Seed replacement rate for paddy rise farmhands decrease

The Hindu Business Line - Mumbai, Nov. 14:

The problem of labour availability has brought in some cheer for the seeds industry, especially in South India.

“The seed replacement rate in paddy is increasing in South India in view of the labour problem,” said Dr M. Ramasami, Managing Director of Salem-based Rasi Seeds Pvt Ltd.

The replacement rate is around 95 per cent in paddy, according to him.

According to Government statistics, the seed replacement rate in Andhra Pradesh and Tamil Nadu for paddy is 82 per cent and 67 per cent respectively till 2008. The seed replacement rate is also higher in the case of maize since hybrids are being used. Even in paddy, the increased preference for hybrids is seen as the reason for the rise in seed replacement rate.

Till 2008, the all-India seed replacement rate was 25.87 for paddy, while it was marginally lower for wheat at 25.23. The seed replacement rate is higher for maize (corn) at 44.24 per cent and bajra at 48.47 per cent.

“Even in traditional varieties, farmers are going for seed replacement due to labour shortage. It needs labour to keep the seeds separate, process, dry and then store them,” Dr Ramasami said.
Economic viability

On the other hand, adoption of methods such as the system of rice intensification (SRI) in Andhra Pradesh and Tamil Nadu is also helping.

“Earlier, farmers were asked to use 30 kg seeds on an acre. With methods such as SRI, it is enough for them to use just 5 kg. It is economically feasible for them to buy seeds now,” he said.

Rasi Seeds, as part of its efforts to improve research and development in rice, has moved its rice research station to Hyderabad from Salem in Tamil Nadu.

It has also set up research stations for vegetables in Kullu (Himachal Pradesh), Gurgaon (near New Delhi) and Bangalore (Karnataka), said Dr Ramasami, who was here to attend the fifth World Cotton Research Conference.

“We have entered the vegetable seeds market aggressively in the last three years since it offers us better scope,” he said.

Rasi Seeds is more popular for its cotton seeds but the fact that the crop is grown in only nine States has forced the company to expand its activities to other crops and horticulture. The company has also started marketing maize seeds for the last three years.

On cotton, Dr Ramasami said that his company was field-testing a variety that would grow more closely. “We are conducting field trials in the North and may commercially release it next year,” he said.

The variety, by growing closely, will help in better fertilisation, irrigation and also ease problems of picking during harvest.

Asked how much the variety would yield, he said: “It is a better yielding one.”

On mechanisation of cotton cultivation, he said breeders or seed makers would have to be given proprietary rights or seed production costs would have to be drastically lower. “It will take time for mechanisation but these things will have to happen,” he said.

Food Logistics needs to expand its network

Paddy Procurement is set to be affected

Tomato market in Maharashtra keeps commission agents at bay

 The Economic Times

 

PUNE: The farmer does not pay the commission agents nor the porters here. He decides the price of his produce and sells it directly to the trader. The open auction market for tomatoes in Narayangaon on the Pune-Nashik highway is something that every farmer wishes exists in his village.

In any market where agricultural produce is sold through commission agents, the farmer does not know the price at which a deal happens between the agent and the trader. He has to believe what the agent tells him and be happy with whatever pittance he gets paid a month later. But at the Narayangaon market, the trader or his representative comes to the farmer and quotes a price. No middlemen involved and the deal is struck. The farmer gets his money right on the spot.

"We are now saving 30% just because of doing away with the commission agents and other market-related expenses," said Prakash Wagh, a tomato farmer from village Pimpalvandi near Narayangaon who is growing the vegetable for the past 30 years.

Today, farm income has more than doubled in the region while the Junnar APMC, under which the open auction market functions as a sub-market, has succeeded in increasing its income five times in four years. "Our turnover has increased from Rs 67 lakh four years ago to Rs 3.75 crore this year," said its secretary Balasaheb Mhaskare.

The market did not come into existence as a reform measure by the government. A group of younger farmers, called the Shivneri group of agricultural graduates, literally forced the government to allow the market come into existence.

"The turnover of the tomato market has increased from Rs 3 crore in 2004 to more than Rs 100 crore last year," said Sriram Gadhave, president of the Shivneri group and the national president of the All India Vegetable Growers' Association. Gadhave took the initiative of developing the market and is making sure that it survives in the midst of middlemen-controlled markets.

Due to its specific climatic conditions, Narayangaon supplies more than 60% of tomatoes consumed in the country during the four months of the rainy season.

There is a strong demand from farmers to extend the open auction system to other crops. The Junnar APMC has started such a market on a pilot basis for bananas at Otur near Junnar.

The growing irrelevance of a MSP

 The Business Standard

The Central government’s MSP has proven to be unrealistic and ultimately disastrous for India’s farmers.

Imagine that the first of the month rolls around triggering a ritual that never fails to give you a distinct, intangible sense of well-being —logging on to your online bank account and seeing your account balance pumped up thanks to a well-deserved paycheck that’s just been deposited. Imagine the feeling in the pit of your stomach when you realise that your paycheck is a third, or maybe even half what it should be because of the vagaries of some complex pricing mechanism controlled by Human Resources. Would you come back to work? This is sort of what farmers across the length and breadth of India have been wrestling with—where the costs of cultivating their land is seldom met by the sale of foodgrain to the government (In India, the government, not private companies, are responsible for procurement) because the price—called the minimum support price (MSP)—is far below what would allow the farmer to earn a living. So grave is the situation that 40,000 farmers in East Godavari district of Andhra Pradesh recently decided to let their fields go fallow this year.

Year after year, the central government declares an MSP which neither reflects the cost of production, nor provides support to farmers. Here’s how it is calculated: First, the department of statistics within the Ministry of Agriculture collects data from about 8000 farmers across the country on a daily basis for a month in a scheme called ‘Cost of Cultivation’. This includes a arange of agricultural inputs such as labour costs, land rent charges, and seed and fertiliser costs. These are then forwarded to the Committee of Agricultural Costs and Prices (CACP), within the same ministry which evaluates the data and then makes a recommendation of an MSP for 24 different commodities to be accepted or rejected by the Cabinet.

Yet, the MSPs very rarely reflect the on-ground reality of farmers in states as a farmer in Punjab, with an average cost of male labour at Rs 250 a day, for example, will face a very different economic equation than a farmer in Maharashtra where labour is Rs 80 a day. Input costs differ dramatically across states and regions. In fact, states go through a similar exercise every year to establish a realistic MSP for their states and send it to the Centre which apparently ignores it and churns its own numbers.

To give you a sense of how far-off the Centre’s finger is, on the pulse of agricultural reality in the country, here is the cost to grow moong based on the calculations done by the Maharashtra government this year versus the Centre’s numbers.

The main inputs (per quintal) with their rupee costs in brackets range from hired human labour, male (Rs 87) and bullock labour (Rs 3459) to seed (Rs 943) and manure (Rs 475), to insurance (Rs 167) and interest on capital (Rs 297) amongst other things. Now, these along with rent and family labour, give a cost per quintal of Rs 3,482. With a 15 per cent profit it becomes Rs 4,062.

The MSP for moong dal declared by the CACP is Rs 3300 this year.

The CACP never releases the inputs it uses to derive the magical numbers each year. “The labour costs, or the land costs are never revealed,’’ says Vijay Jawandhia, of Shetkari Sanghatna of Vidarbha, an organisation for farmer rights.

Last week, the latest MSPs were announced with channa going up to Rs 2,800 while the going market rate is Rs 3,500, in addition to the commodity’s import allowed duty-free. Soya has been selling in the market at Rs 2,000 a quintal for the last four years, but priced this year by the CACP at Rs 1,600.

Another big oversight is that the CACP doesn’t factor the steep rise in certain input costs. For instance, Di ammonium phosphate (DAP), a key fertiliser used by farmers at the rate of two to three bags in an acre of wheat, has seen its price increase from Rs 450 two years ago to Rs 900 today. A bag of 50 kilos sells for Rs 1200 in the black market.

Several objections have already been raised against the MSP methodology. The Parliamentary Standing Committee on Agriculture in 2008 questioned the method of averaging the cost of production and wages in different regions, saying it was unfair. It even suggested that if costs for all 24 inputs be calculated on neutral ground at a government university campus, it would offer a better solution. The MSP, said the committee, was being created by people sitting in offices and without even going to the field.

Yet, Ashok Gulati the new chairman of CACP feels that a higher MSP can never be a solution. “Not only will it add to inflation and hurt consumers, it serves no purpose if there is no procurement,'' he says citing the example of Bihar where farmers sold paddy at 15 per cent below the MSP. “The solution lies in cash compensation to farmers where they get prices below the MSP, or where there is no procurement.'' says Gulati.

Could that be a realistic panacea ? Take for instance this year’s bonus of Rs 500 that the Government had declared to farmers who sold pulses directly to NAFED (the central procurement agency for pulses) within two months of harvest. Jawandhia says that NAFED never even showed up in Vidharbha and no one got paid.

A. Haque the former CACP chairman dismisses Gulati’s solution of a cash compensation. “It is not practical to do it. Where are the banks, and where are the accounts in the remote villages?” he asks. Haque, to his credit, implemented a steep hike in MSP in his last year as chairman. “There is no substitute to a good MSP and procurement and storage. All other talk is just hot air,’’ he says.

Haque also dismisses Gulati’s fears that higher MSP would hurt consumers. If the Government is giving rice and wheat at Rs 2 and Rs 3 a kilo does that not negate the higher MSP the farmers are paid? You don’t need an economist to understand this. Of course there is a limit to increasing MSP. But at least it should reflect the cost incurred,’’ says Haque.

Haque’s solution: Take the highest price so no one loses. He also suggests a choice between minimum wages or market wages to calculate MSP. These would automatically boost the profit margin too, he says. Another welcome move: make the CACP a statutory body as recommended by the Y K Alagh committee set up to study reforms in CACP. This was repeated by the MS Swaminathan Committee. The Government ignored both. Farmers think that this is a key solution for their communities. “The CACP should be independent and it should speak for farmers and not for consumers,” says Ajay Jakhar a farm sector activist and son of former Speaker Balram Jakhar. He can only hope that someone in government is listening.

Effects of higher farm support prices

 The Hindu Businessline
Ensuring that the farm sector remains commercially viable is an important policy goal, given India's growing requirements for food.

Another good farm harvest is expected this year, although the monsoon rains were not quite well-timed everywhere. There was untimely and excessive rainfall in several places and the impact was felt in the higher prices of fruits and vegetables. Nevertheless, a foodgrain harvest of 240 million tonnes has now been projected.

The year is set to be another procurement and storage challenge for the FCI and other agencies. With the current stock of foodgrain in the central pool at about 50 million tonnes, the task of storage and distribution will require much more innovation and efficiency to ensure that better output simply does not mean more subsidy and wastage.

With the bountiful harvest in sight, will prices oblige and lead to a decline in the inflation rate? If the increase in food prices is essentially a signal of rising demand relative to supply, then maintaining a favourable price environment for farmers is important to increase supplies.

Apart from the bountiful harvest now there is also a favourable price environment for major foodgrains. After all, the minimum support price was raised by 8 per cent for kharif rice, and by 9-10 per cent for pulses. The increase in the case of oilseeds was even greater.

Even in cotton, which has seen a technology revolution, there was an increase in MSP. The MSP for rabi crops has also now been increased significantly. In fact, the turnaround in pulses production in recent years is attributed to the price effect.

Unavoidable increase

Given the sharp increase in cost of production, the increases in minimum prices were probably unavoidable. Ensuring that the farm sector remains commercially viable is a policy goal for a populous country like ours, given the growing requirements for food.

The minimum prices are actually set subject to a variety of conditions, keeping in view the interests of producers, consumers and the government, which has to manage the financial outlays besides the commercial incentives for farmers. The generally tight international grain markets in recent times and the depreciation of the rupee would also justify favourable prices for domestic producers.

MSP is not the only instrument with which to influence production, although unfavourable prices are unlikely to boost output. The balance between price and other instruments to raise production has always been a tenuous one. If prices favourable to producers also lead to more investments, productivity improvements and therefore output, a period of rising farm prices is worth the effort.

Facilitating the subsequent changes is crucial for the success of price as an instrument to achieve output growth. The minimum support price is one instrument but it has several goals to consider. More important, it has to be combined with other policy instruments to achieve the often contradictory goals. A further complication that MSPs must contend with is the international markets. If domestic prices are systematically higher than international prices, domestic consumers are losing out on consumption. If the price scenario is the opposite, producers are losing out on income opportunities.

Impact on market prices

To the list of concerns that those setting the MSPs must be watchful of, we must now add inflation. Do the minimum support prices lead to a cost-price spiral, as the wage increases may lead to a wage cost-price spiral? In a sense, any moderation in farm prices is also subject to a moderation in the prices of farm inputs, particularly energy, fertilisers and wages.

If the increases in input prices are persistent there would indeed be stagnation in farm output and higher prices as well. The cost-price linkage can be broken more effectively if the cost-push elements are diffused and there are productivity responses.

Procurement prices are often higher than the MSP. They are more likely to have an impact on market prices and the prices received by the farmers than just the MSP. It is also the case that changes in MSP do not necessarily translate into the same percentage change in actual prices. For instance, the increase in the WPI for rice has remained at about 5 per cent or less in June-September this year.

If market prices are higher than the minimum prices, market forces have some room to operate in times of a bumper harvest. There is also the fact that effective purchase mechanisms may not be available for all farmers, who may end up selling their produce at lower prices.

The MSP is at least a signal that farm income is likely to suffer if there is no price correction. It may act as price protection to farmers where implementation is effective. But its positive impact is limited to the crops where it is available. In this sense, even when MSP does not play a significant role, as in the case of fruits, vegetables, milk, eggs, fish and meat, price increases have to be addressed by improving supplies.

(The author is Senior Research Counsellor, NCAER. The views are personal. blfeedback@thehindu.co.in)

Government brings farmers in loop to push FDI in multi-brand retail

 The Economic Times -

NEW DELHI: The government has readied a plan that will make it mandatory for foreign retailers eyeing India's multi-brand retail sector to do bulk of their sourcing from small farmers, its latest attempt to make the long-delayed reform palatable to opponents.

The commerce and industry ministry is ready with a cabinet note that suggests allowing 51% foreign direct investment in multi-brand retail and has provisions that require potential entrants to source at least 60% of farm produce from small farmers having land holdings of less than 10 hectares, officials with knowledge of the note's contents said.

The note also includes another provision that will ential multi-brand retailers sourcing 30% of their supplies from small and medium enterprises anywhere in the world, they added. The cabinet note is ready and is awaiting clearances from the highest level, an industry ministry official said.

Of late, FDI in multi-brand retail has become a test case of the UPA government's commitment to push pending economic reforms and revive flagging sentiment.

Indian rules now allow 51% FDI in single-brand retail and 100% in wholesale cash and carry operations. Multinational retailers have for long been lobbying for entry into India's $400-billion and fast expanding retail market, but foreign investment in multi-brand retail has for years been a political hot potato, with elements within the ruling coalition, the Left parties and the BJP opposed to it because they believe organised retailers will kill small shopkeepers and traders.

Policymakers in the government are keen to allow FDI in multi-brand retail as they believe this is one reform that could bring modern technology in much-needed back-end infrastructure and help farmers get better remuneration for their produce. The idea received strong backing at a recent meeting of key government economists called by Prime Minister Manmohan Singh.

Officials and some ministers also believe that allowing FDI in multi-brand retail is one reform that could be implemented without much difficulty as it does not need parliamentary approval, unlike the proposal to lift the cap on foreign holdings in insurance companies to 49% from 26%, which needs to be cleared by Parliament.