GS-3, Indian Economy, Uncategorized

More cold chains, food parks to boost farm incomes

The government is planning to set up 100 new cold chain projects at a cost of Rs. 12,000 crore to Rs.13,000 crore.

  • The centre has also kicked off the process to invite investors to set up six new mega food parks.
  • These measures are aimed at boosting farm sector incomes by establishing farm to fork linkages.

Background:

India loses an estimated Rs.92,000 crore a year due to wasted food. Rs.9,000 crore has been invested in new cold storage capacity in the past two years and this has reduced 10% of the country’s food wastage.

Mega Food Parks Scheme:

The Scheme of Mega Food Park aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers so as to ensure maximizing value addition, minimizing wastages, increasing farmers’ income and creating employment opportunities particularly in rural sector.

Aim of the Scheme: The Scheme is aimed at providing modern infrastructure facilities along the value chain from farm gate to the market with strong backward and forward linkages.

What these food parks provide?

  • They facilitate the efforts to increase the level of processing of agricultural and horticultural produce, with particular focus on perishables, in the country and thereby to check the wastage.

How it operates?

  • The Scheme has a cluster based approach based on a hub and spokes model. It includes creation of infrastructure for primary processing and storage near the farm in the form of Primary Processing Centres (PPCs) and Collection Centres (CCs) and common facilities and enabling infrastructure at Central Processing Centre (CPC).
  • The PPCs are meant for functioning as a link between the producers and processors for supply of raw material to the Central Processing Centres.
  • CPC has need based core processing facilities and basic enabling infrastructure to be used by the food processing units setup at the CPC. The minimum area required for a CPC is 50 acres.
  • The scheme is demand-driven and would facilitate food processing units to meet environmental, safety and social standards.
    food-processing

Implementation and financial assistance:

  • Mega Food Park project is implemented by a Special Purpose Vehicle (SPV) which is a Body Corporate registered under the Companies Act. State Government/State Government entities/Cooperatives applying for setting up a project under the scheme are not required to form a separate SPV.
  • The financial assistance for Mega Food Park is provided in the form of grant-in-aid at 50% of eligible project cost in general areas and at 75% of eligible project cost in NE Region and difficult areas (Hilly States and ITDP areas) subject to maximum of Rs. 50 crore per project.

Benefits:

  • Reduction in post-harvest losses.
  • Maintainance of the supply chain in sustainable manner.
  • Additional income generation for the farmers.
  • Shifting the farmers to more market driven and profitable farming activities.
  • It will be a one stop shop where everything will be available at a single location.
  • As per experts, it will directly employ 10,000 people.
  • Integrated food parks will help reduce supply chain costs.
  • Wastage across the food value chain in India will also be reduced and quality and hygiene improvement to create food products in the country can also be seen.
Agriculture, Environment, GS-3, Uncategorized

Insure farmers against climate change

The Hindu

Issue

  • How India’s agricultural policy has made us structurally vulnerable to climate change?

India, a climate change hotspot

  • India is uniquely vulnerable to rising temperatures — it ranks in the top 20 in the Climate Change Vulnerability Index.
  • Our average surface temperature, over the past four decades, has risen by 0.3° Celsius, accompanied by a rising incidence of floods, droughts and cyclones.

How does climate change impact agriculture?

  • Climate change would impact soil health, with increasing surface temperatures leading to higher CO emissions and reducing natural nitrogen availability.
  • Mitigating this by increasing chemical fertilizer usage could impact long-term soil fertility, leaving the soil open to greater erosion and desertification.
  • Meanwhile, migration patterns, farmer suicides and stagnating rural incomes, along with increasingly ad hoc land acquisition in the name of public goods, have politicised the idea of climate mitigation.
  • Marginal farmland will increasingly be useless for agriculture.
  • Our regional crop patterns assume a specific range of weather variability, failing to cope with the recent high periods of heavy rainfall with long dry intervals.
  • India’s flood-affected area has doubled since Independence, despite generous state spending on flood protection schemes.
  • Climate change will impact the entire food production chain, affecting our food security.
  • Livestock production, often considered to be a substitute to farming for marginal farmers, would face reduced fodder supplies given a decline in crop area or production
  • Research has highlighted the deleterious impact of climate change on crop production.

What should be done?

  • Indian agricultural policy has made us structurally vulnerable to climate change.
  • A rural spending plan, focussed on investments in agriculture infrastructure, particularly in irrigation, rainwater harvesting and a national network of soil-testing laboratories is needed.
  • Simple water harvesting and conservation measures (micro-irrigation, watershed management and insurance coverage) can reduce the majority of the potential loss due to drought.
  • Drought strategies should be extended to the village level — for example, each village should have a village pond, created under the Mahatma Gandhi National Rural Employment Guarantee Scheme.
  • Conservation farming and dryland agriculture should be promoted.
  • Each village should be provided timely rainfall forecasts along with weather-based forewarnings regarding crop pests and epidemics in various seasons.
  • Afforestation, in a biodiverse manner, should be encouraged to help modify regional climates and prevent soil erosion.
  • Our agricultural research programmes need to be retooled towards dryland research.
  • Changing planting dates could have a significant impact; research highlights that planting wheat earlier than usual can help reduce climate change-induced damage.
  • Zero tillage and laser-based levelling can also help conserve water and land resources.
  • Crop planning can be conducted as per the climatic zones of different regions, while utilising better genotypes for rain-fed conditions.
  • We should focus on expanding our formal credit system to reach all marginal farmers.
  • Insurance coverage should be expanded to all crops while reducing the rate of interest to nominal levels, with government support and an expanded Rural Insurance Development Fund.
  • A debt moratorium policy on drought-distressed hotspots and areas facing climate change calamities should be announced, waiving interest on loans till farming incomes are restored.
  • The Centre and States should launch an integrated crop, livestock and family health insurance package while instituting an Agriculture Credit Risk Fund to provide relief in the aftermath of successive natural disasters.

Conclusion

  • With India’s population rising, demand for diversified crops will be hard to square with diminishing yields.
  • Agricultural investments in food crops, along with systemic support for irrigation, infrastructure and rural institutions can help move India beyond climate change-induced food insecurity, strengthening our stressed food production systems.
  • Through adaptation and mitigation measures, we can overcome this gigantic crisis.
Agriculture, GS-3, Uncategorized

Overseas investors continue to shun oil palm industry

The Hindu

Issue The government’s allowed 100 per cent foreign direct investment (FDI) in oil palm plantations last year but has failed to draw even a single investor.

Analysis

  • India spends huge amount on imports of edible oil every year.
  • Attempts to increase the area under oilseeds in India have not been very successful, but demand has been rising perennially.
  • Palm oil imports constitute nearly 75 per cent of the total edible oil imports. Palm is generally the cheapest commodity vegetable oil and also the cheapest oil to produce and refine globally.
  • The Government of India has been trying, for many years now, to reduce its dependence on imported edible oils, by encouraging farmers to take up palm cultivation.
  • In 1992, the Oil Palm Development Programme (OPDP) was launched in six Indian States.
  • In 2004-05, the scheme was introduced in six more States, including north-east India — Mizoram, Tripura and Assam.
  • This was followed by an “Oil Palm Area Expansion” (OPAE) programme in 2011-12. But palm cultivation in the country has not really gained traction.
  • Indonesia and Malaysia are the two major palm oil producers globally, producing nearly 85 per cent of the global output.
  • The best growing conditions for palm trees exist in a small band around the equator, limiting the number of places the crop can be successfully farmed. These regions coincide with the rainforest zones.
  • More and more environmentalists are opposing the rapid expansion of palm plantations at the cost of rainforests in Indonesia and Malaysia. As a result, companies have been looking for other geographies to expand the plantation.

Constraints in Expansion

  • First and foremost, lack of large land tracts is a major constraint. The industry wants the government to declare palm oil as a plantation crop to move it out of the Land Ceiling Act. The current policies of the Centre do not allow companies to either acquire or lease land beyond a specific acreage as defined by land ceiling norms. Thus, there is no scope for the corporate sector for large scale plantation of oil palm.
  • A second limitation is the weather. Palm requires humid weather throughout the year. The harsh Indian summer impacts both crop development and yield. In hot summer months, the recommended irrigation is 300 litres per plant per day. This limits the regions where this crop can be grown.
  • A third constraint is the lack of infrastructure. Close proximity between farms and processing mills is a must. The fresh fruit bunches should be processed within 24 hours of harvest to obtain good quality oil. A delay leads to build-up of free fatty acids.
  • Last but not the least, there’s the lack of trained and experienced farmers who can successfully make money out of this crop.

More space

  • In order to encourage its cultivation in the country as a part of its effort to reduce imports and ensure edible oil security, the government came out with a National Mission on Oilseeds and Oil Palm (NMOOP).
  • NMOOP envisages bringing an additional 1.25 lakh hectares under oil palm cultivation through area expansion approach in the States including utilisation of wastelands. The States currently engaged in oil palm cultivation are Andhra Pradesh, Chhattisgarh, Goa, Gujarat, Maharashtra, Mizoram, Karnataka, Kerala, Odisha, Tamil Nadu, Arunachal Pradesh, Assam, Bihar, Manipur, Meghalaya, Nagaland, Sikkim, Tripura and West Bengal.
  • Oil palm developers, however, say that the potential of this crop could be realised effectively if there is a separate oil palm development board, a separate import policy for palm oil and a separate budget for oil palm industry development besides relaxation of land ceiling norms.
Agriculture, GS-3, Uncategorized

National Agricultural Market: How is this a necessity for India?

State of Indian Agriculture & renewed focus on increasing a farmer’s income

If we go back in time (aug 2015) and read this PIB release – National Agricultural Market – A Harbinger of Change, we would realise that government realised (yet again) the importance of agriculture in Indian economy.

While the Government has rolled out large number of programmes to improve yield levels on a sustainable basis, it recognises the need for creating a competitive market structure in the country that will generate marketing efficiency.

Question: Good time to go back in time and revise the programs launched to improve yield levels. Would you like to write them out for us in the comments?

The net result out of this concern this –

The Department of Agriculture & Cooperation formulated a Central Sector scheme for Promotion of National Agriculture Market through Agri-Tech Infrastructure Fund (ATIF) through provision of the common e-platform.

What was wrong with APMCs?

Here’s a crisp answer from Quora,

The APMC (Agricultural Produce Market Committees) is a relic of the past that forces the farmers to sell their produce only to middlemen approved by the government in authorized Mandis (markets). Thus, if you are a vegetable producer and I’m a supermarket, I cannot directly buy from you. Both of us need to go through a broker. This increases prices for the end buyer and unnecessarily adds redtape.

  • An Agricultural Produce Market Committee is a marketing board established by state governments of India
  • One main function of which is basically to provide a platform for farmers to sell their produce

The challenges posed by present day APMCs – 

  1. Fragmentation of State into multiple market areas, each administered by separate APMC
  2. Separate licences for each mandi are required for trading in different market areas within a state. This means that we have limited the first point of sale for the farmer. He has to come to the local mandi – which could be both good and bad depending upon how it is governed
  3. Licensing barriers leading to conditions of monopoly
  4. Opaque process for price discovery

The need to unify the markets both at State and National level was therefore, clearly the requirement of time. Think of it as an e-commerce platform with a marketplace model and not an inventory one. Every farmer has his own webpage (or something to the tune of that).

Quick facts on NAM

National Agriculture Market is going to implemented by the Department of Agriculture & Cooperation through Small Farmers Agribusiness Consortium (SFAC).

NAM is not replacing the mandis. NAM is an online platform with a physical market or mandi at the backend enabling buyers situated even outside the state to participate in trading at the local level.

It seeks to leverage the physical infrastructure of mandis through an online trading portal, enabling buyers situated even outside the state to participate in trading at the local level.

source: Financialexpress.com

NAM is currently being launched in 21 mandis and it will offer trade in –

  • chana,
  • castor seed,
  • paddy,
  • wheat,
  • maize,
  • onion,
  • mustard and tamarind

Cons:

  1. Fruits and vegetables, where there often are prices fluctuations, are yet to be included in the NAM platform
  2. Country’s two biggest mandis—Azadpur (Delhi) and Vashi (Mumbai)—have not yet agreed to come on board
  3. What about interstate taxes and levies? NAM does not say anything on that!

Questions:

  1. How will NAM function and what are the benefits that it would bring?
  2. What needs to be done on ground to make sure that NAM is successful?
Agriculture, Editorials, Uncategorized

eNAM-National Agriculture Markets

Prime Minister Narendra Modi recently launched an online national agricultural products market platform that will integrate 585 wholesale markets across India.

  • The launching of e-platform for marketing of agriculture products is being done with the aim to provide more options to farmers to sell their produce.
  • This initiative is part of implementation of the roadmap for doubling income of the farmers by 2022.

What is National Agriculture Market (NAM)?

NAM is an online platform with a physical market or mandi at the backend. NAM is not a parallel marketing structure but rather an instrument to create a national network of physical mandis which can be accessed online.

  • It seeks to leverage the physical infrastructure of mandis through an online trading portal, enabling buyers situated even outside the state to participate in trading at the local level.

NAM is said to have the following advantages:

  • For the farmers, NAM promises more options for sale. It would increase his access to markets through warehouse based sales and thus obviate the need to transport his produce to the mandi.
  • For the local trader in the mandi / market, NAM offers the opportunity to access a larger national market for secondary trading.
  • Bulk buyers, processors, exporters etc. benefit from being able to participate directly in trading at the local mandi / market level through the NAM platform, thereby reducing their intermediation costs.
  • The gradual integration of all the major mandis in the States into NAM will ensure common procedures for issue of licences, levy of fee and movement of produce. In a period of 5-7 years Union Cabinet expects significant benefits through higher returns to farmers, lower transaction costs to buyers and stable prices and availability to consumers.
  • The NAM will also facilitate the emergence of value chains in major agricultural commodities across the country and help to promote scientific storage and movement of agri goods.

Are existing APMCs or mandis capable of handling NAM?

Experts say that infrastructure available for NAM at local markets varies from state to state. The NAM platform is being supported by agriculture ministry, which is bearing maintenance costs for each mandi.

  • The integration cost for local mandis and customisation of software, training, etc, will also be paid for by the ministry as a one-time grant of around R30 lakh at the time of accepting the mandi in the national network.
  • However, the running costs of the software at the local level, staff costs for quality check, etc, will be met with the transaction fee to be generated through the sale of produce.
  • The key reason behind this support is to avoid any upfront investment by the mandi when it integrates into NAM, and enable it to support the running cost through additional generation of revenue.

Such a platform was necessary to address the following challenges:

  • Fragmentation of state into multiple market areas.
  • Poor quality of infrastructure and low use of technology.
  • In the traditional mandi system, farmers generally procured very less price for their crops as they had to pass through various intermediaries at the physical marketplace. This not only adds costs but also handling costs.
  • In addition, the farmer has to face obstacles in form of multiple tax levies and licenses and weak logistics and infrastructure in India.

How will NAM operate in the current form?

The 21 mandis where NAM is being formally launched would offer trading in commodities such as chana, castor seed, paddy, wheat, maize, onion, mustard and tamarind. But fruits and vegetables, where there often are prices fluctuations, are yet to be included in the NAM platform.

What needs to be done from here?

  • Experts say that as long as fruits and vegetables are kept outside the purview of NAM, the volatility in prices would continue, thus depriving farmers from getting better prices.
  • Barriers hampering interstate transfer of agricultural commodities also have to be removed. High taxes and levies imposed by states such as Punjab, Haryana and Andhra Pradesh on agricultural commodities trade have to be brought down; this would boost interstate trade and farmers’ income.
  • With very few big buyers likely to be interested in buying the small lots that farmers will have to offer, aggregators will be needed and the trick will lie in ensuring it is not the same aggregators who control the mandis that get to dominate NAM.
  • Care will have to be taken, similarly, to ensure markets do not get cornered by speculators or cartels that drive prices up or down.
  • Considerable effort will also be needed for the clearance mechanism to work.

Conclusion:

Eventually, the success of NAM will depend upon whether farmers get a higher price for their produce or not and whether this reduces price volatility—in which case, introducing a system of market-makers needs to be tried at some point in time; bringing in large retail chains will help but with the central government opposing FDI in retail, this looks tough, though it is possible the new FDI window for pure food retail may attract big food retailers. And since most state governments have a history of blocking supplies when local prices go up, it will be critical to ensure the states on the platform don’t resort to their old tricks in times of supply shortage.

Agriculture, Editorials, GS-3, Uncategorized

The Killing Fields and Why Agriculture Cannot Wait

why is the land-owning class across India waving the flag of rebellion, demanding a slice in the quota pie for education and jobs?
The truth is that the business model of agriculture has broken down.
The combination of shrinking holdings and withered returns has led to economic and, therefore, political and social marginalisation of the land-owning class.
Desperate for returns, farmers borrow high-cost capital. Unsurprisingly, 52 per cent of them are in debt.
In 1925, Malcolm Darling wrote in The Punjab Peasant, “The peasant is born in debt, lives in debt, dies in debt and bequeaths debt.” His words ring just as true in 2016. The surround sound system of India’s political economy is screaming “it’s agriculture, stupid”.

Implication of near-zero growth in agriculture:
1. demand deflation
2. poor sales and profits
3. Industrial and manufacturing growth is tepid
4. The thesis of consumption-driven, investment-led growth is grounded
5. Consumption—despite the demography and proclaimed depth of domestic market—is jittery and uncertain as income of 48% rural population is uncertain.

India’s agriculture grew at -0.2 per cent and 1.1 per cent in 2014-15 & 2015-16 FY.
Translated, half of India’s workforce, which lives off less than a sixth of the national income, had two successive years of near-null growth.
Other issues facing by farmers:  fall in global farm produce prices, falling exports and near-zero support in pricing.

Consider the arithmetic of politics. Over 70 per cent of the populace and hence the biggest voter base lives in rural India. Shorn of technical definitions, 133 million households live on a monthly income of roughly `5,000.

Consider the arithmetic of economics. Growth is the outcome of consumption that drives job creation, creates incomes and fuels investment to accelerate job creation and incomes in a virtuous cycle. Unless agriculture is made viable, the aspiration for sustainable momentum will remain an aspiration.

Agriculture is not different from any business. The farmer requires operating capital, irrigation infrastructure, inputs, insurance coverage like any industry, connectivity and access to markets and a controls-free eco-system. Fact is, over half the farmers lack access to formal credit and live with usurious rates—there is much lament about farm loan waivers, but corporate loans are written off with impunity. Irrigation is essentially at the mercy of the rain gods.

Agriculture can be designed viable. How?
The Aadhar-based Jan Dhan accounts afford expansion of access—for credit, insurance and direct delivery of subsidies, and capital cost subvention. The idea of soil health tests and migration to drip irrigation systems can be on mission mode—just as it has been done in rural electrification.

The system of free power is really a regime of no power. This has led to disastrous fall in water levels as farmers are mining for water. Technology and innovation allow for flexible structures—for instance, for shifting farmers to metered power regime subsidised by a pre-paid recharge coupon  system. The online national agri-produce market—Amul II, I have argued for—is taking shape, but needs a deadline. Food inflation is largely about pulses and vegetables’ output—it calls for the Centre to push states to create special zones.

If there can be PPP for roads, airports and power, why not for agriculture? India needs to confront the ghosts and institute a template for contract farming with a regulator to ensure supply-demand predictability for farmers and consumers.

At the dawn of Independence, Jawaharlal Nehru famously observed “everything can wait but not agriculture”.
There is no disputing the inter-dependence—the need to make agriculture viable for a deep and robust economy.

 

 

Agriculture, GS-3, Uncategorized

Focus on reviving agriculture needed

Agriculture GDP:

  1. (-)0.2% in 2014-15
  2. 1% in 2015-16

 The distress in agriculture is due to two factors:

  1. The crash in global commodity prices
  2. Deficit rainfall for two years in a row
  3. 10 states have declared drought this year.

Forward and backward linkages :

Low agriculture growth also affects the prospects of manufacturing and services. For example, tractor sales have declined.

A two-pronged strategy is required:

  1. Raising productivity and incomes of farmers
  2. Climate-resilient agriculture

Increase in productivity:

  1. Investment in infrastructure such as irrigation, rural roads and electricity.
  2. Public investment in rural infrastructure is crucial.
  3. The PMKSY and RKVY are good initiatives.
  4. Water-use efficiency has to be increased.
  5. The use of drip irrigation should be encouraged.

Climate-resilient agriculture (CRA):

  1. Diversified cropping systems in view of climate-related risks.
  2. Crop insurance for risk mitigation: Pradhan Mantri Fasal Bima Yojana (PMFBY)
  3. Research and extension systems.
  4. Reforms in fertilizer subsidies: These are overdue and subsidies should be directly given to farmers.
  5. Legalizing tenancy increase private investment in agriculture.
  6. Remunerative prices and development of markets: national agricultural market, an online platform for selling agricultural produce
  7. Farmer producer organizations (FPOs) have to be strengthened.

FPO:

FPO is one of the important initiatives taken by the Department of Agriculture and Cooperation of the Ministry of Agriculture to mainstream the idea of promoting and strengthening member-based institutions of farmers.

As per the concept, farmers, who are the producers of agricultural products, can form groups and register themselves under the Indian Companies Act. These can be created both at State, cluster, and village levels. It is aimed at engaging the farmer companies to procure agricultural products and sell them.