WHAT AILS OUR FARMERS ?

WHAT AILS OUR FARMERS ?

There are several issues:

1. Indian farming is still extremely traditional. Productivity is extremely low and highly dependent on natural phenomena. Most of the farmers are low educated to learn new techniques. They have no supply of capital.

2. Lack of industries. Farming products need to be processed to enhance value. In farming season farmers have to sell produce at very low rates. In that sense it is actually useful to help industrialist to setup industries near agricultural areas.

3. Middle men cut large profit of farmers efforts. We have lack of (cold) storage facilities which prevents farmers to wait for better prices. They do not have access to market which might fetch them better prices.

4. Too many people in farming. we do not need so many people in farming (50% workforce of India). A piece of land can support on a limited number of people. If you see, so many people are dependent on small farming lands which are simply not sufficient. Again it is beneficial to generate employment which might help move extra labor in other industries (or help farmers during non/low farming months).

5. Poor infrastructure and policies. Already mentioned some above. Storage, Transportation, Irrigation. Weather forecasting. Export assistance and policies. Government already have departments which theoretically do all these, but there effectiveness far from effective.

WELCOME MOVE BY MAHARASHTRA GOVERNMENT

Maharashtra Govt has issued an ordinance amending the Agricultural Produce Market Committee Act, 1963, deregulating sale of vegetables and fruits in a move that signals that the state in all likelihood is moving towards scrapping the APMC Act.
The move aims to facilitate better financial renumerations for the farmers who would now be free from the regulatory mechanism of agriculture produce marketing committees (APMCs).

By introducing the reform, the state signals its intention to join the National Agriculture Mission (NAM) for “free and fair agriculture trade”.

APMC - reason why farmers suffered.

APMCs were originally meant to protect the interests of the farmers and consumers. However, coteries of traders, politicians, commission agents and other organised groups, who pull strings in APMCs, have long been accused by farmer organisations of rigging prices, using faulty weights, distorting the market and fleecing agriculturists and consumers. This leads to a huge difference between wholesale and retail prices.

The Agricultural Produce Market Committee (APMC) Act mandates the purchase and sale of agricultural commodities in government-regulated mandis. The journey of a commodity from farm to fork involves multiple levels of transportation and handling expenses, agents’ commission and mandi taxes — all jacking up the final price of the farm produce by up to 20 per cent.

Also, anywhere between 5 per cent to 40 per cent of food is wasted depending upon the perishability of the item. Thus, the farmer’s farm gate price is suppressed while retail price is inflated. The major chunk of this difference is appropriated by intermediaries, leading to low net realisation to farmers and demand for hikes in support prices. Besides, coverage of select farm commodities under the minimum support price (MSP) weakens the effectiveness of price signals in ensuring optimal resource allocation.

Higher MSPs are needed to compensate for the rising cost of farming, but arbitrarily raising MSPs of cereals vis-à-vis non-cereal food items such as eggs, milk, pulses, fruit and vegetables increases the relative price gap between the two categories. This discourages the production of non-cereal food items even if the demand for them is rising at a faster rate than that for cereals.

Further, the way food is stocked is also an issue. The main objective of Food Corporation of India (FCI) is to maintain buffer stocks; however, FCI buys whatever is offered. When it procures more than what is required as buffer, it creates a perceived shortage in the market and induces buyers to stock more than they need.

Procurement costs also contribute to food inflation. The economic cost of procurement includes MSP plus bonus, state taxes and the cost of storage and distribution. As a result, while the farmers sell, say, wheat at ₹14/kg, its economic cost to FCI is ₹24.70/kg. In case of rice it is Rs. ₹20 and ₹32.30, respectively.

APMC BE ABOLISHED.

India needs to abolish the APMC Act to link farmers directly to the retailers. There is a wide gap between wholesale and retail prices of fruit and vegetables mainly because of wastage. Allowing organised retail will improve post-harvest infrastructure, especially those related to storage of perishable items. This will check prices of fruit and vegetables.

Policy flip flops on export or import make farm markets unpredictable and hurt production planning. Imposing a Minimum Export Price (MEP) is nothing but depriving farmers of better prices for their produce, which ultimately hurts production. A variable export tax system is a better way to deal with occasional domestic shortage of specific agricultural commodities. This will reduce price volatility and yet be less trade distorting.