Context: Government should set up a few institutions, like a contract farming regulator, to allay farmers’ fears.
Issues with Agriculture Sector:
Low Income: Small and marginal farmers account for 85% of all farmers and contribute 51% of the agriculture output but still have poor incomes and even get crowded out of benefits.
Per capita agricultural GDP was at ?45,000 while non-agricultural was ?2.48 lakh in FY2020.
Regional Disparity: Average agricultural income in Punjab at ?2.8 lakh per annum, is 1.1 times higher than per capita non-agricultural income and six times higher than India’s per capita agricultural GDP.
West Bengal and UP, top producers of rice and wheat respectively, have the lowest average procurement and usage of warehouse capacity (12%) by Food Corporation of India.
Exposure to the competition: Shift towards consumer-driven markets means the small farmer will increasingly compete in domestic and foreign markets.
Agricultural Loans under stress: Due to factors like crop losses, unremunerative prices, debt waivers and rigidity in Kisan Credit Card scheme, agricultural loans are coming under stress.
Unsustained successes in contract farming: Large firms initially attract small growers by offering them favourable conditions, but later ‘tighten’ these conditions.
Way Forward:
A contract farming regulator: to provide small and marginal farmers with the power to deal with large buyers and make contract farming sustainable.
E.g. in Malaysia, the Federal Land Development Authority was set up to manage contract farming made Malaysia most successful nation in South Asia.
Revamping Kisan Credit Card: Bring operational flexibility in KCC structure such as a mix of revolving credit and term loan and loans to agricultural start-ups and dairy farming to boost supply chains.
Quantity Guarantee instead of MSP for a limited period: Procurement to production percentage of procured crops should at least be equal to the previous year’s percentage, ensuring assured market.
Safeguards during exceptional events, push farmers to sell outside APMCs to avail higher prices.
Strengthen the Agriculture Produce and Marketing Committee (APMC) infrastructure: to reduce losses for food grains which are up to 16% (lower than often quoted at 40%)