Tag: micro food processing

Will Indian Agriculture Come out Relatively Unscathed in FY’21?

The outlook for kharif 2020 contains a few good signs, but much will depend on the monsoon.

Since the harvesting of most rabi crops was completed in time, despite the nationwide lockdown from March 24 onwards, an impression has gained ground that all is well with Indian agriculture.

It is true that due to extraordinary efforts made by government machinery, procurement of wheat in Punjab, Haryana and Madhya Pradesh has been more successful than expected. The smooth availability of agricultural produce, including fruits and vegetables, has also compounded the belief of India’s opinion making classes that not much is required to be done for agriculture.

As a matter of fact, some recent growth projections for the Indian economy assume that agriculture growth in FY’21 may not be significantly affected. For instance, former RBI governor C. Rangarajan and EY India’s chief policy adviser D.K. Srivastava reckon that this sector might show near-normal performance in 2020-21.

But this doesn’t represent the full picture of what has happened over the last two months.

Cotton farmers were facing low prices even before COVID-19 was taken seriously by the government. Rumours and misinformation have impacted the livelihood of poultry farmers, especially in northern states.

Farmers in Madhya Pradesh, India’s largest gram-producing state realised about Rs 700-800 less than the MSP of Rs 4,875 per quintal.

Also read: Centre Opts for Long-Term Agricultural Reforms, Leaving Farmers ‘Atmanirbhar’ in Crisis

Similarly, fruits and vegetable farmers across the country have suffered from a plunge in prices due bottlenecks in movement from villages to cities. Onion farmers in Nashik are barely able to recover their cost of cultivation. Milk producers, as Finance Minister Nirmala Sitharaman herself recently acknowledged in a press conference, have also greatly suffered.

According to a livelihoods survey carried out by the Azim Premji University, between April 13 and May 9, nearly 90% of the farmers were either not able to harvest or sell their produce or sold it at reduced prices during the lockdown.

Rest of the year

And what of the kharif crop this year? There are a few positive signs, but still much is uncertain.

On March 28, the home ministry allowed domestic production, import and movement of fertilisers to sale points. As a result, domestic availability was not adversely impacted even during the lockdown. It is significant that off-take of all three major fertilisers – urea, DAP and MOP – by farmers was about 36%, 72% and 43% higher in April 2020 than in the same month last year. Total sale of fertiliser (including complex fertilisers) in April 2020 was 19.14 lakh tonne against 12.82 lakh tonne in April, 2019, i.e. increase of about 49%.

Purchase of fertilisers by farmers could be due to the forecast of a good monsoon. In addition, it might be a behavioural response by the anxious farmers amidst a spectre of uncertainty. However, in previous years, the sale of fertilisers in April was only about 5-10% of sale in the entire kharif season (from April to September). So, the higher sale of fertilisers in April is no guarantee for a good kharif crop.

Also read: Amid Lockdown, UP Centres Procuring Grains From Fewer than 2 Farmers a Day on Average

The retail price of urea remains unchanged at Rs 266.50 per bag of 45 kg. Under the nutrient based subsidy scheme, the price of DAP has been reduced from Rs 1,400 to Rs. 1,200 per bag. However, the price of MOP stays at Rs 950 per bag.

According to a 2015 study by Dr Ramesh Chand and Pavithra S, use of potash is lower than the normative requirement in all states (except Assam). In Punjab and Haryana, deficiency is more than 70%. In kharif 2019-20, the share of Punjab and Haryana in consumption of urea was 9% and 5.54% whereas their share in the consumption of MOP was only 2.71% and 3% respectively.

It was an opportunity for the government to offer higher subsidy for potassic fertilisers to “nudge” farmers for more balanced use of the nutrients, particularly in large states with high K deficit. Another issue that merits further research is that neem coating of urea and its sale in smaller bags of 45 kg does not appear to have delivered the expected outcome of a significant decrease in the consumption of urea.

The availability of credit is a critical factor for purchase of inputs by farmers. As per NAFIS Report 2016-17, just about 30.5% of agricultural households borrowed from institutional sources. The rest borrowed from non-institutional sources, like non-banking financial institutions, moneylenders and landlords, often at a usurious rate of interest. There is a need to ensure that flow of credit for kharif is not hampered.

A farers harvests his what crop with the help of a brush cutter, in Palampur, Kangra district, May 15, 2020. Photo: PTI

The impact of lockdown on loan waivers is not known. If the process of loan waiver has not been completed in a state,  farmers would not be able to draw crop loans as their accounts would still be classified as a non-performing asset. For example, the loan waiver announced by the government after assembly elections has not been completed in Maharashtra.

The biggest problem in agriculturally-richer states would be the availability of labour. Transplantation of paddy in Punjab and Haryana was largely done by migrant labour. It is now almost certain that they will not be available for transplantation.

Punjab has announced a 40%-50% subsidy on machinery used for direct seeding of rice (DSR). Under this technique, seedlings are not raised in nursery and puddling, transplantation and submergence of fields in water are not required. The requirement of irrigation water is much less.

Under DSR, the rice is sown with tractor-operated lucky seed drill which sows rice and sprays herbicide. It is claimed that profitability of rice using the DSR technique is higher than rice transplanted in a puddle field. It is also claimed that less irrigation is required. The government has been promoting this technique for several years but it never really took off due to plentiful availability of labour.

There are also media reports of farmers in Punjab shifting from paddy to cotton. In 2019-20, cotton prices fell below the MSP and the procurement by Cotton Corporation of India was sluggish. Indian cotton prices are globally competitive. According to projections of the US department of agriculture (USDA), global consumption of cotton is projected to rebound by 11% and import of cotton by China is expected to increase by 20% over last year.

Also read: Interview |’Wait for Fine Print, But Centre’s Agri Reforms a Step in Right Direction’

If the DSR experience of paddy and shift to cotton is successful in Punjab and Haryana, the requirement of migrant labour may reduce in future years also, which will have unintended consequences of loss of income for labour coming from poor states of Bihar, Jharkhand and UP.

In the last 10 years, the paddy farmers in eastern India have started growing hybrid rice for which seed is available from private companies only. Since paddy is grown in rain-fed areas in these states, hybrid rice is preferred due to higher yield. Most processing units of hybrid seeds are around Hyderabad. Now that restrictions on movement, imposed in early phase of lockdown have eased, it can be expected that the companies will be able to place required quantities of hybrid seed in areas extending from eastern UP, Bihar, Jharkhand, Odisha and Chhattisgarh.

Soybean will face the most serious shortage of quality seed this year. This is due to damage to kharif crop in 2019 due to late rains in Maharashtra and Madhya Pradesh. Farmers will have to use their own farm-saved seed.  MP has asked for continuation of subsidy on a variety of soybean which is already 15 years old. This may reduce the productivity of soybean.

However, the most important determinant of kharif output is the distribution of monsoon in each month from June to September.

Forecasts of both IMD and Skymet went wrong in 2015-16, 2018-19 and 2019-20. Skymet has decided not to issue any forecast this year.

If IMD’s forecast of a near normal monsoon in 2020-21 proves to be correct, the kharif crop may save the day for GDP growth in India in a year for which rating agencies are predicting negative growth.

Siraj Hussain is Visiting Senior Fellow ICRIER. Jugal Mohapatra was Union Secretary, Fertiliser and Rural Development

Centre Opts for Long-Term Agricultural Reforms, Leaving Farmers ‘Atmanirbhar’ in Crisis

The government has failed to provide compensation and relief to farmers for the losses suffered during the lockdown, primarily because it lacks the fiscal space.

New Delhi: On Friday, finance minister Nirmala Sitharaman held her third press conference in as many days to follow up on Prime Minister Narendra Modi’s promise of a Rs 20 lakh crore financial stimulus package. After focussing on Micro, Small and Medium Enterprises (MSMEs), and migrant workers in the first two days, Sitharaman turned her attention to agriculture.

Sitharaman spent about fifteen minutes listing steps that the government had taken in the nearly two-month-long period of lockdown. These steps included the transfer of PM Kisan dues to nine crore farmers and payment of crop insurance claims to farmers – which had already been due and, in fact, delayed in the case of crop insurance claims.

The steps that Sitharaman subsequently announced included promises of three legal reforms to ease up agriculture marketing and the reinforcement of certain schemes that had been announced by the Centre in the past.

For instance, she announced that the government was launching the National Animal Disease Control Program which would ensure 100% vaccination of 53 crore animals and would involve spending Rs 13,000 crore. The same scheme had also been launched by PM Modi in September 2019 with an allocation Ra 12,600 crores.

Sitharaman also announced, as part of the COVID-19 relief package, existing schemes which have achieved varying degrees of success. She announced that the Operation Green launched in 2018 by the then finance minister Arun Jaitley would now be expanded to include fruits and vegetables. It was directed at easing the transport and storage of perishables and an allocation of Rs 500 crore was to be made for this – the same amount that was announced by Jaitley.

Also read: Amid Lockdown, UP Centres Procuring Grains From Fewer than 2 Farmers a Day on Average

The first actual approval of spending (not actual spending) under Operation Green came in February this year – two years after Jaitley’s announcement – when the Centre announced that it had approved projects where it would be spending Rs 162 crore for strengthening production clusters and farmer producer organisations. How much of this amount has been spent remains unknown.

The announcement to enhance the infrastructure for bee-keeping was also only a reiteration of the promise made in Sitharaman’s budget speech in February this year. Similarly, the Pradhan Mantri Matsya Sampada Yojana (PMMSY) to promote the development of marine and inland fisheries is also an existing scheme which was announced in July 2019 in the first budget after the NDA won a second consecutive term.

The government has now promised to spend Rs 20,000 crore under this scheme, which is a substantial increase from the Rs 3,700 crore that had been allocated at the time.

The Animal Husbandry Infrastructure Development Fund which Sitharaman has said will now be provided with Rs 15,000 crore through NABARD, is also an existing scheme which was set up in March 2018.

On the reform front, the government finally took the plunge and decided to roll out three key reforms which economists have long advocated for to ease the lock jams in the process of selling of produce and providing farmers with more avenues of sale.

These include relaxing the agriculture marketing rules, which Sitharaman promised would be done through a central law in due course and would enable farmers to make inter-state sales and enable e-trading of produce.

The finance minister also said that the government would amend the Essential Commodities Act of 1955. The Act, which was brought into effect during a time of scarcity, allows the government to control the price and quantity stored of any commodity listed as an essential.

Also read: Interview |’Wait for Fine Print, But Centre’s Agri Reforms a Step in Right Direction’

“What is happening is that farmers are producing. There is an abundance of crops, and this sometimes leads to issues because they would want to export, and we don’t permit that. Because of a flip-flop sometimes, farmers don’t get the benefit. Some other times, the consumers suffer. So there is a need to amend the Act,” Sitharaman said.

The government has now said that cereals, edible oils, oilseeds, pulses, onions and potato will be deregulated. It has also said that stock limits will only be imposed in “very exceptional circumstances like national calamities, famine with surge in prices.”

The third such reform announced by Sitharaman was that contract farming will be enabled and a legal framework will be devised to oversee the initiative. This would mean that farmers would be able to enter into contracts with buyers with assured sales price and quantities before the crop is sown providing them with an assured income.

Union finance minister Nirmala Sitharaman announcing the details of the government’s economic plan to fight the coronavirus pandemic, in New Delhi, May 13, 2020. Photo: PTI: Kamal Kishore

These steps have been advocated by agriculture economist Ashok Gulati for decades and he welcomed the steps. “What the government is doing with these reforms is it is creating alternative channels for farmers to sell their produce. So, they will have more choices,” he told The Wire in an interview. “I am happy that we are finally moving in the right direction. I congratulate the government for these steps.”

CPI(M)-affiliated All India Kisan Sabha, however, criticised the move. “Clearly, the move is to promote free trade under the slogan of one nation one market. The peasantry at large will be at the mercy of the Agri Business Corporations since there will not be any arrangements for price support and price stabilisation for crops. The Agriculture Produce Market Committees will be side-lined and the powers of the state governments will be eroded,” it said in a statement.

Politician and social scientist Yogendra Yadav, while agreeing that the reforms were necessary and overdue, was critical of the government for not focussing on the problems faced by farmers during the period of the lockdown and those that they would face in the next few months.

Also read: How Much Will Sitharaman’s Plan for Migrant Workers and Farmers Really Help?

“I honestly don’t understand what happened this afternoon. Was it a supplementary budget or a policy statement or were they just sent to occupy one hour of screen time and to manage headlines? What do any of the steps announced have to do with COVID and the lockdown? None of the steps will help the farmers in the next three or four months,” he said.

Yadav argued that the government ought to have compensated farmers for the losses suffered in the almost two-month-long lockdown and provided relief for the post lockdown period. A problem that the government and several commentators, including Gulati, have identified for this is that the government lacks the fiscal space.

“Why does the government lack the fiscal space? I will tell you why. Because it overestimated its revenues last year. Because it gave an ill-advised Rs 1.45 lakh crore tax break to corporates to deal with an economic downturn. This is why the government doesn’t have the money,” Yadav said.

Former Union agriculture secretary and visiting senior fellow at ICRIER Siraj Hussain said, while writing for MoneyControl, that the Centre’s announcements on Friday also signalled that it doesn’t view its ‘JAM trinity’ (Jan Dhan, Aadhar and mobile) as being capable of addressing the woes of the poor. “While the governance reforms of Essential commodities Act and agricultural marketing are good long-term measures, an important inference from three packages announced by the FM is that the Government does not see Jan Dhan, Aadhaar and Mobile trinity of much use to address the distress of the poor,” he wrote.

“The sad message for a vast majority of India’s poor is that: you are on your own,” he said.

COVID-19 Stimulus: Centre Announces Rs 1.63 Lakh-Crore Package for Agriculture and Allied Sectors

Mostly consisting of steps that will be completed over a longer horizon, Budget-like schemes for micro food enterprises, cattle vaccination, dairy sector, herbal plantation, beekeeping, and fruits and vegetables were also announced.

New Delhi: The Narendra Modi government on Friday unveiled the third tranche of its COVID-19 economic package, with announcements worth Rs 1.63 lakh crore for agriculture and allied sectors aimed at strengthening infrastructure, logistics and capacity building.

Like the last two installments, most of the proposals presented by Finance Minister Nirmala Sitharaman today were long-term measures that are unlikely to provide immediate relief caused by the national lockdown.

At a press conference, Sitharaman rolled out a Rs 1 lakh crore ‘Agri Infrastructure Fund’ that will finance projects at the farm-gate and aggregation point for efficient post-harvest management of crops.

She said the government will provide Rs 1 lakh crore for aggregators, farmers producers organisations (FPOs), primary agri cooperative societies, agri entrepreneurs and startups under this fund.

The fund will be created at the earliest, she said.

Besides this, schemes for micro food enterprises, cattle vaccination, dairy sector, herbal plantation, beekeeping, and fruits and vegetables were also announced.

Lack of adequate cold chain facilities and post-harvest management infrastructure in the vicinity of farm gates is causing gaps in the value chain, she said.

Also read: How Much Will Sitharaman’s Plan for Migrant Workers and Farmers Really Help?

Sitharaman also announced Rs 10,000 crore fund to support 2 lakh micro food enterprises (MFEs) for promoting health and wellness, herbal, organic and nutritional products.

The government will also launch a Rs 20,000 crore for fishermen through the Pradhan Mantri Matsya Sampada Yojana for the development of marine and inland fisheries.

Of this, Rs 11,000 crore will be earmarked for activities in marine, inland fisheries and aquaculture while Rs 9,000 crore for infrastructure creation such as fishing harbours, cold chain and markets.

This, she said, will provide employment to over 55 lakh persons and double exports to Rs 1 lakh crore.

Sitharaman also noted that the ongoing National Animal Disease Control Programme for Foot and Mouth Disease (FMD) and Brucellosis will look at 100 per cent vaccination of cattle, buffalo, sheep, goats, and pigs against FMD at an outlay of Rs 13,343 crore.

Also, a Rs 15,000 crore Animal Husbandry Infrastructure Development Fund was announced to support private investment in dairy processing, value addition and cattle feed infrastructure.

The government has launched a Rs 4,000 crore fund to promote herbal cultivation in about 10 lakh hectares of area, she said, adding that the scheme will help generate Rs 5,000 crore income for farmers. Along the bank of Ganga, a corridor of medicinal plants will be developed over 800 hectares area.

Another Rs 500 crore has been earmarked for beekeeping initiatives, helping 2 lakh beekeepers.

The government extended the ‘Operation Greens’ from tomato, onion and potato to all fruits and vegetables by providing an additional fund of Rs 500 crore. This money would go into providing subsidy on transportation from surplus to deficient markets as well as on storages including cold storages.

The scheme prevents any distress sale by farmers, she said.

New budget?

Political analyst Yogendra Yadav and other agriculture experts however said that Sitharaman’s press conference amounted to a new agricultural budget by the Centre and argued that it did too little to alleviate the suffering of small farmers right now.

(With inputs from PTI)