agricultural environment and policy

8/3/2019 Agricultural Environment and Policy

http://slidepdf.com/reader/full/agricultural-environment-and-policy 1/135



AGRIBUSINESS ENVIRONMENT & POLICY

Dr. S.V. Warade

Assistant Professor

School of Agri-Business Management, Nagpur

Dr. PDKV,Akola



Objective of the Course1.Exposure to the environment in which the agri-

business is conducted.

2. Understanding micro and macro environmental forces

and their impact on agri-business



Role of agriculture in Indian economy1. Share in GDP 14.60% in 2009-10 ( 55.10 % in 1950-51)

1. growth rate of GDP = 0.4 % (2009-10)= advanced estimate 5.4% (2010-11)

2. Provide surplus food for growing population.

3. Share agricultural trade /agribusiness.

1. Export 10.59% (2009-10)

2. Import 4.38% (2009-10)4. Major employer in India : 58.20 % in 2009-10

(69.50% IN 1950-51)

1. Base of Secondary(industrial ) and Tertiary sector(Service).(

provide raw material to industry)2. Foodgrain production 218 MT 2009-10

(Growth rate is 1.96 % base 2000-01)

3. It is market of non-agri goodsSource : Central Statistical Organization (CSO) and Department of Agriculture and Cooperation.



Indicator India Maharashtra

Geographical Area

(million ha )

329 30.80

Forest Area

(Lakh Sq Km)

7.74 0.62

Gross Cropped Area(Million Ha)

195.8 22.6

Irrigated Area

(million Ha)

87.2

(45.00% of GCA)

4.0

(18% of GCA)

Cotton Area

(million Ha)

9.08 3.06

Literacy 64.84 76.88

Sex Ratio 922 933

Percentage of Rural

Population

72.18 57.57

About Us




Live stock

(Lakh )

4850.02 370.58

Foodgrain Production

(Million tonnes)

118 12.55

Working Factories

(Thousand)

129.87 18.05

Annual industiral

Employment (thousand)

19,794 3,024

Electricity

Generation (Million

Kwh)

7,41,167 75,195

Electricity Consumption

(million Kwh)

5,27,566 72,994

Number of Banks 85,886 8,120

Per capita Income (Rs)52,421 81,579




Share of Agriculture in

GDP/GSDP

14.60 10.2

Export of Agri 10.59% of total export

Import of Agri 4.38 % of total import

Agriculture GDP/GSDP Share 14.6 10.2

Industry GDP/GSDP Share 33.6 30.9

Services GDP/GSDP Share 52.2 58.9



Scope for Agri-business in India

The food chain in India from the farmer to the consumer involves severalintermediaries leading to handling at multiple points and longer transit time.

Only 25% of the consumers rupees reaches the farmer as compared to 50% indeveloped countries.

It is estimated that 20% of the food produced in India is wasted. This is valuedmore than Rs 50,000 crores approximately.

This wastage is equal to the amount that the government spends on foodsubsidy by more than 3 to 4 times.

India produce a wide range of fruits and vegetables of both the topical and

temperate varieties because of the varied climatic conditions in our country. India having around 4000 fruit processing units with an aggregate capacity of

more than 12 lakh MT (less than 4% of total fruits produced).

Unfortunately, around 2.20% of fruits & Vegetables are processed as against30% in Thailand, 70% in Brazil, 78% in Philippines and 80% in Malaysia.

The wastage is estimated as high as over 25% of the total production of fruits

and vegetables. The cold chain system is primitive and under developed.

The existing capacity of 1 million tonnes is primarily used for storage of potatoes.

The current method of forecasting of agricultural produce does not providefor any time to take corrective action in terms of crop failure or surplus.



Only around 1 percent of India's annual meat production of over 4.5

million tons is converted to value-added products. Milk processing level is 35 percent, which is, 13 % in the organized and 22

% in the unorganized sector.

Out of the total production of bread, 40 percent is produced in theorganized sector and the remaining 60 percent in the unorganized sector.

Similarly, production of biscuits in the organized sector is about 80 percent

and quantity of biscuits produced in the unorganized sector is about 20percent.

Processing level of buffalo meat is estimated at 21 percent, poultry 6percent, and marine products 8 percent.

India's share of processed food is about 1.6%.

Scope for Agribusiness in India



Concept of Agri-Business Management

Agri-business can be defined as a process of planning, organizing,

staffing, Leading and controlling in the agribusiness

It is commercialization of agriculture, which refers to marketorientation of agricultural production process.

Transition from subsistence to commercial agriculture.

From production oriented approach to market oriented approach



Agricultural Economics : Optimisation of resources and

output(efficiency). Allocation of resources at optimum level to get

optimum output or euilibrium (MC=MR)

Agri-Business: Agribusiness is the trade of commerce ( Exchange

activity) in agriculture.

AgriBusiness Management: Whereas optimisation technique(i.e.

efficiency/agricultural economics) is used at every stage of business

includes be input marketing, production, processing and marketing.



Input Output Market

1. Innovation of new

technology

2. Availability of inputs

to farmers

in proper quantity

of good quality

at appropriate time

at appropriate cost

3. ExtensionApproach

Institutions

1. Crop planning

2. Maximize

production

3. Maximize input use

efficiency

4. Food security

5. Employment

generation

6. Sustainability of

natural resources

1.Identifying the market

2. Proper return to

farmer

3. Higher consumer

satisfaction

4. Appropriate market

channel

5. Low marketing cost

6. Higher market

efficiency7. Low wastage

8. Increase value

addition

Agribusiness System



Foodgrains Production in India

Year Area Production Productivity

(Million (Million (Kg./ha.)

hectares) tonnes)

1950-51 97.3 50.8 522

1960-61 115.6 82.0 7101970-71 124.3 108.4 872

1980-81 126.7 129.6 1023

1990-91 127.8 176.4 1380

1999-2000 123.1 208.9(4 times) 1697

2009-10 123.2 218 1798

Population growth

= 36.10 cr in 1950-51 crores to 121 crores in 2011



Problems and Policy changes relating to farm supplies



Seeds

Seeds, which are considered the carriers of new

technology for crop production and higher crop yields,

are a critical input for sustained growth of agriculture.

In India more than four-fifths of the farmers rely on

farm-saved seeds leading to a low seed replacement

rate.



Seeds

The Indian Seed Programme includes the participation

of Central and State Governments, the Indian Council of

Agricultural Research (ICAR), State Agricultural

Universities, the cooperative and private sectors.

There are 15 State Seed Corporations besides two

national-level corporations, namely National Seeds

Corporation and State Farms Corporation of India.



Foundation seeds is around 10 times more than breeder seeds

Certified seeds is around 15-20 times more than foundation seeds

Nucleus seed

Breeder¶s seed

Foundation seed

Registered seed

Certified seed



SeedsThe Ministry of Agriculture is implementing

the Central-sector Development andS

trengthening of Infrastructure Facilities for Production and Distribution of

Quality Seeds scheme.

The aim of the scheme is to make quality seeds of various crops

available to farmers timely and at affordable price.

Under this scheme, the seed component of the Prime MinistersRelief Package is being implemented in 31 suicide-affected

districts of Maharashtra, Andhra Pradesh, Karnataka and Kerala,

to supply certified seeds at 50 per cent of seed cost.

During the year 2008-09, Rs 445.81 crore was released under the

Prime Ministers Relief Package



SeedsThe scheme is being implemented on all -India basis from the

year 2005-06.The major thrusts under the scheme are on improving quality of

farm saved seeds through Seed Village Programmes, to enhance

seed replacement rate (It is the percentage of area sown of

certified/quality seeds other than the farm saved seed), boosting

seed production in the private sector and helping public sectorseed companies to contribute to enhancing seed production.

Some of the remarkable achievements under the scheme during

2008-09 were that more than 1,31,023 seed villages were

organized across the country; certified/quality seed production

increased from 194.31 lakh quintals during 2006-07 to 250.35 lakh

quintals during 2008-09; 183.10 lakh seeds 2009-10



Seeds52 seed infrastructure development proposals were sanctioned

for boosting seed production in the private sector; and financial

sanctions were given for establishing tissue culture facilities in

Orissa (banana) and Maharashtra (pomegranate).

Further, Biotech Consortium of India Limited (BCIL) was engagedas an expert agency to undertake public awareness programmes

in nine BT cotton- growing States at State capital, district and

tehsil levels.

The BCIL has been provided financial assistance of Rs 26.65 lakh

during the year 2008-09.



SeedsThe Protection of Plant Varieties and Farmers Rights (PPV&FR)

Authority, established in November 2005 at the NationalAgricultural Science Complex (NASC), New Delhi, has been

mandated to implement provisions of the PPV&FR Act 2001.

Fourteen crops, namely rice, wheat, maize, sorghum, pearl millet,

chick pea, peagion pea, green gram, black gram, lentil, field pea,

kidney bean, cotton and jute were notified for the purpose of registration under the Act.

There are plans to extend its operations and coverage to forestry

and aromatic and medicinal plants.



SeedsConsidering the vital importance of the seeds sector in

promoting agricultural growth, it is proposed to replace theexisting Seeds Act 1966 by suitable legislation.

The new Act is expected to

(i) create a facilitative climate for growth of the seed industry,

(ii) enhance seed replacement rates for various crops,

(iii) boost the export of seeds and encourage import of usefulgerm plasm and

(iv) create a conducive atmosphere for application of frontier

sciences in varietal development and for enhanced investment in

research and development (R&D).

The Seeds Bill was introduced in the Rajya Sabha in 2004. It was

referred to the Parliamentary Standing Committee on Agriculture

which recommended several modifications in 2008. These would

be taken up for consideration by Parliament



Fertilizers

Chemical fertilizers have played a significant role in the

development of the agricultural sector.

The per hectare consumption of fertilizers in nutrients terms

increased from 105.5 kg in 2005-06 to 135.3 kg in 2009-10.

However, improving the marginal productivity of soil still remains

a challenge.

This requires increased NPK application and application of proper

nutrients, based on soil analysis.



Fertilizers

A new scheme, the National Project on Management of SoilHealth & Fertility (NPMSF), has been introduced in 2008-09 with a

view to setting up of 500 new Soil Testing Laboratories (STLs) and

250 Mobile Soil Testing Laboratories (MSTLs) and strengthening of

the existing State STLs for micronutrient analysis.

In order to ensure adequate availability of fertilizers of standard

quality to farmers and to regulate trade, quality and distribution

in the country, fertilizers have been declared an essential

commodity as per the Fertilizer Control Order (FCO) 1985promulgated under Section 3 of the Essential Commodity Act

1955.



Fertilizers

The procedure for incorporation of new products has been

liberalized and simplified to encourage manufacture and use of fortified fertilizers.

Eight fertilizers have been specified as fortified

fertilizers(basic/strong) in FCO 1985.

To encourage balanced use of fertilizers, a new concept of

customized fertilizers has been introduced. These fertilizers are

soil specific and crop specific.

Organic fertilizers, namely city-based compost and vermin

compost, and bio-fertilizers, namely rhizobium, azotobacter,

azospirillum and phosphate solubilizing bacteria, have beenrecognized and incorporated in FCO(Fertilizer Control Order)

1985.



Irrigation

Irrigation is one of the most important critical inputs for

enhancing the productivity that is required at different criticalstages of plant growth of various crops for optimum production.

The Government of India has taken up irrigation potential

creation through public funding and is assisting farmers to create

potential on their own farms.

Substantial irrigation potential has been created through major

and medium irrigation schemes.

The total irrigation potential in the country has increased from

81.1 million ha in 1991-92 to 108.2 million ha by March 2010



Irrigation

The Central Government initiated the Accelerated Irrigation

Benefit Programme (AIBP) from 1996-97 for extending assistancefor the completion of incomplete irrigation schemes .

Under this programme, projects approved by the Planning

Commission are eligible for assistance.

Further, the assistance, which was entirely a loan from the Centre

in the beginning, was modified by inclusion of a grant component

with effect from 2004-05.



Irrigation

AIBP guidelines were further modified in December 2006 to

provide enhanced assistance at 90 per cent of the project cost as

grant to special category States, Drought Prone Area Programme

(DPAP) States/tribal areas/flood-prone areas and Koraput-

Balangir-Kalahandi (KBK) districts of Orissa.

Under the AIBP, Rs 41,729.37 crore of Central Loan Assistance(CLA)/grant has been released up to March 31, 2010.

An additional irrigation potential of 64 lakh ha has been created

under the AIBP up to March 2010.

As on March 31, 2010, 281 projects have been covered under the

AIBP and 120 completed



PRICE POLICY FOR AGRICULTURAL PRODUCE

Objectives

To ensure remunerative prices to the growers.

Reasonable price to buyer

A balanced and integrated price structure




Minimum support prices (MSPs)

Purchase operations to control market prices.

Central nodal agencies intervene in the market to undertake

procurement operations(NAFED, FCI)




Commission for Agricultural Costs and Prices (CACP)

Assurance of a remunerative and stable price environment Agricultural Prices Commission was set up in January, 1965

1985, Commission for Agricultural Costs and Pricesi) Cost of production

ii) Changes in input prices

iii) In

put-o

utp

ut pri

ce parityiv) Trends in market prices

v) Demand and supply

vi) Inter-crop price parity

vii)Effect on industrial cost str ucture

viii)Effect on cost of living

ix) Effect on general price level x) Inter national price situation

xi) Parity between prices paid and prices received by the farmers.

xii)Effect on issue prices(paid by govt agency) and implications for

subsidy




Price Support Scheme (PSS)

The Department of Agriculture & Cooperation is implementing the

Price Support Scheme (PSS)

Procurement of oilseeds and pulses through (N AFED),

N AFED is a

lso the Ce

ntra

lage

ncy

N AFED undertakes procurement of oilseeds, pulses and cotton

Procurement under the PSS is continued till prices stabilize at or

above the MSP




Market Intervention Scheme (MIS)The Department of Agriculture & Cooperation implements the

MIS

for procurement of agricultural and horticultural commodities that

are generally perishable in nature and not covered under the

PSS.

to protect the growers of these commodities from having to make

distress sales.

In the event of a bumper crop and glut in the market, prices tend

to fall below economic levels/cost of production.

.



CREDIT AND INSURANCE

Agricultural Credit

Adequate and timely credit support to farmers for their

cultivation needs,

The Kisan Credit Card Scheme (KCC) was introduced in

August 1998.

About 970.64 lakhs KCCs have been issued (up to

November 2009.

Provide both consumption credit and investment credit

Crop loans up to a principal amount of Rs 3 lakh, at 7 per

cent rate of interest.

6 per cent per annum , who from the current year




Agricultural Credit A package for revival of short-term Rural Cooperative Credit

(2006) = Rs 13,596 crore.

(MoUs) between the Gover nment of India and N ABARD,

committing to implementing revival package.

T

we

nty-five(25) States have exe

cuted MoUs

with the Gover

nme

ntof India and N ABARD.

This covers 96 per cent PACS and 96 per cent of the Central

cooperative banks (CCBs) in the country.

As on November 2010, Rs 8009.75 crore has been released by

N ABARD for recapitalization.




Agricultural Credit

A rehabilitation package for 31 suicide-prone districts

Financial outlay of Rs 16978.69 crore.




Agricultural Credit

A debt waiver and debt relief scheme 2008-09

Overdue as on December 31, 2007 and which remained

unpaid until Febr uary 29, 2008, are eligible for debt waiver or

debt relief.

About 3.68 crore farmers have benefited from the scheme

Debt waiver and debt relief of Rs 65,318.33 crore




Agricultural Insurance

Uncertainty and risk in agricultural production.

The National Agricultural Insurance Scheme (N AIS) 1999-

2000, for risk management in agriculture

Providing financial support to farmers in the event of crop

failure as a result of natural calamities, pests and diseases.

The scheme is open to all the farmers loanee and non-

loanee-irrespective of their size of holding.

Loanee farmers are covered on compulsory basis in a

notified area for notified crops.





All food crops, oilseeds and annual commer cial/ horticulturalcrops are covered under N AIS,

In respect of which past yield data= bench mark/base line.

25 States and two Union Territories.

1,347 lakh farmers over an area of 2,109 lakh ha have been

covered,Insuring a sum of Rs 1,48,250 crore.





Pilot Modified NAIS (MNAIS)

Modified N AIS for implementation on pilot basis in 50 districts

from rabi 2010-11 season.

The major improvements made in the MN AIS are:

Actuarial premium with subsidy in premium at different rates,

i.e. 40 per cent to 75 per cent depending upon the slab,provided to farmers,

all claims liability on the insurer,

unit area of insurance reduced to village panchayat level for

major crops,indemnity for prevented/sowing/planting risk and for post

harvest losses due to cyclone,

payment up to 25 per cent advance of likely claims as

immediate relief,





Pilot Modified NAIS (MNAIS)

more proficient basis for calculation of threshold yield,

minimum indemnity level of 70 per cent instead of 60 per

cent,

and private-sector insurers with adequate infrastr ucture

allowed (at present, ICICI Lombard, IFFCO-Tokio andCholamandalam-MS).

Only upfront premium subsidy is shared by the Central and

State Gover nments on 50: 50 basis and claims are the

liabi

lity of the i

ns

ura

nce

compa

nies.Seven States have already notified the areas for

implementation of the scheme during Rabi 2010-11.

It is expected that the scheme will be notified by 14- 15

States.





Weather Based Crop Insurance Scheme (WBCIS)Covered By: State Agriculture Insurance Company (AIC),

and other private insurers like ICICI Lombard General

Insurance, Iff co-Tokio General Insurance etc.

13 States

to provide insurance protection to farmers against adverse

weather incidences which adversely impact crop production.

During this period 81 lakh farmers have been covered.





Coconut Palm Insurance Scheme (CPIS) 2009-10

Covered by: The Agriculture Insurance Company of India(AIC)

It operates under Coconut Development Board.

Area Covered : Andhra Pradesh, Goa, Kar nataka, Kerala,

Maharashtra, Orissa and Tamil Nadu.

Eligibility: a farmer should have at least 10 healthy nut-

bearing palms in the age group 4 to 60 years

14.33 lakhs palms are covered under the scheme.

27,023 farmers are

covered



MARKETING AND EXTENSION

Agricultural Marketing

Organized marketing of agricultural commodities has been

promoted in the country through a network of regulatedmarkets.

Agriculture Produce Marketing Committee Act : to provide

for regulation of agricultural produce markets.

7,139 regulated markets in the country as on Mar ch 31,

2009.

20,868 r

ura

lperiodi

ca

lmarkets, abo

ut 15 per

ce

nt of

whi

chf unction under the ambit of regulation.




Agricultural Marketing

Model law on agricultural marketing(2003)

The

legis

latio

nprovides for estab

lishme

nt of private markets/yards,direct pur chase centres, consumers¶/farmers¶ markets for direct sale. To

promote contract farming arrangements

Promotion of public-private partnership in the management and

development of agricultural markets in the country.

Provision has also been made in the law for constitution of state

agricultural produce marketing standards bureaus for promotion of grading, standardization and quality certification of agricultural produce.

This would facilitate pledge financing, direct pur chasing, for ward/ f utures

trading and exports.

Sixteen states/UTs have amended their APMC acts and the remaining

states are in

the process of doi

ng so APMC model r ules based on the model law are under formulation in

consultation with States.




Extension reforms

The Gover nment supports transfer of agricultural

technologies and information to the farming community

through various initiatives.

The Support to State Extension Programmes for the

Extension Reforms scheme launched in 2005-06, aims to

make the extension system farmer driven and farmer

accountable by way of new institutional arrangements for

technology dissemination in the form of an Agricultural

Technology Management Agency (ATMA) at district level.





Extension reformsThe ATMA has active participation of farmers/farmer groups,

nongover nmental organizations (NGOs), KVKs, PRIs and other stakeholders operating at district level and below. Up to January

2010, 595 districts-level ATMAs have been established.

Gender : 30 per cent of resour ces on programmes and

activities are allocated for women farmers and extension

f unctionaries.Since inception, out of a total of 10.19 crore farmer

beneficiaries, 25.80 lakh women farmers (25.34 per cent) have

participated in various extension activities under the scheme.

Further, the Mass Media Support to Agriculture scheme is

focusing on the use of Doordarshan infrastr ucture for providingagriculture-related information and knowledge to the farming

community.





Extension reforms

Mass media initiative is use of 96 FM transmitters of All India

Radio (AIR) to broadcast area-specific agriculturalprogrammes

with 30- minute radio transmission in the evening, six days a

week.

The Kisan Call Centres scheme provides the farming

community agricultural information

toll-free telephone lines ³1800-180-1551´

The Agri-clinic and Agri-business Centres Scheme launched

in 2002 provides extension services to farmers

thro

ugh agri

culture grad

uates by viab

le se

lf-emp

loyme

ntventures.





Extension reforms

N ABARD monitors the credit support to Agri-clinics

Subsidy at 25 per cent of the capital cost of the projectf unded through bank loan.

The subsidy would be 33.33 per cent in respect of

candidates belonging to Scheduled Castes (SC), Scheduled

Tribes (ST), women and other disadvantaged sections

Under the scheme, 19,854 unemployed agriculturegraduates have been trained up to December 2009.

PUBLIC DISTRIBUTION SYSTEM




Objectives Procurement of foodgrains from farmers at remunerative

prices,

Distribution of foodgrains to consumers,

Particular ly the vulnerable sections of society,

At affordable prices and

Maintenance of food buffers for food security and price

stability.

The instr uments used are the MSP and central issue

Price (CIP).





Objectives The nodal agency which undertakes procurement,

distribution and storage of foodgrains is the Food Cororation

of India (FCI).

Procurement at MSP is open-ended,

Distribution is gover ned by the scale of allocation and itsofftake by the beneficiaries.

The off take of foodgrains is primarily under the targeted

public distribution system(TPDS) and for other welfare

schemes of the Gover

nme

nt of I

ndia.Offtake of foodgrains under the TPDS has been increasing

in the last five years and has gone up from 29.7 million

tonnes in 2004-05 to 34.8 million tonnes in 2008-09.




Decentralized Procurement Scheme (DCP)

Introduced in 1997,

Foodgrains are procured and distributed by the StateGover nments themselves.

States procure, store and issue foodgrains under the TPDS

and welfare schemes of the Gover nment of India.

The difference between the economic cost fixed for the

State and the CIP is passed on to the State Gover nment assubsidy.

Objectives: covering more farmers under MSP operations,

improving efficiency of the PDS, providing foodgrains

varieties more suited to

lo

ca

ltastes a

nd red

ucin

gtransportation costs.




The economic cost of foodgrains consists of three

components,

MSP (and bonus) as the price paid to farmers,

procurement incidentals and

Cost of distribution.




Sugar

The estimated sugar cane production in 2009-10 is 2,494.81

lakh tonnes

2,739.31 lakh tonnes as per estimates 2008-09.

9 per cent decline in the production

The estimated production of sugar in the

2009-10 =160 lakh tonnes( 116 LT decline)

2007-08 = 263 lakh tonnes

2006-07 = 282 lakh tonnes





Sugar

The Gover

nme

nt has take

na

number of meas

ures toaugment domestic stocks of sugar and to moderate prices.

Includes allowing sugar mills to import dutyfree raw sugar

under the advance authorization scheme from Febr uary 17,

2009,

Under open general license (OGL) by sugar mills Allowing import of white/refined sugar by STC/MMTC/ PEC

and N AFED up to 1 million tonnes under OGL at zero duty

up to Mar ch 31,2010.

Fair and remunerative price (FRP) to provide reasonable

margins to sugar cane farmers on account of ³risk´ and

³profit´.

The Central Gover nment has fixed an FRP of Rs129.84 per

quintal





Edible Oil

To inc

rease the availabi

lity a

nd

co

ntro

lpri

ces of edib

le oi

ls,Gover nment has reduced the custom duties on crude and

refined edible oils to ³nil´ and 7.5 per cent respectively since

April1, 2008 upto 2010.

Export of all major edible oils from the country has beenbanned since 2008 to 2010

Imported edible oils were distributed through State

Gover nments/UTs at the rate of 1 kg per ration card per

month.



Commodity Future Market



Commodity Future MarketCommodities traded: agricultural commodities, bullion, cr ude

oil, energy and metal products.

Thecommodity f

utu

res market facilitates the pri

ce dis

coveryprocess and provides price risk management.

Its effectiveness depends on the wider participation of all the

stakeholders.

The average daily value of trades in the commodity exchanges

improved from Rs 16,400 crore during 2008 to Rs 23,200 crorein 2009.

The total value of trades in the commodity f utures market rose

from Rs 50.34 lakh crore in 2008 to Rs 95.90 lakh crore during

2010.

The Multi Commodity Exchange, Mumbai, recorded the highesttur nover in terms of value of trade during 2009,

followed by the National Commodity & Derivatives Exchange

Ltd. (NCDEX) and National Multi Commodity Exchange of India

Ltd. (NMCE) respectively




Value of trade in agricultural commodities was about 16.33

per ce

nt.

Agricultural commodities, however, accounted for 38 per cent

of the total volume of trade.




Co od ty utu e a et

For ward Markets Commission (FMC), the regulator for

commodity f

utu

res trading.To counterbalance the speculative element in price discovery

and increasing the awareness level of farmers and other market

participants was emphasized.

Take initiatives to prevent market manipulation

Ensure market integrity, financial integrity and customer protection.

The issuance of guidelines for bringing members of the

commodity exchanges

guidelines for disinvestment of the equity by the existing

national exchanges after five years of their operation. A price dissemination project was initiated by the FMC, under

which spot and f uture prices of agricultural commodities

would be made available to farmers on real-time basis on

ele

ctro

nic

price ti

cker boards p

la

ced at APMC




y

Introduction of exchange of f utures for physicals (EFP) and

alter

nate f

utu

res settleme

nt me

cha

nism, Allowing higher position limits to N AFED

To facilitate hedging and delivery by them and introduction of

ear ly delivery system in select commodities.

Efforts were made to develop an ³aggregation´ model in

collaboration with commodity exchanges to promoteparticipation of farmers.




y

Revocation(cancel) of suspension of f utures trading 4

commodities :

cha

na, soy oi

l, r

ubber a

nd potato, 2008.

Revocation of suspension of trading in wheat in 2009.

The f utures trading in sugar has been suspended till 2010.




yDEVELOPMENT OF ELECTRONIC SPOT EXCHANGES

The Gover nment has allowed the National Commodity Exchanges to set up three

spot exchanges in the country, namely

theN

ationa

lSpot Ex

cha

nge

Ltd. (

NSE

L),

NCDEX spot Exchange Ltd. (NSPOT) and

National Agriculture Produce Marketing Company of India Ltd. (N APMC).

These spot exchanges have created an avenue for direct market linkage among

farmers, processors, exporters and end users

with a view to reducing the cost of intermediation and enhancing price realization

by farmers.They will also provide the most efficient spot price inputs to the f utures

exchanges.

The spot exchanges will encompass the entire spectr um of commodities across

the country

will bring home the advantages of an electronic spot trading platform to all market

participants in the agricultural and nonagricultural segments.

On the agricultural side, the exchanges would enable farmers to trade f lawlessly

on the platform by providing real-time access to price information and a simplified

delivery process, thereby ensuring the best possible price.




yDEVELOPMENT OF ELECTRONIC SPOT EXCHANGES

On the buy side, all users of the commodities in the commodity value chain would

have simul

taneo

us a

ccess to the ex

cha

nges a

nd be ab

le to pro

cure at the bestpossible price.

Therefore the efficiency levels attained as a result o f such f lawless spot

transactions would result in major benefits for both producers and consumers.

These Spot Exchanges will also provide a platform for trading of Warehouse

Receipts.

Agricultural Manufacturing Industry



g g y

1. Growth in industry as whole : 11.00%

1. Min

ing : 9.5 %2. Manufacturing: 11.9%

3. Electricity : 4.0%

2. Growth in components of agri-based industry(base 1993-

94) in 2008-09

1. Food products : 7.0 %2. Beverages , Tobacco: 12.0%

3. Jute textile: 33.1 %

In first quarter of 2009-10 , all these agri components are

negative



Agricultural Manufacturing Industry



Capital Employed per worker

( dollars)1. Bread Bakery products: 3500

2. Cotton yar n and cloth: 1800

3. Flour and gristmill products: 5600

4. Sugar industry: 2600

5. Wood, paper Industry: 600



Indian Budget



Agriculture

Removal of production and distribution bottlenecks for items

like fr uits and vegetables, milk, meat, poultry and fish to be

the focus of attention this year .

Allocation under Rashtriya Krishi Vikas Yojana (RKVY)

increased from ` 6,755 crore to ` 7,860 crore.

Indian Budget

A i lt



Agriculture

B

ringing Green Revolution to Eastern RegionTo improve rice based cropping system in this region,

allocation of 400 crore has been made.

I ntegrated Development of 60,000 pulses villages in rainfed

areas Allocation of 300 crore to promote 60,000 pulses villages in

rainfed areas.

Promotion of Oil Palm

Allocation of 300 crore to bring 60,000 hectares under oil

palm plantations.

Initiative to yield about 3 lakh Metric tonnes of palm oil

annually in five years.

Indian Budget



Agriculture

I nitiative on Vegetable Clusters

Allocation of 300 crore for implementation of vegetable

initiative to provide quality vegetable at competitive prices.

N utri-cereals Allocation of 300 crore to promote higher production of

Bajra, Jowar, Ragi and other millets, which are highly

nutritious and have several medicinal properties.

N ational Mission for Protein Supplement

Allocation of 300 crore to promote animal based protein

production through livestock development, dairy farming,

piggery, goat rearing and fisheries.

Indian Budget



Agriculture

Accelerated Fodder Development Programme

Allocation of 300 crore for Accelerated Fodder Development

Programme to benefit farmers in 25,000 villages.

N ational Mission for Sustainable AgricultureGover nment to promote organic farming methods,

combining moder n technology with traditional farming

practices.

Indian Budget



Agriculture

Agriculture Credit

Credit f low for farmers raised from 3,75,000 crore to

4,75,000 crore in 2011-12.

Interest subvention proposed to be enhanced from 2 per

cent to 3 per cent for providing short-term crop loans tofarmers who repay their crop loan on time.

In view of enhanced target for f low of agriculture credit,

capital base of N ABARD to be strengthened by ` 3,000 crore

in phased manner.

10,000 crore to be contributed to N ABARD¶s Short-term

Rural Credit f und for 2011-12.

Indian Budget



Agriculture

Mega Food Parks

Approval being given to set up 15 more Mega Food Parks

during 2011-12.

Storage Capacity and Cold Chains Augmentation of storage capacity through private

entrepreneurs and warehousing corporations has been fast

tracked.

Capital investment in creation of moder n storage capacity

will be eligible for viability gap f unding of the Finance

Ministry.

Indian Budget



Agriculture

Agriculture Produce Marketing Act

In view of recent episode of inf lation, need for State

Gover nments to review and enfor ce a reformed Agriculture

Produce Marketing Act.



Agriculture risk management

Risk: A state of uncertainty where some of the possibilities

involve a loss or other undesirable outcome.

Uncertainty: The lack of complete certainty, that is, the

existence of more than one possibility. The "tr ue"

outcome/state/result/value is not known.

Risk Management - A process to identify, assess, manage,

and control potential events or situations, to provide

reasonable assurance regarding the achievement of theorganization's objectives.



Comprehensive Agriculture risk management framework can

be presented in three main categories:

The first covers direct initiatives on the part of the

Government, such as agricultural credit, input subsidies

and calamity relief.

The second covers indirect initiatives on the part of the

Government to mitigate production risks through

insurance mechanisms covering crops, weather and

livestock and including micro insurance.

Thirdly, Government and market-based approaches to

mitigate price or income risks, which includes minimum

support prices, farm income insurance, a price

stabilization fund, commodity markets, contract farming,



Agriculture credit

Wor ld¶s largest network of r ural financial institutions,

boasting 30,272 nationalized commer cial bank branches;

2,934 other commer cial banks;

14,241 r ural regional bank branches and

about 122,000 credit outlets from the cooperative sector

18% of each bank¶s net credit should be given to the

agriculture sector



Input subsidiesRs. crore

Fertilizer = 18460

Electricity = 20301

Irrigation = 14625

Other = 6504

Total subsidy = 82967



Calamity funds

The Calamity Relief Fund (CRF)

contributions from both central and state Gover nments (3:1 ration) and is used

to pay for relief in the event of droughts, f loods, cyclones, hailstorms, tsunamis,

etc.

The National Calamity Contingency Fund (NCCF) was created at central level

with 100% contribution from the Central Gover nment, and is used for any relief operations not covered by the CRF.

The Twelfth Finance Commission has allocated a f und of INR 213.33 billion for

the 5 year period between fiscal year 2005-06 to fiscal year 2010-11.2

Though the Calamity Funds were formulated with a noble cause, their

execution, efficiency and timely availability are riddled with shortcomings.



PRODUCTION & ASSET PROTECTION

Area yield±based crop insurance

India is administering the wor ld¶s largest crop insurance programme in terms of

the number of farmers insured.

The National Agricultural Insurance Scheme (N AIS) annually insuresapproximately 18 million farmers, or 15% of all farmers and approximately 17%

of all farmed land.


Area yield±based crop insurance

M j i t id tifi d b G t



Major improvements identified by Govt are:

Bringing the Insurance Unit down to the village Panchayat level so as to

minimize the base risk..

Using a longer time yield series when in fixing the Guaranteed Yield, to ensuremore stable coverage.

Increasing the levels of indemnity (coverage).

Introducing insurance to prevent sowing/planting and post-harvest losses

under adverse conditions.

In case of major disasters, allowing for the partial settlement of claims on

accounts.uniform seasonality discipline (cut-off dates for buying insurance) be employed

for participation for all farmers, both borrowing and non borrowing.

Covering horticultural crops such as vegetables and fr uits.

Introducing a gradual shift from an administered price regime to an actuarial

one, supported by up-front subsidy as a premium.

Adopting transparent norms for subsidy premiums with the participation of theprivate sector participation.

Sharing of premiums by banks, where lending banks bear 25% of the premium

payable by the farmer, subject to a maximum of one per centage point of the

premium.

Through these improvements, the Gover nment is expecting to double the

penetratio

nof

crop i

ns

ura

nce s

chemes by 2012.




Weather-based crop insurance

Weather-based crop insurance appeared in India in 2003.

At present, Agriculture Insurance Company of India (AIC), is providing

weather-insurance services along with two private insurers.Though most of these attempts were taken on the initiative of

particular insurers until 2006-7, in 2007-8 the Gover nment began

offering an alter native to N AIS by initiating pilot projects in select

areas for select crops.




Weather-based crop insurance

While weather-based crop insurance appears a priori to be an

attractive proposal, i t is confronted with many constraints. These

include:

(i) a sparse network of weather stations belonging to the IndiaMeteorological Department (IMD), and the consequent lack of high

quality weather data for locations smaller than the district level;

(ii) prohibitively high premium rates for farmers;

(iii) the limited scope of weather insurance (it only covers parametric

weather events), compared to the µall risk¶ nature of µarea yield¶

insurance, etc.




Livestock insurance

Livestock insurance began in the ear ly 1970s and still

maintains the same µplain vanilla¶ offerings in terms of scope and

coverage. This type of insurance still covers only accidental death

(basic coverage) with permanent total disability as an optional

coverage. The premium for basic coverage is 4% in the case of

general animals and 2.25% in the case of animals financed under Government schemes. Despite being in existence for over 30 years,

the total penetration of livestock insurance in the r ural areas is still

poor. The Gover nment has recently introduced a pilot scheme on

livestock insurance in 100 districts with a 50% premium subsidy for

two animals per family.




Micro-insurance

There are three distinct phases of micro-insurance (MI) development

in India.The first phase coincided with the introduction of target- oriented

poverty alleviation programmes such as the Integrated Rural

Development Programme (IRDP).

The second phase of MI growth can be seen in con junction with the

growth of credit disbursement to the poorer segments of society

through the Self Help Groups (SHGs). This saw an increase in the roleof Non-Gover nmental Organizations (NGOs) for the purposes of

intermediation and the proliferation of Microfinance Institutions (MFIs).

The third phase of MI development was bor ne out of the increasing

realization of the need for an increased coverage of poorer

households through some form of social security measure.

market are related to health insurance, with only a few offeringinsurance for assets, livestock, crops, etc. While India boasts

tremendous MI potential, some areas within the regulations require

amendments in order to achieve their f ull potential.




Micro-insurance

Recognizing the need for insurers to adjust the costs they face in

serving marginal clients in remote areas; collecting premiums andinstallments; and offering doorstep services, the Insurance

Regulatory & Development Authority (IRDA) announced the

introduction of new micro-insurance regulations in December

2005. These regulations enable an insurer with a life insurance

business to offer life micro-insurance products as well as non-life

micro-insurance products to poor households. Similar ly, an insurer providing non-life insurance services may offer general micro-

insurance products as well as life micro-insurance products. Most MI

products on the market are related to health insurance, with only a few

offering insurance for assets, livestock, crops, etc. While India boasts

tremendous MI potential, some areas within the regulations require

amendments in order to achieve their f ull potential.

MARKETING & PRICE INSURANCE




One major issue in an agrarian economy is in the form of price

f luctuations, as they pose a serious risk to farmers¶ income and well-being.

Supply-side problems and agricultural marketing system as well as

infrastr ucture weaknesses contribute to farmers¶ risk in terms of

price/income realization.

Furthermore, seasonal production also leads to price volatility

when harvested crops reach markets in very large volumes within ashort time span.

When there is a bumper crop, the farmer finds himself in a buyer¶s

market during the peak marketing season, making him a price-taker.

Even though globalization and liberalization are expected to

benefit farmers by creating greater opportunities for better price

realisation, the market sometimes exposes them to greater risks asmost agricultural commodities, particular ly those grown by small

farmers, are not well-known at the inter national level.





1.Agriculture price risk management instrumentsMinimum Support Prices (MSP)

Electronic Spot Exchanges

Price Stabilization Fund (PSF)

2.Commodity markets and Contract farming

Commodity markets

Contract farming

3.Revenue based farm income insurance



Issues in agricultural policies




1. I & II plan emphasized on major and medium irri project

2. In 1965-67, India faced severe drought

3. Imported 19 MT foodgrains

4. It lead to reexamination of agri strategy





5. Govt designed National Agricultural Policy

1. Focus on minor irrig project

2. Inputs and credit at subsidized rate

3. Designed MSP

4. Built up PDS str ucture

5. Introduced r ural employment programs as safety net for poor


Impact of Policy Measures




1. Technological Measures: Package of practice at Green Revol.

2. Land Reform(abolish intermdries interest on land) : Tenancy Reform,

transfer of land to actual tiller

3. Cooperation and consolidation of holdings: reorganization andfragmentation of holdings. Cooperative farming





4. Institutions involving people¶s in planning: Community development

programme, for the people, by the people, design panchayat raj

5. Institutional Credit: Cooperative Society expansion, RRBs

6. Procurement and Support Prices: MSP, Issue Price estimation






7. Input Subsidies to agriculture:F

ertilizer, seeds, electricity, irrigation

8. Food security system: PDS

9. Rural Employment Programmes: 4th Plan SFDA, JRY, SGRY, JGSY






Other measures:development of Irrigation projects,

electrification,

Warehousing,

promotion of Agri Research,

econ condition of farm labours,

crop insurance,

KCC,

roads,

rural housing,

telephone . etc.


Trends in Investment

1 Sh f A i i GDP d li f 55 10% i 1950 51 t 15 70 % i 2008 09



1. Share of Agri in GDP decline from 55.10% in 1950-51 to 15.70 % in 2008-09

2.Less I

nvestme

nt i

nAgri

culture mea

ns:

Less growth in infrastr ucture supporting agriculture like

irrigation,

r ural roads,

market,

power,

cold storage etc.,


Trends in Investment



3. Total agri investment : 1990-91 = 14,836 crores (9.9 % of total investment)

(29.60 % public investment)

2008-09 = 1,38,597 crores (7% of total investment)

(17.60 % public investment)

4. Gover nment try to compensate its investment considering the positive

growth private investment .

5. Increasing subsidies reduces Capital Formation. The public investment isdiverted toward subsidies.

6. Considering the problem of RIDF, the govt started RIDF(r ural infrastr ucture

development f und)



Globalization

A process of deepening economic integration, increasing economic

openness and growing economic independence between countries in thewor ld economy.

It is simply growing economic activities across the political boundaries of

nation.

Globalization happens through

Trade in goods and services Movement of capital

Flow of finance

First Step for globalizing is liberalization which was taken between 1950-70

Increasing Foreign investment., liberating financials policies, control and

regulations on potential companies / organization, MNCs for investing in other

countries are removed, permitted to trade in foreign exchange market.

India also permitted to MNC for entering in India.

Globalization

Aft th S d W ld W t i t th f ti f



After the Second Wor ld War many countries come together for promotion of

wor ld trade.

For the purpose, General Agreement of Trade and Tariff (GATT) was settled

in 1947 for legal control on inter national trade.

GATT concluded eight rounds to promote wor ld trade through formulation of

policies regarding reduction of tariff and trade restrictions.

Eight and last round of GATT was Ur uguay Round (1986-93).

In this round Director General of GATT, Arthur Dunkel brought Draft Final Act

in 1986, the 104 countries had signed Draft Final Act, which paved way for

setting Wor ld Trade Organization in 1994.

The Wor ld Trade Organization was established on 1 January 1995 and

became new inter national organization set up as a permanent body and isdesigned to play role of watchdog in the sphere of trade in goods, services,

foreign investment, intellectual property right

Globalization



Globalization

Function of World Trade Organization

It facilitate the implementation, administration and operation of multilateral and

plurilateral trade agreement;

It acts as for um for multilateral trade negotiations;

It administer the understanding on r ules and procedures gover ning the

settlement of disputes;

Overseeing national trade policies;

To achieve coherence in global economic policy-making, cooperation of Wor ldTrade Organization with Inter national Monetary Fund, Inter national Banks for

Reconstr uction and Development.

Globalization



Agreement of Agriculture

In Ur uguay round, all member nations of GATT have decided to a widespread

reduction in

tariffs,

removal of quantitive restrictions and

openin

gup their e

co

nomies to i

nter

natio

na

l competitio

n.

It has directed policies concer ning with domestic protection in different areas

including agriculture.

Globalization




AoA provides framework for long-term reform of agriculture trade anddomestic policies over the years to come

With objectives of increased market orientation in agril trade

It deals with

1. Providing market access: conversion of non-tariff trade barrier in to

tariff protection, differentiating level for developed and developedcountries.

2. Regulating domestic support: AoA divides domestic support as trading

distorting and non-trade distorting (minimal).

Amber box: Trade distorting domestic support (minimize support)

Green box: Environmental assistance programs

Blue box: Subsides as direct payment to farmers for differencebetween MSP and market price(USA)

Special and Differential box(S&D):)Special measures for particular

class and differential treatment for various class

according to the need. It is for developing countries.

3. Containing export subsidies: Provision for export subsidies

Globalization




Amber box trade distorting support is quantified with Aggregate Measure

of Support(AMS)

It consist of product specific and non-product specific.

Product Specific: difference between domestic support and external

reference price.

Non - Product Specific:F

or various agri inputs like fertilizer, electricity,irrigation and credit.

Other than AoA, following agreements are related to agriculture

Agreement on Sanitary and Phyto-sanitary (SPS): conforming

international standard norms for protection of human, animals or plant life

Agreement on Technical Barriers to Trade (TBT): allow countries to fix

high standards other than international standards suitable for the national

level and tested at national laboratory or agency.

Trade Related Intellectual Property Rights(TRIP): Patent, copyrights,

trademark, industrial designs, undisclosed information.

Gl b li ti



Globalization


AoA was expecting reduction in domestic support for agriculture in

developed countries.

And will increase international price;

subsequently will lead to improve export of developing countries.

But after post WTO.

It result in heavy subsidies by developed countries to their agriculture;

decreasing international prices;

Affecting agriculture in developing countries.

agricultural environment and policy

Documents