The agricultural sector - the highest employer in India – is in deep financial crisis due to the Covid-19 pandemic.The sector was already in distress and recorded a significantincrease in the number of farmer suicides in recent years. Now the lockdown has aggravated the situation. Nationwide, citizens are paying high prices to buy foodgrains andvegetables whereas farmers are reporting low earnings. This development will have a direct impact on the agricultural sector and on agro-based industries in the near future.
Agro based industries procure raw materials directly from the agricultural sector. These industries are divided into two major clusters namely - food processing and non-food processing industries. The food processing industry is in a position to face a major fallout due to the ongoing crisis.
The agro based companies, which preserve perishable food items like fruits, vegetables, and foodgrains, and manufacture food items like sugar, bakery products and edible oil may decline sharply. The scarcity of manpower in the farms - indicated by low production - has resulted in utter uncertainty in the market outlook for the whole of the current financial year. The Indian agricultural sector requires around 250 lakh quintals of seeds to be prepared for the kharif season during March to May. The lockdownhas put a temporary hold on the testing and packaging of seeds and that has impacted the overall sowing process. The shortage of seeds will evidently affect the seasonal job distribution and workforce management. Moreover, in few Indian states like Punjab, Haryana and Uttar Pradesh, migrant labourers are recruited as seasonal agro-workers. Unavailability of such workers in the current context is likely to impede farm production.
On April 4, the agricultural sector was exempted from the lockdown. But tight restrictions in transportation eventually disturbed the sector. Cold storage facilities, which are associated with agro industries, are now completely stocked with crops and vegetables, which are being wasted in absence regular transportation facilities to wholesale and retail markets. The government is also facing another challenge in transporting grains to the mills. In absence
of enough grains, many of the mills have ceased their production.
Insufficiency of agro products - which are essential goods - can lead to black marketing. The government must focus on ensuring a smooth flow of transportation of agro inputs and agro products. Major Indian companies like Adani Agro, Parle and Britannia among others may face shortage of supply which can impact their production. The governmentmust look to address these issues. Few railway services have been restored but more focus is needed on ensuring market linkage for agro produce.
The post-lockdown period - when the situation normalises - will be a crucial time for the agro industrial sector. The central and the state governments must look to tackle the situation urgently. Along with big names, the agro industryis loaded with a bunch of small companies. The centralbank can roll out some special provisions for the private companies in the sector to ensure that they can regain their momentum. Focus must be given to poor and marginalfarmers, who should be ensured satisfactory prices for theircrops. Agro companies must be dissuaded from trying tooffer lesser prices – on the pretext of earlier losses duringthe lockdown– to the farmers.
The public sector participation should be more effective. The government must look to focus on enhancing production andalso procure large amounts of agricultural produce directly from the farmers. The tenure of the Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) that directly intervenes into agro processing clusters can be extended beyond its term (2020). The government has already extended the date for submission of proposals for setting up Mega Food Parks (MFPs) through its MFP Scheme. This is also expected to ease the sector. Harsimrat Kaur Badal, Minister of Food Processing, Government of India has also formed a task force to ensure solutions for agro and its ancillary industries. The department is also trying to combat the ongoing issues related to transportation in the sector.