India’s farm sector needs help to get back on its feet. Here are 5 ideas | Opinion
The agriculture sector is critical for India from a consistent growth and food security perspective as the sector and allied activities account for approximately 55% of India’s workforce and nearly 15% of India’s GDP. Today, India has come a long way from facing severe food shortages after Independence to becoming a net exporter of food. While the agricultural sector has made considerable progress, in India, we still have a long way to go when it comes to global benchmarks. The nation-wide lockdown due to the Covid-19 outbreak has further exposed the vulnerabilities in our agricultural supply chain and the prevalence of the Agricultural Produce Market Committee, or APMC, model that made farmers highly dependent on mandis.
Never waste a good crisis
In many ways, a crisis like Covid-19 presents a good opportunity to re-examine underlying assumptions in the way we operate and take a fresh look at the art of the possible. To its credit, the government has been swift in announcing the Covid-19 stimulus package worth Rs 1.63 lakh crore aimed at boosting credit availability for farmers and improving supply chain infrastructure for agriculture and allied industries. The government also announced key reforms related to the deregulation of commodities in the Essential Commodities Act, promoting barrier-free inter-state trade of agricultural produce and legal framework for contract farming.
Here are five recommendations that could help propel Indian agriculture on to a high performing trajectory.
From fragmentation of production to planned production
Indian agriculture needs to move from the current fragmented production model, where each farmer produces what he thinks is right, to a planned production at a district level. This leads to a mismatch in supply-demand and price fluctuations. For instance, domestic onion prices rose by almost 700-800% between January 2019 and December 2019 (Delhi’s Azadpur Mandi). The government should focus on developing a robust sales and operation planning process to estimate the cultivated area under different crops and educate farmers on cropping patterns. This will not only stabilise price fluctuations but also improve farmer income and reduce waste.
Soil health card-based nutrition enhancement programme
Rampant use of urea, partly caused by Nutrient Based Subsidy, has led to worsening soil health, decline in crop response ratio and contamination of surface water. The NPK (Nitrogen, Phosphorus and Potassium) usage ratio has widened from 4.7:2.3:1 in 2010-11 to 6.6:2.6:1 in 2018-19. Further, the crop response ratio to fertilisers has fallen from 12.1 kg grains/kg of fertiliser during 1960-69 to 5 kg grains/kg fertiliser during 2010-17. To address this, a Soil Health Card (SHC) scheme was launched by the government to recommend dosage of different nutrients based on soil health. However, the implementation has suffered due to poor infrastructure support and continued push on urea subsidy.
Digital push to improve farming practices
Digital adoption will be key to improving the reach and delivery of services like agronomy advice (fertiliser, ag-chem usage, farming practices), enhance adoption of Precision Agriculture practices and improve price transparency through digital platforms.
Informal credit dependence to institutional financial products support
With farmer incomes highly dependent on external factors such as climate change and commodity price fluctuations, it is important to have robust risk management and financial solutions for the farmers. The availability of credit through Kisan Credit Card (KCC) and associated crop insurance is one such instrument. The government needs to strengthen the implementation through policy and infrastructural improvements such as digitisation of land records which will improve the timely disbursement of KCC loans by banks. Additionally, the development of the agricultural commodities futures market will help to ensure that farmers’ sowing, selling decisions are based on forward-looking prices vs. past prices today. Farmer participation can be encouraged through FPOs to procure, aggregate and ensure that quality standards required for futures trade are met.
Go for end-to-end integrated supply chain for finished products
The development of a robust supply chain infrastructure is critical to reduce high post-harvest losses estimated at between 10 and 18% in India. With many intermediaries, processors lose control over the quality of produce as well as traceability. By encouraging private sector investment in processing, exports, and retailing of agriculture produce, we can bring local communities together to achieve economies of scale, encourage standard practices to meet quality specifications for exports including niche products like organic produce.
India’s production levels of agriculture and allied segments along with current productivity, infrastructure and processing rates, represent huge untapped opportunities for all players of the agriculture value chain. Backed by progressive policies, fiscal incentives and an effective regulatory environment, the Indian agricultural sector can provide a strong thrust to the economic growth momentum of the nation. These favourable shifts in the agriculture industry will also lead to a substantial increase in farmer incomes in the country, and safeguard food security for the country’s growing population.
(Harsha Razdan is Partner and Head, Consumer Markets and Internet Business, KPMG in India and Manuj Ohri is Partner, KPMG in India)