Agri Business

As mandis get shut, here are five ways the government can help farmers cope

Rajalakshmi Nirmal | Updated on March 26, 2020 Published on March 25, 2020

Representative Image

Encouraging farmers to hedge through futures and increased use of WDRA warehouses are among key options

With the nationwide lockdown to control the spread of Covid-19, mandis where farmers sell their harvest have also been closed. Across the country, the harvest of several crops including wheat, mustard, chana and coriander has started and farmers are sitting on truckloads of grains and pulses.

In the kharif season, many farmers lost their soyabean and other crops due to excessive rains and were waiting for this rabi harvest to pay back their loans. But now they are now facing a new problem: closed mandis and crashing prices. While, initially, most States announced that mandis will open from April 1, it now appears as if they will be closed till April 14 due to the nationwide lock-down. There is now the risk of local traders exploiting small farmers and buying their produce at throwaway prices.

Last week, when the mandis were open, the prices had already moved lower. Our ground check revealed traders in Agar, Madhya Pradesh, paid wheat farmers only ₹1,600-1,700/quintal against the MSP of ₹1,925/quintal. In case of lentil (masoor), trade was done at ₹4,300/quintal versus the MSP of ₹4,800/quintal; gram (chickpea) was traded at ₹3,900-4,000/quintal versus MSP of ₹4,875/quintal.

Farmers who still have standing crops may decide to delay harvest, but that can invite a bigger problem in case of change in weather.

The recovery in agri GDP seen in the last three quarters (April-December 2019-20) at 10.6 per cent compared to 3.8 per cent in the same period last year, will vanish if the current situation is not addressed.

Here are five action points that the Centre and States can consider.

Restricted time for mandis

The government can allow mandis to operate amid the lock-down, though with restricted timings. It can consider announcing a time schedule for different villages, says Kavitha Kuruganti, National Convenor of the Alliance for Sustainable and Holistic Agriculture. This can help avoid crowding at mandis. Checking with procurement agencies at the ground level, BusinessLine found that this can be executed without any hurdle. Mandis do have the phone numbers of farmers and can be informed through SMS. While a long list of essential services is excluded from the lock-down, these are mainly services in urban areas. The government should look at rural India, too, and ensure the smooth functioning of the agri-value chain. If this is not ensured, rice and dall mills will not have their raw materials and soon it will hit supplies for consumers. Trucks carrying agri commodities should also be allowed to ply on roads and warehouses allowed to function normally.

Use of eNAM

It’s now time for Prime Minister Narendra Modi’s flagship scheme — the electronic National Agriculture Market (eNAM) to claim its place under the sun. While so far only traders could buy on the platform from home, it should now let farmers/FPOs (farmer producer organisations) to sell from the farm gate. Uploading pictures of the commodity should be facilitated on the eNAM app so that farmers can do this from their field/home for buyers to know the quality of the grains/pulses. Once the deal is sealed, traders can be encouraged to make part-payment to the farmer. He can take delivery whenever the regular transport systems start functioning and State borders are opened. Mandi boards can be requested by States to appoint officials to look into the smooth execution of the deal between traders and farmers, if any queries arise. It should be noted that 585 mandis across 16 Sates and two Union Territories are connected via eNAM so far, with about 1.6 crore farmers and 1.26 crore traders registered. MSP procurement across many States were initially being done on eNAM. The Centre/States could consider doing this again temporarily.

Encourage hedging via futures

FPOs can consider hedging on futures platform to avoid losses from drop in prices. Wheat, coriander and chana are among the many commodities that are available in the futures market of NCDEX now. In wheat, the April month futures contract is trading at 1,855/quintal now. A farmer can lock in this price by selling the contract. One contract is of 10 tonnes (difficult for an individual farmer of 3/5 acres of land, but doable for an FPO); grains of moisture up to maximum 11 per cent is allowed. An initial margin of 4 per cent of contract value will be charged. If wheat prices drop from here, the farmer/FPO can square up the contract, else, the farmer can also hold the contract till maturity and deliver his produce to the exchange warehouse in Kota (Rajasthan)/ Rajkot (Gujarat)/ Sri Ganganagar (Rajasthan), or Indore (MP). In chana, guar seed, soya bean and two other products, there are options contracts too which are friendlier for hedgers (as there is no mark-to-margin requirements). So far, 259 FPOs are registered on the NCDEX and 99 of these (represented by 2.34 lakh farmers) have traded on the platform. The most traded commodity on the platform by an FPO is soyabean followed by chana.

Publicise eNWRs

 

Over the last one year, the Warehousing Development and Regulatory Authority (WDRA) has brought several Primary Agriculture Co-operative Societies (PACS) and State, Central and private warehouses from across the country under its fold. Some of these are closer to villages and can ensure farmers do not have to spend a lot to get their produce to warehouses. Being registered under WDRA, these warehouses can issue electronic Negotiable Warehouse Receipts (eNWRs). By placing stock in WDRA-accredited warehouses, farmers get eNWRs which can be easily pledged for loans. Unlike the physical warehouse receipt, in the case of eNWRs, it is possible to break up and avail finance for one portion of the stock. Further, the farmer may also get a better price for his produce when he sells it finally, as the stock stored in a WDRA-accredited warehouse is sorted and graded.

Supporting FPOs

There are at least about 5,000 farmer producer companies registered across the country: these are entities registered under SFAC, NABARD and different State government projects over the last several years. These institutions can be used to aggregate the harvest of farmers which could then be lifted by the Centre/State procurement agencies, suggests Yogesh Kumar Dwivedi, CEO, Madhya Bharat Consortium of Farmers Producer Company.

FPOs would need mini trucks to do this as they would be collecting produce from farmers’ fields. Dwivedi adds that more than 100 FPOs under his consortium are willing to take tomatoes and peas door to door to consumers before farmers get into distress selling. While willing to help, FPOs are looking for relaxation on loan repayments and postponing interest due dates on Kisan Credit Card (KCC) loans for farmers. It will be a big relief if a move similar to that taken by the Uttar Pradesh government to support labourers and daily wage earners through cash transfers, comes through for farmers, add farmer groups.

Avoid distress sales

Farmers can consider putting their stock in the godowns of agriculture co-operative societies nearby. If those are ones accredited with WDRA, then borrowing against the stock will also be easy

Published on March 25, 2020

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