Rethinking India’s Agricultural Distress

While India aims to improve its competitiveness in export of permitted agricultural commodities and facilitate exports, there is a need to first construct a more farmer-friendly ‘domestic procurement facility’. That, along with a focus on warehousing and processing, is indispensable for a feasible export facilitation initiative.

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One often misses the paradigm shifts and structural changes happening in agriculture while analyzing its problems. Some issues are ever changing, while some persist. Here, we focus on one such unrelieved stumbling block faced by farmers. Lately, low farm incomes are being deemed, and rightfully so, as a prime reason for agrarian distress. Following this realization, the objective of ‘doubling farm incomes by 2022’ expectedly found its way into the Union Budget of 2017. But what is it that really constitutes the hurdles that keep farmers from raising their farm incomes, is it just an external force such as below-normal monsoons and lack of technological up gradations, or are there inbuilt impediments too. We intend to look at two such bottlenecks- domestic procurement procedures and storage facilitation.

Consider a situation where a farmer needs to spend an entire day to sell his produce to procurement agencies. Following the sale, which is often at lower prices for the ones who are towards the end in queue, is a seven to nine day long wait for payment to be credited in the farmer’s bank account. Not to forget, the procurement process requires Origin Certificate and Aadhar Card to be furnished by the farmer. Although Aadhaar’s penetration has significantly improved in India, obtaining the Origin Certificate from the village patwari remains a challenge for farmers. Whether it is absence of the issuing authority or mere reluctance of getting work done, it is the farmer who suffers. It is a question if the documentation is really facilitating the procurement process or restricting it, in a situation where the government agencies represent a monopsony, naturally rendering the bargaining power of farmers meagre. This discussion would be incomplete if we do not consider the role middlemen play in the scene.

Middlemen are traders who buy agricultural produce from farmers and further sell it where higher prices are ensured. A typical arrangement is one in which the middleman offers 50 percent of the MSP to the farmer, with immediate cash payment. Putting this and the previous situation in perspective, one can see that farmers without adequate documents and in need of cash are prone to selling their produce to middlemen, compromising on their farm incomes. It is with this conundrum that one needs to understand the endogenous factors contributing towards low incomeof farmers.

Low bargaining power and inability to hold the produce result also from a persistent drawback in Indian agriculture- poor storage standards and lack of processing units. According to a 2010 study by Central Institute of Post Harvest Engineering and Technology (CIPHET), Ludhiana, an estimated harvest and post-harvest loss of Rupees 44,143 crore per annum (at 2009 wholesale prices) was incurred . Adequate processing facilities, preceded by ample storage for harvest, are essential requirements for remunerative prices of agricultural produce, and consequently for raising farm incomes.

To conclude, in times as stressful for agriculture as now, it becomes imperative to rethink the issues and look within the sector for solutions. While India aims to improve its competitiveness in export of permitted agricultural commodities and facilitate exports, there is a need to first construct a more farmer-friendly ‘domestic procurement facility’. That, along with a focus on warehousing and processing, is indispensable for a feasible export facilitation initiative. If the nation can’t secure the interests of the primary stakeholder of a sector, the growth path cannot be sustained.

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