The finance minister (FM) announced “Operation Greens” (OG), on the lines of “Operation Flood” (OF), with a seed capital of Rs 500 crore in his Union budget speech. Three days later, the prime minister backed it at a parivartan rally in Bengaluru, saying farmers are his TOP priority, where T is for tomatoes, O for onions, and P for potatoes! The OF changed the face of milk production in India, making India the largest producer of milk in the world, with 164 million metric tonnes (MMT) produced in 2016-17. But important thing to note in OF was that it was driven largely by small holders, and AMUL model ensured 75-80% of the price paid by milk consumers goes to farmers. The OG wants to replicate that success story of milk, in fruits and vegetables, starting with three basic vegetables—tomatoes, onions and potatoes (TOP). The main objective of OG, as per discussions with the finance ministry, is to reduce price volatility in these commodities, and thereby helping farmers augment incomes on a sustainable basis, as also provide these basic vegetables to consumers at affordable prices. The litmus test of the success of this OG would be if it can contain roller-coaster rides of booms and busts in prices, and avert scenes of farmers dumping potatoes and tomatoes on roads, as is happening in several parts of India today. Also, containing prices going through the roof compelling the government to put bans on exports, de-stocking or even having income-tax raids on traders, as happened in case of onions last September. India is the second largest producer of vegetables in the world, with about 180 MMT, next only to China, which produces more than 4 times the Indian production. It suggests that India has a long way to go in veggies. The graph shows that there is a structural break in India’s vegetable production around 2003-04. Although this is not as revolutionary as was the case of green revolution in wheat, or white revolution in milk, yet, potatoes, onion and tomatoes, which form almost half of vegetable production in the country, have shown a very healthy growth. For example, during 2003-04 to 2017-18, potato production increased from 28 MMT to 49 MMT, while onions went up from 6.3 MMT to 21 MMT, and tomatoes from 8.1 MMT to 22 MMT over the same period.
The problem with these commodities is that when their production rises sharply, their prices collapse, as there is not enough modern storage capacity, and the links to processing and organised retailing are very weak and small. As a result, farmers often end up receiving less than one-fourth of what consumers pay in major cities. This must change. The OG needs to set a target that farmers must receive at least 60% of what consumers pay. Remember in case of milk, farmers get more than 75% of what consumers pay. Of course, these veggies are not milk, and each one has its own characteristics. Yet, the basic principles of OF would be useful to operationalise OG. What are these key principles? First, link major consuming centres to major producing centres with minimal number of intermediaries. As Dr Kurien says in his book I too had a Dream, organising farmers and increasing production is easier job. The real challenge is to find right markets for their produce that can give them remunerative prices on sustainable basis. So, one needs to map mega-consuming centres and link their retail networks with producing centres of each commodity identified. Farmers can be organised in farmer producer organisation (FPOs). NABARD and SFAC together have about 3,000 FPOs, which could be the starting points for aggregation of commodities, assaying, sorting, grading, and even packing with bar codes reflecting their traceability.
APMC Act will have to be changed to allow direct buying from FPOs, and giving incentives to FPOs, private companies and NGOs, to build back-end infrastructure, as was done for milk. The announcement of income-tax concession to FPOs for five years is a welcome step in that direction, if it encourages building that critical infrastructure. Second is the investment in logistics, starting with modern warehouses that can minimise wastages. An example will be of cold storages for onions, where wastages are reduced to less than 10% compared to 25-30% in traditional storages on farmers’ fields. Further, such storages have to be cost effective. An example would be of potato cold storage in UP that buys power at almost Rs 10/kwh from SEBs, can generate solar power at less than Rs 4/kwh, if they go for solar tops. Large-scale investments in storage will require tweaking of Essential Commodities Act with respect to storage control order.
Third is linking with processing industry and organised retailing. On an average, about one fourth of the produce must be processed. India is way behind on this curve compared to most of southeast Asian countries. Dehydrated onions, tomato puree, potato chips, and so on should be cheap so that an average household can use them. Processing industry adds value and absorbs surpluses. From that angle, FM’s raising the budget of food processing industry by 100% is again a welcome step. If food processing ministry can coordinate with OG, it will be easier to make it a success for both. By developing these forward and backward linkages, the government can ease wide price fluctuations, raise farmers’ share in consumers’ rupee and yet consumers will pay lower prices—a win-win situation for all! However, OG would need a champion to implement this vision and strategy with honesty; another Kurien, for at least three-five years. A babu will not work! Can the government locate another Kurien?
By: Ashok Gulati and Ritika Juneja
Gulati is Infosys chair professor
for agriculture and Juneja is
research assistant at ICRIER