(Indian Economy) Agriculture - RKVY, MIDH, NFSM, Sustainability and Adaptability, Crop Insurance & Trading in Commodities

INDIAN ECONOMY

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MAJOR SCHEMES OF THE GOVERNMENT

Rashtriya Krishi Vikas Yojana (RKVY)


The government has approved continuation of the RKVY scheme during the Twelfth Plan whereby RKVY funding will be routed into three components, viz, production growth, infrastructure and assets, and sub-scheme and flexi-fund. The proposed allocation for implementation of this scheme during 2015-16 is Rs. 18000 crore. In view of the need to increase capital formation and get higher returns on investments, states are at liberty to spend up to 100 per cent of total outlay in the infrastructure and asset creation component. The scheme aims at incentivizing states to increase investment in agriculture, provide autonomy to State in executing agricultural plans. Ensuring better reflection of local requirements, optimizing incomes of farmers.


The National Food Security Mission


The National Food Security Mission (NFSM) is being implemented with the new target of additional production of 25 million tonnes of foodgrains comprising 10 million tonnes rice, 8 million tonnes wheat, 4 million tonnes pulses, and 3 million tonnes coarse cereals by; the end of the twelfth Five Year Plan (2016-17). The revamped NFSM is being implemented from 2014-15 in 619 districts of 28 states. In addition to rice, wheat and pulses, crops like coars cereals and commercial crops (sugarcane, cotton and jute) have been included since 2014-15. Promotion of farmer producer organisation (FPOs), value addition, dal mill, and assistance for custom hiring charges have also been undertaken under the Mission. The pulses component has been allocated fifty per cent of total funds under the NFSM in order to increase their production. To promote the use of bio-fertilisers, subsidy on bio-fertilisers has also been enhanced from Rs. 100 per ha to Rs. 300 per Ha.

Mission for Integrated Development of Horticulture (MIDH)


With effect from 2014-15, the Mission for Integrated Development of Horticulture (MIDH) has been operationalised by bringing all ongoing schemes on horticulture under a single umbrella. Production and distribution of quality planting material, productivity improvement measures through protected cultivation, use of micro-irrigation, adoption of integrated pest management and integrated nutrient management along with creation of infrastructure for pos-harvest management and marketing are focus areas of the MIDH.

Sustainability and Adaptability


Concerns have been raised for quite some time about non-sustainability of the present cropping pattern and use of water resources. The following initiatives announced in Budget 2014-15 have brought the issue of sustainability and climate adaptation of the forefront.

  • The Pradhan Mantri Krishi Sinchayee Yojana with allocation of Rs. 1000 crore.
  • Neeranchal, a new programme with an initial outlay of Rs. 2142 crore in 2014 to give additional impetus to watershed development in the country.
  • The National Adaptation Fund for Climate Change, with an initial sum of Rs. 100 crore and
  • A scheme to provide, in mission mode, a soil health card to every farmer, with an allocation of Rs. 100 crore. An additional amount of Rs. 56 crore has been allocated to set up 100 mobile soil-testing laboratories across the country.

Food Management


The principal policy objective of food management is to ensure food security. Particularly for the vulnerable, through timely and efficient procurement and distribution of foodgrains. This involves procurement of foodgrains from farmers at remunerative prices, building up and maintenance of buffer stocks, storage, movement, and distribution of foodgrains to consumers at affordable prices and stability of foodgrain prices. The price instruments used are MSP and central issue price (CIP).

Price Policy for Agricultural Produce


As mandated, the Commission for Agricultural Costs and Prices (CACP) recommends MSPs at national for twenty-three crops, but effectively price support operates primarily in wheat and rice and that too in selected states. This creates incentive structures highly skewed in favour of wheat and rice. While the country is dependent on imports for pulses and oilseeds (edible oils), their prices often fall below the MSP as there is no effective price support. Since 2012-13, the growth of MSPs of various crops has been moderate.

Procurement


To enhance efficiency of procurement and public distribution and to extend the benefits of MSP to local farmers, the Decentrailsed Procurement (DCP) scheme has been adopted by some state governments. The central government is urging all state governments to adopt the DCP scheme so that costs of distribution can be save and outreach of price support mechanism to the farmers in hitherto weaker areas can be improved. To overcome the problem of gaps in the flow of information about procurement operations on day-to-day basis, an Online Procurement Monitoring System (OPMS) has been evolved for reporting and monitoring on a daily basis, procurement operations for wheat, paddy, and coarse grains in the country.

Two decisions that will impact procurement and stocks of rice and wheat from kharif marketing season (RMS) 2015-16 are (a) to limit procurement from states that are declaring bonus over and above the MSP to the extent of targeted PDS (TPDS)/ other welfare schemes (OWS) requirements (in the case of non-DCP states) declaring bonus, the FCI will not take part in MSP operations in those states) and (b) to cap the percentage of levy on rice at 25 per cent.

This decision has successfully led to dropping of the practice of giving bonus over and above MSP for paddy in states like Chhattisgrah and Madhya Pradesh in KMS 2014-15 and it is expected that the state governments of Madhya Pradesh and Rajasthan will avoid giving bonus for wheat also in RMS 2015-16 in view of this policy the procurement levels in KMS 2014-15 are lowe in both Chhattisgrah and Madhya Pradesh as compared to the previous year and there is re-emergence of competition in the market.

Buffer Stocks


The buffer norms for foodgrains in the central pool which were in existence since April 2005 have been revised in the backdrop of increased off-take of foodgrains under the TPDS in the last few years and with the coming into force of the National Food Security Act.

Agriculture Trade


India has emerged as a significant agri-exporter in a few crops, viz. cotton, rice, meat, oil, meals, pepper, and sugar. As per the World Trade Organisation’s Trade Statistics, the shares of India’s agricultural exports and imports in world trade in 2013-14 were 2.69 per cent and 1.31 per cent respectively. Agricultural exports as a percentage of agricultural DGP have increased from 9.10 per cent in 2008-09 to 14.05 per cent in 2013-14. During the same period, agricultural imports as a percentage of agricultural DGP also increased from 3.94 per cent to 5.50 per cent.

The import policy for agriculture is often considered as a price support and price stabilistaion tool. Increase in traffics is recommended for agricultural products in response to decline prices on an ad hoc basis. Reform is required in the import policy of agricultural products. The applied tariffs for impots should be linked in countercyclical manner with international prices so that the Land prices of imported commodities fall within a known range. This would protect farmers form adverse impact of steep fall in commodity prices, and facilitate long-term investment in agriculture. While the trade policy regime should be stable, it should also be nimble to quickly respond to the changed export duty stricture of the exporting countries aimed at pushing value-added products by neutralizing our duty differential between raw material and finished product.

Crop Insurance


National Agricultural Insurance Scheme of 2010 is a market based scheme under which actuarial premium rates conforming to product design of the insurance product are determined. Under this system, farmer premiums and subsidies by the government are paid upfront at the beginning of the crop season to the insurer, who would then be responsible for setting all claims. Thus, larger role of the private sector infuses competition and promotes public-private partnership.

Futures Trading in Agri Commodities

An important development during 2015 was that Forwards Markets Commission, the regular of Commodity futures market, was merged with the Securities and Exchange Board of India (SEBI) in late 2015. Futures trading in agri-commodities accounts for nearly 20 per cent of the total turnover. Food items constitute nearly 60 per cent of futures trading in agri-commodities and no-food items 18 per cent.


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