Agriculture

Webinar video: Navigating Covid-19 impact on agriculture supply chains

  • Blog Post Date 23 December, 2020
  • Videos
  • Print Page
Author Image

Kumar Das

International Growth Centre

kumar.das@theigc.org

Author Image

Bijeta Mohanty

International Growth Centre

bijeta.mohanty@theigc.org

In October 2020, the India Programme of the International Growth Centre (IGC) and Asian Development Research Institute (ADRI) organised a webinar on ‘Navigating the Impact of Covid-19 on the Agriculture Supply Chain in India’. The panel comprised N. Saravana Kumar (Secretary, Agriculture Department, Government of Bihar), Siraj Hussain (Senior Visiting Fellow, Indian Council for Research on International Economic Relations (ICRIER) and former Secretary, Ministry of Agriculture, Government of India), Shekhar Tomar (Assistant Professor, Indian School of Business). The discussion was moderated by Mekhala Krishnamurthy (Associate Professor, Ashoka University).

Mekhala Krishnamurthy initiated the discussion by drawing attention to that fact that although it was widely known in March 2020 that some form of lockdown to contain the pandemic was imminent, being the time of rabi 1 harvest, it was difficult to fully understand the significant adverse impact on procurement processes across private and public mandis (market). Although farmers are used to shocks due to the volatile nature of the agriculture sector, the scale and intensity of the disruptions caused by the lockdown – and more recently the farm laws – warrant deep reflection on the happenings of the past few months and how we envision things to work going forward.

Need for robust warehousing infrastructure

Media reports from the initial phase of the lockdown indicated that the agricultural supply chain faced several issues: trucks carrying food items were stuck at state borders, prices of food items were rising in major metro cities, and supply at mandis was declining – even though food items were covered under the Essential Commodities Act. Shekhar Tomar discussed his analysis of consumer data from online markets (for example, Big Basket, Grofers etc.) combined with producer data from mandis in metro cities. It is seen that the supply chain of products faced considerable disruption during end March-May 2020. There was a decline in mandi arrivals by 20%, and for produce that was procured from very far away, this figure was 40%, implying that the worst affected farmers were those who produced perishable products and were far away from retail centres. However, there was no notable change in prices on the online portals.

The concern around the transport of produce from farm-gate to retail centres is exacerbated by the lack of good warehousing facilities, which are needed close to production and retail centres. Tomar emphasised the importance of robust local architecture – that is, supply chains, procurement systems, and storage facilities – as immediate measures for protecting farmers within a region from such shocks.

Hussain added that several studies of the National Centre for Cold Chain Development (NCCD) show that large quantities of horticulture produce need to be consumed within 300 kilometres from the centre of production, pointing towards the requirement of large-scale storage capacity. Horticulture produce in the country is largely managed by the private sector who seem to have done a better job of ensuring supply chain continuity and managing lockdown-related disruptions. Other sectors that were also considerably affected were dairy and poultry.

Importance of reliable agricultural data

Siraj Hussain stressed upon the importance of reliable agriculture data, stating that a majority of agriculture studies and policymaking decisions in India rely on Agmark datasets that have several issues. In particular, Hussain highlighted the differences in government estimates on arrivals in mandis and trade estimates of production, which raises the question of where the high levels of production – as per the latter source – had gone. For instance, procurement of chickpea was very good but Agmark data do not reflect this. Minimum support price (MSP) prices of most pulses and oilseeds do not match the record-high production estimates as given by the Ministry of Agriculture. Hence, Agmark data must be utilised with caution as it is possible that some trade is taking place outside the mandis and it would be difficult to know the prices involved in those cases.

Policy measures in Bihar

N Saravana Kumar described the type and extent of damage that occurred in Bihar, and the immediate relief measures extended by the state government of Bihar (GOB). Bihar is a major maize producer, and maize is raw material for starch factories and the feed industry. Maize is one of the seven crops under the Agri-Investment Promotion Policy – which aims at prioritising production by extending support in post-production management and marketing to ensure proper price discovery – for which the GOB aims to promote maize-based processing and maize-based industries. Since these industries were affected by the lockdown, there was a sudden crash in the demand for/price of maize leading to distress sales. The poultry sector suffered a loss of about Rs. 600 million during the lockdown. Small dairy farmers who earlier sold milk to restaurants and tea shops now diverted their produce to the Bihar State Milk Co-Operative Federation Ltd. (COMFED). This led to an increase in procurement by 25-27%; however, marketing (demand) declined sharply by about 40%. To address the issue, GOB took initiatives to supply small packets of milk powders at anganwadi (childcare) centres and quarantine facilities. In terms of support for harvesting, GOB provided special passes to drivers who usually come from Punjab, and also increased subsidy for affected farmers.

Furthermore, he shared that just before the pandemic, Bihar had experienced a natural disaster which, combined with the hardships of the lockdown, immensely affected the agriculture sector. GOB has transferred relief funds amounting to around Rs. 7 billion to farmers through direct benefit transfer, and started seed distribution through online portals.

Finally, Kumar noted four key policy initiatives of the GOB to support small and marginal farmers. First, GOB has recently established a new marketing division, called the Bihar Agri-Produce Value Addition Division (BAVA), which will link e-NAM (Electronic National Agricultural Market) and market intelligence mechanisms and support right price discovery. Second, Bihar Agri-Investment Promotion Policy, 2020, has been notified and will seek to provide subsidies to new investors in agri-processing or agri-based industries. Third, the Bihar Small Farmers Agri-Business Consortium (BSFAC) has been created to engage with FPOs to facilitate backward and forward linkages. Lastly, GOB has started a scheme called Udyani Utpad Vikas Yojana (Bihar State Horticultural Produce Development Programme). Pointing towards the needs of the smallholder farmers’ agri-business consortiums, Krishnamurthy advocated for marketing units and emphasised role of the government in the process of coordination, investments, and aggregation. Kumar reiterated that one of their priorities has been to support landless farmers. All benefits, subsidies, and compensations under the Department of Agriculture have also been extended to these farmers.

Given the absence of APMC (Agriculture Produce and Marketing Committee) mandis in Bihar since 2006, Kumar stated that private players and farmer producer organisations (FPOs) performed an important function during the lockdown. The former purchased directly from the farm gate level and helped build warehouse structures and storage facilities near the farm gate.

Consumption and demand dynamics

Citing work by Harish Damodaran, Krishnamurthy added that 25% of the demand for agricultural produce used to come from the hospitality industry, which may have seen a sharp decline during the lockdown. Responding to Krishnamurthy’s question regarding consumption and demand dynamics in the farm sector, Tomar, with reference to his related study, said that the impact of seasonal factors since June 2020 has made it difficult to analyse and present a detailed breakdown of the demand and consumption. While there would still be demand from the hotel industry for perishable items such as fruits, vegetables, and edible oil, some diversion would be seen where people stay at home and eat. He further remarked that the supply chain was very dynamic. In the case of durable goods, consumers may have postponed purchases planned for April to say September or compensated with greater quantity in later months, but this does not hold for the agricultural produce, even for semi-perishables such as cereal. Hence, the damage to the sector in the initial phase of the lockdown is somewhat permanent.

Centre-state matters

Reflecting on the ongoing debate around the new farm laws, Hussain contended that weakening of the APMCs will help farmers attract new buyers, although this will bring with it concerns regarding MSP. Similar to the maize distress sales in Bihar (a state where there is no APMC regulation), there is apprehension among farmers in Punjab and Haryana regarding the impact of the legislations, if these were to be implemented in their current form. However, he also shared examples of edible oil and buffalo meat supply chains where the private sector has played a critical role in ensuring and strengthening the ecosystem. He said that at any given point in time, India has only about three weeks of edible oil, and lauded the efforts of the private sector in building supply chain, refineries, and its ecosystem. He also highlighted another success story of the modern export-oriented supply chain of buffalo meat. Despite all the hindrances put up by various groups and even the government, the private sector has invested and set up a supply chain that requires refrigeration – from the abattoir to the port – which has generated earnings of around US$4.5 billion for the country in 2013-14. Though acknowledging the role of private sector in strengthening the supply chain system he stressed that a critical question that remains is how farmers will realise MSP for their produce.

Although agricultural marketing is in the state list and not the concurrent list (despite numerous recommendations from parliamentary committees for this to be changed), the Centre’s latest move in this context indicates its intention of legislating on the matter irrespective. Therefore, it is up to the states to play a proactive role.

Concluding remarks

Concluding the webinar, Krishnamurthy credited the discussion with capturing the nuances of agriculture in terms of places, people, commodities, the actual markets, and the dynamics within the sector. The discussion was not only focussed on the important details but also encouraged deep and innovative thinking around the role of the State. It also brought to light the vital need for public institutions to think about their roles, responsibilities, and capacities as facilitators in different ways across the system; and the diversity, complexity, and resilience of the markets and how these may be strengthened.

Note:

  1. Rabi crops are cultivated and harvested in the dry months (winter and summer).
No comments yet
Join the conversation
Captcha Captcha Reload

Comments will be held for moderation. Your contact information will not be made public.

Related content

Sign up to our newsletter