Daily Answer Writing
16 February 2021

Q) It is often argued that the participation of the organized cooperatives as well as the private sector has led an increase in the income of the milk producers. Why hasn't the same been true for other agricultural commodities? Suggest measures required to replicate these successes. (250 Words)

Source: The Hindu editorial: Farm Laws and taxation of farmers

Topic: GS3: PDS - objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; Economies of Animal - Rearing.

Approach Answer:

 

Introduction: In the past few years India has surpassed USA to become the worlds largest producer of milk. The farmers' income in the milk industry has continuously been on the rise in the recent past. However same is not true with other commodities. This is due to various reasons.

 

Reasons for the Success of Milk cooperatives:

               1. Development of Value chain: The back-end value chain forms the back bone of the system. The farmer organizations have been successful in forming such a chain.

               2. Social relevance: The organizations have been very inclusive in nature by involving participation of most of the farmers. Thus, making themselves socially relevant.

               3. Innovation: In storage facilities and production of value added products.

               4. Branding: Brands such as Mother Dairy and Amul are made famous across India.

               5. Motivated management: The milk cooperatives have been headed by the motivated leaders in the

 

Reasons for the Success of Private players in Dairy industry:

               1. Already developed back-end supply chain: The presence of good production line was utilized by private players.

               2. Easy Private investment portfolio: The investment in storage facilities, preservation facilities and transportation wans is fairly straight forward in the dairy industry.

               3. Presence of large brands: Companies like Cadbury and Nestle has large presence in the premium dairy products.

               4. Existing Skilled Manpower: The Indian dairy sector is highly decentralized with traditionally passed on skills of breeding and animal rearing still being relevant.

               5. Liberalized system: The private sector is allowed to contract with the dairy farmers.

 

However the same advantages are not shared by the Other agricultural commodities:

 

Problems in other Agri-commodity cooperatives:

               1. Bad Marketing: There are no brands like Amul Cooperative operating in other commodities.

               2. Lack of investment into preservation infrastructure: All commodities have specific requirements of storage, which demands investment in preservation and storage facilities.

               3. Excessive control of large farmers: Even the APMC Mandis are to a large extent run as cooperatives, however the control of large farmers have not allowed equity in the businesses; Thus the same succeses cannot be replicated here.

               4. Access to local markets: lack of investment in the transportation facilities, refrigerated vans as in the case of dairy products, creates distance from the markets.

               5. Poor management: The structure of cooperatives is weak in other commodities.

               6. Excessive profits of middlemen: In other commodities, the role of middlemen is more due to less developed markets, which makes overall supply chain less profitable.

               7. Corruption: Often cooperatives become the location of diversion of funds from government subsidies and low-interest agricultural loans from banks

 

Problems of private players in other Agri-products:

               1. Poor supply chain linkage: There is no existing developed supply chain network apart from the traditional market linkages.

               2. Infrastructure bottlenecks: There is a lack of storage facilities such as cold chain networks which can be rented or utilized by the private players to create a stock.

               3. Lack of Skilled manpower: Unlike in the case of dairy products, the labour is not skilled in the modern food preservation techniques. The labour mostly follow traditional techniques such as in meat production units, poultry units etc.

               4. Quality adherence low: There is a dearth of quality standards in agricultural commodities; Milk can be easily tested for its density to assure its quality. Same is not easy for other commodities.

               5. Protection of IPR issues: Recently, there was a  case in Gujarat, where IPR protected seeds were used for private cultivation of farmers.

               6. Regulatory Constraints for the private sector: the private sector is not completely free to buy outside the APMC Mandis currently(before the intrdouction of farm laws)

 

Conclusion: Due to motivated management of the sector and continuous innovation in quality assurance, preservation and transportation facilities, the dairy sector has prospered over the years. However same is not true for other sectors such as poultry and horticulture, which have very high potential for price discovery.

For this investments would first have to be made in improving the infrastructure for the same. For this various schemes have been launched by the government such as PM Krishi Sampada yojana. Along with this the passage of the 'Farm Bills' would help in boosting the value addition and investment in agriculture.

 

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