Central idea 

Odisha’s agricultural transformation, exemplified by a shift from scarcity to surplus, stands as a model for climate-resilient and equitable food security. The state’s success lies in empowering small and marginal farmers, embracing crop diversification, and proactively addressing climate vulnerabilities.

Key Highlights:

• Odisha’s Agricultural Transformation: From importing rice to recording its highest food grain production in 2022, focusing on small and marginal farmers, and tripling average rice yield in two decades.
• Resilience and Sustainability: Odisha’s proactive approach to climate change, developing a comprehensive Climate Change Action Plan covering various sectors, implementing climate-resilient cultivation practices, and adopting innovative measures for crop monitoring.
• Social Protection: Odisha’s partnership with the United Nations World Food Programme, ranking as the top state in the National Food Security Act for 2022, and collaboration on food security, livelihood, and climate resilience initiatives.

Key Challenges:

• Climate Vulnerability: Odisha’s susceptibility to climate change impacts, including cyclones, floods, and droughts, posing risks to livelihoods and infrastructure.
• Implementation Hurdles: The need for effective implementation of climate-resilient practices at the ground level, overcoming potential challenges in executing the Climate Change Action Plan.

Key Terms and Phrases:

• Krushak Assistance for Livelihood and Income Augmentation (KALIA)
• Odisha Millet Mission
• Climate-resilient cultivation practices
• Crop Weather Watch Group
• Integrated farming
• Zero-input-based natural farming
• Biometric technology in the Targeted Public Distribution System
• Rice fortification
• National Food Security Act

Key Quotes:

• Odisha Chief Minister Naveen Patnaik: “Zero Hunger” goal commitment at the United Nations World Food Programme headquarters.
• Anu Garg: “Odisha’s transformative journey presents a unique development model for other States in the context of the challenges of global climate change.”

Key Statements:

• Odisha’s transition from food grain scarcity to surplus, climate-proofing agricultural systems, and ensuring food and nutrition security for vulnerable populations.

Key Examples and References:

• Use of biometric technology in the Targeted Public Distribution System in Rayagada district.
• Rice fortification initiatives in Gajapati district.

Key Facts and Data:

• Odisha’s contribution to India’s rice production, ranking as the top state in the National Food Security Act for 2022.

Critical Analysis:

• Odisha’s success in achieving surplus production and resilience can serve as a model for other states facing similar challenges.
• The effectiveness of climate-resilient practices and the Climate Change Action Plan in mitigating climate risks need continuous evaluation.

Way Forward:

• Scaling Successful Initiatives: Expanding successful schemes like KALIA and promoting crop diversification to enhance resilience.
• Technological Integration: Continued integration of technology in agriculture for monitoring, early warning systems, and precision farming.
• International Collaboration: Strengthening partnerships with international organizations for knowledge exchange and resource mobilization.

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Central idea

The article explores the multifaceted challenges arising from the intersection of cultural pride and economic shifts in opium cultivation in India. It delves into concerns surrounding the government’s policy shift, addressing potential impacts on livelihoods, national security, and transparency.

Key Highlights

• Cultural Significance of Opium Cultivation: Opium farming is a source of cultural pride, termed “agriculture of dignity” in the Mewar region, linking social status to this traditional trade and reflecting generations’ engagement.
• Government Policy Shift in 2021: In 2021, the government allowed private players to produce Concentrate of Poppy Straw (CPS) alongside traditional opium gum, aiming to boost alkaloid yield and align India with global practices. However, this shift faces resistance from opium farmers.
• Concerns about Private Players: Opium farmers express worries about the entry of private companies, fearing threats to livelihood, profits, and national security. Farmers argue that private involvement may lead to misuse of opium, increased drug trafficking, and rising costs of life-saving medicines.
• Impact on Farmers and Traditional Practices: Opium farmers face economic challenges, citing stagnant procurement rates, increased input costs, and reduced poppy seed yield under the new system. The shift to CPS raises concerns about transparency, farmer consultation, and the potential decline in income for traditional opium cultivators.

Challenges

• Threat to Livelihood and National Security: Opium farmers fear that private entry may endanger their profession and lead to increased drug-related issues. There is a possibility of drug mafia influence and security threats if alkaloids fall into the wrong hands.
• Impact of Policy Shift on Farmers: Economic challenges for opium farmers, including reduced poppy seed yield and concerns about transparent practices under CPS. Farmers worry about income loss and express dissatisfaction with the lack of government consultation.
• Safety and Security of Alkaloids: Opium farmers question the safety and security of alkaloids under private production. Fears that private involvement may compromise the integrity of life-saving medicines made from opium.
• Division among Farmers and Lack of Transparency: Farmers express concerns about the government creating divisions with two production systems. Calls for transparent policies and farmer involvement, alleging a lack of transparency in the CPS mechanism.

Key Phrases and Terms for answer enrichment

• Swabhiman ki Kheti (Agriculture of Dignity): Opium cultivation holds cultural pride in the Mewar region, reflecting social status.
• Afeem and Aulat Barabar (Poppy Plants and Children Deserve Similar Treatment): Highlights the cultural significance of opium, equating it with the care given to children.
• Concentrate of Poppy Straw (CPS): New method introduced in 2021, allowing private players to extract alkaloids from poppy straw alongside traditional opium gum.
• Make in India: Farmers question the government’s commitment to “Make in India” while allowing imports of poppy seeds.

Analysis for mains answer

• Cultural Pride vs. Economic Realities: Opium farming holds cultural significance, but economic challenges, policy shifts, and private entry threaten traditional practices.
• Balancing Global Practices and Farmer Concerns: The government’s shift to CPS aligns with global norms but faces resistance from farmers concerned about income, transparency, and safety.
• Security Concerns and Misuse of Opium: Farmers express worries about the potential misuse of opium and security threats, emphasizing the need for strict controls.
• Need for Transparent Policies and Farmer Involvement: Farmers demand transparency, consultation, and the continuation of traditional practices, expressing dissatisfaction with the current policy.

Key Data and Facts

• Opium Farmers in India: About 1 lakh farmers across 22 districts in Madhya Pradesh, Rajasthan, and Uttar Pradesh have licenses to cultivate opium.
• Major Opium-Producing Districts: Mandsaur, Neemuch, and Chittorgarh contribute to 80% of India’s opium production.
• Change in Government Policy (2021): Government policy shift in 2021 allows private players to produce CPS, aiming to boost alkaloid yield.
• Economic Impact on Farmers: Opium farmers face economic challenges, citing stagnant procurement rates, increased input costs, and reduced poppy seed yield under the new system.

Way forward

• Policy Review and Farmer Consultation: Conduct a comprehensive review of the opium policy, ensuring active participation and consultation with opium farmers to address their concerns and incorporate their insights into the decision-making process.
• Transparency Measures: Implement transparent mechanisms in the Concentrate of Poppy Straw (CPS) system, providing clear information on pricing, procurement, and production processes. This ensures accountability and builds trust among farmers.
• Public-Private Collaboration: Establish a structured collaboration between the government and private entities to leverage expertise and resources. This collaboration should prioritize safeguarding national security, ensuring the integrity of medicinal opium production, and preventing misuse.
• Diversification and Economic Support: Explore avenues for diversification in agriculture, providing support and incentives for opium farmers to engage in alternative crops. This can mitigate economic challenges and reduce dependency on a single agricultural practice.

As the government’s 2021 policy allows private entry, concerns about livelihoods, security, and transparency emerge. Navigating the way forward requires a delicate balance, harmonizing cultural heritage, economic considerations, and global standards for a sustainable future.

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Central idea

The article scrutinizes government policies aimed at curbing food inflation, focusing on the restrictive measures on basmati rice exports and their repercussions on farmers. It delves into the broader challenges hindering the achievement of ambitious agri-export targets, emphasizing the need for a balanced approach that considers both consumer welfare and farmer well-being.

Export Restrictions on Basmati Rice:

• Minimum Export Price (MEP): Imposition of a high MEP ($1,200/tonne) limiting basmati rice exports.
• Impact on Farmers: Low buying interest, reduced prices in Punjab-Haryana mandis, affecting farmers negatively.
• Global Market Dynamics: Risk of losing export markets to Pakistan, the main competitor in basmati rice.
• Beyond Basmati Rice: Similar restrictions on broken rice, non-basmati white rice, and parboiled rice.
• Need for Stability: Call for a stable export policy over knee-jerk reactions to support India’s position as the largest global rice exporter.

Challenges in Achieving Agri-Export Targets:

• Policy Impact: Restrictions on wheat exports, 40% export duty on onions, hindering the goal of doubling agri-exports.
• Historical Performance: Comparison of UPA’s $43.27 billion agri-exports in 2013-14 with the current estimate of less than $50 billion in 2023-24.

Consumer Bias vs. Farmer Welfare:

• Implicit Tax on Farmers: Critique of policies favoring domestic consumers, indirectly taxing farmers.
• Urban Consumer Bias: Need for differentiated policies catering to the vulnerable sections rather than blanket measures.

Agricultural Competitiveness and Investment:

• Competitiveness Importance: Agriculture exports as a measure of competitiveness and surplus generation.
• Investment Gap: Low investment in agriculture R&D (0.5% of agri-GDP) as a hindrance to competitiveness.
• Populism Challenge: Balancing subsidies, loan waivers, and “revdis” with the need for substantial investments.

Environmental and Economic Sustainability:

• Impact on Soil Health: Excessive focus on subsidies and populist measures could lead to imbalanced fertilizer usage and soil degradation.
• Long-Term Economic Health: The article hints at the economic burden of subsidies, emphasizing the need for a sustainable economic model.

Global Image and Diplomacy:

• Export Market Dynamics: Consideration of global perceptions and diplomatic relations impacted by abrupt export policy changes.
• Positioning Against Competitors: The unintended consequence of favoring policies potentially benefiting competitors like Pakistan in the global market.

Way Forward:

• Policy Revision: Consideration to revise export restrictions for better market access.
• Investment Boost: Doubling or tripling investments in agriculture R&D for enhanced competitiveness.
• Balanced Policies: Striking a balance between populism and sector health for sustainable growth.
• Reflecting Power: A nation’s strength lies in innovation, production, and competitive exports.
• Call for Change: Urgent need to revisit policies for better-designed, outcome-driven agricultural strategies.

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Central idea

Cotton farmers in North India are grappling with severe pink bollworm attacks, leading to a shift to alternative crops like paddy and horticulture due to consistent losses. The article highlights the declining cotton cultivation area and production in Punjab and Haryana, with farmers opting for crops with lower risks and costs.

Mains Relevance for UPSC:

• Illustrates the challenges faced by farmers and the agricultural sector.
• Discusses the need for government intervention in sustainable agriculture.
• Highlights the importance of technological advancements in addressing agricultural issues.

Key points discussed in this article

• Pink Bollworm Crisis: Unprecedented pink bollworm attacks devastate cotton crops in the northern cotton zone, leading to significant losses for farmers.
• Shift to Alternative Crops: Faced with continuous losses, farmers are abandoning cotton cultivation, opting for alternative crops like paddy and horticulture with lower risks and costs.
• Environmental Concerns: The shift to water-intensive crops raises environmental concerns, particularly in regions like Punjab and Haryana, highlighting the need for sustainable farming practices.
• Demand for Technological Solutions: Farmers demand improved seeds resistant to pink bollworm attacks, emphasizing the necessity for technological advancements in agriculture.

Concerns and Demands:

• Environmental Repercussions: Shifting to water-intensive crops like paddy poses environmental challenges, requiring a balance between short-term gains and long-term sustainability.
• Farmer Demands: Farmers are demanding improved seeds that are resistant to pink bollworm attacks, emphasizing the need for technological solutions.
• Lack of Initiatives: The absence of specific initiatives raises concerns about the long-term sustainability of agriculture in the region.

Critical Analysis of article for good marks in UPSC mains:

• Economic Considerations: While cotton has a higher MSP, the shift to paddy is driven by lower investment costs, reflecting the economic considerations influencing farmers’ choices.
• Environmental Trade-offs: The article implies a trade-off between immediate economic gains and the potential ecological consequences of shifting to water-intensive crops.
• Shifting Landscape: The agricultural landscape is undergoing a transformation, presenting both challenges and opportunities for the farming community.

Key Challenges:

• Pest-Induced Losses: Despite regular pink bollworm attacks, the severity this year is unprecedented, leading to substantial crop losses.
• Environmental Shift: Farmers are opting for water-intensive crops like paddy, raising concerns about increased groundwater exploitation and potential environmental repercussions.
• Regional Constraints: In regions like Rajasthan, where soil and water conditions are unsuitable for paddy, farmers feel compelled to stick with cotton farming despite challenges.

Way Forward:

• Sustainable Farming Practices: Encourage farmers to adopt sustainable practices that address environmental concerns associated with water-intensive crops.
• Government Intervention: The government should play a proactive role in providing advanced and resistant seed varieties to mitigate pest-related challenges.
• Awareness Programs: Conduct awareness programs to educate farmers about the benefits and challenges of diversifying into suitable alternative crops.

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Context

• International Year of Millets in 2023 was approved by the Food and Agriculture Organisation (FAO) in 2018 and the United Nations General Assembly has declared the year 2023 as the International Year of Millets. The Odisha Government had launched Odisha Millet Mission (OMM), which aims to bring millets back to its fields and food plates by encouraging farmers to grow the crops that traditionally formed a substantial part of the diet and crop system in tribal areas.

Importance of millets

• Nutrition rich: Millet is a good source of protein, fibre, key vitamins, and minerals. The potential health benefits of millet include protecting cardiovascular health, preventing the onset of diabetes, helping people achieve and maintain a healthy weight, and managing inflammation in the gut.Millet is fibrous in content, has magnesium, Niacin (Vitamin B3), is gluten-free and has a high protein content.
• Requires less water: Millet’s comprise a significant staple in the semiarid tropic and guarantee food and nutritional security for needy individuals, who can’t develop other food crops because of poor rainfall and soil fertility. They are profoundly nutritious and are utilized by people in the rural area.
• Requires Moderate fertile soils: They can grow in low to medium fertile soils and in areas of low rainfall. Jowar, Bajra, and Ragi are the significant Millet’s developed in India.
• Profitable crop: Millets are the good choice for farmers to achieve primary goals of Farming e.g., profit, versatility, and manageability.
• Drought resistant and sustainable: Millet’s are the ‘marvel grains’ of the future as they are drought resistant which need few external inputs. Due to its high resistance against harsh conditions, millets are sustainable to the environment, to the farmer growing it, and provide cheap and high nutrient options for all.
• Long shelf life: Nearly 40 percent of the food produced in India is wasted every year. Millets do not get destroyed easily, and some of the millets are good for consumption even after 10-12 years of growing, thus providing food security, and playing an important role in keeping a check on food wastage.

What is Odisha Millet mission (OMM) and its impact?

• Promotion of millets: OMM promotes production and consumption of seven millets. But so far, focus has been on ragi, which has accounted for 86 per cent of the total area under millets, according to data on the OMM website. In contrast, little millet, foxtail millet, sorghum, pearl millet, kodo millet and barnyard millet cover less than 13 per cent of the area.
• Non ragi millets: Mission aimed at looking for high-yielding seeds for non-ragi millets. Farmers are urged to plant some non-ragi millets
• Limited procurement: In 2020-21, the state government procured slightly more than 20 million kg of ragi. However, this accounts for only 27 per cent of the total ragi produced, as OMM procures only 500 kg of ragi per ha and leaves the rest for farmers to consume.
• Millets in diet for complete nutrition: This practice has prompted farmers to consume more millets in all seasons, shows a mid-term evaluation by NCDS in 2019-20. But given that average yield is 1,500 kg per ha, much of the produce does not get procured and farmers are forced to sell it at distressed rate. OMM officials also admit that despite ragi being distributed in PDS and as a mix through anganwadi centres in two districts, its consumption has not picked up in a significant manner.
• Diverse products of Millets: OMM also sells millet products, such as cookies, savoury snacks, vermicelli and processed millets, under a brand called “Millet Shakti” through food trucks, cafés, kiosks and other outlets.
• Food processing chain using SHGs: Women self-help groups (SHGs) have been kept at the centre of the programme. They do not just pay a major role in manufacturing biological inputs to improve millet yields and undertake processing of the produce, but also operate the millet-based cafés and outlets.The full potential of SHGs, though, has not yet been realised. So far, only three women’s SHGs manufacture and process Millet Shakti products, which limits the volume available, income generated, and consumption.
• Market linkage by FPOs: OMM also leverages farmer-producer organisations (FPOs) to provide better marketing linkages. Until now, OMM has tapped into existing FPOs to sell processed millets in the open market or aggregate produce for Tribal Development Co-operative Corporation of Odisha Limited; if a block does not have an FPO, an SHG or community group is registered as one.
• Current status of FPO’S: Currently, there are 76 FPOs under OMM. But some of them are engaged only in minor processing and aggregation, without plans of scaling up market linkages. Encouraging FPOs with better incentives and benefit-sharing will help them compete in the market

What are other government efforts to promote millet crops?

• Smart food campaign: Smart Food with the tagline ‘good for you, good for the planet and good for the smallholder farmer’ is an initiative that will initially focus on popularising millets, and sorghum and has been selected by LAUNCH Food as one of the winning innovations for 2017.
• Popularising the millets: Smart Food will be taken forward as a partnership and many organisations have already teamed up to popularise millets. In India, this includes Indian Institute of Millet Research (IIMR), National Institute of Nutrition (NIN), MS Swaminathan Research Foundation (MSSRF) and Self-Employed Women’s Association (SEWA).

Conclusion

• One way to double farm incomes and encourage farm diversification is to make millet production attractive by introducing millet cultivation in areas where farmers’ distress is visible.Dedicated programmes with proper training and capacity-building initiatives that urge farmers to move away from loss-making crops toward diversification via millets can be a timely method to pull farmers away from the region’s distress.

Mains Question

Q.why millets cultivation is suitable for geographic conditions of India? Analyse the various efforts by government to promote the millets.

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Context

There are reports suggesting that the government is mulling a ban on rice exports to tame inflation.

Background

• This is surely not the first time an attempt is being made to ban wheat and rice exports.
• It was also done in 2007-08, in the wake of the global financial crisis.
• Perhaps government will also impose stocking limits on traders for a host of commodities, suspend futures trading in food items, and even conduct income tax raids on traders of food.

Issues in India’s rice export strategy

• Highest ever volume: India exported the highest-ever volume of 21 million metric tonnes (MMT) of rice in 2021-22 (FY22) in a global market of about 51.3 MMT, which amounts to about 41 per cent of global exports.
• Reduces price: Such large volumes of rice exports brought down global prices of rice by about 23 per cent in March (YoY), when all other cereal prices, be it wheat or maize, were going up substantially in global markets.
• In fact, in FY22, the unit value of exports of common rice was just $354/tonne, which was lower than the minimum support price (MSP) of rice.
• Below MSP buying or leakage from PMGKAY: This meant that rice exporters were either buying rice (paddy) from farmers and millers at below the MSP or that quite a substantial part of rice was given free under the PM Garib Kalyan Ann Yojana (PMGKAY) was being siphoned away for exports at prices below MSP.
• Artificial competitive advantage: Free electricity for irrigation in several states, most notably Punjab, and highly subsidised fertilisers, especially urea, create an artificial competitive advantage for Indian rice in global markets.
• Suggestion: This is a perfect case for “optimal export tax” — not a ban — on rice exports.
• If we can’t raise the domestic price of urea, which is long overdue, we should at least recover a part of the urea subsidy from rice exports by imposing an optimal export tax.

Why export ban on wheat and rice is not a solution

• Small contribution of cereals in inflation: In May, the consumer price index (CPI) inflation was 7.04 per cent (YoY). The cereals group as a whole contributed only 6.6 per cent to this inflation.
• Within that, wheat, other than through PDS, contributed just 3.11 per cent and non-PDS rice contributed 1.59 per cent.
• So, by imposing a ban on wheat and rice exports, India can’t tame its inflation as more than 95 per cent of CPI inflation is due to other items.
• Interestingly, inflation in vegetables contributed 14.4 per cent to CPI inflation, which is more than three times the contribution of rice and wheat combined. And within vegetables, tomatoes alone contributed 7.01 per cent.
• What all this indicates is that agri-trade policies need to be more stable and predictable, rather than a result of knee-jerk reactions.
• Irresponsible behaviour: Export bans on food items also show somewhat irresponsible behaviour at the global level, unless there is some major calamity in the country concerned.
• The recently concluded WTO ministerial meeting as well as the G-7 meet expressed concerns about food security in vulnerable nations.

Way forward

• Efficient value chain and processing facilities: In commodities like vegetables, most of which are largely perishable, we need to build efficient value chains and link these to processing facilities.
• The same would go for onions, which often bring tears to kitchen budgets when prices shoot up.
• A switch to dehydrated onion flakes and onion powder would be the answer.
• Our food processing industry, especially in perishable products, is way behind the curve compared to several Southeast Asian nations.

Conclusion

If India wants to be a globally responsible player, it should avoid sudden and abrupt bans and, if need be, filter them through transparent export taxes to recover its large subsidies on power and fertilisers.

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Context

Supply disruptions during the pandemic and the Russia-Ukraine war have led many nations to think about “self-sufficiency” in critical food items or at least reduce their “excessive dependence” on imports of essential food products.

Challenges facing global trade

• The World Trade Organisation’s (WTO) recently concluded12th Ministerial Conference in Geneva, struggled to find answers to some of the complex questions pertaining to global trade.
• The Ministerial Conference is the top decision-making body of the agency whose basic goal is to ensure that trade flows as smoothly, predictably and freely.
• Trading rules for dire situations: As far as agriculture, trade and food security are concerned, the challenge is to figure out the most appropriate trading rules in dire situations like pandemics, wars, social/political disruptions or natural disasters.
• Export bans: Recent examples include Russia’s export ban on wheat and sunflower oil, Ukraine’s ban on exports of food staples, Indonesia’s ban on palm oil exports, Argentina’s ban on beef exports, Turkey, Kyrgyzstan and Kazakhstan’s ban on a variety of grain products, and India’s wheat export ban.
• Sudden actions such as these exacerbate the pressure on global trade leading to a spike in the prices.

India’s import dependence for edible oil

• India imports 55 to 60 per cent of its edible oil requirements.
• India’s edible oil import bill in 2021-22 (FY22) crossed $19 billion (for more than 14 MMT of imports) (see figure).
• Palm oil comprises more than 50 per cent of India’s edible oil imports, followed by soybean and sunflower.
• Atmanirbharta in edible oil: The “excessive dependence” on imports has raised the pitch for “atmanirbharta” in edible oil. 
• The Prime Minister launched the National Edible Oil Mission-Oil Palm (NEOM-OP) in 2021.

Self-reliance Vs Self-sufficiency

• “Self-sufficiency” and “self-reliance” are two different concepts with very different policy implications.
• What is self-sufficiency? Self-sufficiency would imply replacing all imports of a commodity (say edible oils in India’s case) at any cost (thus raising import duties exorbitantly).
• What is self-reliance? Self-reliance would continue to embed the principle of “comparative advantage” in the endeavour to reduce dependence on imports.
• Case of India’s agriculture: The country’s agri-exports in FY22 touched $ 50.3 billion against its agri-imports of $ 32.4 billion.
• This means that Indian agriculture is largely globally competitive. 
• But its biggest agri-import item, edible oil, accounts for 59 per cent of India’s agri-import basket.

Way forward

• 1] Develop oil palm: Given the way international prices of edible oils have surged in the last year or so (by more than 70 per cent), it may be time for India to ramp up its efforts in developing oil palm.
• Why oil palm? The Prime Minister launched the National Edible Oil Mission-Oil Palm (NEOM-OP) in 2021.
• Challenges in traditional oilseed: Achieving atmanirbharta in edible oils through traditional oilseeds such as mustard, groundnuts and soya would require an additional area of about 39 million hectares under oilseeds.
• Danger to food security: Such a large tract of land will not be available without cutting down the area under key staples (cereals) – this could endanger the country’s food security even more.
• So, a rational policy option to reduce import dependence in edible oils is to develop oil palm at home and ensure that it gives productivity comparable to that in Indonesia and Malaysia — about four tonnes of oil per hectare, which is more than 10 times mustard can give at existing yields.
• India has identified 2.8 million hectares of area where oil palm can be grown suitably.
• So far the objective of NEOM-OP is to bring in at least 1 million hectare under oil palm by 2025-26.
• 2] Declare oil palm as a plantation crop: The other option is to declare oil palm as a plantation crop and allow the corporate players to own/lease land on a long-term basis to develop their own plantations and processing units.
• This does not seem plausible in the current socio-political context.

Challenges

• Long gestation period: It takes four to six years to come to maturity; during this period, smallholders need to be fully supported.
• The support (subsidy) could be the opportunity cost of their lands, say profits from paddy cultivation, which is largely the crop oil palm will replace in coastal and upland areas of Andhra, Telangana and Northeast India.
• Pricing formula: Further, the pricing formula of fresh fruit bunches (FFB) for farmers has to be dovetailed with a likely long-run average landed price of crude palm oil with due flexibility in the import duty structure.
• Appropriate import duty: One needs to identify trigger points when import duties need to be raised as global prices come down, and when to reduce these duties in case of rising global prices.
• Oil recovery: Besides this, the processing industry needs to ensure an oil recovery of at least 18 to 20 per cent – that must be built into the pricing formula.

Conclusion

Overall, unless India thinks holistically and adopts a long-term vision, the chances of reducing India’s imports of edible oils from 14MMT in FY22 to 7MMT by FY27 look bleak.

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Context

The economy now seems to be largely out of the shadow of Covid-19, and only a notch better than in 2019-20. But the big question remains: can India rein in the raging inflation that is at 7.8 per cent (CPI for April 2022), with food CPI at 8.4 percent, and WPI at more than 15 per cent?

Need for bold steps on three fronts to tackle inflation

• Unless bold and innovative steps are taken at least on three fronts, GDP growth and inflation both are likely to be in the range of 6.5 to 7.5 per cent in 2022-23.
• 1] Tightening of loose monetary policy: The Reserve Bank of India (RBI) is mandated to keep inflation at 4 per cent, plus-minus 2 per cent.
• The RBI has already started the process of tightening monetary policy by raising the repo rate, albeit a bit late.
• It is expected that by the end of 2022-3, the repo rate will be at least 5.5 per cent, if not more.
• It will still stay below the likely inflation rate and therefore depositors will still lose the real value of their money in banks with negative real interest rates.
• That only reflects an inbuilt bias in the system — in favour of entrepreneurs in the name of growth and against depositors, which ultimately results in increasing inequality in the system.
• 2] Prudent fiscal policy: Fiscal policy has been running loose in the wake of Covid-19 that saw the fiscal deficit of the Union government soar to more than 9 per cent in 2020-21 and 6.7 per cent in 2021-22, but now needs to be tightened.
• Government needs to reduce its fiscal deficit to less than 5 per cent, never mind the FRMB Act’s advice to bring it to 3 per cent of GDP.
• However, it is difficult to achieve when enhanced food and fertiliser subsidies, and cuts in duties of petrol and diesel will cost the government at least Rs 3 trillion more than what was provisioned in the budget.
• 3] Rational trade policy: Export restrictions/bans go beyond agri-commodities, even to iron ore and steel, etc. in the name of taming inflation.
• But abrupt export bans are poor trade policy and reflect only the panic-stricken face of the government.
• A more mature approach to filter exports would be through a gradual process of minimum export prices and transparent export duties for short periods of time, rather than abrupt bans, if at all these are desperately needed to favour consumers.
• Liberal import policy: A prudent solution to moderate inflation at home lies in a liberal import policy, reducing tariffs across board.

Way forward

• If India wants to be atmanirbhar (self-reliant) in critical commodities where import dependence is unduly high, it must focus on two oils — crude oil and edible oils.
• In crude oil, India is almost 80 per cent dependent on imports and in edible oils imports constitute 55 to 60 per cent of our domestic consumption.
• In both cases, agriculture can help.
• Ethanol production: Massive production of ethanol from sugarcane and maize, especially in eastern Uttar Pradesh and north Bihar, where water is abundant and the water table is replenished every second year or so through light floods, is the way to reduce import dependence in crude oil.
• Palm plantation: In the case of edible oils, a large programme of palm plantations in coastal areas and the northeast is the right strategy.

Conclusion

We need to invest in raising productivity, making agri-markets work more efficiently.

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Context

It is no secret that Punjab, once the frontrunner of Indian agriculture, is struggling to retain its dynamism.

Need to diversify

• While Punjab ranked at the top of major Indian states in terms of per capita income during 1967-68 to 2002-03, it has slipped below the 13th position.
• Punjab’s agricultural growth rate, at 5.7 per cent, was more than double the country’s average of 2.3 per cent during 1971-72 to 1985-86.
• This has reversed between 2005 and 2019 with Punjab at 1.9 per cent and India at 3.7 per cent.
• Agriculture least diversified state: With almost 85 per cent of the gross cropped area under wheat and rice, agriculture is least diversified in the state. 
• Mandi transactions cost about 8.5 per cent of the MSP, the highest in the country, making Punjab wheat and rice less competitive.

What explains low diversification in agriculture?

• Policies: Guaranteed MSP for wheat and paddy, backed by assured procurement, free power and highly subsidised fertilisers, has disincentivised diversification.
• Political economy: The political economy around wheat and rice is so intense that any effort to address its distortionary impact is met with fierce opposition by vested interest groups.

How to recalibrate Punjab agriculture towards higher, sustainable growth?

• Augment livestock and milk processing: While fruits and vegetables account for 7.4 per cent of the value of the output of agriculture and allied sectors, livestock accounts for 31.5 per cent and fisheries less than 1 per cent.
• The state has the highest per capita availability of milk but it can process less than 20 per cent of it.
•  Promoting mega parks for value addition in fruits and vegetables, milk, and other livestock products through medium and small enterprises will strengthen its competitiveness.
• Strengthen market for seed potato: It is also a significant player in seed potato and with the right package of practices, traceability systems, and infrastructure, the market for Punjab seed potato can be strengthened.
• Scaling up alternative marketing channel: Alternative marketing channels for fruits and vegetables such as direct marketing, contract farming, and exports have been in place but these models need to be scaled up with the right ecosystem.
• Shift to demand-driven agriculture: Punjab needs to switch from supply-driven agriculture to demand-driven agriculture.
• The demand for fisheries, poultry, dairy, and fruits and vegetables is increasing way faster than the demand for wheat and rice.
• Rationalise mandi charges:  Rationalising mandi charges to not more than 3 per cent will attract private sector investments in building efficient value chains.
• Rationalise subsidies: Time-bound incentives in the form of freight subsidies for exporters of high-value agri-produce, tax exemptions for the processing of perishable commodities for value chain players would be more rational than the overloaded subsidies of urea and free power.
• Use technology and start-up revolution: Punjab should leverage the start-up revolution that is unfolding in India, and use technology to ensure optimal utilisation of resources, expand markets, and augment farmers’ income.
• Geo-tagging of farms can address concerns related to long-term leasing of land that is critical for large-scale investments and enable vibrant agricultural land markets.
• Innovations in supply chain management, be it automated grain silos or state-of-art herd management will not only optimise the use of resources but also bring in traceability of farms and animals, early monitoring and prevention of disease outbreaks, and contain value chain losses.

How to manage financial resources?

• Rationalise urea subsidy: It should rationalise its fertiliser subsidy regime by moving towards cash transfers on a per hectare basis and free up fertiliser prices.
• Include urea in nutrient-based subsidy scheme: If that’s not possible, then urea should be included in the nutrient-based subsidy scheme.
• Bring soluble fertiliser under subsidy: Bring soluble fertilisers under subsidy, which will enhance fertiliser use efficiency through fertigation.
• This will also help reap environmental gains.
• Rationalise food subsidy: Food subsidy can also be rationalised through direct cash transfers replacing PDS, as Punjab is a grain surplus state.

Conclusion

Both environmental and financial sustainability concerns related to business-as-usual farming in Punjab call for a rebooting strategy.

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Context

The essential challenge of public policy for agriculture- the high price of food remains unsolved.

Implications of high food prices

• Increases poverty: A higher price of food increases poverty, especially as the rice and wheat supplied through the PDS constitute only a part of the total expenditure on food of the average Indian household.
• Reduces the expenditure on other item: For the household, a high price of food crowds out expenditure on other items ranging from health and education to non-agricultural goods.
• This prevents the market for non-agricultural goods from expanding.
• This was one of the first discoveries in economics, made by the English economist David Ricardo about two centuries ago.

Rising food prices in India

• An indication of the elevation of the price of food in an economy is the share of food in a household’s budget.
• In a global comparison we would find that this share is very large for India.
• Data from the U.S. Department of Agriculture (2016) show that this share ranges from over 30% for India to less than 10% for the U.S. and the U.K.
• This is in line with Ricardo’s understanding of how economies progress i.e., as food gets cheaper, growth in the non-agricultural economy is stimulated.
• Agricultural policy in India has remained quite unaccountable in the face of a rising relative price of food.
• Impact on manufacturing sector: Arguably, the high price of food has been a factor in the disappointing lack of expansion of the manufacturing sector in India despite repeated efforts to bring it about.

Changes needed in agricultural policy

• Both from the point of view of food security for low-income households and the dynamism of the non-agricultural sector, agricultural policy cannot ignore the price at which food is produced.
• Focus on improving the yield: The fact of low agricultural yield in India by comparison with the rest of the world has been known for long, and little is done about it.
• Management of soil nutrients and moisture: A superior management of soil nutrients and moisture, assured water supply and knowledge inputs made available via an extension service would be crucial.
• Raising yields will ensure profitability without raising producer prices, which will inflate the food subsidy bill.

How government intervention created problems

• Given the importance of food for our survival, this justifies public intervention in agriculture.
• The issue is the design and scale of this intervention.
• In the mid-sixties, when India was facing food shortage that could not be solved through trade, a concerted effort was made to raise domestic agricultural production.
• Profitability through MSP: It introduced the strategy of ensuring farm profitability though favourable prices assured by the state.
• Further, it entrenched the belief that it is the farmer’s right to have the state purchase as much grain as the farmer wishes to sell to the state agency.
• Created grain stockpile: This has resulted in grain stockpiles far greater than the officially announced buffer-stocking norm.
• These stocks have often rotted, resulting in deadweight loss, paid for by the public though taxes or public borrowing.
• Supply more than demand: Finally, with all costs of production reimbursable and all of output finding an assured outlet, supply has outstripped demand. 
• Damage to natural environment: This has led to unimaginable pressure on the natural environment, especially water supply.

Consider the question “India faces the challenge of high food prices. Examine the ways in which high food prices affects the overall economy. How far is the India’s agriculture policy responsible for the problem?”

Conclusion

India needs an agricultural policy that ensures that farming is profitable but this cannot be at the cost of a high price of food. The ‘food problem’ should no longer be seen only in terms of the availability of food from domestic sources.

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Context

In a surprise move, Prime Minister Narendra Modi announced that the government will repeal the farm laws in the Winter Session of Parliament.

Economic impact

• Agri-growth rate to remain constant: The agri-GDP growth has been 3.5 per cent per annum in the last seven years.
• One expects this trend to continue — there might be minor changes in the agri-GDP depending on rainfall patterns.
• Cropping pattern to remain skewed: Cropping patterns will remain skewed in favour of rice and wheat, with the granaries of the Food Corporation of India bulging with stocks of grain.
• Increase in food subsidy: The food subsidy will keep bloating and there will be large leakages.
• Environmental impact: The groundwater table in the north-western states will keep receding and methane and nitrous oxide will keep polluting the environment.

Suggestion on increasing farmers income

• Average agri-household income: The latest Situation Assessment Survey of the NSO reveals that the income of an average agri-household in India was only Rs 10,218 per month in 2018-19.
• This is not a very happy situation and all out measures need to be taken to increase rural incomes in a sustained manner.
• How to increase farmers income: Given that the average holding size stands at just 0.9 ha (2018-19), and has been shrinking over the years.
• Efficient functioning value chain: Unless one goes for high-value agriculture — and, that’s where one needs efficient functioning value chains from farm to fork by the infusion of private investments in logistics, storage, processing, e-commerce, and digital technologies — the incomes of farmers cannot be increased significantly.
• Reforms: This sector needs reforms, both in the marketing of outputs as well as inputs, including land lease markets and direct benefit transfer of all input subsidies — fertilisers, power, credit and farm machinery.

Implications

• Demand for legal status to MSP could strengthen: Farmer leaders are already asking for the legal guarantee of MSPs for 23 agri-commodities.
• Their demand could increase to include a larger basket of commodities.
• Demand for privatisation: There could be demands to block the privatisation reforms of public sector enterprises — Air India, for instance — or to scuttle any other reform for that matter.
• The net result is likely to be slowing down the economic reforms that are desperately needed to propel growth.

Consider the question “The latest Situation Assessment Survey of the NSO reveal the low average agri-household income in India. All out measures need to be taken to increase rural incomes in a sustained manner. In the context of this, suggest the measures to increase the farmers’ income and challenges in it.

Conclusion

The most important lesson from the repeal of the farm laws is that the process of economic reforms has to be more consultative, more transparent and better communicated to the potential beneficiaries. It is this inclusiveness that lies at the heart of democratic functioning of India.

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Context

As per the latest Situation Assessment Survey (SAS) of agricultural households conducted by the National Statistical Office (NSO), an average Indian farmer earned Rs 10,218 per month in 2018-19 (July-June).

SAS analysis: Variation across the states and cause of concern for Punjab

• Across states, the highest income was received by a farming household in Meghalaya (Rs 29,348) followed by Punjab (Rs 26,701), Haryana (Rs 22,841), Arunachal Pradesh (19,225) and Jammu and Kashmir (Rs 18,918).
• While the lowest income levels were in West Bengal (Rs 6,762), Odisha (Rs 5,112) and Jharkhand (Rs 4,895).
• But this is not a fair comparison as holding sizes vary widely across states.
• After normalising these incomes of agri-households by their holding sizes, as in the SAS, Punjab’s ranking on per hectare income falls from 2nd to 11th and Haryana goes down from 3rd to 15th (see figure).
• The states that would do well on this score are Jammu and Kashmir, Kerala, Meghalaya and Arunachal Pradesh.
• In these states, people earn their income from cultivating fruits and vegetables, spices, and livestock.
• These are high value in nature, not linked to MSPs, and market and demand-driven.
• As per the SAS, the average operated area per holding for Punjab is 1.44 ha (we have used that in the figure), but the Census gives a much higher value of 3.62 ha of average operational holding.
•  If we normalise incomes of agri-households using Census values of average holding sizes, Punjab’s rank would go further down to 21st (household monthly income Rs 7,376) out of 28 states.

How can farmers in Punjab and Haryana augment their incomes with more sustainable agriculture?

1) Swith from paddy to maize

• Punjab’s former Chief Minister Amarinder Singh had approached the Centre with an idea to create a fund of around Rs 25,000 crore to help farmers switch from paddy to maize.
• The Centre should give this idea a serious thought with the following modifications:
• One, the fund should be under a five-year plan to shift at least a million hectares of paddy area (out of a total of 3.1 million hectares of paddy area in Punjab) to maize.
• Two, the corpus should have equal contributions from the Centre and state.
• Three, since Punjab wants that farmers be given MSP for maize, an agency, the Maize Corporation of Punjab (MCP), should be created to buy maize from farmers at MSP.
• Four, this agency should enter into contracts with ethanol companies, and much of this maize can be used to produce ethanol as the poultry and starch industries will not be able to absorb this surplus in maize once a million hectares of paddy area shifts to maize.
• Fifth, maize productivity must be as competitive as that of paddy in Punjab and the best seeds should be used for that purpose.
• This is to ensure that ethanol from maize is produced in a globally competitive manner.
• The GoI’s policy for 20 per cent blending of ethanol in petrol should come in handy for this purpose.

2) Diversification

• Other parts of the diversification strategy have to be along the lines of increasing the area under fruits and vegetables, and a more focused policy to build efficient value chains in not just fruits and vegetables but also livestock and fisheries.
• They are more nutritious and the SAS data shows that their profitability is much higher in these enterprises than in crop cultivation, especially cereals.
• The sector needs to be backed by proper processing, grading and packaging infrastructure to tap its full potential.

Benefits of switching to maize from paddy

• Punjab will arrest its depleting water table as maize needs less than one-fifth the water that paddy does for irrigation.
• Also, Punjab will save much on the power subsidy to agriculture, which was budgeted at Rs 8,275 crore in the FY2020-21 budget, as paddy irrigation consumes much of the power subsidy.
• This saving subsidy resulting from the switch from paddy to maize can be used to fund a part of the state’s contribution to the Maize Corporation of Punjab.
• This could result in a win-win situation for all — farmers, the Government of Punjab and the country — as there will be lesser methane emissions and less stubble burning.
• Moreover, ethanol will also reduce GHG emissions in vehicular pollution.

Consider the question “Switching from paddy cultivation to maize can help the Punjab farmers deal with the several issues. In light of this, explain the issues with paddy cultivation and suggest the way forward.”

Conclusion

Their income on a per hectare basis needs to increase more sustainably, protecting the state’s land, water and air from further degradation, and producing more nutritious food. Punjab can then shine again on the nutritional security front with sustainable and climate-resilient agriculture.

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