Crop diversification will fuel the farmer producer organisation (FPO) movement in States such as Punjab and Haryana, former additional secretary PK Swain said on Friday.
Participating in a panel discussion on ‘Challenges in Price Risk Management’, Swain said there was no scope for FPOs in Punjab and Haryana, where 96 per cent of the paddy grown by farmers is procured, while 80 per cent of the wheat is procured by the government. Basmati, another major crop grown by farmers in these States, is larely procured by the exporters.
Swain also highlighted that policy mechanism was required to maintain price stability in the sector. The session was moderated by Prabhudatta Mishra, Deputy Editor, businessline, moderated the session.
Price discovery
Kedar Deshpande, Chief Business Officer, NCDEX, said lack of robust pricing discovery mechanism in the country and absence of right hedging and management tools is leading to farmers not realising appropriate prices.
Ashutosh Kumar, General Manager, Nabard, said agriculture in the country faces the cobweb phenomenon. “Farmers decide the cropping patterns based on previous year’s prices. So, as a result, most of the farmers will go for that particular crop. As a result, production will go up. But since majority of the farmers are going for that particular crop, the prices will go down. So, essentially, even if the production has gone up, income of the farmer is not rising. And, other way around, if the production is down, so in that case also income is lower. So, this is what we call cobweb in economics, actually. So, in that case, what I would like to just say, that this is a unique kind of analysis that we have, that it is a very difficult situation, and we have to somehow manage to subtract the risk.”
Warehouse receipt
Sanjai VS, General Manager, Agri Business Unit, SBI, said most of the farm produce is being sold at distressed rates by the small farmers because they are not aware of the availability of mechanisms like warehouse receipt financing. Of around ₹6,000 crore portfolio of warehouse financing taken against electronic negotiable warehouse receipts (ENWR), only ₹300 crore has been availed of by the farmers, while traders accounted for the rest of the portfolio, he said.
Sanjai suggested that farmers should take the collective route like FPOs to aggregrate so that even a small farmer can go to a warehouse, store his produce and sell it at the right time. Since this is an innovation from the warehouse receipt, they do have any liquidity problem. So this way distress sale can be avoided, he said.
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