Moving beyond Post harvest losses: Part 2

In an effort to understand the problem of post harvest losses and the resulting plight of small and marginal farmers, I took a closer look at the existing post harvest agricultural value chain, starting from the farm to the end consumer. The various components of this agri value-chain included Farmer > Mandi/ marketplace > Warehousing > Distribution network, and ultimately End-consumer. After listing the problems witnessed within each of the value chain components, I realized that “lack of grain storage facilities” was the fundamental problem that created a ripple effect across the subsequent components of the post harvest value chain.

Lack of modern grain storage facilities, coupled with the impending monsoon rains and the urgent need to settle debts and obligations, force farmers to; either participate in distress sale of crops or accept imperfect procurement practices prevailing in mandis. Most often, the farmer does not get the full price for his full crops and is therefore unable to break-even with his input costs. As a result, he is unable to rise out of poverty and provide a better lifestyle for his family.

A narrow procurement window before the monsoon rains, results in tardy procurement practices at the mandis/ market yards. While procurement agents and government agencies work against deadlines to meet procurement targets, fleet operators are challenged for availability of trucks and rail rakes to move food grains to various warehouses for proper storage.

A 2013 CAG report revealed that India had 66.79 million metric tons of food grain stocks in central pool of which 33.60 million metric tons was in covered storage facilities. The remaining 33.19 million metric tons of food grains was being stored in the open using a “Cover and Plinth” (CAP) system in which food grains are stacked on elevated wooden plinth and crates, before being properly covered with specifically fabricated low-density black polythene waterproof covers and tied with nylon ropes and nets. Lastly, unavailability of trucks, rail racks and high storage costs at government warehouses further compound the problem.

The Public Distribution System (PDS) of food grains in India is a government program designed to ensure availability of food grains to poor at subsidized rates. The program has its own set of problems and food subsidies bill has galloped from INR 25,181 crores in 2003 to nearly INR 75,000 crores in 2013; a three-fold increase in the last ten years. Inflation of food prices results in households spending more on food and less on other essentials such as education, health and discretionary goods.

In my humble opinion, micro grain storage solutions for small and marginal farmers at the village level would allow farmers to safely store their harvests on a rental basis, facilitate pledge financing and assist in availing improved market prices at a later date. Farmers can be saved from the existing post harvest hassles at mandis and post harvest losses can be stemmed with these micro grain storage solutions. Rural prosperity will ensure better agricultural practices, create new demand for goods and services and gradually integrate rural India with the national mainstream.

When I filed my first RTI application with FCI and CWC, I must admit that I was not sure of the magnitude of post harvest losses incurred at various warehousing facilities in India. Losses totaling 502,389 tons of rice and 136,206 tons of wheat during 1998 – 2012 only reveal the tip of the iceberg. India has nearly 27+ State Warehousing Corporations (SWC) along with Central Warehousing Corporation (CWC) and other quasi-government agencies who administer grain storage facilities. If an honest attempt were made to account for the post harvest losses at these facilities for the same period, post harvest loss figures would be much higher. 

"Save Indian Grain.Org (SIGO)...a social enterprise, dedicated to the design, development and delivery of modern grain storage solutions, subsistence marketplaces and agri chain networks for small and marginal farmers in rural India."

Moving beyond Post harvest losses: Part 1

Overview

Post harvest losses (henceforth: PHL) of agricultural commodities result in food unfit for human consumption. Lack of modern grain facilities result in lost pledge-financing opportunities; bottlenecks at mandis due to uncoordinated business processes during a narrow procurement window; leading to predatory procurement practices detrimental to farmers’ interests.  Micro-grain storage facilities located in a cluster of villages can usher rural prosperity and help India stem post harvest losses at government warehouses.

Post Harvest Losses (PHL)

PHL of agriculture commodities refers to the loss and waste of food, incurred during various stages of the agricultural value chain; namely, production, post harvest handling & storage, processing, distribution and consumption. A 2011 FAO study Global Food Losses and Food Waste, stated that “roughly one-third of food produced for human consumption is lost or wasted globally, which amounts to about 1.3 billion tons per year". In a perfect world, this global food loss and waste would have fed millions of people suffering from hunger by meeting their minimum nutritional requirements.

In 2013, I was moved by media reports of grain rot at various government storage facilities and filed an information query under the Right To Information (RTI) Act, with the Food Corporation of India (FCI) and Central Warehousing Corporation (CWC); two nodal agencies entrusted with the procurement, storage and distribution of food grains in India. While, CWC expressed their inability to respond to my query on the grounds of information requested being too wide in nature, information from FCI’s various offices revealed that 502,389 tons of rice and 136,206 tons of wheat were subject to food loss and waste during 1998 – 2012. In present day, the value of these food stocks indexed to inflation, would amount to nearly 700 crore INR or 122 million USD.  

Problem

Majority of cultivators in India have tiny landholdings and are defined as small and marginal farmers. While small farmers are classified as cultivators having up to 2 hectares (5 acres) of land, marginal farmers are those who have up to 1 hectare (2.5 acres). Given their small land holdings, crop harvests are meager in volumes and they have an urgent need to make a sale to meet their debts and obligations. Further, lack of access to modern grain storage facilities and the looming monsoon rains ensures lost opportunities for pledge-financing.

In 1960s, fresh from the success of Green Revolution, Government of India initiated a series of measures to improve and organize the marketing of agricultural commodities through a network of regulated markets.  State governments were advised to enact APMC Act, a marketing legislation that would ensure fair environments for market forces, allow regulation of market practices and bring transparency in transactions. Farmers were required to bring their entire harvest/ produce and sell at government regulated mandis. Further, traders participating at these mandis had to get licenses to trade from the state agricultural marketing boards. The ultimate objective of market regulation was to protect the interests of the farmers through fair prices for his produce, timely payments by traders, and prevent exploitation by intermediaries and wholesale buyers.  However, with time, the licensing process at mandis became opaque and led to the creation of a monpolistic business environment.

In recent years, Indian agriculture has witnessed bumper crops due to timely monsoon rains and generous minimum support prices (MSP) for principal kharif and rabi crops. MSP is a price determined and declared by Government of India at which government procurement agencies procure wheat, paddy and coarse grains from farmers. MSP for various commodities is decided on the basis of recommendations made by the Commission of Agricultural Costs and Prices (CACP) after consultations with various state governments, agencies and prevailing factors. The idea is to prevent distress sale of crops and ensure farmers’ profits. Food grains procured by agencies such as Food Corporation of India, are then stored, transported and distributed countrywide to masses under the Public Distribution System (PDS).

Bumper crops create a glut in supply of food grains; thereby depressing the market prices in the tezi mandi/ open markets.  As a result, the MSP offered at the mandis are the highest available, and the farmer is keen to avail this price. Farmers flock to the nearest mandis with their crops in their bullock carts, tractor or pick-up trucks and attempt to get their harvest sold. While grain merchants and government appointed procurement agents vie with each other during auction to ensure procurement of high quality food grains, fleet operators are seen jostling for right of way where no room exists and mandi officials strive to make sense where no one wants to listen.  The farmer is relieved to sell his harvest and faces the ultimate challenge of getting the payment from the mandi/ market yard to clear at the local bank. Post harvest processes, namely; storage, sale and payment seem to be the bigger challenges in the entire crop cycle.