Farming Solution in the Modern Day Agriculture
By: Dr. Ravindra Pastor
Presently, the Indian agriculture sector is going through its lowest phase in an age when the Indian economy is growing very fast. Two laws which have proven detrimental to Indian farmers in the last few years are the Law of Inheritance and the Agriculture Land Ceiling Act. Due to these two laws, land holding has become very small because as fathers die, the land gets divided among legal heirs; as a result, the land is getting divided every day with every new death, leading to 78 percent of land owners being small and marginal farmers. When a farmer has a very small piece of land, his agri-input requirement is very small. Hence, he purchases from the last person in the supply chain. If there are three people in the supply chain, he will pay three people’s profit and get his input, which proves not only costlier but is also of dubious quality and availability. Furthermore, when he grows any crop, his production yield is very low. He sells his harvest to the last person in the supply chain. So, if there are five people in the supply chain, then they will deduct their profit and give the resultant price to the farmer. This point marks the beginning of the vicious cycle of profit and loss in the Indian agriculture sector.
Now, the main buyers in market are wholesalers, processors and exporters, and they have three basic conditions:
• First is Quantity - they need huge quantity;
• Second is Quality – they need same and consistent quality; and
• Third is Competitive price.
These three basic conditions of market cannot be fulfilled by small and marginal farmers and there is this huge supply chain full of middle men. Whenever the government tries to intervene in agri-marketing through the Minimum Support Price scheme or any other scheme, only these middle men benefit. The small or marginal farmers are never able to share in this advantage.
If we cannot fulfill these basic conditions of market and link the farmers with the main buyers, agriculture cannot become profitable.
To fulfill the above stated basic conditions of the buyers, the farmers will have to pull their farmlands together to grow same quality produce in huge quantities, which is not possible in the current context of our society. In that case, the second option is that a large number of farmers adopt the same package of practice for growing the same variety of crop so that they can fulfill the above stated basic conditions of the buyers. Same POP will enable the farmers to buy their input collectively and sell their produce collectively, without going through any middle men in the supply chain. And NOW is the right time to implement this as the Internet and digitisation has made this collective work possible.
We Can Develop Two Supply Chains:
• One from factory to farm for input supply; and
• Second from farm to factory for produce marketing.
If you see the current situation of agro input marketing, there is the Fertilizer Control Act, the Pesticide Control Act, the Seed Control Act, the Agriculture Marketing Act, and many other orders and directives issued by the central and state governments. If you want to setup an agri-input manufacture plant, around 12 permissions are required under various laws; and if you want to setup an input selling shop, you need to take around 9 licenses and permissions from local bodies and the state government under various laws and orders issued from time to time. While the government is endeavouring to establish ease of doing business in other sectors, the agriculture sector has been ignored by central and state governments up till now.
National and international companies are producing different types of fertilisers, pesticides and other chemicals, seeds and micro nutrients, and agro machineries and tools. Every item is subsidised by the government. Thus, government departments have different rules and each company has its own distribution channels and price policies. To understand each company’s distribution challans is a very cumbersome and difficult task. Each company is trying to achieve a monopoly in the distribution, pricing and supply of their products. Although each and every product packing has maximum selling price written on it, not a single product sells at MRP; it sells either below MRP or above MRP. Under GST, tax will be collected on billing price only; however, most of the goods are sold without bills. Unfortunately, we are not trying to see why this is happening in the market.
Farmers are being robbed every day because there is a huge margin given by manufacturers to distributors and retailers. There are different schemes - from foreign tours to lottery of cars or reward schemes - which are not available for consumers but are only available for distributors and retailers. Although there are many laws requiring the production maintenance of quality of products, the market is full of very low quality produce, resulting in farmers losing their crop, income and even lives. However, nobody is bothered about this.
For price maintenance, the government is buying various crops under minimum support price schemes where farmers register and sell their crop to government agencies. However, in the market, only big farmers or traders are receiving the benefits of these schemes. When government buys, they buy from traders, and when they sell, they sell to traders only. There are, sometimes, more than 10 people in the supply chain between farmers and factories, and governments are buying at a higher price and selling at a lower price, and food subsidies are increasing day by day. On the other hand, farmers are not getting the right price. The question then is, who is taking the money which is being paid by the government? Neither farmers nor consumers are benefitting from the MSP schemes.
Individuals and some institutions are trying to experiment with various methods and practices to reveres this vicious cycle in the agriculture sector. Crop wise cluster development is one such type of experiment which is going on in many places, where farmers come together to select the same crop, verity and package of practice for cultivation. Although they are not pulling their land, they are buying their input collectively and selling their produce, after grading, collectively. In this manner, they are fulfilling basic conditions of the market and reducing the supply chain from both ends. Now, many startups and some companies are using various electronic systems and mechanisms to reduce cost and increase productivity and quality.
Commodities, whether they are related to food, energy or metals, are an important part of everyday life. Commodities can be an important way to diversify a portfolio beyond traditional securities – either for the long term, or as a place to park cash during unusually volatile or bearish stock markets, as commodities traditionally move in opposition to stocks.
Allocating commodities require significant amounts of time, money and expertise. Today, there are several routes to the commodity markets, some of which facilitate participation for those who are not even professional traders. If the government can develop fair average quality norms for selling agri-produce, this system can create grain-less and commodity-less ‘mandies’ (vegetable markets). Farmers will bring all their produce for sale in the mandi yard, where traders asses their quality without telling the farmers the quality at which they are grading their produce. So, framers never know what quality rates they are getting for their produce. If there were to be an open mechanism to announce farmers’ produce quality and then decide the price, then farmers will get better prices and will be encouraged to bring better quality produce next time. If an auction starts with sampling of produce, then lots of wastage can be checked at the market level. For example, when farmers sell loose milk, they mix water in it; but if they have to sell their milk through fat count, they will not mix water in it but, instead, make full effort to maximise the fat count in the milk so that they can get a better rate. Same system can apply in commodities also. An electronic mechanism can be developed for assessing quality of produce and implementing the grading system.
If government can do three things - promote crop wise clusters, enforce maximum selling price in agri- input, and establish fair quality norm based auction system in mandies, lots of farming problems can be reduced through just these three steps, and the agriculture sector can become profitable again.
Dr. Ravindra Pastor
Chairman & CEO, Electronics Farming Solutions Associates Pvt. Ltd.