Parliament. These legislations sought to bring much needed reforms in the agricultural marketing system, such as removal of restrictions of private stockholding of agricultural produce or creating trading areas free from middlemen and taking the market to the farmers.
Need For Amendment
Farmers have been unable to get better prices due to the lack of investment in cold storage, warehouse, processing and export. This has resulted in farmers suffering huge losses during bumper harvest, especially in perishable commodities. Hence, with adequate processing facilities, much of the wastage can be avoided.
Farmers in India suffer from various restrictions in marketing their produce. Restrictions exist in the form of selling their produce only to notified APMC mandis and to only registered licensees of the state govt. Barriers also exist in free flow of produce between various states owing to the prevalence of APMC legislation enacted by state govt.
Indian agriculture is characterized by fragmentation due to smallholdings and having weaknesses such as weather dependence, production uncertainty and market unpredictability, making agriculture risky and inefficient both in terms of input and output.
Why are the Farmers Protesting?
There has been a widespread protest by farmers even if the two bills namely FARMER’S (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES ORDINANCE, 2020 and FARMER’S PRODUCE TRADE AND COMMERCE (PROMOTION & FACILITATION) BILL, 2020 prove to be beneficial for them. Some of the reasons why they are unhappy can be seen considering the following points:
Lack of Consultation: The ordinance routes and then attempts of the passage of the Acts without consultation adds to mistrusts among stakeholders, including farmers. The allowance of trade zones outside APMC has made farmers apprehensive that the new system would eventually lead to existence from the MSP.There has been a widespread protest by farmers even if the two bills namely FARMER’S (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES ORDINANCE, 2020 and FARMER’S PRODUCE TRADE AND COMMERCE (PROMOTION & FACILITATION) BILL, 2020 prove to be beneficial for them. Some of the reasons why they are unhappy can be seen considering the following points:
Non Favourable Market Conditions: While the retail prices have remained high, the Wholesale price Index data suggest a deceleration in farm gate prices for most agricultural produce. Farmers do not see the remunerative prices that the framework suggests they will receive with the rise in input costs. Moreover, farmers’ fear has increased after farmers from Bihar received prices lower than that of MSP for most crops post abolition of APMCs.
Absence of Any Regulation in Non APMC Mandis – Farmers fear that it will give preferences to corporate interests at the cost of farmer interest. The farmers will be facing difficulties dealing with the big corporate in the absence of regulation – motive of corporate being profit seeking.
Improve Agricultural Infrastructure – There should be massive funding for the expansion of the APMC market system, trade cartel removals, providing good roads to the farmers, logistics of scale and real-time information by the government. In addition, soil health improvement and water conservation measures should be a top priority to enhance farm productivity.
Appropriate research can bring out a more improved technology that can benefit the environment (e.g., solar irrigation), multiply farmers’ income, and make their work easier.
Empowering State Farmers Commission– Instead of opting for heavy centralization, to bring about a speedy government response to the issue, emphasis should be on empowering farmers through State Framers Commissions recommended by the National Commission for Farmers.
The commission agents should be facilitated with value added services where they would be leveraged in setting up cold storage, warehouse and infrastructures for food processing, etc. This could become beneficial for both the state government and the agents.
Consensus Building – Proper communication is required with those opposing the bills, henceforth explaining the need for reform and getting them onboard. Also, their point of view should also be considered, and the government should provide a proper official notice in consultation with them.
It is not every day that we need a doctor or lawyer or a priest, but we do need a farmer. Without food, the world will slowly die, and it is the farmers who work hard every single day to keep plenty of crops and animal products in our market for our survival. All that the farmers have been asking is legally guaranteed remunerative prices for their produce. Effective steps and measures are to be taken by Government to ensure that the farmers earn a significant living. A robust institutional arrangement has to be made without which the free market may harm lakhs of unorganised small farmers, who have been remarkably productive and have been responsible for economic progress even during the pandemic. India has the capacity to produce food grains and other crops that can make a vast difference in the Indian economy – just appropriate support would bring much of the improvements.