Success demands champions and championing of the cause. More critically, proof of concept is essential for ‘Demonstration Effect’, to portray and show the potential for a bountiful harvest.
Shankkar Aiyar | BloombergQuintOpinion| October 29 2020, 11:03 AM |
It took three decades after independence and a champion called C Subramaniam for India to initiate the ‘Green Revolution’ which ended the humiliation of dependence for food security. India’s farmers though continued to be shackled by an enduring myth that farmers must be protected from market forces.
Last month the government unshackled agriculture from political bondage. Predictably agitations followed. Typically, parties in India propose reforms when in power and yet manage to retain the right to oppose those very reforms when in opposition.
The government pushed three critical pieces of legislation — it dismantled the licence raj on agriculture freeing farmers from the stranglehold of Agricultural Produce Market Committees, enabled contracts with private buyers, and lifted limits on stocks of essential commodities.
Think about this factoid. India’s business entrepreneurs were freed from licence raj in 1991. India’s farmers, manning the largest private-sector enterprise of the nation, waited three decades longer to be liberated.
A truism attributed to Vladimir Ilyich Lenin has it that there are decades where nothing happens and then there are weeks where decades happen. Validation of the truism, in the age of Vladimir Putin, though, demands much needs to be done in the next weeks and months for decades to happen.
Lessons From History
The promise represented by the farm sector reforms calls for champions and championing, enabling forward and backward linkages, connecting farmers with inputs and markets.
History can be a useful teacher. In 1966, those championing the cause had to plough through intense resistance from politicians and policymakers. To overcome scepticism and win over naysayers, Subramaniam proposed and promoted the setting up of 1,000 demonstration farms all over India. Farmers heartily adopted the new ideas creating the demonstration effect for the Green Revolution.
It is critical for the government to present what is known as the proof of concept through pilot projects aka Kisan Camps across states. For starters, the government could start with ten Kisan Camps in each state. These pilot projects would portray and show performance across the range of possibilities and the potential for a bountiful harvest.
There are many templates for mass propagation — from cattle camps of yesteryears to the more recent experience of Jan Dhan camps or those set up to expand digital transactions across states. These camps would be essential to connect producers with entrepreneurs providing goods and services through the value chain.
State governments could focus on particular regions or crops — for instance, connect fortified food producers with millet growers in Mewar or fruit processing units with pomegranate growers in Sholapur.
These camps could be funded and organised by state agricultural produce cooperatives and/or private equity funds that have financed agri-business startups.
Government As Policy Incubator
The overriding temptation in government is intervene with force-fit solutions and targets — and the history of failures of government interventions, in industrial or backward regions development, is well documented. A better approach would be for the government to be the incubator of policies which make leveraging the agriculture reforms package possible.
It could usher rules and regulations and deploy incentives to empower models –shifting from water intensive to conservative methods, induction of nutrient based rather than fertiliser and pesticide intense cultivation, enable storage, portability and securitization of stocks for credit or sales.
As India moves on the income chart there is need to enable output to move with shift in demand from cereals to proteins and fruits/vegetables.
India needs a new crop map to nudge, but not dictate, efficient deployment of land and water. Shift water-intensive crops from water-scarce areas, incentivise the adoption of renewables, and adopt a climate-conscious crop calendar.
The execution of the grand challenge of Green Revolution II is best left to the private sector. Indeed, the alignment of linkages is best done by arranging the flow of needs and incentives enabling education, engagement, empowerment, and execution.
Empowerment by Process
Markets connect producers and sellers and enable price discovery and engagement. A major role in value addition will be that of startups. The engagement of the startups in the domain requires mediation, a collaborative approach that rests on light regulation as against toe-to-toe confrontation by regulators, which has been the hallmark thus far.
Already startups are offering end-to-end solutions to FPOs. These range from vanilla arrangements for that purchase of produce to lease of machinery to cold storage to advisory services on soil-mapping, use of nutrients to induction of clean energy practices such as solar farms.
The use of data analytics by startups for a host of functions from the quality and traceability mapping via QR codes to use of artificial intelligence/imaging/drones for crop and pesticide management is attracting both skills and capital to the sector.
Arguably India is at the cusp of Green Revolution II. The surge of investment and startups will afford farmers access to the most modern techniques in precision agriculture and carry the promise of better yields, water and energy conservation, and efficient use of land. The induction of scientific knowledge and best practices can and will deliver enhanced incomes through value addition.
Building Economies Of Scale
The average size of land-holding in India is less than a hectare in many regions. Scale is critical and aggregation can be done through common crops, optimising and enhancing the shared use of mechanisation and data, to induct efficiencies in procurement, production, and pricing.
India has had a long history of cooperatives and institutions such as the legendary Amul and Safal. The cooperative and collaborative models lend themselves to corporatisation and building scale using the template of Farmer Producer Organisations or FPOs.
Already the National Association of Farmer Producer Organisations claims the membership of over 5,400 farmer producer cooperatives. Also, start-ups financed by private equity funds such as Aavishkaar, Omnivore, Pioneering Ventures et al besides transnationals such as Sequoia to name a few have successfully funded initiatives that have brought farmers together.
It is critical to avoid the seduction of one-size-fits-all model. There is no one way or perfect template to replicate — and this has been validated in different segments of the rural economy from dairy to horticulture.
Sharks And Minnows
A small farmer or an FPO entering into a contract with big corporations has been likened to minnows being at the mercy of sharks, thanks to the asymmetry of moolah power. There is some justification for these fears given the state of dispute redressal across the landscape — there are over 3.4 crore cases pending in lower courts and over 51 lakh in high courts.
A crucial condition for success is confidence in the terms of engagement which scaffold the interests of producers and buyers and credibility of the dispute resolution mechanism. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 (essentially based on the ‘Model Contract Farming Act, 2018’) provides for settlement by conciliation and litigation at the level of the sub-divisional magistrate who will be the sub divisional authority for deciding on disputes.
Success rests on presence of necessary and sufficient conditions. To start with it would be useful to institute a review of process and pendency at the level of the sub-divisional authority, perhaps after every crop season to avoid the spectre haunting courts.
Enabling the process of conciliation with scaffolding may shrink the space for disputes. Navigation of negotiation is not alien for farmers but may need assistance and handholding, mentorship by farmer councils and advisory services which could be provided by start-ups for a fee or by NGOs.
Money may not grow on trees but it does help grow crops. For decades, farmers have suffered due to poor access to credit. In the urban economy, businesses can access credit for operating expenses based on contracts or orders. Farmers lacked a similar facility thus far.
The freeing of markets and freedom to contract, in theory, affords the farmer to use the contract to raise resources.
Translating theory into practice calls for systemic cognition of options — from input credit to expansion of credit card limits to hypothecation of produce — and instruments the new concept may make available for farmers to leverage.
A recent Reserve Bank guideline ‘Master Directions — Priority Sector Lending’ is a useful starter for enabling facilitation, to bring banks and NBFCs into play through focused programmes and policy — to level the playing field, to make available the instruments of finance which are available to industry for farmers too.
There is no disputing the challenges, and yet at the same time it is instructive to remember the potential harnessed by the first green revolution. The upside of transformation can hardly be over-emphasised. If shepherded well the farm sector reforms have the potential to awaken the spirits of entrepreneurship in the greater economy at the most granular level.
Bharat has a shot at emerging from penury to prosperity — catch up and be a part of the India Story.
Shankkar Aiyar, political-economy analyst, is the author of The Gated Republic: India’s Public Policy Failures and Private Solutions, ‘Aadhaar: A Biometric History of India’s 12-Digit Revolution’; and ‘Accidental India. Twitter: @ShankkarAiyar