AGRIBUSINESS ENVIRONMENT & POLICY

Dr. S.V. Warade

Assistant Professor School of Agri-Business Management, Nagpur Dr. PDKV,Akola

Objective of the Course

1.Exposure to the environment in which the agribusiness is conducted. 2. Understanding micro and macro environmental forces and their impact on agri-business

Role of agriculture in Indian economy

1. Share in GDP 14.60% in 2009-10 ( 55.10 % in 1950-51) 1. growth rate of GDP = 0.4 % (2009-10) = advanced estimate 5.4% (2010-11) 2. Provide surplus food for growing population. 3. Share agricultural trade /agribusiness. 1. Export 10.59% (2009-10) 2. Import 4.38% (2009-10) 4. Major employer in India : 58.20 % in 2009-10 (69.50% IN 1950-51) 1. Base of Secondary(industrial ) and Tertiary sector(Service).( provide raw material to industry) 2. Foodgrain production 218 MT 2009-10 (Growth rate is 1.96 % base 2000-01) 3. It is market of non-agri goods
Source : Central Statistical Organization (CSO) and Department of Agriculture and Cooperation.

About Us Indicator
Geographical Area (million ha ) Forest Area (Lakh Sq Km) Gross Cropped Area (Million Ha) Irrigated Area (million Ha) Cotton Area (million Ha) Literacy Sex Ratio Percentage of Rural Population

India
329 7.74 195.8 87.2 (45.00% of GCA) 9.08 64.84 922 72.18

Maharashtra
30.80 0.62 22.6 4.0 (18% of GCA) 3.06 76.88 933 57.57

Indicator
Live stock (Lakh ) Foodgrain Production (Million tonnes) Working Factories (Thousand) Annual industiral Employment (thousand) Electricity Generation (Million Kwh) Electricity Consumption (million Kwh) Number of Banks Per capita Income (Rs)

India
4850.02 118 129.87 19,794 7,41,167

Maharashtra
370.58 12.55 18.05 3,024 75,195

5,27,566 85,886
52,421

72,994 8,120
81,579

Indicator
Share of Agriculture in GDP/GSDP Export of Agri Import of Agri Agriculture GDP/GSDP Share Industry GDP/GSDP Share Services GDP/GSDP Share

India
14.60 10.59% of total export 4.38 % of total import 14.6 33.6 52.2

Maharashtra
10.2

10.2 30.9 58.9

Scope for Agri-business in India

The food chain in India from the farmer to the consumer involves several intermediaries leading to handling at multiple points and longer transit time. Only 25% of the consumer s rupees reaches the farmer as compared to 50% in developed countries. It is estimated that 20% of the food produced in India is wasted. This is valued more than Rs 50,000 crores approximately. This wastage is equal to the amount that the government spends on food subsidy by more than 3 to 4 times. India produce a wide range of fruits and vegetables of both the topical and temperate varieties because of the varied climatic conditions in our country. India having around 4000 fruit processing units with an aggregate capacity of more than 12 lakh MT (less than 4% of total fruits produced). Unfortunately, around 2.20% of fruits & Vegetables are processed as against 30% in Thailand, 70% in Brazil, 78% in Philippines and 80% in Malaysia. The wastage is estimated as high as over 25% of the total production of fruits and vegetables. The cold chain system is primitive and under developed. The existing capacity of 1 million tonnes is primarily used for storage of potatoes. The current method of forecasting of agricultural produce does not provide for any time to take corrective action in terms of crop failure or surplus.

Scope for Agribusiness in India

Only around 1 percent of India's annual meat production of over 4.5 million tons is converted to value-added products. Milk processing level is 35 percent, which is, 13 % in the organized and 22 % in the unorganized sector. Out of the total production of bread, 40 percent is produced in the organized sector and the remaining 60 percent in the unorganized sector. Similarly, production of biscuits in the organized sector is about 80 percent and quantity of biscuits produced in the unorganized sector is about 20 percent. Processing level of buffalo meat is estimated at 21 percent, poultry 6 percent, and marine products 8 percent. India's share of processed food is about 1.6%.

Concept of Agri-Business Management

Agri-business can be defined as a process of planning, organizing, staffing, Leading and controlling in the agribusiness It is commercialization of agriculture, which refers to market orientation of agricultural production process. Transition from subsistence to commercial agriculture. From production oriented approach to market oriented approach

Agribusiness Management emphasize on

1. Appropriate Quantity 2. Best Quality 3. Timeliness 4. Cost reduction 5. Specialization 6. Optimization 7. Output Maximization

Traditional Agriculture Produce and sell homogenous commodities Emphasis on traditions in agriculture Emphasis on technical skills Food security is primary concern for production Marketing is organized in centrally planned economy Increased role of government to protect the farmers Low income low risk for farmers

Agribusiness Management Produce specific attributes and differentiated products Emphasis on innovations Emphasis on managerial skills Production is diversified as per market demand Marketing is conducted in market economy. Partnership web between farmers, corporate business and government High income high risk for farmers

Agricultural Economics : Optimisation of resources and output(efficiency). Allocation of resources at optimum level to get optimum output or euilibrium (MC=MR) Agri-Business: Agribusiness is the trade of commerce ( Exchange activity) in agriculture. AgriBusiness Management: Whereas optimisation technique(i.e. efficiency/agricultural economics) is used at every stage of business includes be input marketing, production, processing and marketing.

Agribusiness System
Input 1. Innovation of new technology 2. Availability of inputs to farmers in proper quantity of good quality at appropriate time at appropriate cost 3. Extension Approach Institutions Output 1. Crop planning 2. Maximize production 3. Maximize input use efficiency 4. Food security 5. Employment generation 6. Sustainability of natural resources Market 1.Identifying the market 2. Proper return to farmer 3. Higher consumer satisfaction 4. Appropriate market channel 5. Low marketing cost 6. Higher market efficiency 7. Low wastage 8. Increase value addition

Foodgrains Production in India

Year Area (Million hectares) 97.3 115.6 124.3 126.7 127.8 123.1 123.2 Production Productivity (Million (Kg./ha.) tonnes) 50.8 522 82.0 710 108.4 872 129.6 1023 176.4 1380 208.9(4 times) 1697 218 1798

1950-51 1960-61 1970-71 1980-81 1990-91 1999-2000 2009-10

Population growth = 36.10 cr in 1950-51 crores to 121 crores in 2011

Problems and Policy changes relating to farm supplies

Seeds
Seeds, which are considered the carriers of new technology for crop production and higher crop yields, are a critical input for sustained growth of agriculture. In India more than four-fifths of the farmers rely on farm-saved seeds leading to a low seed replacement rate.

Seeds
The Indian Seed Programme includes the participation of Central and State Governments, the Indian Council of Agricultural Research (ICAR), State Agricultural Universities, the cooperative and private sectors. There are 15 State Seed Corporations besides two national-level corporations, namely National Seeds Corporation and State Farms Corporation of India.

Nucleus seed Breeders seed Foundation seed Registered seed Certified seed

Foundation seeds is around 10 times more than breeder seeds Certified seeds is around 15-20 times more than foundation seeds

Seeds
The Ministry of Agriculture is implementing the Central-sector Development and Strengthening of Infrastructure Facilities for Production and Distribution of Quality Seeds scheme. The aim of the scheme is to make quality seeds of various crops available to farmers timely and at affordable price. Under this scheme, the seed component of the Prime Minister s Relief Package is being implemented in 31 suicide-affected districts of Maharashtra, Andhra Pradesh, Karnataka and Kerala, to supply certified seeds at 50 per cent of seed cost. During the year 2008-09, Rs 445.81 crore was released under the Prime Minister s Relief Package

Seeds
The scheme is being implemented on all -India basis from the year 2005-06. The major thrusts under the scheme are on improving quality of farm saved seeds through Seed Village Programmes, to enhance seed replacement rate (It is the percentage of area sown of certified/quality seeds other than the farm saved seed), boosting seed production in the private sector and helping public sector seed companies to contribute to enhancing seed production. Some of the remarkable achievements under the scheme during 2008-09 were that more than 1,31,023 seed villages were organized across the country; certified/quality seed production increased from 194.31 lakh quintals during 2006-07 to 250.35 lakh quintals during 2008-09; 183.10 lakh seeds 2009-10

Seeds
52 seed infrastructure development proposals were sanctioned for boosting seed production in the private sector; and financial sanctions were given for establishing tissue culture facilities in Orissa (banana) and Maharashtra (pomegranate). Further, Biotech Consortium of India Limited (BCIL) was engaged as an expert agency to undertake public awareness programmes in nine BT cotton- growing States at State capital, district and tehsil levels. The BCIL has been provided financial assistance of Rs 26.65 lakh during the year 2008-09.

Seeds
The Protection of Plant Varieties and Farmers Rights (PPV&FR) Authority, established in November 2005 at the National Agricultural Science Complex (NASC), New Delhi, has been mandated to implement provisions of the PPV&FR Act 2001. Fourteen crops, namely rice, wheat, maize, sorghum, pearl millet, chick pea, peagion pea, green gram, black gram, lentil, field pea, kidney bean, cotton and jute were notified for the purpose of registration under the Act. There are plans to extend its operations and coverage to forestry and aromatic and medicinal plants.

Seeds
Considering the vital importance of the seeds sector in promoting agricultural growth, it is proposed to replace the existing Seeds Act 1966 by suitable legislation. The new Act is expected to (i) create a facilitative climate for growth of the seed industry, (ii) enhance seed replacement rates for various crops, (iii) boost the export of seeds and encourage import of useful germ plasm and (iv) create a conducive atmosphere for application of frontier sciences in varietal development and for enhanced investment in research and development (R&D). The Seeds Bill was introduced in the Rajya Sabha in 2004. It was referred to the Parliamentary Standing Committee on Agriculture which recommended several modifications in 2008. These would be taken up for consideration by Parliament

Fertilizers
Chemical fertilizers have played a significant role in the development of the agricultural sector. The per hectare consumption of fertilizers in nutrients terms increased from 105.5 kg in 2005-06 to 135.3 kg in 2009-10. However, improving the marginal productivity of soil still remains a challenge. This requires increased NPK application and application of proper nutrients, based on soil analysis.

Fertilizers
A new scheme, the National Project on Management of Soil Health & Fertility (NPMSF), has been introduced in 2008-09 with a view to setting up of 500 new Soil Testing Laboratories (STLs) and 250 Mobile Soil Testing Laboratories (MSTLs) and strengthening of the existing State STLs for micronutrient analysis. In order to ensure adequate availability of fertilizers of standard quality to farmers and to regulate trade, quality and distribution in the country, fertilizers have been declared an essential commodity as per the Fertilizer Control Order (FCO) 1985 promulgated under Section 3 of the Essential Commodity Act 1955.

Fertilizers
The procedure for incorporation of new products has been liberalized and simplified to encourage manufacture and use of fortified fertilizers. Eight fertilizers have been specified as fortified fertilizers(basic/strong) in FCO 1985. To encourage balanced use of fertilizers, a new concept of customized fertilizers has been introduced. These fertilizers are soil specific and crop specific. Organic fertilizers, namely city-based compost and vermin compost, and bio-fertilizers, namely rhizobium, azotobacter, azospirillum and phosphate solubilizing bacteria, have been recognized and incorporated in FCO(Fertilizer Control Order) 1985.

Irrigation
Irrigation is one of the most important critical inputs for enhancing the productivity that is required at different critical stages of plant growth of various crops for optimum production. The Government of India has taken up irrigation potential creation through public funding and is assisting farmers to create potential on their own farms. Substantial irrigation potential has been created through major and medium irrigation schemes. The total irrigation potential in the country has increased from 81.1 million ha in 1991-92 to 108.2 million ha by March 2010

Irrigation
The Central Government initiated the Accelerated Irrigation Benefit Programme (AIBP) from 1996-97 for extending assistance for the completion of incomplete irrigation schemes . Under this programme, projects approved by the Planning Commission are eligible for assistance. Further, the assistance, which was entirely a loan from the Centre in the beginning, was modified by inclusion of a grant component with effect from 2004-05.

Irrigation
AIBP guidelines were further modified in December 2006 to provide enhanced assistance at 90 per cent of the project cost as grant to special category States, Drought Prone Area Programme (DPAP) States/tribal areas/flood-prone areas and KoraputBalangir-Kalahandi (KBK) districts of Orissa. Under the AIBP, Rs 41,729.37 crore of Central Loan Assistance (CLA)/grant has been released up to March 31, 2010. An additional irrigation potential of 64 lakh ha has been created under the AIBP up to March 2010. As on March 31, 2010, 281 projects have been covered under the AIBP and 120 completed

PRICE POLICY FOR AGRICULTURAL PRODUCE

Objectives To ensure remunerative prices to the growers. Reasonable price to buyer A balanced and integrated price structure

PRICE POLICY FOR AGRICULTURAL PRODUCE

Minimum support prices (MSPs) Purchase operations to control market prices. Central nodal agencies intervene in the market to undertake procurement operations(NAFED, FCI)

PRICE POLICY FOR AGRICULTURAL PRODUCE

Commission for Agricultural Costs and Prices (CACP) Assurance of a remunerative and stable price environment Agricultural Prices Commission was set up in January, 1965 1985, Commission for Agricultural Costs and Prices
i) Cost of production ii) Changes in input prices iii) Input-output price parity iv) Trends in market prices v) Demand and supply vi) Inter-crop price parity vii) Effect on industrial cost structure viii)Effect on cost of living ix) Effect on general price level x) International price situation xi) Parity between prices paid and prices received by the farmers. xii) Effect on issue prices(paid by govt agency) and implications for subsidy

PRICE POLICY FOR AGRICULTURAL PRODUCE Price Support Scheme (PSS)

The Department of Agriculture & Cooperation is implementing the Price Support Scheme (PSS) Procurement of oilseeds and pulses through (NAFED), NAFED is also the Central agency NAFED undertakes procurement of oilseeds, pulses and cotton Procurement under the PSS is continued till prices stabilize at or above the MSP

PRICE POLICY FOR AGRICULTURAL PRODUCE Market Intervention Scheme (MIS)

The Department of Agriculture & Cooperation implements the MIS for procurement of agricultural and horticultural commodities that are generally perishable in nature and not covered under the PSS. to protect the growers of these commodities from having to make distress sales. In the event of a bumper crop and glut in the market, prices tend to fall below economic levels/cost of production. .

CREDIT AND INSURANCE Agricultural Credit Adequate and timely credit support to farmers for their cultivation needs, The Kisan Credit Card Scheme (KCC) was introduced in August 1998. About 970.64 lakhs KCCs have been issued (up to November 2009. Provide both consumption credit and investment credit Crop loans up to a principal amount of Rs 3 lakh, at 7 per cent rate of interest. 6 per cent per annum , who from the current year

CREDIT AND INSURANCE Agricultural Credit

A package for revival of short-term Rural Cooperative Credit (2006) = Rs 13,596 crore. (MoUs) between the Government of India and NABARD, committing to implementing revival package. Twenty-five(25) States have executed MoUs with the Government of India and NABARD. This covers 96 per cent PACS and 96 per cent of the Central cooperative banks (CCBs) in the country. As on November 2010, Rs 8009.75 crore has been released by NABARD for recapitalization.

CREDIT AND INSURANCE Agricultural Credit A rehabilitation package for 31 suicide-prone districts Financial outlay of Rs 16978.69 crore.

CREDIT AND INSURANCE Agricultural Credit A debt waiver and debt relief scheme 2008-09 Overdue as on December 31, 2007 and which remained unpaid until February 29, 2008, are eligible for debt waiver or debt relief. About 3.68 crore farmers have benefited from the scheme Debt waiver and debt relief of Rs 65,318.33 crore

CREDIT AND INSURANCE Agricultural Insurance Uncertainty and risk in agricultural production. The National Agricultural Insurance Scheme (NAIS) 19992000, for risk management in agriculture Providing financial support to farmers in the event of crop failure as a result of natural calamities, pests and diseases. The scheme is open to all the farmers loanee and nonloanee-irrespective of their size of holding. Loanee farmers are covered on compulsory basis in a notified area for notified crops.

CREDIT AND INSURANCE Agricultural Insurance All food crops, oilseeds and annual commercial/ horticultural crops are covered under NAIS, In respect of which past yield data= bench mark/base line. 25 States and two Union Territories. 1,347 lakh farmers over an area of 2,109 lakh ha have been covered, Insuring a sum of Rs 1,48,250 crore.

CREDIT AND INSURANCE Agricultural Insurance Pilot Modified NAIS (MNAIS) Modified NAIS for implementation on pilot basis in 50 districts from rabi 2010-11 season. The major improvements made in the MNAIS are: Actuarial premium with subsidy in premium at different rates, i.e. 40 per cent to 75 per cent depending upon the slab, provided to farmers, all claims liability on the insurer, unit area of insurance reduced to village panchayat level for major crops, indemnity for prevented/sowing/planting risk and for post harvest losses due to cyclone, payment up to 25 per cent advance of likely claims as immediate relief,

CREDIT AND INSURANCE Agricultural Insurance Pilot Modified NAIS (MNAIS) more proficient basis for calculation of threshold yield, minimum indemnity level of 70 per cent instead of 60 per cent, and private-sector insurers with adequate infrastructure allowed (at present, ICICI Lombard, IFFCO-Tokio and Cholamandalam-MS). Only upfront premium subsidy is shared by the Central and State Governments on 50: 50 basis and claims are the liability of the insurance companies. Seven States have already notified the areas for implementation of the scheme during Rabi 2010-11. It is expected that the scheme will be notified by 14- 15 States.

CREDIT AND INSURANCE Agricultural Insurance Weather Based Crop Insurance Scheme (WBCIS) Covered By: State Agriculture Insurance Company (AIC), and other private insurers like ICICI Lombard General Insurance, Iffco-Tokio General Insurance etc. 13 States to provide insurance protection to farmers against adverse weather incidences which adversely impact crop production. During this period 81 lakh farmers have been covered.

CREDIT AND INSURANCE Agricultural Insurance Coconut Palm Insurance Scheme (CPIS) 2009-10 Covered by: The Agriculture Insurance Company of India (AIC) It operates under Coconut Development Board. Area Covered : Andhra Pradesh, Goa, Karnataka, Kerala, Maharashtra, Orissa and Tamil Nadu. Eligibility: a farmer should have at least 10 healthy nutbearing palms in the age group 4 to 60 years 14.33 lakhs palms are covered under the scheme. 27,023 farmers are covered

MARKETING AND EXTENSION Agricultural Marketing Organized marketing of agricultural commodities has been promoted in the country through a network of regulated markets. Agriculture Produce Marketing Committee Act : to provide for regulation of agricultural produce markets. 7,139 regulated markets in the country as on March 31, 2009. 20,868 rural periodical markets, about 15 per cent of which function under the ambit of regulation.

MARKETING AND EXTENSION Agricultural Marketing Model law on agricultural marketing(2003)

The legislation provides for establishment of private markets/yards, direct purchase centres, consumers/farmers markets for direct sale. To promote contract farming arrangements Promotion of public-private partnership in the management and development of agricultural markets in the country. Provision has also been made in the law for constitution of state agricultural produce marketing standards bureaus for promotion of grading, standardization and quality certification of agricultural produce. This would facilitate pledge financing, direct purchasing, forward/ futures trading and exports. Sixteen states/UTs have amended their APMC acts and the remaining states are in the process of doing so APMC model rules based on the model law are under formulation in consultation with States.

MARKETING AND EXTENSION Extension reforms The Government supports transfer of agricultural technologies and information to the farming community through various initiatives. The Support to State Extension Programmes for the Extension Reforms scheme launched in 2005-06, aims to make the extension system farmer driven and farmer accountable by way of new institutional arrangements for technology dissemination in the form of an Agricultural Technology Management Agency (ATMA) at district level.

MARKETING AND EXTENSION Extension reforms The ATMA has active participation of farmers/farmer groups, nongovernmental organizations (NGOs), KVKs, PRIs and other stakeholders operating at district level and below. Up to January 2010, 595 districts-level ATMAs have been established. Gender : 30 per cent of resources on programmes and activities are allocated for women farmers and extension functionaries. Since inception, out of a total of 10.19 crore farmer beneficiaries, 25.80 lakh women farmers (25.34 per cent) have participated in various extension activities under the scheme. Further, the Mass Media Support to Agriculture scheme is focusing on the use of Doordarshan infrastructure for providing agriculture-related information and knowledge to the farming community.

MARKETING AND EXTENSION Extension reforms Mass media initiative is use of 96 FM transmitters of All India Radio (AIR) to broadcast area-specific agricultural programmes with 30- minute radio transmission in the evening, six days a week. The Kisan Call Centres scheme provides the farming community agricultural information toll-free telephone lines 1800-180-1551 The Agri-clinic and Agri-business Centres Scheme launched in 2002 provides extension services to farmers through agriculture graduates by viable self-employment ventures.

MARKETING AND EXTENSION Extension reforms NABARD monitors the credit support to Agri-clinics Subsidy at 25 per cent of the capital cost of the project funded through bank loan. The subsidy would be 33.33 per cent in respect of candidates belonging to Scheduled Castes (SC), Scheduled Tribes (ST), women and other disadvantaged sections Under the scheme, 19,854 unemployed agriculture graduates have been trained up to December 2009.

PUBLIC DISTRIBUTION SYSTEM

Objectives Procurement of foodgrains from farmers at remunerative prices, Distribution of foodgrains to consumers, Particularly the vulnerable sections of society, At affordable prices and Maintenance of food buffers for food security and price stability. The instruments used are the MSP and central issue Price (CIP).

PUBLIC DISTRIBUTION SYSTEM

Objectives The nodal agency which undertakes procurement, distribution and storage of foodgrains is the Food Cororation of India (FCI). Procurement at MSP is open-ended, Distribution is governed by the scale of allocation and its offtake by the beneficiaries. The off take of foodgrains is primarily under the targeted public distribution system(TPDS) and for other welfare schemes of the Government of India. Offtake of foodgrains under the TPDS has been increasing in the last five years and has gone up from 29.7 million tonnes in 2004-05 to 34.8 million tonnes in 2008-09.

PUBLIC DISTRIBUTION SYSTEM Decentralized Procurement Scheme (DCP) Introduced in 1997, Foodgrains are procured and distributed by the State Governments themselves. States procure, store and issue foodgrains under the TPDS and welfare schemes of the Government of India. The difference between the economic cost fixed for the State and the CIP is passed on to the State Government as subsidy. Objectives: covering more farmers under MSP operations, improving efficiency of the PDS, providing foodgrains varieties more suited to local tastes and reducing transportation costs.

PUBLIC DISTRIBUTION SYSTEM The economic cost of foodgrains consists of three components, MSP (and bonus) as the price paid to farmers, procurement incidentals and Cost of distribution.

PUBLIC DISTRIBUTION SYSTEM Sugar The estimated sugarcane production in 2009-10 is 2,494.81 lakh tonnes 2,739.31 lakh tonnes as per estimates 2008-09. 9 per cent decline in the production The estimated production of sugar in the 2009-10 =160 lakh tonnes( 116 LT decline) 2007-08 = 263 lakh tonnes 2006-07 = 282 lakh tonnes

PUBLIC DISTRIBUTION SYSTEM Sugar The Government has taken a number of measures to augment domestic stocks of sugar and to moderate prices. Includes allowing sugar mills to import dutyfree raw sugar under the advance authorization scheme from February 17, 2009, Under open general license (OGL) by sugar mills Allowing import of white/refined sugar by STC/MMTC/ PEC and NAFED up to 1 million tonnes under OGL at zero duty up to March 31,2010. Fair and remunerative price (FRP) to provide reasonable margins to sugarcane farmers on account of risk and profit. The Central Government has fixed an FRP of Rs129.84 per quintal

PUBLIC DISTRIBUTION SYSTEM Edible Oil To increase the availability and control prices of edible oils, Government has reduced the custom duties on crude and refined edible oils to nil and 7.5 per cent respectively since April1, 2008 upto 2010. Export of all major edible oils from the country has been banned since 2008 to 2010 Imported edible oils were distributed through State Governments/UTs at the rate of 1 kg per ration card per month.

Commodity Future Market Commodities traded: agricultural commodities, bullion, crude oil, energy and metal products. The commodity futures market facilitates the price discovery process and provides price risk management. Its effectiveness depends on the wider participation of all the stakeholders. The average daily value of trades in the commodity exchanges improved from Rs 16,400 crore during 2008 to Rs 23,200 crore in 2009. The total value of trades in the commodity futures market rose from Rs 50.34 lakh crore in 2008 to Rs 95.90 lakh crore during 2010. The Multi Commodity Exchange, Mumbai, recorded the highest turnover in terms of value of trade during 2009, followed by the National Commodity & Derivatives Exchange Ltd. (NCDEX) and National Multi Commodity Exchange of India Ltd. (NMCE) respectively

Commodity Future Market Value of trade in agricultural commodities was about 16.33 per cent. Agricultural commodities, however, accounted for 38 per cent of the total volume of trade.

Commodity Future Market

Forward Markets Commission (FMC), the regulator for commodity futures trading. To counterbalance the speculative element in price discovery and increasing the awareness level of farmers and other market participants was emphasized. Take initiatives to prevent market manipulation Ensure market integrity, financial integrity and customer protection. The issuance of guidelines for bringing members of the commodity exchanges guidelines for disinvestment of the equity by the existing national exchanges after five years of their operation. A price dissemination project was initiated by the FMC, under which spot and future prices of agricultural commodities would be made available to farmers on real-time basis on electronic price ticker boards placed at APMC

Commodity Future Market

Introduction of exchange of futures for physicals (EFP) and alternate futures settlement mechanism, Allowing higher position limits to NAFED To facilitate hedging and delivery by them and introduction of early delivery system in select commodities. Efforts were made to develop an aggregation model in collaboration with commodity exchanges to promote participation of farmers.

Commodity Future Market Revocation(cancel) of suspension of futures trading 4 commodities : chana, soy oil, rubber and potato, 2008. Revocation of suspension of trading in wheat in 2009. The futures trading in sugar has been suspended till 2010.

Commodity Future Market

DEVELOPMENT OF ELECTRONIC SPOT EXCHANGES The Government has allowed the National Commodity Exchanges to set up three spot exchanges in the country, namely the National Spot Exchange Ltd. (NSEL), NCDEX spot Exchange Ltd. (NSPOT) and National Agriculture Produce Marketing Company of India Ltd. (NAPMC). These spot exchanges have created an avenue for direct market linkage among farmers, processors, exporters and end users with a view to reducing the cost of intermediation and enhancing price realization by farmers. They will also provide the most efficient spot price inputs to the futures exchanges. The spot exchanges will encompass the entire spectrum of commodities across the country will bring home the advantages of an electronic spot trading platform to all market participants in the agricultural and nonagricultural segments. On the agricultural side, the exchanges would enable farmers to trade flawlessly on the platform by providing real-time access to price information and a simplified delivery process, thereby ensuring the best possible price.

Commodity Future Market

DEVELOPMENT OF ELECTRONIC SPOT EXCHANGES On the buy side, all users of the commodities in the commodity value chain would have simultaneous access to the exchanges and be able to procure at the best possible price. Therefore the efficiency levels attained as a result of such flawless spot transactions would result in major benefits for both producers and consumers. These Spot Exchanges will also provide a platform for trading of Warehouse Receipts.

Agricultural Manufacturing Industry 1. Growth in industry as whole : 11.00% 1. Mining : 9.5 % 2. Manufacturing: 11.9% 3. Electricity : 4.0% 2. Growth in components of agri-based industry(base 199394) in 2008-09 1. Food products : 7.0 % 2. Beverages , Tobacco: 12.0% 3. Jute textile: 33.1 % In first quarter of 2009-10 , all these agri components are negative

Agricultural Manufacturing Industry Capital Employed per worker ( dollars) 1. 2. 3. 4. 5. Bread Bakery products: 3500 Cotton yarn and cloth: 1800 Flour and gristmill products: 5600 Sugar industry: 2600 Wood, paper Industry: 600

Indian Budget Agriculture Removal of production and distribution bottlenecks for items like fruits and vegetables, milk, meat, poultry and fish to be the focus of attention this year. Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from ` 6,755 crore to ` 7,860 crore.

Indian Budget Agriculture Bringing Green Revolution to Eastern Region To improve rice based cropping system in this region, allocation of 400 crore has been made. Integrated Development of 60,000 pulses villages in rainfed areas Allocation of 300 crore to promote 60,000 pulses villages in rainfed areas. Promotion of Oil Palm Allocation of 300 crore to bring 60,000 hectares under oil palm plantations. Initiative to yield about 3 lakh Metric tonnes of palm oil annually in five years.

Indian Budget Agriculture Initiative on Vegetable Clusters Allocation of 300 crore for implementation of vegetable initiative to provide quality vegetable at competitive prices. Nutri-cereals Allocation of 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties. National Mission for Protein Supplement Allocation of 300 crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries.

Indian Budget Agriculture Accelerated Fodder Development Programme Allocation of 300 crore for Accelerated Fodder Development Programme to benefit farmers in 25,000 villages. National Mission for Sustainable Agriculture Government to promote organic farming methods, combining modern technology with traditional farming practices.

Indian Budget Agriculture Agriculture Credit Credit flow for farmers raised from 3,75,000 crore to 4,75,000 crore in 2011-12. Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for providing short-term crop loans to farmers who repay their crop loan on time. In view of enhanced target for flow of agriculture credit, capital base of NABARD to be strengthened by ` 3,000 crore in phased manner. 10,000 crore to be contributed to NABARDs Short-term Rural Credit fund for 2011-12.

Indian Budget Agriculture Mega Food Parks Approval being given to set up 15 more Mega Food Parks during 2011-12. Storage Capacity and Cold Chains Augmentation of storage capacity through private entrepreneurs and warehousing corporations has been fast tracked. Capital investment in creation of modern storage capacity will be eligible for viability gap funding of the Finance Ministry.

Indian Budget Agriculture Agriculture Produce Marketing Act In view of recent episode of inflation, need for State Governments to review and enforce a reformed Agriculture Produce Marketing Act.

Agriculture risk management

Risk: A state of uncertainty where some of the possibilities involve a loss or other undesirable outcome. Uncertainty: The lack of complete certainty, that is, the existence of more than one possibility. The "true" outcome/state/result/value is not known. Risk Management - A process to identify, assess, manage, and control potential events or situations, to provide reasonable assurance regarding the achievement of the organization's objectives.

Comprehensive Agriculture risk management framework can be presented in three main categories: The first covers direct initiatives on the part of the Government, such as agricultural credit, input subsidies and calamity relief. The second covers indirect initiatives on the part of the Government to mitigate production risks through insurance mechanisms covering crops, weather and livestock and including micro insurance. Thirdly, Government and market-based approaches to mitigate price or income risks, which includes minimum support prices, farm income insurance, a price stabilization fund, commodity markets, contract farming, etc.

Agriculture credit Worlds largest network of rural financial institutions, boasting 30,272 nationalized commercial bank branches; 2,934 other commercial banks; 14,241 rural regional bank branches and about 122,000 credit outlets from the cooperative sector 18% of each banks net credit should be given to the agriculture sector

Input subsidies Rs. crore Fertilizer = 18460 Electricity = 20301 Irrigation = 14625 Other = 6504 Total subsidy = 82967

Calamity funds The Calamity Relief Fund (CRF) contributions from both central and state Governments (3:1 ration) and is used to pay for relief in the event of droughts, floods, cyclones, hailstorms, tsunamis, etc. The National Calamity Contingency Fund (NCCF) was created at central level with 100% contribution from the Central Government, and is used for any relief operations not covered by the CRF. The Twelfth Finance Commission has allocated a fund of INR 213.33 billion for the 5 year period between fiscal year 2005-06 to fiscal year 2010-11.2 Though the Calamity Funds were formulated with a noble cause, their execution, efficiency and timely availability are riddled with shortcomings.

PRODUCTION & ASSET PROTECTION Area yieldbased crop insurance India is administering the worlds largest crop insurance programme in terms of the number of farmers insured. The National Agricultural Insurance Scheme (NAIS) annually insures approximately 18 million farmers, or 15% of all farmers and approximately 17% of all farmed land.

PRODUCTION & ASSET PROTECTION Area yieldbased crop insurance Major improvements identified by Govt are: Bringing the Insurance Unit down to the village Panchayat level so as to minimize the base risk.. Using a longer time yield series when in fixing the Guaranteed Yield, to ensure more stable coverage. Increasing the levels of indemnity (coverage). Introducing insurance to prevent sowing/planting and post-harvest losses under adverse conditions. In case of major disasters, allowing for the partial settlement of claims on accounts. uniform seasonality discipline (cut-off dates for buying insurance) be employed for participation for all farmers, both borrowing and non borrowing. Covering horticultural crops such as vegetables and fruits. Introducing a gradual shift from an administered price regime to an actuarial one, supported by up-front subsidy as a premium. Adopting transparent norms for subsidy premiums with the participation of the private sector participation. Sharing of premiums by banks, where lending banks bear 25% of the premium payable by the farmer, subject to a maximum of one percentage point of the premium. Through these improvements, the Government is expecting to double the penetration of crop insurance schemes by 2012.

PRODUCTION & ASSET PROTECTION Weather-based crop insurance Weather-based crop insurance appeared in India in 2003. At present, Agriculture Insurance Company of India (AIC), is providing weather-insurance services along with two private insurers. Though most of these attempts were taken on the initiative of particular insurers until 2006-7, in 2007-8 the Government began offering an alternative to NAIS by initiating pilot projects in select areas for select crops.

PRODUCTION & ASSET PROTECTION Weather-based crop insurance While weather-based crop insurance appears a priori to be an attractive proposal, it is confronted with many constraints. These include: (i) a sparse network of weather stations belonging to the India Meteorological Department (IMD), and the consequent lack of high quality weather data for locations smaller than the district level; (ii) prohibitively high premium rates for farmers; (iii) the limited scope of weather insurance (it only covers parametric weather events), compared to the all risk nature of area yield insurance, etc.

PRODUCTION & ASSET PROTECTION Livestock insurance Livestock insurance began in the early 1970s and still maintains the same plain vanilla offerings in terms of scope and coverage. This type of insurance still covers only accidental death (basic coverage) with permanent total disability as an optional coverage. The premium for basic coverage is 4% in the case of general animals and 2.25% in the case of animals financed under Government schemes. Despite being in existence for over 30 years, the total penetration of livestock insurance in the rural areas is still poor. The Government has recently introduced a pilot scheme on livestock insurance in 100 districts with a 50% premium subsidy for two animals per family.

PRODUCTION & ASSET PROTECTION Micro-insurance There are three distinct phases of micro-insurance (MI) development in India. The first phase coincided with the introduction of target- oriented poverty alleviation programmes such as the Integrated Rural Development Programme (IRDP). The second phase of MI growth can be seen in conjunction with the growth of credit disbursement to the poorer segments of society through the Self Help Groups (SHGs). This saw an increase in the role of Non-Governmental Organizations (NGOs) for the purposes of intermediation and the proliferation of Microfinance Institutions (MFIs). The third phase of MI development was borne out of the increasing realization of the need for an increased coverage of poorer households through some form of social security measure. market are related to health insurance, with only a few offering insurance for assets, livestock, crops, etc. While India boasts tremendous MI potential, some areas within the regulations require amendments in order to achieve their full potential.

PRODUCTION & ASSET PROTECTION Micro-insurance Recognizing the need for insurers to adjust the costs they face in serving marginal clients in remote areas; collecting premiums and installments; and offering doorstep services, the Insurance Regulatory & Development Authority (IRDA) announced the introduction of new micro-insurance regulations in December 2005. These regulations enable an insurer with a life insurance business to offer life micro-insurance products as well as non-life micro-insurance products to poor households. Similarly, an insurer providing non-life insurance services may offer general microinsurance products as well as life micro-insurance products. Most MI products on the market are related to health insurance, with only a few offering insurance for assets, livestock, crops, etc. While India boasts tremendous MI potential, some areas within the regulations require amendments in order to achieve their full potential.

MARKETING & PRICE INSURANCE One major issue in an agrarian economy is in the form of price fluctuations, as they pose a serious risk to farmers income and wellbeing. Supply-side problems and agricultural marketing system as well as infrastructure weaknesses contribute to farmers risk in terms of price/income realization. Furthermore, seasonal production also leads to price volatility when harvested crops reach markets in very large volumes within a short time span. When there is a bumper crop, the farmer finds himself in a buyers market during the peak marketing season, making him a price-taker. Even though globalization and liberalization are expected to benefit farmers by creating greater opportunities for better price realisation, the market sometimes exposes them to greater risks as most agricultural commodities, particularly those grown by small farmers, are not well-known at the international level.

MARKETING & PRICE INSURANCE

1.Agriculture price risk management instruments Minimum Support Prices (MSP) Electronic Spot Exchanges Price Stabilization Fund (PSF) 2.Commodity markets and Contract farming Commodity markets Contract farming 3.Revenue based farm income insurance

Issues in agricultural policies 1. I & II plan emphasized on major and medium irri project 2. In 1965-67, India faced severe drought 3. Imported 19 MT foodgrains 4. It lead to reexamination of agri strategy

Issues in agricultural policies

5. Govt designed National Agricultural Policy 1. Focus on minor irrig project 2. Inputs and credit at subsidized rate 3. Designed MSP 4. Built up PDS structure 5. Introduced rural employment programs as safety net for poor

Issues in agricultural policies Impact of Policy Measures 1. Technological Measures: Package of practice at Green Revol. 2. Land Reform(abolish intermdries interest on land) : Tenancy Reform, transfer of land to actual tiller

3. Cooperation and consolidation of holdings: reorganization and fragmentation of holdings. Cooperative farming

Issues in agricultural policies Impact of Policy Measures 4. Institutions involving peoples in planning: Community development programme, for the people, by the people, design panchayat raj

5. Institutional Credit: Cooperative Society expansion, RRBs

6. Procurement and Support Prices: MSP, Issue Price estimation

Issues in agricultural policies Impact of Policy Measures 7. Input Subsidies to agriculture: Fertilizer, seeds, electricity, irrigation 8. Food security system: PDS 9. Rural Employment Programmes: 4th Plan SFDA, JRY, SGRY, JGSY

Issues in agricultural policies Impact of Policy Measures Other measures: development of Irrigation projects, electrification, Warehousing, promotion of Agri Research, econ condition of farm labours, crop insurance, KCC, roads, rural housing, telephone . etc.

Issues in agricultural policies Trends in Investment 1. Share of Agri in GDP decline from 55.10% in 1950-51 to 15.70 % in 2008-09 2. Less Investment in Agriculture means: Less growth in infrastructure supporting agriculture like irrigation, rural roads, market, power, cold storage etc.,

Issues in agricultural policies Trends in Investment 3. Total agri investment : 1990-91 = 14,836 crores (9.9 % of total investment) (29.60 % public investment) 2008-09 = 1,38,597 crores (7% of total investment) (17.60 % public investment) 4. Government try to compensate its investment considering the positive growth private investment . 5. Increasing subsidies reduces Capital Formation. The public investment is diverted toward subsidies. 6. Considering the problem of RIDF, the govt started RIDF(rural infrastructure development fund)

Globalization A process of deepening economic integration, increasing economic openness and growing economic independence between countries in the world economy. It is simply growing economic activities across the political boundaries of nation. Globalization happens through
Trade in goods and services Movement of capital Flow of finance First Step for globalizing is liberalization which was taken between 1950-70 Increasing Foreign investment., liberating financials policies, control and regulations on potential companies / organization, MNCs for investing in other countries are removed, permitted to trade in foreign exchange market. India also permitted to MNC for entering in India.

Globalization After the Second World War many countries come together for promotion of world trade. For the purpose, General Agreement of Trade and Tariff (GATT) was settled in 1947 for legal control on international trade. GATT concluded eight rounds to promote world trade through formulation of policies regarding reduction of tariff and trade restrictions. Eight and last round of GATT was Uruguay Round (1986-93). In this round Director General of GATT, Arthur Dunkel brought Draft Final Act in 1986, the 104 countries had signed Draft Final Act, which paved way for setting World Trade Organization in 1994. The World Trade Organization was established on 1 January 1995 and became new international organization set up as a permanent body and is designed to play role of watchdog in the sphere of trade in goods, services, foreign investment, intellectual property right

Globalization

Function of World Trade Organization It facilitate the implementation, administration and operation of multilateral and plurilateral trade agreement; It acts as forum for multilateral trade negotiations; It administer the understanding on rules and procedures governing the settlement of disputes; Overseeing national trade policies; To achieve coherence in global economic policy-making, cooperation of World Trade Organization with International Monetary Fund, International Banks for Reconstruction and Development.

Globalization

Agreement of Agriculture In Uruguay round, all member nations of GATT have decided to a widespread reduction in tariffs, removal of quantitive restrictions and opening up their economies to international competition. It has directed policies concerning with domestic protection in different areas including agriculture.

Globalization Agreement of Agriculture AoA provides framework for long-term reform of agriculture trade and domestic policies over the years to come With objectives of increased market orientation in agril trade It deals with 1. Providing market access: conversion of non-tariff trade barrier in to tariff protection, differentiating level for developed and developed countries. 2. Regulating domestic support: AoA divides domestic support as trading distorting and non-trade distorting (minimal). Amber box: Trade distorting domestic support (minimize support) Green box: Environmental assistance programs Blue box: Subsides as direct payment to farmers for difference between MSP and market price(USA) Special and Differential box(S&D):)Special measures for particular class and differential treatment for various class according to the need. It is for developing countries. 3. Containing export subsidies: Provision for export subsidies

Globalization Agreement of Agriculture Amber box trade distorting support is quantified with Aggregate Measure of Support(AMS) It consist of product specific and non-product specific. Product Specific: difference between domestic support and external reference price. Non - Product Specific: For various agri inputs like fertilizer, electricity, irrigation and credit. Other than AoA, following agreements are related to agriculture Agreement on Sanitary and Phyto-sanitary (SPS): conforming international standard norms for protection of human, animals or plant life Agreement on Technical Barriers to Trade (TBT): allow countries to fix high standards other than international standards suitable for the national level and tested at national laboratory or agency. Trade Related Intellectual Property Rights(TRIP): Patent, copyrights, trademark, industrial designs, undisclosed information.

Globalization Agreement of Agriculture AoA was expecting reduction in domestic support for agriculture in developed countries. And will increase international price; subsequently will lead to improve export of developing countries. But after post WTO. It result in heavy subsidies by developed countries to their agriculture; decreasing international prices; Affecting agriculture in developing countries.