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2020-08-11

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Relevant for: Indian Economy | Topic: Agriculture Issues and related constraints

After having issued ordinances removing stockholding restrictions on major foodstuffs and dismantling the monopoly of regulated mandis in the trading of farm produce, the Narendra Modi government has launched a new Agriculture Infrastructure Fund. A financing facility for setting up warehousing, cold chain, processing and other post-harvest management infrastructure, it provides an interest subvention of 3 per cent on loans of up to Rs 2 crore for a maximum seven-year period. The borrowers are mainly to be farmer producer organisations and primary agricultural cooperative societies, with a targeted disbursement of Rs 1 lakh crore over the current and next three fiscals. In order to make it attractive for banks, the loans would also have government-backed credit coverage against defaults. All in all, a good scheme at least on paper. No one can doubt the need for investments in produce shelf life extension and value addition. Also, there can be nothing better than this infrastructure coming up closer to farms and established farmer-owned institutions, thereby complementing the recent reforms that essentially aim at improving producers’ realisations and their share in the consumer’s rupee.

But there’s a need to temper expectations. To start with, organisations such as the National Horticultural Board are already providing credit-linked subsidy on capital investments in pre-cooling units, controlled/modified atmosphere cold stores, reefer vans, ripening/curing chambers and other such post-harvest infrastructure. There is no dearth today of cold stores in potatoes, just as a lot of storage capacity, including low-cost scientifically-built on-farm structures, has been created for onions under the Rashtriya Krishi Vikas Yojana. So why one more scheme, is a natural question to ask. If at all, it would make sense to merge all existing schemes with the new fund so as to better leverage government money.

Secondly, cold chains and agro-processing cannot be a panacea. More than three-fourths of India’s sugarcane crop is “processed” by mills. Organised dairies, likewise, handle nearly a quarter of the officially-estimated milk production. Many have even installed bulk coolers allowing milk to be chilled “at source” in the village collection centres itself. But all that hasn’t solved the problem of cane payment arrears or stopped the current crash in milk procurement prices. The same goes for onions and potatoes. Being able to store certainly enables farmers to harvest their crop, say, in March and make staggered sales till November to take advantage of higher off-season rates. But again, it has not ended price volatility that ultimately benefits neither producers nor consumers. The focus of policymakers during the first 40 years after Independence was raising farm production. In the subsequent two decades, they started paying more attention to agro-processing. The next revolution, especially in today’s age of surplus, should be in crop planning and information dissemination to help farmers better align their production decisions — what to grow and how much — to market demand.

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