The Narendra Modi government is learnt to be working on a grand plan to deal with India’s chronic agrarian distress, including incentives for home delivery startups to aggregate products from farmers, creating 10,000 farmer produce organisations, and a national warehousing network along highways among others.
The plan, some components of which Finance Minister Nirmala Sitharaman will likely announce in the Union Budget for 2019-20 on July 5, also includes creating a mobile app-based system for direct marketing by farmers, a distinct fund for fish and aquatic farming, a village storage scheme of agri-produce and a special plan for using uncultivated rural land for solar farming.
The Centre is examining policy interventions to enable investment worth Rs 25 lakh crore, both by the government and the private sector, in India's rural economy spread over a five-year period.
Some of these will likely be mirrored in the new government's first budget on July 5.
The new set of policies will also look at extensive use of big data, artificial intelligence (AI) and block chain technology as vehicles to enable farmers to get swifter and accurate information about weather, prices and other aspects.
A special mobile app-based system is likely to be created that would aggregate suppliers of agri-implements for farmers to use on rental and custom hiring basis. The system will also give real time information on weather and market prices of various agro products. The budget could propose incentives to the private sector to develop such systems.
"Across different sectors, we have a fragmentation in markets. The focus now needs to be make India an intergated market. For that, lots of regulatory and logistics barriers need to be removed," an official, who did not wish to be identified, said.
The government also intends to add one crore hectares of land under micro-irrigation as part of a broader strategy to lower Indian agriculture's dependence on monsoon.Nearly 60 percent of India's net sown area doesn't have irrigation cover, making the farm sector exposed to weather whims.
This will be supplemented with a "fertigation" plan to promote prudent use of fertilisers. Fertigation is a process in which fertiliser is dissolved and distributed along with water in drip or spray irrigation system. Fertigation can potentially bring down fertiliser usage by 70-90 percent, cut down water usage by about 20 percent, and reduce environmental contamination.
It also reduces soil erosion, minimises the risk of the roots contracting soil-borne diseases, reduces water consumption, reduces the amount of fertiliser used, increases the nutrients absorbed by the plants, and controls the precise time and rate of fertilisers being released.
The projects will be implemented under the Pradhan Mantri Krishi Sinchai Yojana. While 31 long-pending irrigation projects have been completed under the scheme, the government intends to complete work on the remaining 68 projects in phases by the next few months.
Over the last two years, farmers have been protesting in several states, demanding better prices and debt write-offs. Low retail prices may be heartening to consumers, but persistently low food prices, have meant that farmers' income have remained flat.
India's long slowdown in food prices – "disinflation" in economists' jargon – may well be symptomatic of a problem of abundance
The current price crash is partly due to a bumper winter-sown crop that have flooded mandis. With few buyers, the glut has forced farmers to dump products at throwaway prices to clear up a piling mount of vegetables.
This is showing up in food inflation, a proxy to measure how costly or cheaper commonly consumed items have become on an annualised basis, which has moderated sharply.
In July 2018, the Centre had also announced a sharp rise in minimum support prices (MSPs) for 14 summer-sown kharif crops. The government has set the MSP at a minimum of 1.5 times the cost of cultivation, a proposal made in the budget for 2018-19, based on Commission on Agricultural Costs and Prices (CACP) calculations
This was the biggest increase in the Narendra Modi government's tenure in 2014-19.
A state-supported MSP mechanism acts a cushion, cuts the dependence on private wholesale buyers, and helps fix a minimum floor price that farmers are almost guaranteed to get even if markets are swamped by an abundant harvest collapsing mandi rates.
Vegetables, potatoes and onions, however, do not attract minimum support price (MSP)—where the government purchases crops from the farmers at a certain assured price.
Latest price trends show that market prices are lower than inflation-adjusted prices. Market prices at wholesale mandis seem to be clearly ruling at significantly lower levels than the MSPs.
This is symptomatic of a lower farm income, something that lies at the core of the current rural distress in many parts of the country.
The thinking within the government is that one of the reasons behind the glut is also because production is increasing at a pace higher than a corresponding increase in population. India, psychologically because of a history of famines, has been production-centric but now the focus needs to shift to supply.
"The main focus has to be on the marketing side, to bring the markets closer to the farmers," the official said.
A mechanism through which FPOs and farmers' cooperatives that consolidate produce from hundreds of peasants can directly sell vegetables, fruits, dairy and fishery products to households in cities is also on the anvil.
Farmers in India can now practise cooperative farming by forming groups and the Centre has made a law that promotes such type of farming. The law has been sent to states and farmers can now form collectives or sign MoUs to practice cooperative farming.
This is one of the bigger ideas that the policies around agriculture would concentrate on - how to use technology and reduce regulations to bring markets closer to the farmers.