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Daily News Simplified - DNS

04 06 20 Notes

SL. NO. TOPICS

THE HINDUPAGE NO.

1 In the Himalayan stare down, the dilemmas for Delhi (Article) 06

2 Time to discontinue free power for farmers (Article) 07

3 Seven to eleven 06

4 Cabinet nod for Agri-market reforms 10

Dated: 04-June-2020 DNS Notes

Title 1. In the Himalayan stare down, the dilemmas for Delhi (Article) (The Hindu – Pg. 6)

Syllabus Mains: GS Paper II – International RelationsTheme India – China Border standoff Highlights

Context: The author highlights that the growing number of disputes on the India-china border by the Chinese troops indicate new age of territorial aggression against India. The present standoff is unprecedented in its scope and manner. He further focuses on the reasons behind the present aggression and throws light on the limitations of China in such standoffs and what strategy India needs to pursue.

Why Chinese escalation now

China wants to distract the world from COVID-19 crisis for which it is being held responsible.

It is a reaction to India’s political rhetoric on the Aksai Chin after the Jammu & Kashmir reorganisation in August last year.

India is also carrying out infrastructural development along LAC.

China’s geopolitical view of the region. China’s CPEC passes through the POK and India’s criticism of it.

Under Xi Jinping China has moved away from the principle of peaceful rise towards asserting itself as the next superpower.

This is reflected in China engaging itself on multiple fronts like handling COVID crisis at home, crackdown in Hong Kong and Escalation on India-China border .

China’s limited scope military expeditions on the long-contested border is cost effective for the PLA given the ever-growing conventional military superiority that it enjoys with India. (Such skirmishes won’t provoke nuclear warfare)

Further China thinks that India will overlook such small standoffs in order to avoid further escalation of the issue.

However the author says that the more New Delhi overlooks them, the more Beijing would be tempted to repeat them. These considerations lie at the heart of India’s China dilemma.

Limits on China’s adventurism

There are several places along the several thousand kilometre long LAC where the PLA is militarily weak, the Indian Army has the upper hand, and, therefore, a tit-for-tat military campaign could be undertaken by India

Second, while China enjoys continental superiority over India, maritime domain is China’s weak spot, in particular China’s commercial and energy interest to which the maritime space is crucial.

China’s close to $100 billion trade with India will also be under threat if the border conflict is further escalated.

Way forward


The time has come to checkmate China’s military aggression.

India should get more serious about finalising a border agreement with China .

India should not accept Beijing’s attempts at land grabs, or military intimidation.

That China is a rising superpower located next door to us is a reality, but how we deal with that reality is a choice we must make as a nation.

Personal Notes

Title 2. Time to discontinue free power for farmers (Article) (The Hindu Pg. No. 8)

Syllabus Prelims: Economy Mains: GS Paper III – Economy

Theme Power subsidy Highlights

Context: Recently, the Centre has decided to increase the borrowing limit of the State Governments to deal with the COVID-19 pandemic. However, in order to avail enhanced borrowing limit, the State Governments are required to implement a number of structural reforms. One of the significant reforms pushed by the Central Government is doing away with the free electricity to the farmers and replacing it with the Direct Benefits Transfer for certain targeted beneficiaries only. This has been a proposed reform since more than 15-20 years to solve the ailing problems of Indian agriculture as well as power sector. However, since it is politically sensitive, state governments have been reluctant to bite the bullet.

Understanding the Power SubsidyThe Power Sector has 3 distinct segments- Power Generation, Transmission and Distribution. Most of the distribution network is still managed by the State Distribution companies (DISCOMs). Usually, these DISCOMs do not enjoy operational flexibility with respect to setting the power tariffs. The State Governments usually interfere in fixing the power tariffs. Accordingly, the State Governments dictate the tariffs in a way that caters to its vote bank. For example, some of the State Governments provide electricity at subsided rates to all the farmers, irrespective of their land holdings. Such Universal subsidies are often distortionary and regressive in nature.

ADVERSE IMPACT OF POWER SUBSIDY

Agriculture

Regressive: Availed mainly by large farmers. Less benefit for the small and marginal farmers who constitute 86% of total farmers.Soil Fertility: Gives scope for over Irrigation leading to decline in the soil fertility in the long run.Decline in Water Table: The over-irrigation leads to decline in ground


water levels. Promotes cultivation of Water-Intensive Crops: The subsidized power incentives more production of water intensive crops such as Rice, Wheat, Sugarcane etc. Less emphasis on cultivation of Pulses and Oilseeds.

DISCOMs

Higher Losses for the DISCOMs. Poor Financial Position of DISCOMs --> Less investment in

maintenance of distribution lines--> Higher Aggregate Transmission and Commercial Losses (AT&C). Presently, it is as high as 23%.

Vicious cycle: Power Subsidies--> Higher Losses--> Higher AT&C losses--> Poor Financial Position.

Impact on other crucial sectors

Entire Economy: Total Debt of the DISCOMs has increased to around Rs 2.6 lakh crores--> Higher NPAs of the Banks--> Decrease in Credit Creation--> Slowdown in Economy.Power Generation Companies: DISCOMs owe around Rs 92,000 crores to the power generating companies--> Poor Financial Position of power producers--> Less Investment in Power generation.Industries: Loss suffered by DISCOMs through power subsidy given to farmers is compensated by increasing the power tariffs for the Industries--> Cross-Subsidization of power--> Higher losses to the Industries--> Constraint for Make in India

Way forwardThe replacement of power subsidy with the DBT is politically difficult exercise for the States. But, considering the nature of impact of Power subsidy on Agriculture, Power Sector, Financial Sector and as well as entire Indian economy, this seems the best way forward.

Personal Notes


Title 3. Seven to eleven (The Hindu – Pg. 10) Syllabus Prelims: International RelationsTheme G11 Highlights

Context: US President Donald Trump has said that the G7 grouping is an outdated one and has proposed a new group known as the G11 group.

G 11

• G7 Countries + India , Australia, South Korea and Russia

G8 + 5

G8 plus + India, China, Brazil, South Africa and Mexico

What is the G7?The G7 (or Group of Seven) is an organization made up of the world's seven largest so-called advanced economies: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.The group regards itself as "a community of values", with freedom and human rights, democracy and the rule of law, and prosperity and sustainable development as its key principles. "D10" clubClub of democratic partners, including G7 countries — UK, US, Italy, Germany, France, Japan and Canada — plus Australia, South Korea and India will aim to create alternative suppliers of 5G equipment and other technologies to avoid relying on China

Personal Notes

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Title 4. Cabinet nod for Agri-market reforms (Page number 10) Syllabus Prelims: Economy

Mains: GS Paper III – Economy Theme Agriculture marketing reforms Highlights

Context: Recently, in order to deal with the COVID-19 pandemic, the Union Finance Minister had announced the 3rd tranche of measures to introduce various reforms in the Agricultural sector. The most significant reforms included:

1. Amendment to the essential commodities Act to enable better price realisation for farmers.2. Agriculture Marketing Reforms to provide marketing choices to farmers3. Legal Framework for Contract Farming

These reforms had been recommended by number of committees including the Committee on Doubling Farmers’ Income headed by Ashok Dalwai.

Now, yesterday, the Union Cabinet has finally given approval for the Economic Stimulus for agriculture sector. The following decisions have been taken:

1. Promulgation of the Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance to promote barrier free trade in agricultural produce.

2. Promulgation of The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 to promote contract farming.

3. Approval of the Amendments proposed to the Essential Commodities Act.

Governance and Administrative Reforms

1. Amendments to Essential Commodities Act to enable better price realisation for farmers


Essential Commodities Act and its rationale

The Essential Commodities Act was enacted in 1955 to make available certain commodities to the consumers at fair prices. It is used by the Government to regulate the production, supply and distribution of commodities which are declared as essential under the act.

The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products. The Central Government may add or remove a commodity from the schedule in consultation with the State Governments.

For instance, in march 2020, the Union Government declared masks and hand-sanitisers as essential commodities under the Essential Commodities Act, 1955 . This was done in order to ensure that they are available to people at the right price and in the right quality.

How does it work?

If the Centre finds that a certain commodity is in short supply and its price is increasing, it can notify stock-holding limits on it for a specified period. Anybody trading or dealing in a such a commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity. This improves supplies and brings down prices. How Essential Commodities Act hinders the agricultural marketing?

Fails to realize stocking is essential: The fear of bringing the agricultural commodities under the act has prevented the traders and processors from undertaking bulk procurement of agricultural commodities during bumper harvest season. Hence, the increase in the agricultural production has not translated into higher income levels. Further, since almost all crops are seasonal, ensuring round-the-clock supply requires adequate build-up of stocks during the season.

Poor investment in Storage infrastructure: With frequent stock limits, traders have not invested in better storage infrastructure.

Adverse impact on Food Processing Industry: Food processing industries need to maintain large stocks to run their operations smoothly. Stock limits curtail their Operations. In such a situation, large scale private investments are unlikely to flow into food processing and cold storage facilities.

Impact on agriculture exports: Whenever the Government declares an agricultural commodity as essential, it imposes a number of restrictions on it including ban of export of such commodities. This prevents the Indian farmers to get the best prices on their agriculture produce from the international markets.

Outdated Act: The Act is not in tune with present times. This act was enacted in 1955 when we used to frequently face shortage of agricultural commodities. Hence, it needed government intervention to clamp down on black marketing and hoarding.


However, now situation has changed completely. Now, we have surplus production of agricultural production. Hence, accordingly, we must give the necessary freedom to the traders, aggregators and food processing industries to undertake bulk procurement of the agricultural commodities. New Announcement:

The Government will amend Essential Commodities Act. Agriculture food stuffs including cereals, edible oils, oilseeds, pulses, onions and potato shall be deregulated. Stock limit will be imposed under very exceptional circumstances like national calamities, famine with surge in prices. Further, no such stock limit shall apply to processors or value chain participant, subject to their installed capacity or to any exporter subject to the export demand.

2. Agriculture Marketing Reforms to provide marketing choices to farmers

Background:

Agriculture is a subject which is placed under the State List. Accordingly, the state governments have enacted their respective APMC Acts to regulate the marketing of agriculture commodities. However, the APMCs are considered to be highly restrictive and prohibitive and hence go against the interest of farmers. For example, the farmers are required to compulsorily sell their produce only to the registered traders in the APMCs. They cannot sell their produce directly to the end consumers, processors or exporters. Similarly, some of the states have restricted the farmers from selling their produce outside their APMC Zones. However, such kind of restrictions are not applicable to sale of industrial goods. Considering the fact that there are around 22,000 such APMCs, the APMC act has led to fragmented marketing infrastructure. Accordingly, in order to bring about agriculture marketing reforms, the Central Government has come out with Model Agriculture produce and livestock marketing act, 2017. It has been persuading the state government to adopt the features of this model legislation. New Announcement:

The Inter-state trade and commerce is placed under the concurrent list. So, accordingly, the Centre can formulate a law to promote, regulate and restrict the inter-state trading of various goods.As discussed before, presently, the APMC Acts are highly restrictive and prohibit the farmers from selling their produce to whomsoever they want to. We need to give adequate freedom to the farmers to sell their produce anywhere within India where they are likely to get higher prices. We need to dismantle fragmented agriculture marketing infrastructure and move towards integrated domestic market or agriculture goods.

In pursuance of such an objective, the Government had declared that it would come up


with a new central law. Such a central law would incorporate the following: Adequate choices to farmer to sell produce at attractive price; Barrier free Inter-State Trade; Framework for e-trading of agriculture produce.

3. Facilitative Legal Framework for Contract Farming

What is Contract farming?

Under contract farming, agricultural production (including livestock and poultry) can be carried out based on a pre-harvest agreement between buyers (such as food processing units and exporters) and producers (farmers or farmer organizations). The producer can sell the agricultural produce at a specific price in the future to the buyer as per the agreement. This benefits both the producers as well as the buyers. The producer can get support from the buyer for improving production through inputs (such as technology, pre-harvest and post-harvest infrastructure) as per the agreement. The producer canalso reduce the risk of fluctuating market price and demand. On the other hand, the buyer can reduce the risk of non-availability of quality produce. Current Legal Framework

Currently, contract farming requires registration with the Agricultural Produce Marketing Committee (APMC) in few states. This means that contractual agreements are recorded with the APMCs which can also resolve disputes arising out of these contracts. FFurther, market fees and levies are paid to the APMC to undertake contract farming. The central government has formulated Model Agriculture Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 which provides for contract farming. Accordingly, the central Government has asked the states to use this as reference while enacting their respective laws. New Announcement:

The Government will finalize a facilitative legal framework to enable farmers to engage with processors, aggregators, large retailers, exporters etc. in a fair and transparent manner. Risk mitigation for farmers, assured returns and quality standardization shall form integral part of the framework.

Importance of Agriculture in IndiaThe agriculture is the one of the largest enterprise in the country employing almost half of India’s workforce. The overall development of Indian agriculture is extremely vital for faster, sustainable and more inclusive growth. It can be argued that the development of agriculture would have local multiplier effect in terms of nutritional security, women empowerment, increase in income levels and consequently holistic development of rural areas. In this regard, the Government has come up with an


objective of doubling the farmers’ income by the end of 2022. Can the Indian agriculture fulfil these objectives??

It is being said that poor marketing infrastructure in India is one of the biggest hurdles before farmers for realising optimum prices on their agricultural produce. The farmers have immensely contributed to the growth of economy as evident in the record production of agricultural commodities. They have been able to provide us with food and nutritional security. However, the increase in the agricultural production has neither benefitted the farmers nor the end-consumers. While on one hand, farmers continue to get lower prices, on the other hand, the consumers continue to pay more money. This can be attributed to fragmented agricultural market, lack of integrated domestic market, restrictions imposed on the storage, movement and sale of agricultural commodities etcHence, let us understand the importance of Agricultural Marketing in India, its weakness and what should be done in order to address these challenges.

Agriculture as an EnterpriseEssentially, the Indian agriculture can be seen to be consisting of two distinct components- Production and Post-Production activities. The Production activity refers to the cultivation of the agricultural crops while the post-production refers to the marketing related activities. With respect to agricultural production, the Indian agriculture has made rapid strides since Independence. India has not only become self-sufficient in terms of food production, but it has also emerged as a net exporter of agricultural products. It is one of the top producers of cereals, pulses, fruits, vegetables, milk, meat and marine fish. But, have we made equal progress with respect to post-production agricultural marketing?

The post-production activities of Indian agriculture have not kept pace with the production related activities. The quantities of marketable surplus have multiplied by almost 10 times during the last 50 years. However, the agriculture marketing infrastructure continues to remain out-dated. Hence, inspite of record production of agricultural commodities, the farmers are not able to get remunerative prices on their agricultural produce. This problem has got manifested in the form of agrarian distress and increase in the farmers’ suicides. The increase in the instances of dumping of the agricultural produce such as tomatoes, potatoes, milk etc on the roads by the farmers highlight the urgency for carrying out reforms in the agricultural marketing.

The rapid growth of agricultural production in India calls for a paradigm shift in the agricultural marketing system. The earlier marketing system was set up in order to cater to shortfall in the agricultural production and was accordingly more geared towards price controls. However, since the production scenario has got changed, the agricultural marketing policies should also be changed accordingly.

Understanding the role of Agricultural Marketing Agriculture marketing in India has a much broader connotation and basically includes all activities in the procurement of farm inputs by the farmers as well as the movement of agricultural produce from farm land to the end-consumers, industries and traders. This covers broad range of activities which include storage, physical handling, transportation, primary processing, grading and packaging, sale of agri-commodities etc. Thus, agricultural marketing involves all the aspects related to agriculture, while excluding the core activity of cultivation. An efficient agricultural marketing system is extremely critical for the growth of agriculture sector in a country on account of number of reasons.

Firstly, an efficient and well-connected agricultural marketing enables the farmers to buy agricultural inputs such as fertilisers, seeds etc at affordable prices. This becomes quite important since the agricultural input costs have been increasing over a period of time.


Secondly, it provides signals to the farmers with respect to planning for sowing of crops. By making use of market signals, the farmers would be able to grow those crops which are in high demand and get remunerative prices.A well-connected and an efficient market would also be able to address the food inflation since it would be able to match the supply with the demand.

Thirdly, an integrated domestic marketing system would considerably reduce the price variations in the agricultural commodities across India. This would enable the farmers to sell their produce anywhere in India and get best prices.

Fourthly, a High level Expert Committee constituted by Ministry of Agriculture has estimated that 25 to 30 % of fruit and vegetables and 8 to 10 % of food grains are wasted annually due to lack of post-harvest technology and non-existence of integrated transport, storage and marketing facilities, etc. Thus, an efficient marketing infrastructure would enable the farmers to reduce their post-harvest losses and improve their incomes.

Lastly, there is lot of scope for India to boost its export of agricultural commodities. However, India has failed to make optimum use of this opportunity. In this regard, the agricultural marketing policies can act as an enabler for boosting agri-exports.

Evolution of Agricultural Marketing in IndiaPost-Independence, the government has largely focused on providing markets to provide farmers the platform to trade their agricultural produce and to keep the prices under control. Accordingly, most of the State governments enacted the Agricultural Produce Market Regulation Act (APMC Act) which authorizes the States to set up and regulate marketing. Apart from that, there are more than 22,000 Rural Markets or Grameen Haats under the control of local bodies, panchayats, APMCs, etc.

Further, the Cabinet Committee on Economic Affairs (CCEA) declares the Minimum Support Prices (MSP) for certain agricultural commodities based upon the recommendations of the Commission for Agricultural Costs and Prices (CACP). The MSP is intended to act as demand signal to the farmers so that they can take up the cultivation of appropriate crops based upon the existing demand in the economy. Apart from that, the MSP incentivises the farmers to invest in the agriculture by assuring them of minimum returns.

Problems with Agriculture MarketingThe Agricultural Marketing continues to face multi-faceted challenges. When India adopted LPG reforms in 1991, it was expected that the agricultural marketing would also be liberalised. However, the government failed to bring out reforms in the agricultural marketing in tune with the changed environment.The agricultural marketing continues to be plagued by problems such as fragmented supply chain, poor marketing infrastructure, higher post-production losses, lack of accurate/ timely information system etc.Let us look into these problems afflicting the agricultural marketing.

Regulation of markets: Under the present APMC Act, only the State Governments are permitted to set up markets. The Act requires that farm produce be sold only at regulated markets through registered intermediaries. Further, the Essential Commodities Act allows central and state governments to place restrictions on the storage and movement of commodities deemed essential by governments. Such kind of regulations has stifled the private sector investment in the agricultural marketing infrastructure. Such restrictions also create artificial barriers and unnecessarily hinder free flow of agricultural commodities in India. Thus, the focus of the government has so far been on regulating rather


than facilitating agricultural trade. Rather than facilitating options for the farmers to sell their produce, it constraints their selling options.

Fragmented Agricultural Marketing: There are about 2500 regulated APMCs and around 5000 sub-market yards regulated by the respective APMCs in India. Apart from that, there are thousands of Rural Markets or Grameen Haats. Hence, due to this fragmented marketing infrastructure, the agricultural commodities pass through multiple middlemen and traders who are operating in the APMCs. This leads to escalation in the cost of prices and prevents the farmers from getting remunerative prices. Ideally, the farmers should be allowed to sell their produce anywhere throughout India based on prices which they get. This can significantly improve their bargaining position and enable them to earn more incomes. Hence, the present fragmented marketing infrastructure goes against the interest of both farmers as well as consumers. In this regard, there is a need to develop integrated domestic market by removing all the existing agricultural trade related barriers.

Lack of Access to APMCs: Adequate number of markets should be set up closer to agricultural fields so that the farmers have access to APMCs. This also leads to decrease in transportation costs for the farmers and cut down post-harvest losses. Accordingly, the National Commission for Farmers had recommended that each APMC should serve a market area of around 80sq.km and it should be available to farmers within a radius of 5km.However, an average APMC in India serves an area of around 450 sq.km, which denotes poor access of the farmers to the APMCs. On account of this, the farmers are forced to sell their produce at lower prices outside the APMCs.

Against the Interests of Small and Marginal Farmers: Almost 85% of the farmers in India are small and marginal. These farmers with lower marketable surplus find it difficult to aggregate their produce and sell it in the APMCs through auction. Hence, these farmers resort to sell their produce to local agents and traders at much lower prices.

Poor Infrastructure of the APMCs: Even though the APMCs earn regular revenue through the imposition of Mandi tax, the infrastructure in the APMCs such as Godowns,Cold chain infrastructure etc continue to remain quite poor. This leads to improper storage and consequently higher post-harvest losses. Further, most of the APMCs have not able to set up electronic auction platforms which are quite important for offering remunerative prices to the farmers.

Imposition of Multiple Fees in APMCs: The APMCs charge market fee for the buyers as well as licensing fee from the traders. Apart from that, they also charge licensing fee from other agents such as warehousing agents and loading agents.These multiple fees are estimated to be around 15% of the value of the agricultural produce in some of the states. These charges imposed have a cascading effect on the prices of the commodities which adversely affect the end consumers.

Higher Post-harvest Losses: According to the recent study, the total estimated loss in India is around Rs 92,000 crores. The higher post-harvest losses could be attributed to fragmented market, lack of access to proper storage, poor handling and transportation etc.

Initiatives taken by the Government so farIn order to address these problems associated with the agriculture marketing, the government has taken a number of initiatives. Let us understand about these initiatives and whether these initiatives have been able to address the present structural problems.

Model APMC Act: The Ministry of Agriculture has developed a model Model Agriculture produce and livestock marketing act, 2017. and has been pursuing the state governments to modify their respective


Acts along the lines of the Model APLM act 2017. The Model APLM Act provides for the freedom to the farmers to sell their produce outside the APMCs to the exporters, processors and end-consumers. It permits private sector entities to establish new markets for agricultural produce in any area. It seeks to do away with multiple levies and instead impose a single levy of market fee on the sale of notified agricultural commodities in any market area. Similarly, it does away with the need for multiple licensing requirements for the traders and has instead proposed licensing of market functionaries which would allow them to operate in multiple markets.

However, most of the states have not fully completed all the provisions of the ModelAPLM Act. There has been general reluctance on behalf of the states to amend their APMC act in tune with the Model APMC Act.Further, it is being said that the provisions of the Model APLM Act would not lead to creation of a national or state level common market for agricultural commodities. This is because the model APMC Act states that even when buyers are buying the agricultural produce outside APMC area, they are still required to pay APMC charges. This acts as a barrier for the creation of integrated domestic market in India.

However, some states such as Karnataka have been at forefront of ushering in marketing reforms. The Government of Karnataka has set up unified agricultural marketing platform in association with NCDEX Spot Exchange. It provides an electronic trading portal that allows farmers to have access to a larger market and get the best prices from traders located anywhere in the country.

National Agricultural Market (e-NAM):In order to integrate agriculture markets throughout India, the Government has set up National Agriculture Market (NAM) in 2016. It is a pan-India electronic trading (e-trading) portal which seeks to network the existing APMCs through a virtual platform to create a unified national market for agricultural commodities. The e-NAM platform promotes better marketing opportunities for the farmers to sell their produce through online, competitive and transparent price discovery system and online payment facility.

Initially, trade on e-NAM started inside the individual e-NAM mandi, with farmers and traders of that mandi. After persuasive efforts by the Central Government, inter-mandi trade on e-NAM platform started within the State. Now, Inter State trade of agricultural produce is gathering pace. Recently, the first Inter State transaction in tomatoes has been carried out between the APMCs located in Uttar Pradesh and Uttarakhand. Further, Rajasthan has become the first State to start inter-State trade with more than one State, establishing trade link with Gujarat, Maharashtra and Madhya Pradesh through e-NAM. The Volume of inter-State trade is also picking up as farmers and traders are gaining confidence in the system. However, the e-NAM portal stills face multiple challenges. To implement the e-NAM, every state has to first amend its APMC Act to make a provision for electronic auction as a mode of price discovery, allow a single licence across the State and have market fees levied at a single point. However, most of the states have failed to carry out these amendments and thus the e-NAM portal has been unable to provide benefits to all the farmers across India.

Further, recently a high-powered panel of experts on "Integration of Commodity Spot and Derivatives market" has highlighted a number of problems with e-NAM.In order to ensure the success of e-NAM, the APMCs have to set up necessary infrastructure such as labs and internet connectivity. The labs are necessary to ascertain the quality of agricultural produce to be put on auction platform.However, the APMCs have failed to set up the labs for grading of the commodities .Similarly, the panel has found out


that online auction of commodities on eNAM platform is not taking place. Rather, the data of manual trading is being recorded into the system after the auction is done offline.Accordingly, these issues related to e-NAM have to be addressed by the concerned state governments at the earliest so as to make this online platform more effective.

Contract FarmingThe contract farming agreement is an agreement between the farmers and buyers such as MNCs where in the buyers provide for necessary inputs such as seedsto the farmers and the farmers agree to sell their produce at a pre-determined price. In this regard, the Model APMC Act provides for contract farming agreement to reduce barriers to agricultural trade and ensure remunerative prices to the farmers. There are few notable successes on contract farming by Pepsi Co India in respect of potato, tomato, groundnut etc in different parts of country. However, even the contract farming faces multiple issues and challenges. Most of the state governments have failed to provide for contract farming in their APMC Act. Due to this, most of the time, such an agreement is more of informal agreement between farmers and MNCs. We have to recognise that the contract farming will not be successful unless it is legally protected. Further, it has been observed that in order to cut their transaction costs, the MNCs prefer farmers who own huge land rather than small and marginal farmers. Hence, the contract farming has not benefitted the major chunk of farming community.

Farmer producer organisations (FPOs): Farmer Producer Organisation (FPO) is an entity formed by primary producers such as farmers, milk producers etc which provides for sharing of profits/benefits among the members. The small and marginal farmers do not have the large marketable surplus and hence formation of FPOs by these farmers increases their bargaining power and avoids the long chain of intermediaries to sell their produce directly to end-consumers. In this regard, the Union Budget 2018-19 announced a five-year tax holiday and small credit guarantee fund of Rs 100 crore for promoting FPOs. Further, the central Government has been encouraging the states to directly support the FPOs through various schemes.

However, this sector still faces multiple challenges. The banks are usually reluctant to grant loans to the FPOs as they do not have assets of their own to serve as collaterals. Consequently, the FPOs rely on loans from NBFCs to raise working capital at very high interest rates. Further, the facility of cheap bank loans through interest subvention offered to individual farmers is denied to the FPOs. They also face resistance in operating at the APMCs because of the resistance offered by the licensed traders. These issues need to be addressed at the earliest to enable the FPOs to perform to their full potential for the benefit of the farmers.

PM-AASHA: The Government has launched a new Umbrella Scheme “Pradhan Mantri Annadata Aay SanraksHan Abhiyan’ (PM-AASHA).This scheme has been launched by the Government to ensure that benefits of MSP reach the poor farmers. It involves different components such as physical procurement of commodities by the Government agencies (Price Support Scheme), payment of difference amount between MSP and selling price (Price Deficiency Payment Scheme) and procurement of commodities by private sector agencies (Private Procurement & Stockist Scheme). It is expected that proper implementation of this scheme would prevent distress sale of commodities by the farmers and enable the government to fulfil its stated objective of doubling the farmers' income by the end of 2022.However, the success of this scheme depends on its proper implementation and the ability of the government to put in a fail proof mechanism for the benefit the farmers. For instance, the Madhya Pradesh had implemented Price Deficiency Payment Scheme (PDPS) under the Bhavantar Bhugtan Yojana. Some of the studies highlighted that the traders deliberately depressed the prices at the mandi


level for their benefit. They forced the farmers to sell their produce at lower prices and pocketed the compensation amount from the government. Similarly, the private sector agencies have concerns with respect to delayed payments from the government under the Private Procurement & Stockist Scheme (PPSS).

Gramin Rural Markets: The Budget 2018-19 proposed to set up Gramin Agricultural Markets (GrAMs) in order to enable the farmers to sell their agricultural produce without any restrictions which they presently encounter in the APMCs. The government has declared its intent to develop and upgrade existing 22,000 rural haats (village markets) into Gramin Agricultural Markets (GrAMs). These GrAMs, electronically linked to e-NAM and exempted from regulations of Agricultural Produce Marketing Committee (APMCs), will provide farmers facility to make direct sale to consumers and bulk purchasers.

Further,Agriculture is a state subject. Therefore, the success of the policies and programmes of the Government of India depends on how effectively they are adopted and implemented by the state governments. Some of the states have been quite progressive in implementing various reforms. On the other hands, many states have lagged behind leading to inter-state income disparities. Hence, in order to incentivise the states to undertake the agriculture marketing reforms, the central Government has come out various indices to measure the progress on marketing Reforms. For Instance, NITI Aayog has launched Agricultural Marketing and Farm Friendly Reforms. On similar lines, the Ministry of Agriculture has launched the Ease of Doing Agri-Business Index.

Further Reforms NeededThe growth trajectory of the agriculture and non-agriculture sectors has been witnessing divergent paths in India. While non-agriculture sector continue to experience acceleration in growth, the growth in the agriculture sector has remained stagnant at around 3%. One of the main reasons for the lower productivity of the agriculture sector can be attributed to poor agricultural marketing infrastructure in India. Hence, in this regard, it can be argued that there is a need for further reforms to be undertaken and simultaneously address the present concerns with the new initiatives taken by the Government.

The European Union, consisting of multiple countries, has been able to set up Common Market for all products by eliminating all forms of trade barriers. In this regard, India would also be able to reap benefits by setting up a "Single Market". One of the major impacts of removing the inter State barriers would be the realisation of better prices by the Indian farmers as supply chain between the producer and the consumer would be reasonably streamlined. This would also benefit the consumers.

Agricultural marketing is a State subject. However, a number of major policy decisions impacting the sector are taken by the Central Government. This includes the several Central Government schemes/ programmes and policies including laying down of Minimum Support Price for selected agriculture products. Further, the Indian Constitution guarantees to every citizen freedom of trade, business or profession, but the State Legislatures are empowered to impose reasonable restriction in public interest. However, in practice this freedom guaranteed by the Constitution has been somewhat restricted by several states.

Hence, in this regard, the National Commission on Farmers (NCF) headed by M.S. Swaminathan had recommended creation of a single integrated market for farmers. The Commission also recommended that agricultural marketing be placed under the Concurrent List. Even the Committee on Doubling Farmers’ Income (DFI) had argued for placing agricultural marketing under the Concurrent List.

Apart from that, both the Central and State Governments must come together with the spirit of


cooperative federalism in order to address all the structural challenges associated with the agricultural marketing infrastructure highlighted before. The states must amend their APMC Acts so as to facilitate internal trade and provide the necessary ecosystem to ensure fair and remunerative prices to the farmers.There is a need to promote new models of marketing such as Contract Farming, Commodity Exchanges, private wholesale markets, farmer producer organisations, agricultural cooperatives etc.

Way ForwardIndia needs to enhance production and productivity of agricultural produce in a sustainable manner so as to ensure food and nutritional security. Hence, creation of an efficient and integrated domestic agricultural market is quite vital for the benefit of economy.The marketing system needs to address the challenges of high post-harvest and storages losses, high marketing costs, inadequate market/procurement centers and efficient storage and distribution of produce across the country. The domestic agricultural market in India needs to be integrated with the foreign markets to ensure optimum benefits for the farmers. The agricultural production has to keep pace with the population growth, consumers’ preference and demand in the domestic and international markets by adoption of appropriate policies of market-led production.

In order to improve agriculture marketing infrastructure, there is a need for fundamental change in our perception towards Indian Agriculture. We need to view agriculture as an enterprise and farmer as an entrepreneur. This perception would mean that the success of Indian agriculture would depend upon our ability to link the entrepreneur (farmer) with the markets and ensure maximum productivity of the enterprise.

Since 1991 reforms, India has made rapid strides in the field of IT/ITES, Banking, Financial sector etc. Unfortunately, these reforms have not been replicated in the agricultural marketing infrastructure. We have to realise that the key to achieving rural prosperity is through linking the farmers with the market. Unless we do it, we would not able to bring about transformative changes in the rural society!!

Personal Notes

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