Chapter # 7.Doubling Farmers’ Income (III): Value Chain & Rural Infrastructure
• Transform the rural economy through the creation of modern rural infrastructure and an integrated value chain system.
• Leverage the value chain to boost India’s exports of food products.
• Create occupational diversification and quality employment opportunities for doubling farmers’ income by 2022-23.
Despite rapid progress, rural India suffers from an infrastructure deficit. The present government has done an admirable job in achieving full village electrification and accelerating the pace of connecting habitations through the Pradhan Mantri Gram Sadak Yojana (PMGSY). Similarly, household electrification has been given a significant push under the Saubhagya scheme. Agriculture infrastructure, such as rural markets, warehouses, cold chain, farm machinery hubs and public irrigation need upgradation.
Based on the recommendations of the Dalwai Committee on Doubling Farmers’ Income, the number of additional markets required comes to 3,548. The recent 2018-19 budget announcement to develop the existing 22,000 Rural Periodic Markets (RPMs) into Grameen Agriculture Markets (GrAMs) will offer better market access to small and marginal farmers. This initiative recognises GrAMs as facilities for first stage post production activities, enabling aggregation and transport from the village level to wholesale markets. The electronic national agriculture market (e-NAM) was launched in 2016 to create a unified national market. So far,
479 mandis across 14 states and UTs have been integrated on the platform.
The lack of an adequate and efficient cold chain infrastructure leads to massive post-harvest losses, estimated at INR 92,561crore annually.1 Perishables account for the bulk of post-harvest losses. Moreover, as a recent report indicates,2 most existing cold storages are single commodity storages, resulting in their capacities lying idle for up to six months a year. The cold-chain infrastructure is also unevenly distributed among states.
Inadequate cold-chain infrastructure hampers India’s food exports as well. Countries across the world have stringent guidelines for import of agricultural and processed food products. The European Union (EU) has raised more notifications, issued more rejections and destroyed more consignments from India as compared to consignments from other developing countries such as Turkey, Brazil, China and Vietnam.3 India has huge export potential, reflected in the fact that its domestic commodity prices were below export parity prices in 72 per cent of cases.4
The present government has taken several steps to modernise the agri value chain. The SAMPADA central sector scheme aims to supplement agriculture by modernising processing activities and decreasing agri-waste. Similarly, in the 2018-19 budget, ‘Operation Green’ on the lines of ‘Operation Flood’ was announced. This scheme aims to promote farmer producer organisations, agri-logistics, processing facilities and professional management of such operations.
1. Public and private investments in agriculture have remained low since the early 90s. Bottlenecks in implementation and a high degree of uncertainty have further reduced investor appetite for agricultural investments.
2. Inability to acquire land for setting up of market yards, resulting from the restrictions on land leasing and land acquisition, is another major constraint.
3. Even the existing marketing infrastructure suffers because of a lack of finances, manpower and proper facilities. Sub-market yards largely function as a location for government procurement and do not provide opportunities for open auction. Further, they are irregular in their operations and handle less than five per cent of the volume handled in principal yards.
4. Poor maintenance of rural roads is a major constraint as well. Linkages with local and feeder roads remain sub-optimal.
5. In the electricity sector, separate feeders for supply of power to agriculture and domestic electrification have not been carried out in many states.
6. Lack of agriculture best practices hinders India’s food exports. Interventions at the farm or producer level are needed to ensure that products meet export standards. However, factors such as the lack of a traceability mechanism from the farm to the consumer, fragmented holdings and restrictions on direct procurement of products from farmers in some states makes it virtually impossible to ensure that products meet export quality standards.
Markets and value chain
Infrastructure status for agriculture value chains: Warehousing, pack-houses, ripening chambers, and cold storages, including those set up at the village level, should be accorded full-fledged infrastructure status to enable them to avail of the fiscal benefits that come with infrastructure status.
Village level procurement centres: To benefit small and marginal farmers, government collection centres and warehousing facilities should be
set up at the village/block level. The budget announcement of developing Gramin Agricultural Markets (GrAMs) will help develop the agricultural marketing infrastructure and bring markets closer to the farm-gate.
Link production to processing: Village level collection centres for fruits and vegetables should be linked to larger processing units. Actively engage the private sector in developing processing centres near rural periodic markets (RPMs).
Food processing: A greater focus should be placed on the food processing industry for enhancing value addition in vegetable and fruit crops. The government has now shifted its attention to promoting “agripreneurs”. This will result in rapid modernization of the agriculture sector.
Rural markets: Develop private market yards. Agro-processors and food processors that wish to establish backward integration to secure their raw material should partner with the government in organizing sourcing through the RPMs.
Upgrade wolesale markets: Upgrade wholesale markets with facilities for temporary storage, pack-house operations and cold storage facilities.
Warehouse upgradation: Pledge financing at warehouses, through negotiable warehouse receipts (NWR), needs to be adopted and popularized as an alternative means of financing. The Department of Agriculture and Farmers’ Welfare (DACFW) should draw up guidelines to promote warehouse based post-harvest loans and e-NWR trading.
Block level resource centres: Establish functional block level resource centres to create value chains, targeting clusters of villages along with social services. It will create an integrated solution for the farmer to access his/her requirements for agriculture and other services. It will also add to employment generation at the local level by engaging youth and creating village level entrepreneurs.
Convergence in government initiatives: Coordination is needed between the initiatives of the Ministry of Agriculture, Food Processing, and Commerce to develop effective procurement linkages, processing facilities, retail chains and export activity. This will facilitate synergies between various initiatives such as the Rashtriya Krishi Vikas Yojana (RKVY) of the agriculture ministry, viability gap funding of the Ministry of Commerce for cold chains and warehousing infrastructure development and Pradhan Mantri Kisan Sampada Yojana of MOFPI.
Strengthen railway freight operations: Railway freight operations should be strengthened through temperature-controlled containers and loading and unloading facilities to reduce post-harvest losses and connect land-locked states to export markets.
Rural roads, electricity and mechanization
Maintenance of rural roads through women SHGs: The maintenance of roads by women SHGs has been experimented with by some states (Uttarakhand for example) and has been found to be very promising. This model could be replicated by other states.
Revisit criteria for identification of rural habitats for road connectivity: To ensure better inclusion, the criteria for identification of habitats for rural roads connectivity in hill and left-wing extremism (LWE) affected districts must be revisited.
Incentivize feeder separation: All distribution companies (DISCOMs) need to be incentivized for rural feeder separation. Agriculture connections and electricity supply feeders should be separated from domestic rural electricity supply.
Incentivize private investment in farm implements: Private entrepreneurs should be incentivized to establish small farm implement mechanization hubs for every 1000 ha and big machinery hubs for every 5000 ha of cultivated area.
Develop export oriented clusters: The Agricultural and Processed Food Export Development Authority (APEDA) has been championing the development of export-oriented clusters with common infrastructure facilities. These clusters should contain a functional, end-to-end cold chain system along with processing facilities.
Increase the number of testing laboratories: There exists a shortage of testing laboratories, essential for health certificates for exports. Private laboratories should be extended financial support to achieve international accreditation. As suggested by APEDA, agricultural universities should also seek to get their labs accredited by APEDA.
Augment cargo handling facilities at airports: APEDA has suggested augmenting the capacity of the Ahmedabad Air Cargo Complex and Mumbai Airport to handle agricultural cargo.
Green channel clearance: Efforts must be made to setup a green channel for perishable produce at identified airports handling cargo.
Regulatory frameworks to combat rejections in export markets: Regulatory frameworks regarding use of pesticides, growth hormones, and antibiotics for marine produce need to be developed and implemented effectively to curb the rejection rate in the export market.
Ensure traceability mechanism: Promotion of farmer producer organizations (FPOs), export-based clusters and contract farming will go a long way towards ensuring traceability of farm produce, a key export requirement.