ENLIVEN IAS ECONOMICS

AGRICULTURAL PRICING
In a developing country like India where majority of the population
devotes 2/3 of its expenditure on food alone and where majority of the
population is engaged in agricultural sector, prices affect both income
and consumption of the cultivators. The Govt. of India announces
procurement/support prices each year for major agricultural
commodities and organizes purchase operations through public agencies.
Objectives of Agricultural Price Policy:
(i) To Ensure Relation between Prices of Food-grains and
Agricultural Goods:
The foremost objective of agricultural price policy is to ensure the
appropriate relationship between the prices of food grains and non food
grains and between the agricultural commodities so that the terms of
trade between these two sectors of the economy do not change sharply
against one another.

(ii) To Watch Interests of Producers and Consumers:

To achieve the balance between the interest of producers and consumers,
price policy should keep a close eye the fluctuations within maximum
and minimum limits.

(iii) Relation Between Prices of Crops:

The price policy should be such which may sustain the relationship
between the prices of competing crops in order to fulfill the production
targets in respect of different commodities in accordance of its demand.

(iv) To Control Seasonal Fluctuations:

Another object of price policy is to control cyclical and seasonal
fluctuations of price rise to the minimum extent.

(v) Integrate the Price:

The agricultural price policy should also aim at to bring the greater
integration of price between the various regions in the country so that
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regular flow of marketable surplus could be maintained and exports of
farm products stimulated regularly.

(vi) Stabilise the General Price:

To stabilize the general price level, it should aim at increasing the public
outlay to boost economic development in the country.

(vii) Increase in Production:

The agricultural price should aim at to raise the production of various
commodities in the country. Therefore, it must keep balance between
output and input required by the cultivations.
Minimum Support Price
The MSP is the rate at which the government buys grains from
farmers.
Reason behind the idea of MSP is to counter price volatility
of agricultural commodities due to the factors like variation in their
supply, lack of market integration and information asymmetry.
Fixation of MSP
The MSP is announced by the Cabinet Committee on Economic Affirs
based on the recommendations of the Commission for Agricultural Costs
and Prices (CACP).

Factors taken into consideration for fixing MSP include:

a) Demand and supply;

b) Cost of production (A2 + FL method)
(Cost of Farming can be calculated at 3 levels
A2: All the types of cash expenditure to generate the crop like seeds,
manure, chemicals, labour costs, fuel costs and irrigation costs.
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A2+FL: It includes A2 plus an imputed value of unpaid family labour.
C2: Under C2, the estimated land rent and the cost of interest on the
money taken for farming are added to A2 and FL)

c) Price trends in the market, both domestic and international;

d) Inter-crop price parity;
e) Terms of trade between agriculture and non-agriculture;
f) A minimum of 50% as the margin over cost of production; and
g) Likely implications of MSP on consumers of that product.
The Commission also makes visits to states for on-the-spot assessment
of the various constraints that farmers face in marketing their produce,
or even raising the productivity levels of their crops.
Based on all these inputs, the Commission then finalizes its
recommendations/reports, which are then submitted to the government.
The government, in turn, circulates the CACP reports to state
governments and concerned Central Ministries for their comments.
After receiving the feed-back from them, the Cabinet Committee on
Economic Affairs (CCEA) of the Union government takes a final
decision on the level of MSPs and other recommendations made by the
CACP.
Procurement: The Food Corporation of India (FCI), the nodal central
agency of the Government of India, along with other State Agencies
undertakes procurement of crops.
There is pressing need for reorientation of price policy if it is to serve
the basic goal of remunerative prices for farmers. This goal cannot be
achieved through procurement backed MSP, however, because it is
neither possible nor desirable for the government to buy each
commodity in each market in all regions. Financial cost of such a policy
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would place fiscal consolidation at risk and administrative burden would
put challenge the capacity of the bureaucracy. One measure that can help
check the prices received by farmers to some degree is the system of
“Price Deficiency Payment”. While MSP may still be used for need-
based procurement, under the deficiency payments system, a subsidy
would be provided on other targeted produce in case the price falls
below a pre-specified assured threshold. This approach would help
prevent unwanted stocks and spread price incentives to producers in all
the regions and all the crops considered important for providing price
support. Under the system, the government would announce a floor price
for each crop. This floor may be the average of the market price in the
preceding three or four years. Each farmer would register her crop and
acreage sown with the nearest APMC mandi. If the market price then
fell below the floor price, the farmer would be entitled to the difference
up to a maximum of, say, 10% of the assured price that could be paid via
direct benefit transfer into an Aadhar linked bank account. This system
would keep the quantum of the subsidy in some check and also meet the
restrictions on the subsidy imposed by the World Trade Organization
(WTO)
Article on MSP in Business Line
https://www.thehindubusinessline.com/opinion/should-the-msp-regime-
be-dumped/article30525802.ece
An article on MSP published in Down To Earth in 2018
https://www.downtoearth.org.in/coverage/agriculture/why-msp-will-not-
provide-even-minimum-support-to-farmers-60952
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Agricultural marketing
Agricultural marketing covers all the activities in the movement of
agricultural products from the farms to the consumers.
Importance

Advanced agricultural practices resulted in the surplus production which

changed the subsistence face of Indian agriculture.

Approximately 33% of the output of food grains, pulses and nearly all of
the productions of cash crops like cotton, sugarcane, oilseeds etc. are
marketed as they remain surplus after meeting the consumption needs of
the farmers.

As agriculture sector produces raw materials for many of the other

industries, marketing of such commercial products assumes significance.

Increased efficiency of the marketing mechanisms would result in the

distribution of products at lower prices to consumers having a direct
bearing on national income.

An improved marketing system will stimulate the growth in the number

of agro-based industries mainly in the field of processing.

The regulated market aims at the elimination of unhealthy and

unscrupulous practices, reducing market costs and providing benefits to
both producers as well as the sellers in the market
Current APMC system
At time of Independence, a moneylenders or trader in villages mainly
controls the whole distribution system of agriculture commodities;
consequently farmers were trapped into a perpetual debt instead of
getting any profit. Hence to overcome this problem, different states
enacted their APMC acts to set up Agricultural Markets.
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Features of APMC Act

1) The state is divided into different markets based on geography and
many principal or sub markets established in various parts of the state.
Once a particular area is declared a market area and falls under the
jurisdiction of a Market Committee, no person or agency is allowed
freely to carry on wholesale marketing activities.
2) These markets are managed by the Market Committees constituted
by the State Governments. Market Committee generally composes of
10-20 members who are either elected or nominated by govt but
elections are rare.
3) Market committee authorizes various commission agents or traders to
carry out various procurement and distribution activities related to
agriculture produce. In other words, license raj is prevalent in today’s
liberalized India as traders had to take license before carrying out any
activity.
Issues with APMCs

APMCs technically have multiple buyers, but the system of open

auctions for determining prices through transparent bidding is, in
practice, non-existent.
In most APMCs, buyers have to route all purchases through licenced
aadhatiyas(middlemen).

These middlemen charge a commission for their “services” — many

times, both from the buyer and seller.
The aadhatiya is also often a moneylender, supplying seeds, fertilisers
and pesticides to farmers on credit. They, then, are forced to sell through
him and settle their dues in perpetuity.
Also, mandi fees ranges from 0.5% to 5% on the value of the sale, while
varying across states and commodities
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Further mandi fees on inter-state trade amount to double taxation,
besides violating the idea of a single national market.
Distress sale due to lack of storage infrastructure

At mandis the lowest prices are during the 3-4 post-harvest months and
highest in the immediate pre-harvest period.
Farmers undertake maximum sales just after harvest, as they need to
purchase inputs for the next sowing season.
To rectify this APMC issue:
Model APMC Act 2003 was prepared
The Union Agriculture Ministry has formulated the Model Agricultural
Produce and Livestock Marketing (APLM) Act
The Act seeks to expand farmers’ marketing choices — by allowing
private markets (as against only APMCs), permitting direct bulk
purchases from the farm gate, declaring warehouses or cold storages as
deemed markets, and demolishing the existing concept of a “market
area”
But APLM act is witnessing opposition, primarily due to the delineation
of “market area”, which has a bearing on the earnings of APMCs.

Price volatility
The root cause of price volatility is the uncontrolled cycles of excesses
and shortages.
Price projections in a particular commodity are often made based on
previous years’ trends that may not hold true, leading to excess or low
plantings

WAY FORWARD
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Uniform mandi fees:

It is proposed that a uniform mandi fee of 0.25% or 0.50% be levied

nationwide for foodgrains, oilseeds and fruits & vegetables.
The consequent losses to APMCs may be compensated by the Centre
and state governments, as in the case of the Goods and Services Tax.
Eliminate Aadhatiya-based trading:

All trade in APMCs should be through open auctioning, involving

multiple bidders for each lot. Such trades should be directly between
buyers and sellers, with no middlemen charging commission.
The aadhatiya should participate only as a trader.

Enable sample-based sales:

The farmer today brings his whole produce to the APMC and the buyers
do the physical inspection before bidding.
This results in double transportation — from the farm gate to APMC and
from the APMC to the ultimate destination.
If grading and sorting facilities exist closer to the farm gate, the farmer
needs to take only a sample of his produce, along with the relevant
quality certification documents, to the mandi. It would save both time
and cost.
Storage and banking facilities near APMCs:

Distress sales can be avoided if facilities for bagging and storage, along
with loans against warehouse receipts, are available to meet immediate
cash requirements. These should exist in the vicinity of APMCs.
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Promote FPOs in marketing:

Farmer producer organisations/companies should be encouraged to take

up direct marketing of their members’ produce to large buyers and
processors.
It will result in more competition and better prices at APMCs.
Relax/abolish Essential Commodities Act(ECA):

ECA places restrictions on the movement of produce, stockholding,

pricing and adoption of new technologies
The dismantling of such controls under ECA and other regulations
would expand trade and lead to better realisations for cultivators.
The narrative of “ease of doing business” is necessary as much for
agriculture as other businesses.
e-NAM:

The government has created an electronic national agriculture market

(eNAM) to connect all regulated wholesale produce markets through a
pan-India trading portal.
Its effectiveness is, however, dependent on the participation of traders
from these mandis.

Risk management:

Crop Insurance schemes offer protection to farmers against weather

risks.
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The premium in the Pradhan Mantri Fasal Bima Yojana is largely borne
by the Government.
Increase the number of markets:

According to Ashok Dalwai Committee, India needs at least 30,000

farms produce markets, as against the approximately 6,500 now.
There is a need for a “mini-market” concept to bridge this wide gap.
Government’s announcement of GRAMs(Gramin rural agricultural
market) is a step in the right direction
Also with ubiquitous electronic communication and reliable rural roads,
GRAMs can become viable hubs for economic activity and employment
generation.
AgTech startups should be roped in for price discovery mechanism, so
that price volatility can be controlled.

Producer consolidation:

Consolidation of small and fragmented farms into more viable holdings

will improve producers’ access to finance and quality inputs, besides
enabling better price realisations.
This will also incentivize much-needed investments in land
development/ improvement and farm mechanisation.

Agricultural Financing
Agri credit is an important mediating input for agriculture to improve
productivity. Access to institutional credit enables the farmer to enhance
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productivity by investing in machinery and purchase of variable inputs
like fertilizers, quality seeds, and manure and providing funds till the
farmer receives payment from sale of produce, which is at times delayed
and staggered
Issues
Predominance of informal sources of credit: farmers still avail as much
as 40 per cent of the funds from informal sources – 26 per cent of the
total agricultural credit flow from the local money lenders (highly
exploitative lenders)

There is regional disparity in the distribution of agricultural credit. The

coverage is very low in the north-eastern and eastern regions of the
country.

Crop Loans being short-term (for less than 15 months) in nature are
meant to meet the current expenditure till the crop is harvested fail to
promote major investments in agriculture

PUBLIC DISTRIBUTION SYSTEM

The Public distribution system (PDS) is an Indian food Security

System established under the Ministry of Consumer Affairs, Food,
and Public Distribution.
PDS evolved as a system of management of scarcity through distribution
of food grains at affordable prices.
PDS is operated under the joint responsibility of the Central and the
State Governments.

The Central Government, through Food Corporation of India (FCI),

has assumed the responsibility for procurement, storage, transportation
and bulk allocation of food grains to the State Governments.
The operational responsibilities including allocation within the State,
identification of eligible families, issue of Ration Cards and supervision
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of the functioning of Fair Price Shops (FPSs) etc., rest with the State
Governments.
Under the PDS, presently the commodities namely wheat, rice, sugar
and kerosene are being allocated to the States/UTs for distribution.
Some States/UTs also distribute additional items of mass consumption
through the PDS outlets such as pulses, edible oils, iodized salt, spices,
etc.
Importance of PDS
It helps in ensuring Food and Nutritional Security of the nation.
It has helped in stabilising food prices and making food available to the
poor at affordable prices.
It maintains the buffer stock of food grains in the warehouse so that
the flow of food remain active even during the period of less agricultural
food production.
It has helped in redistribution of grains by supplying food from surplus
regions of the country to deficient regions.
The system of minimum support price and procurement has contributed
to the increase in food grain production.
Evolution of PDS in India
PDS was introduced around World War II as a war-time rationing
measure. Before the 1960s, distribution through PDS was generally
dependant on imports of food grains.
It was expanded in the 1960s as a response to the food shortages of the
time; subsequently, the government set up the Agriculture Prices
Commission and the FCI to improve domestic procurement and storage
of food grains for PDS.
By the 1970s, PDS had evolved into a universal scheme for the
distribution of subsidised food
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Till 1992, PDS was a general entitlement scheme for all consumers
without any specific target.
The Revamped Public Distribution System (RPDS) was launched in
June, 1992 with a view to strengthen and streamline the PDS as well as
to improve its reach in the far-flung, hilly, remote and inaccessible areas
where a substantial section of the underprivileged classes lives.
In June, 1997, the Government of India launched the Targeted Public
Distribution System (TPDS) with a focus on the poor.

Under TPDS, beneficiaries were divided into two categories:

Households below the poverty line or BPL; and Households above the
poverty line or APL.
Antyodaya Anna Yojana (AAY): AAY was a step in the direction of
making TPDS aim at reducing hunger among the poorest segments of
the BPL population.

A National Sample Survey exercise pointed towards the fact that about
5% of the total population in the country sleeps without two square
meals a day. In order to make TPDS more focused and targeted towards
this category of population, the "Antyodaya Anna Yojana” (AAY)
was launched in December, 2000 for one crore poorest of the poor
families.
In September 2013, Parliament enacted the National Food Security
Act, 2013. The Act relies largely on the existing TPDS to deliver food
grains as legal entitlements to poor households. This marks a shift
by making the right to food a justiciable right.

Procurement and Distribution

The Central and State Governments share responsibilities in order to
provide food grains to the identified beneficiaries.
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The centre procures food grains from farmers at a minimum support
price (MSP) and sells it to states at central issue prices. It is
responsible for transporting the grains to godowns in each state.
States bear the responsibility of transporting food grains from these
godowns to each fair price shop (ration shop), where the beneficiary
buys the food grains at the lower central issue price. Many states
further subsidise the price of food grains before selling it to
beneficiaries.
Under the PDS, presently the commodities namely wheat, rice, sugar
and kerosene are being allocated to the States/UTs for distribution.
Some States/UTs also distribute additional items of mass consumption
through the PDS outlets such as pulses, edible oils, iodized salt, spices,
etc.

Issues Associated with PDS System in India

Identification of beneficiaries: Studies have shown that targeting

mechanisms such as TPDS are prone to large inclusion and exclusion
errors. This implies that entitled beneficiaries are not getting food
grains while those that are ineligible are getting undue benefits.

According to the estimation of an expert group set up in 2009, PDS

suffers from nearly 61% error of exclusion and 25% inclusion of
beneficiaries, i.e. the misclassification of the poor as non-poor and vice
versa.
Leakage of food grains: (Transportation leakages + Black Marketing
by FPS owners) TPDS suffers from large leakages of food grains during
transportation to and from ration shops into the open market. In an
evaluation of TPDS, the erstwhile Planning Commission found 36%
leakage of PDS rice and wheat at the all-India level.
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Issue with procurement: Open-ended Procurement i.e., all incoming
grains accepted even if buffer stock is filled, creates a shortage in the
open market.
Issues with storage: A performance audit by the CAG has revealed a
serious shortfall in the government’s storage capacity.

Given the increasing procurement and incidents of rotting food

grains, the lack of adequate covered storage is bound to be a cause for
concern.
The provision of minimum support price (MSP) has encouraged
farmers to divert land from production of coarse grains that are
consumed by the poor, to rice and wheat and thus, discourages crop
diversification.
Environmental issues: The over-emphasis on attaining self-sufficiency
and a surplus in food grains, which are water-intensive, has been found
to be environmentally unsustainable.

Procuring states such as Punjab and Haryana are under environmental

stress, including rapid groundwater depletion, deteriorating soil and
water conditions from overuse of fertilisers.
PDS Reforms
Role of Aadhar: Integrating Aadhar with TPDS will help in better
identification of beneficiaries and address the problem of inclusion
and exclusion errors. According to a study by the Unique Identification
Authority of India, using Aadhaar with TPDS would help eliminate
duplicate and ghost (fake) beneficiaries, and make identification of
beneficiaries more accurate.
Technology-based reforms of TPDS implemented by states:
Wadhwa Committee, appointed by the Supreme court, found that
certain states had implemented computerisation and other technology-
based reforms to TPDS. Technology-based reforms helped plug leakages
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of food grains during TPDS.

Tamil Nadu implements a universal PDS, such that every household is

entitled to subsidised food grains.
States such as Chhattisgarh and Madhya Pradesh have implemented IT
measures to streamline TPDS, through the digitisation of ration cards,
the use of GPS tracking of delivery, and the use of SMS based
monitoring by citizens.
Scope for Improvement
Its effectiveness can be enhanced with technology based solutions as is
evident from some of the states’ successes towards the same. Shifting
towards DBT is another idea, but with caution.

In its report on State finances, the Reserve Bank of India (RBI) has
advised States that are planning to shift to cash transfer to be cautious
while effecting the migration.
Economic survey 2016-17 also highlighted the need for more caution
and better infrastructure while replacing subsidised PDS supplies with
DBT.
Strengthening of the existing TPDS system by capacity building and
training of the implementing authorities along with efforts to plug
leakages is the best way forward.
It can be further strengthened by the increased public participation
through social audits and participation of SHGs, Cooperatives and
NGOs in ensuring the transparency of PDS system at ground level.
To enhance the nutritional level of masses, bio-fortified foods need to be
distributed through the PDS that will make it more relevant in the
backdrop of prevalent malnutrition in India.
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https://pursuit.unimelb.edu.au/articles/securing-india-s-food-supply-
during-covid-19

National Food Security Act

Sustainable Agriculture:

The concept of sustainable agriculture gained prominence since the

publication of the Brundtland Report in 1987. Sustainable Agriculture
involves the processes that would enable to meet the current and long
term societal needs for food, fiber and other resources, while
maximizing benefits through the conservation of natural resources and
maintenance of ecosystem functions.

Principles of Sustainable Agriculture:

The three main principles of sustainable agriculture are:

1. Environmental sustainability: through e.g. protecting, recycling,

replacing and maintaining the natural resources base such as land
(soil), water and wildlife
2. Economic sustainability: through e.g. improving soil management
and crop rotation which raise yields
3. Social sustainability: through upholding social justice and cultural
cohesion

Benefits of Sustainable Agriculture:

Environmental Protection: Sustainable Agriculture emphasizes on

methods and processes that improve soil productivity while minimizing
harmful effects on the climate, soil, water, air, biodiversity and human
health.
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Saving Energy: It emphasizes to minimize the use of inputs from
nonrenewable sources and petroleum-based products and replace them
with those from renewable resources

Food security: It seeks to ensure that the basic nutritional requirements

of current and future generations are met in both quantity and quality
terms.

Economic profitability: It not only ensures sustainable increase in

agricultural production but also reduces the agricultural sector’s
vulnerability to adverse natural conditions (e.g. climate), socioeconomic
factors (e.g. strong price fluctuations) and other risks.

Economic and social equity:

It seeks to ensure long-term employment, an adequate income and

dignified and equal working and living conditions to people involved in
agriculture value chain

It also focuses on local people and their needs, knowledge, skills, socio-
cultural values and institutional structures.

Different Methods of Sustainable Agriculture:

Crop Rotation: It involves the systematic planting of different crops in

a particular order over several years in the same growing space. It helps
in maintaining nutrients in the soil, reducing soil erosion, and preventing
plant diseases and pests.

Planting cover crops: Cover crops are planted during lean season times
when soils might otherwise be left bare. These crops protect and build
soil health by preventing erosion, replenishing soil nutrients, and
keeping weeds in check, reducing the need for herbicides.

Biointensive Integrated Pest Management (IPM): It emphasizes the

prevention of pest problems with crop rotation; the reintroduction of
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natural, disease-fighting microbes into plants/soil, and release of
beneficial organisms that prey on the pests. Chemical pesticides are not
used.

Agroforestry: It involves the growth of trees and shrubs amongst crops

or grazing land. Agroforestry systems can combine both agriculture and
forestry practices for long-lasting, productive, and diverse land use.

Permaculture: The concept of permaculture was developed by Bill

Mollison and David Holmgren in the 70s and early 80s. It is the design
and maintenance of agriculturally productive ecosystems which have the
diversity, stability, and resilience of natural ecosystems.

Organic Farming: It is a type of farming which avoids or largely

excludes the use of synthetic inputs (such as fertilizers, pesticides, etc.)
and to the maximum extent feasible rely upon crop rotations, crop
residues, animal manures, off-farm organic waste, mineral grade rock
additives and biological system of nutrient mobilization and plant
protection.

LEISA (Low External Input sustainable Agriculture): It uses low

synthetic fertilizers or pesticides. Yields are maintained through greater
emphasis on cultural practices, IPM, and utilization of on-farm resources
and management.

Zero Budget Natural farming: The phrase ‘Zero Budget’ means

without using any credit, and without spending any money on purchased
inputs. ‘Natural farming’ means farming with Nature
and without chemicals (FAO). It is a set of farming methods first
introduced in Andhra Pradesh.

Biodynamic agriculture: It considers farm as a living system. The

system puts great emphasis on the integration of animals to create a
closed nutrient cycle, effect of crop planting dates in relation to the
calendar, and awareness of spiritual forces in nature.
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Conservation Agriculture: Conservation agriculture is a farming
method that largely forgoes tillage and involves permanent organic
mulch cover and extended crop rotation.

Issues with sustainable agriculture:

Organic farming and food security: Switching to organic farming

typically leads to a sharp drop in yields compared with intensive farming
with rising world population; there is a growing debate over our ability
to sustain the population. Therefore, organic farming alone will not be
able to feed the world in its present form but will instead have to be
combined with other sustainable production methods.

Feasibility of conservation agriculture for soil management: The

absence of ploughing as in case of conservation agriculture requires
changes to weed management, use of herbicides and also special
machinery for sowing. Smallholders in developing countries face a
challenge to adopt conservation agriculture. Thus such practice has been
concentrated predominantly in North America, Europe and Australia.

Issue with small land holdings: Many scholars, environmentalists

advocate that cultivation based on small holdings is more sustainable
and less polluting than intensive, industry-based production models.
However, environmentally harmful farming methods are not only
characteristic of industrial or intensive large agricultural businesses;
smallholders can also damage the soil and the environment due to lack
of knowledge and access to modern sustainable techniques.

The debate on use of HYV seeds: High yielding hybrid seeds have
been known to pose threat to not only human and environmental health
but are also economically unsustainable for farmers. However, given the
growing concern over food security, these seeds are crucial to enhance
productivity.

Use of chemical pesticides: To completely do away with chemical

pesticides may not be a feasible idea given the growing incidences of
ENLIVEN IAS ECONOMICS
pest attacks and consequent loss of crop. The amount of chemical
pesticide used should be kept to a minimum, and less harmful agents
should be used.

Sustainable Agriculture in India:

Government Initiatives:

National Mission on Sustainable Agriculture: It is one of the 8

missions outlined under National Action Plan on Climate Change
(NAPCC). It aims at enhancing agriculture productivity especially in
rainfed areas focusing on integrated farming, soil health management,
and synergizing resource conservation.

Paramparagat Krishi Vikas Yojana (PKVY): The scheme aims at

promotion of commercial organic production through certified organic
farming y involving group of farmers (cluster farming)

Network Project on Organic Farming of ICAR: It aims at evaluating

the relative performance of location-specific, important cropping
systems under organic and conventional farming, and assesses
agronomic efficiency of different production systems.

Sustainable Sugarcane Initiative: It is a method of sugarcane

production using less seeds, less water and optimum utilization of
fertilizers and land to achieve more yields.

System of Rice Intensification (SRI): It is an agro-ecological

methodology for increasing the productivity of irrigated rice by
changing the management of plants, soil, water and nutrients. It is a low
water, labor-intensive, method that uses younger seedlings singly
spaced. Kadiramangalam System of Rice Intensification, a variant of
SRI, is practiced in Cauvery delta region in India.

Challenges involved:
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Rising population and degraded ecosystems have increased resilience on
intensive, conventional (use of HYV seeds, chemical fertilizers) and
deforestation.

There is lack of capital among the large sections of agricultural

community (small and medium farmers) for transition to sustainable
agricultural production.

There is lack of access to information and technology to improve

agriculture practices, processing and marketing agricultural products.

Lack of economic incentives to switch to sustainable farming which

makes farmers apprehensive of the returns.

There is inadequate public policy and basic infrastructure to promote

adoption of sustainable agricultural practices.

Shantha Kumar Committee Recommendations

The government had set up a six-member committee to suggest
restructuring or unbundling of FCI to improve its financial management
and operational efficiency in procurement, storage and distribution of
food grains.

Important recommendations made:

Reduce the number of beneficiaries under the Food Security Act—
from the current 67 per cent to 40 per cent.

Allow private players to procure and store food grains.

Stop bonuses on minimum support price (MSP) paid by states to

farmers, and adopt cash transfer system so that MSP and food subsidy
amounts can be directly transferred to the accounts of farmers and food
security beneficiaries.
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FCI should involve itself in full-fledged grains procurement only in
those states which are poor in procurement. In the case of those states
which are performing well, like Haryana, Punjab, Andhra Pradesh,
Chhattisgarh, Madhya Pradesh and Odisha, the states should do the
procurement.

Abolishing levy rice: Under levy rice policy, government buys certain
percentage of rice (varies from 25 to 75 per cent in states) from the mills
compulsorily, which is called levy rice. Mills are allowed to sell only the
remainder in the open market.

Deregulate fertiliser sector and provide cash fertiliser subsidy of Rs

7,000 per hectare to farmers.

outsource of stocking of grains: The committee calls for setting up of

negotiable warehouse receipt (NWR) system. In the new system, farmers
can deposit their produce in these registered warehouses and get 80 per
cent of the advance from bank against their produce on the basis of
MSP.

Clear and transparent liquidation policy for buffer stock: FCI should be
given greater flexibility in doing business; it should offload surplus
stock in open market or export, as per need.

Ashok Dalwai Committee Recommendations

The Union Government had constituted an inter-ministerial committee

headed by Ashok Dalwai to prepare a blueprint for doubling farmers’
income by 2022. It noted that policy should focus on creating a
favourable investment climate for increasing investment 'in agriculture'.
An additional investment of Rs 6,399 billion is required from both
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public and private sectors to enable doubling of farmers' real income by
2022.
Key Recommendations
Placing agricultural marketing in the Concurrent list
Greater private sector participation in agri-marketing and logistics.
While GST is a step in the right direction, a lot more needs to be done at
the State level.
Farmer producer and village producer organisations (FPO/VPO) could
play a critical role in integrating small and marginal farmers into the
agricultural market system.
Union Agriculture Ministry to roll out the Model Agricultural Produce
and Livestock Marketing (APLM) Rules
Market reforms and investment in infrastructure for cold-chain
integration to reduce wastages
The committee strongly recommends stepping up of institutional
credit on a large scale.
Key aspect of doubling farmers’ income is to focus on export. The aim
should be to raise agricultural export by a minimum of three times by
2022-23. It suggests a permanent inter-ministerial committee, including
commerce, consumer affairs and agriculture. This would monitor
domestic and global prices, recommending on needed changes.
Agricultural marketing under Concurrent List Cultivation is limited
to the land and area of farming operations While marketing has no
boundaries and needs to operate on a pan-India level to meet demand
across the country
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The one-India market concept may benefit from placing agricultural
marketing under the Concurrent List.
State Level Measures
Creation of better physical infrastructure Improved price information
dissemination campaigns Reform regulations that force farmers to sell
their produce to local monopolies.
FPOs/VPOs The report set a minimum target of 7,000 FPOs/VPOs,
each of which could cover 1,000 farmers and/or 1,000 hectares.
Amend the Companies Act to facilitate private sector shareholding in
FPOs up to 26 per cent and incentivising them by treating them at par
with cooperative societies.
Agricultural Marketing
The committee estimated that the country need about 10,000 wholesale
and 20,000 rural retail markets. The current agricultural marketing
system in the country comprised of 2,339 principal markets with sub-
market numbering 4,276.
It suggested that State Governments may convert these principal and
sub-market yards into fullfledged and independent markets.
Promote private markets under the provisions of the proposed APLM
Act, 2017.
Warehouses as Markets
States could upgrade existing warehouses and silos as markets The
demand for rural retail markets could be met by upgrading the existing
over-20,000 rural periodical markets as Primary Rural Agricultural
Markets.
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Financial support Small and marginal farmers, who constitute 80% of
Indian farmers, would benefit from an efficient marketing system, only
if they have withholding capacity. This can be achieved by offering
them pledge finance (post-harvest loan against produce as collateral).
Storage godowns, including cold storages, should be upgraded to get
Negotiable Warehouse Receipts (NWR) for these loans. The Ministry
has to develop comprehensive guidelines to promote warehouse-based
post-harvest loans and eNWR based trading There is a need to orient
financial institutions to participate in the pledge loan system.

Please read the following article on the importance of Agriculture in

mitigating the covid crisis, published in India Today on 25/04/2020

https://www.indiatoday.in/magazine/cover-story/story/20200504-
harvest-of-hope-1670506-2020-04-25