Agricultural Transformation in India PDF

Module III - Agricultural Transformation in India Agricultural production in India →FOOD SECURITY DEBATE IN INDIA A major question for India concerns the agriculture sector’s contribution to national food security. Agro-resources: India is the world’s most populous country, and it has t...

Module III - Agricultural Transformation in India Agricultural production in India →FOOD SECURITY DEBATE IN INDIA A major question for India concerns the agriculture sector’s contribution to national food security. Agro-resources: India is the world’s most populous country, and it has the largest number of farmers and rural population. Lack of accessibility: About one-quarter of the world’s total food insecure people live in India. Trade off: Subsidies and food distribution programmes may increase production and consumption, but they absorb a large share of national finances that could alternatively be spent on essential public goods and services, such as health, education, and the development of rural infrastructure. Domestic consumption versus Export-oriented approach: Another issue is whether increases in production will serve higher domestic consumption or larger exports. India is among the leading exporters of agricultural products The projections of the OECD-FAO Agricultural Outlook 2014-2023 suggest that India’s agriculture production growth will likely slow from the rapid pace of the previous decade, but it will still advance at more than double the rate of population growth. Meanwhile, consumption will advance at a similar pace, implying no dramatic changes in net trade. →TRENDS IN INDIAN AGRICULTURE SECTOR The agriculture sector is the largest source of livelihood in India. The country is one of the world's largest producers of agriculture and food products. In 2022-23, India’s agriculture sector growth rate was estimated to be at 3.5% The country produces many crops and food grains such as rice, wheat, pulses, oilseeds, coffee, jute, sugarcane, tea, tobacco, groundnuts, dairy products, fruits, etc.  India is one of the largest agricultural product exporters in the world. Total farm exports were at USD 53.15 billion and imports were USD 35.69 billion during 2022-23. Rice is the largest exported agricultural product from India and contributed to more than 19% of the total agriculture export during the year 2021-22. Sugar, spices and buffalo meat are among the largest exported products ➔ EXPORT DESTINATIONS The largest importers of India’s agricultural products are Bangladesh, UAE, USA, Vietnam, Saudi Arabia, Nepal, Malaysia, and Indonesia. The other importing countries are Iran, Egypt, Iraq, and China. During 2021-22, Bangladesh was the largest importer of Indian agricultural products at US$ 2.83 billion with a share of 11.46% of the total exports. Bangladesh is the major importer of Agri & allied products at US$ 3.8 billion followed by UAE at US$ 2.3 billion. The government has set up thirteen Agri-Cells in Indian embassies in Vietnam, USA, Bangladesh, Nepal, UAE, Iran, Saudi Arabia, Malaysia, Indonesia, Singapore, China, Japan and Argentina to provide inputs on real-time basis to improve Indian exports at these destinations by promoting trade, tourism, technology and investment goals. Agricultural Productivity It is measured as the ratio of agricultural outputs to agricultural inputs Agricultural productivity may also be measured by what is termed total factor productivity (TFP). It shows the efficiency with which producers combine inputs to make outputs. Historical Trends in Agriculture Production & Productivity Agriculture is a state subject Since 1970-71, trend growth in Indian agriculture has been approximately 3%. While per-capita agricultural output has seen a steady rise, the share of agriculture in the Gross Domestic Product (GDP) has fallen. Growth in agricultural output is characterised by fluctuations -each high growth period is followed by a phase of low growth. Annual growth rate has been 4.6% since 2018 Specific sub sectors, most notably crop segment, are subject to occasional severe negative shocks leading to serious distress.  ➔ Causes for low agricultural Productivity India with its sizable agricultural sector has to face a number of problems. Low production and low productivity are at the core of agricultural problems in India. The productivity of agriculture is relatively low in India compared to other countries with comparable natural environments. There have been some improvements in recent years. But conditions in agriculture have not changed much. It will be useful to analyze the factors responsible for the backwardness of agriculture. The factors are classified into 1. Demographic factors 2. General factors 3. Institutional factors and 4. Technologies factors Demographic factors The most important demographic factor responsible for low yield in agriculture is the increasing pressure of population on land. With population growth rates being what they are, an increasing addition to the labour force could be expected to be absorbed in the industrial sector of the economy. But the rate of growth in the industrial sector has been far from adequate. Thus most of the times this excessive labour is a liability than an asset. Consequently, the increasing population has fallen back on land for its livelihood, with the result that the population pressure has created a number of problems like fragmentation and subdivision of holdings; the supply of improved practices and services has always fallen short of requirements. It has created conditions of unemployment and disguised unemployment. All these evils, taken together have been responsible for low productivity in agriculture. General factors A. Socio-economic factors Generational poverty: The farmers of India generally are poor, ignorant, superstitious, conservative, and illiterate and bound by outmoded customs and institutions such as the caste system and the joint family system. Belief system: Superstition and belief in fact are the curses, which keep the farmers fully satisfied with their primitive system of cultivation. Limited technological gains: Except for a small group of farmers, who adopted quickly modern techniques of production, the vast majority of farmers are not motivated by considerations of economic progress B. Inadequate non-farm services, poor finance and marketing Indian agriculture has suffered because of the inadequacy of non-farm services such as the provision of finance, marketing etc…  All these facilities are inadequate in India. Marketing system is defective and costly. Modern warehousing is inadequate and indigenous. Storing methods are defective and costly. Modern credit facilities are still poorly developed for the farmers. Farmers still depend on moneylenders for their day-to-day requirements C. Natural Factors Gamble of monsoons and vagaries of nature Floods and drought leading to widespread damage and destruction Infestation and pest attacks D. Institutional factors 1. Size of holdings The average size of holdings in India is very low. About 80 percent of the land holdings are less than 2 acres. Small and fragmented agricultural holdings. In certain parts of the country, plots of land have become so small that it is impossible to move even ordinary plough. Limited scope for scientific cultivation with improved implements due to small size. Small size of holdings leads to poor productivity: due to wastage of labour and cattle power, difficulty in proper utilisation of irrigation facilities, and consequent litigation among farmers, wastage of crops in the absence of fencing etc. 2. Defective land tenure structure The land tenure system in India has been depressing and dis-incentive ridden. Abolition of Zamindari system in 1951. But number of landless agricultural workers has steadily increased in India. There were 106.7 million landless agricultural labourers according to the 2001 Census. This number increased to 144.3 million in 2011 Landless, marginal, and small farmers together constitute 93.7% of the total agricultural workforce in India. Farmer Exploitation: Contemporary Scenario “When farmers come to mandis to sell their agriculture produce, the middlemen of the mandis, also known as commission agents, buy farmers produce below the Minimum Support Price (MSP), which is set by the government. They do this with the help of the Government Inspector, who checks the farmer’s produce quality in the mandis.  At times, they deliberately declare farmer produce to be below quality, to be sold at a lower price. Commission Agents take a major chunk of profit from farmers’ produce. This leaves very little for the farmers. For instance, in Yamunanagar onion farmer sold onions at Rs35 a kilo and the middlemen sold the same for more than Rs100 a kilo. E. Technological Factors 1. Poor inputs and techniques – traditional methods of cultivation Lack of knowledge about the latest methods and technology: A majority of Indian farmers are smallholders who rely on traditional labour-intensive methods The method and techniques of cultivation have been old and inefficient. It results in high cost and low productivity. The investment in agriculture in the form of manures and fertilizers has been miserably low. Average fertilizer application per hectare of about 145 kg in India during 2019-20 was much below the usage in SAARC countries of about 174 kg. 2. Inadequate irrigation facilities One of the basic causes for the weakness of Indian agriculture has been that most of the farmers throughout the country have to depend upon rainfall and very few of them can avail the facilities of artificial irrigation. Nearly 48.8 percent of India's 140 million hectares (mha) of agricultural land is irrigated. Rainfall covers the remaining 51.2 percent. 3. Lack of high yielding seeds No sufficient financial ability to buy high-quality seeds and the supply of high-yielding seeds is also limited The high-yield crops require more water and fertilizers as compared to the normal varieties of crops. They require frequent weeding. Continuous use of pesticides. The high-yield crops, when compared with the traditional varieties are generally more susceptible to diseases 4. Indebtedness of the farmers It is said that the farmers in India are born in debt, live in debt, die in debt, and bequeath debt. The causes of their indebtedness are many such as hereditary debt, litigation, and wasteful social expenditure. An average agricultural household in India has debt equivalent to 60 per cent of their annual income. According to the National Sample Survey, the annual income of a farm household was Rs 1.23 lakh, and the average debt was Rs 74,100 from July 2018 - June 2019. At least 50.2 percent of Agri households in India are in debt. An average farm household in India is Rs 74,100 At the same time, state-wise data reveals that more than 90 per cent of farmers in Telangana and Andhra Pradesh face debt.  ➔ Measures to improve agricultural productivity 1. Irrigation potential It has been increased through public funding and assisting farmers to create potential on their own farms. In 2022-23, of the 141 million hectares of gross sown area in the country, nearly 73 million hectares, or 52%, had irrigation access, up from 41% in 2016. The ultimate irrigation potential of India has been estimated to be 139.5 million hectares. The scope of expanding irrigation through large & medium scale projects has yet to be fully exploited. 2. Diversification of agriculture Crop Diversification refers to a shift from the regional dominance of one crop to regional production of a number of crops, to meet ever increasing demand Diversification of agriculture to horticulture & other areas is also high on the govt agenda. It includes the cultivation of fruits, vegetables, ornamental, aromatic, plantation, and medicinal plants, which have high market value. Besides raising farmers’ income, this results in better utilization of resources, creation of employment & growth. National Horticulture Mission & Mission for Horticulture in the northeast & other hilly areas have been set up to promote horticulture in a mission mode. Acc to Economic Survey 2021-22, The existing cropping pattern is skewed towards the cultivation of sugarcane, paddy and wheat, which has led to the depletion of fresh groundwater resources at an alarming rate in many parts of the country. There is also a need to facilitate the shift to high-value and less water-consuming crops However, crop diversification can be used as a tool to promote sustainable agriculture, reduction in import dependence and higher incomes for the farmers. 3. Exploiting production potential : To achieve the expected level of productivity, farmers must be guided by experts in respect of soil & water analysis for adopting the best-diversified cropping system, meticulous adoption of technology (when & how), judicious use of seeds, fertilizers, pesticides, water, labour, and credit. Supply of inputs must be of standard quality, reasonably priced and available in a timely manner. Research shows that every rupee spent on agricultural research and development yields better returns compared to returns on money spent on subsidies or other expenditure on inputs. The increase in agriculture R&D therefore may improve productivity in the crop and allied sectors.  4. Capital formation in agriculture: Productivity in agriculture is also dependent on capital formation both from the public & private sectors. The capital formation facilitates to expand agricultural market as these benefits result in more marketable surplus. It includes storage, packaging, logistics management etc. 5. Crop Insurance Productivity in agriculture also depends on various external factors like monsoons, pests, diseases, drought & other natural calamities. So crops need to be covered under insurance to provide financial support to farmers. 1999: National Crop Insurance Scheme was formulated 2016: Pradhan Mantri Fasal Bima Yojana (PMFBY) Government Initiatives- recent major government initiatives 2019 Pradhan Mantri Kisan Samman Nidhi Yojana (PM-Kisan): As Minimum Support Income, the government transferred Rs 2,021 crore (US$ 284.48 million) to the bank accounts of more than 10 million beneficiaries on February 24, 2019. 2019: Transport and Marketing Assistance (TMA) scheme was launched to provide financial assistance for the transport and marketing of agriculture products in order to boost agriculture exports, mainly to European markets. 2018: National Agriculture Export Policy was approved to double the farmers income and increase the share of agricultural exports from present US$ 30 Billion to US$ 60+ Billion by 2022 2018: Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) under which Rs 15,053 crore (US$ 2.25 billion) under which states can decide the compensation scheme and can also partner with private agencies to ensure fair prices for farmers in the country. 2018: Pradhan Mantri Krishi Sinchai Yojana (PMKSY) was launched with an investment of Rs 50,000 crore (US$ 7.7 billion) aimed at the development of irrigation sources for providing a permanent solution to drought. 2017: Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA) was announced to triple the capacity of food processing sector in India from the current 10 percent of agricultural produce 2016: Government of India has allowed 100 percent FDI in marketing of food products and in food product e-commerce under the automatic route. 2015: AGRI-UDAAN programme to mentor start-ups and enable them to connect with potential investors.  GREEN REVOLUTION The Green Revolution was a venture undertaken by American Agronomist Norman Borlaug in the 1960s. Its early dramatic successes were in Mexico, India, Pakistan, the Philippines, and other developing countries in the 1960s and 1970s. Known as the 'Father of Green Revolution' to everyone in the world, he won the Nobel Peace Prize in 1970 for his work and contribution to the development of High Yielding Varieties (HYVs) of wheat. In India, M.S. Swaminathan, Cambridge University educated Indian Agronomist spearheaded the Green Revolution predominantly and is called the “Father of India’s Green Revolution”. Dr. M. S. Swaminathan, the advisor to India's minister of agriculture, extended an invitation to Norman Borlaug to visit. Green Revolution in India began in 1968, led by Prime Minister Indira Gandhi, and resulted in an increase in food grain output, particularly in Punjab, Haryana, and Uttar Pradesh. There was a notable increase in the production of food grains (especially wheat and rice) due to the introduction of new, high-yielding variety seeds in Developing nations, beginning in the mid-20th century. India’s status was changed from a food-deficient country to a leading agricultural nation post-Green Revolution. What is the Green Revolution? “Green revolution describes the dramatic rise in food grain output, particularly for wheat and rice, that began in the middle of the 20th century to address the issue of food insecurity. The production of wheat and rice doubled after the Green Revolution, while that of other food crops, such as indigenous rice types and millets, decreased. Some of the popular techniques developed under this program were the use of high- yielding variety seeds, tractors, irrigational facilities, pesticides, and fertilizers. Background: Green Revolution in India The conception of the Green Revolution in India has an interesting history. Below, the points have been listed chronologically for a better understanding of the concept; The year 1943 saw India struggling immensely as the country recorded its worst ever; the Bengal Famine. This calamity resulted in the death of nearly 4 million people in the eastern parts of India due to starvation. Independence in 1947 did not bring much respite as till 1967, the government majorly focused on increasing the farming areas. Productivity was low and food security continued to be a major issue. Due to demographic pressures post-independence, India’s food production was much below the need. There was a need for immediate action to increase the total yield.  Aid dependence: India in the 1960s was pathetically dependent on US food aid. Even in the bumper monsoon year of 1964-65, food aid totaled 7 million tonnes, over one- tenth of domestic production. Droughts: Then India was hit by twin droughts in 1965 and 1966. Grain production crashed by one-fifth. These issues were structurally addressed by the introduction of the Green Revolution in India. The need was felt to shift the focus from the expansion of the farming areas, as our government had been doing, to the productive development of the agricultural sector. ➔ Basic Elements of the Green Revolution in India There are three main basic elements of the Green Revolution in India. They have been discussed briefly below: Expansion of Farming Areas: The expansion of the farming areas had been a point of focus for the Indian Government since 1947, the demand was still rising rapidly with the production not being able to keep up. The Green Revolution proved to be helpful by providing assistance by quantitatively expanding the area of farmlands. Double-cropping System: This was one of the primary features of the Green Revolution. Traditionally, each season saw one crop season. The aim was to have two crop seasons per year instead of just one. o The original one-season-per-year exercise was based on the rain happening once a year. o The water for the second cycle came from the new irrigation projects. o Dams being built along with other simple irrigation techniques were adopted for water crisis. Using seeds with improved genetics: This formed to be the scientific aspect of the Green Revolution. New versions of high-yield variety seeds were developed by the Indian Council for Agricultural Research. This practice was mainly adopted for crops like wheat, rice, millet and corn. Important Crops in the Revolution: o The main crops were Wheat, Rice, Jowar, Bajra and Maize. o The new strategy did not include non-food grains. o Wheat became the focal point of the Green Revolution for years.  ➔ Positive Impacts of Green Revolution This movement impacted the country in great ways that were not just limited to the increased food production. ➔ Negative Impacts of Green Revolution  Health Hazards and Environment Consequences: As per Subash Palekar, the father of Zero Budget Natural Farming(ZBNF), the Green revolution was not a revolution, it was a fraud. It leads to the destruction of the environment, reduces productivity, and destruction of soil, water, air, vegetation, and human health. A number of critical health illnesses including cancer, renal failure, stillborn babies and birth defects were observed due to the large-scale use of chemical fertilizers and pesticides such as Phosphamidon, Methomyl, and Phorate, Triazophos and Monocrotophos. ➔ GREEN REVOLUTION AND PUNJAB: CASE STUDY Punjab is frequently cited as the Green Revolution’s most celebrated success story. In the 1970s, a large dosage of pesticides revolutionized farming ways in India, with the results considered good at the time. Government Schemes Under Green Revolution in India Recently, Prime Minister Narendra Modi greenlit the Umbrella Scheme Green Revolution – ‘Krishonnati Yojana’ in the agriculture sector for the period of three years from 2017 to 2020. The Centre’s Share equals Rs. 33, 269 crores. The Krishonnati Yojana has 11 schemes under it to help and facilitate the achievement of its objectives. All of these schemes have been devised to develop the agriculture and allied sector scientifically and holistically. The primary objective is to maximise farmers’ income by increasing productivity, production, and returns on products along with the facilitation of production infrastructure, reduction of production costs, and marketing of agriculture and allied produce. ➔ The 11 schemes that are part of the Umbrella Schemes under the Green revolution are: 1. Mission for Integrated Development of Horticulture (MIDH) 2. National Food Security Mission (NFSM) 3. National Mission for Sustainable Agriculture (NMSA) 4. Submission on Agriculture Extension (SMAE) 5. Sub-Mission on Seeds and Planting Material (SMSP) 6. Sub-Mission on Agricultural Mechanisation (SMAM) 7. Sub Mission on Plant Protection and Plan Quarantine (SMPPQ) 8. Integrated Scheme on Agriculture Census, Economics, and Statistics (ISACES) 9. Integrated Scheme on Agricultural Cooperation (ISAC) 10. Integrated Scheme on Agricultural Marketing (ISAM) 11. National e-Governance Plan (NeGP-A)  FOOD PROCUREMENT POLICY IN INDIA The Food Corporation of India (FCI), an agency of the GoI, handles procurement, storage, and transportation of grains to states. The state in turn distributes to consumers at subsidized prices of a network to more than 460,000 Fair Price Shops (FPSs). The ‘food subsidy’ comprises the cost of procurement incurred by the GoI net of sales realization (for rice, wheat and sugar) and the carrying costs for maintaining the central pool of buffer stock incurred by the FCI reimbursed by the GoI.  WHEAT AND RICE PROCUREMENT For wheat, the government offers to buy all grain that comes forth for sale at the announced MSP. In the case of rice, part of procurement is in the form of paddy at the MSP. The rest, which is the major part, is procured as rice with a statutory levy imposed by all major rice-producing states on rice millers/dealers. The levy percentage varies widely from 10 percent in Pondicherry to 75 percent in Haryana, Punjab, and Orissa. Rice millers are paid levy rice prices fixed by the state government. The Commission for Agricultural Costs and Prices (CACP) recommends levels at which the MSP should be fixed on several considerations. These include the cost of cultivation, the overall shortage of grains as reflected by the trend in wholesale prices, and the need to keep in check the rate of inflation in the consumers’ interest. Apart from supporting farmer’s prices the government’s policy of procurement helps supply grain to the PDS, the scheme to distribute subsidized grain to consumers. Fall in Procurement by the Government due to higher activity by private players to meet export and domestic demand. Some of the larger farmers also seem to be holding back stocks in anticipation of better realisation in future. CRITICISMS The policy has come under criticism not only for increasing the fiscal burden that it causes but also for administrative inefficiencies and creating market distortions. Fixing the MSP to cover the full cost of cultivation imposes a heavy burden on the government’s finances. Although the MSP is fixed supposedly based on a cost – formula, the actual price offered in practice is higher and influenced by the high expectations of rich farmers represented by politically strong farm lobbies. The high and rising MSPs provided by the GoI for wheat and more recently for paddy increased the profitability of these crops and motivated farmers to shift greater areas to these crops from coarse cereals, pulses, and oilseeds. Moreover, the income transfers accrued disproportionately to large farmers confined mainly to surplus states. The policy also led to an accumulation of buffer stocks of grains and the credit blocked in these stocks put pressure on interest rates and possibly crowded out more productive investment. These adverse fiscal and environmental implications led to increased recognition of the need to reform farm support policies. ➔ National Food Security Act, 2013 As passed by the Parliament, Government notified the National Food Security Act, 2013 on September 10, 2013 with the objective to provide for food and nutritional security in human life cycle approach, by ensuring access to adequate quantity of quality food at affordable prices to people to live a life with dignity. ➔ Facets of National Food Security Act The National Food Security Act 2013 (also Right to Food Act) is an Act of the Parliament of India that aims to provide subsidized food grains to approximately two- thirds of India’s billion people. It was signed into law on 12 September 2013. The Act converts into legal entitlements for existing food security programmes of the Government of India. India has an overabundance of food grains stocked in warehouses, yet millions of India's poor are left without food. The government's national food security bill proposes to provide food at a subsidized rate to nearly two-thirds of the country's 1.3 billion population. It includes the Midday Meal Scheme, Integrated Child Development Services Scheme, and the Public Distribution System. The enactment of the NFSA signaled a shift from a ‘welfare approach’ to a ‘rights- based approach’ to food security. It set up a legal framework for benefits under existing programmes like the Targeted Public Distribution System (TPDS), Mid Day Meal Scheme (MDMS), Integrated Child Development Services (ICDS), and maternity cash entitlement. The Act established a monitoring mechanism and a grievance redressal mechanism. The Midday Meal Scheme and the Integrated Child Development Services Scheme are universal in nature whereas the PDS will reach about two-thirds of the population (75% in rural areas and 50% in urban areas).  Under the provisions of the bill, beneficiaries of the Public Distribution System (or, PDS) are entitled to 5 kilograms per person per month of cereals at the following prices: Rice at ₹3 per kg Wheat at ₹2 per kg Coarse grains (millet) at ₹1 per kg For the first time, hot cooked mid-day meals for school-going children, cooked meals and take-home rations for children under 6 years of age, pregnant and lactating mothers, 5 kilograms of food grains at highly subsidised prices for 50% of urban and 75% of rural population and cash benefits for pregnant and lactating women became justiciable legal entitlements. ❖ CRITICISM The fundamental and unanswered question is: Why do so many people in the country face persistent hunger and vulnerability for generations? Whilst the objective of the Act has been applauded by most, there are heavy criticisms regarding the implementation and purpose of the same. These criticisms hover mostly around the financial and functional aspects of the Act. Despite 10 years of food security being a legal right and the availability of sufficient quantities of food grains, India has at least 189 million (nearly 19 crore) people—14% of its population—suffering from serious hunger. India ranks 107th out of 121 countries in the Global Hunger Index released in October 2022, placing it in the ‘serious’ category for the 22nd consecutive year. Firstly, the National Food Security Act gives immense importance and reliance to the already existing institutions that have a proven history of ineffectiveness. The current ‘leaky’ Public Distribution System has been repeatedly given importance despite its established loopholes in terms of effective implementation of the programs. Secondly, the Central government has restricted its accountability to procuring the grains and delivering them to the State government for distribution through the Public Distribution System. The State government is loaded with the task of not just collecting these food grains from the Food Corporation of India but also ensuring that the legal entitlements are enforced amongst the beneficiaries. If the Centre cannot provide food grains directly to the State through its Centre Pool, it is supposed to provide, according to its own discretion, funds to the extent of a short supply of food grains to them. 3. Costly Burden on Our Battered Economy The central bank has warned that the increased public spending could deepen the government's deficits and stoke already elevated inflation. Critics of the food programme say India can ill-afford such a costly subsidy burden at a time when economic growth has slowed to a decade-low. The cost of food subsidy will go up from 0.8% of Gross Domestic Product to around 1.1% of GDP. The feasibility of the Act is under scrutiny because it is estimated that the government will find it tediously difficult to contain spending money in the prescribed limited budget even in 2013-2014, let alone further. It is said that the government’s estimate of their budget is overly optimistic and not at all realistic, for it does not take into account the additional expenditure that would be required for administrative set-ups, large-scale production and outlay for storage, processing and infrastructure. The unsystematic outflow will essentially mean a much higher expenditure for the government than expected and an imbalanced fiscal deficit.  AGRICULTURAL MARKETING IN INDIA WHAT IS AGRICULTURAL MARKETING In a very narrow sense, Agriculture marketing means delivering farm product from farmers to the final consumers. (Procurement is done via marketing) The National Commission on Agriculture defined agricultural marketing as a process which starts with a decision to produce a saleable farm commodity, and it involves all aspects of market structure of system, both functional and institutional, based on technical and economic considerations. It includes pre-and post-harvest operations, assembling, grading, storage, transportation and distribution. DEFECTS OF AGRICULTURAL MARKETING 1. Lack of Transportation Facility :- It is the main obstacle in the way of efficient marketing. The rural areas are not linked with the market by roads. A lot of agricultural product is wasted due to transport problem. 2. Poor Quality of Product :- Farmer is not using the improved seeds and fertilizers so quality of production is very poor and its prices are low in the market. 3. Presence of middlemen :- The middleman also takes a big share of farmer's income without doing anything. A poor farmer borrows the money from them and sells his product at lower rates. 4. Lack of Grading :- In case of agricultural commodities the mixing of high and poor quality products is very common in developing countries like India and Pakistan. There is no proper method of grading these crops. It creates a problem of marketing inside and outside the country. 5. Lack of Credit Facilities :- The credit facilities are not adequate to meet the farmer's requirement. Poor farmer is borrows the money from private money lenders at tied conditions. 6. Problems of Produce Collection :- The collection of produce from small farmers is very expensive and a difficult process. It is a great problem for the efficient marketing. 7. Lack of Storage Facility :- The storage facilities are required by the producers as well as by the government. The farmers need storage to sell their product at a suitable time. The government needs stores for keeping reserve stocks. Due to lack of storage facilities a lot of product is damaged on railway stations and in open air. 8. Lack of standard weights and measures :- In various parts of weight and measures are not same. So a farmer suffers a loss at the time of buying selling of his product. 9. Want of proper market information :- Most of farmers in underdeveloped countries are uneducated and they knows nothing about the market conditions. So farmer is unable to achieve the real price of his product ❖ MEASURES TO IMPROVE AGRICULTURAL MARKETING GOVERNMENT INTERVENTION IN AGRICULTURE MARKETS  1. Development and Strengthening of Grading and Standardization System o Setting up of Grading stations under Agricultural Produce (Grading and Marketing) Act, 1937 for products like ghee, flour, eggs, etc. o Laying down of standards for 162 Agricultural and allied products. o Assigning ‘AGMARK’ to these graded products which ensure good quality and also command a better price in the market. o Setting up of central quality control laboratory at Nagpur along with eleven regional labs for product quality testing o So far 108 rules for Agricultural commodities have been framed. 2. STRENGTHENING THE PROVISION OF STORAGE AND WAREHOUSING FACILITY. Necessary To Prevent Wastage And Distress Sale Of Farmers. Central Warehousing Corporation Was Set Up In 1957 With The Purpose Of Constructing And Running Godowns And Warehouses States Have Also Set Up The Warehousing Corporations For The Same Purpose. The Fci Has Its Own Network Of Storage Facilities. 3. SETTING UP OF REGULATED MARKETS AND STRENGTHENING AGRICULTURAL MARKETING SYSTEM The regulated markets are set up to eliminate unhealthy market practices and protect the interests of the farmers. Agriculture being a state subject, a model apmc act was formulated and circulated to the states/ut’s in the year 2003 for adoption. There are 2477 principal regulated markets and 4,843 sub-market yards  REGULATED MARKETS Regulated market is wholesale market where buying and selling is regulated and controlled by the state government through the market committee. It aims at the elimination of unhealthy and unscrupulous practices reducing marketing charges and providing facilities to producers and sellers in the market. 4. ORGANISATION OF CO-OPERATIVE MARKETING SYSTEM These are multi-purpose organisations with emphasis on credit and marketing. Marketing societies have been encouraged to form societies at state and apex level National agricultural (cooperative marketing) federation (nafed 1958) and national cooperative development corporation (ncdc 1963) to provide marketing related support. Setting up of special boards and organisations. 5. MARKET RESEARCH INFORMATION NETWORK The objective of the Scheme: To establish a Nationwide market information Network for speedy collection To facilitate collection and dissemination of information related to better price dissemination of market information and data for its efficient and timely utilization. realization and market access by the farmers. This would cover: 1. Market-related information 2. Price related information 3. Infrastructure related information 4. Market requirement-related information More than 3200 markets are covered under the scheme and more than 2700 markets are reporting data at the Agmarknet portal. More than 350 commodities and 2000 varieties are covered under the scheme. ➔ REGULATORY MEASURES Regulatory measures include development and regulation of wholesale markets in Indian; and, adoption of legal instruments for regulation of agriculture marketing and trade.  AGRICULTURAL FINANCE IN INDIA INTRODUCTION Agricultural credit in itself is not an input but it helps in creating environment for the adoption of modern production technology and encouraging private investments on the farms. A large number of institutional agencies are involved in the disbursement of credit to agriculture. The Government of India, Reserve Bank of India and National Bank for Agriculture and Rural Development (NABARD) have initiated several policy measures to improve the accessibility of farmers to the institutional sources of credit. Due to the proactive policies, agricultural credit disbursement in the country increased from Rs.46268 crore in 1999-2000 to Rs.1392729 crore in 2019-20 at a compound annual growth rate (CAGR) of 19.81 per cent TYPES OF CREDIT REQUIRED BY FARMERS SHORT TERM- (less than 15 months) seeds, PRODUCTIVE – agro production fertilizers, pesticides, marketing, wage payment, consumption, productive purpose CONSUMPTION – for personal purposes/self-use during the period MEDIUM TERM – (15 months-5 yrs.) between Marketing & and harvesting Cattle, small implements, repair & UNPRODUCTIVE – customs, construction of wells traditions, rituals, marriages etc LONG TERM – (more than 5 yrs) permanent land improvement, buying land, repayment of old debts ➔ SOURCES OF AGRICULTURAL FINANCE ❖ INSTITUTIONAL ❖ NON-INSTITUTIONAL NON-INSTITUTIONAL FINANCE IN INDIAN AGRICULTURE Main source of Agricultural Finance at the beginning of the planning period Share: 92% in 1951( money lenders – 71%) to 41% (money lenders 11.5%) in 2016. MERITS ▪ EASY TO OBTAIN ▪ SIMPLE PROCEDURES  ▪ EASY ACCESS ▪ NO RESTRICTIONS ▪ CONSUMPTION LOANS DEMERITS ▪ EXORBITANT RATES OF INTEREST ▪ INDEBTEDNESS ▪ LOSS OF LAND ▪ MALPRACTICES ▪ EXPLOITATION ▪ BONDED LABOUR COOPERATIVES: RURAL CREDIT SOCIETIES STRUCTURE PROBLEMS: 1) low profitability not able meet the growing needs 2) poor recovery – over dues → COMMERCIAL BANKS GROWTH IN RURAL CREDIT AFTER NATIONALIZATION- 1969 & 1980 ❖ Nationalisation of banks changed the fate of rural areas. Banks started coming out of cities and opening in villages and towns. 18% net bank credit is for the priority Sector  Short term finance Medium & long-term finance Direct finance: for expenditure of land development- 10% Farmers’ Service Societies, Village Adoption scheme Indirect Finance: finance to co-operatives to FCI (4%) Lead Bank Scheme: individual commercial bank responsible for development of Individual district ➔ REGIONAL RURAL BANKS Were established in 1975 on the recommendations of M. Narsimha committee (RBI Governor) Regionally based, rurally oriented, and generally sponsored by scheduled commercial banks and in some cases by private and state cooperative banks Main objective is to supply credit to the areas in which other financial institutes are not active, mainly rural areas. NABARD - 1982 National bank for agriculture and rural development Share capital contributed by goi & rbi head office at mumbai, 16 regional offices Apex body for rural credit Supervising co-ops short-term credit to state co-ops Medium and long-term to state co-ops and rrb Suggestions to govt. R&d Taccavi Loans History: Muḥammad ibn Tughluq (1300s) It was re-introduced in the late 1950s. Taccavi loan was a short-term loan given to poor farmers to purchase seeds, fertilizers, equipment's and for other agriculture purposes, at interest rates as low as 6%. They were specifically granted to tackle damage of crops due to natural calamities and other forms of crisis like drought. → CHALLENGES OF RURAL CREDIT 1. Insufficiency: In spite of expansion of rural credit structure, the volume of rural credit in the country is still insufficient as compared to its growing requirement arising out of increase in prices of agricultural inputs. 2. Inadequate Amount of Sanction: The amount of loan sanctioned to the farmers by the agencies is also very much inadequate for meeting their different aspects of agricultural operations. The farmers often divert such loan for unproductive purposes and thereby dilute the very purpose of such loans. 3. Lesser Attention of Poor Farmers: Rural credit agencies and their schemes have failed to meet the needs of the small and marginal farmers. Thus, lesser attention has been given to the credit needs of the needy farmers whereas the comparatively well-to-do farmers are getting more attention from the credit agencies for their better credit worthiness. 4. Growing Over-dues: The problem of over-dues in agricultural credit continues to be an area of concern. The recovery of agricultural advances to various institutions is also not at all satisfactory. Such growing over-dues have also resulted from poor repaying capacity of farmers. As a result of that, the credit agencies are becoming wary of granting loan to farmers. 5. Inadequate Institutional Coverage: In India, the institutional credit arrangement continues to be inadequate as compared to its growing needs. The development of co-operative credit institutions like Primary agricultural credit societies, land development banks, commercial banks and regional rural banks, has failed to cover the entire gamut of rural farmers of the country. 6. Red Tapism: Institutional agricultural credit is subjected to red-tapism. Credit institutions are still adopting cumbersome rules and formalities for advancing loan to farmers which ultimately force the farmers to depend more on costly non-institutional sources of credit. Measures taken to Improve Credit Flow to Agriculture: In order to improve the flow of credit to agriculture, the Government has introduced the following measures in 1998-99: 1. Procedural simplification for credit delivery has been made (as per R.V. Gupta Committee Report 1998) via short term credit during cropping season. 2. More powers have been delegated to branch managers to raise the credit flow to agriculture. 3. Introduction of composite cash credit limit to farmers, introduction of new loan products with saving components, cash disbursement of loans, dispensation of no due certificate and discretion to banks on matters relating to margin security requirements for agricultural loans above Rs 10,000. 4. Introduction of at least one specialised agricultural bank in each state to cater to the needs for high tech machinery. ➔ Kisan Credit card Scheme 1998  Agricultural pricing policy This policy is a tool to influence the price of agricultural product. It is on incentive to the producer to produce a particular product according the desired quantity. Agriculture price has a significant impact on producers and buyers of agriculture products. The agriculture price offers incentives to improve production and marketable surplus to the cultivators and affect the allocation of resources. The government formulated price policy for agricultural produce to secure remunerative prices for farmers to encourage them to invest more in agricultural production. Keeping in mind, the government announces Minimum Support Prices (MSP) for major agricultural products every year. Government provides food grains to the BPL families through the public distribution system. These prices are fixed after consulting the Commission for Agricultural Costs and Prices (CACP). →OBJECTIVES Following are the important objects of agricultural price policy : (i) To determine, regulate and control agricultural prices; (ii) To prevent violent fluctuations in agricultural prices; (iii) To provide fair prices for agricultural products to the farmers; (iv) To provide quality goods to households at reasonable prices; (v) To maintain an appropriate relationship and balance between the prices of foodgrains and non-foodgrains; (vi) To integrate prices between various states. The Commission of Agricultural Costs and Prices (CACP) while recommending prices takes into account important factors I. Cost of production II. Changes in input prices III. Input/output Price Parity IV. Trends in market prices V. Inter-crop Price Parity VI. Demand and supply situation VII. Effect on Industrial Cost Structure VIII. Effect on general price level IX. Effect on cost of living X. International market price situation XI. Parity between prices paid and prices received by farmers (Terms of Trade) ➔ Instruments of Agricultural price policy Minimum Support Price (MSP) Procurement prices Issue prices Retail prices Buffer Stocks Minimum Support Price Minimum Support Price is the price at which the government purchases crops from the farmers, whatever may be the price for the crops. Minimum Support Price is an important part of India’s agricultural price policy. The MSP helps to incentivize the framers and thus ensures adequate food grain production in the country. It gives sufficient remuneration to the farmers, provides food grains supply to buffer stocks, and supports the food security program through PDS and other programmes. Advantages of Minimum Support Price (MSP): To secure the interests of the farmers as also the need of self reliance, government has been announcing the minimum support price for 24 major crops. The main objectives of the MSP are: To prevent a fall in the price in the situation of over production. To protect the interests of the farmers by ensuring them a minimum price for their crops in the situation of a price fall in the market. To meet the domestic consumption requirement To provide price stability in the agricultural product To ensure a reasonable relationship between the prices of agricultural commodities and manufactured goods To remove price differences between two regions or the whole country. To increase the production and exports of agricultural produce. To provide raw materials to the different industries at reasonable prices in the whole country. Disadvantages of the Minimum Support Price: I. To increase the income of the farmers, the poor of the country have to pay more. This practice will create the problem of allocating inefficiency in the country. II. Subsidizing farmers through higher product prices is an inefficient method because it penalizes the consumer with higher prices. Also, it means large farmers will benefit the most. They have received more than they need but small farmers are still struggling.  Procurement Price Sometimes, the government procures at a higher price than the MSP. Here, the price will be referred as the procurement price. The procurement price will be announced soon after the harvest. Normally, the procurement price will be higher than the MSP, but lower than the market price. The price at which the procured and buffer-stocked food grains are provided through the PDS is called as issue price. Issue prices Issue prices are the prices at which food grains are allocated and supplied by Food Corporation of India (FCI) to the states and union territories. These prices meet the requirements of the Public Distribution System. Prices of goods to be supplied through fair price shops directly depend upon issue prices. Issue prices are normally less than market prices and higher than procurement prices Retail prices Public distribution system is carried on through the network of fair price shops (ration shops). These shops supply essential consumer goods to households at the prices fixed by the government. These prices are known as retail prices. Retail prices are higher than issue prices so that the expenses of Public Distribution System may be recovered and the licensees may get a certain margin. Buffer stocks and Public Distribution System Under the buffer stock policy, the government builds up stock of agricultural commodities either through purchases from domestic market or through imports and releases these stocks in the domestic market when the prices are rising. The government supply thus moderates the sharp increase in the price of agricultural products. In the event of a bumper crop, the market price is substantially reduced. In this situation government makes procurements at MSP or procurement price and prevents fall in price. This helps to prevent distress sales among farmers.  ESSENTIAL COMMODITIES ACT 1955 Background: The ECA Act 1955 was legislated when the country faced a scarcity of foodstuffs due to persistent low levels of foodgrains production. The country was dependent on imports and assistance (such as wheat import from the US under PL-480) to feed the population. To prevent hoarding and black marketing of foodstuffs, the Essential Commodities Act was enacted in 1955. The Essential Commodities (Amendment) Ordinance, 2020 was promulgated on June 5, 2020. It amends the Essential Commodities Act, 1955. The Act empowers the central government to control the production, supply, distribution, trade, and commerce in certain commodities. It aims to liberalise the regulatory system while protecting the interests of consumers. The Amended Act 2020 could not be passed due to Farmer’s Protest. ➔ CONTROVERSY SURROUNDING THE ACT ESSENTIAL COMMODITIES ACT 2020 WAS ONE OF THE THREE BILLS GOVERNMENT WANTED TO PASS IN 2020