Transforming Indian Agriculture: Agenda for Reforms

1. Introduction

India’s target of achieving a $5 trillion economy needs to be supported by a transformed and reformed agriculture sector. It is, therefore, imperative that the agriculture sector should support the objective by focusing on transformational reforms, while targeting an annual agri-GVA growth of 5 percent.

 The criticality of agriculture for sustainable and inclusive growth of the Indian economy can be gauged from the fact that, the sector provides employment to about 42.4 per cent of the total workforce in India, but contributes only about 16.4 per cent (2020-21) to the country’s real Gross Value Added (GVA)[1]. About 86 per cent of operational holdings in the country are in the small and marginal categories, and the average size of an operational holding is only 1.08 hectare (ha). Due to fragmentation and disorganisation, majority of the small and marginal farm holders are unable to realise optimal value from their farming operations, resulting in agrarian distress.

 This paper deliberates on a reforms agenda for transforming the sector for doubling farmers’ income (DFI) and empowering small and marginal farm holders to move from subsistence farming to farm enterprises integrated to agri-value chains, while managing the VUCA (volatility, uncertainty, complexity, ambiguity) world to mitigate agrarian distress.

 The rest of the paper is organised as follows: Section 2 presents growth trends in Indian agriculture during the period 2010-11 to 2019-20. Critical issues and challenges in the agriculture sector in India are discussed in section 3. Section 4 presents the agenda for reforms to transform Indian agriculture. Section 5.

2. Indian Agriculture Sector: Growth Trends

The average annual growth of agri-GVA during the period 2012-13 to 2020-21[2] stood at 3.2 percent. The period witnessed sharp dips in the growth in 2012-13 (1.5 percent), 2014-15 (-0.2 percent) and 2015-16 (0.6 percent) (Figure – 1), due to less than normal monsoon rainfall in these years. On the other hand, good monsoon rains resulted in high growth rates in agri-GVA during the years 2013-14 (5.6 percent), 2017-17 (6.3 percent), 5.0 percent (2017-18), 4.0 percent (2019-20) and 3.6 percent (2020-21) (Figure-1). However, in spite of India making great strides in terms of food security and being the leading producer of rice, wheat,  pulses, sugarcane and cotton, agriculture in the country continues to be heavily dependent on monsoon rains.  

Source: Data accessed from: (1) Press Note on First Revised Estimates of National Income, Consumption, Savings and Capital Formation 2018-19, MoSPI, Government of India; and (2) Press Note on Provisional Estimates of Annual National Income, 2020-21, 31 May 2021, MoSPI, Government of India.

The country recorded its highest foodgrain production of 303.3 million tonnes (MT) in 2020-21. However, the CAGR of foodgrain production during the period 2011-12 to 2019-20 was only 2.0 percent, due to low CAGR of rice (1.7 percent), wheat (1.9 percent), and nutri/ coarse cereals (1.9 percent). Pulses recorded the highest CAGR of 4.3 percent, due to sharp increase in production in 2016-17, as the farmers were encouraged to grow pulses, on account of significant increase in minimum support prices (MSPs).

 Among commercial crops, groundnuts experienced the highest CAGR of 4.7 percent, during the period under review. The CAGRs of other crops were very low, e.g., Soybean (0.2), sugarcane (0.7 percent), tea (2.2 percent), coffee  (0.4 percent), cotton (-0.4 percent), and jute and m

3. Indian Agriculture:  Critical Issues and Challenges

India is self-sufficient in the production of foodgrains, horticulture crops and milk. However,  Indian agriculture has long been suffering from structural problems, which need to be addressed urgently. Farmers in India, truly live in a VUCA world of volatile prices, uncertain rainfall and income, complex institutional mechanisms, restrictive laws, and policy ambiguities. Some of the critical issues and challenges confronting Indian agriculture are presented in the following sub-sections.

 

3.1 Small Size of Holdings and Low Income

The predominance of small and marginal holdings in India has resulted in inefficiency in cultivation and low average income of farmers. The findings of NABARD All India Rural Financial Inclusion Survey 2016-17 (NAFIS) (NABARD, 2018), reveal that for agricultural  source of income, with the average monthly contribution of ₹3,508 (43.1 percent)  to the total income of ₹8,136, while cultivation contributed 7 percent (₹566). On the other hand, the share of average monthly income from cultivation in respect of agricultural households with landholdings of  greater than 2 ha was 51.6 percent (₹7,572). The findings of NAFIS indicate a positive correlation between the average monthly income and size class of land possessed. Further, states like Punjab (₹23,133), Haryana (₹18,496) and Kerala (₹16,927) have witnessed much higher average income of agricultural households, compared to Uttar Pradesh (₹6,668), Andhra Pradesh (₹6,920), and Jharkhand (₹6,991). Therefore, reducing regional disparities in agricultural income need to be prioritised.

Strategies for promoting sustainable agricultural growth and enhancing farmers’ income, should include a group approach through farmer producer organisations (FPOs), which can improve market access to land, and help spread the risk of farming among a larger number and increase production opportunities by experimenting with higher value, and more risk prone crops with larger payoffs (Agarwal, 2016). Further, a group would be better placed to enter into non-exploitative contract farming arrangements (ibid.).

3.2 Low Agricultural Productivity

India is the largest producer of pulses and groundnut in the world, and  the second largest producer of paddy, wheat and sugarcane. However, stagnation in yield of major crops has been observed during the past two decades. The average yield of rice increased from 1,901 kg/ha in 2000-01 to 2,705 kg/ha in 2019-20  (Table-1), at a CAGR of 1.8 percent . The second decade (2010-11 to 2019-20) witnessed a marginally higher CAGR of yield of rice at 1.7 percent against 1.6 percent in the previous decade (2000-01 to 2009-10).  Wheat experienced an increase in average yield from 2,708 kg/ha in 2000-01 to 3,421 kg/ha in 2019-20, at a CAGR of 1.4 percent. The CAGR of productivity of wheat increased from 0.7 percent during the decade 2000-01 to 2009-10 to 1.5 percent during the following decade (2010-11 to 2019-20).  Pulses experienced a CAGR of yield of 1.5 percent in both the decades under review.

 Among commercial crops, a sharp increase in yield of cotton was witnessed during 2013-14 (532 bales/ ha compared to 190 bales/ ha in 2000-01), due to the introduction of Bt cotton in 2009-10. The CAGR of yield of cotton during the past two decades (2010-11 to 2019-20) stood at 11.3 percent (Table – 2). However,  the CAGR declined sharply from 4.3 percent during the decade 2000-01 to 2009-10 to -2.1 percent during 2010-11 to 2019-20, reflecting a stagnation in yield of cotton, after benefitting from the introduction of Bt cotton.  Groundnut has witnessed an increase in CAGR of yield from 3.3 per cent during the first decade to 4 percent during the following decade (2010-11 to 2019-20), mainly due to the introduction of improved varieties of seed. Yield of major crops in India also compare poorly with that of other countries in the world.

Table – 1

                       Yield of Foodgrains in India                                    

(Kg/ha)

Crops	2000-01	2010-11	2011-12	2012-13	2013-14	2014-15	2015-16	2016-17	2017-18	2018-19	2019-20 (4th AE)
Rice	1901	2239	2393	2461	2424	2390	2400	2494	2576	2638	2705
Wheat	2708	2988	3177	3117	3075	2872	3034	3200	3368	3533	3421
Nutri/ Coarse cereals	1027	1531	1590	1617	1677	1729	1579	1750	1934	1944	1976
Pulses	544	691	699	789	764	744	656	786	853	757	817
Total Foodgrains	1626	1930	2078	2129	2101	2070	2056	2129	2235	2286	2325

                      Source: Handbook of Statistics on the Indian Economy 2019-20, RBI

Table – 2

Yield of Commercial Crops in India

                                                                                    (Kg/ha)

Crops	2000-01	2010-11	2011-12	2012-13	2013-14	2014-15	2015-16	2016-17	2017-18	2018-19	2019-20 (4th AE)
Groundnut	977	1411	1323	996	1750	1400	1465	1398	1893	1422	2065
Soybean	822	1327	1208	1354	983	950	738	1177	1058	1192	928.0
Total oilseeds	810	1193	1133	1169	1153	1037	968	1195	1284	1271	1236.0
Sugarcane	68577	70091	71668	68254	69839	69859	70720	69001	80198	80105	77893
Tea	1682	1726	1956	2027	2121	2113	2176	2165	2285	2109	2126
Coffee	959	838	852	846	799	847	876	761	765	767	718
Cotton	190	499	491	486	532	461	415	512	443	378	451
Jute & Mesta	1867	2192	2283	2281	2449	2550	2421	2585	2435	2508	2641

Source: Handbook of Statistics on the Indian Economy 2019-20, RBI   

3.3 Stagnant Capital Formation in Agriculture

Capital formation in agriculture is of critical importance for the sustainability of agricultural growth.  The percentage share of Gross Capital Formation (GCF) in agriculture and allied sector in the Gross Value Added (GVA) of the sector, declined steadily from 18.2 percent in 2011-12 to 14.7 percent in 2015-16, before rising slowly to 16.4 percent in 2018-19 (Figure-2), which is too meagre to address the issue of sustainability of Indian agriculture. Therefore, capital formation through rural infrastructure development assumes significance. Public sector investment in rural infrastructure would result in high growth of the agricultural sector, and could also crowd-in private sector investment.

Source: Based on data accessed from Economic Survey 2020-21, Ministry of Finance, GoI and National Income Statistics 2020, MoSPI, GoI

 

3.4 Climate Change and Agriculture

Climate change poses a major and growing threat to food security (FAO, 2016). It would be a daunting challenge to produce enough food for the increasing population in the face of decreasing resources and changing climate. The estimated loss in yields in respect of major crops like rice (-30 per cent), wheat (-23 per cent) and maize (-31 per cent) during 2050-69 in India, due to climate change is quite alarming. Further, the net emissions from agriculture in carbon dioxide equivalent in 2014 in the world was as much as 5,241,761 thousand tonnes. China (707,640 thousand tonnes), India (626,864 thousand tonnes) and Brazil (441,905 thousand tonnes) account for the major quantum of net emissions from agriculture (FAO, 2016).

 

3.5 Market Constraints

A critical problem faced by India’s agriculture sector is the fragmented and distortions-ridden state of agricultural markets. One of the major reasons for low income of farmers is lack of competitive market structure, which is bereft of transparent price discovery system. Small and marginal farm holders lack the bargaining power to sell their produce at remunerative prices due to the exploitation by traders (arhatiyas) in the Agriculture Produce Marketing Committee (APMC) markets. Lack of aggregation of produce makes it uneconomical for farmers to transport their produce to the APMC markets for their sale. 

 GoI announces Minimum Support Price (MSP) in respect of 23 commodities. However, only few states like Punjab, Haryana and M.P.,  have strong procurement systems and FCI procures major quantities of wheat from these states (84.8 percent during Rabi Marketing Year 2020-21).

 

           4. Transforming Indian Agriculture:  Agenda for Reforms

An agenda for reforms to transform Indian agriculture is presented in the following sub-sections.

4.1 Doubling Farmers’ Income

GoI has envisioned the achievement of doubling farmers’ income (DFI) by the year 2024-25. The following seven-point strategy for DFI is mostly under implementation: (i) irrigation with focus on water-use efficiency, viz. “per drop more crop” (PDMC) through Pradhan Mantri Krishi Sinchayee Yojana (PMKSY); (ii) quality seed and soil health, (iii) investments in warehouses and cold chains; (iv) value addition through food processing; (v) electronic National Agriculture Market (e-NAM); (vi) increase in the coverage and effective implementation of Pradhan Mantri Fasal Bima Yojana (PMFBY); and (vii) promotion of ancillary activities like dairy, poultry, bee-keeping and fisheries. The strategy for DFI, involving increase in private investment by 6.62 per cent per annum from the base year 2015-16 at the national level, should also include among others: (a) promoting higher agricultural growth in less developed regions, including rainfed areas, with a focus on marginal and small holders; (b) strengthening livestock related activities and crop diversification to high value produce like horticulture, in line with market signals; (c) shifting priority focus to post-production management and the agricultural marketing system; (d) sizeable increase in institutional credit to farmers; (e) allocation of more resources by state governments towards minor irrigation; and (f) incentivising private corporate sector to participate in investments in agriculture (GoI, 2017). In order to achieve DFI, GoI can use income policy to protect the poor, free up prices for farmers, and allow private trade to stock and operate freely and have unhindered exports (Gulati and Hussain, 2017). What is also needed is the continuance of PM-KISAN, with possibly a higher allocation, along with top-up by states, on the lines of YSR-Rythu Bharosa-PM-KISAN of Andhra Pradesh.

 

 4.2 Irrigation and Water-use Efficiency

India is a water-stressed country, and the declining per capita availability of water in the country poses a major challenge to the growth of agriculture. Out of the country’s 4 percent share of global freshwater availability, the agriculture sector consumes about 78 percent share of water (Sharma, et al., 2018). However, while only 48.7 per cent of the net sown area in the country is irrigated, the depletion of groundwater, which accounts for about 60 per cent of the country’s irrigated area, has adverse impact on irrigation cost and crop productivity. Therefore,  implementation of  PMKSY and PDMC should create higher irrigation potential and ensure water-use efficiency.

 

The overall irrigation efficiency in India is observed to be low compared to global standards due to the use of conventional flood irrigation technique, practised in large parts of the country. In order to improve water-use efficiency of crop cultivation, the use of precision irrigation technologies needs to gain momentum. Water stress can be reduced and availability of water can be increased through cost-based water pricing. There is also a need to make a paradigm shift from use of input intensive technology to significantly enhancing input productivity, e.g., the use of water-saving technology like micro-irrigation, System of Rice Intensification (SRI), direct seeded rice, zero tillage, etc.

  4.3 Tech-driven agriculture

According to NITI Aayog (2018), Artificial Intelligence (AI) will have significant global impact on agricultural productivity at all levels of the value chain. AI and embedded systems in agriculture sector via smart irrigation system can result in the efficient use of water resources. Drip irrigation system can be fully automated using IoT, resulting in significantly higher crop yield due to much better water-use efficiency than traditional drip irrigation system. NITI Aayog and IBM have partnered to develop a crop yield prediction model using AI to provide real time advisory to farmers. Also, Microsoft in collaboration with ICRISAT, has developed an AI Sowing App. The app sends sowing advisories to participating farmers on the optimal date to sow. 

According to NASSCOM and Zinnov (2020), agri-tech start-ups are using technology drivers such as AI, machine learning (ML), robotics and satellite communication to serve farmers’ needs. The interface of agriculture with technology steered entrepreneurship is increasing competitiveness, leveraging digitisation and relying on innovation to solve varied challenges in the sector (Kant, 2021). There are 735 agri-tech start-ups in India which are enabling Indian agriculture to become future ready, and there is a need to scale up the agri-tech start-up ecosystem for the benefit of majority of farmers.

4.4 Agriculture Marketing Reforms

GoI’s vision of DFI signified a paradigm shift in agriculture policy from ensuring food security to income security of farmers, by maximising their gains through post-production activities. The enactment of Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC Act, 2020), Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 (FAPAFS Act, 2020) and Essential Commodities (Amendment) Act, 2020 (ECA, 2020), signified the ushering in of the long-awaited comprehensive  agri-marketing reforms. However, the Acts have since been repealed, in response to the year-long agitation by a section of farmers against the Acts. It is, therefore, imperative for the central and state governments, along with agriculture scientists, economists, farmers, agri-tech companies, corporate sector, and all stakeholders to start a consultative process to facilitate state governments to enact agriculture marketing reform Acts, and for GoI to enact a law facilitating easy inter-state movement of agri-commodities/ produce. Further, in order to develop an efficient nation-wide  agri-marketing system, e-NAMs need to be scaled up and made more efficient, and all private markets and accredited warehouses should be linked to e-NAMs.

4.5 Rural Infrastructure and Efficient Agri-Value Chains

Investment in rural infrastructure is a pre-condition to enable the acceleration of agricultural growth, creation of new economic opportunities, and generation of employment. It is, therefore, worth appreciating that the Union Budget 2021-22 has enhanced the allocation under Rural Infrastructure Development Fund (RIDF), administered by NABARD, by a whopping 33.3 percent to `40,000 crore over the allocation in the previous year’s Budget.

Further, setting up of mega food parks, integrated cold chains, food processing units, agro-processing clusters, and implementation of Operations Greens Scheme, under GoI’s comprehensive package of PM Kisan SAMPADA Yojana (PMKSY) , will not only provide a big boost to the growth of food processing sector in the country but also ensure higher income to farmers, while creating huge employment opportunities especially in the rural areas, reducing wastage of agricultural produce, and enhancing the export of processed foods. The Production Linked Incentive (PLI) Scheme for the food processing sector is a step in the right direction.

 India is the largest producer of milk in the world, having increased from 146.3 million tonnes in 2014-15 to 198.4 million tonnes in 2019-20 (GoI, 2021). The country is also the second largest fish producing country in the world, and fisheries is the fastest-growing (12 percent real GVA growth in 2018-19) sub-sector of agriculture and allied sector.  A focus on development of efficient dairy and fisheries value chains could significantly increase employment and improve the income of smallholder farmers.

4.6  Agriculture Export Reforms

India ranks among the top ten exporters of agricultural products in the world.  According to WTO’s World Trade Statistical Review 2021, the country’s share in global agricultural exports increased from 1.1 percent in the year 2000 to 2.2 percent in 2020, valued at $39 billion, In order to catch-up with Brazil ($89 billion) and China ($82 billion), India needs to bring about structural reforms in the agriculture sector, including a stable trade policy regime (Roy, 2021).

India’s agricultural exports experienced huge fluctuations during the period 2011-12 to 2020-21 (Figure – 3). The ten-year CAGR was -0.6 percent. During the first five-year period 2011-12 to 2015-16, the CAGR was -3.0 percent. The second five-year period (2016-17 to 2020-21) witnessed a positive CAGR to 2.4 percent.

CAGR:  2011-12 to 2020-21 = -0.6%; 2011-12 to 2015-16 = -3.0%; 2016-17 to 2020-21 = 2.4%

Source: Author’s calculations based on data accessed from Economic Survey, Government of India (various issues) and World Trade Statistical Review 2021, WTO

The Agriculture Export Policy (AEP), 2018 of GoI, aims at achieving an export target of $60 billion by 2022 and $100 billion within a few years, thereafter. This is indeed a humongous task, and achieving the target would involve a paradigm shift from a “business-as-usual” approach to a well-calibrated, comprehensive, strategic  and result-oriented agri-export policy and action plan.

 The agri-export strategy should include integration of value-added agri-produce with global value chains (GVC), by adopting the best agricultural practices involving productivity gains and cost competitiveness. Also, in order to boost exports of dairy products and make the dairy sector globally competitive, GoI needs to consider the development of Dairy Export Zones (DEZs) in collaboration with state governments (Roy, 2021). The AEP has recommended the establishment of Agriculture Export Zones (AEZs), to facilitate value addition of agri-commodities for increasing exports in a WTO compatible manner. In order to ensure higher income to farmers, FPOs need to be linked to AEZs to supply SPS-compliant agri-products. 

4.7  Climate Mitigation and Adaptation for Sustainable Agriculture Development

Climate Smart Agriculture (CSA) works to reconcile the objectives of sustainably increasing agricultural productivity and incomes, building resilience and adapting agriculture to climate change, and reducing and removing greenhouse gas emissions from agriculture (FAO, 2019). Drip irrigation is a CSA technology, which saves water and energy, while reducing GHG emissions. Expansion in the use of solar-powered AI-based drip irrigation systems across all states in India and for major crops, viz. rice, wheat, horticultural crops and sugarcane can be an integral part of a Water-Energy-Food (WEF) nexus approach to support water-use efficiency, use of renewable energy and mitigation of GHG emissions, food security and sustainable agriculture.

 Methane (CH₄) emissions contribute to a third of the current anthropogenic GHG warming. Paddy cultivation contributes about 15-20 percent of the total anthropogenic CH₄ emissions. Methods like System of Rice Intensification (SRI), drip irrigation, soil amendments, organic matter management, different tillage, rotation, and cultivar selection, can facilitate mitigation of methane emission (Roy, 2020).

 

4.8 Research and Development and Extension Services

The needs of farmers in terms of information and technology support have become more complex, due to the rapid pace of developments in the agriculture sector. India needs a vibrant, responsive, market oriented and globally competitive agricultural research ecosystem (NITI Aayog, 2017). Budgetary resources for R&D on seeds (HYV and GM), and agri-technology,  need to be enhanced significantly.  The private sector, too, needs to enhance investment in R&D. Further, there is a need to revitalise agriculture extension services by making them more relevant and useful in order to improve agricultural productivity. Also, efforts need to be made to enhance post-harvest processing and value-added activities at the farm. FPOs/ FPCs could be developed into alternative agencies for providing extension services to farmers.

4.9  Agriculture Credit

Adequate and timely availability of bank credit, at affordable rates of interest is essential to improve agricultural productivity and sustainability. The  focus needs be on ensuring increased credit flows to high-growth and high-value activities, viz. animal husbandry, dairy, and fisheries, along with horticulture, farm mechanisation, warehouses and cold chains, to farmers, FPOs and agripreneurs. It is imperative to increase the share of agriculture term loans in total agriculture credit disbursed, from the current 40 percent to 60 percent, to accelerate  capital formation in agriculture.

4.10        Risk Management

The PMFBY, which aims to provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crops as a result of natural calamities, pests and diseases, needs to be redesigned for timely and adequate support to farmers.  Futures markets provide a market mechanism to balance the imbalance of the supply-demand pattern of agricultural commodities. Also, the combination of futures and options can give market participants the benefit of price discovery of futures and simpler risk management of options. FPOs need to be encouraged to participate in futures and options trading of NCDEX.

 

     5. Conclusion 

An enabling environment for agricultural sustainability needs to be created through massive investment in irrigation, with a focus on water-use efficiency, enhancement in total factor productivity of crops, tech-driven agriculture,  climate-smart agriculture, creation of rural infrastructure, development of efficient agri-value chains, agri-marketing reforms, promotion of agri-exports, enhancing spending on R&D, credit innovations, and agri-risk management. Also, tenancy reforms need to be carried out by states. Effective implementation of these transformative reforms, could lead to sustainability of Indian agriculture, and facilitate the achievement of doubling farmers’ income by 2024-25, while mitigating agrarian distress. Reforms would create an ecosystem which promises to enable farmers to come out of the VUCA world.

 (This blog is drawn from paper published in Indian Economic Journal Special Issue of the 103rd Annual Conference of the Indian Economic Association)

References:

Agarwal, Bina. 2016. “Rethinking Agricultural Production Collectives: The Case for a Group Approach to Energise Agriculture and Empower Small Farmers” in C.Ramasamy and K.R.Ashok (Eds.) Vicissitudes of Agriculture in the Fast Growing Indian Economy: Challenges, Strategies and the Way Forward, Indian Society for Agricultural Economics, Academic Foundation, New Delhi.

FAO. 2016. State of Food and Agriculture 2016.

FAO. 2019. Climate-smart Agriculture and the Sustainable Development Goals

Government of India. 2017. Report of the Committee on Doubling Farmers’ Income, Volume II, Ministry of Agriculture and farmers’ Welfare, New Delhi.

Government of India. 2021. Economic Survey 2020-21, Vol.2, Ministry of Finance.

Gulati, Ashok and Siraj Hussain. 2017. “Chasing a Dream: Doubling Farmers’ Income by2022", Financial Express, August 28, 2017, Mumbai.

Kant, Amitabh. 2021. “Sowing Future Growth: Advantage Agritech for Farm  Sector Transformation.” Financial Express, January 15, 2021.

NABARD, 2018. NABARD All India Rural Financial Inclusion Survey 2016-17 (NAFIS)

NASSCOM and Zinnov. 2020. Indian Tech Start-up Ecosystem 2020.

NITI Aayog. 2017. India: Three Year Action Agenda 2017-18 to 2019-20, NITI Aayog, New Delhi.

 NITI Aayog. 2018. Discussion Paper: National Strategy for Artificial Intelligence. NITI Aayog, New Delhi.

 Roy, Debesh. 2020. “Green development: Strategising mitigation of agricultural methane emissions”, Financial Express,  August 24, 2020.

 Roy, Debesh. 2021. “Doubling Farmers’ Income: Increasing Agricultural Exports is Key.” Financial Express, January 12, 2021.

Sharma, Bharat R., Ashok Gulati, Gayathri Mohan, Stuti Manchanda, Indro Ray, and Upali Amarasinghe, 2018. Water Productivity Mapping of Major Indian Crops. NABARD & ICRIER

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[1] Based on data accessed from Press Note on Provisional Estimates of Annual National Income, 2020-21, National Statistical Office Ministry of Statistics & Programme Implementation,  Government of India, 31 May 2021.

[2] 2020-21 data is as per Second Advance Estimate of GDP, 26 February 2021, MoSPI, GoI.

Agriculture Marketing and Farmers’ Problems in India: Perspectives on Reforms and Doubling Farmers’ Income

 

Introduction

India’s target of achieving a $5 trillion economy by 2024-25 needs to be supported by a transformed and reformed agriculture sector, which would significantly improve the income of farmers. It is, therefore, imperative that the agriculture sector should support the objective by focusing on transformative reforms, while targeting an annual agriculture GVA growth of 5 per cent. In this lecture I will discuss the critical challenges being faced by Indian farmers in the existing agriculture marketing system, doubling farmers’ income, need for agriculture marketing reforms for making farming financially sustainable, development of rural infrastructure and efficient agri-value chains, agriculture export reforms,  and I would conclude the lecture by underscoring the need for comprehensive reforms in the agriculture sector with a high priority accorded to agri-marketing reforms, for doubling farmers’ income and mitigating agrarian distress.

 

Critical Challenges for Indian Farmers

The criticality of agriculture for sustainable and inclusive growth of the Indian economy can be gauged from the fact that, the sector provides employment to about 41.5 per cent of the total workforce in India, but contributes only about 15.5 per cent (2021-22) to the country’s real Gross Value Added (GVA)[1] . About 86 per cent of operational holdings in the country are in the small and marginal categories, and the average size of an operational holding is only 1.08 hectare (ha). Due to fragmentation and disorganisation, farmers face constraints in procuring inputs like seeds and fertilizers at reasonable prices, lack bargaining power in the market for realising better value for their produce, and have inadequate access to technology, extension services, market, credit and crop insurance. As a result, majority of the small and marginal farm holders are unable to realise optimal value from their farming operations, resulting in agrarian distress.

 

The average monthly income of an agricultural household during July 2012 to June 2013 was as low as INR 6,426, as against its average monthly consumption expenditure of INR 6,223 (GoI, 2017). As many as 22.5 per cent of the farmers live below the official poverty line. According to the NABARD All India Rural Financial Inclusion Survey (NAFIS) (NABARD, 2018), the average monthly income of agriculture households in India was INR 8,931 in 2016-17. Further, a wide variation was observed by NAFIS among states with respect to the average monthly income of agricultural households. States like Punjab (INR 23,133),  followed by Haryana (INR 18,496), Kerala (INR 16,927), Gujarat (INR 11,899) and Himachal Pradesh (INR 11,828) reported high income, which indicates that this sector has been making a sizeable contribution to the economy of the states. On the other hand, agricultural households from Jharkhand (INR 6,991), Andhra Pradesh (INR 6,920), Uttar Pradesh (INR 6,668), Bihar (INR 7,175), Tripura (INR 7,592), Odisha (INR 7,731) and West Bengal (INR 7,756) reported low average monthly income (NABARD, 2018).

 

According to the Report of the Committee on Doubling Farmers’ Income (DFI Committee, Chairman: Dr. Ashok Dalwai) (GoI, 2017), technology fatigue is manifesting in the form of yield plateaus, and India’s yield averages for most crops at global level do not compare favourably. At the same time, the costs of cultivation are rising. Further, there has been an alarming rise in the  magnitude of food loss and food waste. Finally, the markets do not assure the farmer of remunerative returns on his produce (GoI, 2017).

 

A critical problem faced by India’s agriculture sector is the fragmented and distortions-ridden state of agricultural markets. One of the major reasons for low income of farmers is unremunerative prices for their produce due to lack of a competitive market structure, which is bereft of transparent price discovery system. With majority of farmers belonging to the small and marginal category, they lack the bargaining power to sell their produce at remunerative prices in the Agriculture Produce Marketing Committee (APMC) markets.

 

More often than not, farmers are forced to sell their produce at unremunerative prices due to distress sales during the immediate post-harvest season, because of their lack of holding capacity, and the exploitation by traders (arhatiyas) in APMC markets. Also, in an open economy, sometimes the price shocks that emerge in global markets are imported into domestic markets.  Lack of aggregation of produce makes it uneconomical for farmers to transport their produce to the APMC markets for their sale.  APMC Acts require that farm produce to be sold only at regulated markets through registered intermediaries. Therefore, bereft of options for alternative and competitive marketing channels near the farm gate, small and marginal farm holders, on most occasions sell their produce at unremunerative prices.

 

Farmers lack knowledge about consumer demand across India, which is critical to develop efficiency in agriculture value chains. This is also influenced by various economic considerations, and on the technical and logistical capabilities to connect the produce, involving post-production activities of aggregation/assembly/pooling, sorting/ assaying/testing, transportation, food/agro-processing, storage, distribution and retail (GoI, 2017). There is also a lack of transparency in price discovery, which restricts returns to farmers. Marketing, as a support function, helps to direct the other activities, for greater optimisation of the costs involved and for improved value realisation (ibid.).

 

GoI announces Minimum Support Price (MSP) in respect of 23 commodities. However, wheat and rice are the major commodities which are procured by state agencies at MSP, from a few states.  Hence, 92.7 per cent of procurement of wheat  of 433.4 lakh metric tonnes (LMT) by state agencies and FCI, during Rabi Marketing Year 2021-22, was from Punjab (30.5 per cent), M.P. (29.6 per cent), Haryana (19.6 per cent) and U.P. (7.4 per cent). In case of rice, Punjab (22.6 per cent), Telangana (15.7 per cent) and Andhra Pradesh (9.4 per cent), together procured 47.7 per cent of the total procurement of 601.85 LMT during Kharif Marketing Season 2020-21[2]. However, the same is not true in respect of other states and other commodities like pulses and oilseeds, and farmers have been found to receive prices below MSP.  Table 1 shows that during October 2021-February 2022, the prices of arhar in the APMC markets of major producing states, viz. Maharashtra, Madhya Pradesh, Karnataka and Gujarat, as also the all-India average (except January 2022) prices remained below MSP.  In M.P. which is the second largest producer of arhar, the prices ranged between 64.3 per cent of MSP in October 2021 and 93.5 per cent in December 2021.

 

 

Table 1

Wholesale Prices of Arhar as a Percentage of MSP

	Oct-21	Nov-21	Dec-21`	Jan-22	Feb-22
Maharashtra	94.2	91.1	90.7	95.1	98.2
Madhya Pradesh	64.3	70.4	93.5	84.4	86.7
Karnataka	99.6	94.3	89.7	95.1	96.1
Gujarat	89.4	83.5	87.2	92.4	88.0
All-India average	94,1	85.8	89.6	102.7	96.8

Source: Prepared by the author based on data accessed from agmarknet.in

 

As explained by noted agricultural economist Dr. Ashok Gulati, asking for legal status for MSP is untenable as the Centre does not have the wherewithal to buy all the 23 commodities, and private players fearing legal action would shun buying. Mandating MSP would lead to disappearance of export markets, disruption in domestic supply chain, unmanageable surpluses and an unaffordable subsidy burden (Kumar, 2020). In the current scenario of complex demands in a surcharged atmosphere, a tectonic shift to a highly decentralised food and agriculture management, giving more legal authority, financial support and responsibilities to states may be an option worth considering (ibid.). Interestingly, the Commission for Agricultural Costs and Prices (CACP) in its Kharif Policy 2018-19 had suggested a legislation conferring on farmers ‘the Right to Sell at MSP.’ The DFI Committee observes, that though MSP is an important intervention by the government, it is not sufficient by itself. The honouring of the MSP through its use in procurement is a more substantive condition in making MSP mechanism effective. Hence, there is need for a bouquet of procurement tools that can cater to different commodities in different ways (GoI, 2017).

 

Doubling Farmers’ Income

GoI has envisioned the achievement of doubling farmers’ income (DFI) by the year 2024-25. However, this is a humongous task, and more so in the context of the pandemic.  The following seven-point strategy for DFI is mostly under implementation: (i) irrigation with focus on water-use efficiency, viz. “per drop more crop” (PDMC) through Pradhan Mantri Krishi Sinchayee Yojana (PMKSY); (ii) quality seed and soil health, (iii) investments in warehouses and cold chains; (iv) value addition through food processing; (v) electronic National Agriculture Market (e-NAM); (vi) increase in the coverage and effective implementation of Pradhan Mantri Fasal Bima Yojana (PMFBY); and (vii) promotion of ancillary activities like dairy, poultry, bee-keeping and fisheries.

 

The strategy for DFI, involving increase in private investment by 6.62 per cent per annum from the base year 2015-16 at the national level, also includes among others: (a) promoting higher agricultural growth in less developed regions, including rainfed areas, with a focus on marginal and small holders; (b) strengthening livestock related activities and crop diversification to high value produce like horticulture, in line with market signals; (c) shifting priority focus to post-production management and the agricultural marketing system; (d) sizeable increase in institutional credit to farmers; (e) allocation of more resources by state governments towards minor irrigation; and (f) incentivising private corporate sector to participate in investments in agriculture (GoI, 2017). In order to achieve DFI, GoI can use income policy to protect the poor, free up prices for farmers, and allow private trade to stock and operate freely and have unhindered exports (Gulati and Hussain, 2017). What is also needed is continuance of PM-KISAN, with a reasonably higher allocation, along with top-up by states, on the lines of YSR-Rythu Bharosa-PM-KISAN of Andhra Pradesh.

 

Agriculture Marketing Reforms: Making Farming Financially Sustainable

A series of reforms in quick succession was undertaken by GoI, beginning from 2002, in response to the changes in trading environment during 1990s. The reforms included the Removal of (Licensing Requirements, Stock Limits and Movement Restrictions) on Specified Foodstuffs Order, 2002 and 2003, under which paddy/rice, coarse grains, sugar, edible oilseeds and edible oils, pulses, gur, wheat products and hydrogenated vegetable oil or vanaspati were removed from the list of Essential Commodities Act (1955).  Further, the prohibition on futures trading in agricultural commodities was removed in 2003. While these were important reforms, they did not include agriculture marketing reforms, as agriculture marketing is a state subject, and, hence, it required reform by respective states. Nevertheless, GoI undertook several initiatives to facilitate agriculture marketing reforms in states. The Expert Committee set up in by Ministry of Agriculture, GoI, in its report submitted on 29 June 2001, suggested various legislative reforms as well as the reorientation of the policies and programmes for the development and strengthening of agricultural marketing in India. The committee noted that there were stringent controls on the storage and movement of several agricultural commodities, which were acting as a disincentive to farmers, trade and industries. The State Agricultural Produce Marketing Regulations Act and the Essential Commodities Act had to be amended to remove restrictive provisions, preventing the emergence of an efficient and competitive marketing system. Further, it was felt that a negotiable warehousing receipt system could be  introduced through appropriate legal change, for agricultural commodities to enhance institutional lending to the agricultural marketing sector, and to improve price-risk management

 

In view of the foregoing, the Ministry of Agriculture set up a committee under the chairmanship of K M Sahni, which drafted and finalised the model legislation after holding discussions with the officials of state governments. The model Act, viz. the State Agricultural Produce Marketing (Development and Regulation) Act, 2003, was shared with all state governments for implementation. Some of the major provisions of the Model Act are: (i) more than one market can be established by private persons, farmers, cooperatives and consumers in a market area; (ii) there will be no compulsion on the growers to sell their produce through existing markets administered by the Agricultural Produce Market Committee (APMC); (iii) a new chapter on contract farming was added to facilitate and promote smooth progress in contract farming; (iv) provision made for the direct sale of farm produce to contract farming sponsor from farmers’ field without the necessity of routing it through notified markets; (v) provision made for imposition of single point levy of market fee on the sale of notified agricultural commodities in any market area and discretion provided to the state governments to fix graded levy of market fee on different types of sales; (vi) registration for market functionaries provided to operate in one or more than one market areas; and (vii) provision made for the purchase of agricultural produce through private yards or directly from agriculturists in one or more than one market area (Chand, 2016).

 

A path-breaking agriculture marketing reform initiative by GoI is the electronic National Agriculture Market (e-NAM), which envisages setting up of a common e-market platform that was initially be deployed in 585 regulated wholesale markets in states/union territories desirous of joining the e-platform. The e-NAM is expected to lead to significant benefits to farmers through higher returns, while benefitting buyers through lower transaction costs, and consumers through stable prices. It is also expected to facilitate the emergence of integrated value chains in major agricultural commodities across the country, and encourage the setting up of scientific storage and movement of agri-commodities. Smallholder farmers can benefit if they were to find ways for aggregating produce on their own, bypassing the arhatiya and even the local mandi in the process. This is where farmer producer organisations (FPOs)/ farmer producer companies (FPCs) can play a key role, by facilitating aggregation and creation of volumes that is intrinsic to the success of e-NAM. The government needs to incentivise and regulate the development of FPOs, and not seek to form or control them directly (Gulati et al, 2020). However, it has been observed that creating a seamless, unified national market for agriculture produce, as e-NAM is supposed to do, even a state-wide market, has been difficult, due to resistance from existing market players. The success of e-NAM would depend on GoI’s efforts to influence state governments to dismantle the existing structure and operations of APMC mandis by amending the APMC Acts and implement e-NAM as seamless national hi-tech markets competing with each other, and ultimately benefitting the farmers.

 

Better price realisation for farmers will serve as an important incentive for raising productivity and production, and in turn lead to higher growth of output. In many states, farm harvest prices prevail below the minimum support price (MSP) in the harvest period and shoot up subsequently. e-NAM will help check such market imperfections. Some states like Punjab and Haryana desperately need diversification in crop pattern away from paddy–wheat rotation. However, this has not been happening due to unattractive market for alternative crops. e-NAM is expected to promote market-driven diversification and reduce dependence of farmers in these states on MSP and public procurement. The success of e-NAM in improving competitiveness and integrating pan-India markets will require assaying facilities created in various markets to ascertain quality traits as quality variations are quite large in agricultural commodities. Also, each mandi will require forwarding agents to handle the produce for buyers from outside the mandi (Chand, 2016).

 

According to Dr. Ramesh Chand (2016), the price dispersion at farm-gates and between them and wholesale markets is large for most crops. He has further emphasized that there is a need for a  mind-set shift that looks at market-linked realisation, instead of administered returns to farms to take agriculture into enterprise mode, and goes on to assert that the marketing system has to develop options that address the price dispersion between wholesale markets and farm-gate. This will lead to market led price realisations and not gratuitous cost-plus price mechanism only. Farmers’ well-being is directly linked to their ability to carry out exchange at markets of choice (Chand, 2016).

 

Though e-NAM will improve competitiveness in markets through larger participation of buyers and more transparent system of bidding, it should not be considered a panacea for all deficiencies in agricultural markets. e-NAM necessitates some reforms proposed in model APMC Act whereas it will not address some vital issues having bearing on conduct and performance of market (Chand, 2016).

 

There are four important areas for agri-marketing reforms, which are not part of e-NAM, viz: (i) direct sale by farmers to buyers, processors, or, contract marketing without bringing produce to mandi; (ii) establishment of private markets with treatment at par with APMC. Even under e-NAM, market committee will continue to hold its monopoly power in terms of offering a platform for sale/ purchase; (iii) removal of legal barriers to entry of organised and modern capital and investments into agricultural marketing.; and (iv) rationalisation of market fee, commission charges, cess and taxes and development charges (Chand, 2016).

 

It is imperative to work out strategies to capture the totality of marketable surpluses generated by the farmers. This calls for the creation of an enabling market environment with in-built mechanism to absorb as high a percentage as possible or the minimum 60 per cent of the surpluses, through an efficient market environment (GoI, 2017). Further, there is a need for information at regular intervals to optimise the agri-business value chain system. The information would not only help to make market linked decisions during crop planning, input sourcing and harvest time-lines, but also provide due cause for the right sized and rightly located infrastructure, such that capacity creation is with market flow and throughputs in mind (GoI, 2017).

 

GoI’s vision of DFI signified a paradigm shift in agriculture policy from ensuring food security to income security of farmers, by maximising their gains through post-production activities. The enactment of Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC Act, 2020), Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 (FAPAFS Act, 2020) and Essential Commodities (Amendment) Act, 2020 (ECA, 2020), was an attempt by GoI, to usher in a comprehensive  agri-marketing reforms. However, the Acts have been repealed, in response to the year-long agitation by a section of farmers against the Acts. It is, therefore, imperative for the central and state governments, along with agriculture scientists, economists, farmers, agri-tech companies, corporate sector, and all stakeholders to start a consultative process to facilitate state governments to enact agriculture marketing reform Acts, and for GoI to enact a law facilitating easy inter-state movement of agri-commodities/ produce. Further, in order to develop an efficient nation-wide  agri-marketing system, e-NAMs need to be scaled up and made more efficient, and all private markets and accredited warehouses should be linked to e-NAMs.

 

The prices of agricultural commodities are generally at their lowest during the harvest season as the supply far exceeds the immediate, short-term demand, and increase significantly during the lean season when the demand exceeds the supply. This adversely affects the farmers who realise lower prices of their produce in the harvest season. Futures markets provide a market mechanism to balance this imbalance of the supply–demand pattern of agricultural commodities. Trading in futures not only provides price signals to the market of today, but also of months ahead, and affords guidance to sellers (farmers/ growers/ processors) and buyers (consumers) of agricultural commodities in planning ahead and, in financing and marketing commodities from one season to the another. While commodity exchanges in India were allowed only futures trading in commodities, the Securities and Exchange Board of India (SEBI) has, subsequently, laid out rules for the introduction of commodity options. The launch of options will boost overall market participation and also complement the existing futures and make the commodities market more robust and efficient. The combination of futures and options can give market participants the benefit of price discovery of futures and simpler risk management of options. However, SEBI has banned futures and options trading in major agriculture commodities, viz. chana, mustard seed, soya bean and its derivatives, crude palm oil, moong, paddy (Basmati) and wheat on 21 December 2021, for a period of one year, as part of GoI’s efforts to curb inflation. While the impact of a ban on futures and options on curbing inflation is debatable, it prevents market participants, most importantly the farmers in the spot market, of a crucial source of price information. Spot markets (viz. the mandis) for agricultural commodities are fragmented across geographical locations, and futures prices provide a critical reference point for pricing in these spot markets[3].

 

Development of Rural Infrastructure and Efficient Agri-Value Chains

Investment in rural infrastructure is a pre-condition to enable the acceleration of agricultural growth, creation of new economic opportunities, and generation of employment. The Union Budget 2021-22 had made available the Agriculture Infrastructure Fund (AIF) to APMCs for augmenting their infrastructure facilities. Also, 1,000 more APMC  mandis were to be integrated with e-NAM. There are about 1.7 crore farmers registered in the existing 1,000 e-NAMs, which have displayed transparency and competitiveness into the agricultural market. The AIF, with a corpus of INR 1 lakh crore was created by GoI under  Atma Nirbhar Bharat Abhiyan, for the development of farm-gates and aggregation points, and post-harvest management infrastructure. The scheme involves credit support by banks and financial institutions to primary agricultural credit societies (PACS), marketing cooperative societies, farmer producer organisations (FPOs),  self-help groups (SHGs), farmers, joint liability groups (JLG), multipurpose cooperative societies, agri-entrepreneurs, startups and central/state agency or local body sponsored public-private partnership projects. Interest subvention and credit guarantee for loans up to INR 2 crore is also available to eligible borrowers.

 

Further, setting up of mega food parks, integrated cold chains, food processing units, agro-processing clusters, and implementation of Operations Greens Scheme, under GoI’s comprehensive package of PM Kisan SAMPADA Yojana (PMKSY) , will not only provide a big boost to the growth of food processing sector in the country but also ensure higher income to farmers, while creating huge employment opportunities especially in the rural areas, reducing wastage of agricultural produce, and enhancing the export of processed foods. The Production Linked Incentive (PLI) Scheme for the food processing sector is a step in the right direction.

 

India is the largest producer of milk in the world, having increased from 146.3 million tonnes in 2014-15 to 198.4 million tonnes in 2019-20 (GoI, 2021). Dairying is an important secondary source of income for millions of rural households engaged in agriculture. The success of the dairy industry has resulted from the integrated co-operative system of milk collection, transportation, processing and distribution, conversion of the same to milk powder and products, to minimize seasonal impact on suppliers and buyers, retail distribution of milk and milk products, sharing of profits with the farmer, which are ploughed back to enhance productivity and needs to be emulated by other farm produce/producers. A focus on dairy value chain could significantly improve the income of smallholder farmers. Therefore, in order to double income of farmers, it is important to focus on dairy value chain through FPOs/ FPCs and cooperatives.   India is also the second largest producer of fish, fruits and vegetables in the world. Promotion of value chains for horticulture, poultry and fisheries, involving FPOs/ FPCs, could significantly give a fillip to the income of small and marginal farmers.  

 

Agriculture Export Reforms

India ranks among the top ten exporters of agricultural products in the world.  According to WTO’s World Trade Statistical Review 2021, the country’s share in global agricultural exports increased from 1.1 percent in the year 2000 to 2.2 percent in 2020, valued at $39 billion, In order to catch-up with Brazil ($89 billion) and China ($82 billion), India needs to bring about structural reforms in the agriculture sector, including a stable trade policy regime (Roy, 2021).

 

The Agriculture Export Policy (AEP), 2018 of GoI, aims at achieving an export target of $60 billion by 2022 and $100 billion within a few years, thereafter. This is indeed a humongous task, and achieving the target would involve a paradigm shift from a “business-as-usual” approach to a well-calibrated, comprehensive, strategic  and result-oriented agri-export policy and action plan.

 

The agri-export strategy should include integration of value-added agri-produce with global value chains (GVC), by adopting the best agricultural practices involving productivity gains and cost competitiveness. Also, in order to boost exports of dairy products and make the dairy sector globally competitive, GoI needs to consider the development of Dairy Export Zones (DEZs) in collaboration with state governments (Roy, 2021). The AEP has recommended the establishment of Agriculture Export Zones (AEZs), to facilitate value addition of agri-commodities for increasing exports in a WTO compatible manner. In order to ensure higher income to farmers, FPOs need to be linked to AEZs to supply SPS-compliant agri-products. 

 

Conclusion

The full benefit from linking agricultural markets in India and putting them on electronic platform will be available to farmers when a single trading license is valid across the country and when a farmer gets the option to sell her/his produce in any market throughout the country.

 

The unfinished agenda for agri-reforms would include pursuing tenancy reforms, significantly raising R&D spending on modernisation of agriculture through artificial intelligence and blockchain technology for increasing crop productivity and resource-use efficiency, strengthening of agri-tech start-up ecosystem, and skilling of farmers who could be taken out of farming to be gainfully employed along efficient agri-value chains. Further, inclusion of agri-marketing in the Concurrent List of the Constitution of India, needs to be thoroughly debated nationally by all stakeholders and prioritised by the government. Effective implementation of comprehensive agricultural reforms, with a high priority accorded to agri-marketing reforms, could lead to sustainability of Indian agriculture, and facilitate the achievement of doubling farmers’ income by 2024-25, while mitigating agrarian distress.

References

Chand, Ramesh. (2016). “e-Platform for National Agricultural Market”, Economic & Political Weekly, July 9, 2016 vol lI no 28

 

Government of India, (2017). Report of the Committee on Doubling Farmers’ Income, Volume IV, Ministry of Agriculture and farmers’ Welfare, New Delhi.

 Government of India, (2021). Economic Survey 2020-21, Vol.2, Ministry of Finance.

 Gulati, Ashok and Siraj Hussain, (2017. “Chasing a Dream: Doubling Farmers’ Income by2022", Financial Express, August 28, 2017, Mumbai.

 Gulati, Ashok, Devesh Kapur and Marshall M Bouton, (2020). Reforming Indian Agriculture. Economic and Political Weekly, March 14, 2020 Vol. LV No. 11.

 NABARD, (2018). NABARD All India Rural Financial Inclusion Survey 2016-17.  

 Nanda Kumar. T.,  (2020). “Mandatory Minimum Support Price (MSP): Watering a dangerous idea”. Financial Express, December 8, 2020.

 Roy, Debesh, (2021). “Doubling Farmers’ Income: Increasing Agricultural Exports is Key.” Financial Express, January 12, 2021.

 

(This paper was published in Arthabeekshan  - Journal of Bengal Economic Association - Vol. 31, Nos. 1&2, June & Septemnber 2022)

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[1] Second Advance Estimates of National Income 2021-22, National Statistical Office,  Ministry of Statistics and Programme Implementation, Government of India

[2] Source: Food Corporation of India

[3] https://www.bloombergquint.com/opinion/the-ban-on-agri-commodities-futures-is-weak-in-law-and-economics (accessed on 28 February 2022).

Promoting Organic Food Exports: Opportunities and Challenges

 The 20^th edition of the Organic World Congress (OWC), being hosted at Rennes, France, is  scheduled to be held virtually during 6-10 September 2021. The OWC is expected to bring together more than 2,500 organic stakeholders, farmers, researchers and policymakers to address questions  around resilience, societal transformation, health, and food sovereignty.  Held once in three years, the key priorities of OWC, which is the world’s largest organic gathering, are: (i) innovations to stimulate farmer conversion to organic – increase nutritional revenues from fields while maintaining ecosystem vigour; (ii) organic systems are tied to the living soil and should be enhanced to preserve and develop biodiversity as well as plant and animal integrity; (iii) the organic agriculture movement inspires healthy food systems and a culture of sustainability; (iv) organic agriculture is forward-looking and achieves innovation through the melding of tradition and science; (v) organic agriculture serves as an inspiration for the transformational changes needed within the agricultural sector; (vi) it is time to scale up and harness the benefits reaped from sustainable farming; and (vii) offer alternatives to global challenges and maximize positive impacts on people and the planet.

According to the Research Institute of Organic Agriculture FiBL, organic land is estimated to constitute 1.5% of global agricultural land. Australia had the largest area (35.69 million ha) in the world under organic agriculture in 2019, followed by  Argentina (3.67 million ha), Spain (2.35 million ha), the US (2.33 million ha), India (2.30 million ha), France (2.24 million ha), China (2.22 million ha), Uruguay (2.14 million ha), Italy (1.99 million ha), and Germany (1.61 million ha). These ten countries constitute 75% of the world’s organic agricultural land. India had the highest increase in land under organic cultivation in 2019 by 0.36 million ha, compared to 0.29 million ha in the US and 0.21 million ha in France. The area under organic farming in India grew at a CAGR  of 15.6% during the 10-year period up to 2019.

Traditional farming in India was by default, organic. However, Green Revolution was achieved due to the use of chemical inputs like fertilizers and pesticides, which led to significant  improvement in crop yields and attainment of food security in the country. But, overuse and disproportionate use of chemical fertilizers and pesticides had adverse effects on soil health, groundwater  and consumer health. There has, however,  been a growing demand for organic food products both domestically and globally, and there is growing awareness about the need to protect soil and consumer health. While consumption of health and wellness organic products in India is estimated to grow at a CAGR of 11.1% (2015-20), organic packaged food and organic beverages grew at CAGRs of 12.1% and 15%, respectively.

India is a net exporter of organic products. One of the objectives of India’s Agriculture Export Policy, 2018 (AEP),  is to promote novel, indigenous, organic, ethnic, traditional and non-traditional agri products exports.  Therefore, it is indeed heartening to note that India’s exports of organic farm products touched a record $1,040 million, having  surged 51% during FY 21 over that of the previous year, while overcoming Covid-induced supply chain bottlenecks.

Madhya Pradesh is the largest producer of organic food in India, at 0.95 million metric tonnes (MMT), in 2019-20, followed by Maharashtra at 0.91 MMT. These two states together accounted for 69.2% of total organic production in India at 2.67 MMT.

Oilseeds production at 1.07 MMT accounted for 40% of total organic production. There is a need to focus on production of processed food, cereals, pulses, fruits, vegetables,  medicinal plants, tea and coffee, in view of a steady increase in consumption demand in India and abroad. It is, therefore,  imperative to develop a comprehensive policy on organic food processing to promote exports.

Sikkim was the first fully organic state. But the state has witnessed some decline in yields following conversion to organic farming. However, there is a need to promote and develop organic agriculture in Sikkim, Eastern and North Eastern Regions, Uttarakhand, Jammu & Kashmir  and Ladakh, which have good potential for organic production and exports.  According to the AEP ‘Amul’ style cooperatives need to be developed in the Eastern and North Eastern states, to promote exports of organic products.

The share of organic exports to organic production in India is estimated at 23.3%. With a steady increase in exports and increasing potential for exports, it is possible to raise the share of organic exports  to 30-35% within the next five years The share of processed food in organic exports in terms of value in USD, is the highest at 45%, followed by oilseeds (13.3%), cereals & millets (8.2%) and tea (7.2%). M.P. has the highest share of organic exports at 35.6%, followed by Gujarat (10.9%), and Maharashtra (10.1%). The US has the highest share of India’s organic exports at 51.3%, followed by the EU (36.4%).

Global trade in organic products is dependent on the recognition of standards and processes by the importing countries. To counter this barrier, the EU, the US and other countries have entered into equivalence arrangements whereby a country or region may unilaterally or bilaterally recognise the standards, certification process, label, etc., of its trading partner. Seventy-two countries, including India, have fully implemented organic regulations.

Agricultural & Processed Food Products Export Development Authority (APEDA) had developed regulations for the export of organic produce in 2002, viz. the National Programme for Organic Production (NPOP). The United States Department of Agriculture (USDA) has recognized NPOP conformity assessment procedures of accreditation as equivalent to that of NOP of the US. APEDA is also in the process of bilateral equivalence arrangements with South Korea, Taiwan, Canada, Japan, and other countries.

The Ministry of Agriculture and Farmers’ Welfare, GoI,  has established the Participatory Guarantee System for India (PGS-India), which is a self-certification process to encourage small and mid-sized farmers to take up organic farming. The total of PGS-certified producers in India is 1.08 million, which is the highest in the world. India is home to 30% of total certified organic producers in the world, and there are export opportunities for value added fruits and vegetables, dairy products, processed livestock, and ready-to-eat food, as they are in demand in the US, the EU, and the UK, which are India’s major export destinations.

There is a need to develop Organic Clusters (OC) and Organic Product Export Zones (OPEZ), providing common infrastructure for processing, production, certification and export of organic food products. Investments in logistics and connectivity of OC and OPEZ to ports and airports too need to be prioritised. Farmer Producer Organisations  (FPOs) could be linked to OC or OPEZ, which could facilitate significant increase in income of small and marginal farm holders. Further, there is a need to promote  “Jaivik Bharat” certification of organic food,   through diplomatic efforts. Product innovations through R&D could be another important strategy to promote exports of organic products.

Participation by India’s policy makers, researchers, organic exporters and farmers at the OWC could certainly be a good opportunity to learn from global best practices for the development and export of organic food products.