Chain Management system

The food crisis looms large. Analysts reckon that demand will soon outstrip supply and India will be a major importer of staple food items. Average Incomes are rising, true, but what if it can’t keep up with inflation that consistently hangs around at double digit levels. Green Revolution of the 1970s mitigated the food crisis to a certain extent through usage of better seeds, fertilizers and also expansion of area under cultivation.

Now, we grapple with an entirely different situation wherein there’s virtually no scope to expand arable area, some of which is being chipped off for highways and urban expansion, the only option is to improve output levels by lifting its yields, use better farming techniques that are green and help develop a sustainable farmland. India’s food problems are of its own making. While the Government has aggressively pursued policy reforms in the services and financial sectors, it has turned a blind eye towards agri sector, which accounts for 52% of India’s livelihood1. Agriculture reforms are not an option but a necessity.

Several reasons point to the demand supply mismatch, essentially the gradual stagnation of production, Low productivity, high dependency on monsoon and unavailability of credit. Lack of proper Supply Chain has further exacerbated the situation. The country’s average farm productivity stands at around two tonnes per hectare, one of the lowest, as against the global average of 2. 6 tonnes2. Region wise variation in yields point out the lack of penetration of modern agricultural practises and use of technology, adoption of sustainable irrigation facilities, finance and marketing services for farm products.

There is a need for a second Green Revolution and Biotechnology should be one of the major touch points. Genetic engineering opens up the prospect of developing new varieties of crops which can weather the lack of water and chemical inputs, apart from improving the yield. Bt Cotton is one such example, where the production has more than doubled3 in a p of a decade. Reduced dependency on chemical fertilisers and pesticides is also desirable because of harmful environmental implications. A public-private synergy for technology development is the need of the hour.

Secondly, India severely neglected its water resources and ground water re-generation leading to over-dependency on the unpredictable monsoon. It’s so relevant that even the success of monetary policy will depend on the monsoon, as stated by the RBI governor S SubbaRao in the recently concluded review. However, the Government has tried to address with initiatives such as National watershed development project for rainfed areas, and artificial recharge to ground water through dug wells in hard rock areas, but they have seen only minimal success.

There is a need for greater focus in this direction, along with progressive action on the National River Linking Project (NRLP), which was proposed a few years ago. NRLP is the project which aims to ease the water shortages in western and southern India through transfer of water from surplus river basins, while mitigating the impacts of recurrent floods in eastern part of the Ganga Basin. Experts reckon that it might cost a staggering US$123 billion4 and may not be completed by 2050. If the project’s simply unviable, alternate parallel research should be stepped up to overcome the problem.

Thirdly, with the sector’s profitability greatly linked to economies of scale, it’s plagued by the shrinking size of farmland at the small-farmer end. India’s small-holder farmers (owning less than 2 hectares) comprise 78% of the farmers, but produce only 41% of the food-grains5. Restructuring is required within the existing land ceilings to improve the Economic efficiency, which can be done either through outright purchase of land, group farming or through easier route of lease and rental.

Strong land ownership sentiment might act as a road block and this necessitates restructuring of land laws which would be designed to not only protect the rights of the tenant but also make the ‘land-lord’ a weaker party. Agricultural growth and modernisation needs to be underpinned by an efficient credit system. The sustainability of credit institutions primarily depends upon recovery performance. Unfortunately, our agricultural credit system suffers from a very poor recovery record. Periodic loan write offs by Governments have further crippled the system.

Re-scheduling or even write-offs in case of identified crop failure are understandable, but generalised loan write-offs will only perpetuate the issue, and also encourage defaults in hope of getting relief later. Majorly, loan waiver doesn’t address the concerns of farmers who have borrowed money from private parties. Majority of the farmers tend to borrow to meet their short term needs in anticipation of a bumper crop, but they need to be educated about the sustainability of farm land through long term investment.

Micro-finance and Kisan Credit Card Scheme (KCCS) have emerged as the major policy developments in addressing the infirmities associated with the distributional aspects of credit. There is a need to further upscale its’ outreach through greater publicity. RBI can allot the new proposed licenses to private banks on the condition that they will buy and strengthen RRB (Regional Rural Bank) which will increase the private sector participation in providing credit to farmers. The previous points have only touched upon the production and financial aspects.

Lack of an efficient Supply Chain Management system is the missing piece in the puzzle; the objectives are not met until and unless the benefits get percolated to the ultimate consumer. It’s ironical that on one side we discuss food crisis and on the other, thousands of tonnes of food grain is rotting in the go downs. About 30% of farm’s annual produce6, pegged at Rs. 58000 Crore, gets wasted for want of post-harvest infrastructure like storage, transportation and cold storage chains. Compare this figure against the farm loan waiver of Rs. 70000 Crore in 2008.

A proper logistics system could have surely averted this. The system needs to start at the farm level and integrate right up to the consumer level. A well-organized cold chain reduces spoilage, retains quality and guarantees a cost efficient delivery to the consumer, the long term benefits far outweigh the initial costs. Government needs to restructure its policies and promote FDI, ECBs and Private Partnership in this sector through tax sops and alike. Another problem lies in the post-processing sector. Only 2% of our agriculture output6 is processed against 30% in US.

A strong agro-processing sector provides farmers with assured demand and good prices. On the distribution side, the main challenge is to improve PDS penetration. As proposed by experts, food coupon is one of the better options. Coordinated efforts on war footing are necessary to tackle the issue of price rise coupled with population growth. Three aspects are vital for the success of next Green Revolution: Favourable legislation, Modern post-harvesting infrastructure, and Post-harvest management. Luckily it’s still in our hands to overcome food crisis. It’s more like a time bomb waiting to explode.

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