A glimpse of the price movement of some of the key farm commodities in recent years suggests that while one-off factors like demonetisation may have temporarily dampened the prices at the wholesale level, in a remonetised system, it’s the same old issues that continue to haunt farmers. In years of a bumper crop, especially during harvesting, prices of farm items that are not procured by the government tend to fall. Inadequate storage facilities, low processing levels and flip-flops in farm trade policies just make the matter worse for farmers, according to official sources.
Take the instance of potato. In 2014-15, when the country had a bumper potato production of 48 million tonnes, wholesale prices during the harvest period (February-April) crashed to an average of Rs 1,198 per quintal, against Rs 1,938 in the previous three months (see the chart). Similarly, when onion production touched as much as 21 million tonnes in 2015-16, prices eased to Rs 1,201 per quintal during the rabi harvesting period (April-June), compared with Rs 1,563 in the previous quarter. On the contrary, prices of rice and wheat, which are procured by the government regularly and also grab the bulk of the country’s storage space, leaving hardly any space for horticultural commodities, are more insulated from sharp fluctuations in prices.
Rice prices, in fact, rose during the harvesting months of October through December in 2016-17 to Rs 2,492 per quintal from Rs 2,465 in the quarter before, even though the country was heading for a record crop of over 109 million tonnes. This is mainly due to the fact that procurement ensures market prices don’t crash below the minimum support prices, which are raised almost every year. “The procurement system should be widened to ensure farmers get at least the benchmark prices of crops. Also, storage facilities should be improved dramatically so that crops can be kept for a longer time in warehouses. Else in good production years, farmers will continue to suffer,” an agriculture ministry official, who didn’t want to be named, told FE. He, however, added that states ought to take the lead in fixing farm marketing, storage and even procurement, as the Centre alone can’t solve these problems for the fact that agriculture is essentially a state subject.
A senior Food Corporation of India official admitted that lack of adequate storage space is a reason for constraints in official procurement beyond rice and wheat on a regular basis. A senior official with Nafed concurred, saying storage space for horticulture crops are grossly inadequate. Food processing minister Harsimrat Kaur Badal recently said the country’s storage capacity (mainly for horticultural products) is only 6% of the total requirement. Even this storage capacity is mostly limited to only one commodity — potato — which accounts for roughly 70-80% of the total storage facility.
Although total storage capacity (with FCI and other agencies) improved to 81.48 million tonnes as of April 2016, from 60.74 million tonnes five years earlier, it’s hardly enough to store more items than rice and wheat.
Little wonder then that India loses crops worth Rs 92,651 crore a year during and after the harvesting is completed, according to a study by the Central Institute of Post Harvest Engineering & Technology. The study showed that highest contribution towards losses (34%) was from horticultural items such as fruit and vegetables, followed by cereal (22%) and livestock produce (20%). Although processing levels of farm and food items have improved substantially in recent years, at 10%, it still remains far below potential.
A senior scientist with the Indian Agricultural Research Institute said declaration of MSPs in close to two dozen commodities doesn’t mean anything, unless backed by official procurement. “Procurement is also an incentive for farmers to grow more, as they know, if prices crash upon a good harvest, the government will procure. If storage and procurement facilities are strengthened and trade is promoted, there is no need for giving any loan waiver to farmers,” he said.