The Hindu Business Line : Freeing farmers

The article “Freeing farmers from intermediaries” (Business Line, April 16) rightly observed: “Alas, between the farm gate and the final buyer, therefore, they are intermediaries at different stage...

Thus, the farmers earn low incomes and, therefore, have insufficient resources for investment. This lead to perpetuation of poverty.” The article rightly suggests improved infrastructure such as well-maintained warehouses and modern cold storages.

Yet it takes little note of the significant efforts made by commodity exchanges such as the Multi Commodity Exchange (MCX) and NCDEX that provide warehousing and cold storage facilities to farmers in India.

National Bulk Handling Corporation (NBHC), an arm of MCX has tie-ups with 21 major banks to provide collateral management services and professional warehousing services to farmers that enable them to seek bank loans against their commodities stocked with NBHC warehouses.

In the end farmers get better prices for their commodities, thus freeing them from the clutches of middlemen. These efforts, though on a small scale at present, do have large spin-offs.

NBHC’s reach right now is not wide though eventually it will be. NBHC at present has a storage capacity of 1.2 million tonnes, 323 storage facilities, presence in 17 States, commodity managed funding of Rs 3,000 crore-plus, and over 90 commodities that have been funded besides 24 functional quality assessment labs.

Such infrastructural initiatives coming from private sector need to be beefed up with appropriate government encouragement.

It is rather futile to expect the government to shoulder the responsibility of providing infrastructural facilities all on its own.

Private sector initiatives such as the one shown by MCX arm, NBHC, will go some way in alleviating pressure on public resources.

India, with a population of over one billion, is predominantly an agrarian economy.

Agriculture’s share of the country’s GDP has shrunk to a little over 20 per cent. Yet the farm sector continues to employ about 64 per cent of rural workforce. The farm sector accounts for about 18 per cent of the country’s exports. India is among the top three producers of several farm commodities — rice, wheat, spices, coconut, etc. Over 70 per cent of the country’s population is directly or indirectly dependent on the farm sector.

A considerable gap between initial spending and receipts from final produce exposes a farmer to price volatility and forces him to middlemen to dilute its impact by selling a substantial portion of his produce at very low price.

Thus the entire cost calculation and expected returns from investments goes haywire. Thus, the Indian farmers get trapped in a syndrome of low prices, low wages and low return that spells danger to the farm sector.

S. R. Kasbekar e-mail