Agriculture Policy

Onus on States to Reform Agri-Marketing Laws after Centre’s Repeal: Ramesh Chand

Ramesh Chand in Office. Photo by Vivian Fernandes

NITI Aayog Member Ramesh Chand brings intellectual acuity to policy making because of his training as an agricultural economist, his long research experience, and feet on the ground. He is disappointed that the three farm laws – liberalising the marketing of agricultural produce, promoting contract farming, and lifting restrictions on stock holding – were repealed at the end of 2021 after more than a year of protests by farmers. Here, he touches on issues of topical interest in an interview to Vivian Fernandes, which has been lightly edited for brevity, and annotated to place issues in context.

(Q) Extreme and aberrant weather events seem to be happening more frequently. Last year this time, during the wheat grain-filling stage there was high temperature in Punjab and Haryana. This year, there has been excess rainfall. Is this likely to affect wheat production, procurement, and prices?

Ramesh Chand: I feel the effect of this year’s weather is totally different from last year’s. Terminal heat impacts all the wheat in the field. The effect of excess rain is localised. It happens in pockets and the crop becomes flat. A large quantity of crop can be recovered. It will happen at a cost; the yield will be lower. It will need to be manually harvested; more labour will be needed. Like Madhya Pradesh saved last year, this year also Madhya Pradesh will save us. There the crop has matured, and large parts have been harvested. (In 2022, Punjab and Haryana’s wheat production was 4.5 million tonnes lower than in 2021. Madhya Pradesh’s was 4.3 million tonnes higher- Editor).

(Q) And prices will not be high like last year when there was a spike because of the conflict in Ukraine.

Ramesh Chand: Last year the price of wheat crossed more than $400 a tonne, even $450 a tonne. This year it is between $275 to $300 tonne depending on the quality. The impact on production this year, I feel, will be much less than last year, as of today. What happens one week from now – Australia and Punjab, large crop is there is the field. If there is a hailstorm it can devastate the crop. (In May 2022, the price of US benchmark wheat averaged $521 a tonne as of May 2022. It was 82.5 percent above the June 2021 price. At end of March,  it was quoting at $370 a tonne).

(Q) What about losses suffered by farmers?

Ramesh Chand: That is a concern. I used to plead with farmers’ groups that do not be misled by political parties which say that insurance does not help you, it helps private companies. Individual farmers may not (all) benefit, but farmers as a community have got five times the amount they have paid for insurance. Even states like Punjab, because of rising cases of weather aberrations, my suggestion has been to go for crop insurance. Whether it is Pradhan Mantri Fasal Bima Yojana (PMFBY) or the state’s own (scheme), they should have insurance. (Under PMFBY, farmers bear two percent of the total premium for kharif cereals and oilseeds; they pay 1.5 percent of the premium for rabi cereals and oilseeds. The rest is borne by the states and the centre).

(Q) Should the insurance scheme be modified so that the high profits which insurance companies make in some years are clawed back?

Ramesh Chand: You see, you learn all this over time. Already Mr. Poddar and Mr. Murthy (officials) of AIC (Agricultural Insurance Corporation of India) have come up with a model where in a year, if there is no (crop) loss and (insurance) companies makes supernormal profits, they share a part of it with the states. In years when the loss exceeds some reasonable rate, the states should bear a part of it. But there are other things that are more important, like quick and timely estimation of loss. Many a times delays happen because the estimates are not made in time. The second is estimating the loss at as disaggregated a level as possible. We have moved from district to taluka to block in some areas. We need to go down further and make use of GPS and other devices. If you look at how much private insurance companies charge globally – I have seen a study which reported the cost of insurance for nearly 70 countries – I find the charges here are close to the world average.


(Q) Milk prices were raised by Rs 8 per litre in 2022, the highest in nine years. Of course, there were reasons like demand destruction during the Covid pandemic resulting in shrinking of the cattle population, the spike in fodder prices last year and demand rebound. These are one off issues. Is it likely that we have more cattle heads than we can support because of the ban on culling? Are we spreading limited fodder over a larger population and not giving enough to milk-yielding cattle?

Ramesh Chand: The shortage of dry fodder is man-made. The incidence of crop residue burning is spreading in the country. It is no longer restricted to rice and north-west India. It happens even in the case of wheat which gives very good fodder. Unfortunately, even wheat fields are set on fire after being combine-harvested. Area that is combine harvested is rising. While travelling to Ahmedabad, Rajkot, Junagadh and Somnath last month, I found very large number of wheat fields were on fire after harvesting. Gujarat is a fodder scare state. I want to highlight this. If we do not put a cap on this, the situation will become very, very difficult. Even in Bihar where labour is available, farmers harvest wheat with combine harvesters and set the fields on fire after that. Wheat is very good dry fodder. It is rich in total digestible nutrients (TDN) and total crude protein (TCP). It is richer than rice (stalks). Farmers are clearing fields with fire because in some cases there is a shortage of labour and also because they want to get a third, summer crop, because power is free (or cheap).

(Q) The expansion of the cattle population is not the reason?

Ramesh Chand: No. Those numbers are very small. Also, because of lumpy skin disease (last year) about 1.55 lakh milch animals perished and milk yield was also affected. (The government told the Lok Sabha in February that 1.84 lakh cattle had died due to lumpy skin disease. The cattle population in 2019 was 193.5 million as per the livestock census).

(Q) Sir, this is the international year of millets. I have read your article where you say that there has been demand reduction in millets and demand displacement too. The supply of millets has dropped from 35 kg to 13 kg over five decades and the bottom 25 percent of the population by income is consuming less millets. Their intake has dropped from 1.6 kg per person per month to 270 grams between the NSSO surveys in 1993-94 and 2011-12. Before we tell the world to consume more millets shouldn’t we be persuading our own people to eat more of them?

Ramesh Chand: We need to pay attention to raising the production of millets. Even in the last two years it has declined from 18 million tonnes to 16 million tonnes. What I was pointing out was the double whammy for the poor. Per capita intake in the country was less than half in the period 1993-94 and 2011-12. In 1993-94, across income quintiles, the highest consumption was in the lowest income quintile. But in 2011-12, consumption in the lowest quintile was minimum across all categories. It was the upper middle class that was consuming more. Everyone needs to consume millets, but the poor, who do physical work need millets more. They are reducing it more than other people.

(q) Is this because of cultural reasons?

Ramesh Chand: There are so many reasons for it. When income improves, people tend to shift from coarse grains to so-called fine grains. Also, the dependence of the poor on PDS (public distribution system or rations) is more. In PDS wheat and rice are given.

(Q) Should millets be given in PDS?

Ramesh Chand: Provided we have millets. More millets need to be given so that the poor consume more. But we must increase production as well. Increasing the yield should get maximum priority. We should put kharif fallows under millets.

(Q) What if area under pulses shifts to millets?

Ramesh Chand:  That should not happen. We are deficient in pulses. But if a lot of awareness comes about and prices of millets go up, they are likely to replace some area under oilseeds and pulses where we have shortage. They are not going to replace rice and wheat.

(Q) In a conversation we had some time back you said conversion of paddy straw to ethanol was the best solution to stubble burning. Is it practical both financially and logistically as Punjab’s rice area is about 31 lakh hectares?

Ramesh Chand: I said the best solution is not ethanol but compressed biogas (CBG). But for anaerobic digestion to be effective we need to put something like gobar (cow dung). Ideally, it should be 20 percent. That is why, I have recently given a report on goshalas (cattle pounds) and strongly pleaded that crop residue, wherever it is getting burnt or wasted, should be mixed with cow dung so that the efficacy of CBG increases and the slurry can be used to improve soil health.

(Q) The logistics of collecting so much of straw will be daunting.

Ramesh Chand: Not with baling technology, in thickly planted areas.

(Q) It will not need subsidy?

Ramesh Chand: I think it will not be needed in areas where intensive cultivation (of rice) is happening. I got a study done by FAO (Food & Agriculture Organisation of the United Nations). For Punjab, it found there was no need for this thing (subsidy) in case of intensive cultivation.

(Q) Sir, regarding sugarcane – we are in a glut situation. Is that glut likely to continue because a blockbuster variety, CO 0238 has become susceptible to red rot fungus.

Ramesh Chand: The calculation earlier was that given the profitability of this crop farmers are likely to stick to it. That is why ethanol blending up to 20 percent (was mandated) and concession for investment in ethanol production was given. That variety is mainly grown in western UP. Glut will not go. It will only reduce. Maybe ICAR (Indian Council of Agricultural Research) is already working on finding a replacement for that variety.

(Q) I had a conversation with people in the poultry industry. They were concerned about maize, which is poultry feed, being diverted for ethanol production.

Ramesh Chand: The product will go where it gets best returns. Ideally, one should compete, but distortions should not be there.

(Q) Distortions means subsidies?

Ramesh Chand: Too much concession for ethanol. I feel maize is one crop where there is lot of scope for increasing productivity. Lot of technological changes are happening. You can grow maize 365 days a year anywhere in India. Maize prices this year are slightly better. Earlier, they used to be very low. Earlier, maize was No. 3 among cereals. Now it has surpassed paddy (not just rice which is 2/3rds of paddy) and wheat in terms of total world production.

(Q) A case has been made for a part of the rice area in Punjab to shift to maize. But that has not happened. Is it because rice is procured but maize is not.

Ramesh: No. it is not just a question of incentives only on the output side. What matters more are input subsidies. The biggest input for rice is water. As long as power is free the price incentive for maize will not work. Both should be done simultaneously. Power is in the control of the state. I am not against that. There are ways of giving it by delinking it from pumping of water. Punjab give power subsidy of about Rs 6,000 cr. We can work out how much that is per hectare. The payment can be made to farmers, but electricity should be metered. Some pilots were done, but they were left at that stage.

I feel in Punjab we can introduce soybean also in some areas provided our productivity is at par with international levels. (Punjab’s power subsidy in 2021-22 as per its budget documents was Rs 13,443 cr or 36 percent of its tax revenue – Editor).

(Q) For that we will have to introduce genetically modified (GM) soybean which is borer resistant and herbicide tolerant.

Ramesh Chand: No. there are possibilities without that, and I am working on that. In case of maize we have the technologies but in case of soybean we need to upgrade them. (India’s soybean yield is 0.99 tonnes per ha; that of the US is 3.41 tonnes per ha. Almost all of US soybean is GM).

(Q) Rice is vulnerable to climate change – sea water ingress, droughts and flooding. We are growing too much of rice and many states are incentivising its production. Should we not change the cultivation practices for less water use and also grow rice with low glycaemic index in view of the wide prevalence of diabetes?

Ramesh Chand: When we are bulk buying at minimum support prices (MSP), you can’t pay for attributes. We don’t have a separate supply chain for rice with low glycaemic index. Unless we have a different arrangement for marketing it is difficult to encourage farmers to move in that direction. I am willing to pay for rice with low glycaemic index but I don’t know whether the rice I am buying is low glycaemic index rice. That is why there is space for traceability, labelling… it will require contract farming where the produce can be taken from the field itself and kept away from normal marketing channels. All that we kept in mind when we legislated the three farm laws. (The government procures rice and wheat at minimum support prices based on fair, average quality, or FAQ. Private companies can buy agricultural produce as per attributes, brand and sell it, like ITC’s Ashirvaad Sharbati atta- Editor).

(Q) Since the farm laws have been withdrawn what is the alternative?

Ramesh Chand: The states should do something.

(Q) Like?

Ramesh Chand: Farmers had objections to certain provisions in the farm laws. States should reform by addressing those concerns. State were saying that outside the market there is no market fee (as per one of the repealed laws). So, it was not a level field. States can say that for any transaction outside the market you have to pay the same fee.

(Q) The market fee must be reduced, of course?

Ramesh Chand: One can work out that ok within the mandi (regulated market yard) it can be 2 percent and outside 1 percent. Because in the mandi, the state is providing some facilities also.

(Q) Sir, the world over, soil is regarded as a resource that needs to be conserved. Farmers are practising no-till or low-till agriculture. They do crop rotation and use bio-agents to increase the use efficiency of chemical fertilisers, build plant immunity and enable beneficial soil microbes to thrive. This consciousness has not seeped in here.

Ramesh Chand: Consciousness was there 30-40 years back. Overtime we want easy solutions. We don’t want to touch farmyard manure.

(Q) It’s not available also…

Ramesh Chand: Even what is available we don’t apply it. We are burning crop residue rather than decomposing it in the field. Waste to wealth is the way. We may not have enough farmyard manure, but we have 400-500 million tonnes of biomass which is going waste. We can convert it into compost. I don’t think in India farmers will adopt crop rotation immediately or in the near future to increase the productivity of soil. The only practical solution is to apply more farmyard manure and organic fertiliser.

(Q) What about microbials, Sir.

Ramesh Chand: Biofertiliser should be applied. Some trend has set in. If you see the growth in specialty fertilisers, some awareness is there though not at the scale needed. That’s why FCO (Fertiliser Control Order) was amended to accommodate this new kind of fertiliser.

(Q) Sir, NITI Aayog had drafted a model legislation for the state on land leasing to check the fragmentation of holdings. Have states acted on it?

Ramesh Chand: We have not monitored it. Initially, MP did something. UP did wonderful. They have changed the act to make way for introduction of tenant farmers. Even TN took initiative. Karnataka could not take it to the logical end. This is the problem with our agriculture. Most of it comes under states. The moment the centre wants to do something different bells start ringing. Even in the case of marketing, I did something pro-actively but a political leader from one of the states wrote to the Prime Minster to ask Member NITI Aayog not to speak out of turn.

(Q) There is a demand for a GST kind of council to bring the centre and states together…

Ramesh Chand: These things should come from farmers’ organisations. I often used to tell farmers unions that you raise issues like MSP but you don’t raise your voice about more fundamental issues. I also used to tell some of them that you prepare a list of issues, and whose purview they come under, and ask the concerned governments to address them. There are more pressing issues than MSP and subsidies.

(Q) And finally, about agricultural research. The United States Department of Agriculture has just come out with a report which details the concentration and market dominance of a few MNCs in the seeds and agri-inputs business. In view of that trend, we need to strengthen our public research capability.

Ramesh Chand: Modern research agriculture or in any other field is highly capital intensive and highly knowledge intensive. We are weak in both. We have not upgraded scientific skills for application of frontier sciences. Also, in terms of funding, the spending by states and the centre combined is not even 0.4 percent of agricultural GDP. Even Prime Minister Manmohan Singh said it should be raised to 1.5 percent of agricultural GDP. But after making that statement, he forgot.

I will summarise it in a different way: Globally, agriculture is getting more focus now. One reason is survival in the time of climate change. You have to do agriculture differently. Secondly, much of the durable solutions to health do not lie in medicines but in food. Manufacturing, which economists considered as an engine of growth, is not proving that strong. People are looking back at agriculture. And even manufacturing will become agriculture-centric because of preference of people for bios (biologicals). In India, manufacturing is not creating the jobs required. The standard theory that people need to move out of agriculture is not happening. Because of this, there is need for renewed emphasis on agriculture.

(This interview was first published in BQPrime on 10 April, 2023)

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