Doubling Farmer income

Recently NITI Ayog released its ‘Three Year action agenda’ in which one of the key agenda is to double the agriculture income by 2022. Today we are witnessing a scenario of crop losses due to either elusive or excessive rainfall on the one side and on the other side farmers are committing suicide because they have excess produce and not getting fair value for their produce.

This ambitious target will be difficult to achieve unless we solve the issues in the post-harvest chain.

  1. Currently existing agricultural marketing under the Agricultural Produce Market Committees (APMC) acts has led to policy distortion and fragmentation due to huge number of intermediaries and poor infrastructure .These intermediaries are getting better share than the farmers
  2. Inadequate warehousing facilities at the village level leading to post harvest losses and distress selling
  3. Huge gap in the exiting and required cold chain infrastructure. Below chart gives us an idea of the gap

Gap Analysis of Cold-chain Infrastructure in India

4. Minimum support price (MSP) completely ignores the demand dimension and hence leading to inefficient allocation of resources and unwanted accumulation of cereals. MSP regime has also caused distortions in cropping patterns by favoring cultivation of wheat, ice and sugarcane.

Here are some possible solutions

  1. Reforming marketing system of agricultural produce. Developing new institutions and reviving existing ones such as APMC to facilitate linking of farmers to the market
  2. Creation of more number of Farmer Producer and village producer organisations (FPOs/VPOs) and thereby creation of a federation of FPOs similar to Amul. This will eliminate the middlemen
  3. MSP reform through Price Deficiency Payment as proposed by NITI Ayog. It will reduce the need for the government to actually procure food crops, transport and store them and then dispose of them under PDS
  4. Stepping up institutional credit and the way it is being channelized. Currently bulk of the agricultural credit goes into giving farm loans. More focus needs to be given in encouraging asset creation in rural areas.

Here a link to a study on cold chain infrastructure in India