How to protect India’s agriculture sector from over-zealous govt functionaries?

By RN Bhaskar

New Delhi : If there is any sector which the government of India is focused on, it is agriculture. There are several reasons for this.

For one, almost 50 percent of India’s population dwells in rural areas and are directly influenced by agricultural prosperity. These people are also keen voters.

Secondly, the rural sector is in such a poor state – except for fat-cat farmers who enjoy excellent linkages with politicians – that every rupee invested in this sector is likely to yield richer dividends that in urban sectors.

Third, rural prosperity is bound to reduce the pressure on urbanisation. Chances are that villages will begin to upgrade into towns and towns into cities, thus reducing the influx of people into already overstretched metropolises.

That could explain the government’s decision to double rural incomes by 2022. It has also begun thinking of pruning the entire agricultural procurement and distribution apparatus.

Take for instance two pieces of legislation:

Two legislations

First, on 14 March, 2017, R.C.Chaudhary, minister of state, consumer affairs, food and public distribution, stated (in reply to Lok Sabha unstarred question No.2059) that the government had approved engaging a professional Buffer Stock Management Agency (BSMA) for efficient management of the buffer stock including procurement, storage, maintenance and liquidation of the stock as per Government directives from time to time. The agency for designing and managing the bid process has been selected. Contract for appointment is being finalised.”

It is not yet known if this agency will supervise the workings of the Food Corporation of India (FCI) as well.
Taken in conjunction with an earlier piece of legislation, the WDRA, the results can be startling.

It may be recalled that the government had on 25 October, 2010 notified the Warehouse Development & Regulation Act (WDRA) 2007. Under pressure from the Supreme Court of India, furious at the callous manner in which grain was allowed to rot by the FCI, the WDRA became law.

To understand the WDRA, it may be best to quote from its own presentation made to key officials of the Food and Agriculture Organisation (FAO) last year. WDRA had stated that

• Before the enactment of the WDRA, 2007, the warehouse receipt did not enjoy the fiduciary trust of the depositors and the banks.

• With the enactment of the WDRA Act 2007, the negotiable warehouse receipt issued by the registered warehouses has become a fully negotiable instrument and can be traded as well as endorsed by the holder of the receipt.

• A uniform format of the negotiable warehouse receipt has been finalised and has unique features, such as anticopy, endless text, fine line pattern, micro-printing with rainbow coloring etc.

The WDRA enables farmers to take his crop to the nearest authorised warehouse. The warehouse, in turn identifies it (wheat, rice, urad, moong etc), gives it a grade (A or B or C), weighs it and then a receipt to the farmer which states the crop-, weight and quality. This negotiable warehouse receipt can then be given to the bank in return for cash. Prices are determined by checking the quotes on the commodity exchange – both spot and futures.

The purchaser takes the receipt and picks up the grain from the authorised warehouse nearest to him for the quantity and grade mentioned in the receipt.

The problems

First, warehouses come under state governments, and it is still not clear whether the warehouse will have to be certified by the WDRA, by the state government or even panchayats.

Second, there aren’t enough warehouses for easy access to all farmers.

Third, unless and until FCI’s stocks are also put in authorised warehouses, the volumes just won’t be there to ensure viability. Will the government do this?

Fourth, warehouse receipts must be dematerialised. Else scams are possible. Remember how security press stamp papers were forged — the Telgi scam? Dematerialised receipts can be verified online. When linked with Aadhaar, there is better transparency and security.

Fifth, the government has not yet come up with the process of assaying crops and insuring them in all the warehouses.

What is not being done

Ideally, the government should be putting out a notification that any grain that cannot be stored must be sold on the commodity markets within 1 week of the new crop being procured. The system that should be followed should be first-in-first-out (FIFO).

Thus old grain gets sold first, and new grain gets stored. This way, all the old grain the warehouses can be evaluated and cleared, and the quality certification from warehouses can be used by auditors. Within two years, the rotting of grains will get eliminated, and the potential of scams (paying first grade prices for second grade grain) almost eliminated. When the government needs additional grain, it can re-purchase the grain from the commodity markets. But this will require building of modern warehouses – where grain can be stored from the top and evacuated from the bottom. The Australian Wheat Board had initiated the building of such warehouses on a pilot basis a few years ago, but nothing happened thereafter .

Using commodity markets the government can transfer the cost of warehousing to the markets. True, it will lose some money. But losing 10-30 percent of the value of grain is preferable to losing 100 percent of the value which is what happens when the grain becomes rotten.

All warehouses should be told to reserve at least a quarter of their capacity for pulses and coarse grains.

But the lot is being done as well

Some amazing work is being done as well.

WDRA has already registered 1,299 warehouses (with storage capacity of 57.80 lakh tonnes). These warehouses also include 439 commodity-exchange-linked warehouses located in Rajasthan, Madhya Pradesh, Maharashtra and Gujarat. How soon it will go beyond these (BJP ruled) states has yet to be determined.

Then as mentioned by Sudarshan Bhagar, minister of state in the ministry of agriculture and farmers’welfare (in reply to Lok Sabha unstarred question no 6200 on 11 April 2017), scientists of Bhabha Atomic Research Centre (BARC) are involved in research to develop the new varieties of pulses crops. A total 19 high yielding varieties of pulses including 6 of pigeon-pea, 5 of urad-bean and 8 of moong-bean have been developed by BARC to date.

A few days earlier (on 11 April, 2017) SS Ahluwalia, minister of state in the ministry of agriculture and farmers welfare had stated (in reply to Lok Sabha unstarred question No 6185) that several initiatives were underway.

Lastly, farmers need to make profits. This depends on both the price at which he can sell his crop, and his ability to reach the markets in time. Equally, it means mitigating risks. Thankfully, the government, in January 2016, launched the Pradhan Mantri Fasal Bima Yojana (PMFBY).

As Ashok Gulati, noted agronomist, puts it, “For the first time, farmers’ share of the premium was pegged at 2 percent for kharif crops and 1.5 percent for rabi crops. As a result, the area covered under insurance increased from 27.2 million hectare in kharif 2015 to 37.5 million hectare in kharif 2016, and the sum insured increased from Rs 60,773 crore to Rs 1,08,055 crore over the same period. However, the system of crop damage assessment has not changed much and most of the states could not even procure smartphones that were supposed to facilitate the faster compilation of crop cutting experiments.”

The crisis for farmers growing pulses has a lot to do with all these schemes and their shortcomings. It is possible that the present crisis will have taught the government a great deal.

Source: Firstpost

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