In an unprecedented move, the government of Assam in the first week of May has called for suggestions from various quarters to deal with challenges emerging from spread of COVID19 which has thrown economic and social life out of gear across the country. During the nation-wide lockdown that has already spanned approx two months, major chunk of economic activities have come to a grinding halt in the country, throwing more than a quarter of its workforce out of jobs.
The effect is particularly severe for a relatively poorer state like Assam, which despite limited spread of COVID19, has low fiscal capacity to deal with such crisis. In this backdrop, the present report makes some policy suggestions to improve agri-food supply chain, which is fractured by the lockdown imposed in response to the ongoing pandemic. In addition to making some short term policy suggestions, the present essay has also made some suggestions to restructure agri-food supply chain in the state not just because such supply chain still forms the back bone of the state’s economy, in terms of ensuring food security and livelihood of people linked with the sector. Further, a well functioning and inclusive agri-food chain can revitalize the economy of the state.
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In this context, it is important to revisit the structure of the state’s economy. According to official statistics, the share of agriculture in the state GDP accounts for only slightly more than 19%, with manufacturing and service sector accounting for only 28.72% and 45.51% respectively. Approximately, 60 % of population are still dependent on agriculture and allied activities for livelihood, with manufacturing (processing) and service sector (distribution, retail etc) accounting for the remaining portion of GDP. These numbers, however, belie interconnected nature of the three sectors as food moves from farm gate to the plate, connecting livelihoods involved in all three sectors. The estimates available at national level show that prices at the farm gate still account for approximately 20-30% of total values generated in agri-food supply chain with bulk of the values generated outside the farm sector. In mirror image of this, share of income coming from direct involvement in agriculture has declined over time, accounting for less than 50% of total income reported by households. A fractured food supply chain will affect livelihood of people involved in all three sectors and a well functioning one will lift all boats together.
The reports emerging from local newspapers indicate that lockdown has disturbed harvesting of crops in many regions, with crops sold at cheaper rates and at times unsold and even got spoiled in the field. During lockdown, many economic activities are getting either stalled or slowing down, leading to drop in income with adverse effect on demand for farm produce. Making the matter worse is return of lakhs of migrant to their native place from their corners of the country that witnessed collapse of economic activities, due to lock down. Low productivity in agriculture, which is often ravaged by flood, coupled with limited industrial activities in the state, means that the state has increasingly witnessed migration of lakhs of its workforce to metro cities, many of whom go all the way to southern states such as Kerala and Karnataka. Just to put these numbers in perspective, Kerala alone reported 14 lakh migrants from Northeast out of which major chunk come from Assam. Return of these migrants will pose additional challenges, as sharp increase in the rural workforce will lead to drop in real rural wages. Overall result is drop in rural income and rural demand with adverse effect on farm prices.
One or two months from now, the state may be looking at impending food crisis, with more mouths to feed (thanks to return migration) and drop in rural come further complicating the matter. The state government may be better off identifying vulnerable pockets, specially the migration prone area, and introduce universal PDS in those areas. It is important that the government quickly introduce MGNREGA to give some cash to the rural folks in search of livelihoods.
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It is important to recognize that the food supply chain has also changed substantially in the past two decades, with vegetables and other perishables such as meat and chicken assuming more important role than before. Given their perishable nature, supply chain should remain integrated to ensure their smooth movement unaffected by not just lockdown but also deficit in physical infrastructure such as cold storage. In the wake of present crisis, when local job market offers little job prospect, the state can adopt Keynesian principle, leveraging and even combing public work program to create rural infrastructure in the food supply chain. One of 16 action points agenda for agriculture announced in this year’s budget is construction of warehouse at the village level to be run by Self Help Groups. In this context, construction of such storage facilities under the budget will also imply honoring one of key recommendation of National Commission of Farmers, which recommended, among others, construction of storage and warehouse facilities in every block of India. This, coupled with construction of milk processing facilities in some of urban centres in tier 3 towns and rural towns, as already proposed in the budget for agriculture, may create more localized labor demand, without putting additional strain on the exchequer. More importantly, such steps may be one of many initiatives required to revitalize rural and small towns as centres of economic activity to kick start development model that is more sustainable, inclusive and environment friendly.
Following the amendment introduced in Model APMC Act at the centre, there has been talk of APMC Reforms being implemented in the state too. Such move will, however, amount to whipping the wrong horse as Assam already has very relaxed APMC laws, with bi-weekly hut (village market) serving as major selling points in the rural towns. In those markets, farmers bring their green vegetables to sell to their traders or consumers directly. The crucial element that we need at the moment is more APMC market with robust infrastructure rather than wishing away the existing ones as restrictive ones. A similar move by the state of Bihar over a decade and half earlier has a disastrous outcome, with marketing infrastructure in the state now crying for attention as private sector did not fill the gap left by the government. While it is claimed that farmers are free to sell wherever they want to, studies show that organized private actors such as retail chain continue to refer to the mandi prices as reference point for any negotiation.
Given that APMC markets are still sparsely located in the state of Assam, hut markets may serve as procurement centre where farmers can bring their leafy vegetables to be procured by pick up van for delivering produces to retailers at nearby urban centres, especially during time such as COVID where mass gathering may not be permitted in such market. Local self help group may co-ordinate such activities. Prices may be fixed on the basis of wholesale market prices, along the lines of other successful models such as Rythu bazaar (Telangana state).
Going beyond fresh produce segment, it is important to look at what is happening in high value segment of agri-food supply chain. Much of the values in food supply chain get generated in processing, packaging and distribution of the food supply chain. These parts of value chain are dominated by MSME/ SSI which account for approximately 20% of MSME/SSI s in the state. Such MSME / SSI number approximately 10000 units in food processing sector, each employing average 7 people. Thus, approximately 70000 people are directly engaged in the sector, in addition to many more involved in distribution of products in both upstream and downstream segment. It is important that relief packages announced by the central government are implemented properly to keep these MSME functional, which are vital clog in the supply chain from the perspective of both value addition and employment. In addition to these MSME/SSI units, there are thousands of micro processing units which need extension and financial support. Policy measures to empower these processing units may require aligning them with SHGS.
Within Assam, one less discussed but very successful model in agri-food value chain is Milk Co-operative at Sita Jakhala, Jagiroad which has diversified into various value added activities such as ice cream, paneer and other processed milk products, which add more jobs and capture more values for the local economy. In areas identified as clusters of vegetable and milk productions, some of these self help groups can be empowered with technical and extension support including adequate credit provision to kick start value added activities. The state, however, needs to build capacity among the self help groups so that the latter can carry out the roles defined for them. The recent provision of credit through NBFC can be utilized to make credits available to these self help groups. In the context of Assam, one hears very little about big ticket investment such as Mega Food Parks set up in Nalbari and Chaigaon. In such context, models such as Sita Jakhala assume immense significance which can hold key to roll out an agri-food value chain which is driven by local community, who captures much of the values generated in the supply chain. Such more value added activities in agri-food value chain can also obviate the distress driven migration in the state of Assam. Even if entry of organized firms is encouraged by the state as part of Act East policies, such SHG driven farmer groups can be a forum to negotiate with such big players so higher share of values generated in the supply chain can be ploughed back into the local economy, else the state will remain supplier of raw materials, with benefits bypassing the local economy.
(The author is an Assistant Professor at the Department of Economics, Christ University in Bangalore. He can be reached at [email protected])