Heralding a new era for agriculture

Salil Singhal | Updated on May 29, 2020

While the recent reform steps and stimulus package for agriculture will go a long way in boosting farmers’ income, price volatility in perishables continues to be a challenge

Timely prioritisation of agriculture as ‘essential’ and the enablers thereafter averted the adverse impact of Covid-19 on the sector. The stimulus package announced will further boost agriculture resilience and the progressive reforms on agriculture marketing will go a long way in boosting farmers’ income.

With interventions to ensure timely harvesting of the rabi crop, harvesting operations have mostly been completed, and with MSP procurement underway, this should ensure working capital makes its way into the hands of the farmers. Efforts to streamline mandi operations and direct marketing arrangements between farmers and buyers also herald a new beginning.

E-NAM has been scaled to 1,000 mandis, a notable effort to de-congest mandis while maintaining supply chains of fruits and vegetables. The introduction of the ‘Kisan Rath’ app is also helping streamline logistics-related issues by providing seamless supply linkages between farmers, FPOs, APMC mandis and intra-State and inter-State buyers.

Pressure on perishables

In terms of mandi arrivals and prices, pressure is however being felt in the case of perishables. What is evident is that while MSP procurement is helping farmers, price volatility in perishables continues to be a challenge. Azadpur mandi has witnessed a 36 per cent drop in F&V arrivals owing to regulated trade and volume per trader.

Similarly, onion in Lasalgaon reported an almost 90 per cent drop in arrivals due to closure of the APMC. This is also leading to a pressure on prices. Onion prices, for example, were trading below the cultivators’ cost of production in April while farmers were desperate to sell off their produce, especially of the late kharif variety, due to its low shelf life and fear of spoilage.

On the other hand, tomato prices in Kolar have dropped by almost 75 per cent, in the absence of private traders in the mandi despite a bumper crop. What is encouraging is the announcement made around framing a central law to provide farmers the freedom to sell their produce as per their choice, and to promote barrier free inter-State trade and e-trading of agri produce. These measures will facilitate direct linkages between farmers and industry and will help enhance incomes in the hands of the farmers. In the long run, they will also give impetus to bulk buyers to invest in extension services to the farmers to improve productivity and returns.

Another challenge confronting perishables is a 20-25 per cent reduction in demand as bulk demand from hotels and restaurants decline and this surplus needs to be consumed to ensure returns to farmers. While the processing sector offers the capacity to consume the surplus production, they need to be supported with additional working capital loans, to purchase raw material.

Food processing

The major announcement made around deregulating the Essential Commodities Act will also provide the much-needed boost to the processing industry and encourage investment by the private sector for creating agri market infrastructure that supports scale. Further, the ₹1 lakh crore agri infra fund announced by the government will help bridge the gap in post-harvest infrastructure requirement at farm gate.

Freight cost escalation is also impacting marketing of high value perishables with localised production, particularly in the hilly areas. To ease the pressure, efforts being made to streamline logistics will need to have special focus on perishables. The government can consider resuming air freight from the production locations to major metros to help retailers in off-take of these high-value commodities.

For ensuring input availability in the upcoming kharif season, manufacturing and packaging units for fertiliser, pesticides and seeds are included in the exempted list and their retail and distribution channel has been allowed to operate. For seed, agro-chemicals and fertilisers, the manufacturing units, except those in the containment zones, are producing at 60-70 per cent capacity with retail channels resuming operations.

Any adverse impact of Covid on kharif 2020 sowing is not visible so far, which is important as adequate kharif output will ensure food availability in the long run. What will be important is to ensure maintaining cash flow of the industry to maintain supplies.

In containment zones it will be critical to ensure stock availability at the retail shops at village level. Towards this, to facilitate availability of agri inputs, pre-positioning of inputs such as seeds, fertilisers, pesticides, etc., at centralised locations would be useful.

Machinery, tractor sales

The farm machinery sector was hit hard with almost 50 per cent drop in sales in March 2020. Tractors alone have seen sales drop almost 80 per cent in April 2020. Also, at present, manufacturing of tractors and farm machinery is under severe constraints. As per the Tractor and Mechanisation Association, manufacturing is running at barely 3-5 per cent and if the scenario continues, the sales opportunity in the monsoon window (June) will also be missed significantly impacting the segment. The other key concern facing the farm mechanisation sector is the liquidity crunch. This is primarily owing to challenges in retail finance with banks and NBFCs still not very forth coming in lending at present.

Some of the suggestions in the short term to reduce the pressure include categorising of agri-machinery and its supply chain as an essential service and prioritising loan for purchase of agriculture equipment to farmers through banks and NBFCs. For further easing the challenge of liquidity at farmer level, the agri input and mechanisation service providers may be linked to KCCs to allow purchase of inputs/renting of equipment by farmers on credit without impacting the input/service providers.

From an overall policy perspective, the recent announcements certainly herald a new era for agriculture and have taken care of a lot of the long-standing reform agenda. The industry is encouraged by the ongoing reform process and will fully support the initiatives of the government towards building a resilient farm sector.

The writer is Chairman CII National Council on Agriculture

Published on May 29, 2020

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