Economic Survey 2020-21: Vol 2 Ch 7: Agriculture & Food Management

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  • COVID-19 pandemic has influenced the lives of people across the globe and India is no exception to that.
  • The farming activities also experienced the impact of this pandemic as the COVID-induced lockdowns influenced the movement of farm inputs including farm machinery from one location to another.
  • The national lockdown coincided with the commencement of the harvesting season for the Rabi crops creating further adversity for the sector.
  • The migration of agricultural labourers to their native places during the lockdown created a shortage of farm labourers.
  • India’s agricultural system demonstrated its resilience amid such adversities.
  • The agriculture and allied sectors were the sole bright spot amid the slide in performance of other sectors, clocking a growth rate of 3.4% at constant prices during 2020-21.
  • Against all adversities due to COVID-19, a continuous supply of agriculture commodities, especially staples like rice, wheat, pulses, and vegetables, has been maintained thereby enabling food security. 

    Agriculture sector at a glance:

    • The agriculture sector accounts for 18% of India’s GDP and provides employment to 50% of the workforce of the country.
    • Gross cropped area-195 million hectare
    • Net sown area-141 million hectare
    • Agricultural irrigated land (% of total agricultural land)-36% (As per 2014 World bank data)
    • Animal husbandry output-Constitutes about 32% of the country’s agricultural output.
  • In order to further strengthen and support the agricultural sector, several initiatives have been taken by the Government of India under the Atma Nirbhar Bharat Abhiyan as mentioned below:

Overview of Agriculture 
  • Share in GVA:
    • The share of agriculture and allied sectors in the GVA of the country has declined from 18.2% in 2014-15 to 17.8% in 2019-20.
    • It is an inevitable outcome of a development process in which the relative performance of non-agricultural sectors becomes more dominant.
  • Growth in Agriculture & Allied Sectors:
    • During 2020-21, while the GVA for the entire economy contracted by 7.2%, growth in GVA for agriculture maintained a positive growth of 3.4%.
  • Gross Capital Formation:
    • Gross Capital Formation (GCF) in the agriculture and allied sector as a proportion to GVA has been showing a fluctuating trend from 17.7% in 2013-14 to 16.4% in 2018-19, with a dip to 14.7% in 2015-16.
  • Production of Crops:
    • Total food grain production in the country is estimated at a record of 296.65 million tonnes which is higher by 11.44 million tonnes than the production of food grain during the last fiscal year.
    • It is also higher than the average of the last five years of agriculture production.
  • Agricultural Credit:
    • The agriculture credit flow target for 2020-21 was fixed at Rs. 15,00,000 crores and till 30th November 2020 a sum of Rs. 9,73,517.80 crores were disbursed.
    • The Agriculture Infrastructure Fund will further boost credit flow to the agriculture sector.

Agriculture Infrastructure Fund (AIF)

  • Recently, The Govt launched the financing facility of Rs 1 lakh crore under the Agriculture Infrastructure Fund.
  • The fund has been launched as part of ‘Atmanirbhar Bharat’ (self-reliant India) to make farmers self-reliant.
    • About:
      • It is a Central Sector Scheme meant for setting up storage and processing facilities, which will help farmers, get higher prices for their crops.
      • It will support farmers, PACS, FPOs, Agri-entrepreneurs, etc. in building community farming assets and post-harvest agriculture infrastructure.
      • These assets will enable farmers to get greater value for their produce as they will be able to store and sell at higher prices, reduce wastage and increase processing and value addition.
      • The duration of the Scheme shall be from FY2020 to FY2029 (10 years).
    • Regional distribution of Agricultural Credit in India in 2020-21 is presented in the map below:

  • International Trade in Agricultural Commodities:
    • India’s agricultural and allied exports amounted to approximately Rs. 252 thousand crores with major export destinations were the USA, Saudi Arabia, Iran, Nepal, and Bangladesh. 
    • Marine products, basmati rice, buffalo meat, spices, non-basmati rice, cotton raw, oil meals, sugar, castor oil, and tea were the top agriculture and related products exported from India.
    • India’s total agri-export basket accounts for a little over 2.5% of world agri-trade which is very less owing to heavy demands of Indian agriculture products.
Minimum Support Price
  • The Union Budget for 2018-19 had announced that MSPs would be kept at the level of 1.5 times the cost of production.
  • On the basis of the above-mentioned principle, Government recently increased the MSPs for all mandated Kharif and rabi crops for the 2020-21 season.
  • Kharif Crops:
    • The highest increase in MSP announced is for Nigerseed (Rs. 755 per quintal) followed by sesamum (Rs. 370 per quintal), urad (Rs. 300 per quintal), and cotton (long staple) (Rs. 275 per quintal).
  • Rabi Crops:
    • The highest increase in MSP has been announced for lentils (Rs. 300 per quintal) followed by the gram and rapeseed & mustard (Rs.225 per quintal each) and safflower (Rs.112 per quintal).
    • For barley and wheat, an increase of Rs. 75 per quintal and Rs. 50 per quintal respectively has been announced.

Minimum Support Price

  • The MSP is the rate at which the government buys grains from farmers.
  • The reason behind the idea of MSP is to counter the price volatility of agricultural commodities due to the factors like the variation in their supply, lack of market integration, and information asymmetry.
  • Fixation of MSP
    • The MSP is fixed on the recommendations of the Commission for Agricultural Costs and Prices (CACP). Factors taken into consideration for fixing MSP include:
      • Demand and supply;
      • Cost of production (A2 + FL method)
      • Price trends in the market, both domestic and international;
      • Inter-crop price parity;
      • Terms of trade between agriculture and non-agriculture;
      • A minimum of 50% as the margin over the cost of production; and
      • Likely implications of MSP on consumers of that product.
    • The Commission also makes visits to states for an on-the-spot assessment of the various constraints that farmers face in marketing their products or even raising the productivity levels of their crops.
    • Based on all these inputs, the Commission then finalizes its recommendations/reports, which are then submitted to the government.
    • The government, in turn, circulates the CACP reports to state governments and concerned Central Ministries for their comments.
    • After receiving the feedback from them, the Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by the CACP.
  • Procurement: The Food Corporation of India (FCI), the nodal central agency of the Government of India, along with other State Agencies undertakes procurement of crops.
  • Crop Insurance:
    • The average sum insured per hectare has increased from Rs 15,100 during the pre PMFBY Schemes to Rs. 40,700 under Pradhan Mantri Fasal Bima Yojana (PMFBY)
    • The Scheme has covered over 5.5 crore farmer applications year on year.
    • As of 12th January 2021, claims worth Rs. 90,000 crores have already been paid out under the Scheme.
    • During the COVID lockdown period, nearly 70 lakh farmers benefitted and claims worth Rs. 8741.30 crores were transferred to the beneficiaries.

About PMFBY:

  • Launched in 2016.
  • Merged schemes include the National Agricultural Insurance Scheme (NAIS) and the Modified National Agricultural Insurance Scheme (MNAIS). It aims to reduce the premium burden on farmers and ensure early settlement of crop assurance claim for the full insured sum.
  • Coverage:
    • The Scheme covers all Food & Oilseeds crops and Annual Commercial/Horticultural Crops for which past yield data is available and for which requisite number of Crop Cutting Experiments (CCEs) are being conducted under General Crop Estimation Survey (GCES).
  • Premium:
    • 2% for Kharif crops.
    • 1.5% for Rabi crops.
    • 5% for commercial and horticultural crops.
    • The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) Scheme was launched in 2019 to provide income support to all landholder farmer families across the country with cultivable land.
    • Under the Scheme, an amount of Rs. 6000 per year is released in three installments of Rs. 2000 each directly into the bank accounts of the beneficiaries.
    • More than Rs. 1.10 lakh crore has reached the account of farmers after the 7th round of installment under the scheme.
Allied Sectors: Animal Husbandry, Dairying & Fisheries
  • The livestock sector is an important sub-sector of agriculture in the Indian economy.
  • It grew at a CAGR of 8.24% during 2014-15 to 2018-19.
  • As per the estimates of National Accounts Statistics (NAS) 2020, the contribution of livestock in total agriculture and allied sector GVA (at constant prices) has increased from 24.32% (2014-15) to 28.63% (2018-19).
  • The livestock sector contributed 4.2% of total GVA in 2018-19.
  • Milk
    • India continues to be the largest producer of milk in the world. Milk production in the country has increased from 146.3 million tonnes in 2014-15 to 198.4 million tonnes in 2019-20.
    • In 2019-20, milk production increased by 5.68% as compared to the previous year, and the per capita availability of milk was 407 grams per day.
    • As per a study on the demand for milk conducted by the National Dairy Development Board (NDDB), the estimated demand for 2030 at an All India level is 266.5 million metric tonnes for milk and milk products.
    • The rural sector has an estimated share of 57% in total consumption.
    • The per capita consumption in the urban areas (592 ml) remains higher than the rural areas (404 ml) even in the 2030 projections.
  • Livestock Population and Production
    • According to FAOSTAT production data (2019), India ranks 3rd in egg production in the world.
    • In the egg production with 10.19% growth has been registered in 2019-20.
    • The per capita availability of eggs was 86 eggs per annum in 2019-20.
    • It has been achieved due to a quantum leap in the last four decades of technological support and commercial production.
  • Recent initiatives in the Livestock sector
    • Covid-19 lockdown caused a drop in the market demand due to the closure of the outlets selling livestock products.
    • With the closure of sweet shops and tea stalls, a large number of private dairies were impacted and they stopped milk procurement from the farmers.
    • This resulted in the farmers diverting their milk to the cooperatives.
    • As a result, milk procurement in the cooperative sector increased because, as per their mandate, they could not reject milk supplied by the farmers.
    • The cooperatives are faced with liquidity problems due to higher conversion into milk powder and white butter caused by higher milk procurement.
    • Steps were taken to keep close surveillance on the milk situation and facilitate the resolution of the issues relating to the forward and backward linkages for the smooth supply of milk and milk products during the lockdown.
      • Interest subvention: As one-time support, a sub-scheme for providing interest subvention on working capital loans were designed for the financial year 2020-21 under the ongoing scheme State Dairy Cooperative & Farmers Producers Organization (SDCFPO) to provide interest subvention of 2% per annum, with an additional incentive of 2% interest subvention for prompt and timely repayment to the financially stressed milk unions.
      • KCC: 1.5 crores dairy farmers of milk cooperatives and milk producer companies’ were targeted to provide Kisan Credit Cards (KCC) as part of Prime Minister’s Atma Nirbhar Bharat Package.
    • Animal Husbandry Infrastructure Development Fund (AHIDF)
      • As a part of the Atma Nirbhar Bharat Abhiyan stimulus package, a Rs 15000 crores Animal Husbandry Infrastructure Development Fund (AHIDF) has been set up.
      • The AHIDF will incentivize investments by individual entrepreneurs, private companies including MSME, farmers producers organizations(FPOs), and Section 8 companies to establish
        1. dairy processing and value addition infrastructure
        2. meat processing and value addition infrastructure, and
        3. animal feed plant
    • National Animal Disease Control Programme (NADCP)
      • The Government has approved an ambitious scheme “National Animal Disease Control Programme (NADCP) for control of Foot & Mouth Disease (FMD) and Brucellosis” for vaccinating all cattle, buffalo, sheep, goat, and pig population against FMD and all bovine female calves of 4-8 months of age against brucellosis.
  • Fisheries
    • India is the second-largest fish producing country in the world and accounts for 7.58% of global production.
    • The fish production in India has reached an all-time high of 14.16 million metric tons during 2019-20.
    • The fisheries sector contributes 1.24% to the GVA and 7.28% to the agricultural GVA.
    • The Government of India has taken several initiatives to harness the untapped potential of the sector. 
    • Blue Revolution 
      • The centrally sponsored scheme – Blue Revolution (CSS-BR) which was launched in 2015-16 for a 5 year period with a central financial outlay of ` 3000 crores to catalyze the “Integrated, Responsible and Holistic Development and Management of the Fisheries Sector”, ended in March 2020.
    • Fisheries and Aquaculture Infrastructure Development Fund (FIDF)
    • Kisan Credit Cards (KCCs)
      • It has been issued to fishers and fish farmers and an additional 4.04 lakh applications from fishers and fish farmers are with the banks at various stages of issuance.
    • Pradhan Mantri Matsya Sampada Yojana (PMMSY)
      • Launched in May 2020 as a part of the Atma Nirbhar Bharat Package by the Government of India.
  • Fisheries and Aquaculture Infrastructure Development Fund (FIDF):
    • The government has approved Rs. 7522 crore Fisheries and Aquaculture Infrastructure Development Fund (FIDF).
    • It creates employment opportunities for over 9.40 lakhs of fishers/fishermen/ fisher folks and other entrepreneurs in fishing and allied activities.
    • It attracts private investment in the creation and management of fisheries infrastructure facilities.
    • It helps in the creation of fisheries infrastructure facilities both in marine and inland fisheries sectors, which would boast fish production and help achieve the target of Rs. 15 million tonnes by 2020 under the Blue revolution.
    • It aims to achieve a sustainable growth of 8% to 9% in a move to augment fish production to the level of about 20 million tonnes by 2022-23.
  • Pradhan Mantri Matsya Sampada Yojana (PMMSY):
    • PMMSY is a scheme to bring about the Blue Revolution through sustainable and responsible development of the fisheries sector in India under two components namely, Central Sector Scheme (CS) and Centrally Sponsored Scheme (CSS).
    • The Scheme will be implemented during a period of 5 years from FY 2020-21 to FY 2024-25.
    • Nodal Ministry: Ministry of Fisheries, Animal Husbandry and Dairying.
    • Implementation:
    • Central Sector Scheme (CS)- The entire project/unit cost will be borne by the Central government (i.e. 100% central funding).
    • The Centrally Sponsored Scheme (CSS) Component is further segregated into Non-beneficiary oriented and Beneficiary orientated sub­components/activities under the following three broad heads:
      • Enhancement of Production and Productivity.
      • Infrastructure and Post-Harvest Management.
      • Fisheries Management and Regulatory Framework.


Agricultural Research And Education
  • Indian Council of Agricultural Research (ICAR) h taken a number of initiatives in this field.
  • A total of 172 new varieties/hybrids of field crops and 75 horticultural crops were notified/released till October 2020.
  • The Council had also developed 17 biofortified varieties of field and horticulture crops to ensure nutritional security through the natural food system.
  • It has taken the tally of biofortified varieties to 71.
  • Some other initiative:
    • Natural Resource Management and Integrated Farming
      • The Council has developed 60 location-specific, cost-effective, eco-friendly, socially acceptable multi-enterprise Integrated Farming System (IFS) models in farmers’ participatory mode to reduce risk in farming, enhance farm productivity/profitability, and secure livelihoods of resource-poor small and marginal farmers.
      • The Council has developed an agri-voltaic system to generate electricity in the interspace area of crops and to harvest rainwater from the top surface of the photovoltaic (PV)-module has been designed.
      • It is a step towards achieving the ambitious target of 100,000 MW of solar PV based power generation capacity in the country and doubling the farmers’ income.
    • Demonstration and Upscaling of Climate Resilient Technologies
      • Climate-resilient technologies are being demonstrated in 446 villages and up-scaled in about 300 cluster villages in the country.
    • Mechanization and Crop Residue Management
      • To increase the availability of equipment/machines to the small and marginal farmers on a hire basis, custom hiring centers have so far been initiated in Punjab, Haryana, and UP.
      • Several measures have been taken to manage crop residue which includes:
        • Awareness creation about in-situ crop residue management
        • Distribution of machines to the farmers in these states during the last two years and
        • Crop diversification leading to a reduction in area under paddy.
      • Reaching to the Farmers and Youth with Improved Technologies
        • The linking of common service centers with KVKs has tremendously enhanced the outreach of the KVKs and provided demand-driven services and information to farmers.
Food Processing Sector
  • In the last 5 years ending 2018-19, food processing industries (FPI) has been growing at an average annual growth rate of around 9.99% as compared to around 3.12% in agriculture and 8.25% in manufacturing at 2011-12 prices.
  • The sector constitutes as much as 8.98% of Gross Value Added (GVA) in manufacturing in 2018-19 at 2011-12 prices.
  • New Initiatives in the Food Processing Sector
    • Formalization of Micro Food Processing Enterprises
      • It is a Centrally Sponsored Scheme launched under Atma Nirbhar Bharat Abhiyan by the Ministry of Food Processing Industries (MoFPI).
      • It is expected to benefit 2 lakh micro food processing units through credit-linked subsidy.
      • One District One Product (ODOP) approach has been adopted by the government to reap the benefit of scale in terms of procurement of inputs, availing common services, and marketing of products.
      • The States need to identify one food product per district keeping in view the existing clusters and availability of raw material, under the scheme.
      • The scheme focuses especially on waste to wealth products, minor forest products, and Aspirational Districts.
    • Operation Greens
      • MoFPI is implementing a central sector scheme “Operation Greens – A scheme for integrated development of Tomato, Onion and Potato (TOP) value chain” to provide support to farmers when prices of Agri produce are low.
      • This scheme is not meant for intervention in the market during price rises.
      • Under the short-term- price stabilization measures of the scheme, there is a provision for a 50% subsidy on the cost of transportation and storage for the evacuation of surplus production from producing area to the consumption center during the glut situation.
      • Under Atma Nirbhar Bharat Abhiyan, this scheme has been extended from tomato, onion, and potato (TOP) crops to the other notified horticulture crops (Total) for a period of six months.
      • Transport subsidy has been allowed on any fruit & vegetable through any rail service provided by Indian Railways.
    • Production-Linked Incentive (PLI) Scheme
      • The Production-Linked Incentive (PLI) Scheme has been approved in 10 key sectors, including the food processing sector, for enhancing India’s manufacturing capabilities and improving exports.
      • The scheme supports ready to eat/ready to cook, marine products, processed fruits & vegetables, mozzarella cheese, and innovative/organic products of SMEs.
      • It will also promote the marketing and branding of agricultural produce abroad.
    • Pradhan Mantri Kisan SAMPADA Yojana (PMKSY)
      • Under the umbrella scheme Pradhan Mantri Kisan SAMPADA Yojana, the Ministry is implementing various component schemes which, inter-alia, includes:
      • Mega Food Parks,
      • Integrated Cold Chain and Value Addition Infrastructure,
      • Infrastructure for Agro-processing Clusters,
      • Creation of Backward and Forward Linkages
      • Creation/ Expansion of Food Processing & Preservation Capacities, and
      • Operation Greens.
Food Management
  • For prudent management of foodgrain stock and to ensure adequate availability of wheat and rice in the central pool with a view to augment the domestic availability of wheat and rice and ensure food security, the Central Government has undertaken the following measures:
    1. MSP of wheat and paddy has been increased to protect the interest of farmers.
    2. State Governments, particularly those undertaking Decentralized Procurement (DCP), are encouraged to maximize the procurement of wheat and rice by state agencies.
    3. Strategic reserves of 5 million tons of food grains over the existing buffer norms have been maintained to be used in extreme situations.
    4. The sale of wheat and rice is undertaken through the Open Market Sale Scheme (OMSS)(Domestic) to check the inflationary trend of food in the market.

One Nation One Ration Card 

  • Existing ration cards will be turned as one nation one ration card.
  • It will be a universal ration card allotted to each beneficiary registered under NFSA.
  • Using the ONORC, a beneficiary who migrates from one place to another can buy subsidized food grains from the fair price shop located in the destination city regardless of the origin of the beneficiaries.
  • The beneficiaries will be identified through biometric authentication on electronic Point of Sale (ePoS) devices.
  • These devices will be installed at each fair price shop.
  • The national portability will work using the:
    • Integrated Management of Public Distribution System (IM-PDS) portal – It will provide the technological platform for the ration cards portability.
    • Annavitran portal – It will host the data of the food grains distribution through ePoS devices within a state. This will help a beneficiary to access subsidized food grains within a state (inter-district.)
  • Aadhar Cards will be seeded with ration cards which will help beneficiaries get the ration using the same ration card.


Recent agricultural reforms: A REMEDY, NOT A MALADY
  • The President gave his assent on September 27, 2020, to three reforms related to the agriculture sector—Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, and the Essential Commodities (Amendment) Act. Major provisions of the Reforms are presented below:
    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
      • It seeks to create an ecosystem where the farmers and traders enjoy the freedom of choice relating to the sale and purchase of farmers’ produce.
      • The reform grants freedom to farmers and buyers to transact in agricultural commodities even outside notified APMC mandis ensuring competitive alternative trading channels to promote efficient, transparent and barrier-free interstate and intra-state trade.
    • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020
      • It seeks to provide for a national framework on contract farming that protects and empowers farmers in their engagement with agri-business firms, processors, wholesalers, exporters, or large retailers for farm services and sale of future farming produce at a mutually agreed remunerative price in a fair and transparent manner.
    • The Essential Commodities (Amendment) Act, 2020
      • It seeks to remove commodities like cereals, pulses, oilseeds, edible oils, onion,s and potatoes from the list of essential commodities.
      • The reform ends the era of frequent imposition of stock-holding limits except under extraordinary circumstances.
  • Benefits of the Farm Reforms
    • APMC regulations have indeed resulted in a number of inefficiencies and consequent loss to the farmers. 
    • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 will empower farmers in their engagement with processors, wholesalers, aggregators, large retailers, exporters and will provide a level playing field.
      • It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs.
      • Farmers have been provided adequate protection as sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery.
      • The farmers will have full power in the contract to fix a sale price of their choice for the produce.
      • They will receive a payment within a maximum of 3 days.
      • As part of this law, 10000 Farmer Producer Organizations are being formed throughout the country.
    • The Essential Commodities (Amendment) Act 2020 removes commodities like cereals, pulses, oilseeds, edible oils, onion,s and potatoes from the list of essential commodities.
      • This aims to remove fears in private investors from excessive regulatory interference in their business operations.
      • The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and will attract private sector/foreign direct investment into the agriculture sector.
      • The legislation will help drive up investment in cold storage and modernization of the food supply chain.
    • The three agricultural reform legislation are designed and intended primarily for the benefit of small and marginal farmers which constitute around 85% of the total number of farmers and are the biggest sufferer of the regressive APMC regulated market regime.
    • The newly introduced farm laws herald a new era of market freedom which can go a long way in the improvement of farmer welfare in India.
Way Forward
  • The objective of inclusive development in India cannot be realized without the development of the rural sector which crucially depends on agriculture.
  • Progress in agriculture (including forestry and fisheries) has a bearing on the fate of the largest low-income group in India.
  • Agriculture and allied activities engage almost half of India’s workforce and contribute close to 18% of the gross value added of the country. 
  • The agricultural sector in India performed well in the last financial year despite the COVID-19 pandemic.
  • The government has also taken a large number of initiatives to secure the production, distribution, processing, and storage of agricultural commodities.
  • These steps of government will help India to double the farmer’s income by 2022 and agricultural export.
  • Further, it will also help India to ensure food security to its citizens and achieve sustainable development goals such as SDG 1 (No Poverty) and SDG2 (Zero Hunger).

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