Are measures able to address the challenges of the farmers in the pandemic?

What will a rational human being do when a lockdown is announced? Will he/she run to stock up the necessities?

On 24th March 2020, when the Prime minister of India announced the nationwide curfew, long queues were visible outside the grocery stores and supermarkets. In this situation, farmers, the most important pillar of the Indian economy suffered a massive blow! The nationwide lockdown resulted in acres of farmers’ produce being left to rot or sold at very low prices (Rs 3 per kg for onions in Maharashtra’s Lasalgaon mandi!). The condition of Indian farmers is deteriorating every day due to transport constraints, labour shortage, and limited market access, with almost no buyers.

Chapter 1 - Ground Zero Situation

Recently a very serious issue was reported in Madhya Pradesh, a state in India. Here the farmers were forced to sell maize at prices lower than the MSP(minimum support price - which is a price floor set by the government, it’s the legal minimum that’s imposed on the price at which a good can be sold ). According to the government sources, the price set for maize as MSP is 1760 per quintal. However, in the local mandis, the farmers were able to sell it for 800 -1000 Rs per quintal, which is a significant difference!

An image from the mandi showing the prices of the maize (Rs. 959)

The prices of maize were increasing at a very high rate in the previous years but this recent major administrative decision has led to a decline in its price in the Indian markets. The decision of importing maize from Ukraine, Myanmar, and Russia has increased the supply of maize in the market, thus leading the prices to take a dip. Moreover, the rumours about the spread of the virus through consumption of meat led to a decrease in demand for maize by poultries(a major consumer of maize). These two incidents of an increase in supply and decrease in demand have consequently decreased the price of maize by a significant amount.

Farmers in Sivani, Chhindwara, Betul, Narsinghpur, Harda, Hoshangabad, Mandla, and Sagar districts of Madhya Pradesh prefer maize over other crops because of uncertain rain and high demand of this product in the market. But the situation is different, all their expectations of good returns have been washed away due to current restrictions imposed. Not only in Madhya Pradesh but the various parts of the country, lakhs of acres of crops have been burnt or left to rot. The reason being due to the ban on exports, transport problems, labour supply issues, etc. All across the country, issues are visible where farmers are compelled by the drastic situations to destroy their crops, this stands as a big concern before the leaders.

Chapter 2 - Measures Undertaken

Keeping in mind the current COVID-19 situation was unlike other professions farmers have not been spared. The government is taking every possible step to keep the wheel moving via relief programs. According to the general law of nature, the ones at the lower end of the pyramid are at the most receiving end in times of a crisis. In response, the Government in its mammoth 20 lakh crores package announced three major agricultural reforms-

• First, the amendment of the Essential Commodities Act that will keep food commodities out of it. This would allow stock limits to be abolished, excluding in the situation of war or emergency periods.

• Second, the Finance minister announcement also includes laws regarding agriculture trade, thus liberalizing the sale and purchase of farmer produce.

• Third, the legal framework for the partnership of farmers with agri-business to involve modern technology in the agriculture sector.

The government has regulated APMC(Agricultural produce market committee) laws with a view of “one nation one market” in true sense. This law will provide freedom and choice to farmers to decide whether to sell in the APMC market or sell elsewhere in the country. This could be done either directly at the farm gate to an aggregator, trader, company, farmer producer organization, cooperative, processor, exporter, or at any other place such as trading platform, warehouse, silo, or factory gate. The proposed central law will not affect the right of the state to regulate agriculture trade within APMC space.

Other announcements also included the allocation of Rs. 30,000 crores of additional working capital for farmers through NABARD (National Bank for Agriculture and Rural Development). This is in addition to the Rs. 90,000 crores which NABARD already will be providing as per general norms. These reliefs will most probably benefit the small and marginalized farmers.

Chapter 3 - What Will Actually Happen?

As per the above reliefs, there can be two economic interpretations.

First, credit availability to the farmers will ensure that the supply chain remains uninterrupted. It will not only boost the economy of the agriculture sector but also cater to the needs of the population in terms of their food requirements. Even Sher Shah Suri, the forerunner of Akbar, acknowledged for an economy to remain stable, if not on a growth trajectory, welfare of farmers is imperative. According to the Rawlsian Welfare function of Welfare Economics which states that the utility of a state as a whole can be marked as ‘upscaled’ only if the utility of the lowest individual in society has been elevated. Utility (U) = min(u1, u2… UI). (Note- the utility or the satisfaction derived by the society as a whole depends on the economic growth which is measured by GDP. Thus the utility which we are trying to measure here is, in fact, the measure of terms related to GDP, a keynote factor in economic growth).

Second, stability which is subject to the success of the scheme can be ensured. This would lead to a generation of demand in this section of society. Under the Keynesian Approach which states that SCE (State Consumption Expenditure) is a function of GDP. As a result, we can ensure that even the demand chain disruptions do not occur, which does not seem to be a goal that the Government is aiming to achieve under its own Atma Nirbhar Project.

Apart from the credit availability steps which will ensure the supply chain continuation. It might also to an extent, guarantee the increase or a stable production in the short run. Indian Government has come up with a plan to strengthen infrastructure logistics and capacity building. These motives might target long term production targets which the Agriculture Industry would want to touch upon, if not surpass.

According to the Keynesian Approach, the production function ( Y=F(K, L) where Y denotes the quantity of output, K denotes the amount of Capital, and L denotes the amount of labour used in production) shifts outwards when the amount of capital is increased. This shifting of the function implies that there is an increase in total production when other factors of production are kept constant.

Besides, the Essential Commodities Act amendment talks about the trade of cereals, edible oils, oilseeds, pulses, onion and potato, and removal of stock limits. In cases of extraordinary situations like war and severe natural calamity, limits can be imposed. This amendment will encourage food processing and yield better prices to farmers. The recent change in the act would encourage new investments in warehouses, modern silos, cold storage, pack houses, etc. This change will bring temporal and spatial price integration, reduction in wastage and price volatility, and help in better tapping overseas.

Chapter 4- How is Technology helping farmers to survive in these tough times?

The recent creation of a legal framework which enables farmers to enter into arrangements with value chain participants and agri-business firms. This has allowed farmers to access modern technology, know-how, and capital with private sector players. Arrangements have been made to protect farmers against market and price risk besides incentive for quality and high-value production.

Agricultural technology mainly refers to the technology used for the production of machines to assist with farming and has been used on a farm as well. These agricultural machines have been designed for practically every stage of the agricultural method. Adapting to the latest technologies has been a step taken in the direction of the optimization of quantity and quality. The nature of technology affects crop yield.

Given the pandemic, online startups have become more important and the decline in the number of labourers in current situations requires an instant adaptation to methods that would help to keep up to the pace of production. However, agricultural technology’s importance goes beyond the amounts produced. Among the number of other aspects of agriculture now also includes technology like-

1. Artificial Intelligence: For the growth of agriculture, it is essential to identify factors that can contribute to better yield and place of harvest. With AI tools entering the new technology space in agriculture, it’s possible to reach solutions based on data that indicates weather conditions, type of harvest a crop would need, the type of soil most suitable, etc. Government schemes like Pradhan Mantri Fasal Bima Yojana (PMFBY) are welcoming AI technology to reduce the time consumption in settling claims of the farmers. The government has also signed an MoU(Memorandum of Understanding) with IBM to monitor the agriculture sector with AI.

2. Mobile Applications: The government has majorly focused on the usage of technology in agriculture with E- Nam (National Agriculture Market)- which is an electronic trading portal for agricultural commodities. Individual initiatives have been taken up by some states that benefit farmers. For example, Punjab introduced ‘Punjab Remote Sensing Centre (PRSC) which sensitizes farmers on measuring air quality and crop residue burning. There are 3 applications under it:- i-Khet Machine, e-PeHal, and e-Prevent.

3. Drones: For precision or smart farming, drones have brought efficiency on the table with accurate information thus reducing uncertainty during any decision making process. By using the correct sensors, drones can provide farmers with real-time information regarding their crops, soil deterioration, dry regions, fungal infections, etc. Farmers would be able to gauge which area needs irrigation and better techniques with the help of this feature. Also, drones have been used for spraying purposes as well. In India, drones usage is visible at corn or maize fields in Andhra Pradesh.

4. Satellite: Satellite images have been used for information like road networks, weather changes, the behaviour of oceans, etc. Since this technology is used to keep an eye on crops without being present on the farm so it saves a considerable amount of money and time.

5. Soil and Water Sensors: These sensors can help detect moisture and nitrogen levels. A farm can use these sensors to find out when to water and fertilize rather than relying on a predetermined schedule. This strategy helps in bringing a more efficient use of resources and lowered costs. Also, it helps the farm to be more environmentally friendly by conserving water, limiting erosion, and reducing fertilizer levels in local rivers and lakes.

6. Biotechnology: The most common form of genetic engineering is herbicide resistance. The other could likely be insect-resistant traits. Crops are made to express toxins that control pests. Many employ BT toxin which is the same toxin found in organic pesticides

7. Irrigate via Smartphone: Mobile technology has a crucial role in monitoring and controlling crop irrigation systems. With the help of the right equipment, a farmer can control irrigation systems remotely from a phone or computer instead of being physically present in each field. Moisture sensors in the ground can communicate information about the moisture level present at certain depths in the soil. It has helped increased flexibility and allows for more precise control of water and other inputs such as fertilizer which are applied by irrigation pivots.

Farmers will no longer have to apply water, fertilizers, and also pesticides uniformly across entire fields. Some benefits of agricultural technology include:

• Higher crop productivity,

• Decreased usage of water, fertilizer, and pesticides, which indirectly allows the food prices to be less,

• Reduced impact on natural ecosystems,

• Less runoff of chemicals into rivers and also groundwater,

• Increased worker safety.

Chapter 5 - Agri Tech Startups

The agri-tech sector has recorded total funding of $244.59 million in 2019, an increase of over 350% in the amount of funding from the previous year. Given the current pandemic, online startups have become more important in the market.

Some of the few prominent Agritech startups are:

1. Next: Founded by Taranjeet Bhamra in 2016. next to focuses on solving efficiency challenges in agriculture and the food value chain by deploying its Qualix Platform. This platform uses computer vision, spectroscopy and IoT(Internet of Things) devices merged with AI-based data sciences for instant analysis of physical, chemical, and ambient quality of food traced back to the source. Plantation companies, agricultural processors, and other agriculture food chain participants form the customer base for AgNext.

2. Aquaconnect: Aquaconnect is a startup that uses AI and remote-sensing technologies to assist shrimp and fish farmers to improve efficiency and farming revenue. FarmMOJO, its AI-enabled mobile app, acts as a farm advisor and provides context-specific suggestions and alerts to farmers in multiple languages. This assists farmer in making decisions like to improve water quality parameters feed consumption patterns and health management of the inventory, etc. Based on the data intelligence, FarmMOJO also connects the farmers with the upstream (hatcheries, feed producers, farm equipment manufacturers, lenders, insurers) and downstream of the supply chain (processors, exporters, and certifying bodies).

3. Fasal: Fasal’s AI-powered IoT-SaaS platform for horticulture captures real-time data on growing conditions from on-farm sensors and delivers farm-specific, crop-specific actionable advisories to farmers via mobile in regional languages. Fasal’s field sensors measure multiple dynamic variables which include micro-climate, soil, and crop conditions. It leverages machine learning to transform this data into farm-level predictions, thus anticipating various risks while helping horticulture farmers reduce input costs, optimize crop protection, irrigation, and crop nutrition.

4. Freshokartz: Jaipur-based Freshokartz not only provides analytics to farmers based on soil tests, past crop history, and financial data, but also operates physical centres in the villages to provide farm advisory, deliver quality seeds, pesticides, and fertilizers to the farmer’s doorstep.

Chapter 6 - Economic Impact of the Use of Technology in Agriculture

Increase in GDP: Adaptation to technologies and continuous usage at each step of farming will directly lead to a higher yield of the crop. The Agriculture sector currently contributes to India’s Gross Domestic Product with a share of around 15% and this share might witness a rise due to the increase in the usage of technology in the sector.

Increase in Consumer and Producer Surplus: Let S1 and S11, represent the supply curve with and without Technology respectively. The supply curve is assumed to shift from S1 to S11 because the successful implementation of technology is expected to reduce the cost of harvesting. As a result, the equilibrium output and price will change from Q1 to Q2 and P1 to P2.

The area (R + S + T) represents an increment to the consumers' surplus as a result of mechanization of the agricultural sector, and the increment to the producers' surplus is measured by the area (-R + V +W).

Thus, the benefit to society in terms of consumers' and producers' surplus is the area (R + S + T) + (-R + V + W)= S + T + V +W; that is, the area between the two supply curves and below the demand curve, as shown in the figure.

However, the negative impact of unemployment due to involvement is overlooked here, which is bound to reduce the overall benefit by some amount.

CHAPTER 7 - WHAT MORE CAN BE DONE TO SAVE FARMERS FROM THE EFFECTS OF PANDEMIC.

Despite relaxation on agrarian activity, farmers are still finding it difficult to take their product to the mandis or use the agri-tech features - to get a good price for their produce. If different reforms and laws have been implemented, but the problem lies in the price volatility, there is a need to reduce it to prevent farmers from moving into destitution. The enforced presence of city-wide lockdown will help in an increase in effective demand for cash crops like fruits, vegetables, cotton, sugarcane etc, thus resulting in very low or negative farm incomes.

What more could be done to help the superheroes suffer the least at this time? Here are some measures that could be adopted:-

• Redirecting farm supply chains to localities and local societies.

Farm supply chains can be redirected to local areas by providing farmers with an incentive to sell more of their products in local cooperative channels. Emphasis should be on the benefits of creating (and encouraging) Commodity Based Cooperatives (CBCs), which could accrue greater benefits by localizing supply-chains, lowering transport costs, offering better-more direct prices to farmers themselves, and also changing the crop-cultivation pattern to localized demands that are part of the community’s palate.

However, the limitation to this is that most farmers generally prefer to choose and invest in cash-crops which are of huge demand in urban regions thus offering greater profitability. However, due to ongoing restrictions, cities are closed and are non-functional at this point. Fruits like mangoes, watermelons, bananas are going to be a waste and even the costs aren’t reducing as well.

• Focussing more on food crops rather than just on cash crops

Farmers must be incentivized to move away from cash crops (say, for a year) and shift towards food crops. “Food crops” largely consist of grains, pulses, cereals, legumes (including dried beans), seeds, nuts, vegetables, herbs, and spices, etc. A doubling up of the minimum support price (MSP) for food crops could allow farmers from different states to approximately shifting their cultivation-pattern towards food-based crops. This will help in addressing the larger food insecurity concern for most of those living in urban slums, or in rural areas with limited food supplies. At the same time, they offer better prices to farmers in local areas for food crops.

Additionally, both local and state governments must empower social organizations, NGOs, and different civil society members (including RWAs) to allow direct procurement of supplies from local farmers/farmer producer organizations (FPOs). This would ensure a more formalized, localized distribution of cooked/pre-cooked food in/across communities to avoid any possibilities of human starvation or lack of adequate nutritional supplies.

• Increasing allocations for direct transfers

There should be an Increasement in the allocations for direct transfer to farmers through PM Kisan Yojna. This includes everyone who is actively involved in farming irrespective of where he owns a given piece of land or not, from Rs 6,000 to Rs 10,000 per farming family for this fiscal year (2020-21). This would immediately help partially compensate all farming families for the losses witnessed in months of March and April. This shall also benefit them some cushion against the deflationary effect on farm-prices due to the prolonged lockdown.

Since firms are stocked with a supply of grains and crops, there is a need for emerging startups' involvement in transporting them from the supplier to the customer directly. According to new reforms passed by the government which directly allows farmers to sell their produce directly to the mandi or consumer, this would definitely help the supply chain become stronger.