Unit 2
Agriculture During Post Reform Period
Q1) Explain objectives of NAP 2000? (5 marks) (Year 2019)
A1)
The National Agricultural Policy 2000 was announced on July 28, 2000 in the Parliament to promote agricultural growth that suffered serious setback in the nineties. The Policy observed that the decline in public investments in agriculture, controls on the movement, storage and sale of agricultural products have adversely affected the profitability and contributed to a decline in the growth of this sector.
The Policy is called Rainbow Revolution as it aims at a comprehensive development of all the sub-sectors in agriculture like, horticulture, seri-culture, animal husbandry, poultry, aquaculture and aromatic and medicinal plants.
The policy aims at ensuring food and nutrition to the population, providing raw materials for expanding industries, generating exportable surplus and ensuring equitable returns foe the farming community. The following are the objectives of the NAP 2000:
a. A growth rate of over 4% p.a. In the agricultural sector.
b. Efficient use of resources and conservation of soil, water and bio-diversity.
c. Growth of equity across regions and farmers.
d. Promoting demand-driven growth that caters to the domestic markets and maximise the benefits from exports of agricultural products that arise from liberalisation and globalisation.
e. To promote technologically, environmentally and economically sustainable growth in agricultural sector.
In order to achieve the above objectives, the NAP 2000 proposes the following steps:
i) To contain biotic pressures on land and to prevent the fraudulent transfer of agricultural land for non-agricultural purposes.
Ii) Promote the effective use of wastelands by providing financial incentives and entitlements for the landless labour and to the backward classes.
Iii) To promote multi-cropping and inter-cropping to conserve soil fertility.
Iv) To cover 2/3 of the cropped area by watersheds and promote the use of drip and sprinkler irrigation to conserve water resources
The NAP 2000 has the following strategy to achieve the objectives:
- Greater attention will be paid to the development of new varieties of food crops with higher nutritional value.
- Ensure adequate food supply and exportable surplus by promoting horticulture, floriculture, aromatic and medicinal plants among others.
- Improve animal protein availability by promoting animal husbandry, poultry, fisheries, etc.
- Involve private sector and co-operatives to encourage development of contract farming, and animal husbandry.
- Use bio-technology, remote sensing, energy saving technologies to promote production and productivity.
- Ensure the sustainability of extension services by promoting realistic cost recovery, keeping in mind the needs of small and marginal farmers.
- Promote empowerment of women by providing access to land, credit and other services.
- Implementation of the land reforms by consolidating land holdings, redistribution of surplus land, tenancy reforms, improvement of land records and providing land leasing in oil seeds, cotton and horticulture.
- A comprehensive agricultural insurance scheme to cover all the risks from sowing to post-harvesting operations, and ensuring reasonable prices for all farmers throughout the country.
Q2) Explain features of NAP 2000? (8 Marks) (Year 2018, 2019)
A2)
The National Agricultural Policy 2000 was announced on July 28, 2000 in the Parliament to promote agricultural growth that suffered serious setback in the nineties. The Policy observed that the decline in public investments in agriculture, controls on the movement, storage and sale of agricultural products have adversely affected the profitability and contributed to a decline in the growth of this sector.
The Policy is called Rainbow Revolution as it aims at a comprehensive development of all the sub-sectors in agriculture like, horticulture, seri-culture, animal husbandry, poultry, aquaculture and aromatic and medicinal plants.
The policy aims at ensuring food and nutrition to the population, providing raw materials for expanding industries, generating exportable surplus and ensuring equitable returns foe the farming community. The following are the objectives of the NAP 2000:
a. A growth rate of over 4% p.a. In the agricultural sector.
b. Efficient use of resources and conservation of soil, water and bio-diversity.
c. Growth of equity across regions and farmers.
d. Promoting demand-driven growth that caters to the domestic markets and maximise the benefits from exports of agricultural products that arise from liberalisation and globalisation.
e. To promote technologically, environmentally and economically sustainable growth in agricultural sector.
In order to achieve the above objectives, the NAP 2000 proposes the following steps:
i) To contain biotic pressures on land and to prevent the fraudulent transfer of agricultural land for non-agricultural purposes.
Ii) Promote the effective use of wastelands by providing financial incentives and entitlements for the landless labour and to the backward classes.
Iii) To promote multi-cropping and inter-cropping to conserve soil fertility.
Iv) To cover 2/3 of the cropped area by watersheds and promote the use of drip and sprinkler irrigation to conserve water resources
The NAP 2000 has the following strategy to achieve the objectives:
- Greater attention will be paid to the development of new varieties of food crops with higher nutritional value.
- Ensure adequate food supply and exportable surplus by promoting horticulture, floriculture, aromatic and medicinal plants among others.
- Improve animal protein availability by promoting animal husbandry, poultry, fisheries, etc.
- Involve private sector and co-operatives to encourage development of contract farming, and animal husbandry.
- Use bio-technology, remote sensing, energy saving technologies to promote production and productivity.
- Ensure the sustainability of extension services by promoting realistic cost recovery, keeping in mind the needs of small and marginal farmers.
- Promote empowerment of women by providing access to land, credit and other services.
- Implementation of the land reforms by consolidating land holdings, redistribution of surplus land, tenancy reforms, improvement of land records and providing land leasing in oil seeds, cotton and horticulture.
- A comprehensive agricultural insurance scheme to cover all the risks from sowing to post-harvesting operations, and ensuring reasonable prices for all farmers throughout the country.
The main features of the new agricultural policy are as follows:
This policy seeks to harness the vast untapped potential of Indian agriculture and also to strengthen rural infrastructure that is necessary for faster agricultural development. Therefore, this policy seeks to promote technically sound, economically viable, environmentally non degrading, and socially acceptable use of country’s natural resources to promote sustainable development, to raise and to serve as a vehicle for building a resurgent national economy.
The new policy promises a lot. It hopes to achieve green revolution, white revolution, and blue revolution. In other words, it promises “Rainbow Revolution”.
The policy aims at removing controls and restrictions and subsidies to inputs. The policy also lays emphasis on private sector through contract farming by land leasing arrangements.
Private sector investment in agriculture will be encouraged. The domestic agricultural market will be liberalized. Restrictions on the movement of agricultural commodities will be progressively dismantled. The policy aims at encouraging lease markets for raising the size of holdings. It also seeks to encourage consolidation of holdings and speeding up tenancy reforms to recognize the rights of the tenants and sharecroppers. The policy encourages future trading in all important products. The policy has recommended formulation of commodity wise strategies and arrangements to protect farmers from adverse impact of undue price fluctuations in the world market and promote exports.
The important characteristic features of this policy are as follows:
1. Privatisation of agriculture and price protection of farmers in the post QR (Qualitative Restriction) regime would be a part of the government’s strategy to synergise agricultural growth. The major focus is on use of resources and technology, adequate availability, of credit to the farmers and protecting them from seasonal and price fluctuations.
2. Contract farming and land leasing is done to push private sector participation, to allow accelerated technology transfer, capital inflow, assured markets for crop production, especially of oilseeds, cotton and horticulture crops.
3. Private sector investment in agriculture would be encouraged, particularly in areas like agricultural research, human resource development, post-harvest management and marketing.
4. After the dismantling of QRs (quantitative restrictions) on imports, the policy has recommended formulation of commodity wise strategies and arrangement to safeguard farmers from adverse impact of undue price fluctuation within the world market and promote exports.
5. In order to minimise the wide fluctuations in commodity prices the govt would enlarge coverage of future markets.
6. Restriction on the movement of agricultural commodities within the country is reduced.
7. Main stress is given on rural electrification.
8. The utilization of new and renewable source of energy for irrigation and other agriculture purposes would be encouraged.
9. Progressive institutionalisation of rural and farm credit would be continued for providing timely and adequate credit to farmers.
10. The policy envisages evolving a ‘National Livestock Breeding Strategy’ to fulfil the necessity of milk, meat, egg and livestock products and to boost the role of draught animals as a source of energy for farming operations.
11. High priority would be accorded to evolve new location-specific and economically viable improved sorts of farm and horticulture crops, livestock species and aquaculture.
12. The restrictions on the movement of agricultural commodities throughout the country would be progressively dismantled. The structure of taxes on food grains and other commercial crops would be reviewed.
13. The excise duty on materials like farm machinery and implements and fertilizers used as inputs in agricultural production, post-harvest stage and processing would be reviewed
14. Rural electrification would tend high priority as a main mover for agricultural development.
15. The utilization of new and renewable sources of energy for irrigation and other agricultural purposes would be encouraged.
16. Endeavour would be made to provide a package insurance policy for the farmers, right from sowing of crops to post-harvest operations including market fluctuations within the prices of agricultural produce.
Q3) Explain National Agricultural Policy 2000: Objectives, Features and Implications? (8 marks)
A3)
The National Agricultural Policy 2000 was announced on July 28, 2000 in the Parliament to promote agricultural growth that suffered serious setback in the nineties. The Policy observed that the decline in public investments in agriculture, controls on the movement, storage and sale of agricultural products have adversely affected the profitability and contributed to a decline in the growth of this sector.
The Policy is called Rainbow Revolution as it aims at a comprehensive development of all the sub-sectors in agriculture like, horticulture, seri-culture, animal husbandry, poultry, aquaculture and aromatic and medicinal plants.
The policy aims at ensuring food and nutrition to the population, providing raw materials for expanding industries, generating exportable surplus and ensuring equitable returns foe the farming community. The following are the objectives of the NAP 2000:
a. A growth rate of over 4% p.a. In the agricultural sector.
b. Efficient use of resources and conservation of soil, water and bio-diversity.
c. Growth of equity across regions and farmers.
d. Promoting demand-driven growth that caters to the domestic markets and maximise the benefits from exports of agricultural products that arise from liberalisation and globalisation.
e. To promote technologically, environmentally and economically sustainable growth in agricultural sector.
In order to achieve the above objectives, the NAP 2000 proposes the following steps:
i) To contain biotic pressures on land and to prevent the fraudulent transfer of agricultural land for non-agricultural purposes.
Ii) Promote the effective use of wastelands by providing financial incentives and entitlements for the landless labour and to the backward classes.
Iii) To promote multi-cropping and inter-cropping to conserve soil fertility.
Iv) To cover 2/3 of the cropped area by watersheds and promote the use of drip and sprinkler irrigation to conserve water resources
The NAP 2000 has the following strategy to achieve the objectives:
j. Greater attention will be paid to the development of new varieties of food crops with higher nutritional value.
k. Ensure adequate food supply and exportable surplus by promoting horticulture, floriculture, aromatic and medicinal plants among others.
l. Improve animal protein availability by promoting animal husbandry, poultry, fisheries, etc.
m. Involve private sector and co-operatives to encourage development of contract farming, and animal husbandry.
n. Use bio-technology, remote sensing, energy saving technologies to promote production and productivity.
o. Ensure the sustainability of extension services by promoting realistic cost recovery, keeping in mind the needs of small and marginal farmers.
p. Promote empowerment of women by providing access to land, credit and other services.
q. Implementation of the land reforms by consolidating land holdings, redistribution of surplus land, tenancy reforms, improvement of land records and providing land leasing in oil seeds, cotton and horticulture.
r. A comprehensive agricultural insurance scheme to cover all the risks from sowing to post-harvesting operations, and ensuring reasonable prices for all farmers throughout the country.
The main features of the new agricultural policy are as follows:
This policy seeks to harness the vast untapped potential of Indian agriculture and also to strengthen rural infrastructure that is necessary for faster agricultural development. Therefore, this policy seeks to promote technically sound, economically viable, environmentally non degrading, and socially acceptable use of country’s natural resources to promote sustainable development, to raise and to serve as a vehicle for building a resurgent national economy.
The new policy promises a lot. It hopes to achieve green revolution, white revolution, and blue revolution. In other words, it promises “Rainbow Revolution”.
The policy aims at removing controls and restrictions and subsidies to inputs. The policy also lays emphasis on private sector through contract farming by land leasing arrangements.
Private sector investment in agriculture will be encouraged. The domestic agricultural market will be liberalized. Restrictions on the movement of agricultural commodities will be progressively dismantled. The policy aims at encouraging lease markets for raising the size of holdings. It also seeks to encourage consolidation of holdings and speeding up tenancy reforms to recognize the rights of the tenants and sharecroppers. The policy encourages future trading in all important products. The policy has recommended formulation of commodity wise strategies and arrangements to protect farmers from adverse impact of undue price fluctuations in the world market and promote exports.
The important characteristic features of this policy are as follows:
1. Privatisation of agriculture and price protection of farmers in the post QR (Qualitative Restriction) regime would be a part of the government’s strategy to synergise agricultural growth. The major focus is on use of resources and technology, adequate availability, of credit to the farmers and protecting them from seasonal and price fluctuations.
2. Contract farming and land leasing is done to push private sector participation, to allow accelerated technology transfer, capital inflow, assured markets for crop production, especially of oilseeds, cotton and horticulture crops.
3. Private sector investment in agriculture would be encouraged, particularly in areas like agricultural research, human resource development, post-harvest management and marketing.
4. After the dismantling of QRs (quantitative restrictions) on imports, the policy has recommended formulation of commodity wise strategies and arrangement to safeguard farmers from adverse impact of undue price fluctuation within the world market and promote exports.
5. In order to minimise the wide fluctuations in commodity prices the govt would enlarge coverage of future markets.
6. Restriction on the movement of agricultural commodities within the country is reduced.
7. Main stress is given on rural electrification.
8. The utilization of new and renewable source of energy for irrigation and other agriculture purposes would be encouraged.
9. Progressive institutionalisation of rural and farm credit would be continued for providing timely and adequate credit to farmers.
10. The policy envisages evolving a ‘National Livestock Breeding Strategy’ to fulfil the necessity of milk, meat, egg and livestock products and to boost the role of draught animals as a source of energy for farming operations.
11. High priority would be accorded to evolve new location-specific and economically viable improved sorts of farm and horticulture crops, livestock species and aquaculture.
12. The restrictions on the movement of agricultural commodities throughout the country would be progressively dismantled. The structure of taxes on food grains and other commercial crops would be reviewed.
13. The excise duty on materials like farm machinery and implements and fertilizers used as inputs in agricultural production, post-harvest stage and processing would be reviewed
14. Rural electrification would tend high priority as a main mover for agricultural development.
15. The utilization of new and renewable sources of energy for irrigation and other agricultural purposes would be encouraged.
16. Endeavour would be made to provide a package insurance policy for the farmers, right from sowing of crops to post-harvest operations including market fluctuations within the prices of agricultural produce.
Implication
- Sustainability in agriculture - The new policy seeks to introduce economically viable, technically sound, environmentally non-degrading and non-hazardous and socially acceptable use of natural resources of the country for promoting the concept of sustainable agriculture.
2. Food and nutritional security - In order to meet the growing pressure of population growth and to provide food and nutritional security to such a large population, special efforts will be made for raising the productivity and production of crops and thereby to meet the requirement of raw materials of expanding agro-based industries. Special stress will be made for the development of new crop varieties, especially food crops, with higher nutritional value.
The policy has paid due emphasis for the development of rain-fed irrigation, horticulture, floriculture, roots and tubers plantation crops, aromatic and medicinal plants, bee-keeping and sericulture for augmenting food supply and boosting exports along with generation of employment in rural areas.
3. Development and transfer of technology - The policy suggested that the Government should encourage application of biotechnology, remote sensing technologies, energy saving technologies, pre- and post-harvest technologies, and technology for environmental protection. Moreover, the Government will make a fresh attempt to move towards a regime financial sustainability of extension services in a pleased manner. The Government will also undertake special measures for empowering women and also to build their capabilities for improving their access to inputs, technology process and other farming resources.
4. Incentives and investment in agriculture - The policy suggested that the Government should make adequate efforts for improving the terms of trade for agriculture along with associated manufacturing sector. Accordingly, attempts will be made to review and rationalize the structure of taxes on food grains, other commercial crops and also excise duty on farm machinery and implements. The Government has committed to keep agriculture outside purview of taxes and decided to continue the present regime of agricultural subsidies.
5. Policy on institutional structure - The policy gave due emphasis for reforming the Institutional structure. The policy has made arrangement for promotion through contract farming and land leasing arrangements for allowing accelerated technology transfer, capital inflow and assured marketing arrangements for some crops, especially of oilseeds, cotton and horticultural crops.
6. Risk management - The National Agricultural Policy (2000) gave due importance for the promotion of National Agriculture Insurance Scheme (NAIS) so as to cover all crops and all farmers over the country by giving package insurance policy ensuring protection from all risks in pre- and post-harvest operations, including marketing fluctuations in agricultural prices.
Q4) Explain Agricultural pricing? (8 marks) (Year 2018)
A4)
Agricultural price policy in India was introduced since independence. But the agricultural price policy formulated in India has varied widely for various years and also for different crops. This policy put much emphasis on the costs of food grains like wheat, rice and coarse cereals like jowar, bajra, maize etc.
In India, the price policy was first introduced in 1947 with the formation of Food grains Policy Committee which recommended a policy of progressive decontrol, reduction of imports or food grains and substantial increase within the production of food grains. Again in 1950, Food grains Procurement Committee was appointed which introduced the system of rationing and control in the supply of food grains in the country.
The main objective of the worth policy in India was to safeguard the interests of consumers. In this policy no attention was paid to give incentive price to farmers. It had been only in 1964, a clear-cut policy was introduced for providing incentive price to farmers.
The Third Plan document rightly observed that, “The producer of food grains must get a reasonable return. The farmer, in other words, should be assured that the costs of food grains and therefore the commodities that he produces won't be allowed to fall below reasonable minimum.” Accordingly, the food grains Price Committee was appointed in 1964.
Need of agricultural price policy
Movement of price may be a common feature. But rapid and violent movement or fluctuations in the prices of agricultural commodities have serious consequences on the economy of the country. Because the sudden steep fall in the price of a specific crop, result in huge loss to the farmers producing that crop as their income declines.
This will force the farmers to not cultivate the crop next year resulting in a serious shortage in the supply of that food item which may force the govt to import that food crop from foreign countries.
Alternatively, a sudden hike in the price of a specific crop may cause huge suffering to the consumers which can force the consumers to discard it or to curtail their other expenditure substantially for meeting the consumption expenditure thereon crop. In both ways, the large scale fluctuation in the price of agricultural produce will create a disastrous effect on the economy of the country.
Price policy of the govt for agricultural produce seeks to ensure remunerative prices to growers for their produce so as to encourage higher investment and production and also for safeguarding the interests of consumers by making available food supplies at reasonable prices.
The price policy of the country also seeks to evolve a balanced and integrated price structure keep with the general needs of the economy.
In order to achieve this end, the govt announces minimum support prices (MSPs) for major agricultural commodities in each season and also organises purchase operations through the Food Corporations of India (FCI), and cooperative and other agencies designated by state governments for the purpose.
In order to safeguard the interest of both producers and consumers a comprehensive agricultural price policy must be suitably formulated. This could be supported by maintaining buffer stocks of agricultural commodities along with the extensive network of public distribution system.
These will provide a minimum support price to the producers and arrange the supply of these agricultural produce to the consumers at fair prices. Thus, while fixing the minimum support prices and procurement prices care must be taken to repair those prices at such level which can induce the farmers to provide more. Thus, the agricultural price policy is often designed as an “instrument of growth”.
Objectives for agricultural price policy
The agricultural price policy of the country like India should have the subsequent objectives:
“(1) to safeguard or insure the producer through guaranteed minimum support price, which as a stabilisation measure reduces the variability in product prices and thus price risk of the farmers. The impact of the danger reduction is predicted to induce farmers to undertake large investments and to adopt improved production technology.
(2) To induce the specified outputs of various crops consistent with growth targets.
(3) To induce a rise in aggregate agricultural output through large input use and adoption of high yielding seed, fertilizer and water responsive technology.
(4) To induce farmers to part with an outsized proportion of food grains production as a marketed surplus.
(5) To guard the buyer against the excessive rise in prices, especially to safeguard the low income consumers in periods when supplies lag behind demand and market prices rise continuously”.
Features for agricultural price policy in India
Following are a number of the important features of agricultural price policy followed by the govt of India since independence:
(i) Fixing Institutions:
The Government of India has found out some institutions for the implementation of agricultural price policy within the country. Accordingly, the Agricultural Price Commission was found out in 1965 which announced the minimum support prices and procurement prices for the agricultural products.
In 1985, the name of this institution was become Agricultural Cost and prices Commission. Moreover, the food grains Policy Committee was appointed by the govt in 1966 which also recommended various measures of price support.
FCI:
The Food Corporation of India was found out in 1965 for making necessary procurement, storage and distribution of food grains. In 1989-90, total capital employed in FCI was to the extent of Rs 5138 crore with its total storage capacity at 18 million tonnes. The corporation organises the value of food grains at government determined prices and sale these food stocks through the network distribution system.
(ii) Minimum Support Price:
The government fixes the minimum support prices of agricultural products like wheat, rice, maize, cotton, sugarcane, pulses etc., regularly for safeguarding the interest of farmers. The FCI also make their purchases of food grains at the procurement prices so on maintain a rational price of food grains in the interest of farmers.
Accordingly, minimum support price of food grains fixed by the govt increased from Rs 388.26 per quintal in 2003-04 to Rs 429.22 in 2007-08 then to Rs 829.94 (at average) in 2012-13.
(iii) Protecting the Consumers:
In order to safeguard the interest of the consumers, the agricultural price policy has made provision for buffer stock of food grains for its distribution among the consumers through public distribution system.
(iv) Fixation of Maximum Prices:
In order to possess an impact over the prices of essential commodities the govt usually determines the maximum price of agricultural products so on protect the general people from exorbitant rise in prices.
Effects of agricultural price policy
Important effects of Agricultural Price Policy are as follows:
(i) Incentive to increase Production:
Agricultural price policy has been providing necessary incentive to the farmers for raising their agricultural output through modernisation of the sector. The minimum support price should be determined effectively by the govt which can safeguard the interest of the farmers.
Accordingly, minimum support price of food grains fixed by the govt increased from Rs 388.26 per quintal in 2003-04 to Rs 429.27 in 2007-08 then to Rs 829.94 (at average) in 2012-13
(ii) Increase within the Level of Income of Farmers:
The agricultural price policy has provided necessary benefit to the farmers by providing necessary encouragement and incentives to boost their output and also by supporting its prices of these have resulted in a rise in the level of income of farmers also as their living standards.
(iii) Change in Cropping Pattern:
The agricultural price policy has resulted in a considerable change in cropping pattern of Indian agriculture. The production of wheat and rice has increased considerably through the adoption of recent techniques by getting necessary support from the Governments. But the assembly of pulses and oilseeds couldn't achieve any considerable change within the absence of such price support.
(iv)Benefits to Consumers:
The policy has also resulted in considerable benefit to the consumers by supplying the essential agricultural commodities at reasonable price regularly.
(v) Benefit to Industries:
The agricultural price policy has also benefitted the agro industries of the country, like sugar, cotton textile, oil etc. By stabilising of costs/prices of agricultural commodities, the policy has made provision for adequate quantity of raw materials for the agro industries of the country at reasonable prices.
(vi) Price Stability:
The agricultural price policy has stabilised of costs/prices of agricultural products to a large extent. It’s become successful to contain the undue fluctuation of costs/prices of agricultural products. This has created a favourable impact on both the consumers and producers of the country.
Measures induced for enforcing agricultural price policy
Thus, the agricultural price policy which was introduced just after independence made a compromise with the situation and followed a variable policy of progressive decontrol in 1947 then a partial control in 1955. Then in 1959, the govt introduced the state trading in food grains particularly in rice and wheat.
After that in 1964, the govt introduced food zones for imposing restriction on the movement of food grains from one zone to another so as to enforce stability in agricultural prices.
In 1965, the Agricultural Price Commission was found out which announced the minimum support prices and procurement prices in the successive years in order to ensure minimum prices to the producers and for build up buffer stocks to maintain the public distribution system.
The minimum support price for wheat which was fixed at Rs 37.50 per quintal in 1964-65 gradually raised to Rs 50 per quintal in 1965-66 then to Rs 350 per quintal in 1993-94. The procurement price for paddy per quintal was also gradually raised from Rs 77 in 1977-78 to Rs 230 in 1991-92.
The procurement price for coarse grains was also raised from Rs 48.29 per quintal in 1965-66 to Rs 205 in 1991-92. While fixing these procurement prices, the large farmers’ lobby has played a vital role in its decision making.
Again, so as to fulfil the minimum needs of the weaker sections of the society, the rationing system through public distribution system was introduced in India and accordingly the total number of fair price shops has also increased from 2.39 lakh in 1979 to 3.54 lakh in 1980. This public distribution system has been handling about 19 million tonnes of food grains.
NAFED is additionally a vital agency which appoints state agencies for undertaking price support Scheme (PSS) operations. The losses, if any, incurred by central agencies on undertaking PSS operations are reimbursed up to fifteen per cent by the Central Government. Aside from this, government also provides working capital to the central agencies for undertaking PSS operations.
Moreover, the govt also implements Market Intervention Scheme (MIS) for horticultural and agricultural commodities, especially perishable in nature and not covered under the PSS which helps the farmer to get remunerative prices for their produce.
The MIS is contingent the premise of specific request of a State or Union Territory (UT) government which is simply ready to bear 50 per cent (25 per cent in respect of north-eastern states), if any, incurred on its implementation.
However, the loss in such case is restricted up to 25 per cent of total procurement value. However, the profit earned, if any in implementing the MIS is retained by the procuring agencies.
Moreover, so as to ensure a minimum remunerative price to the farmers another steps were also followed by the govt including state trading, build up of buffer stocks, nationalisation of wholesale trade in wheat and rice, procurement from wholesalers, import of food grains etc.
Q5) Explain agricultural finance? (8 marks)
A5)
“Agricultural finance is that the study of financing and liquidity services credit provides to farm borrowers. It's also considered as the study of these financial intermediaries who provide loan funds to agriculture and the financial markets during which these intermediaries obtain their loan able funds.”
Finance in agriculture is as important as other inputs getting used in agricultural production. Technical inputs are often purchased and used by farmer only if he has money (funds). But his own money is always inadequate and he needs outside finance or credit. Agricultural finance capitalizes farmers to undertake new investments and/or adopt new technologies. The importance of agricultural credit is further reinforced by the unique role of Indian agriculture in the macroeconomic framework alongside its significant role in poverty alleviation. Realizing the importance of agricultural credit in fostering agricultural growth and development, the emphasis on the institutional framework for agricultural credit is being emphasized since the start of planned development era in India.
The paper aims to discuss the history and need of agricultural finance in India, sources and magnitude of agricultural finance and to assess its progress.
History of financing agriculture in India
Money lenders were the sole source of credit to agriculture till 1935. They used to charge unduly high rates of interest and follow serious practices while giving loans and recovering them. As a result, farmers were heavily burdened with debts and lots of them perpetuated debts. With the passing of reserve bank of India Act 1934,
District Central Co-op. Banks Act and land development Banks Act, agricultural credit received impetus and there have been improvements in agricultural credit. A strong alternative agency came into being. Large-scale credit became available with reasonable rates of interest at easy terms, both in terms of granting loans and recovery of them. Although the co-operative banks started financing agriculture with their establishments in 1930’s real impetus was received only after Independence when suitable legislation were passed and policies were formulated. Thereafter, bank credit to agriculture made phenomenal progress by opening branches in rural areas and attracting deposits.
Till 14 major commercial banks were nationalized in 1969, co-operative banks were the most institutional agencies providing finance to agriculture. After nationalization, it had been made mandatory for these banks to supply finance to agriculture as a priority sector. These banks undertook special programs of branch expansion and created a network of banking services throughout the country and began financing agriculture on large scale. Thus, agriculture credit acquired multi-agency dimension. Development and adoption of latest technologies and availability of finance go hand in hand. a large number of formal institutional agencies like Co-operatives, Regional Rural Banks (RRBs), Scheduled Commercial Banks (SCBs), Non– Banking Financial Institutions
(NBFIs), and Self-help Groups (SHGs), etc. are involved in meeting the short- and long-term needs of the farmers. Several initiatives are taken to strengthen the institutional mechanism of rural credit system. In bringing "Green Revolution", "White Revolution" and "Yellow Revolution" finance has played an important role. In the first half of 2000s, there has been a steep rise in the share of economic banks in total agricultural credit.
Starting 1990s, the share of short-term agricultural credit in total agricultural credit has been rising. Newer credit delivery systems in the form of Kisan credit card (KCC) were introduced to supply quick access to credit.
The procedures and amount of loans for various purposes are standardized. Among the varied purposes "Crop loans" (Short-term loan) has the main share. Additionally, farmers get loans for purchase of electrical motor with pump, tractor and other machinery, digging wells or boring wells, installation of pipe lines, drip irrigation, planting fruit orchards, purchase of dairy animals and feeds/fodder for them, poultry, sheep/goat keeping and for several other allied enterprises.
In the 12-year period from 2000-01 to 2011-12, the flow of ground level credit has increased impressively, especially after the ‘doubling period’ (2004-07), showing almost a 10 fold increase. Around Rs 28 lakh crore are disbursed during the 12 years and in the next 5 years of 12th FYP, another Rs35 to 42 lakh crores are expected to be invested (12th Five Year Plan Estimates). Clearly, agriculture credit has emerged as a significant strategy for accelerating investments in agriculture.
Need for agricultural finance
The financial need of the Indian farmer are often broadly classified into two categories
a) Productive Needs
Productive needs refer to need of finance for purchase of fertilizers and implements and also digging and deepening of wells.
b) Unproductive Needs
The farmer needs credit for purposes aside from agriculture, too. They’re for celebration of marriages, birth and death.
The adoption of modern technology, which is capital intensive, has commercialized agricultural production in India. Besides, the farmer’s income is seasonal while his working expenses are spread over time. Additionally, farmer’s inadequate savings require the uses of more credit to meet the increasing capital requirements.
Furthermore, credit may be a unique resource, since it provides the opportunity to use additional inputs and capital items now and to pay for them from future earnings. In fact, credit has both “static” and “dynamic” characters.
Because of the high risk inherent in traditional farming activity, the prevalence of high interest rates was the norm instead of an exception, and the concomitant exploitation and misery that often resulted. Development of rural credit systems has therefore, been found to be intrinsically very difficult and, as we'll see, an issue of continuous official concern for over a century.
Importance of agriculture finance
Agricultural production in our country depends upon millions of small farmers. Their intensity, effort and efficiency have helped in raising yields per acre.
Finance in agriculture act as a key to farmers. But farmers‟ money is usually inadequate and he needs outside finance or credit. Due to inadequate financial resources and absence of timely credit facilities at reasonable rates, many of the farmers, are unable to go in for improved seeds and manures or to introduce better methods or techniques.
The farming community must be kept informed about the varied sources of agriculture finance. Agricultural finance possesses its usefulness to the farmers, lenders and extension workers. The knowledge of lending institutions, their legal and regulatory environment helps in selecting the suitable lender who can adequately provide the credit with terms and related services needed to finance the farm business
Role of agriculture finance
Agriculture plays an important role in the development of the Indian economy. It accounts for about 19 per cent of GDP and about two thirds of the population relies on this sector. Agricultural finance is a subset of rural finance dedicated to financing agricultural related activities like input supply, production, distribution, wholesale, processing and marketing. Financial service providers face distinct challenges when handling this sector. For instance, the seasonal nature of production and the dependence on biological processes and natural resources leave producers subject to events beyond their control like droughts, floods or diseases.
The modern agriculture has increased the use of inputs especially for seed, fertilizers, irrigational water, machineries and implements, which has increased demand for agricultural credit. The adoption of modern technology, which is capital intensive, has commercialized agricultural production in India. Besides, the farmers‟ income is seasonal while his working expenses are spread over time. Additionally, farmer's inadequate savings require the uses of more credit to meet the increasing capital requirements. Furthermore, credit is a unique resource, since it provides the chance to use additional inputs and capital items now and to pay for them from future earnings.
The rural population in India suffers from a great deal of indebtedness and is subject to exploitation in the credit market because of high interest rates and the lack of convenient access to credit. Rural households need credit for investing in agriculture and smoothening out seasonal fluctuations in earnings. Since cash flows and savings in rural areas for the majority of households are small, rural households typically tend to depend on credit. Rural households need access to financial institutions that can provide them with credit at lower rates and at reasonable terms than the traditional money-lender and thereby help them avoid debt-traps that are common in rural India.
Timely and adequate agricultural credit is very important for the rise in fixed and working capital for farmers. So as to supply sufficient credit to the farmers, many institutional and non-institutional agencies are working. Under institutional agencies cooperative, commercial, regional rural banks and different Government organizations are supplying credit to the needy farmers on priority basis.
Status of agriculture finance
Credit in conjunction with modern agricultural technologies has ushered in the agricultural development across Indian regions. The liberal credit supply by the lending institutions enabled rapid infrastructural growth across and thereby improved the farm level credit absorption capacity. Although credit has played vital role in agricultural development yet regional and farm-category wise disparity has also taken place. Infect, a number of the states with better natural resources base have progressed well while some others lagged far behind. Likewise, some farmers with better resource endowments and access to financial and other institutions have marched faster while others couldn't do so. Furthermore, multiplicity of lending institutions alongside the liberal deployment of credit through various ongoing schemes including micro-financing have saved rural dwellers from the clutches of cash lenders. Yet, non-institutional credit agents still survive as they follow the canons of financing.
Strategy to improve agriculture finance
The achievement of targets in the agricultural sector which covers production of food and essential material like cotton, jute and oilseeds, ought to not be allowed to suffer for want of adequate credit. However, specific items of productive work and rates of interest got to be considered as an integral a part of the Plan. For providing these facilities all the present agencies like money lenders, commercial banks, cooperatives and therefore the State need to be integrated and harnessed to a common purpose. Such a comprehensive approach is important for ensuring the most effective use of all the available resources of the nation.
Sources of agriculture finance
The two major sources of finance in agriculture are institutional and non- institutional sources.
A. Institutional Source
Institutional sources comprise the govt and co-operative societies, commercial bank including the Regional bank, Lead bank.
1) Co-operative Societies
Indian planners consider co-operation as an instrument for economical development of the deprived farmers, particularly in the rural areas. They see in a very village panchayat, a village co-operatives and village school, because the trinity of institution on which a self-reliant and just economic and social order is to be built. The co-operative movement was started in India largely with a view to providing agriculturists funds for agricultural operations at low rates of interest and projects them from the clutches of cash lenders.
a) Primary Agricultural Credit Society
Primary agricultural credit societies are grass root level arms of the short term co-operative credit structure. PACs deal directly with farmer borrowers, grant short term and medium term loans and also undertake distribution and making functions. The usefulness of PACs has been rising steadily. In 1950-51, it advanced loan worth Rs. 23 crores and Rs. 34,520 crores in 2000-01. The PACs have stepped up their advances to the weaker sections particularly the tiny and marginal farmers. The progress has been quite spectacular but not sufficient considering the demand of finance by farmers.
b) Central Co-operative Banks
There are now 369 (2001-2002) District Central Co-operative Banks. The loan amount of 56,650crore is distributed to the farmers thus far. Their main task is to guide Primary Agricultural Credit Societies in village.
Central Co-operative Banks functions as intermediaries between the State Co-operative Bank and first Agricultural credit society
c) State Co-operative Banks
There are now 30 State Co-operative banks within the country. These Banks are the apex banks of the Co-operative credit structure. It is a link between NABARD from which it borrows and lends to the co-operative central bank and primary societies village.
2. PRIMARY LAND DEVELOPMENT BANKS (PLDBs)
The establishment of the Land Mortgage Bank (LMBs) on cooperative lines dates back to the year 1920 in Punjab. Later during the amount 1920 and 1929 number of LMBs was established in the states of Punjab, Madras, Mysore, Assam and Bengal. Then not much growth was observed in the number of LMBs till 1945. However, during 1945-53 a rapid growth was observed in the number of those banks. During this era only rich and affluent farmers derived benefits of those banks and small and marginal farmers remained untouched of the developments. LMBs got massive support from the RBI, SBI, LIC and Agricultural Refinance Corporation. As a result, LMBs had to reorient its lending policies in favour of marginal and small farmers. LMBs were renamed as land development Banks (LDBs) in 1974.
3. CENTRAL LAND DEVELOPMENT BANK (CLDBs)
In many nations PLDBs are federated into CLDBs. Branches of CLDBs, PLDBs and individual entrepreneurs are the members of the CLDB. NABARD and LIC subscribe for its debentures in large amounts. In fact, NABARD is that the refinance agency of CLDBs. It acts as a link between NABARD and the Government in long term business transactions. It supervises and guides the PLDBs. It inculcates the practice of thrift among member banks by mobilizing savings and stimulating capital formation. The CLDBs provides loans to member banks for the redemption of old debts, improvement, reclamation and development of land, purchase of agricultural machinery and equipment and development of minor irrigation.
4. REGIONAL RURAL BANKS
In the multi-agency approach to supply credit to agriculture, Regional Rural Banks (RRB's) have special places. They’re state sponsored, regionally based and rural oriented commercial banks. An effort was made to integrate commercial banking within the broad policy thrust towards social banking keeping in sight the local peculiarities. The genesis of the RRBs is often traced to the necessity for a stronger institutional arrangement for providing rural credit.
RRBs were supposed to evolve as a specialised rural financial institution for developing the rural economy by providing credit to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs
5. NATIONAL BANK FOR AGRICULTURE & RURAL DEVELOPMENT
National Bank for Agriculture and Rural Development (NABARD) was established in the year 1982 by an Act of Parliament and was entrusted with all matters concerning policy, planning and operation in the field of credit for agriculture and other economic activities in rural areas. The Bill for setting up the Bank was passed by the Parliament in December, 1981 and national bank for Agriculture and Rural Development came into existence on 12th July, 1982. Before that, this job was being done by reserve bank of India.
Objectives
NABARD works for progressive institutionalisation of the agricultural credit and ensures that the demands for credit from agriculture including the new and upcoming areas like floriculture, tissue culture, bio-fertilisers, sprinkler irrigation, drip irrigation etc. are met. It's also vested with the responsibility of promoting and integrating rural development activities through refinance.
Functions
• It helps in planning and operational matters associated with credit for agriculture and allied activities, rural artisans, village industries and other rural development activities;
• It extends refinance to commercial banks for term loans in reference to agriculture and rural development;
• It provides short term credit to state cooperative banks, RRBs, and other financial organization notified by RBI for a period not exceeding 18 months by way of refinance for agricultural operations, marketing of crops and marketing and distribution of agricultural inputs.
• It offers direct loan by way of refinance to all or any eligible institutions for a period not exceeding 25 years.
NON GOVERNMENTAL ORGANISATION (NGO)
A Non-Governmental Organisation (NGO) may be a voluntary organization established to undertake social intermediation like organizing SHGs of micro entrepreneurs and entrusting them to banks for credit linkage or financial intermediation like borrowing bulk funds from banks for on-lending to SHGs. The microfinance sector has emerged from the efforts of Non-Governmental Organisations (NGOs), and as a response to the failure of existing structures to deliver financial services to the poor. The efforts by NGOs have emerged from grassroots and represent diversity.
1. SELF HELP GROUP (SHG)
A Self-Help Group (SHG) may be a registered or unregistered group of micro entrepreneurs having homogenous social and economic background voluntarily, coming together to save small amounts regularly, to mutually comply with contribute to a common fund and to fulfill their emergency needs on mutual help basis. The group members use collective wisdom and peer pressure to make sure proper end-use of credit and timely repayment thereof. In fact, peer pressure has been recognized as an efficient substitute for collaterals.
2. PRIORITY SECTOR LENDING (PSL)
Priority Sector includes those sectors that impact large sections of the population, the weaker sections and therefore the sectors which are employment-intensive like agriculture, tiny and little enterprises. Presently, the broad categories of priority sector for all scheduled commercial banks are as under:
3. ASSESSMENT OF PROGRESS IN AGRICULTURAL CREDIT
Agricultural credit clearly began to grow after bank nationalization and it's been growing continuously since then. With all the concerns and scepticism expressed, the difficult and continuous changes in institutional credit have indeed borne fruit. Over the years there has been a big increase in the access of rural cultivators to institutional credit and, simultaneously, the role of informal agencies, including money lenders, as source of credit has declined.
According to the All India Debt and Investment Survey 1991-92, the relative shares of institutional agencies in the total cash debt of rural cultivators increased from 31.7 per cent in 1971 to 63.2 per cent in 1981 and further to 66.3 per cent in 1991. Nonetheless, recent years have again been characterized by a concern over the falling share of agricultural credit as a proportion of total credit. This is often indeed true, but is this the right metric to seem at the progress of agricultural credit? What would be more relevant is to evaluate agricultural credit as a proportion of agricultural GDP; or short-term credit as a proportion of the worth of inputs; or long term credit as a proportion of private investment.
As might be expected, the share of agricultural value added has been falling as a share of total GDP. Hence credit to agriculture can also be expected to fall as a proportion of total credit, assuming relative stability in the share of purchased inputs as a proportion useful added. The share of agricultural credit as a proportion of agricultural GDP has been rising continuously since the 1950s, and even as a proportion of total GDP until the1980s. There was indeed a fall in the mid 1990s, but has again risen now (Table 4). It's true, however, that agricultural credit has indeed fallen as a proportion of total credit.
4. KCC SCHEME
Kisan credit card (KCC) scheme was introduced in August 1998 for short-term loans for seasonal agricultural operations (SAO). The KCC is that the most effective mode of credit delivery to agriculture in terms of the timeliness, hassle-free operations as also adequacy of credit with minimum of transaction costs and documentation.
Top six states with KCCs issued by institution are:
• Cooperative Banks: Uttar Pradesh (16.7%), Maharashtra (14.3%), Andhra Pradesh (9.85%), Orissa (9.13%), Madhya Pradesh (8.85%) and Rajasthan (7.82%)
•RRBs: Uttar Pradesh (28.93%), Andhra Pradesh (16.03%), Karnataka (9.49%), Bihar (7.18%), Orissa (5.23%) and Madhya Pradesh (4.27%)
• Commercial Banks: Andhra Pradesh (24.5%), Uttar Pradesh (16.32%), Tamil Nadu (10.12%),
• Maharashtra (6.62%), Karnataka (6.29%) and Madhya Pradesh (4.21%)
5. MICRO-FINANCE AND AGRICULTURE
The micro finance sector has developed rapidly over the last two decades, making credit available for several poor micro-entrepreneurs, although in most cases it's practically skipped the rural poor and most particularly their agricultural activities as smallholders. Three-fourth of the people lives in rural areas and for livelihood, directly or indirectly, largely depends up on agriculture and allied activities. Between 60-99 percent of rural households earn a living from farming and for many, it's rarely the sole source of income. Most of these individuals also earn wages either within the agricultural sector or other sectors, are self-employed, or receive money from family members who migrate to cities. Family farming is characterized by low productivity due especially to low levels of investment in inputs or in equipment. But such investments require access to financial sources in the form of short, medium or long- term loans.
Agricultural prices are notoriously volatile and few farmers offers guarantees that are legally or financial acceptable. The returns also are low. These peculiarities demand financing mechanisms adapted to the varied needs and services of rural households. These needs include (i) Short-term: input financing at the beginning of the crop year (seeds, fertilizers, pesticides), additional labour, feed, storage facilitates, processing, etc.; (ii)
Medium and long- term: equipment for intensification, commercialization (transportation), storage (buildings), perennial crops (investment, renewal, maintenance), (re) constitution of herds, land purchase; (iii) Family needs: personal, durables, housing; (iv) Nonfinancial services: monitoring demand, technical assistance and extension; and (v) Savings.
There is no doubt that micro-finance can play a crucial role in agricultural finance in India and is capable of mitigating the challenges related to the sector.
B. Non – Institutional Source
1. Money Lenders
There are two sorts of money lenders in rural areas. There are rich farmers or landlords who combine farming with money-lending. There also are professional money lenders whose only occupation or profession is to lend money. The cultivators depend on the money-lenders for their requirements of money. However, there are many reasons for the preponderance of the village money-lenders in rural area even now.
I. The cash lender freely supplies credit for productive and non-productive propose, and also for short-term and long-term requirements the farmers.
II. It is easily accessible and maintains a close and private contact with the borrowers often having relations with family extending over generations.
III. Their methods of business are simple and elastic.
2. Landlord and others
Traders and commission agent supply funds to farmers for productive purpose much before the crops mature. They force the framers to sell their produce at low price and they charge a heavy commission for themselves. Thus, source of finance is especially important in the case of cash crop like cotton, groundnut, tobacco, and in the case of fruit of chard like mangoes. Traders and commission agent may be bracketed with money lenders, as their lending to farmers is additionally at exorbitant rates and has other undesirable effects too.
2. Institutional Credit Agencies
The evolution of institutional credit to agriculture can be broadly classified into four distinct phases - 1904-1969 (predominance of cooperatives and setting up of RBI), 1969-1975 (Nationalization of commercial banks and fixing of Regional Rural Banks (RRBs)), 1975-1990 (setting from NABARD) and from 1991 onwards (financial sector reforms). Institutional funding of the farm sector is especially done by commercial banks, regional rural banks and cooperative banks. Share of commercial banks in total institutional credit to agriculture is nearly 48 per cent followed by cooperative banks with a share of 46 per cent. Regional Rural Banks account for almost 6 per cent of total credit disbursement.
• Government: the govt sector banks extend both short term also as long-term loans. These loans are popularly referred to as "Taccavi loans" which are generally advanced in times of natural calamities. The rate of interest is low and it's not a major source of agricultural finance.
• Cooperative Credit Societies: The history of cooperative movement in India dates back to 1904 when first Cooperative Credit Societies Act was passed by the govt. The scope of the Act was restricted to establishment of primary credit societies and non-credit societies. The shortcomings of the Act were rectified through passing another Act called Cooperative Societies Act 1912. The Act gave provision for registration of all kinds of Cooperative Societies. This made the emergence of rural cooperatives both in the credit and non-credit areas, though with uneven spatial growth. Soon after the independence, the govt of India following the recommendations of All India Rural Credit Survey Committee (1951) felt that cooperatives were the sole alternative to market agricultural credit and development of rural areas16. Accordingly, cooperatives received substantial help in the provision of credit from reserve bank of India as a part of loan policy and large scale assistance from Central and State Governments for his or her development and strengthening. Many schemes involving subsidies and concessions for the weaker sections were routed through cooperatives. As a result, cooperative institutions registered a remarkable growth within the post-independent India.
• Commercial Banks: Previously commercial banks (CBs) were confined only to urban areas serving mainly the activities of trade, commerce and industry.
• Their role in rural credit was meagre i.e., 0.9 per cent in 1951-52 and 0.7 per cent in 1961-62. The insignificant participation of CBs in rural lending was explained by the risky nature of agriculture because of its heavy dependence on monsoon, unorganized nature and subsistence approach. Through nationalisation of CBs in 1969 and CBs were made to play a lively role in agricultural credit was accelerated and that they are the most important source of institutional credit to agriculture.
4. Regional Rural Banks (RRBs): RRBs were found out in those regions where availability of institutional credit was found to be inadequate but potential for agricultural development was very high. However, the main thrust of the RRBs is to supply loans to small and marginal farmers, landless labourers and village artisans. These loans are advanced for productive purposes. At the present 196 RRBs are functioning in the country lending around Rs 9,000 crore to rural people, particularly to weaker sections.
5. Micro financing: Micro financing through Self Help Groups (SHG) has assumed prominence in recent years. SHG is a group of rural poor who volunteer to organise themselves into a group for eradication of poverty of the members. They comply with save regularly and convert their savings into a common fund referred to as the Group corpus. The members of the group agree to use this common fund and such other funds that they'll receive as a gaggle through a standard management. As soon because the SHG is formed and a few of group meetings are held, an SHG can open a Savings checking account with the nearest Commercial or Regional Rural Bank or a Cooperative Bank. This is often essential to stay the thrift and other earnings of the SHG safely and also to improve the transparency levels of SHG's transactions. Opening of SB account is that the beginning of a relationship between the bank and the SHG. Once this process is over, banks liberally lend to the groups or to members and recover the loans conveniently. The banks even offer subsidy to the amount of loans borrowed based on their good response
Q6) Explain the features and implication of NAP 2000? (8 Marks)
A6)
The National Agricultural Policy 2000 was announced on July 28, 2000 in the Parliament to promote agricultural growth that suffered serious setback in the nineties. The Policy observed that the decline in public investments in agriculture, controls on the movement, storage and sale of agricultural products have adversely affected the profitability and contributed to a decline in the growth of this sector.
The Policy is called Rainbow Revolution as it aims at a comprehensive development of all the sub-sectors in agriculture like, horticulture, seri-culture, animal husbandry, poultry, aquaculture and aromatic and medicinal plants.
The policy aims at ensuring food and nutrition to the population, providing raw materials for expanding industries, generating exportable surplus and ensuring equitable returns foe the farming community.
The main features of the new agricultural policy are as follows:
This policy seeks to harness the vast untapped potential of Indian agriculture and also to strengthen rural infrastructure that is necessary for faster agricultural development. Therefore, this policy seeks to promote technically sound, economically viable, environmentally non degrading, and socially acceptable use of country’s natural resources to promote sustainable development, to raise and to serve as a vehicle for building a resurgent national economy.
The new policy promises a lot. It hopes to achieve green revolution, white revolution, and blue revolution. In other words, it promises “Rainbow Revolution”.
The policy aims at removing controls and restrictions and subsidies to inputs. The policy also lays emphasis on private sector through contract farming by land leasing arrangements.
Private sector investment in agriculture will be encouraged. The domestic agricultural market will be liberalized. Restrictions on the movement of agricultural commodities will be progressively dismantled. The policy aims at encouraging lease markets for raising the size of holdings. It also seeks to encourage consolidation of holdings and speeding up tenancy reforms to recognize the rights of the tenants and sharecroppers. The policy encourages future trading in all important products. The policy has recommended formulation of commodity wise strategies and arrangements to protect farmers from adverse impact of undue price fluctuations in the world market and promote exports.
The important characteristic features of this policy are as follows:
1. Privatisation of agriculture and price protection of farmers in the post QR (Qualitative Restriction) regime would be a part of the government’s strategy to synergise agricultural growth. The major focus is on use of resources and technology, adequate availability, of credit to the farmers and protecting them from seasonal and price fluctuations.
2. Contract farming and land leasing is done to push private sector participation, to allow accelerated technology transfer, capital inflow, assured markets for crop production, especially of oilseeds, cotton and horticulture crops.
3. Private sector investment in agriculture would be encouraged, particularly in areas like agricultural research, human resource development, post-harvest management and marketing.
4. After the dismantling of QRs (quantitative restrictions) on imports, the policy has recommended formulation of commodity wise strategies and arrangement to safeguard farmers from adverse impact of undue price fluctuation within the world market and promote exports.
5. In order to minimise the wide fluctuations in commodity prices the govt would enlarge coverage of future markets.
6. Restriction on the movement of agricultural commodities within the country is reduced.
7. Main stress is given on rural electrification.
8. The utilization of new and renewable source of energy for irrigation and other agriculture purposes would be encouraged.
9. Progressive institutionalisation of rural and farm credit would be continued for providing timely and adequate credit to farmers.
10. The policy envisages evolving a ‘National Livestock Breeding Strategy’ to fulfil the necessity of milk, meat, egg and livestock products and to boost the role of draught animals as a source of energy for farming operations.
11. High priority would be accorded to evolve new location-specific and economically viable improved sorts of farm and horticulture crops, livestock species and aquaculture.
12. The restrictions on the movement of agricultural commodities throughout the country would be progressively dismantled. The structure of taxes on food grains and other commercial crops would be reviewed.
13. The excise duty on materials like farm machinery and implements and fertilizers used as inputs in agricultural production, post-harvest stage and processing would be reviewed
14. Rural electrification would tend high priority as a main mover for agricultural development.
15. The utilization of new and renewable sources of energy for irrigation and other agricultural purposes would be encouraged.
16. Endeavour would be made to provide a package insurance policy for the farmers, right from sowing of crops to post-harvest operations including market fluctuations within the prices of agricultural produce.
Implication
- Sustainability in agriculture - The new policy seeks to introduce economically viable, technically sound, environmentally non-degrading and non-hazardous and socially acceptable use of natural resources of the country for promoting the concept of sustainable agriculture.
- Food and nutritional security - In order to meet the growing pressure of population growth and to provide food and nutritional security to such a large population, special efforts will be made for raising the productivity and production of crops and thereby to meet the requirement of raw materials of expanding agro-based industries. Special stress will be made for the development of new crop varieties, especially food crops, with higher nutritional value.
The policy has paid due emphasis for the development of rain-fed irrigation, horticulture, floriculture, roots and tubers plantation crops, aromatic and medicinal plants, bee-keeping and sericulture for augmenting food supply and boosting exports along with generation of employment in rural areas.
3. Development and transfer of technology - The policy suggested that the Government should encourage application of biotechnology, remote sensing technologies, energy saving technologies, pre- and post-harvest technologies, and technology for environmental protection. Moreover, the Government will make a fresh attempt to move towards a regime financial sustainability of extension services in a pleased manner. The Government will also undertake special measures for empowering women and also to build their capabilities for improving their access to inputs, technology process and other farming resources.
4. Incentives and investment in agriculture - The policy suggested that the Government should make adequate efforts for improving the terms of trade for agriculture along with associated manufacturing sector. Accordingly, attempts will be made to review and rationalize the structure of taxes on food grains, other commercial crops and also excise duty on farm machinery and implements. The Government has committed to keep agriculture outside purview of taxes and decided to continue the present regime of agricultural subsidies.
5. Policy on institutional structure - The policy gave due emphasis for reforming the Institutional structure. The policy has made arrangement for promotion through contract farming and land leasing arrangements for allowing accelerated technology transfer, capital inflow and assured marketing arrangements for some crops, especially of oilseeds, cotton and horticultural crops.
6. Risk management - The National Agricultural Policy (2000) gave due importance for the promotion of National Agriculture Insurance Scheme (NAIS) so as to cover all crops and all farmers over the country by giving package insurance policy ensuring protection from all risks in pre- and post-harvest operations, including marketing fluctuations in agricultural prices.
Q7) Explain the sources of agriculture finance? (12 marks) (Year 2019)
A7)
The two major sources of finance in agriculture are institutional and non- institutional sources.
A. Institutional Source
Institutional sources comprise the govt and co-operative societies, commercial bank including the Regional bank, Lead bank.
1) Co-operative Societies
Indian planners consider co-operation as an instrument for economical development of the deprived farmers, particularly in the rural areas. They see in a very village panchayat, a village co-operatives and village school, because the trinity of institution on which a self-reliant and just economic and social order is to be built. The co-operative movement was started in India largely with a view to providing agriculturists funds for agricultural operations at low rates of interest and projects them from the clutches of cash lenders.
a) Primary Agricultural Credit Society
Primary agricultural credit societies are grass root level arms of the short term co-operative credit structure. PACs deal directly with farmer borrowers, grant short term and medium term loans and also undertake distribution and making functions. The usefulness of PACs has been rising steadily. In 1950-51, it advanced loan worth Rs. 23 crores and Rs. 34,520 crores in 2000-01. The PACs have stepped up their advances to the weaker sections particularly the tiny and marginal farmers. The progress has been quite spectacular but not sufficient considering the demand of finance by farmers.
b) Central Co-operative Banks
There are now 369 (2001-2002) District Central Co-operative Banks. The loan amount of 56,650crore is distributed to the farmers thus far. Their main task is to guide Primary Agricultural Credit Societies in village.
Central Co-operative Banks functions as intermediaries between the State Co-operative Bank and first Agricultural credit society
c) State Co-operative Banks
There are now 30 State Co-operative banks within the country. These Banks are the apex banks of the Co-operative credit structure. It is a link between NABARD from which it borrows and lends to the co-operative central bank and primary societies village.
2. PRIMARY LAND DEVELOPMENT BANKS (PLDBs)
The establishment of the Land Mortgage Bank (LMBs) on cooperative lines dates back to the year 1920 in Punjab. Later during the amount 1920 and 1929 number of LMBs was established in the states of Punjab, Madras, Mysore, Assam and Bengal. Then not much growth was observed in the number of LMBs till 1945. However, during 1945-53 a rapid growth was observed in the number of those banks. During this era only rich and affluent farmers derived benefits of those banks and small and marginal farmers remained untouched of the developments. LMBs got massive support from the RBI, SBI, LIC and Agricultural Refinance Corporation. As a result, LMBs had to reorient its lending policies in favour of marginal and small farmers. LMBs were renamed as land development Banks (LDBs) in 1974.
3. CENTRAL LAND DEVELOPMENT BANK (CLDBs)
In many nations PLDBs are federated into CLDBs. Branches of CLDBs, PLDBs and individual entrepreneurs are the members of the CLDB. NABARD and LIC subscribe for its debentures in large amounts. In fact, NABARD is that the refinance agency of CLDBs. It acts as a link between NABARD and the Government in long term business transactions. It supervises and guides the PLDBs. It inculcates the practice of thrift among member banks by mobilizing savings and stimulating capital formation. The CLDBs provides loans to member banks for the redemption of old debts, improvement, reclamation and development of land, purchase of agricultural machinery and equipment and development of minor irrigation.
4. REGIONAL RURAL BANKS
In the multi-agency approach to supply credit to agriculture, Regional Rural Banks (RRB's) have special places. They’re state sponsored, regionally based and rural oriented commercial banks. An effort was made to integrate commercial banking within the broad policy thrust towards social banking keeping in sight the local peculiarities. The genesis of the RRBs is often traced to the necessity for a stronger institutional arrangement for providing rural credit.
RRBs were supposed to evolve as a specialised rural financial institution for developing the rural economy by providing credit to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs
5. NATIONAL BANK FOR AGRICULTURE & RURAL DEVELOPMENT
National Bank for Agriculture and Rural Development (NABARD) was established in the year 1982 by an Act of Parliament and was entrusted with all matters concerning policy, planning and operation in the field of credit for agriculture and other economic activities in rural areas. The Bill for setting up the Bank was passed by the Parliament in December, 1981 and national bank for Agriculture and Rural Development came into existence on 12th July, 1982. Before that, this job was being done by reserve bank of India.
Objectives
NABARD works for progressive institutionalisation of the agricultural credit and ensures that the demands for credit from agriculture including the new and upcoming areas like floriculture, tissue culture, bio-fertilisers, sprinkler irrigation, drip irrigation etc. are met. It's also vested with the responsibility of promoting and integrating rural development activities through refinance.
Functions
• It helps in planning and operational matters associated with credit for agriculture and allied activities, rural artisans, village industries and other rural development activities;
• It extends refinance to commercial banks for term loans in reference to agriculture and rural development;
• It provides short term credit to state cooperative banks, RRBs, and other financial organization notified by RBI for a period not exceeding 18 months by way of refinance for agricultural operations, marketing of crops and marketing and distribution of agricultural inputs.
• It offers direct loan by way of refinance to all or any eligible institutions for a period not exceeding 25 years.
NON GOVERNMENTAL ORGANISATION (NGO)
A Non-Governmental Organisation (NGO) may be a voluntary organization established to undertake social intermediation like organizing SHGs of micro entrepreneurs and entrusting them to banks for credit linkage or financial intermediation like borrowing bulk funds from banks for on-lending to SHGs. The microfinance sector has emerged from the efforts of Non-Governmental Organisations (NGOs), and as a response to the failure of existing structures to deliver financial services to the poor. The efforts by NGOs have emerged from grassroots and represent diversity.
1. SELF HELP GROUP (SHG)
A Self-Help Group (SHG) may be a registered or unregistered group of micro entrepreneurs having homogenous social and economic background voluntarily, coming together to save small amounts regularly, to mutually comply with contribute to a common fund and to fulfill their emergency needs on mutual help basis. The group members use collective wisdom and peer pressure to make sure proper end-use of credit and timely repayment thereof. In fact, peer pressure has been recognized as an efficient substitute for collaterals.
2. PRIORITY SECTOR LENDING (PSL)
Priority Sector includes those sectors that impact large sections of the population, the weaker sections and therefore the sectors which are employment-intensive like agriculture, tiny and little enterprises. Presently, the broad categories of priority sector for all scheduled commercial banks are as under:
3. ASSESSMENT OF PROGRESS IN AGRICULTURAL CREDIT
Agricultural credit clearly began to grow after bank nationalization and it's been growing continuously since then. With all the concerns and scepticism expressed, the difficult and continuous changes in institutional credit have indeed borne fruit. Over the years there has been a big increase in the access of rural cultivators to institutional credit and, simultaneously, the role of informal agencies, including money lenders, as source of credit has declined.
According to the All India Debt and Investment Survey 1991-92, the relative shares of institutional agencies in the total cash debt of rural cultivators increased from 31.7 per cent in 1971 to 63.2 per cent in 1981 and further to 66.3 per cent in 1991. Nonetheless, recent years have again been characterized by a concern over the falling share of agricultural credit as a proportion of total credit. This is often indeed true, but is this the right metric to seem at the progress of agricultural credit? What would be more relevant is to evaluate agricultural credit as a proportion of agricultural GDP; or short-term credit as a proportion of the worth of inputs; or long term credit as a proportion of private investment.
As might be expected, the share of agricultural value added has been falling as a share of total GDP. Hence credit to agriculture can also be expected to fall as a proportion of total credit, assuming relative stability in the share of purchased inputs as a proportion useful added. The share of agricultural credit as a proportion of agricultural GDP has been rising continuously since the 1950s, and even as a proportion of total GDP until the1980s. There was indeed a fall in the mid 1990s, but has again risen now (Table 4). It's true, however, that agricultural credit has indeed fallen as a proportion of total credit.
4. KCC SCHEME
Kisan credit card (KCC) scheme was introduced in August 1998 for short-term loans for seasonal agricultural operations (SAO). The KCC is that the most effective mode of credit delivery to agriculture in terms of the timeliness, hassle-free operations as also adequacy of credit with minimum of transaction costs and documentation.
Top six states with KCCs issued by institution are:
• Cooperative Banks: Uttar Pradesh (16.7%), Maharashtra (14.3%), Andhra Pradesh (9.85%), Orissa (9.13%), Madhya Pradesh (8.85%) and Rajasthan (7.82%)
•RRBs: Uttar Pradesh (28.93%), Andhra Pradesh (16.03%), Karnataka (9.49%), Bihar (7.18%), Orissa (5.23%) and Madhya Pradesh (4.27%)
• Commercial Banks: Andhra Pradesh (24.5%), Uttar Pradesh (16.32%), Tamil Nadu (10.12%),
• Maharashtra (6.62%), Karnataka (6.29%) and Madhya Pradesh (4.21%)
5. MICRO-FINANCE AND AGRICULTURE
The micro finance sector has developed rapidly over the last two decades, making credit available for several poor micro-entrepreneurs, although in most cases it's practically skipped the rural poor and most particularly their agricultural activities as smallholders. Three-fourth of the people lives in rural areas and for livelihood, directly or indirectly, largely depends up on agriculture and allied activities. Between 60-99 percent of rural households earn a living from farming and for many, it's rarely the sole source of income. Most of these individuals also earn wages either within the agricultural sector or other sectors, are self-employed, or receive money from family members who migrate to cities. Family farming is characterized by low productivity due especially to low levels of investment in inputs or in equipment. But such investments require access to financial sources in the form of short, medium or long- term loans.
Agricultural prices are notoriously volatile and few farmers offers guarantees that are legally or financial acceptable. The returns also are low. These peculiarities demand financing mechanisms adapted to the varied needs and services of rural households. These needs include (i) Short-term: input financing at the beginning of the crop year (seeds, fertilizers, pesticides), additional labour, feed, storage facilitates, processing, etc.; (ii)
Medium and long- term: equipment for intensification, commercialization (transportation), storage (buildings), perennial crops (investment, renewal, maintenance), (re) constitution of herds, land purchase; (iii) Family needs: personal, durables, housing; (iv) Nonfinancial services: monitoring demand, technical assistance and extension; and (v) Savings.
There is no doubt that micro-finance can play a crucial role in agricultural finance in India and is capable of mitigating the challenges related to the sector.
B. Non – Institutional Source
1. Money Lenders
There are two sorts of money lenders in rural areas. There are rich farmers or landlords who combine farming with money-lending. There also are professional money lenders whose only occupation or profession is to lend money. The cultivators depend on the money-lenders for their requirements of money. However, there are many reasons for the preponderance of the village money-lenders in rural area even now.
I. The cash lender freely supplies credit for productive and non-productive propose, and also for short-term and long-term requirements the farmers.
II. It is easily accessible and maintains a close and private contact with the borrowers often having relations with family extending over generations.
III. Their methods of business are simple and elastic.
2. Landlord and others
Traders and commission agent supply funds to farmers for productive purpose much before the crops mature. They force the framers to sell their produce at low price and they charge a heavy commission for themselves. Thus, source of finance is especially important in the case of cash crop like cotton, groundnut, tobacco, and in the case of fruit of chard like mangoes. Traders and commission agent may be bracketed with money lenders, as their lending to farmers is additionally at exorbitant rates and has other undesirable effects too.
2. Institutional Credit Agencies
The evolution of institutional credit to agriculture can be broadly classified into four distinct phases - 1904-1969 (predominance of cooperatives and setting up of RBI), 1969-1975 (Nationalization of commercial banks and fixing of Regional Rural Banks (RRBs)), 1975-1990 (setting from NABARD) and from 1991 onwards (financial sector reforms). Institutional funding of the farm sector is especially done by commercial banks, regional rural banks and cooperative banks. Share of commercial banks in total institutional credit to agriculture is nearly 48 per cent followed by cooperative banks with a share of 46 per cent. Regional Rural Banks account for almost 6 per cent of total credit disbursement.
• Government: the govt sector banks extend both short term also as long-term loans. These loans are popularly referred to as "Taccavi loans" which are generally advanced in times of natural calamities. The rate of interest is low and it's not a major source of agricultural finance.
• Cooperative Credit Societies: The history of cooperative movement in India dates back to 1904 when first Cooperative Credit Societies Act was passed by the govt. The scope of the Act was restricted to establishment of primary credit societies and non-credit societies. The shortcomings of the Act were rectified through passing another Act called Cooperative Societies Act 1912. The Act gave provision for registration of all kinds of Cooperative Societies. This made the emergence of rural cooperatives both in the credit and non-credit areas, though with uneven spatial growth. Soon after the independence, the govt of India following the recommendations of All India Rural Credit Survey Committee (1951) felt that cooperatives were the sole alternative to market agricultural credit and development of rural areas16. Accordingly, cooperatives received substantial help in the provision of credit from reserve bank of India as a part of loan policy and large scale assistance from Central and State Governments for his or her development and strengthening. Many schemes involving subsidies and concessions for the weaker sections were routed through cooperatives. As a result, cooperative institutions registered a remarkable growth within the post-independent India.
• Commercial Banks: Previously commercial banks (CBs) were confined only to urban areas serving mainly the activities of trade, commerce and industry.
• Their role in rural credit was meagre i.e., 0.9 per cent in 1951-52 and 0.7 per cent in 1961-62. The insignificant participation of CBs in rural lending was explained by the risky nature of agriculture because of its heavy dependence on monsoon, unorganized nature and subsistence approach. Through nationalisation of CBs in 1969 and CBs were made to play a lively role in agricultural credit was accelerated and that they are the most important source of institutional credit to agriculture.
4. Regional Rural Banks (RRBs): RRBs were found out in those regions where availability of institutional credit was found to be inadequate but potential for agricultural development was very high. However, the main thrust of the RRBs is to supply loans to small and marginal farmers, landless labourers and village artisans. These loans are advanced for productive purposes. At the present 196 RRBs are functioning in the country lending around Rs 9,000 crore to rural people, particularly to weaker sections.
5. Micro financing: Micro financing through Self Help Groups (SHG) has assumed prominence in recent years. SHG is a group of rural poor who volunteer to organise themselves into a group for eradication of poverty of the members. They comply with save regularly and convert their savings into a common fund referred to as the Group corpus. The members of the group agree to use this common fund and such other funds that they'll receive as a gaggle through a standard management. As soon because the SHG is formed and a few of group meetings are held, an SHG can open a Savings checking account with the nearest Commercial or Regional Rural Bank or a Cooperative Bank. This is often essential to stay the thrift and other earnings of the SHG safely and also to improve the transparency levels of SHG's transactions. Opening of SB account is that the beginning of a relationship between the bank and the SHG. Once this process is over, banks liberally lend to the groups or to members and recover the loans conveniently. The banks even offer subsidy to the amount of loans borrowed based on their good response.
Q8) Explain the history of agriculture finance? (5 marks)
A8)
“Agricultural finance is that the study of financing and liquidity services credit provides to farm borrowers. It's also considered as the study of these financial intermediaries who provide loan funds to agriculture and the financial markets during which these intermediaries obtain their loan able funds.”
Finance in agriculture is as important as other inputs getting used in agricultural production. Technical inputs are often purchased and used by farmer only if he has money (funds). But his own money is always inadequate and he needs outside finance or credit. Agricultural finance capitalizes farmers to undertake new investments and/or adopt new technologies. The importance of agricultural credit is further reinforced by the unique role of Indian agriculture in the macroeconomic framework alongside its significant role in poverty alleviation. Realizing the importance of agricultural credit in fostering agricultural growth and development, the emphasis on the institutional framework for agricultural credit is being emphasized since the start of planned development era in India.
The paper aims to discuss the history and need of agricultural finance in India, sources and magnitude of agricultural finance and to assess its progress.
History of financing agriculture in India
Money lenders were the sole source of credit to agriculture till 1935. They used to charge unduly high rates of interest and follow serious practices while giving loans and recovering them. As a result, farmers were heavily burdened with debts and lots of them perpetuated debts. With the passing of reserve bank of India Act 1934,
District Central Co-op. Banks Act and land development Banks Act, agricultural credit received impetus and there have been improvements in agricultural credit. A strong alternative agency came into being. Large-scale credit became available with reasonable rates of interest at easy terms, both in terms of granting loans and recovery of them. Although the co-operative banks started financing agriculture with their establishments in 1930’s real impetus was received only after Independence when suitable legislation were passed and policies were formulated. Thereafter, bank credit to agriculture made phenomenal progress by opening branches in rural areas and attracting deposits.
Till 14 major commercial banks were nationalized in 1969, co-operative banks were the most institutional agencies providing finance to agriculture. After nationalization, it had been made mandatory for these banks to supply finance to agriculture as a priority sector. These banks undertook special programs of branch expansion and created a network of banking services throughout the country and began financing agriculture on large scale. Thus, agriculture credit acquired multi-agency dimension. Development and adoption of latest technologies and availability of finance go hand in hand. a large number of formal institutional agencies like Co-operatives, Regional Rural Banks (RRBs), Scheduled Commercial Banks (SCBs), Non– Banking Financial Institutions
(NBFIs), and Self-help Groups (SHGs), etc. are involved in meeting the short- and long-term needs of the farmers. Several initiatives are taken to strengthen the institutional mechanism of rural credit system. In bringing "Green Revolution", "White Revolution" and "Yellow Revolution" finance has played an important role. In the first half of 2000s, there has been a steep rise in the share of economic banks in total agricultural credit.
Starting 1990s, the share of short-term agricultural credit in total agricultural credit has been rising. Newer credit delivery systems in the form of Kisan credit card (KCC) were introduced to supply quick access to credit.
The procedures and amount of loans for various purposes are standardized. Among the varied purposes "Crop loans" (Short-term loan) has the main share. Additionally, farmers get loans for purchase of electrical motor with pump, tractor and other machinery, digging wells or boring wells, installation of pipe lines, drip irrigation, planting fruit orchards, purchase of dairy animals and feeds/fodder for them, poultry, sheep/goat keeping and for several other allied enterprises.
In the 12-year period from 2000-01 to 2011-12, the flow of ground level credit has increased impressively, especially after the ‘doubling period’ (2004-07), showing almost a 10-fold increase. Around Rs 28 lakh crore are disbursed during the 12 years and in the next 5 years of 12th FYP, another Rs35 to 42 lakh crores are expected to be invested (12th Five Year Plan Estimates). Clearly, agriculture credit has emerged as a significant strategy for accelerating investments in agriculture.
Q9) Explain role of agriculture finance? (5 marks)
A9)
“Agricultural finance is that the study of financing and liquidity services credit provides to farm borrowers. It's also considered as the study of these financial intermediaries who provide loan funds to agriculture and the financial markets during which these intermediaries obtain their loan able funds.”
Finance in agriculture is as important as other inputs getting used in agricultural production. Technical inputs are often purchased and used by farmer only if he has money (funds). But his own money is always inadequate and he needs outside finance or credit. Agricultural finance capitalizes farmers to undertake new investments and/or adopt new technologies. The importance of agricultural credit is further reinforced by the unique role of Indian agriculture in the macroeconomic framework alongside its significant role in poverty alleviation. Realizing the importance of agricultural credit in fostering agricultural growth and development, the emphasis on the institutional framework for agricultural credit is being emphasized since the start of planned development era in India.
Role of agriculture finance
Agriculture plays an important role in the development of the Indian economy. It accounts for about 19 per cent of GDP and about two thirds of the population relies on this sector. Agricultural finance is a subset of rural finance dedicated to financing agricultural related activities like input supply, production, distribution, wholesale, processing and marketing. Financial service providers face distinct challenges when handling this sector. For instance, the seasonal nature of production and the dependence on biological processes and natural resources leave producers subject to events beyond their control like droughts, floods or diseases.
The modern agriculture has increased the use of inputs especially for seed, fertilizers, irrigational water, machineries and implements, which has increased demand for agricultural credit. The adoption of modern technology, which is capital intensive, has commercialized agricultural production in India. Besides, the farmers‟ income is seasonal while his working expenses are spread over time. Additionally, farmer's inadequate savings require the uses of more credit to meet the increasing capital requirements. Furthermore, credit is a unique resource, since it provides the chance to use additional inputs and capital items now and to pay for them from future earnings.
The rural population in India suffers from a great deal of indebtedness and is subject to exploitation in the credit market because of high interest rates and the lack of convenient access to credit. Rural households need credit for investing in agriculture and smoothening out seasonal fluctuations in earnings. Since cash flows and savings in rural areas for the majority of households are small, rural households typically tend to depend on credit. Rural households need access to financial institutions that can provide them with credit at lower rates and at reasonable terms than the traditional money-lender and thereby help them avoid debt-traps that are common in rural India.
Timely and adequate agricultural credit is very important for the rise in fixed and working capital for farmers. So as to supply sufficient credit to the farmers, many institutional and non-institutional agencies are working. Under institutional agencies cooperative, commercial, regional rural banks and different Government organizations are supplying credit to the needy farmers on priority basis.
Q10) Explain the effects and measures of agriculture price policy? (5 marks)
A10)
Agricultural price policy in India was introduced since independence. But the agricultural price policy formulated in India has varied widely for various years and also for different crops. This policy put much emphasis on the costs of food grains like wheat, rice and coarse cereals like jowar, bajra, maize etc.
In India, the price policy was first introduced in 1947 with the formation of Food grains Policy Committee which recommended a policy of progressive decontrol, reduction of imports or food grains and substantial increase within the production of food grains. Again in 1950, Food grains Procurement Committee was appointed which introduced the system of rationing and control in the supply of food grains in the country.
The main objective of the worth policy in India was to safeguard the interests of consumers. In this policy no attention was paid to give incentive price to farmers. It had been only in 1964, a clear-cut policy was introduced for providing incentive price to farmers.
The Third Plan document rightly observed that, “The producer of food grains must get a reasonable return. The farmer, in other words, should be assured that the costs of food grains and therefore the commodities that he produces won't be allowed to fall below reasonable minimum.” Accordingly, the food grains Price Committee was appointed in 1964.
Effects of agricultural price policy
Important effects of Agricultural Price Policy are as follows:
(i) Incentive to increase Production:
Agricultural price policy has been providing necessary incentive to the farmers for raising their agricultural output through modernisation of the sector. The minimum support price should be determined effectively by the govt which can safeguard the interest of the farmers.
Accordingly, minimum support price of food grains fixed by the govt increased from Rs 388.26 per quintal in 2003-04 to Rs 429.27 in 2007-08 then to Rs 829.94 (at average) in 2012-13
(ii) Increase within the Level of Income of Farmers:
The agricultural price policy has provided necessary benefit to the farmers by providing necessary encouragement and incentives to boost their output and also by supporting its prices of these have resulted in a rise in the level of income of farmers also as their living standards.
(iii) Change in Cropping Pattern:
The agricultural price policy has resulted in a considerable change in cropping pattern of Indian agriculture. The production of wheat and rice has increased considerably through the adoption of recent techniques by getting necessary support from the Governments. But the assembly of pulses and oilseeds couldn't achieve any considerable change within the absence of such price support.
(iv)Benefits to Consumers:
The policy has also resulted in considerable benefit to the consumers by supplying the essential agricultural commodities at reasonable price regularly.
(v) Benefit to Industries:
The agricultural price policy has also benefitted the agro industries of the country, like sugar, cotton textile, oil etc. By stabilising of costs/prices of agricultural commodities, the policy has made provision for adequate quantity of raw materials for the agro industries of the country at reasonable prices.
(vi) Price Stability:
The agricultural price policy has stabilised of costs/prices of agricultural products to a large extent. It’s become successful to contain the undue fluctuation of costs/prices of agricultural products. This has created a favourable impact on both the consumers and producers of the country.
Measures induced for enforcing agricultural price policy
Thus, the agricultural price policy which was introduced just after independence made a compromise with the situation and followed a variable policy of progressive decontrol in 1947 then a partial control in 1955. Then in 1959, the govt introduced the state trading in food grains particularly in rice and wheat.
After that in 1964, the govt introduced food zones for imposing restriction on the movement of food grains from one zone to another so as to enforce stability in agricultural prices.
In 1965, the Agricultural Price Commission was found out which announced the minimum support prices and procurement prices in the successive years in order to ensure minimum prices to the producers and for build up buffer stocks to maintain the public distribution system.
The minimum support price for wheat which was fixed at Rs 37.50 per quintal in 1964-65 gradually raised to Rs 50 per quintal in 1965-66 then to Rs 350 per quintal in 1993-94. The procurement price for paddy per quintal was also gradually raised from Rs 77 in 1977-78 to Rs 230 in 1991-92.
The procurement price for coarse grains was also raised from Rs 48.29 per quintal in 1965-66 to Rs 205 in 1991-92. While fixing these procurement prices, the large farmers’ lobby has played a vital role in its decision making.
Again, so as to fulfil the minimum needs of the weaker sections of the society, the rationing system through public distribution system was introduced in India and accordingly the total number of fair price shops has also increased from 2.39 lakh in 1979 to 3.54 lakh in 1980. This public distribution system has been handling about 19 million tonnes of food grains.
NAFED is additionally a vital agency which appoints state agencies for undertaking price support Scheme (PSS) operations. The losses, if any, incurred by central agencies on undertaking PSS operations are reimbursed up to fifteen per cent by the Central Government. Aside from this, government also provides working capital to the central agencies for undertaking PSS operations.
Moreover, the govt also implements Market Intervention Scheme (MIS) for horticultural and agricultural commodities, especially perishable in nature and not covered under the PSS which helps the farmer to get remunerative prices for their produce.
The MIS is contingent the premise of specific request of a State or Union Territory (UT) government which is simply ready to bear 50 per cent (25 per cent in respect of north-eastern states), if any, incurred on its implementation.
However, the loss in such case is restricted up to 25 per cent of total procurement value. However, the profit earned, if any in implementing the MIS is retained by the procuring agencies.
Moreover, so as to ensure a minimum remunerative price to the farmers another steps were also followed by the govt including state trading, build up of buffer stocks, nationalisation of wholesale trade in wheat and rice, procurement from wholesalers, import of food grains etc.
Q11) Write the features of agriculture price policy? (5 marks) (Year 2019)
A11)
Agricultural price policy in India was introduced since independence. But the agricultural price policy formulated in India has varied widely for various years and also for different crops. This policy put much emphasis on the costs of food grains like wheat, rice and coarse cereals like jowar, bajra, maize etc.
In India, the price policy was first introduced in 1947 with the formation of Food grains Policy Committee which recommended a policy of progressive decontrol, reduction of imports or food grains and substantial increase within the production of food grains. Again in 1950, Food grains Procurement Committee was appointed which introduced the system of rationing and control in the supply of food grains in the country.
The main objective of the worth policy in India was to safeguard the interests of consumers. In this policy no attention was paid to give incentive price to farmers. It had been only in 1964, a clear-cut policy was introduced for providing incentive price to farmers.
The Third Plan document rightly observed that, “The producer of food grains must get a reasonable return. The farmer, in other words, should be assured that the costs of food grains and therefore the commodities that he produces won't be allowed to fall below reasonable minimum.” Accordingly, the food grains Price Committee was appointed in 1964.
Features for agricultural price policy in India
Following are a number of the important features of agricultural price policy followed by the govt of India since independence:
(i) Fixing Institutions:
The Government of India has found out some institutions for the implementation of agricultural price policy within the country. Accordingly, the Agricultural Price Commission was found out in 1965 which announced the minimum support prices and procurement prices for the agricultural products.
In 1985, the name of this institution was become Agricultural Cost and prices Commission. Moreover, the food grains Policy Committee was appointed by the govt in 1966 which also recommended various measures of price support.
FCI:
The Food Corporation of India was found out in 1965 for making necessary procurement, storage and distribution of food grains. In 1989-90, total capital employed in FCI was to the extent of Rs 5138 crore with its total storage capacity at 18 million tonnes. The corporation organises the value of food grains at government determined prices and sale these food stocks through the network distribution system.
(ii) Minimum Support Price:
The government fixes the minimum support prices of agricultural products like wheat, rice, maize, cotton, sugarcane, pulses etc., regularly for safeguarding the interest of farmers. The FCI also make their purchases of food grains at the procurement prices so on maintain a rational price of food grains in the interest of farmers.
Accordingly, minimum support price of food grains fixed by the govt increased from Rs 388.26 per quintal in 2003-04 to Rs 429.22 in 2007-08 then to Rs 829.94 (at average) in 2012-13.
(iii) Protecting the Consumers:
In order to safeguard the interest of the consumers, the agricultural price policy has made provision for buffer stock of food grains for its distribution among the consumers through public distribution system.
(iv) Fixation of Maximum Prices:
In order to possess an impact over the prices of essential commodities the govt usually determines the maximum price of agricultural products so on protect the general people from exorbitant rise in prices.
Q12) What is the present state of agricultural marketing in India? (5 marks)
A12)
Agricultural marketing covers the services involved in moving an agricultural product from the farm to the consumer. These services involve the design; organizing, directing and handling of agricultural produce in such a way on satisfy farmers, intermediaries and consumers. Numerous interconnected activities are involved in doing this, like planning production, growing and harvesting, grading, packing and packaging, transport, storage, agro- and food processing, provision of market information, distribution, advertising and sale. Effectively, the term encompasses the whole range of supply chain operations for agricultural products, whether conducted through unplanned sales or through a more integrated chain, like one involving contract farming.
Efforts to develop agricultural marketing have, particularly in developing countries, tended to concentrate on variety of areas, specifically infrastructure development; information provision; training of farmers and traders in marketing and post-harvest issues; and support to the event of an appropriate policy environment. In the past, efforts were made to develop government-run marketing bodies but these have tended to diminish prominent over the years.
Agricultural market information
Efficient marketing infrastructure like wholesale, retail and assembly markets and storage facilities is crucial for cost-effective marketing, to attenuate post-harvest losses and to reduce health risks. Markets play a vital role in rural development, income generation, food security, and developing rural-market linkages. Experience shows that planners got to be aware of the way to design markets that meet a community's social and economic needs and the way to choose an appropriate site for a new market. In many cases sites are chosen that are inappropriate and end in under-use or maybe no use of the infrastructure constructed. It's also not sufficient just to create a market: attention needs to be paid to how that market is managed, operated and maintained.
Rural assembly markets are located in production areas and primarily function places where farmers can meet with traders to sell their products. These may be occasional (perhaps weekly) markets, like haat bazaars in India and Nepal, or permanent.
Terminal wholesale markets are located in major metropolitan areas, where produce is finally channelled to consumers through trade between wholesalers and retailers, caterers, etc.
The characteristics of wholesale markets have changed considerably as retailing changes in response to urban growth, the increasing role of supermarkets and increased consumer spending capacity. These changes may require responses in the way within which traditional wholesale markets are organized and managed.
Retail marketing systems in western countries have broadly evolved from traditional street markets through to the modern hypermarket or out-of-town shopping mall. In developing countries, there remains scope to enhance agricultural marketing by constructing new retail markets, despite the expansion of supermarkets, although municipalities often view markets primarily as sources of revenue instead of infrastructure requiring development.
Effective regulation of markets is important. Inside a market, both hygiene rules and revenue collection activities need to be enforced. Of equal importance, however, is that the maintenance of order outside the market. Licensed traders during a market won't be willing to cooperate in raising standards if they face competition from unlicensed operators outside who don't pay any of the prices involved in providing a correct service.
PRESENT STATE OF AGRICULTURAL MARKETING IN INDIA:
In India, four different systems of agricultural marketing are prevalent as mentioned below:
(i) Sale in Villages:
The first method open to the farmers in India is to sell away their surplus produce to the village moneylenders and traders at a really low price, The moneylender and traders may buy independently or work as an agent of a much bigger merchant of the nearly mandi. In India quite 50 per cent of the agricultural produce are sold in these village markets in the absence of organised markets.
(ii) Sale in Markets:
The second method of disposing surplus of the Indian farmers is to sell their produce within the weekly village markets popularly referred to as ‘hat’ or in annual fairs.
(iii) Sale in Mandis:
The third sort of agricultural marketing in India is to sell the excess produce though mandis located in various small and enormous towns. There are nearly 1700 mandis which are spread everywhere the country. As these mandis are located during a distant place, thus the farmers will need to carry their produce to the mandi and sell those produce to the wholesalers with the assistance of brokers or ‘Dallas’.
These wholesalers of Mahajan again sell those farm produce to the mills and factories and to the retailers who successively sell these goods to the consumers directly in the retail markets.
(iv) Co-Operative Marketing:
The fourth sort of marketing is the co-operative marketing where marketing societies are formed by farmers to sell the output collectively to require the advantage of collective bargaining for obtaining a far better price.
(v) Regulated Markets:
Organised marketing of agricultural commodities has been promoted throughout the country through a network of regulated markets, whose basic objective is to make sure reasonable prices to both farmers and consumers by creating a conducive market environment for fair play of supply and demand.
The number of regulated markets has grown from 286 in 1950 to 7,114 as on 31st March, 2014, besides which there are 22,759 rural periodical markets.
Q13) Explain the defects and remedial measures of agricultural marketing in India? (8 marks) (Year 2018, 2019)
A13)
Defects of agricultural marketing in India
Following are a number of the main defects of the agricultural marketing in India:
(i) Lack of Storage Facility:
There is no proper storage or warehousing facilities for farmers within the villages where they will store their agriculture produce. Per annum 15 to 30 per cent of the agricultural produce are damaged either by rats or rains because of the absence of proper storage facilities. Thus, the farmers are forced to sell their surplus produce just after harvests at a really low and un-remunerative price.
(ii) Distress Sale:
Most of the Indian farmers are very poor and thus haven't any capacity to wait for better price of his produce in the absence of proper credit facilities. Farmers often need to go for even distress sale of their output to the village moneylenders-cum-traders at a really poor price.
(iii) Lack of Transportation:
In the absence of proper road transportation facilities in the rural areas, Indian farmers cannot reach nearby mandis to sell their produce at a good price. Thus, they like to sell their produce at the village markets itself.
(iv) Unfavourable Mandis:
The condition of the mandis is also not in the least favourable to the farmers. In the mandis, the farmers have to await disposing their produce that there's no storage facilities. Thus, the farmers will need to take help of the middleman or dalal who take away a significant share of the profit, and finalizes the deal either in his favour or in favour of achatina or wholesalers.
(v) Intermediaries:
A large number of intermediaries exist between the cultivator and the consumer. Of these middlemen and Dallas claim a decent amount of margin and thus reduce the returns of the cultivators.
(vi) Unregulated Markets:
There are huge numbers of unregulated markets which adopt various malpractices. Prevalence of false weights and measures and lack of grading and standardization of products in village markets in India are always going against the interest of ignorant, small and poor farmers.
(vii) Lack of Market Intelligence:
There is absence of market intelligence or information system in India. Indian farmers aren't conscious of the ruling prices of their produce prevailing in big markets. Thus, they need to accept any un-remunerative price for their produce as offered by traders or middlemen.
(viii) Lack of Organisation:
There is lack of collective organisation on a part of Indian farmers. a really small amount of marketable surplus is being delivered to the markets by a large number of small farmers leading to a high transportation cost.
Accordingly, the Royal Commission on Agriculture has rightly observed, “So long because the farmer doesn't learn the system of marketing himself or in co-operation with others, he can never bargain better with the buyers of his produce who are very shrewd and well informed.”
(ix) Lack of Grading:
Indian farmers don't give importance to grading of their produce. They hesitate to separate the qualitatively good crops from bad crops. Therefore, they fail to fetch a decent price of their quality product.
(x) Lack of Institutional Finance:
In the absence of adequate institutional finance, Indian farmers need to come under the clutches of traders and moneylenders for taking loan. After harvest they need to sell their produce to those moneylenders at unfavourable terms.
(xi) Unfavourable Conditions:
Farmers are marketing their product under adverse circumstances. a large number of small and marginal farmers are forced by the rich farmers, traders and moneylenders to fall under their trap to go for distress sale of their produce by involving them into a vicious circle of indebtedness. Of these worsen the income distribution pattern of the village economy of the country.
Remedial measures for improvement of agricultural marketing
Improvement of the agricultural marketing in India is utmost need of the hour.
Following are a number of the measures to be followed for improving the present system of agricultural marketing in the country:
(i) Establishment of regulated markets.
(ii) Establishment of co-operative marketing societies.
(iii) Extension and construction of additional storage and warehousing facilities for agricultural produce of the farmers.
(iv) Expansion of market yards and other allied facilities for the new and existing markets.
(v) Provision be made for extending adequate amount of credit facilities to the farmers.
(vi) Timely supply of selling information to the farmers.
(vii) Improvement and extension of road and transportation facilities for connecting the villages with mandis.
(viii) Provision for standardisation and grading of the produce for ensuring good quality to the consumers and better prices for the farmers.
(ix) Formulating suitable agricultural price policy by the govt for creating a provision for remunerative prices of agricultural produce of the country.
STEPS TAKEN FOR IMPROVEMENT OF AGRICULTURAL MARKETING IN INDIA
In the meantime, the govt has taken following important steps for the development of agricultural marketing in India:
(i) Warehouses:
For constructing the network of warehouses in the town and mandis, the All India Warehousing Corporation has already been found out. In 1988-89, the Central Warehousing Corporation (CMC) owned and managed nearly 465 warehouses with its total storage capacity of 6.4 million tonnes.
Moreover, State Warehousing Corporations (SWCs) also owned and managed about 1300 warehouses in 1988-89 with its total storage capacity of about 8.5 million tonnes. Besides, the Co-operative Societies have also been given necessary financial and technical help to market warehousing facilities in the rural areas of the country.
(ii) Development of marketing Societies and regulated Markets:
Moreover, the Co-operative Credit Societies also are re-vitalised for providing more credit to the farmers. Again about 2633 general purpose primary co-operative marketing and processing societies have also been formed for assuring reasonable prices to the farmers and also to get rid of all existing intermediaries from the market.
As on March 2009, about 7,139 regulated markets have also been found out to safeguard the interest of farmers.
Price of important food grains also are stabilized by the govt as per the recommendations of the Agricultural Costs and prices. Lastly, the marketing of agricultural produce has also been improved significantly by the govt with the growing involvement of the organisations like Food Corporation of India, Cotton Corporation of India, Jute Corporation of India etc.
(iii) Infrastructure Facilities:
The central Government is also providing assistance for the creation of infrastructural facilities within the markets and also for setting up godowns in rural areas.
These schemes are transferred to different States and Union Territories with effect from April 1992 so as to facilitate grading; standards are laid down for 143 agricultural and allied commodities under the Agricultural Produce (Grading and Marketing) Act, 1937.
In order to line up cold storage under co-operative sector, the National Co-operative Development Corporation has advanced a sum of Rs 75 crore for installing 248 cold storages having an installed capacity of 7.39 lakh tonnes till the end of March, 1996. Moreover, agricultural marketing is additionally suitably attended by a network of co-operatives at primary level, state level and national level.
This network comprises both general marketing societies and commodity marketing societies. Accordingly, the marketing of agricultural produce through co-operatives has increased from Rs 1,950 crore in 1980-81 to Rs 11,500 crore in 1995-96.
Again, the co-operatives are playing a major role within the procurement operation of both essential consumer commodities like rice and wheat and commercial crops like cotton and jute.
Moreover, the National Agricultural Co-operative Marketing Federation of India (NAFED) is additionally working as an apex body of selling co-operatives within the country. It's also providing effective support to the farmers for marketing their produce and also undertaking subsidy and market intervention operation.
(iv) NAFED:
NAFED may be a central nodal agency for undertaking subsidy operations for pulses and oilseeds and market intervention operation for horticultural items like Kinnu/Malta, onion, potato, grapes, black pepper, red chilies etc. During 1994-95 NAFED’s turnover was Rs 718.77 crore and therefore the turnover target for 1997-98 is Rs 80.000 crore.
A few other organisations in the co-operative sector are the National Cooperative Tobacco Growers Federation Ltd., the National Consumers’ Co-operative Federation and therefore the Tribal Co-operative Marketing Development Federation of India Ltd. (TRIFED) which attends specifically to the marketing problems of the tribal areas.
However, the share of co-operatives within the total marketing of agricultural commodities is very small.
(v) Commodity Boards:
Moreover, specialised Commodity Boards still operate for rubber, coffee, tea, tobacco, spices, coconut, oilseed and vegetable oils, horticulture etc. The National Dairy Development Board is also engaged in the marketing of agricultural commodities.
Separate Directorates are functioning for the development of agro-raw materials like sugarcane, jute, tobacco, oilseeds, rice, millets, cotton, pulses, cashew-nuts, cocoa, areca-nut, spices etc.
Moreover, there are various organisations active in the field of agricultural commodity exports like the State Trading Corporation, the Cashew-nuts Export Promotion Council, the Shellac Export Promotion Council and therefore the Agricultural and Processed Food Development Authority, which also accomplish the task of promoting/boosting agriculture exports.
The role of Co-operatives in the marketing of agricultural produce has also been expanding progressively.
(vi) Standardisation and Grading:
Finally, promotion of standardisation and grading of agricultural products is the main function under institutionalised agricultural marketing. So as to improve the marketability of products within and outside the country, an efficient quality control mechanism is important.
Accordingly, the Agricultural Produce (Grading and Marking) Act, 1937 was the first legislation enacted by the Central Government to formulate standards and perform grading and marking of agricultural and allied commodities.
The articles included in the schedule are fruits and vegetables, dairy and poultry products, food grains and allied products, pulses, oilseeds, oils mid cakes, essential oils, fibres, spices and condiments, forest produce, edible nuts, tobacco, tea, coffee, honey, wheat, Atta, besan, suji and Maida, meat etc.
The Act also empowers the Central Government to incorporate additional commodities/products in the schedule for enforcement of grade standards and implementing grading and internal control. This type of grading and internal control will help farmers to fetch a good price for quality products produced by them.
So far, Ag-mark standards are framed and notified in respect of 163 commodities which include food grains, pulses, fruits and vegetables, spices, edible nuts, oilseeds, vegetable oils and fats, fibres, forest products, livestock, dairy and poultry products.
At present, 22 Regional Ag-mark Laboratories are operating under the Apex Central Ag-mark Laboratories, Nagpur. These laboratories also provide training to chemists of the laboratories of States and Union Territories.
Q14) Explain the types of marketing information? (5 marks)
A14)
Efficient market information can be shown to own positive benefits for farmers and traders. Up-to-date information on prices and other market factors enables farmers to negotiate with traders and also facilitates spatial distribution of products from rural areas to towns and between markets.
Most governments in developing countries have tried to supply market information services to farmers, but these have attended experience problems of sustainability. Moreover, even once they function, the service provided is usually insufficient to permit commercial decisions to be made due to time lags between data collection and dissemination.
Modern communications technologies open up the likelihood for market information services to enhance information delivery through SMS on cell phones and the rapid growth of FM radio stations in many developing countries offers the likelihood of more localised information services. Within the longer run, the internet may become an efficient way of delivering information to farmers. However, problems associated with the value and accuracy of knowledge collection still remain to be addressed. Even once they have access to market information, farmers often require assistance in interpreting that information. For instance, the market price quoted on the radio may ask a wholesale selling price and farmers may have difficulty in translating this into a sensible price at their local assembly market.[9] Various attempts are made in developing countries to introduce commercial market information services but these have largely been targeted at traders, commercial farmers or exporters. It's tough to ascertain how small, poor farmers can generate sufficient income for a commercial service to be profitable although in India a replacement service introduced by Thomson Reuters was reportedly utilized by over 100,000 farmers in its first year of operation. Esoko in West Africa attempts to subsidize the cost of such services to farmers by charging access to a more advanced feature set of mobile-based tools to businesses.
Types of market information system
There is a wide sort of market information systems or services. OECD countries have traditionally emphasised the importance of information provision for the agricultural sector, a notable example being the service provided by the US Department of Agriculture (USDA). Such systems are widely utilized in order to extend the transparency and therefore the volume of data flowing through the availability chains for different agricultural products. The power of market information systems to supply a valuable service was strengthened with the event of the web and therefore the advance of electronic commerce (business-to-business (B2B), consumer-to-consumer, etc.). Industry structure, product complexity and the demanding nature of agricultural transactions are considered determining factors for the development of B2B electronic commerce in agriculture.
Agricultural market information in developing countries
In developing countries, market information initiatives are often part of"> a part of broader interventions and part of the agricultural marketing and agribusiness development strategy that several governments are actively engaged in.
It's commonly understood that long transaction chains, lack of transparency, lack of standards, and insufficient access to markets for products has perpetuated low incomes in predominantly agrarian economies. Early attempts at market information provision in developing countries involved government bodies in collecting price information, and arranging for this to be disseminated via newspapers and radio stations.
The knowledge provided was often not very accurate and usually reached farmers too late to be of practical use. Governments often attempted to cover far too many locations and lots of services either collapsed after initial donor assistance came to an end or managed to struggle along with little impact. Furthermore, it had been soon recognised that it had been not enough just to provide market information to farmers.
They needed assistance in understanding the way to use that information. However, donor organizations, like FAO, CTA, IICD, USAID, DFID, and the Bill and Melinda Gates Foundation, remain committed to improving the efficiencies within the supply chain through greater information provision. The recent surge of mobile usage in developing countries has provided a chance for innovative projects to leverage this new distribution channel to get critical market data into the hands of farmers and traders, taking advantage of the SMS capacity of phones.
Using the so-called "push" method recipients of information are identified on a database and automatically receive messages of relevance to them. Alternatively, the "pull" method enables farmers and traders to interrogate the database of the MIS. A farmer can send an SMS with the product and site he's interested in (e.g., tomatoes; Nairobi) and receive an immediate reply. Several projects by Reuters, Nokia, Esoko, KACE, Manobi, AgRisk and others have demonstrated the impact that such information can have. Amongst donors there's a renewed interest in promoting regional trade, particularly in Africa, and market information is seen as a vital way of achieving this. Samples of donor-supported services are RATIN for East Africa and RESIMAO for West Africa.
Nevertheless, it remains unclear whether MIS are often delivered on a profitable basis by the private sector, given the problem of fully covering costs, or on a sustainable basis by the public sector, given the latter's history of gathering inaccurate data and disseminating it badly. To deal with some of these problems, a new approach makes the buyers liable for uploading the price information via SMS, and facilitates trade by creating a capacity for sellers to contact individual buyers. Others question whether formal systems are still necessary when farmers can just contact traders by phone. Add Bangladesh, India, China and Vietnam found that 80% of farmers now own cell phones and that they use these to speak to multiple traders about prices and demand and to conclude deals.[13] A study in the Philippines found that farmers using cell phones reported improved relationships with their trading partners, possibly because the ability to match prices made them trust their buyers more. Studies in Niger and India demonstrate the impact of cell phones in reducing price variations and creating greater equilibrium among markets. Introduction of internet kiosks and cafes that provide wholesale price information to farmers has been shown to reinforce the functioning of rural markets by increasing the competitiveness of local traders in India.
Q15) Write about recent trends in agricultural marketing? (8 marks)
A15)
Most governments have at some stage made efforts to push agricultural marketing improvements. In the United States the Agricultural Marketing Service (AMS) may be a division of USDA and has programs that provide testing, support standardization and grading and offer market news services. AMS oversees marketing agreements and orders research and promotion programs. It also purchases commodities for federal food programs. USDA also provides support to agricultural marketing work on various universities. In the United Kingdom, support for marketing of some commodities was provided before and after the Second war by boards like the Milk Marketing Board and therefore the Egg Marketing Board. These boards were closed down in the 1970s. As a colonial power, Britain established marketing boards in many countries, particularly in Africa. Some still exist although many were closed at the time of the introduction of structural adjustment measures within the 1990s.
Several developing countries have established government-sponsored marketing or agribusiness units. South Africa, for instance, started the National Agricultural Marketing Council (NAMC) as a response to the deregulation of the agriculture industry and closure of selling boards in the country. India has the long-established National Institute of Agricultural Marketing. These are primarily research and policy organizations, but other agencies provide facilitating services for marketing channels, like the supply of infrastructure, market information and documentation support. Examples from the Caribbean include the National Agricultural Marketing Development Corporation (NAMDEVCO) in Trinidad and Tobago and the New Guyana Marketing Corporation in Guyana.
Recent development
New marketing linkages between agribusiness, large retailers and farmers are gradually being developed, e.g., through contract farming, group marketing and other sorts of collective action.
Donors and NGOs are paying increasing attention to ways of promoting direct linkages between farmers and buyers within a worth chain context. More attention is now being paid to the development of regional markets (e.g., East Africa) and to structured trading systems that ought to facilitate such developments.
The growth of supermarkets, particularly in Latin America and East and South East Asia, has a big impact on marketing channels for horticultural, dairy and livestock products.
Nevertheless, “spot” markets will still be important for many years, necessitating attention to infrastructure improvement like for retail and wholesale markets.
RECENT TRENDS
With the emergence of latest inputs and new technologies in the market Agriculture has changed from deficit oriented to surplus oriented sector. New methods of selling like Contract farming are visible, providing farmers with better returns. Contract farming is more practiced now days. The Tata’s, The Birla’s, The Mahindra’s and other corporate houses are entering and expanding agricultural business. With 68,000 plus branches, commercial banks and regional banks have phenomenal strength in financing agri-business ventures. With the newer and newer areas emerging, there is a scope for Agri-business for profitable operations not only to individuals but to institutions as well. The administrators of public and private/corporate have taken the responsibility of translating the research findings and discoveries to concrete programmes and policies of action. The Cooperatives, the Panchayat’s, the NGO’s and the Media must also join hands in the method of transmission of knowledge and information and to supply better market connectivity.
Bilateral, Regional and Trade agreement have provided way in reducing tariff and non-tariff barriers to cross boarder flows of agricultural output and increased openness of financial markets, leading to enhanced capital flow into developing countries especially in the sort of Foreign Direct Investment (FDI). Moreover, FDI liberalizations have paved many opportunities for creating investments in post-harvesting process and agricultural retailing in developing countries since 1990’s, this also fostered improved market efficiencies and competitiveness, integration of fragmented markets providing product diversification through differentiation, value additions and technology transfer. These market liberalizations and globalizations have provided opportunities in transforming agro-food markets in India. Food procurement and distribution system is also witnessing the institutional innovations like contract farming, producer associations and super markets. Out of 7310 wholesale markets in the country 7161 are covered under Agriculture Produce Marketing Committee (APMC). As per rule in APMC market, commodity brought by farmer for sale should be kept open on auction floor, where buyers in presence of APMC officials and commission agents bid price and highest bidders are entitled the produce.
National Spot Exchange Limited (NSEL) is another sort of nationalized transparent electronic spot exchange established in 2005 headquartered in Mumbai. It's a state of art market place providing customized A) s to varied problems faced by agricultural producers, Asian Journal of Agriculture and Rural Development, 2(1)2012: 69-75 73 processors, exporters, importers, investors and general commodity stakeholders.
Indian Public Distribution System (PDS) though old, but features a wider coverage than the other system prevailing within the country. It is estimated that out of 11.2 crore households, 4 crore utilize services of PDS. PDS distributes essential commodities like wheat, rice, sugar, edible oils etc. Food Corporation of India (FCI) transport bulk quantity to its godowns and then uses PDS to distribute the commodities through its 4.76 lakh Fair Price Shops, is that the largest of its type within the world. Grameen Sanchar Society (GRASSO), the e-seva Kendra provides Agri-related services like access to plug, price for agricultural products, availability of cold storage facilities, availability of labour and work opportunities. It's a bulk franchisee of Bharat Sanchar Nigam Limited in West Bengal, Odisha and Jharkhand.
AGMARKNET-The internet based information system aims at providing “single window” service catering to diversified demands of information with the development of knowledge and data infrastructure market prices will perform role of information service providers, online marketing information will connect distant marketers and promote the efficient marketing in near future. There are several other areas of agricultural marketing with which the user gets awareness like adopting best market practices for improving price realization and knowledge is imparted in areas as market driven production programs, post harvest management, market finance, facilities for quality assurance and standards, packaging and labelling storing and transporting, contract farming, marketing, alternative markets, commodities exchange etc.
Agricultural and Processed Food Products Export Development Authority an autonomous organization to the Ministry of Commerce, Government of India It functions as a link between Indian producers and the worldwide markets and also provides financial assistance under various schemes to promote and develop agricultural exports. It’s extensive data base of Indian Exporters of Agri produce from all major cities and enormous towns.
Indian Tobacco Company’s e-choupal (ITC’s e-choupal) also achieved considerable success in agricultural marketing, ITC has found out a small internet kiosk at the village level to provide farmers real time market and pricing related information and highlighting arbitrage opportunities in sales between various mandis. It also provides information related to availability of inputs, weather, market conditions etc. ITC believes that their intervention in this chain has increased their realization on crops between 10%-15% than earlier.
Indian leading tractor manufacturing company Mahindra and Mahindra limited has entered the Private sector extension scene through forming subsidiary Mahindra Shublabh Services Limited (MSSL), that runs centre as Mahindra Krishi Vihar (MKV) first operated in Madurai district of Tamil Nadu in October 2000. It provides agriculture extension services and buyers a lot of agricultural produce from the farmers Krushak Bazaars within the state of Odisha fetch 4-41% of higher prices than wholesale market price. Government of Odisha established 40 Krushak Bazaars within the state in 200-01. The price fixation policy in these Bazaars involve the farmers deciding.
Hadapsar vegetable market in Pune city is a model for marketing of vegetables, there are not any commission agents and middle man the purchaser makes payment direct to the farmer.
Commodity Future Trading came into existence in 2003 trading for 54 agricultural commodities.
The national Horticulture Mission was launched in May 2005 as a serious initiative to cause diversification in agriculture marketing
The other initiatives include DCM shiram consolidated Haryali Kisan Bazaars. The Godrej group runs a sequence of Agri-stores named Aadhaar in Maharashtra and Gujarat. These serve as one stop shop for farmers selling agricultural products. More over websites like ikisan.com, krishivihar.com, agriwatch.com and commodityindia.com provide information to farmers on production and marketing of agricultural commodities
Summary
Market information is provided by
- Mass media
- Market survey
- Grading and standardisation of agricultural commodities
Marketing Training
- Marketing skills
- Acquiring information
- Liaison officers
- Rules and regulations
Enabling environment by
- Production
- Transport
- Grading
- Infrastructure
- Supply chain co ordination
- Institutional system
- Regulatory system
- Ease of doing business
