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Farmers’ issues have come under the spotlight in recent times. Though the the three newly introduced farm laws have been much debated, efforts are on to address farmers’ apprehensions regarding the future of the Minimum Support Price (MSP) mechanism.
Yet, farmer protests continue unabated in Punjab and Haryana, the leading beneficiaries of the MSP regime, as recently introduced changes in the framework regulating agricultural marketing have emerged as a contentious issue.
But one vital agri-commodity, despite not being covered under the MSP, has garnered attention after the promulgation of the Essential Commodities (Amendment) Act, 2020, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.
The potato sub-sector has in the past witnessed a disruptive wave of financialisation through unscrupulous trading of potato bonds or Dabba (futures) trading and created a nexus of cold storage owners, contract firms, and local traders for controlling the farm supply or speculating on the price movement.
The potato sub-sector in Uttar Pradesh, the largest producer of potatoes in India, faces myriad challenges and has much potential in the light of the three new laws.
Potato economy in UP
Uttar Pradesh accounts for close to 30 per cent of the country’s potato production and cultivation. Yield per hectare for the State is slightly higher than the national average, but lags other major potato producing States such as Bihar, Gujarat and West Bengal.
With about 2,400 facilities, the combined cold storage capacity in Uttar Pradesh is around 15 million tonnes, which is approximately 40 per cent of the national cold storage capacity. About 70 per cent of this capacity is utilised for storing potatoes. Despite these impressive numbers, cold storages in the State have been hit by lack of capital for technology up-gradation. This has pushed many cold storage units to the verge of closure, exacerbating the precariousness of potato growers.
Storage facilities, marketing
The inadequate cold storage facilities and the lack of access to such facilities restrict many farmers from deriving gains from seasonal price fluctuations. Also, the lack of multiple and dispersed supply links due to farmers’ low direct participation in cold storage arrangements are leading to an oligopoly-like situation favouring price manipulation through hoarding.
The potato sub-sector is beset with recurrent marketing challenges leading to enhanced price risks for potato farmers.
When prices crash, a common sight is of farmers dumping their produce in fields and on roadsides. This situation gets aggravated during the years of bumper production.
Prices of potato are determined largely in oligopsony markets since it is not covered under the MSP regime resulting in no specific regulation and guarantee of state-supported prices. This precarious situation faced by potato farmers is a reality check for advocates for delimiting exchange entitlement failure for potato peasants.
Ad-hoc policies
Despite the importance of this humble tuber in the farm economy and its potential for fulfilling the calorie requirements of the large malnourished and poverty-stricken section in Uttar Pradesh, there is no clear policy guideline for the potato sub-sector. Belated announcements of state-supported prices and including potatoes in the mid-day meal scheme are the usual fire-fighting measures.
The red tape and power asymmetry, which become perverse during a bumper harvest year, result in insignificant gains for farmers. The fragmented potato value-chain restricts institutional buyers in the overall potato market.
Potatoes can potentially be converted into value-added products such as pickles, chips, chutneys, fries, etc., with immense possibilities for customisation depending on regional consumer preferences.
However, the extent of value addition taking place in Uttar Pradesh is limited.
The value-added products manufactured mainly by a few multinationals, national, and regional private players, are sold at a high price. Moreover, their tastes are not suited for integration in regular meals by consumers.
The multiple challenges facing the potato sub-sector are too formidable to be addressed through a single policy intervention. Hence, it becomes essential to adopt a multi-pronged approach to achieve better synergy among various schemes and organisations.
Collectivising potato producers through farmer producer organisations (FPOs) facilitates resource and output pooling, which helps in achieving economies of scale, reducing transaction costs, and market risks for other value chain actors wanting to work with potato producers.
FPOs can support potato farmers’ better value creation with increased access to storage, markets and ability to work with institutional players such as contract firms.
FPO-SHG synergy
Women play a pivotal role in Indian agriculture.
The self-help group (SHG) movement has boosted women’s empowerment through enhanced livelihood opportunities. Despite their common objective of promoting socio-economic empowerment in rural areas, there is a little convergence between FPOs and SHGs.
Achieving greater synergy between these organisations through inter-locking governance structures providing regular opportunities for interaction among their functionaries and members can mutually strengthen and enhance their performance.
Also, Micro, Small, and Medium Enterprises (MSMEs) have come to play a key role in Atmanirbhar Bharat scheme. They can serve as a critical interface for developing cold chains and processing infrastructure for the benefit of potato growers.
Government schemes such as Operation Green and Kisan Rail can help in price stabilisation and value chain development. So, it is plausible that cross-sectoral collaborations can go a long way in creating sustainable producer ecosystems.
Explore new markets
Creating awareness about electronic trading and transaction platform eNAM and facilitating individual farmers and FPOs to use this platform can help in reliable price discovery and broad-base price dissemination.
Moreover, besides focussing on the National Capital Region (NCR), Uttar Pradesh can leverage its geographical and cultural proximity to Nepal, the largest export markets for Indian potato. The State should actively support FPOs in establishing direct trading centres in the NCR as well as facilitate their relationships with export agents in Nepal.
As farmers in eastern Uttar Pradesh still use comparatively lower amounts of chemical inputs, they can be transformed into organic potato producers. However, before initiating such change, it is essential to find and establish assured lucrative markets for organic potatoes.
The potato sub-sector’s recurrent crisis is an outcome of neglected and ad hoc policy measures. This sub-sector has immense potential in Uttar Pradesh. A better-informed and evidence-based approach by the Central and the State governments are perhaps essential for initiating and successfully implementing these much-needed interventions.
Kumar is a doctoral scholar of IIM Lucknow, and Dey is Chairman of the Centre for Food & Agri-business Management of IIM Lucknow. Views are personal.
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