Commodity Outlook and Situation

Analysis

Weekly Report 10 – 16 May, 2020

‘FPOs can help make farming profitable’

Karnataka: A senior official of the Horticulture Department has underscored

the point that innovations, backed by Farmers Producers’ Organisations

(FPO), can play a major role in making agriculture a profitable venture.

Kshama Patil, Deputy Director of Horticulture, Project Monitoring Unit,

explains that Karnataka has a total of about 400 Farmers Producers’

Organisations, including 99 formed by the department. Those formed by the

department have been trained in various aspects of management through

resource institutions. Of the 99, 55 have been working very actively during the

COVID-19 situation and have been able to lift about 2,000 tonnes of perishable

produce of farmers, she notes. “We have been able to organise only about 1

lakh farmers so far in the form of FPOs. The situatiation will improve further

when most of the farmers and taluks are covered under this system,” she feels.

“Agriculture is the only sector where farmer buys inputs at retail prices and

sells his output at a bulk rate. The FPOs can help reverse this trend by taking

up bulk buying of fertilizers, pesticides and other inputs from the

manufacturers and also helping the farmers to sell their produce to

consumers directly,” she added.

Farm credit to get fillip: Nabard window wider, Kisan

credit cards to 2.5 crore more

The Centre has enhanced Nabard’s refinancing

facility for the co-operative banks and regional

rural banks (RRBs) by Rs 30,000 crore to about

Rs 1.2 lakh crore in FY21. The move is expected

to help as many as 3 crore additional small and

marginal farmers having less than two-hectare land. The enhanced credit

facility will help farmers to cover post-harvest expenses. This is since the

farmers are in the process of selling their rabi crops, and also to meet the

sowing requirement for ensuing kharif season. “This is a very timely step as

these cooperatives and RRBs will be able to disburse credit as they were

facing challenges to augment resources after moratorium on loan re-payment

was announced. Small and marginal farmers mainly depend on these

institutions as the average loan amount is smaller than public sector banks,”

said Harsh Kumar Bhanwala, chairman of Nabard. Through this credit

enhancement, there will be no impediment for farmers to buy agri inputs such

as seeds and fertilisers as sowing will commence from next month after the

arrival of monsoon, he said. Finance minister Nirmala Sitharaman said,

besides the additional credit enahancement, 2.5 crore PM-Kisan beneficiaries,

so far left out from the ambit of the Kisan Credit Card, will be covered under

the official credit net through a special drive. The Centre hopes to disburse `2

lakh crore to these farmers. Farmers in animal husbandry and fishery sectors

will also be covered under KCC, she added. Farmers are eligible to get crop

loans up to `1 lakh without collateral through KCC. While the Centre bears a

5% subsidy on crop loan for those who repay in time, many states have

further subsidised agriculture credit from their own funds. In making credit

available to farmers at cheaper interest rates, the Centre bears the

administrative costs (0.2%) and the interest subsidy to Nabard. The Centre

has allocated `21,175 crore on interest subsidy for FY21 against `17,863.43

crore last year. Sitharaman in her Budget speech had announced `15-lakh-

crore agriculture credit target for FY21, up from `13 lakh crore last year. The

actual disbursal was about `13.6 lakh crore in FY20. Banks have disbursed

`86,600 crore of credit to 63 lakh farmers during March-April. Out of total

agriculture credit, 65% is disbursed as short-term (within a year) crop loans.

The share of institutional credit is approximately 72%, according to Nabard

All India Rural Financial Inclusion Survey (NAFIS) 2016-17. According to MK

Jain panel report on agriculture credit set up by RBI, commercial banks

contributed the majority share (78-80%) in agricultural and allied credit

while all co-operative banks constituted 15-16% and the RRBs contributed

the remaining of the farm credit. However, the RRBs have significant presence

(10-35% share in credit) in states like Bihar, Telangana, Himachal Pradesh

and Uttar Pradesh, while cooperatives have good share (20-46%) in Odisha,

Goa, Maharashtra, Chhattisgarh, Madhya Pradesh, Gujarat and Haryana.

Meanwhile, the minister further said 3 crore farmers have already availed the

benefit of 3 months moratorium on loan amounting `4.22 lakh crore,

announced last month. The Centre had extended up to May 31 for the crop

loans repayment which was due from March 1. It has also sanctioned 25 lakh

new KCCs with a credit limit of `25,000 crore since lockdown. However, it has

not enthused farmer leaders who said the Prime Minister’s recent address had

raised hopes specifically among those who are involved in vegetables, fruits,

flowers, milk, poultry and fisheries on direct support to compensate loss. “The

announcement by the finance minister has shattered the hopes of any direct

financial assistance. While two months moratorium on crop loan was

announced last month, enrollment of more farmers under KCC without a

deadline has no meaning,” said Sudhir Panwar, president of Kisan Jagriti

Manch. Ajay Kakra, leader (food and agriculture), PwC India, said: “The

initiative to boost credit of `2 lakh crore to increase coverage of 2.5 lakh

farmers under KCC will surely increase the credit umbrella and help increase

their liquidity issue given the acute cash crunch during the Covid situation.

Additional emergency working capital fund of `30,000 crore from Nabard can

come very handy to farmers for managing post-harvest operations for rabi or

pre-season operations for kharif season at a time when the entire food supply

chain is looking forward towards increasing liquidity.

Agriculture sector to grow by 4.5% over next 3 years:

Union Minister Narendra Singh Tomar

The agriculture sector will grow by 4.5% over the

next three years, on the back of trade reforms and

investments in farm produce infrastructure,

agriculture minister Narendra Singh Tomar said. In

an interview with ET’s Rituraj Tiwari, Tomar

pointed out that the government had taken steps to minimise farm distress by

injecting 1 lakh crore into the economy through welfare schemes like PM

Kisan Yojana and procurement of grains from farmers. Edited excerpts:

How will the government initiatives help farmers?

These reforms and the stimulus package have been long awaited. The Rs 1

lakh crore agriculture infrastructure fund will help in developing robust

marketing infrastructure, which will take care of post-harvest management

and aid farmers in better price realisation through Farmer Producers’

Organisations, private sector participation and cooperatives. Similarly,

financial packages for micro food enterprises, bee-keeping and herbal

cultivation will shore up farmers’ income and agricultural exports.

What is the agricultural growth rate you are estimating post-reforms?

Last year, the sector grew at 3.7% and this year, despite adverse

circumstances, it will grow at around 3%. These initiatives will give a major

fillip to the sector and I expect it to clock a growth rate of 4.5% over the next

three years. Agriculture will be a major contributor to the GDP growth rate

this year too.

How long will it take to implement these steps?

We are well prepared. We will implement these initiatives immediately.

There is rural distress and lack of funds in the rural economy. Will it

affect the kharif season?

We have infused over 1 lakh crore into the rural economy. Farmers have got

money directly in their pockets. They are ready for yet another record food

production this year. Monsoon is also likely to be normal. So, I don’t see

any farm distress. We have provided over 75,000 crore through procurement,

19,000 crore through PM Kisan scheme and 6,600 crore as claim settlement

through Fasal Bima Yojana. Only horticulture farmers are facing distress and

for that we have launched the market intervention scheme (MIS) to buy their

produce.

Migrant labourers have moved back to their villages. How will you help

them to find jobs?

Since most migrant labourers are back, the issue of shortage of farm labour

will be resolved. We have asked Punjab and Haryana to promote mechanised

farming, which requires less manual labour. For states like Uttar Pradesh,

Bihar, Odisha and Jharkhand, where more labourers will be available, we have

asked them to register them for the rural job guarantee scheme (MGNREGS)

so that they get jobs there. We have seen a surge of 40-50% in man-days

under this scheme.

Sitharaman brings farm sector reforms, to deregulate

onion, potato prices

In a measure that could help improve the supply

chain, Finance Minister Nirmala Sitharaman on

Friday announced that food items such as cereals,

edible oils, oilseeds, pulses, onions and potatoes will

henceforth not fall under the purview of the

Essential Commodities Act. Measures such as stock limits will be imposed only

under exceptional circumstances like natural calamities and famines. Though

a pale shadow of its former self, the Essential Commodities Act, vested state

governments with a lot of powers, many of which will not exist once the Act is

amended at the Central level. “The Essential Commodities Act, along with

amendments to APMC Act, measures to smoothen inter-state trade, and

contract farming, will all help in building efficient supply chains, thus

benefitting farmers as well as consumers,” Ashok Gulati, Infosys Chair

Professor for Agriculture at the Indian Council for Research on International

Economic Relations (ICRIER), told Business Standard. Gulati said the

proposed changes ensure that stock holding limits will not be imposed on

processors, exporters and value chain agents across cereals, pulses, and

oilseeds. Speaking about the second tranche of measures as part of the relief

package in the wake of the Covid-19 crisis, Sitharaman said Prime Minister

Narendra Modi had come out with a plan to ensure that farmers get better

price for their produce, and also get a larger share of the rupee spent by

consumers. The Essential Commodities Act was framed in 1955 to deal with

chronic shortages and prevent unscrupulous elements from taking advantage

by hoarding essential items. It empowered the government to control the

production, supply and distribution of certain items. The Centre authorised

state governments to impose stock limits on identified food items, issue

licences to produce, sell and distribute under the Act. The Narendra Modi

government in 2016 had removed the licensing requirement, stock limits and

restrictions on movement of certain food items. These included items like

wheat and wheat products, edible oils, hydrogenated vegetable oils, onions

and potatoes. Exporters, retailers with multiple outlets or large departmental

stores, food processors and importers were also kept out of the licensing

requirement, stock limits and movement restrictions under ECA according to

the 2016 amendments. However, despite the dilution, the Centre retained

overarching powers to enforce the various provisions of ECA. Officials said

according to the plan, all discretionary powers vested with the central

government to impose ECA through the states would be completely

withdrawn and the Act would come into force only in case of three exceptional

circumstances. These include natural calamities, emergencies such as war or

national conflict, and when production of a certain commodity falls below a

threshold, say a drop of over 10-15 per cent. A senior official said the

intention behind the changes was that there were instances when big

businesses shied away from investing in building farm infrastructure like

storage facilities and warehouses out of fear of clampdowns by authorities

under the ECA. “This would give a certain amount of certainty to investors,”

the official said.

Rs. 1 lakh crore farm infra fund to be financed by NABARD:

FM

Farmers seek immediate relief for supply chain

disruptions due to lockdown. With supply chain

disruptions during COVID-19 revealing critical gaps in

agricultural infrastructure and logistics systems,

Finance Minister Nirmala Sitharaman announced plans for a Rs. 1 lakh crore

farm infrastructure fund as part of the Atmanirbhar Bharat Abhiyan stimulus

package on Friday. The third tranche of the stimulus package also included

plans to strengthen infrastructure in food processing, fisheries, animal

husbandry, horticulture, herbal cultivation and beekeeping with a total

funding of Rs. 50,000 crore, including funds allocated earlier in the budget.

The Rs. 1 lakh crore Agriculture Infrastructure Fund will be financed and

managed by the National Bank for Agriculture and Rural Development

(NABARD), the Finance Minister said. Financing will be provided to primary

agriculture cooperative societies, farmer producer organisations, agriculture

entrepreneurs and start-ups to develop cold chain storage and other post-

harvest management infrastructure at the farm gate and aggregation points.

“These are good measures, but everything is in the future tense. In the present

crisis, farmers are facing huge losses. What is desperately needed now is some

immediate compensation rather than funds which will only have future

impact,” said Ramandeep Singh Mann, a farmer and activist based in the

Punjab-Haryana area. “The government talks about supply chain disruptions

and promises improvements. But they could have just taken over transport

and storage facilities during the COVID-19 crisis to help farmers,” said S.

Kannaiyan, a Tamil Nadu-based farmer and activist who was forced to throw

away a portion of his cabbage crop and sell the rest at a loss due to the

lockdown. The focus hitherto has been on short term crop loans while

investment in long term agriculture infrastructure has often not been enough,

said Ms. Sitharaman. “The underlying principle is to empower the people, give

them resources so that they can produce for themselves and have livelihoods

for themselves rather than going for entitlements,” she added. This rationale

drives the plan for a Rs. 10,000 crore scheme to support two lakh micro-food

processing enterprises, providing technical support to reach FSSAI health and

safety standards, build brands and marketing. The National Medicinal Plants

Board will spend Rs. 4,000 crore on herbal cultivation over 10 lakh hectares

with a special focus on an 800 hectare corridor of medicinal plants on the

banks of the Ganga.

Govt sets up separate panel for rice exports under APEDA

The Centre has set up a separate panel under agri-

export promotion body Apeda to boost shipments of

rice following a meeting held by the Prime Minister on

May 2, in which creation of commodity-specific

boards/councils was discussed. The non-basmati

exporters were demanding for a separate board since Apeda’s main focus has

been only for basmati rice. The commerce ministry was of the view that since

a number of items such as buffalo meat, processed products and floriculture

are handled by Apeda, creation of additional boards will dilute its role. Among

all items under the Agricultural and Processed Food Products Export

Development Authority (Apeda), rice and buffalo meat exports together have

60% share in terms of value. “There are already tea, coffee, rubber and spices

boards. If rice and buffalo meat are taken away from Apeda, it will have

virtually no work. Constitution of separate board is not the solution to

increase exports as a number of other factors are responsible,” said a senior

official of Apeda. India is not considered by regular importing nations as a

sustainable destination to buy agri products due to sudden changes in policy

— restrictions on shipments in case of a price rise in any commodity in the

domestic market. India’s non-basmati rice exports have dropped 41% to

about 4.5 million tonne in FY20, according to the Kakinada-based Rice

Exporters’ Association. The association, in June last year, had sought

constitution of a separate board for non-basmati rice like Tea Board. It drew

attention of the commerce ministry to address issues that pertains to different

ministries and state governments. “Fixing of minimum support price (MSP) is

a major challenge for the exporters as every year it has been rising

irrespective of the international prices. Though, we support the government’s

plan in doubling farmers’ income, which can be done through DBT also,” said

BV Krishna Rao, president of the Rice Exporters Association, who is also a

member of the Rice Export Promotion Forum, set up under the chairmanship

of Apeda chairman. Rice exporters, officials of the Centre and states are

members of the Forum. India’s export of rice was $7.77 billion during FY19—

basmati share was $4.72 billion and non-basmati was $3.05 billion. During

April-January of FY20, exports were down by nearly 18% (y-o-y) at $5.03

billion — basmati was $3.4 billion and non-basmati was $1.63 billion.

Meanwhile, the Food Corporation of India has procured 3.7 million tonne of

rabi rice against the target of 11.3 million tonne. This year’s total rice

purchase- both kharif and rabi – has reached 44.6 million tonne as on May 11,

which is more than the record 44.4 million tonne procured in 2018-19 during

the entire season (October-September). The wheat procurement also is no

peak at about 26 MT as on May 11, against 30 MT in the year-ago period due

to delayed start and enforcement of the social distancing norm at purchase

centres. The FCI has bought 97% of the wheat arrived at its centres while it

was 95% in the year-ago. The central agency has already relaxed quality

norms after farmers demanded the grains with luster loss (less shining and

reduced shelf life), should be bought as unseasonal rains had affected the

wheat crop in many places.

Haryana, Punjab Push Non-Paddy Cultivation

New Delhi: Depleting water table and shortage of farm labour have prompted

Haryana and Punjab to promote planting of crops other than paddy. The

Haryana government has announced an incentive of ₹7,000 per acre for non-

paddy cultivation, while Punjab is urging farmers to go for maize instead of

paddy. In recent years, the Centre has been asking Punjab and Haryana to

encourage crop diversification. Haryana has banned paddy cultivation in eight

water-stressed blocks besides announcing the cash incentive for planting

other crops. Last year, the state gave an incentive of ₹2,000 per acre besides

free seeds and other inputs for diversification to maize.

Regulated crop cultivation from this rainy season

Telangana: Only those who follow govt. directive to get benefits, says KCR. In a

significant decision that can bring far-reaching changes in cultivation of crops,

Chief Minister K. Chandrasekhar Rao said that a system of regulated

cultivation of crops would commence this rainy season. The decision was

taken to make agriculture profitable, he asserted. t was decided to cultivate

paddy in 50 lakh acres with fine and normal variety and Sona variety of paddy

in 10 lakh acres. The government will soon come with guidelines. The Rythu

Bandhu scheme would be extended to only those farmers who would abide by

the government’s directive and procure only such crops by giving a support

price, he said.

Safal Fasal supports more than 75,000 farmers through

Covid-19

Lucknow: Digital payment solutions provider

BMC and its SME marketplace SafalFasal is

supporting more than 75,000 Covid-19 hit

farmers across India by offering solutions that

extend formal financing to the agricultural sector

from NBFCs as well as engaging and educating them through the pandemic.

The platform's backers inclduing Tanager, Bayer, Coromondal, Greaves and

other players are advising and mentoring farmers who have been rendered

vulnerable, helping them connect with buyers and ecosystem partners and

create contingency plans. “In the last three weeks of the pilot we had to act

fast with the unexpected challenge of COVID-19,” said Debarshi Dutta, EVP

and Global Head of SafalFasal. “Reinforcing our mission, SafalFasal was able to

provide farmers with invaluable guidance to overcome the new challenges

facing them including a broken supply chain," he said. SafalFasal is also

educating farmers on how they can continue their activity while not exposing

themselves to the virus. The team is also focussed on gathering all

requirements for the next sowing season for inputs and preparing the ground

for credit support, so that the marketplace is able to weather the impact of the

pandemic, a release by the company said.

Agriculture reforms take off, good deal for farmers

Agriculture reform in the country got a big boost with the government finally

deciding to defang the 65-year-old Essential

Commodities Act (ECA), which, by terrorising

traders and food processors—and even importers

and exporters—ensured that there was no steady

buyer of farm produce. In the name of protecting

the consumer—the ECA was born in a scarcity economy—the government

would impose stocking limits on various commodities and these limits would

abruptly be lowered if prices rose. As a result, an exporter building up stock to

export would also be forced to cut them; while export bans were implemented

under trade policy, the ECA was also a critical part of the same policy. While

announcing the change, finance minister Nirmala Sitharaman said that only in

very extenuating circumstances of national calamities—like a famine—would

reintroducing these changes be considered. Indeed, since the idea of the ECA

is to keep control on prices, there are also other measures the government

should be looking at. In the case of rice and wheat, for instance, where FCI

maintains a buffer stock—and so much more—stocks could be dumped in the

market during exceptional price hikes. An active futures market can also be

used for the same purpose. While several states have amended the APMC Act

to allow farmers to sell to non-APMC licencees—arhatiyas—the central

government has decided to formalise this. As the finance minister said, in no

other good—a two-wheeler, for instance—is a producer told to whom he can

sell. Yet, that it is what the APMC Act did—ironically, by governments that

continued to swear by the farmer. A central law is to be brought in to change

this; it is not clear whether the states will oppose this, or if they will be able to

stall it. Indeed, while states still have the right to prevent crops from moving

across their borders, this was also a way to ensure farmers never got the right

price. The new law will also free farmers to take their produce to the most

lucrative market. In order to encourage competition among mandis, though,

the government will have to do more. It will have to ensure that private

mandis—set up to competition with the APMC mandis—get subsidised credit

and land to create critical infrastructural facilities. Equally important, the

government has said it will create a ‘facilitative legal framework’ to allow

farmers to enter into contracts with processors, exporters, aggregators, and

large retailers, etc, so that a farmer has some certainty over what prices he

will receive. In other words, a legal framework will be made to allow contract

farming; as a result, a farmer can lock in on a price before the crop is sown

instead of being left to the vagaries of the market. Indeed, to the extent that

the middleman can be cut out from the transaction, the farmer should also

find it possible to get a greater share of the final retail price. Over time, as

farmers start getting better prices, the government can also think of

restricting the scope of its MSP policy as well as compulsory procurement by

government agencies that distorts markets, and tries to dictate crop choices to

farmers. Given all the changes announced will hurt established interests, it is

likely they will try their best to stall it, so the next challenge for the

government will be to ensure the proposed reforms actually go through. A

good beginning for the agriculture sector, apart from the moves—both today

and earlier—is to invest a lot more in creating physical infrastructure like

irrigation, cold storages, etc.

Source: Verbatim reproduced from different sources