The Hindu Business Line : For a workable farm revolution

A practical approach to agri-reforms is to develop a national-level, electronic, institutionalised, spot exchange where farmers can sell their produce to end-users, while the settlement responsibility is undertaken by the exchange.

The term "Green Revolution" was first used by American scientist William Gaud to denote higher productivity by the more efficient functioning of green plants. In India, though the Green Revolution led to significant growth in production, making the country self-sufficient in foodgrains, it did have a number of limitations.

It primarily focussed on paddy, wheat, maize, jowar and bajra. As a result, while the productivity of foodgrains and coarse grains improved significantly, not much headway was made in pulses and oilseeds. While foodgrain imports, which were around 10 million tonnes in the 1960s, has been virtually arrested, the country continues to import huge quantities of pulses and edible oils.

And as these are costlier than foodgrains, the net impact on the exchequer is even higher.

Moreover, the Green Revolution has benefited only a few States, such as Punjab, Haryana, Uttar Pradesh and Madhya Pradesh.

Increase in productivity

As a result of better quality seeds, productivity increased during the 1970s. But, unfortunately, in the last 10 years, both production and productivity have remained stagnant or even declined. This implies that though the Green Revolution has been able to significantly boost production, it has not been able to maintain the pace of growth to match the demand. In 2006, for instance, there was demand-supply mismatch, particularly in wheat and pulses.

And though the country has emerged as a leading exporter of a number of agricultural commodities, the typical Indian farmer is debt-ridden and mired in poverty, not having sufficient money to meet his basic needs and social obligations. And if the crop fails, he finds himself in a debt trap, completely at the mercy of local moneylenders.

The present system of agriculture marketing, which falls under the State APMC (Agricultural Produce Marketing Committee) Act, is based on providing an organised marketplace where farmers from nearby areas can sell their produce and realise money under the supervision and administration of local APMCs.

The APMC, set up as an autonomous body constituted by representatives of, among others, farmers and traders, is expected to protect the interests of all stakeholders.

Though good in intent, its benefits have mainly been cornered by the licensed commission agents and traders.

Theoretically, the commission agent operates in a free market environment. The grower voluntarily hands over his produce to the agent, who then auctions it on the former's behalf, retaining only the legal, specified commission. The auction system is intended to ensure the farmer gets the highest prevailing price for the variety and quality of produce consigned.

The actual practice

In practice, the system works somewhat differently. Most large commission agents operate extensively in production areas. Working through sub-agents, they compel the growers to supply produce by financing the production and other requirements. The price ultimately realised by auction is then "adjusted" to deduct the loan principal and disguised interest, the latter generally exceeding the statutory limits.

To ensure proper price realisation by the farmer, structural reforms are necessary in the area of agricultural marketing and marketing infrastructure.

A Green Revolution that merely focuses on productivity will not be able to achieve the desired results in isolation.

Rather, it will be driven by the application of powerful new technologies that make it possible to incorporate farmers, large and small, into formal agribusiness networks, on a fair and equitable basis.

A practical approach to achieve this target is to develop a national-level, electronic, institutionalised, spot exchange for agricultural produce, where farmers can sell their produce directly to end-users, while the settlement responsibility will be undertaken by the exchange. In this case, local traders will not be able to influence the price of farm produce; rather, the prices will be discovered through the interaction of a large number of end-users.

This will reduce the cost of intermediation, bring efficiency in the agricultural marketing process and create a Common Indian Market. Farmers will become equal partners in the "farm-to-fork" and the "farm-to-fashion" value chains. This is the model of inclusive growth, in which both rural and urban masses will share the success. This will increase farmers' realisation without increasing the price that consumers pay.

Increase in farmers' income will trigger a chain reaction in revolutionising the rural economy.

The next generation may indeed term this an "Evergreen Revolution", as it would consistently protect farmers' interest in the growth process.

(The author is MD & CEO, National Spot Exchange and Director, MCX.)