[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

REIMAGINING INDIA
etc. The idea is to increase production of
fruits and vegetables manifold if production
of food grains cannot be increased
significantly. Human food habits also keep
on changing, with change in socio economic
factors. If fruits and vegetables are
commercially within reach of lower middle
class people, it will ease the pressure
on cereals. However, this will also need
good investment in rural infrastructure,
cold chain, transportation and
marketing support.
4.7 In order to ensure food security,
another important strategy should be to
strengthen marketing infrastructure and
make the farming more remunerative. If
production increases, but marketing infrastructure
is not strong to tackle load of
increased production, it will be a big disaster.
In case of absence of strong marketing
infrastructure, increase in production
will lead to glut at arrival centers, which
means unremunerative prices to the farmers
and in such case, increase in production
cannot be sustained. The solution lies
in improving marketing efficiency by reducing
cost of intermediation and bringing
in price transparency. This can be achieved
through developing electronic spot markets
with facilities for deliveries at various
arrival centers and developing a robust
structured market, which can be relied
upon by buyers located anywhere in the
country for sourcing deliveries. The Exchange
will, guarantee payment to the sellers
against deliveries and delivery of quality
certified material to the buyers. Hence,
electronic national level spot exchange is
the next strategy to ensure food security.
4.8 Now, we have Warehousing Development
and Regulation Act in place.
This will certainly promote investment in
rural infrastructure in terms of warehousing,
cold storage, etc. We know that around
Futures market has helped in discovering correct price
levels and improving farmers’ realization. In Uttar Pradesh,
Mentha farmers are now getting Rs.500 per kg; while
earlier they were getting only Rs.300-350 per kg
15% of total production goes as post harvest
losses. Even bringing the storage loss
to 5% will have large effects on our food
security. However, marketability of warehouses
is also crucial, because it is a capital
intensive project and unless people use it,
private investment in rural warehouses will
not be viable in a big way. Marketability of
warehouses means a platform, where warehouse
receipts can be negotiated. If a
farmer or trader knows that by keeping
goods in a designated warehouse, he can
sell his produce on a national level electronic
platform, he will certainly choose to
keep his produce in such designated scientific
rural warehouses. But, for this purpose
national level electronic spot exchange
has to come up, where warehouse
receipts representing quality certified farm
produce can be traded. This will create a
business model for institutional investors
for creating rural infrastructure. In absence
of this, we may find big shopping
malls coming up in cities, but creating
warehouses and cold storage in rural area
may not be achieved, unless we also have
a viable business model enhancing marketability
of warehouses at national level.
Hence, strengthening rural infrastructure
and linking them to modern market is next
strategy to ensure food security.
4.9 Futures market has helped in discovering
correct price levels for various
commodities and hence improving farmers’
realization. In U.P., Mentha farmers
are now getting Rs.500 per kg; while earlier
they were getting only Rs. 300- 350 per
kg. As a result, area under cultivation has
doubled. Production has also increased
from 18000 MT to 32000 MT per annum.
But, futures market will be more helpful
to the farmers, if there is also an electronic
spot market, so that farmers can use
futures market for price discovery and spot
market for price realization. For developing
electronic spot market, the most important
requirement is amendment in
APMC law and recognition of the concept
of E Trading, E Markets or Electronic
Spot Exchanges under the APMC Act.
Presently, the scenario is that sale and purchase
of farm produce outside the principal
yard and sub yard is illegal. A farmer
is not allowed to sell more than head load
to a person not holding APMC license,
otherwise the buyer can be prosecuted.
Futures markets and spot markets will
help ensure food security by making farming
remunerative and improving farmers’
realization thereby strengthening rural
economy. Hence, amendment in APMC
Act, promoting alternative marketing
channels, recognizing E Trading and E
Market as national level platforms, giving
the farmers a choice to sell wherever he
desires, are important steps towards ensuring
food security. In order to ensure
food security, we have to make farming
remunerative and attractive. Developing
alternative channels for marketing of agriculture
produce and giving freedom to
farmers to sell wherever they get the highest
price is key to achieve this goal.
78 THE IIPM THINK TANK