‘A farmer should know the price he will get at the time of sowing’

S Sivakumar, CEO of ITC’s Agri Business Division, is considered to be a thought leader in the agri business sector. He was instrumental in developing the e-choupal model and farm produce procurement in the hinterland. Sivakumar wrote and spoke extensively on the bottlenecks the Indian agriculture is facing for over a decade. He spoke on the impact of the Goods and Services Tax (GST) on agriculture, and the issues Indian agriculture is facing, in an interview. Excerpts..

What’ impact will GST have on agriculture?

Keeping raw agriculture produce in the zero bracket is a significant move. It will help long-term investors and scrupulous players to step in. Earlier, unscrupulous players both in the organised and unorganised sectors would use the differential tax rates in different States, keeping the scrupulous players in a disadvantageous situation.

But processed foods are taxed...

I feel there should be either no tax. There can be 5 per cent tax if the government wants to broad base the taxpayer network. But ideally it should be zero until such time as processed food reaches a certain level. Different products are put under different slabs. But the good thing is the government is listening. Tax rates on some items have been reduced to 12 per cent from 18 per cent.

How is the overall agriculture situation in the country?

After some stress in the last two-three years, they have predicted a good monsoon this year. It seems to be according to the forecast. But there’s farm distress across States and there are these loan waivers. A large part of it has to do with unremunerative prices and escalating costs. These unremunerative prices are already unattractive for consumers. Consumers are saying they are paying more. The consumer is saying “I don’t mind paying more if you give me quality and safe stuff with convenience to access it”. But this is a small segment as yet.

What are the reasons for this?

A fundamental transition is happening from a production-led agriculture to demand-driven agriculture. Agriculture in the past primarily catered to shortages — because there’s not enough food, we need to produce more. We’re in a transition to a multi-consumer segment based, demand-driven agriculture. We are facing these transition pains now. Implications of a transition from a production-driven supply chain to demand driven-value chain are not understood by many people.

Simultaneously, we have this issue of climate change. Much of the farm distress is linked to it. A summer crop that is going to be harvested in a few days could be spoiled by hailstorm, while it is normal in the next village. Nothing is predictable for a farmer. Climate change is impacting micro climatic variations. We are able to predict at an aggregate level but at the micro level it is an issue.

What should be done to improve the situation?

Much has to be done by the private sector and much has to be done by the government. A significant value addition is possible in perishables and non-perishables. Adding value and making the consumer understand is the role of the private sector. To make this feasible, the government has to take steps. Research, distribution and extension is being done by the government. Open up the AMC Act. A new model Act is ready for consultations.

The government’s support is important in forward contract regulations. A farmer should know the price he will get at the time of planting the crop. The other important issue is the Essential Commodities Act. The market adjusts itself if it is left to supply, demand and prices. Demand adjusts itself based on the supply.

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