W

AGRO.INDUSTRIES TO INCREASE FARMER'S INCOME

The ogro'industries ore getting even more importont in view of very impressive growth in high voluecommodities olongside rising incomes in retent yeors. lt hos lorger scope for ocrelerotion in future given rheihrusl on doubling former's income. With lhe corporote sector keen on investing in ogribusiness lo hornessthe emerging opportunities in domestit ond globol morkets, time is opportune for reforms thot would provideheolrhy business environment for this sector.

he 68th Round of NSSO survey on employmentestimated about 48.9 per cent workers' majorlivelihood support coming from agriculture.

Added to that -70 per cent of our populationlives in rural areas (Census 2011) whose incomeaugmentation should be the number one priority.While price led growth of agriculture, the majorrural employer, as a means of enhancing incomeis not sustainable; the only way is to infuse agro-industrialization in the urban-rural continuumfollowing the cluster approach. lt will also addressthe call of the day of income dimension in agriculturethat has taken the driver seat in all agriculturalpolicies and priorities after Prime Minister's callfor doubling farmers' income by 2022. Fortunately,the country is miles ahead on the agenda of zerohunger and food security to all from 2.18 to 47.57times increase in various food items over 1950-51. This is an added feature in lndian Agricultureas the marketed surplus of the commodities hasbeen increasing, demanding more post harvestmanagement and processing to provide adequateshelf life to the produce for negotiating the marketon an appropriate time and for fetching good, ifnot the best, price. Remarkably, our high vaiuecommodities production growth is much fasterthan the staples food items. This is most satisfyingfor nutritional security point of view, but opens upthe challenges for agro-based industries to absorbthe additional production that cannot be consumedafresh/raw. Now time is ripe to change our visionand approach of the past which traditionally viewedagriculture and industry as two separate sectors incharacteristics and role in the economy and growthwas taken as a gradual shift from agriculture toindustries with agriculture owning the financing atfirst stage. Perhaps this needs larger debate as itis easy to distinguish between production and firststage of processing but becomes rather complexafterward. Development of agro processing

Kurukshetra I December 2019 .:-.:-':::":=:'=::-:.:

Table 1: Changing Scenario of agricultural Productionin lndia

Item 1950-51 zlL}-tg TimesProduction Production lncrease

(lV Adv. (x)Estimate)

Food grains 50.83

Pulses 8.41

Oilseeds 5.16

Cotton O.52 4.88 9.38

Sugarcane 57.05 400.15 7.O7

Horticulture 96.56 (1991- 374.67@ 3.2692level)

Mitk

Fish#

Eggo

Meat# 1.9 (1998-99 7.37level)

3.88

17.OO

o.75

1830

284.95

23.40

32.26

165.40

77.4L

5.61

2.78

6.25

9.73

t5.21

87050 47.s7

l'

t

industries should be viewed as industrializationof agriculture and a joint process leading to a

new industrial sector. While it is really difficult toclearly demarcate between the industry and agro-based industry, the definition given by FamineEnquiry Commission (lndia), 1944 holds prettyappropriate. The Commission defined agro-basedindustry as "those industries which are involved insupplying the farm with agricultural inputs besideshandling the product of the farm may be termedas agro-based industry." The lnternational Standardlndustrial Classification (tStC) included agro-industrial production under manufacture of food,beverages and tobacco, textiles, wearing apparels,leather industries, manufacturing of wood andwood products, manufacturing of paper and paperproducts, printing and publishing, manufacturing ofrubber products.

ffi

lncome and Employment Opportunities

With such a classification, it shows that the agroand agro-based industries (agro processing, textile,suga; and other allied activities), which have beenthe major employer close to hinterlands, have to playa much larger role in present context and prioritysetting for diversification of the source of incomein the rural lndia as the contribution of croppingand animal husbandry in total income of the farmhouseholds is only 35 per cent (Table 2) while wagesand service contribute more than 50 per cent in theaverage monthly income of the agri-households.

Table 2: Share of various sources in average monthlyhousehold income (per cent)

of Per cent income to the averagemonthly

Agri- Non-agri Allhouseholds households households

Cultivation 35 NA 19

Livestock 8 NA 4Rearing

Other 6 12 8enterprise

Govt/Pvt 34 54 43Service

Wage labour 16 32 24

Other L 2 2

sources

Source: NABARD All lndia Financiol lnclusion Survey (NAFIS),

2076-77

Table3: Characteristics of Agro-lndustry Sector in

The Economic Survey 201.4-15 emphasized a

deeper shift in the agricultural sector to addressthe risk of high level of food inflation, seasonal andshort-term price spikes in some commodities likeonions, tomatoes, and potatoes, which have becomemore severe and long lasting causing economicinstability in the system. The Survey recommendedbringing a new paradigm in the approach towardsagriculture for getting more from less. One of thecritical areas that can enhance the income of therural households is to provide higher opportunityin agro-based food and non-food activities. TheAnnual lndustrial Survey, 201.6-17 shows that theagro-industries contribute about 35 per cent of theindustrial employment (Table 3). Additionally, thesubstantial employment is generated in productionagriculture and the supply chain. These featuresindicate that these agribusinesses still largelydeserve the priority given to them in the nationalstrategy for development and employment.

From 2016-17 onwards, significant emphasison agricultu re through reorientation of Governmentinterventions in the farm and non-farm sectors waslaid so as to double the income of the farmers by2022by creation of new infrastructure for irrigationand providing value addition and connectivity fromfarm to markets.

Agro-food processing industries have

the potential to generate directly significantemployment in production activities and alsoindirect employment through its forward andbackward linkages. This employment wiil be in ruralareas where these industries have to be Iocated nearthe source of raw materials, especially perishableagricultural products. These industries would helpin reducing post-harvest losses and wastes as wellas in using by-products more efficiently. This can

increase rural income by fetching better prices toproducers and also consumer welfare by increasingthe availability of agricultural consumer goods.

The available vast potential in our country couldbe sufficiently exploited through: (i) selection ofappropriate scale and technology of production;(ii) up gradation of technology of existing units;(iii) establishment of suitable linkages betweenproducts and consumers at home and abroad;and (iv) establishment of suitable institutionalarrangements.

Small scale has been a major constrainton the growth of this industry and hence on

Sourcelncome

lndia during 2Ot6-17

234865 (100.00)

Agro-based lndustries 34.73

4OL78 (t7.tol

Flgures in parentheses indicate per cent share of the

s658s (41.16)

r industry sectorSource: Annual Suruey of lndustries 2076-77

Kurukshetra I December 2019

6

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the diversification by the vast majority of lndiafarmers into high value agriculture. lnvestmentin infrastructure comprising roads, electricity, andcommunication would reduce agribusiness costsand induce the private sector to invest in agro-processing, cold storage facilities, refrigeratedtransportation, and retail chains. lnstitutionalarrangements such as contract farming, producers,orga n izatio ns, a nd coope ratives that p rovide fa rm erseasy access to markets, distribute price risks, andreduce marketing and transaction costs can go a

long way in pushing high value agriculture.

Food Processing lndustry is one of the majorem ployment intensive segments contributing 11. 69per cent of employment generated in all RegisteredFactory sector in 201.2-L3. Food is the biggestexpense for an urban and rural lndian householdconstituting near about 39 per cent and 49 per centof the total consumption expenditure of households,respectively. The food processing industries coversa wide range of activities utilizing farm, animal andforestry based products as raw materials. There arecertain traditional agro-based industries such as riceand flourmills, sugar, khandsari and gur; manufactureof edible oils and the processing of plantation cropslike tea, coffee and cashew nuts. There are also somerelatively modern food processing industries suchas dairy products, confectionery, marine products,horticultural and vegetable products as well as meatand poultry products. ln addition, there is also a

limited extent of processing of agro-wastes and

Kurukshetra I December 2019

ffiby-products of main agro-based industries. Due tothis wide range of activities,there is a lot of diversity in

the nature of problems and

issues relating to differentagro-food processrng

industries. lt is, therefore,difficult to envisage an

overall technology policy

framework covenngthe various agro-foodprocessing industries.They have the potential ofcreatinga substantial im pact

on the rural economy and

improving the income ofthe rural population.

Though processing necessarily changes thebasic characteristics of the raw produce, butpolicies relating to food processing activitiesapply differently in the case of different activitiesdepending on the purpose of processing. Someprocessing refers to necessary processing thatmust be done before consumption. Cereals sectorbelongs to this category of processing. Whilesuch processing is already being done in thecountry, introduction of modern technology inthis sector is considered to be beneficial in twoways. Firstly, it would improve the efficiency ofprocessing in terms of higher recovery of desiredproducts. Secondly, it would create a num6er ofpotentially useful by-products, some of which arenot being fully utilized at present or not utilizedin optimum way for producing higher value addedproducts. Although most of the technology is

readily available in the country, it is not beingextensively adopted because economic incentivesare often missing, or institutional arrangementsfor collection, processing and marketing of theby products may be lacking. Since the processingof by products in the cereals sector constitutesintroduction of new manufacturing activities, orthe expansion of existing ones, such activitieswould generate additional employment. lndia'sfood processing industry employs more than 54lakh people directly and indirectly.

r*"lb'

Y

wThe next category of agro-based food processing

is concerned with processing and packaging in orderto provide easy transportability and marketability ofsome food products. The processing of milk and milkproducts falls in this category. This would increasethe income of farmers, especially small farmers and

landless agricultural labourers in the rural areas. ltwould also promote coniumer welfare. The thirdcategory relates to processing activities whichwould help in extending the storage life of seasonal

food products, Fruits and vegetables belong to thiscategory. Processing of fruits and vegetables wouldhelp in reducing post-harvest losses and would alsoprovide stable income to the growers by eliminatingthe seasonal fluctuations in income.

The challenges and complexities arise fromthese constraints on the one hand, and the need

for their continued growth with multiple objectivesincluding profitability and contribution to rural and

small farmer development on the other; raises theneed for innovative approaches and institutionalmodels for the organization of this agribusinessactivity in lndia. Fortunately, several models-individual and cooperatives-have emerged andprovide adequate learning to be scaled out. These

include the meaningful learning for technology and

innovation in production, procurement, quality and

efficiency and the ability to invest in the state-of-the-a rt mode rn processi ng tech nology to prod uce q ualityproducts, also meeting its high fixed capital need.

Food Processing Policy of lndia

The Ministry of Food Processing lndustriesbrought out Food Processing Policy of lndia in

2018. The policy, inter olia, has also included thebest practices across states and the world. The

Government has also emphasized to make lndiaGlobal Food Factory and Global Food Market and

thus opened up immense opportunities for foodprocessing sector. Several initiatives have also beenannounced for ushering into zero post-harvest

wastage by creating a national food grid and nationalcold chain grid. These policies and programmes mustbe implemented at the earnest to ensure appropriategrowth of agro-food industry and provide adequateopportunity for the rural employment. The reformslike allowing 100 per cent FDI in multi-brand retailwill have a long lasting impact. Similarlythe initiativesfor attractive incentives including capital subsidies,tax rebates, and reduced custom and excise duties,

8

etc., will help attracting more investment in thissector. lncreasing focus is also being given to supply-chain related infrastructure, such as cold chains,

abattoirs and food parks. The whole idea is to spurgreater growth in the food processing sector as wellas connect farmers with the value chain to increasetheir returns. The States need to create an eco-system to allow single window clearances and otherstatutory clearances along with showcasing ourraw produce and processed food. The Ministry ofFood Processing lndustries (MoFPl) has been in theprocess of collating and addressing issues related

to the sectoL with an aim to facilitate investors and

help build their confidence to boost engagement offoreign investors.

Conclusion:

The agro-industries are getting even moreimportant in view of very impressive growth inhigh value commodities alongside rising incomesin recent years. lt has larger scope for accelerationin future given the thrust on doubling farmer'sincome. While it would be a welcome move, it also

demands for a vibrant and robust response fromagro-based food and agro-based non-food industriesand other stakeholders involved in the cold chainmanagement. The demand for cold storage andquality storage for non-perishables will go up. The

recent studies put a gap of 3.28 million tons. The

cold storage facilities need to be developed in themajor production catchments so that the farmerhas the option to store the produce and may hold itback when the market is saturated and sell it whenshortages occur. Above all, policies that facilitate thedevelopment of agro-processing industry will go a

long way towards creating demand at lucrative prices

for high value commodities and other non-foodagro-produce. Turning agro and food-processing

industry into a major export industry can also create

vast employment opportunities for workers since itis a labour-intensive industry. With the corporatesector keen on investing in agribusiness to harness

the emerging opportunities in domestic and,globalmarkets, time is opportune for reforms that wouldprovide healthy business environment for thissector.

(The author is Assistant Director General(Plan lmplementation & Monitoring), ICAR

ond Former Adviser, Agriculture, NlTl Aoyog,Emoi I :j p.mishrodT @ gov.i n, m ish roiai p @ g mai l. co m)

Kurukshetra I December 2019