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For over 50 years since Independence, the government’s approach to agriculture was aimed at self-sufficiency in food. The objective was achieved, and what is now needed is a system that is responsive to the demand, according to S Sivakumar, Head of ITC’s Agri Business.
He said the production-driven supply chain, which was developed over years, required no linkages with the consumers.
But the situation now has changed with about one-third of consumers willing to pay more for diversified agri produce with quality and safety. “You need heavy investments to set up cold storage infrastructure to address this demand,” he said.
Addressing a virtual meet on ‘Demystifying the three new farm reform laws’ organised by the Administrative Staff College of India (ASCI) on Wednesday, he said the demand-driven system would go a long way in improving farmers’ income.
Mandi system
He said the APMC (Agricultural Produce Marketing Committee) system had helped the small farmers get a better price by protecting them from the village traders. “It did a great job but the price discovery happens post production. But farmers get penalised (if they produce more) as prices fall due to the supply-demand imbalances,” he said.
Though it helped small farmers sell their produce at the mandis , they can’t afford to take the produce back if they didn’t get good price. Transportation costs were prohibitive.
“The relationship between the farmer and seller is only for the particular transaction and not through the full crop cycle engagement,” he said.
Subsidies
The APMC regime was complemented by the MSP (minimum support system) system. “But the MSP supports only 23 crops, covering only one-fourth of the agricultural system’s value and 10 per cent of the farmers. For the rest of the crops, farmers are depended on the market,” he said.
“Offering MSP for all the crops could be disastrous for the economy and not feasible. The MSP system is beset with a problem. With assured profitability, there is no incentive to go for soil and water efficient methods,” he said.
Stating that subsidies were required to support the farmers, he said it was important to see whether these subsidies were used to distort the behaviour (in usage of resources like water and power). Citing the example of PM-KISAN scheme, he said the benefits were crop agnostic and didn’t “distort the behaviour”.
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