To make agriculture a profitable enterprise
In a special interview to SMART AGRPOST, Dr Ashok Dalwai, CEO, NRAA, who is also the Chairman, Committee on Doubling Farmers’ Income explains how the Union Budget will help doubling farmers’ income and create a new market architecture to discover profitable price of the farm produce.
- What are the major takeaways from the Budget 2018?
Ans: Firstly, this budget recognizes agriculture is an enterprise. Now, the farmer will be facilitated to practice his agriculture on the principles of profit which means that he will pay attention to increase productivity and do it at a reduced cost of cultivation and simultaneously benefit from input post monetization environment. The budget, therefore, focuses largely on post monetization which includes market reforms as well as intervention through MSP.
- The government is talking about increasing MSP, 50% margin of profit on cost of production. How are you going to estimate that?
Ans: The decision of the government with respect to MSP is a historic step. There has been a long standing demand of the farmers that their cost of cultivation should be covered adequately and they should be given a minimum profit margin of 50%. The budget 2018 makes it very clear that a minimum support price through the MSP shall be based on providing at least 50% as a margin of profit on the cost of cultivation.
The cost of cultivation to be calculated by the Commissioner on Agriculture Costs & Prices (CACP) will include all the paid out costs by the farmers. The paid out cost could be in terms of cash or in terms of kind or both. In addition to all these costs which include all the inputs, interest rate and borrowings and also rental value on the leased in land, the CACP will also be including the imputed value of the family labor which means that the cost of cultivation would be A2+ FL and on this, there will be 50 per cent margin of profit. We believe this is adequate to cover all the costs the farmer incurs in practicing agriculture.
- The government has announced MSP for all crops. Will the government be able to fulfill its promise?
Ans: It is a very rational and conscious decision of the government as seen from the budget 2018. What does it say that apart from providing 50% margin of profit; it does allow the government also to give a profit margin beyond that.
For example for Rabi 2018, the profit of margin is 112% on A2+FL. That is much beyond 50%. Now the benefit that comes from saying all crops will get 50% minimum is that every crop will get it. That is the minimum which I said is adequate to cover costs and also offer the farmer a rational profit.
Another path making decision of the government is, as the honorable finance minister said in his budget speech, that we believe in honoring the MSP, not just announcing MSP. So now the government’s commitment is to adopt different procurement mechanisms and cover all the crops across the country. It is true that the current procurement mechanism has not benefited everybody. It has not benefited all the crops. It has been confined to certain crops.
Now the NITI AAYOG will sit and work out different tools which will be rolled out to benefit all the commodities and all the farmers across the country. I think these two decisions of MSP based on a minimum profit margin of 50% combined with procurement, I think, constitute the new direction that the project gives towards realizing the vision of doubling farmers’ income.
- The government has declared connecting all 22000 gramin haats to the national agriculture market. How are they going to do that?
Ans: Now we must appreciate that MSP which is a minimum support price is a floor price. That means it is an assurance to the farmers before the cultivation season begins that he can expect the government to intervene and procure his commodities if the market prices fall below it. So it is in a way a price signal and an incentive.
However, we must appreciate that the government believes in creating a robust marketing system. It is the markets that must discover the prices for the farmers and our aim is always to transfer prices which are more than MSP. Towards creating that kind of market structure, this particular budget looks at new market architectures. This is based on reforms and integration at three levels, one is creating efficient retail markets, second is creating efficient wholesale markets and the third one is to create a facility for the farmers to integrate with the global market.
Till now we had been only focusing on domestic wholesale markets whereas we had forgotten the first mile, that is a retail market and the last mile, that is the global market. Now integration of these three levels of market will offer a wider space to the farmer for marketing their commodities.
Now the committee on doubling farmers’ income has recommended that we need around 30,000 markets in the country, so that farmers are able to access markets in close proximity of their farm gate. Of the 30000, the committee says around 20000 retail markets and 10,000 wholesale markets. So the union budget now recognizes that there are more than 22000 numbers of haats in the country which can be now taken advantage of building the first level of retail agriculture markets.
So we will now be focusing on promoting these rural retail agriculture markets in phases and at these haats, the space would be defined by boundary a wall, basic infrastructures like platforms for sale and purchase, weighing machines, assaying laboratories, storage both dry and cold will be provided. So that small farmers can get their lots, aggregate them at these platforms. The aggregated lots of all the farmers can then move to the primary agriculture wholesale markets which are in the form of APMCs. So there will be an organic link between the retail agriculture markets, called Grams with the wholesale markets, called the APMCs.
- That means the rural markets will be brought under the purview of APMC act.
Ans: No, they will be outside the preview of the state marketing acts. They will serve as independent market platforms. The farmers can either aggregate and then transfer the commodities to the wholesale markets or they can also sell their commodities directly to the consumers.
The consumer can be an individual household or it can be an exporter, a bulk purchaser etc. Primarily the new Gram structure will serve as an aggregation platform and also help in direct sale and purchase.
So that is the new architecture, or in a way, I would say a radical departure from the thought process so far and simultaneously we already have been working on reforming the domestic wholesale market that is primary, secondary and tertiary markets under the new marketing act, and that also includes promoting online trade. E-NAM is already under process and that process will continue.
- How are you going to address the infrastructural gap? Do you have sufficient fund provisions in this budget?
Ans: Yes, now the budget has also announced the creation of a corpus fund of Rs. 2000 crore under the agri-market infrastructure development fund. So the needed funds for promoting these grams as well as providing additional infrastructure at the 585 number of e-NAM on-boarded markets will be made from the corpus fund of Rs.2000 crore and budget is already available under the marketing division of the department and also additional mobilization can happen from the rural development schemes, because under NAREGA, there is provision for utilizing funds for rural markets.
There are funds for connecting roads, for example, because we require basic infrastructure like connecting roads, sanitation facilities, solid waste management facilities, toilets etc. which all can be done under the NAREGA and the funds available with the department of agriculture can be used to create market infrastructure like assaying labs, weighing machines, cold and dry storages etc. So there will be a convergence of resources and further activities are not covered under any of these things can be met from the corpus fund that has been announced.
And then finally these domestic wholesale markets will get connected with the global markets or even farmers can directly export because the target for export has been now kept at 100 billion dollars by 2022-23 and the finance minister has announced that we will set up an institutional mechanism to have a new policy which means that import-export duties would be tailored in order to support the farmers to undertake export. So this is the first time we are talking about offering the farmers a global market beginning with the retail market in close proximity of about 5-6 km from his farm gate.
- The budget talks about cluster farming. What is your view in this regard?
Ans: Now one of the weaknesses of Indian agriculture is that more than 86% or more farms are marginal in nature. Therefore input management and output management is always a challenge. They cannot take the advantage of the scales of economy. So when the budget speaks about promoting cluster based agriculture, what it means is that farmers would be encouraged to pull their practices and not the land through farmer producers’ organizations and village producers’ organizations. So when this happens they can together purchase their inputs and now it will become more economical to purchase and it will also help to sell their commodities as an organization. So they will have higher bargaining power.
As said by John F Kennedy in 1960 that a challenge that a farmer faces they buy everything in retail and sell in wholesale. Now through the FPOs, through the cluster based agriculture we will be helping the farmers to purchase their inputs in wholesale. So they will be able to get it at a more rational price.
Now these FPOs and clusters can also integrate with the provisions of the contract farming act, so the farmers will benefit from the pre-seasonal agreed price from the sponsoring companies and they can also benefit, in other ways, that the sponsoring company will assist them, support them in new technology, farm management practices and input management. So it is a very new way of looking at it.
We are going beyond the farmer producers’ organization to village producers’ organization which means that there will be a number of large organizations at the village level. So it becomes easy for the government to provide backward linkages, forward linkages and make agriculture more profitable, more an enterprise than subsistence farmed activity.
- When do you expect the contract farming act will be passed?
Ans: As you know agriculture is a state subject, the government of India provides agriculture policy formulations and framework as a backstop and supports the state governments in adopting this. So likewise, with regards to contract farming, we are preparing a model contract farming act and that will be shared after the approval of the competent authority with the state governments.
The first draft is already on the website seeking comments from the people and stakeholders. I am very happy to share with you that there has been large engagement by all stakeholders- farmers, farming bodies, trade bodies and academia. We are now examining all the responses that have come and would revise the draft giving some more days to the people to respond. So we hope that within next two months, we should be able to release the model of contract farming act.
- The government has announced ‘Operation Green’ and also has focused on improving fisheries and animal husbandry sector. What’s your perspective?
Ans: When we talk about agriculture, it is a generic term. It includes several sub-sectors. It includes crop, animal husbandry, then dairy, livestock, and fisheries. Within the crop segment, we have field crops and horticulture crops.
So we need to take advantage of all subsectors to transfer higher income to the farmers. So what this budget now does it gives focus on high value crops and practices including horticulture as well as dairy and husbandry, fisheries.
It provides additional funds for improving the infrastructure required to achieve high growth. Fisheries sector for examples has demonstrated that it has great potential in growing and both inland as well as marine fisheries have huge potential in India and the budget provides funds for those things.
Likewise, when we talk about horticulture India has already started growing tremendously in terms of production of horticulture. Horticulture crops are more susceptible than field crops because they are perishables. Therefore we need to make efficient market interventions including the agri-logistics. So when we talk about the ‘operation green’ we are talking about three more sensitive crops that are potato, tomato, and onion. These are three universal crops which are in demand across the country across the 365 days in a year.
We are not being able to connect the products with the production centers to the consumption centers efficiently. We find that there are wide price variations, price fluctuations and neither the farmer nor the consumer has been benefited. So under operation green which will be based on the experiences that India has in operation flood sector relating to milk will be organizing co-operative models and infusing appropriate technologies , agri-logistics, and professional managements, so that the sale of these commodities happens efficiently across the space and across the time.
- The main challenge lies in implementation of government policies and schemes. Do you have any budgetary provision for extension and implementation?
Ans: Yes, we should appreciate one thing that when the budget speech announces we talk about certain funds, that are not the only funds in the budget, they are the highlights, the new initiatives whereas all other initiatives which are going on for years and years they continue. Therefore, this budget also provides adequate funds for all extension activities, ICT initiatives and various other production and risk management related activities of the ministry of agriculture.
Our ministry does recognize that extension requires revitalization and we are working now on the new model of extension which will optimally combine manpower and ICT. Today, ICT has a very important role to play.
Its advantage is it can reach out to the farmer in a quick speed of time. It can transfer data in real time. Therefore, certain data and information which are routine in nature can replace the manpower and manpower based extension can focus more on direct communication and conducting demonstrations etc. So this way we can combine the best advantages of manpower based extensions and ICT based extensions to transfer technology from the labs to the lands and also transfer technology by connecting people to people that means farmer to farmer. That is very important.