Looking Beyond Farm Loan Waivers: Emerging Perspectives – Part 2

NeML - Looking beyond farm loan waivers

In the first part of this two-part series, we covered the various diverse perspectives that are emerging on Farm Loan Waivers in India and presented a new perspective – linking Commodity Spot Markets with short-term credit linkage initiatives to enhance famers’ bargaining power that will lead to better realisations for their agriculture produce.

Before we deep dive into this new perspective, let’s first understand the current agri-finance ecosystem in India. National Bank for Agriculture and Rural Development (NABARD) is the apex agri-finance institute in India that is dedicated to provide agricultural credit to farmers and National Cooperative Development Center (NCDC) is dedicated to fund Cooperatives. Further, the government runs Price Support Schemes (PSS) through its two main entities – Food Corporation of India (FCI) and National Agricultural Cooperative Marketing Federation of India (NAFED) to support farmers get remunerative prices as per the prices fixed by the Cost and Accounts Committee On Prices (CACP).

While the government is doing its best to help farmers through these institutions and various agri initiatives like higher MSPs, Soil Health Cards, Operation Green to help TOP (Tomato, Onion, Potato) farmers, Crop Insurance, etc., more needs to be done to revive India’s ailing agri sector and achieve the Hon. Prime Minister’s vision of doubling farmers’ incomes by 2022.

In isolation, credit measures like loan waivers, interest subventions, market reforms, etc. can create only a limited impact. But together, the impact can be significantly higher owing to the synergies and the reinforcing effects that each one of these have on the other.

One of the main grievances of farmers, especially Smallholder Farmers (SHFs) is not getting adequate prices for their produce. The primary reason for this is a lack of direct market access that keeps them dependent on a long chain of intermediaries to market their produce, which ends up with the farmers getting the lowest share of the consumers’ wallets. To empower farmers to unshackle themselves from the vicious circle of intermediaries that leave them bereft of market prices, the need of the hour is to encourage more e-Market platforms that directly connect farmers and buyers in a transparent trading ecosystem.

A classic example is Karnataka’s Unified Market Platform (UMP) that has completely transformed the state’s primary agri markets by seamlessly connecting all the Agricultural Produce Market Committees (APMCs) in the state on a single e-trading platform. Benefitting 5.2 million farmers in the state, the UMP empowers farmers to sell their produce to the highest bidder across any APMC in the state. As on date, the UMP has seamlessly connected 164 APMCs in Karnataka and farmers have traded agricultural produce worth Rs. 75,690 crores through the UMP that has resulted in their income being enhanced by over 38%.

From the story of Muzaffarpur’s Litchi Growers directly selling their produce in Chennai’s markets, to Odisha’s Sweet Potato farmers selling their produce online, to Punjab’s Kinnow farmers selling their produce to distant markets in South and East India without any intermediaries in between, there are many success stories that are a testimony to e-Market platforms’ prowess in empowering farmers by making them the real masters of their produce.

To truly tackle agrarian crisis, India needs empowered farmers, not temporarily pacified ones. The need of the hour is to introduce an “out of box” agri policy that creates efficient marketplaces where credit and markets come together and work hand in hand.

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