In a major initiative, the Tamil Nadu government has constituted a high-level committee headed by former RBI Governor C Rangarajan to assess the overall immediate impact of Covid-19 pandemic on different sectors of the State’s economy. The committee, comprising economists and industrialists, has been tasked to submit its report to the government within three months and is expected to provide recommendations on policy measures that can put the State back on the growth trajectory.
With the pandemic being viewed as a black swan event, both unpredictable and devastating in its impact, the constitution of the committee is indeed a timely and welcome move.
Lockdown impact
From aviation, hospitality, real estate, and apparel to poultry, petroleum and shipping, no sector in the State has escaped from the impact of the pandemic. However, the impact of the nationwide lockdown on the State’s agriculture sector has been severe, breaking the supply chain of agricultural commodities. Transport, harvesting, marketing and procurement bottlenecks, lack of cold storage and processing facilities, market shutdowns and labour shortages have resulted in rotting of the harvested produce in the fields, leaving the State’s rural economy high and dry.
Although no estimate is available on the quantum of losses suffered by farmers because of the lockdown, distress sale of vegetable, fruits and flowers have been reported from across the State. Frustrated by the disruption in input and output supply chains of agriculture goods, scores of horticulture farmers across the State have been reportedly dumping their perishable produce on roads, into compost pits and irrigation canals.
In response to the prevailing crisis, the State government announced a slew of immediate measures such as a three-month moratorium for repayment of instalments for crop loans, opening of cold storage facilities, deployment of mobile vegetable and fruit carts and the E-Thottam or E-farm services of the Department of Horticulture and Plantation Crops, that could insulate the farm sector from the impact of the pandemic. Nevertheless, the need of the hour is a set of new and novel approaches that should be capable of protecting the State’s farmers from all forms of shocks.
State of agriculture
Although the GSDP (gross state domestic product) of Tamil Nadu is shifting away from agriculture to other sectors with average contribution of only 10.9 per cent from 2012-13 to 2016-17, agriculture is still the largest source of livelihood in Tamil Nadu. Over two-thirds of the rural households depend on agriculture, and about 93 per cent of them are small and marginal. Agriculture also played a big role in reducing rural poverty in the State over the years. In view of this, many new initiatives have been introduced by the State to improve the growth performance of agriculture.
In order to achieve 115 lakh tonnes of foodgrain production during 2019-20, the State has conceived a slew of technology based smart schemes right from sowing to marketing the commodity. Tamil Nadu is a leading horticulture State, thanks to diversified agro-climatic conditions suitable for a wide range of horticulture crops.
Despite having made impressive strides in terms of productivity in many crops, the average monthly income of farm households is not very impressive. As per the NAFIS survey (2016-17) conducted across the country by NABARD, it is only about ₹9,975, which is much lower than that of many States. Probably, because of low income from farming, the incidence of indebtedness of farm households is also higher in Tamil Nadu (61 per cent), much higher than the national average of 47 per cent. The stress on farm households may have increased considerably due to corona-induced lockdown.
Evidences cited in the Report of the Committee on Doubling Farmers’ Income (2017) suggest that the speed with which agriculture sector reduces rural poverty is at least twice than what the rest of the economy does and, therefore, reviving the pandemic ravaged farm sector on a war footing becomes increasingly important.
Support needed
Without bringing growth in agriculture, increasing the overall growth of the economy will be difficult as it has huge backward and forward linkages with other sectors. In fact, C Rangarajan’s classic work carried out during 1980s on agricultural growth and industrial performance pointed out that “1 per cent additional growth in agriculture stimulates a further 0.5 per cent point increase in growth of industrial output and hence 0.7 per cent in growth rate of national income.” This holds true even today. Therefore, the committee must give highest priority for bringing back the corona ravaged farm sector to normalcy.
The speeding up the pace of procurement of all perishable and non-perishable crops, decentralised procurement of crops at the village level, adoption of the market intervention scheme (MIS) for the procurement of those perishable agricultural and horticultural commodities which are neither covered under MSP nor by the procurement mechanism and promotion of direct marketing are some of the crucial pro-farmer measures that the committee needs to consider.
Going by the evidences cited in a joint study by NABARD and IFMR (2017) that online marketplaces provide higher price realisation to farmers, the need to bring the markets under e-NAM becomes an immediate priority. In order to avoid any further disruptions in the supply chain, the need to scale up and improve the availability of cold storage infrastructure and waiving off cold storage charges for an extended period is yet another suggested measure.
With the coordinated support of the local transporters, SHGs, farmers and panchayats, efforts towards creating local supply chains that links local producers to the local consumers, creation of mobile storage facilities at local levels using unused railway wagons, containers and tankers used by the transporters are among other suggestions. The local MSMEs can also be roped in to join the local marketing network.
The mandi fee for FPOs registered on e-NAM should be waived which will help move a significant chunk of primary trade on the electronic platform. Besides, a stimulus package needs to be given to the FPOs which purchase at least 50 per cent of the total procurement from small and marginal farmers. Along with increased disbursal of farm loan, interest on farm loans and the premium on crop insurance should be waived for at least one year. The three months moratorium on repayment of loans announced by the RBI need to be extended to a period of at least one year.
At this time of uncertainty and distress, these suggested pro-farmer measures coupled with the farm reforms announced by the Finance Minister as a part of PM Modi's ₹20 lakh crore economic package, if embraced by the committee will definitely prove to be not only competitive but also inclusive, scalable and sustainable. At a time when farmers have been pushed to the brink of despair, bringing competitiveness in agriculture and helping farmers realise better price for their produce should be the ultimate mantra of the committee.
Narayanamoorthy is former Member (Official), Commission for Agricultural Costs and Prices, New Delhi, and Alli is Senior Assistant Professor in Economics, Department of Social Sciences, Vellore Institute of Technology