Agricultural markets in India require spatial and temporal integration for better price discovery for farmers. Explain (200 Words)
Refer - The Indian Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· Prime Minister launched the Rs 1 lakh crore Agriculture Infrastructure Fund (AIF) to be used over the next four years. This fund will be used to build post-harvest storage and processing facilities, largely anchored at the Farmer Producer Organisations (FPOs), but can also be availed by individual entrepreneurs.
· The fund will also be used to provide loans, at concessional rates, to FPOs and other entrepreneurs through primary agriculture credit societies (PACs). NABARD will steer this initiative in association with the Ministry of Agriculture and Farmers Welfare.
· Changes in the legal framework are a necessary condition, though not a sufficient one, for getting agri-markets right. Creating post-harvest physical infrastructure is as important as the changes in the legal framework. The AIF will help fill this gap.
· There is no doubt that more and better storage facilities can help farmers avoid distress selling immediately after the harvest, when prices are generally at their lowest. But small farmers cannot hold stocks for long as they have urgent cash needs to meet family expenditures.
· Therefore, the value of the storage facilities at the FPO level could be enhanced by a negotiable warehouse receipt system: FPOs can give an advance to farmers, say 75-80 per cent of the value of their produce at the current market price.
· A vibrant futures market is a standard way of hedging risks in a market economy. Several countries — be it China or the US — have agri-futures markets that are multiple times the size of those in India.
· Government agencies dabbling in commodity markets — the Food Corporation of India (FCI), National Agricultural Cooperative Marketing Federation of India (NAFED), State Trading Corporation (STC) — should increase their participation in agri-futures. That is how China deepened its agri-futures markets.
· The banks that give loans to FPOs and traders should also participate in commodity futures as “re-insurers” of sorts for the healthy growth of agri-markets. Finally, government policy has to be more stable and market friendly.
· The bottom line is that India needs to not only spatially integrate its agri-markets (one nation, one market) but also integrate them temporally — spot and futures markets have to converge. Only then will Indian farmers realise the best price for their produce and hedge market risks.
PRASHANT KUMAR 4 years
Pls Review Sir
IAS Parliament 4 years
Good attempt. Keep Writing.
Shivangi 4 years
Please review. Thank you.
IAS Parliament 4 years
Good attempt. Keep Writing.
