Need to integrate production and marketing of farm produce

Updated: Feb 8 2002, 05:30am hrs
Reforms in agriculture, especially those related to market, are essential to enhance price and quality competitiveness of agricultural products and to bring in customer orientation in agricultural production and marketing.

The major problems in this context are: poor quality of inputs and services such as seeds, pesticides, and irrigation and extension have resulted in low productivity; poor infrastructure at the post-harvest stage has contributed to the deterioration in quality; out-of-line MSP for some commodities, huge amount of procured stock, inability of FCI to procure further, non-accessibility of MSP-based procurement to farmers in many states, subdued private trade participation, poor quality of stocked grains are causing huge economic and societal losses etc.

Many of these problems are inter-linked, and so are their solutions. The key, however, seems to be bringing greater degree of integration in the production and marketing processes so that market orientation can be effectively brought in throughout the value chain. To achieve this, in the past several models of cooperatives have been tried. But the success rates of these models have been dismal except in cases like dairy and sugar in some parts of the country. The emphasis should now extend to corporate models as well. The corporate sector could play a vital role in integrating production and marketing without change in the ownership of land.

Modifications in the Essential Commodities Act to allow for freedom in transportation, storage and trade, and Agricultural Produce Market Committee Act to allow for contract farming needs to be made on an urgent basis. A model for a comprehensive reform of agricultural markets at the state level need to be developed in consultation with the states.

There is an urgent need to de-link MSPs from procurement, as it is becoming unsustainable and is likely to lead to huge waste of agricultural commodities at the cost of the exchequer. Other alternatives such as comprehensive income insurance and/or direct payment scheme along with the current National Agricultural Insurance Scheme could be introduced. However, even in for these alternative schemes case several other policy measures also need to be implemented simultaneously to benefit farmers and reduce the burden on the government.

The MSP should be set based purely on the CACP recommendations. Diversification of acreage under wheat and rice in states like Punjab and Haryana should be encouraged through attractive schemes for competing crops.

Globalisation of agricultural markets would need efficient risk management institutions. Recognition of the of role of institutions such as futures market and the encouragement provided so far has hardly made any significant progress in developing these institutions. Efforts are needed to facilitate development of these risk management institutions through establishing an inter-ministerial coordination cell to interface with the organisations/investors.

There is an urgent need to develop Commodity Management Systems to advise the government to proactively take steps based on continuous tracking of the demand, supply, imports, exports, and prices of commodities in the domestic and international markets, and assessing futures trends, and supplying marketing information and intelligence and information about production and processing technologies to farmers and processors.

(The writer is Professor, Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad)