The saying “all models are wrong, but some models are useful” sounds true in the case of coronavirus. In all probabilities, the downcast of economy will last for a year or so. This is testing time and both Central and State Governments are working to their full capacity in fighting the novel corona virus. Under these circumstances, after health, food security and sustaining livelihoods should be the priority for the people. As per a United Nations report published in 2019, 69% of India’s population live in rural areas, which comprises to more than 700 million people constituting mostly marginalized society like farmers, agricultural labourer, old-aged, single-women-headed families,self-employed and micro-enterprises.To attain food security both food availability and universal access is vital. Currently India is having enough food grain in buffer stocks with about 60 mt (million tonnes) of rice and wheat, on top of it, this year production of food grains likely to reach record 292 mt coupled with bumper production of horticultural crops (313 mt), indicating comfortable position in food availability.
Meteorological department projected that the coming monsoon will be above normal. Preparations are on for kharif planting. Keeping the changing supply demand situations as it is more likely that demand for export commodities like cotton and other cash crops may decline, but imported commodities (like oilseeds and pulses) may increase as their imports may be effected by supply chain disruptions under post-COVID situation. Ensuring supply of seeds for kharif sowing coupled with complimentary inputs like fertilizers in sufficient quantities either by private or government is the key. The recent boost for infrastructure investment and market reforms like amending Essential Commodities Act,strengthening electronic national agricultural markets, emphasis on faster implementation of Model APMC Acts set a stage for unleashing potential for development of agricultural markets. In addition, in this testing times, it is also important to provide relief and social safety net to casual labourer, farmers migrant workers through large scale employment generation programmes like MGNREGA, ready procurement of farmers harvest at Minimum Support Price(MSP), food ration through PDS to poor can alleviate hunger and poverty. Freeing up of agricultural markets through elimination of restrictions on the intra and interstate transport for both inputs and outputs can also widen agricultural markets.
Food access and entitlements
Although there is no food shortage, food access at affordable prices in right time to vulnerable sections of society depends not only on food availability but also moving food from production centre’s to consumers and enhancing purchasing power through employment and income generating activities.Additionally, effective implementation of welfare schemes like PM Garib Kalyana Yojana(PMGKY), direct money transfer to various vulnerable sections of society like women,old-aged, disabled, and other pensioners, farmers and migrant workers who are out of job and construction workers is essential. Reports indicate that around 39 crore poor people received financial assistance totaling of Rs 34,800 crore under the PMGKY as on May 5, 2020.Most of the migrant workers stranded away from their hometowns without any identity, ration, cash and community support were vulnerable to acute mental stress too, the report said. In this dire situation India needs to capitalize on the existing social welfare system rather than creating new ones. The government may have to directly provide the basic means of survival to all vulnerable both in cash and kind as per requirements. The relief package will give farmers the vital support to get back on track. Given that employment is at historical lows, dependence on effective implementation of schemes like MGNREGA and PDS is vital to ensure boost in livelihood programmes and food security.
Community should help state to reach last mile
Although, some of the welfare schemes and policies formulated by central government, most of the implementation is in the hands of state and local governments. For example, in Telangana state, civil supply department is overseeing the food distribution through PDS shops to 87.6 lakh BPL card holders. As per latest data, about 88.1 per cent of BPL card holders obtained their PDS rice in April,2020 against about 83 per cent in March. Ration card portability seems to be handy for migrant workers, as data suggest that about 13 lakh BPL card holders obtained PDS rice under ration portability.
The Telangana government also deposited Rs 1,500 each into the bank accounts of 74 lakh families with BPL cards, amounting to a total Rs 1,112 crore as on 14th April. The remaining 15% of BPL card holders not yet received money due to issues like non-linkage of bank accounts to BPL cards etc. Some research reports pointed out that the reach of welfare schemes to bottom 40% of population, comprising migrant-labourer, old-aged, disabled, widowed/divorced female is doubtful in a crisis situation as many times they don’t have proof of residence, permanent address and ration cards. They also don’t have necessary connections to community to support during this testing times. This needs to be addressed with pro-active community participation in identification and reach of beneficiaries. The state governments are closely working at the block levelto make sure that the farmers get the inputs and logistic support to send out the harvest to the market. In the recent lockdown-5.0 guidelines, central government is giving more flexibility to states and local authorities to tweak guidelines and modalities to suite to the evolving situation, although it formulate the model guidelines. The state governments should involvement of local communities, farmers and vulnerable migrant labourer in development and implementation of such policies as well as decisions.
Private sector to support government
Most of the rabi crops are already harvested but some commodities prices declined due to lack of marketing. Some state governments are proactive in procuring food grains especially paddy and wheat, but for some other commodities like oilseeds, pulses and perishable commodities like vegetables and fruits marketing is a problem. Telangana’s paddy production has shot up to 10.5 mt this year from 6.6 mt last year. State roped in millers to process the additional paddy produce and planning to double the godown space from existing 2.2 mt to 4 mt to store the milled rice. “Procuring paddy, sending it to the mills to make rice and selling that will become a hard task. The existing policy or capacity cannot deal with this situation,” the Chief Minister said. The State, which has about 2,200 rice mills, can process 10 mt of rice a year, but generally they work below capacity. Again, marketing of processed rice in open market is an issue. They need to expand their marketing capabilities and find market for alternative uses of rice to cater to the expanding paddy area in response to increased irrigated area from new projects such as Kaleshwaram. It was also proposed that, the surplus rice available with Food Corporation of India may be converted to ethanol for utilization in making alcohol-based hand-sanitizers by the private sector.The e-commerce companies functioning in the agricultural sector can play vital role in these circumstances. The inputs need of the farmers are met effectually through e-commerce. For instance, annual FMCG consumption in rural areas was around INR 2 lakh crore and is projected to reach INR 8 lakh crore by 2025. As per published reports, in 2018, Indian farming market was worth INR 16 lakh crore and growing at a CAGR of 10.8% by 2024 it was projected to reach INR 30 lakh crore. These e-commerce players can bring the inputs and other essential commodities to the rural households at their doorsteps which has been disinfected at the warehouse level. It is equally important to encourage MSME and SME’s to take up alternate income and employment generating activities for example diverting in to health sector to retain and engage their staff to lower the job cuts. This will help in sustaining the economic activities during the COVID-10. In the coming year, the rural sector drives massive consumption across categories, while urban demand is subdued.
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Setting supply chains right
Although agricultural production is not effected due to the pandemic, it effected more severely agricultural supply-chain. While the government has issued permits to trucks allowing them to carry groceries, fruits, and cereals, many transporters have not received their permits. Which has increased the transaction time and cost for the farm produce to reach the market. Further, there is an impact on the demand side as the restaurants are closed. This is resulting in a substantial decline in farm gate prices and revenue loss to many farmers across country. As per a published reports, the railway ministry suggests that freight loading has dipped from a usual 10,000 cargo rakes per day to just about 3-4,000 now. As a result, the farmersleft with no choice than sell his crop at a less price, settle with a lower profit or losses.
It is not possible to anticipate the arrival of global crises such as the coronavirus pandemic, but the impact can be mitigated through higher level of preparedness of supply chain. In many places, supply chain disrupted suddenly due to COVID, with driver, commission agent, truck companies are stuck up in different places. Some farmers stopped harvesting fruits and vegetables, resulted in rotting in the fields; some could not sell due to lack of transportation after harvest.Inter-state markets for tomato’s, mangoes, banana, sweet lime and onion are subdued due to lack of logistic arrangements in terms refrigerated transport and storage. Relaxation to agriculture from the lockdown is not effective as people are hesitant due to fear of contamination. All the establishments like hotels, hostels, offices and educational institutions and processing industry is closed and demand reduced by one-fourth for most of the agricultural commodities. Households are eating more rice and pulses, but less of milk, meat and vegetables. All these affected access to food by the urban poor migrants on the one end, and demand for farmers at the other end.
As most of the mandis are shut down, farmers are exploring alternate channels to directly sell to consumers through farmer producer companies (FPOs), farmers groups or linking directly to retailers and wholesalers in urban centres. Procurement of mangos, mandarin and tomato’s directly from the farmers and selling to retailers is a hard task which requires storage and transport infrastructure along with arrangements to collect, aggregate and sell the produce.
Working through farmers organisations
However, in some places, Covid-19 lockdown has power of farmers, farmers groups and Farmers Producer Organisations (FPOs) to directly deliver their produce at the doorstep of the consumers. Many FPOs have step forward to operate during the lockdowns by procuring and marketing farmers’ produce and giving farmers the income in this dire situation. The existing milk supply chain in each village (either operated by private/cooperative/government) needs to be used for marketing of fruits and vegetables as already demonstrated by SAFAL promoted by Mother-Dairy in Delhi. Some FPOs are arranging trucks to move raw fruits and vegetables to supply to processing industry. However, processing units are not able to pay immediately; hence there is a need for short term loan with zero interest to FPOs on liberal terms, so that they can pay immediately to farmers without waiting payment from the buyer. Further, transport and other logistics can be subsidized to weaker FPOs promoted by small and marginal farmers, so that they can jump into food logistics during these hard times, otherwise they don’t have any capacity to mobilise their resources. The share of fresh fruits and vegetables sold to food processing industry needs to be increased. This not only reduce supply-demand gapacross seasons but also curtail imports from China. The FPOs can also meet the needs of online food retailers like BigBasket and Reliance Fresh through unleashing the potential of contract farming Act. FPOs should adopt online-technology platforms to expand alternate channels like FPO-consumer, FPO-wholesale-tech platform and FPOs-retail chain. The FPOs may use the wide network of existing women-SHGs in collecting, grading, sorting andprimary processing like making ghee, pickles, dehydrated onion powder, retailing etc. FPOs can exploit synergies by running input shops, door delivery, and provide farm advisory through what’sapp and other mobile applications by engaging recently returned tech-savvy migrants from urban centres. In this way this crisis can be altered to anopportunity for local development by local community.
Engaging return migrants in building villages
According to the census report, there are about 15 crore urban workers in the country, of whichabout 3 crore have been returned to their native villages during COVID-19. On the commencement of monsoon season, maximum number of migrant workers can be engaged in agriculture to avoid shortage of agriculture labour. However, agricultural sector did not have the capacity to absorb these additional labour.
In the villages, it is high time to identify and promote alternate employment opportunities for returned migrant labourer’s to not only use their youthfulness, but also exposure to latest technologies. For example, they can start farm advisory services through mobile apps, e-commerce of fruits and vegetables, act as banking correspondent, set up custom hiring centres for farm machinery, undertake construction of warehouses, roads, setup two-wheeler repair shops, fabrication units of farm machinery or work as tractor driver etc.
The surplus labour in the villages needs to be engaged fully in MGNREGA works with the availability of experienced reverse migrant workers in creating long lasting community assets like construction of library, market yard, community hall, meeting place, computer centres etc. In addition, provisions of use of MGNREGA labour on farms of SC/ST and small and marginal farmers with 50% wages paid by MGNREGA funds can be fully utilized especially for land and water development etc.
Paralysed agricultural marketing system due to COVID—19 crisis created an opportunity to overturn the policy paralysis in agricultural reforms. It needs nervy deciding along with the courage to push long pending reforms like relaxing Essential Commodities Act, pushing Model APMC Act, Contract Farming Act and Land Lease Act. It also demands huge political backing to overcome the resistance from the market players, equally in the media and academia. It entails a remarkable ability to challenge the dominant economic thinking of huge government support, subsidies and free-bees towards investments in infrastructure, empowering farmers through unleashing the power of free markets. The land, labour and capital markets are inefficient in allocating scarce resources due to freebee mentality during the past 50 years in agricultural sector. But to presume the present privilege of economists to try a perpetual change to prepare for a new normal is perhaps asking for the impossible.
The agricultural sector will play a key role in bringing the economy back on track post-COVID. Unlike, the welfare and development schemes, agricultural reforms/policy shift require no extra funds from government, but their impact is many times more than the highly subsidized schemes if implemented efficiently. During the past decade, government of India came out with three important model acts to free up agricultural input and output markets with wider implications on efficiency and productivity, Viz., (i) Model Contract Farming Act, 2018 to free up contract farming from all restrictions and better enforcement of the contract between farmer and private firms for mutual benefit with scope for infusion of private/cooperative sector capital, technology and scale, (ii) Model Agricultural Land Leasing Act, 2016 to free up and strengthen land lease market without infringing on land owners right to facilitate tenancy farming (with tenants get all benefits on par with owner farmers from agricultural schemes like avail agricultural loans and crop insurance but without infringing ownership rights of farmers) and cooperative farming, community farming to enhance scale economies(iii) Agricultural Produce & Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 to free up agricultural markets to promote farmers markets, FPOs, private markets, infusion of private capital, technology and efficiency in agricultural markets.
If the states adopt these model acts in addition to the effective deregulation of agricultural commodity markets by implementing amended essential commodities act will freeing up of both input and output markets in agriculture and have enormous scope in increasing private sector participation, efficiency and scale, adoption of better technology, easing transfer of cultivation from low productive users (absentee land lords) to high productive users (tenants/cooperatives) and enhancing backward and forward linkages in agriculture etc.
During this huge never beforesituation, government machinery is preoccupied with law and order, so the void can be filled up by FPOs and cooperatives, local communities as strong back up coupled with better policies to revitalize the rural sector.
by Dr. A Amarender Reddy
Ph.D. IARI, Principal Scientist(Agricultural Economics), ICAR-Centre Research Institute. The Author can be reached at [email protected]