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Department of Economic Analysis and Research
Rural Pulse
Issue - VI, November - December 2014
NABARD
Publisher :- Shri M. V. Ashok, CGM, Department of Economic Analysis and Research (DEAR), NABARD, Head Office: Plot No. C-24,
‘G’ Block, Bandra-Kurla Complex, Bandra (E), Mumbai- 400051
Disclaimer: “Rural Pulse” is the publication of the Bank. The opinions expressed in the publication, are that of the Research Team
and not necessarily reflect those of the Bank or its subsidiaries. The contents can be reproduced with proper acknowledgement. The
write-up is based on information & data procured from various sources and no responsibility is accepted for the accuracy of facts and
figures. The Bank or the Research Team assumes no liability, if any, person or entity relies on views, opinions or facts & figures finding
place in the document.
email ID :
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from crop centric research in irrigated areas to location
specific cropping systems in dry lands, hills and tribal areas.
Greater attention needs to be directed towards horticulture
crops which are land and water saving. Efforts may also
be made for harnessing remote sensing technologies
to optimise application of inputs and exploring areas in
emerging capital-intensive biotechnology.
• Agriculture Prices and Market Reforms
Minimum Support Price (MSP) policy, particularly for
wheat and rice, has remained de-linked from domestic and
international market realities, creating significant budgetary
costs and market distortion. In order to protect farmers from
national and international price volatility, there is a need for
creating a price stabilisation fund. High food inflation with
an inadequate supply response, aggravated by logistic
and market-related constraints are other areas requiring
adequate attention. Small and marginal farmers lack proper
access to markets. They can enter into the agri-marketing
space through producer organisations, collectives, small
producer cooperatives and contract farming. The real
challenge lies in organising the small and marginal farmers
for marketing and linking them to high value agriculture.
The amendment in the APMC Act has paved the way for
contract farming in some states. It is, therefore, necessary
to complete the process of market reforms early in order
to provide farmers an alternative competitive marketing
channel for transaction of their agricultural produce at
remunerative prices. Commodity exchanges through
derivatives trading can lead to efficient price discovery
and effective price signals. Further, commodity exchanges
also provide a specialised risk management tool for the
producers, traders and consumers encompassing the
entire ecosystem.
• Rural Infrastructure and Efficient Value Chain
Management
The Indian farmer has suffered not only from restrictions on
marketing and processing, but also frompoor infrastructure.
The greatest challenge lies in reducing the transaction
costs of the farmers by providing them with world class
physical infrastructure. A comprehensive value chain
model covering innovations in farming, transportation,
storage, processing, value addition, and marketing can
help farmers earn profit in a sustainable manner.
Policy options for promoting sustainable agriculture
• Policy interventions by the central and state
governments to promote evergreen revolution by
incentivising small and marginal farmers, need to be
given high priority. There is also a need to incentivise
the scaling up of low cost input supply, water saving
agronomic and management practices like system of
rice intensification (SRI) and energy saving irrigation
methods.
• While almost all states are in various stages of
amending their respective State APMC Acts so as
to bring in holistic changes, farmer friendly APMCs
catering to the much needed grouping of farmers
into Producer Organisations and Farmer Clubs would
enable them, especially the small and marginal
farmers to strike a better bargain and sell their produce
profitably, directly to organised retailers, agri/ food
processors or consumers. Further, participation of
farmers in futures trading in agricultural commodities
could lead to better and efficient price discovery.
Prices of commodities not traded in any commodity
exchange, e.g. urad is more volatile than that of its
close substitute chana, which is traded. Besides
reducing price volatility, futures exchanges have also
provided an effective tool for the management of
risks for the entire ecosystem players by hedging and
sharing their risk with other ecosystem players.
• Rural infrastructure and scientific value chain
management need to be put in place for linking
wholesale processing, logistics and retailing with
agriculture production activities. Policy environment
to enable commercial banks, RRBs and cooperative
banks to finance private companies and producer
organisations for creating value chain infrastructure,
need to be created.
• For smallholder farmers with profit potential, their ability
to be successful is hampered by such challenges as
climate change, price shocks, limited financing options,
and inadequateaccess tohealthyandnutritious food. By
overcoming these challenges, smallholders can move
from subsistence to commercially oriented agricultural
systems – by forming producer organisations - and
operate at an efficient scale to increase their profits.
This requires a policy and investment environment
that: (a) promotes context-specific farm size; (b)
supports productive social safety nets; (c) improves
risk-mitigation and adaptation strategies; (d) links
agriculture, nutrition, and health; (e) promotes pro-
smallholder value chains; and (f) increases smallholder-
friendly financing and investment.
