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January 02, 2019 Wednesday 02:18:07 PM IST
NURTURE AGRI-BUSINESS

India today occupies the first or second global position in terms of production of a host of agricultural commodities such as coconut, chilly, milk, wheat, rice, fruits, vegetables and cotton.  However, due to our failure to forge smart commodity value chains, we have not been successful in translating the quantum jump in production into higher income and better quality of life for the farmers. The country’s foodgrains production grew from 51 million metric tonnes (MT) in 1947-48 to 273 million MT in 2016-17, registering a growth of 404.06 per cent. But the benefits of Green Revolution unleashed in 1960s have been snatched away by the big farmers confined to a few States, especially in the North.

          Agriculture continues to be a gamble with the South-West monsoon and market forces.  Whether it is crop failure (loss due to drought, flood, diseases or pests) or bumper crop (due to favourable climate), it is the farmer who loses. In the case of perishable commodities (fruits and vegetables), even a small increase in production volume can result in huge fall in the price of the crop due to the lack of storage capacity and procurement mechanisms ready to suck out the above normal supply. The recent fall in the price of red onion and pomegranate is a typical case for this phenomenon.  In the case of tomato and potato also, the same phenomenon is repeated.

SCOURGE OF MIDDLEMEN

          Even under normal conditions, the farmers hardly get more than 40 per cent of the consumer price for their crops due to the fractured and protracted marketing channels dominated by unscrupulous middlemen who wield immense political, muscle and money power.  Probably, the agricultural commodities where the farmer’s share in the consumer price is more than 90 per cent could be natural rubber, milk and cardamom.  The larger the number of intermediaries in a marketing channel, the lower will be the farm gate price. The gap between the potential and actual yield is also exceptionally wide in India mainly due to technological fatigue, soil fatigue and farmer fatigue. Though the average yields of cereals such as rice and wheat have more than doubled since the 1970’s, they are still lower than that of China or the US.  The sluggish growth in the yields of pulses and oilseeds still remains a concern. 

It is worth noting that after the Green Revolution, Indian agriculture has not witnessed any major breakthrough in crop production technology. The adoption of GM seeds (brinjal, mustard, etc.) by farmer is not given green signal by the government due to the resistance of the public. The incriminate application of chemical fertilizers and pesticides has severely impaired the soil health and fertility. The farmers in several States are giving up farming and migrating to other greener pastures fed up with the lower and unstable return on investment.  How long can the government persuade the farmers to continue cultivating their landholdings after having incurred losses season after season. The younger generation is also shying away from agriculture seeing the high risk and low return of agriculture.

COST ESCALATION

The cost of cultivation (seed, fertilizer, pesticides, diesel, labour, etc.) has also shot up substantially over the years without corresponding increase in the market price of the crops.  For example, the current market price of natural rubber at Rs.110 per kg is not at all attractive for carrying out production.  Given the global demand and supply situation, the price of natural rubber is unlikely to improve in the near future. Hence, the rubber growers are cutting rubber trees and shifting to other crops. 

Pepper farmers are also facing the same dire situation.  The price of black pepper is stagnant for the past few years, showing no signs of recovery immediately.  The only two crops that look attractive for the time being in Kerala are coconut and cardamom. Cardamom prices have firmed up after the flood which caused heavy loss to the standing crop in Idukki district.  Coconut oil price has picked up recently mainly due to lower production and surge in the seasonal demand.

VALUE ADDITION

Though Kerala is the largest producer of coconut in India (India is the largest producer of coconut in the world), we have not been much successful in developing and commercialising many value-added products from coconut. Even ‘Neera’ extracted from the inflorescence of coconut and projected as a no-alcoholic health drink had a premature death. Was it launched without scientific study of the consumer behaviour?  Had it succeeded in the market it would have changed the fortune of coconut growers and the economy of Kerala remarkably.  Only through innovation and value addition, price stability can be brought to a commodity. Farmers will be cultivating or caring a crop only when they are assured of a stable remunerative price for their crop.

          We lag behind the developed countries in food processing. When 70 to 80 per cent of the agricultural produce is processed in USA and Canada, hardly 10 per cent is processed in India. The share of value added products in our agri- export basket is also very low. Experts opine that India has the potential to become the food bowl of the world provided we put in place an efficient marketing ecosystem and a vibrant food processing industry. It is very unfortunate that India has not been able to develop any global food brands such as Nestle, Cadbury, Tetley, Lipton, Pepsi, Coco Cola, KFC, Quakers, etc.  Indian farmers can take advantage of the global markets only if our production system is aligned to global supply chains by raising the quality standards of our products to international standards. The wastage at the harvest and post-harvest stages in India is at unacceptable high levels due to the absence of and insufficiency of scientific marketing ecosystem in the form of dehumidified storage capacities, cooling chambers, reefer vans, cold storage facilities, ripening chambers, packing houses, refrigerated cargo terminals, etc.  India’s colossal agri-wastage is estimated at Rs.92,000 crore per year. A large part of this wastage is in perishables. Simply by arresting this loss, the income of the farmers can be boosted significantly.

ERRING PRICE SUPPORT

Farmers across the country are in deep distress and are revolting against the apathetic attitude of the central and state governments towards the problems  of the farmers. The recent electoral defeat of BJP in three states namely, Rajasthan, MP and Chhattisgarh may be attributed to the anger of the farmers against the incumbent governments. The vision of the central government of doubling the income of the farmers by 2022 is unlikely to be attained, given the depressed agricultural commodity prices. Though the government has raised the Minimum Support Price for the Rabi and Kharif crops (23 crops) significantly, the market price of majority of the crops have dropped below the MSP due to the lack of adequate procurement mechanism which is the responsibility of the state government and some central government agencies (FCI, NAFED, etc.). The private traders are keeping away from the market due to restrictions on cash deals and stock holding positions. The Government of India has recently lifted some restrictions on the export of some agri-commodities giving some relief to the farmers. 

The loan waivers announced by the governments of Karnataka, UP, Maharashtra, Rajasthan, MP and Chhatisgarh will give temporary relief to the farmers who are locked up in the debt-trap.  It is only band-aid and not a panacea for the problems faced by the farmers as loan waiver is applicable only to loans taken from formal financial institutions. It may be noted that only 40% of the small and marginal farmers have got agricultural loans from banks and the rest are depending on money lenders for crop loans.

The establishment electronic National Agricultural Market (e-NAM) linking the wholesale markets and rural markets is a bold step by the central government to make price discovery efficient by pooling the demand and supply at the national level and to eliminate price arbitrage opportunities. The APMC Act must be amended by state governments enabling the farmers to sell their produce directly to big retailers and processors under contract farming agreements. This measure will liberate the farmers from the clutches of commission agents who often collude with the traders in the APMC market to exploit the farmers. Since the prices of almost all commodities which are globally traded are influenced by the global production, consumption, tariffs and exchange rates, the Government must take steps to have a stable rupee and provide incentives to promote export of high value and value-added agricultural products.  The EXIM policy must also be calibrated to protect the interest of the farmers in the domestic market.

AGRIBUSINESS

Sustainable and profitable growth of agriculture is possible only by transforming farming into agribusiness and converting farmers into agripreneurs.  Today’s consumers, influenced by rapid globalisation, and with increasing purchasing power, are seeking superior nutritional and taste benefits, better hygiene, and convenience.  The share of cereals in diet across socio-economic strata is reducing in favour of fruits, vegetables, meat, egg and milk. Demand for high value and value-added processed food is on the rise.  Increasing awareness of health and wellness is also generating demand for a wide variety of grains. This calls for a fundamental transformation for the farmer from selling whatever is produced to producing what the consumer wants. Such demand-driven value chains can bring enormous benefits to the farmers if they are able to align production to market signals.

Even in this gloom and doom, there are hundreds of individual farmers and farmer collectives who have swam against the adverse currents and emerged winners through determination and innovation. 

The food and agribusiness sector is all set for a leap jump.  A herd of venture capitalists, private equities and impact investors are queuing up to make investments in agro-processing companies, new and existing.  The present stress in the agricultural sector can be solved only by developing market-driven commodity value chains owned and operated by farmer collectives and smart agripreneurs.


PHILIP SABU

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