Aug 6, 2015

APMC regulated market network needs to be expanded in India. That will be the true integration of agri-commodities markets.

Here is an interview with the World Trade Centre, Mumbai. 

While India is one of the largest producers of foodgrains, around 194.6 million people are undernourished in the country (according to the latest FAO estimates). What are the fundamental issues ailing the food production and distribution sectors in India?

India faces a shameful paradox of plenty. On the one hand the grain silos/godowns are bursting at the seams and on the other hand India has the largest population of hungry in the world. As far as acute child malnourishment and undernourishment is concerned, India ranks below sub-Saharan Africa. This piquant situation has prevailed over the decades because of gross mismanagement in handling food reserves. Since 2001-03, the average annual surplus food stocks in the country have been around 60 million tonnes and yet millions of people continue to go to bed empty stomach and are faced with household food insecurity. In June 2014, India had a record surplus of 83 million tonnes. In fact, if the surplus food was to be stacked one bag over the other, and stocked like this in a single row, it is possible to walk up to the moon and come back. With so much of food surplus lying around, I don’t see any reason why still one-fourth of the world’s hungry should be living in India. The primary reason for the failure to tackle food insecurity is the inherent limitation in addressing issues related to access and distribution of food. Feeding the country should be the foremost task for any government. In the past two years, India has exported more than 40 million tonnes of foodgrains. I don’t see any economic rationale for any nation to be exporting food when its own population is living in hunger.  

The government is taking several steps to address huge post-harvest losses in fruits and vegetables, and food grains. These include providing infrastructure status to cold chain facilities, Central Sector Scheme of Cold Chain, Value Addition and Preservation Infrastructure, assistance on capital cost for integrated post-harvest management etc. What are your observations on these steps and what more should the government and private sector do to prevent losses?

While it is true that post-harvest losses should be minimized, but in India the losses being projected are simply blown out of proportion. For the past 30 years, I have been hearing that 40 per cent of food goes waste in India. I don’t know from where the figure came around and has been very conveniently used time and again. A study done of the Central Institute for Post Harvest Engineering and Technology (CIPHET) at Ludhiana, on the basis of a countrywide study, worked out looses in cereals at 4.3 to 6.1 per cent; pulses 4.3 to 6.1 per cent; Oilseeds: 6 per cent; meat: 2.3 per cent; milk: zero per cent; wastage n fruits varying between 5.8 per cent (in Sapota) to a maximum of 18 per cent for Guava; and in vegetables cauliflower has the minimum wastage at 6.8 per cent while wastage in tomato is the highest at 12.4 per cent. Compare this with America, where 40 per cent food is wasted before it reaches the table. It is also estimated that roughly 52 per cent fruits and vegetables rot in the supermarkets.

This does not however mean that whatever is being wasted should be allowed at any cost. Infrastructure like cold chains and for minimizing post-harvest losses is certainly needed. It is good that the government has stepped in to provide financial support to the industry. But much of the wastage is at the food processing level which is not at all being talked about. The thrust of food processing in the name of reducing wastage is meaningless till the food industry pulls up its act. For instance, I see no reason why 6 litres of water be wasted to pack one litre of bottled water. Similarly, 75 litres of water goes down the drain to produce 25 litres of drinking water in an RO machine. Why shouldn’t the private industry focus on reducing such gross wastages is something that is not even on the agenda. For the processed foods also, the wastage is enormous. I am equally worried at the growing tendency of the food industry to import fruit concentrates, and then pack them into tetra packs. In case of tomatoes for instance huge quantities of tomato paste are being imported for use in ketchups and other products. This will not reduce the wastage in domestically produced fruits and vegetables. At the same time what is the justification in importing apples from as far as Chile and New Zealand when the domestic supply goes waste. Such unwanted food shipments also add to food miles and of course global warming. 

India’s public distribution system is fraught with numerous issues like poor targeting, leakages, non-transparent administration etc. What is the ideal way to reform the system?

There is no denying that India’s Public Distribution System (PDS) is fraught with leakages. Reaching food to every nook and corner in a big country like India is no easy task. While leakages have to be further curbed to ensure food reaches in time to those who need it, the task of ensuring household food security needs a radical overhaul. I am of the opinion that in a country like India, which has roughly 6.4 lakh villages, the paramount task should be to turn these villages self-reliant in food production and consumption. Each village or a cluster of villages should be in a position to take care of its own hunger and food insecurity. This can only be possible if India shifts to setting up of community foodgrain banks in each taluka or a panchayat. These community foodgrains banks should be managed by women self-help groups or village communities, and should be based on the concept of local production, local procurement and local distribution. This system was prevalent in India before the British came and still exists in several pockets in the country. Ensuring food security at the household level would also mean that an adequate push comes for producing and distributing food locally which would significantly minimize losses in transportation. It would mean that food distribution gets decentralized. This would also ensure that India will not have to worry about WTO obligations, which are aimed at dismantling or severe curtailment of PDS operations. If the villages are able to take care of their own food security needs, it will reduce the dependence on PDS, which can then be effectively targeted for the urban areas.

The government is planning to unify the agriculture markets across the world through the Agri-Tech Infrastructure Fund (ATIF). Under this scheme, a common e-platform would be set up and deployed in 585 selected wholesale regulated markets across the country. Can you share your thoughts on the unification of agriculture markets in India.

It is certainly important to use the latest technology tools in agricultural marketing. Setting up a common e-platform in 55 selected wholesale regulated markets comes from Karnataka which has given the country an idea to integrate the existing APMC markets through a common e-platform. If the establishment of a Rashtriya e-Market Services Private Ltd, a 50:50 joint venture with NCDX Spot Exchange, was helpful indeed I fail to understand why Karnataka farmers are not getting the right price for their produce. Already 55 of the 155 main market yards have been integrated into a single licensing system. And yet, Karnataka is faced with an unprecedented serial death dance on the farm with almost 100 farmers committing suicide since June. In my understanding, the e-platform is nothing more than a spot exchange, which even in Karnataka has performed well only for coconut. To expect this e-platform to be the solution to the existing crisis in agriculture is certainly too far-fetched and has not been well thought off.  What India needs desperately is to make adequate investments in setting up a huge countrywide network of APMC regulated markets. At present, about 7,000 APMC markets exists in the country against the requirement of 42,000 mandis if a regulated procurement centre is to be provided in the range of 5 kms from each village. This will enable not only an assured market for the farmers but at the same time help in the providing an assured procurement price to the farmers.

Since only 6 per cent farmers get the benefit of procurement prices, 94 per cent farmers are already dependent on the markets. If the markets were so effective, farmers wouldn’t have been committing suicides in droves and wanting to quit agriculture if given a choice. Take the case of Punjab and Bihar. Punjab has a widespread network of AMPC markets. Bihar had revoked APMC Act in 2007. The result if while Punjab farmers got a procurement price of Rs 1450 per quintal for wheat this season, Bihar farmers were able to sell their wheat crop at a distress price of Rs 800-900 per quintal. Dismantling APMC markets in Punjab, if successful, would turn Punjab farmers the Bihar way.

Use technology to remove middlemen in the APMC regulated markets, but dispensing with APMC markets would only add on to the prevailing agrarian crisis. The need therefore is to expand the network of APMC markets throughout the country and provide assured purchase of all the 23 crops for which the procurement prices are announced. This will be the true unification of the agricultural markets. This would require investments in setting up warehouses. But if the government can make investments in building panchayat ghar in 2.5 lakh panchayats, I don't see any reason why warehouses cannot be built in these panchayats. It doesn't need a rocket science to build a warehouse.

Is contract farming a solution for some of the problems in the agriculture sector in India? How far has contract farming been successful in India and what can be done to promote it across the country? 

Contract farming has been successful in some crops in some parts of the country. But the experience of contract farming in most staple crops has not been satisfactory. So it has been a mixed experience. There are numerous studies that bring out the flaws in the existing system and also what needs to be done to make contract farming workable for both the farmers as well as for the private companies. Traditionally, sugarcane is a crop which operates under a bonding system with the sugar mills which in many ways is like contract farming. But the recent experiences with the bonding system in sugarcane, where sugar mills are unable to pay the huge cane arrears, shows that not all is well with even the bonding system. I think contract farming should certainly be workable, if the rules under which the contract operates are transparent and are pro-farmer and pro-environment. Since most food industries are keenly looking for short-term profits, a highly intensive cropping system is followed. This results in massive environmental destruction. Precautionary clause must be weaved in the contracts where it must be mandated to maintain soil fertility at an acceptable level. 

Talks on the Doha Round of the WTO has not seen significant breakthrough in the last decade because of diverging positions of different countries on trading in agriculture. What are the flaws in the existing trading regime on agriculture and how can they be rectified?

Ever since WTO came into play, my own studies (available on the web) have shown that more and more developing countries are turning into food importing countries. In fact, 105 of the Third World countries have already become food dependent and if the Doha Development Round goes ahead with the Special and Differential Treatment being withdrawn for the developing countries as being pushed by US/EU, India would be at a receiving end. Already, India’s procurement prices are under a chopping block. While it may not be possible to detail everything that is wrong with the trading regime in agriculture, the main obstacle is the refusal by the rich developed countries to reduce their phenomenal farm subsidies. With agricultural subsidies in rich countries now exceeding $ 500 billion every year, and with the US alone making a provision for $ 960 billion in agricultural support over the next 10 years under the US Farm bill 2014, agriculture of the rich countries remains robustly protected. These countries are wanting the developing countries like India to provide more market access by cutting down on the applicable bound rates, which means further lowering the import tariffs. For a country like India, importing food is like importing unemployment. The more agricultural commodities India imports would mean more small farmers are out of production. Although the Govt so far appears steadfast on not compromising on food security needs, it remains to be seen how will India negotiate at the ensuing WTO Ministerial in December.  

Most of the farmers in India are small and marginal land holders. The greatest challenge is to improve productivity in these small holdings. What is the role of the government, community-based organizations in achieving this?

Yes, most of India’s farmers are small and marginal. The greatest challenge is not only to improve productivity in these small holdings but to provide an economic price to these farmers. All these years, food prices are deliberately being kept low so as to keep food inflation under check. In other words, farmer is carrying the burden of providing cheap food to the consumers. This is grossly unfair. While incomes for all sections of the society have multiplied in the past 45 years, farm output price has been kept artificially low. In 1970, the procurement price for wheat was Rs 76 a quintal. Forty five years later, in 2015, the procurement price for wheat is Rs 1450/quintal. Wheat price has gone up by roughly 19 times. In the same period, the average basic salary plus DA of central government employees have risen by 110 to 120 times; of school teachers by 280 to 320 times; of college/university teachers by 150 to 170 times; and of mid to high class corporate sector employees by 350 to 1000 times. In the same period, school fees have increased by 200 to 300 times; medical treatment cost has gone up again by 200 to 300 per cent; and average house rent in cities has risen by 350 times.

The primary task should be to bring about an income parity between the farming and non-farming class. I find while no one talks of how to provide a remunerative income to farmers, productivity improvement is being talked about simply because it provides a market for input suppliers. More income in the hands of the farmers would be a blessing for the industry which will see a jump in demand for consumer goods. The industry therefore should also support the need for providing a higher assured income to farmers. A National Farmers Income Commission, which is able to work out a minimum take home package for farmers every month, is the crying need.

Agriculture also needs a heavy dose of public investments. In the 11th Plan period only Rs 1 lakh crore was allocated for agriculture. In the 12th Plan, the allocation was increased to rs 1.5 lakh crore. In other words, in 10 years, agriculture received a public sector investment of only Rs 2.5 lakh crore. This bias against agriculture needs to be immediately corrected. #

Source: 'Strengthening APMC network is true integration of agri-commodities markets in India.' WTC website, Mumbai. Aug 2015.

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