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- Civilsdaily
CONTEXT
A persistent slump in the commodities market despite substantial hikes in the of cial oor prices
of major crops to 50 per cent above their production cost is among the issues the new
government would need to address urgently.
Background
Most of the commodities for which the government xes minimum support prices (MSPs) are
being traded at 10 to 30 per cent below these rates in the ongoing rabi marketing season.
The situation in the last kharif season was no different. The only exceptions are wheat and rice in
select areas where these are procured by of cial agencies and a few others like barley, tur
(pigeonpea) and cotton, whose demand outstrips supplies.
Though pulses and oilseeds are also purchased in some areas by government-designated
agencies, the quantities picked up by them are too meagre to impact the market.
The government’s agship price support scheme, PM-AASHA (Annadata Aay Sanrakshan
Abhiyan), has remained virtually a non-starter.
The losers in the process are the farmers who, it is feared, might resume their protests once the
new government settles down in of ce.
The present commodity price meltdown can, indeed, be attributed largely to factors such as
consistent surplus production in the last couple of years, subdued global commodity prices and
unfavourable domestic and external trade policies concerning agri-commodities.
Besides, some imprudent moves such as of oading previously procured stocks and permitting
imports while the domestic crops are still being marketed also seem to have contributed to it.
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Flaws of PMAASHA –
This aside, the PM-AASHA (Pradhan Mantri Annadata Aay Sanrakshan Abhiyan) scheme has
been marred by some basic aws in all the three price support components:
Physical procurement of stocks at MSPs, price de ciency payment of the kind tried out in
Madhya Pradesh, and a few other states, and the participation of private trade in the
procurement and management of farm produce on a xed-commission basis.
The system of open-ended procurement of staple cereals, notably rice and wheat, has been in
operation for decades and has served well to run the world’s largest public distribution system
but at a huge cost to the exchequer.
Open-ended procurement limited to few states – It has, however, remained con ned primarily
to parts of a handful of states where the procurement infrastructure exists.
Elsewhere, even rice and wheat are traded at sub-MSP rates. Universalising this system to cover
all crops all over the country is unthinkable.
Failure of price de ciency system – The price de ciency payment system, too, has failed to
deliver the results because of a cumbersome registration procedure; mandatory sale through the
regulated mandis dominated by manipulative middlemen; and capping total purchases at 25 per
cent of production.
Less participation by private traders – The third option of roping in private traders in price
support operations has found no takers chie y because the proposed commission of 15 per cent
of the MSP for the operation involving buying, bagging, transporting, storing and disposing of the
stocks is too meagre for the task.
Way Forward
Apart from addressing these issues, several other measures may be needed to prop up agri-
commodities prices.
An export window as an outlet for surplus stocks is a must.
This can be created by modifying import-export tariffs with an eye on boosting agri-exports.
Besides, the farmers need to be incentivised to diversify their production by growing high-value
crops, which could yield better returns without the government’s intervention.
The overarching objective of the policy regime has to be to strike a balance between the
farmers’ interests and in ation management
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News
To bring world coffee producers, including Indian growers, out of this appalling situation, The
World Coffee Producers Forum has decided to reach out to the coffee consuming countries
around the world.
India, which has a domestic consumption of more than 5 million bags (of 60 kg each)
India will plan and roll out a coffee consumption campaign on behalf of global coffee growers
who suffered huge nancial losses on account of falling coffee prices and soaring labour cost.
As a precursor India will kick off a ve-year coffee consumption campaign in collaboration with
top global roasters including Nestle and Starbucks, cafe chains, other stakeholders and the GoI.
A special entity would be formed to execute this country-wide coffee campaign.
The plan is to get most of the funding from international roasters while ICO will play a catalyst’s
role.
The campaign will address a population of 450 million, mostly school and college students, in
India. C
The context is that coffee growers around the globe are going paupers and turning poverty
stricken.
As per International Coffee Organization (ICO), 25 million farmers, including more than 3,00,000
in India, produce coffee in 60 counties.
Over 90% of these growers are smallholders and are forced to sell their coffees at a price much
below the cost of production.
This scenario has led to socio-economic issues. These growers and their families have gone
deeper into debts. Many even have abandoned their farms and migrated to cities.
There is a huge demand-supply imbalance that currently exists in the global coffee markets.
That’s the root cause for price fall. Increasing the consumption is the only way to counter this and
therefore demand for the commodity in the global markets will increase.
The plan is to import excess coffees from Brazil, Colombia and Vietnam, provided the
government of India waives off the import duty on coffee which is 105%.
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Mar, 05, 2019
[op-ed snap]Unmet farm challenge
Note4students
Mains level: The news-card analyses decline in farm incomes and policy failure in reviving
growth.
NEWS
CONTEXT
Policy still hasn’t adjusted itself to address the crisis of agricultural produce de ation.
Background
News
Farmers who wish to avail themselves of bene ts under PM-KISAN must have Aadhaar
identi cation to get the money from the second installment, which would be paid by July 2019.
However, this would not be compulsory for the rst installment expected to be disbursed by
March 31.
1. Under this programme, vulnerable landholding farmer families, having cultivable land upto 2
hectares, will be provided direct income support at the rate of Rs. 6,000 per year.
2. This income support will be transferred directly into the bank accounts of bene ciary farmers,
in three equal installments of Rs. 2,000 each.
3. Around 12 crore small and marginal farmer families are expected to bene t from this.
1. States have been told to prepare a database of bene ciaries — small and marginal landholder
farmer families in all villages — including whether they belong to SC/ST, bank account, mobile
and Aadhaar details.
2. For transfer of the rst installment, Aadhaar number shall be collected wherever available.
3. An alternate list of identi cation documents has also been provided, as options.
4. However, for transfer of subsequent installments, Aadhaar number shall have to be
compulsorily captured.
Land records
1. States have also been told to update their land records, as that would serve as the basis for
determination of landholding for bene ciaries.
2. However, the secretary also said that the cut-off date for determination of ownership of land
(as per land records) under the scheme was already over; the cut-off date was February 1, 2019.
3. Changes thereafter in land records shall not be considered for eligibility of the bene t to the
new land holder for next 5 years.
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Role of States
1. States would be given a maximum of 0.25% of funds transferred to bene ciaries in the rst
instalment to pay for their administrative expenses in the implementation of the scheme.
2. That amount would drop to 0.125% for all further installments.
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Feb, 02, 2019
[op-ed snap] No budget for farmers
Note4students
Mains Paper 3: Economic Development| Major crops cropping patterns in various parts of
the country, different types of irrigation and irrigation systems storage, transport and
marketing of agricultural produce and issues and related constraints; e-technology in the aid
of farmers
Mains level: The news-card analyses the direct income support scheme for farmers as proposed
in budget 2019, in a brief manner.
Context
According to some experts, the proposed Rs 6,000 annual direct income support to small and
marginal farmers in Budget 2019 is a drop in the ocean.
States like Telangana and Odisha have done much better with their Rythu Bandhu and Kalia
schemes respectively.
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Issue
It must be seen that this Rs 72,000 crore as direct income support to farmers is nowhere near
the annual loss of about Rs 2,65,000 crore that farmers have been suffering in recent years
because of the low prices they have received due to restrictive marketing and trade policies.
Until major marketing reforms are initiated, there is no hope of doubling farmers’ real incomes by
2022-23.
The enhanced interest subvention only leads to diversion of funds from agriculture to non-
agriculture uses.
There is ample evidence that in some states agri-credit is even more than the value of agri-
output.
So, this scheme of interest subvention needs to be reviewed.
The schemes for cow protection and upgrading their breeds and having a separate out t for
sheries are steps in the right direction, but they cannot make any difference to the current
problems faced by farmers.
It will take years before any of these schemes can deliver.
Increasing milk production, without its pricing being competitive and remunerative to farmers,
may not do much bene t to farmers.
However, there is a need to know rst how much of India’s population is poor.
There is no robust gure from the government side in the last ve years.
Following the Tendulkar poverty line, the previous government had come up with an estimate of
about 22 per cent poverty in theApp.
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It was contested by many and later, the Rangarajan Committee had put it at 30 per cent.
The World Bank’s poverty clock puts it at 5.5 per cent.
Even if one thinks that roughly one- fth of India needs income support — say Rs 5,000 per
month — the bill will amount to about Rs 3.5 lakh crore.
Way Forward
The income support scheme is doable if the food subsidies and MGNREGA are drastically pruned
and targeted to this bottom 20 per cent of population.
Food subsidies and MGNREGA are costing the government more than 2.2 lakh crore, and a
sizeable part of this is either lost in leakages or is not utilised productively.
Similarly, fertiliser subsidies can also be made through direct income support to farmers even
those with holdings up to the size of four hectares.
Gradually, the states can be encouraged to put even power subsidy through direct income
transfer and charge the market price for power, recovering at least its cost of supply.
These can then be fundamental reforms, switching from the price policy approach to income
policy approach, for helping the small and marginal farmers and poor consumers.
The current problems of the peasantry are not on the supply, but on the demand side; it is about
low prices.
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Feb, 02, 2019
Pradhan Mantri Kisan Samman Nidhi
Context
According to Agriculture Census 2015-16, though more than 86 per cent farmers are small and
marginal in India, they have belied the general assumption that farm size and productivity have
an inverse relationship.
Issue
Despite small farm sizes, with better quality inputs and hard work combined with the scienti c
management of farming, productivity and production have gone up.
However, ensuring food security for the country through their hard work and increased
production has not meant greater income and prosperity for the farmers.
There are several possible solutions being discussed in the policy circles as to how to increase
the income of farmers.
1. Price of seeds
Farmers can grow seeds for their own use from the open-pollinated varieties whereas they have
to buy hybrid seeds every year as these are terminal in nature.
2. Hybrid varieties developed through public-funded research should be available to the public
sector institutions without paying any royalty amount on a non-exclusive basis.
Currently, the public sector units also have to pay a royalty for new discoveries by scientists of
public sector institutions, achieved through public-funded research.
Scientists can be allowed to get a royalty from the private sector in order to incentivise them to
continue doing high-end research but for the public sector, it should come free in order to make
the fruits of science available to the farmers at a reasonable and affordable price.
In fact, this principle should apply to all public-funded research.
Many states have recently opted for direct investment subsidy to the farmers.
This has been done on a at area basis, without linking it to any particular input.
Rather than providing cash transfer on a at basis of the area of landholding, this direct transfer
can be designed to incentivise the desired cropping pattern.
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While agricultural credit can be linked to the landholding and made crop neutral, direct
investment subsidy can be linked to the cropping pattern to ensure demand-led cultivation and
the judicious usage of natural resources.
Through direct subsidy transfer, it should be possible to motivate the farmer to grow millets in a
water-scarce area rather than paddy or sugarcane, which further deplete the water table.
Thus, through deft manipulation of credit and subsidy, it should be possible to make cultivation
environmentally sustainable and demand-led based on forecasts of consumption pattern.
This will help farmers to obtain better and remunerative prices.
Allowing the leasing of land will help nd out the real tiller of land and it will be possible to extend
the bene ts of various schemes to the real cultivator rather than the landowner.
Today, most sharecroppers are not able to access the various bene ts extended by the
government whether it is crop insurance, accident insurance or different input subsidies.
This will also make the scheme of direct investment subsidy more ef cient and effective.
As per Agriculture Census data, the average landholding size in India came down from 2.28 ha in
1970-71 to 1.08 ha in 2015-16.
In some of the densely populated states like Uttar Pradesh and Bihar, the average landholding
size is 0.73 ha and 0.39 ha, respectively.
This implies that more than 50 per cent of farmers have less than 0.73 hectares of land in UP and
less than 0.39 hectares of land in Bihar respectively.
If we take out the large farmers, then it will become obvious that most of the farmers in UP and
Bihar own less than one and a half acres of land.
With this landholding size, it is simply not possible to have a decent standard of living unless
there are other avenues of additional income for the family.
Conclusion
Therefore, affordable inputs, access to credit and formal land-leasing are some of the urgent
requirements for increasing the prosperity of India’s small and marginal farmers.
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Mains level: The news-card analyses the farmer’s distress issues and their possible solutions, in a
brief manner.
Context
Recently, there has been active discussion on the strategies addressing farm distress.
There are reports that the ‘interim Budget’ may focus on the farm sector among other things.
Background
In the present context, agrarian distress is mainly in terms of low agricultural prices and,
consequently, poor farm incomes.
Low productivity in agriculture and related supply side factors are equally important.
An issue that is connected is the declining average size of farm holdings and the viability of this
size for raising farm incomes.
When output increases well beyond the market demand at a price remunerative to producers,
market prices decline.
In the absence of an effective price support policy, farmers are faced with a loss in income,
depending on how much the price decline is.
The ‘farm distress’ in recent years has been partly on account of this situation, as the loss of
income is beyond the ability, particularly of small farmers, to absorb.
It is the success in increasing production that has resulted in this adverse consequence.
A few schemes have been suggested to address the problem of managing declining output
prices when output increases signi cantly.
(a) Price de ciency compensation scheme: It is one such mechanism which amounts to paying
the difference between market price and the MSP.
(b) Open procurement system scheme: It has been in vogue quite effectively in the case of rice
and wheat, where procurement is open ended at the MSP.
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A ‘price de ciency’ scheme may compensate farmers when prices decrease below a certain
speci ed level. However, market prices may continue to fall as supply exceeds ‘normal demand’.
Under this scheme, the government will procure the ‘excess’, leaving the normal production level
to clear the market at a remunerative price.
Thus, procurement will continue until the market price rises to touch the MSP.
The suggested ‘limited procurement system’ will not work if the MSP is xed at a level to which
the market price will never rise.
There are costs involved which will go up as production increases above the average level.
The government can sell the procured grain in later years or use them in welfare programmes.
Some States have introduced farm support schemes, examples being the Rythu Bandhu Scheme
(Telangana) and the Krushak Assistance for Livelihood and Income Augmentation (KALIA)
scheme (Odisha).
One problem with the Telangana model is that it does not cover tenants, who are the actual
cultivators.
These schemes are income support schemes which will be in operation year after year.
Thus, raising the MSP, price de ciency payments or income support schemes can only be a
partial solution to the problem of providing remunerative returns to farmers.
A sustainable solution is market reforms to enable better price discovery combined with long-
term trade policies favourable to exports.
The creation of a competitive, stable and uni ed national market is needed for farmers to get
better prices.
Agricultural markets have witnessed only limited reforms.
They are characterised by inef cient physical operations, excessive crowding of intermediaries,
and fragmented market chains.
Due to this, farmers are deprived of a fair share of the price paid by nal consumers.
For better price for farmers, agriculture has to go beyond farming and develop a value chain
comprising farming, wholesaling, warehousing, logistics, processing and retailing.
Basics such as seeds, fertilizers, credit, land and water management and technology are
important and should not be forgotten.
Similarly, investment in infrastructure and research and development are needed.
Another major issue relates to the shrinking size of farms which is also responsible for low
incomes and farmers’ distress.
The average size of farm holdings declined from 2.3 hectares in 1970-71 to 1.08 hectares in
2015-16.
The share of small and marginal farmers increased from 70% in 1980-81 to 86% in 2015-16.
The average size of marginal holdings is only 0.38 hectares (less than one acre) in 2015-16.
The monthly income of small and marginal farmers from all sources is only around ₹4,000 and
₹5,000 as compared to ₹41,000 for large farmers.
Thus, the viability of marginal and small farmers is a major challenge for Indian agriculture.
Many small farmers cannot leave agriculture because of a lack of opportunities in the non-farm
sector.
They can get only partial income from the non-farm sector.
In this context, a consolidation
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Experts had argued that compulsory consolidation of land holdings alongside land development
activities could enhance the incomes/livelihoods of the poor in rural areas.
Unfortunately, there is little discussion now on land fragmentation and consolidation of farm
holdings.
We need to have policies for land consolidation along with land development activities in order to
tackle the challenge of the low average size of holdings.
Farmers can voluntarily come together and pool land to gain the bene ts of size.
Through consolidation, farmers can reap the economies of scale both in input procurement and
output marketing.
Conclusion
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Jan, 04, 2019
[op-ed snap] A look at how the poorest fared under the present government
Note4students
Mains Paper 3: Agriculture | Transport & marketing of agricultural produce & issues &
related constraints