Pricing of Agricultural Commodities

Context: 

Recently, the Ministry of Finance has imposed a 40 percent export duty on onions to ensure a more stable domestic supply. 

More on News:

• Prices of pulses have also risen sharply in recent months, speeding to 13.3% in July from 10.6% in June.
• The retail prices of tomatoes have shot up to ₹200-250 per kilogram in several parts of the country in the near month.
  • Recently, prices have fallen to Rs 50-70 per kilogramme with arrival of new crops from Nashik, Naryangaon and Aurangabad belt in Maharashtra.

Factor Responsible for Price Rise:

• Tomato: 
  • Extreme Weather Conditions: The months of April and May experienced heatwaves and high temperatures, followed by delayed monsoon showers in southern India and Maharashtra. 
    • These adverse weather conditions led to pest attacks in tomato crops, affecting the quality and yield of the produce.
  • Low Prices for Farmers: Prices as low as ₹6 to ₹11 per kg were reported between December of the previous year and April of the current year. 
    • Many farmers had to sell their crops at these low prices or even abandon their fields, leading to a decrease in supply.
  • Lean Production Period: July and August typically represent a lean production period for tomatoes as they fall between crop yields, further exacerbating supply shortages.
  • Plant Viruses: The Tomato Mosaic Virus (ToMV) and the Cucumber Mosaic Virus (CMV).
    • These viruses have caused partial to complete crop losses in tomato plantations over the last three years.
• Pulses: 
  • Below-Par Monsoon: One of the primary factors is a below-par monsoon in August. 
    • The sown area for pulses in the Kharif season has decreased by almost 10% compared to the previous year due to deficient rainfall towards the end of the sowing season. 
    • As of August 18, the southwest monsoon has been 6% below its long period average (LPA), leading to concerns about reduced pulse production.
  • Reservoir Levels: Reservoir levels in the country have also been lower compared to the previous year, with only 62% of total capacity as of August 17, 2023, compared to 76% in the previous season. This impacts irrigation for pulse crops.
• Onion: 
  • Shortage in Stored Produce: Onions are not grown year-round, and they have specific planting and harvesting seasons. 
    • The Rabi crop, which is harvested post-March, is most amenable to storage due to its lower moisture content. However, unseasonal rain and hail storms in March and April damaged a significant portion of the Rabi crop, affecting the stored onions’ quality. 
    • This forced farmers to offload their stored onions earlier than usual.
  • Lower Acreage: Another factor is the lower-than-expected acreage of onion cultivation. 
    • In the previous year, there was a dip in onion acreage, with sowing covering only about 3.29 lakh hectares out of a target of 3.76 lakh hectares. 
    • This reduced cultivation contributed to a reduced onion supply in the market.
  • Export Demand: Demand for Indian onions in the international market has been high, particularly from countries like Bangladesh and West Asia.
    • In fiscal 2022-23, India exported 25.25 lakh tonnes of onion as compared to 15.37 lakh tonnes in 2021-22.

Government Initiative to check Pricing of Agricultural Commodities:

• Price Stabilization Fund: It was established in 2014-15, to absorb extreme volatility in selected commodity prices.
• Operation Greens: It aims to promote farmer producers organizations, agri-logistics, processing facilities and professional management. 
  • The operation aims to aid farmers and help control and limit the erratic fluctuations in the prices of onions, potatoes and tomatoes.
• Price Support Scheme (PSS): The PSS, under the Agriculture Ministry, is operationalised only when prices of agri-produce fall below the minimum support price (MSP).
  • Under this, physical procurement of pulses, oilseeds and Copra will be done by Central Nodal Agencies with proactive role of State governments
• Pradhan Mantri Krishi Sinchai Yojana (PMKSY): To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crops as a result of natural calamities, pests & diseases.
• e-NAM (National Agriculture Market): e-NAM is an online platform that connects agricultural markets across the country, enabling farmers to access a wider market and obtain better prices for their produce.
• Agriculture Infrastructure Fund: It aims to provide all-around financial support to the farmers, agri-entrepreneurs, farmer groups like Farmer Producer Organisations (FPOs), etc. to create post-harvest management infrastructure and build community farming assets throughout the country.

Challenges in Agriculture Pricing:

• Demand-Side Challenges:
  • Fluctuating Consumer Demand: Consumer preferences for agricultural products can change rapidly, leading to fluctuations in demand. Sudden shifts in dietary habits or health concerns can affect demand for specific crops.
  • Income Elasticity: The demand for agricultural products is often income-sensitive. In times of economic downturns, consumers may reduce their spending on certain agricultural products, leading to lower prices.
  • Global Market Influences: International factors, such as global commodity prices and trade policies, can impact demand. Imports or exports of agricultural products can disrupt domestic markets.
  • Consumer Awareness: Consumer awareness regarding food safety, quality, and certifications can influence demand. Products meeting specific standards may command higher prices.
• Supply-Side Challenges:
  • Weather and Climate Change: Weather-related challenges, such as droughts, floods, and erratic rainfall patterns due to climate change, can lead to crop failures and reduced supply.
  • Pest and Disease Outbreaks: Outbreaks of pests and diseases can devastate crops, reducing yields and affecting the availability of agricultural products.
  • Input Costs:Fluctuations in the prices of inputs like seeds, fertilizers, and pesticides can impact production costs, affecting the supply of agricultural goods.
  • Infrastructure and Storage: Inadequate post-harvest infrastructure and storage facilities can result in post-harvest losses, reducing the effective supply of agricultural products.
  • Land Fragmentation: Fragmentation of agricultural land into smaller plots can limit economies of scale and reduce overall production efficiency.
  • Market Access and Intermediaries: Challenges in accessing markets and the role of middlemen can result in farmers receiving lower prices for their produce.
  • Government Policies: Government policies related to procurement, subsidies, and trade can influence supply. Policies that restrict exports or set minimum support prices (MSPs) can impact the availability of agricultural products.

Way Forward:

• Leverage Technology: Utilize precision agriculture, IoT (Internet of Things), and remote sensing to boost crop yields, lower production costs, and provide farmers with valuable information.
  • Develop mobile apps offering real-time market data, weather updates, and best practices to empower farmers with informed decision-making abilities.
• Crop Diversity: Encourage farmers to grow high-value, climate-resilient crops to reduce dependence on traditional crop MSPs.
• Innovative Farming: Promote innovative practices such as organic, vertical, and hydroponic farming to access niche markets and increase profits.
• Public-Private Partnerships (PPPs): Foster collaborations between government, private sector, and farmer groups to strengthen market connections, enhance value addition, and bolster farmers’ bargaining power.
• Collaborative Initiatives: Implement initiatives like contract farming, agri-logistics infrastructure development, and agro-processing units for fair and lucrative markets for farmers.
• Direct Sales through FPOs: Promote direct sales by encouraging Farmer Producer Organizations (FPOs) to sell produce, eliminating middlemen and increasing farmers’ earnings.
• Reform APMC Rules: Amend Agricultural Produce Market Committee (APMC) rules to reduce commissions and fees, ensuring that more of the profit goes directly to the farmers.
  • According to the RBI, farmers receive less than 50% of the retail price for major traded crops like tomatoes.
  • The margin between what a farmer gets and what a consumer pays consists of a host of other charges such as commissions, mandi charges, Agricultural Produce Market Committee (APMC) memberships fees, etc.
• Improve Value and Supply Chains: Enhance value and supply chains to address perishability and transportation issues.
• Promote Cultivation in Controlled Environments like Poly Houses and Greenhouses to enhance yield and manage pest issues effectively.
  • Poly house is a type of greenhouse, where special types of polyethylene sheets are used as covering materials, under which crops can be grown partially or under fully controlled climatic conditions.

News Source: The Hindu

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