The COVID-19 pandemic has led to a halt of economic activity globally, raising concerns regarding the demand and supply shocks to the food and agriculture sectors. Despite assurances from the Central Government of adequate food storage which can last for the next four months, food security remains an area of concern. The matter becomes even more worrisome, given the uncertainty of the impact of the lockdown on the agricultural sector.
In 2019-20, the food and agricultural sector contributed to 16.5 percent of the National Gross Value Added (GVA) in India, and provided direct employment to 43 percent of the population in 2019-20. The food and retail market is valued at USD 828.92 billion, and the food processing industry is worth an additional USD 543 billion (2020). The pandemic and the associated country-wide lockdown is bound to hit the agricultural sector in more ways than one. We are already witnessing the initial impacts on the industry.
Labour shortages rooted in mass exodus of migrants
Firstly, the 21-day lockdown initiated on 25 March 2020 came just as the rabi crops were ready to hit the market. The resulting limitations on free movement of labour and the mass exodus of informal migrants in the northern states of the country triggered the first major impact on the sector. This shortage of labor was especially felt in the harvesting of rabi crops like wheat, gram and mustard in the states of Gujarat, Rajasthan, Uttar Pradesh and Madhya Pradesh.
The labour shortages are likely to affect the harvesting operations for standing crops as well. For instance, potato farmers in Punjab had to face losses because of untimely rain and an acute shortage of labour for harvesting caused by the lockdown. The labour shortage is also affecting the planting of crops like moong, maize, cotton and arhar.
It may be a long time before migrant labourers find it safe and remunerative to return to work. This will most likely pile on to an already impoverished population and increase the poverty level of the people involved in agricultural activity. Curtails placed on inter-state movement of labour put additional pressure on both primary agriculture and food processing. The migrant labourers who move toward working on seasonal agricultural activities in other states or sectors, typically hire sharecroppers from the village for cultivation. After the mass exodus of migrant laborers to their villages, it is expected they will not be returning back for a long time post COVID-19, which is also the peak season for summer cropping and the Kharif onset. These additional laborers may now displace the sharecroppers and add excess burden to the existing labor force in agriculture.
According to estimates by the Economic Survey (2016-17) at least nine million people migrate annually within the country, most of them in search of work. While the top destination for migrants is Delhi followed by Mumbai, the southern states have become a migrant magnet in recent years. The highest outbound migration is seen from Bihar, Uttar Pradesh, Bengal and Assam, with migrants often traveling more than 3000 Km to distant Kerala. There is bound to be some shift in the agri-labour market as well. With the onset of the lockdown, Delhi witnessed the exodus of around 1.8 lakh agricultural and non-agricultural migrated labourers. Some of these labourers, who worked in the agricultural sector in Punjab and Haryana, have created a strong labour crunch in these states. As a result, farms are relying on domestic labour and family labour as a substitute. On the other hand, labourers from West Bengal, Odisha, Uttar Pradesh and Bihar, who were preparing to travel to the farms for the next cropping season are stuck amidst the lockdown. The migrated labourers returning back to their villages will lead to some labour displacement in the already existing agricultural labour population in the state they belong to.
Sluggish food supply-chains amidst lockdown
Secondly, as the state borders continue to be sealed, concerns are also being raised about slow downs in the supply of food in reaching their destinations. ICAR has largely directed the farmers to follow the guidelines of social distancing and hygiene in harvesting and handling movement of produce to markets. Working in the field with social distancing is something very new to the agricultural sector, hence without monitoring and proper facilitation of the practice, the workers may find it hard to follow. As suggested by ICAR, for tackling any emerging issues related to managing crops, livestocks and fisheries, farmers should consult and be in touch with agri-scientists in Krishi Vigyan Kendras (KVKs). The agricultural extension services have a proactive role to play in this aspect.
Hazy implementation guidelines for supply-chain logistics
Thirdly, though the procurement of agricultural inputs has been cleared as an essential category by the state governments, there are no implementation guidelines to inform the logistics of purchasing these inputs and the movement of machinery from Custom Hiring Centers to farms. For example, it is estimated that India needs about 250 lakh quintals of seeds for this kharif season. There are high chances that this demand will not be met, since the lockdown has curtailed the movement for the supply and the purchase of these inputs.
The intensity of the effects of the lockdown will vary across different crops in different parts of the country. States like Telangana and Andhra Pradesh, where crops like paddy and maize have higher acreage and had a bumper crop in the rabi season, demanding more labour during harvesting, will be highly affected due to shortage of the labour. An additional concern is that they might not be able to sell the produce at a better price or be able to sell at all after the harvesting is completed. After the losses suffered by farmers due to heavy unseasonal rainfall in the previous kharif season, the rabi harvest was expected to have a bumper crop because of higher soil fertility and water reservoir levels. In September 2019 the Ministry of Agriculture forecasted an estimated 100.5 lakh tonnes of wheat output this year. While the government has exempted procurement agencies, mandis, farming operations and farm workers from lockdown rules, the ground reality of implementation of the exemption could be very different.
The state governments of Andhra Pradesh and Telangana have intervened and provided interim platforms for farmers to sell their produce at the Minimum Support Price (MSP), to avoid distress sales amidst lockdown. The farmers have sold 4,773 tonnes of paddy in different government centres in Andhra Pradesh. Similar platforms to address the supply chain disruptions in horticulture and floriculture can also be practiced. The plantation sector too, has come into the grip of the crisis. The Association of Planters of Kerala (APK) has estimated the loss in the plantation industry in the state to be nearly Rs. 500 crore, with the rubber sector alone suffering damages to the tune of Rs. 300 crore.
Agricultural credit and insurance related issues
Fourthly, as the country prepares for the next cropping season, it is expected that there will be higher demand for agricultural credit via the Kissan Credit Card (KCC). Smooth flow of credit becomes an important concern since the farmers largely depend on the credit as a stimulus to buy essential agricultural inputs like machinery, tools, seeds, fertilizers, pesticides, support irrigation and other activities. Given only few bank branches remain open and the loaning process is not being completely digitised, the farmers would find it hard to access credit.
It is at a crucial time that just after the announcement of the Pradhan Mantri Fasal Bima Yojana (PMFBY) linked to the KCC, was amended as an optional scheme in February 2020, and a large percentage of the farmers covered under the scheme are loanee farmers who have been exposed to this unprecedented situation. The PMFBY, however, does not cover post-harvest losses, since in India the Minimum Support Price is in place to safeguard farmers from price fluctuations in the market. However, it is worth noting that the MSP only applies to 22 crops, which primarily include cereals, oil-seeds, spices and other cash crops. The government has increased the MSP on a number of crops for Rabi 2020-21. We shall wait to see if the increase in MSP will cover the losses due to the lockdown. The vegetable, dairy, fisheries and horticultural crops do not have such mechanisms in place and could be adversely hit.
It is of interest to note that the Agricultural Insurance Company Ltd. (AICL) had estimated approximately a 30 percent dip in the uptake of the PMFBY, after the opt out option was added in the scheme. The scheme is likely to face heavy operational setbacks, as the bidding for the participation of the insurance companies begins much before the notification (by 31st of March). It is only in the states of Tamil Nadu, Gujarat and Assam that a multi-season long-term contract is being followed, with some extension formalities every season. Besides extending the cut-off dates, one way to go about this would be to extend the already existing contracts in the remaining states.
The loaning period starts from April until July, where all the farmers are covered under the PMFBY by default. These enrollment numbers in the scheme may shoot up assuming the demand for credit will increase as a result of the pandemic. However, with limited mobility, the efforts and programs of the government in implementing awareness and advertising campaigns may be restricted. Under such circumstances farmers’ awareness regarding the recent modification in the scheme, and their ability to exercise the ‘opt-out’ feature would need massive awareness drives and campaigns; which might be difficult to implement under present circumstances. There could be high levels of indebtedness and government bailing out the farmers by providing low interest rates would limit the capacity to stimulate the economy. This should however encourage the FPOs to consider hedging on future events to avoid losses from price fluctuations and uncertain events that directly or indirectly affect agriculture. The traditional insurance offered to the farmers does not cover risks such as a pandemic outbreak or post-harvest losses to crops lying in the fields beyond two weeks. The insurance products can be further designed to incorporate such risk. The government can initiate such efforts through the AICL and IRDA for any future shocks like pandemics.
The way forward
Thinking forward, it is important to consider how the current produce in the rabi season will be brought to the markets and farmers will be assured good prices. One way to do so would be using the railway systems effectively for transporting agricultural outputs and for procurement/ transportation of agri-inputs for the next season. The passenger coaches can be used to carry agricultural inputs like seeds, fertilizers etc. from seed hubs to farms across all states. Similarly the agricultural produce could also reach the mandis and distribution centers through the railways.
Strengthening the financial institutions and the digital banking network, and increasing the subsidy in agricultural inputs may ease out the pressure on the availability and accessibility of credit requirements. Financial institutions can have mobile bank counters in small vehicles manned by the least number of people possible, to reach out to farmers and deliver financial services.
The migrant agricultural labourers should be entitled to more government welfare schemes to support them in staying back in their place of work. The government with the aid of agricultural extension services can conduct small workshops on maintaining hygiene and social distancing while working on the field, proper sanitization of shared equipment, tools and machinery, cleaning and loading and so on.
Through technical extension services, farmers should be aided with food storage development, processing and marketing through e-nam app based services. This can also be done with the help of telephonic guidance, keeping physical contact at the minimum. Meanwhile, operators and drivers of machineries could be facilitated with passes for inter-state movement, wherever it is required, through online portals along with offline application processing. The processing itself will be faster and convenient, keeping social distancing norms intact in such cases.
Agriculture is the backbone of India, and any adverse effects felt by the sector will have a ripple effect throughout the country. As policymakers grapple with the health and economic consequences of the COVID-19 pandemic, there is an urgent need to shift the focus toward agricultural production and supply chain management as well. In Pandit Jawahar Lal Nehru’s words, “Everything else can wait, but not agriculture.”
About the Author
Sabina Yasmin is a Research Fellow at LEAD at Krea University. Her areas of research include development economics and applied microeconomics. She has a keen interest in agricultural economics and risk mitigation mechanisms in agriculture.