There’s a third alternative to redefine agri markets

Written by Shirish Joshi

The three farm bills have outlined the Union government’s approach allowing market forces to play a broader role in the agriculture sector. This could be a good move for large farmers, but it will certainly create serious challenges for many small farmers who practice agriculture as a way of life and not as a business. Economists such as Vijay Kelkar and Ajay Shah have accepted the need for “regulated” “free” markets and selective government interventions. As the small and marginal farmers are yet to be integrated in the market, the following scheme design intends to provide minimum income security to small farmers and also help them build their institutional capacities to become viable players in the “free” market.

Through the public distribution system (PDS), the government is one of India’s largest buyers of agri produce. Thus, by redesigning the procurement end of PDS, the small farmers could achieve income security. The Shanta Kumar Committee in 2014 recommended that the state government could be entrusted to manage the procurement and distribution instead of the central government. The State government could aggregate the demand for captive consumption of agri-produce, which includes quantities required for distribution in PDS, Anganwadi, food for lactating mothers as part of Poshan Abhiyan, the requirement for tribal ashramshalas etc.

Instead of focussing only on rice and wheat, the state government could consider supplying a combination of locally grown cereals, millets and pulses within the existing overall limit of five kgs per person per month to the PDS consumers. Each participating farmer will be assigned a product mix and quantity per product. Sharecroppers also could be co-opted in the scheme. The price payable to the farmer will be the MSP declared by the central government for the concerned year.

Instead of traders, Farmer Producer Organisations (FPOs) or gram sabhas (in tribal villages) will act as aggregation agents. FPOs will prepare the farmers to adhere to the FAQ norms. FPOs can also help farmers in minimising the effort and expenses for taking the produce to procurement centres. Wherever feasible, FPOs can also store the grains, process and release them for distribution to the civil supplies department. FPOs can be given commission starting with 1.5 per cent depending upon the range of services provided by them.

Farmers who are also ration cardholders need not sell to the government and buy it back from the ration shop. Suppose the farmers are expected to sell say 100 units to the government while their ration entitlement is 10 units. In that case, the government could pay for 100 units while taking the delivery of only 90 units. Such modality can be a major breakthrough in minimising the cost of procurement, storage and distribution associated with the PDS system. On the other hand, for a family of five, it will amount to more than Rs 6,000 benefit for growing their own food.

This scheme has multiple positive consequences for its stakeholders. Locally grown items will be consumed through the PDS, which will minimise the distortion of the traditional food habits. Consumers will eat what they are used to eating instead of rice or wheat, which may not be their staple diet. The inclusion of millets and pulses in the PDS will help consumers move towards nutrition security and not just food security.

Furthermore, this scheme will develop institutional capabilities of FPOs in aggregation, quality control, weighing, packaging etc. These FPOs can then undertake aggregation activities for other crops beyond food crops. Aggregation capability based on specifications, quality and weight can be a game-changer for enhancing price realisation, while selling to other buyers. Central and state governments have made investments for promotion of FPOs during the last decade. This scheme of government procurement will help them get a return on their investment, in terms of achieving welfare of the farmers.

While market forces will shape the larger transactions in the agriculture sector, by protecting the small and marginal farmers, the government will be able to ensure that, going forward, farmers build needed capacities to participate fully in the market. At the same time, farmers who have identified more lucrative opportunities have no compulsion to join the scheme.

Some of the aspects of the scheme mentioned above are already integrated into the Odisha Millets Mission. Odisha introduced ragi in its PDS in 2019 and procured 1 lakh quintal ragi from 72 tribal blocks. It has introduced ragi laddus under the ICDS scheme for preschool children and plans to introduce millets-based recipes under the mid-day meal scheme. Consistent, assured buying by the state government has encouraged farmers to undertake productivity-enhancing methodologies like the System of Millet Intensification. The nutritional and environmental benefits of the initiative taken by the Odisha Millet Mission are worthy of becoming a national scheme. The government procurement scheme could be localised and piloted in other states and then scaled up across the nation, over a period of three to five years. It could be argued that the scheme can be initiated in the aspirational/tribal/rain-fed districts in the beginning, where the farmers will be keen to participate.

Going beyond the polarities of regulated vs free market, this scheme provides a third alternative by creating a state-community partnership and could offer a nuanced and innovative response to the current crisis.

Joshi is an independent organisation design consultant with nearly four decades of experience in corporate and social sectors. He is involved with FPO promoting agencies in eight state