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Injustice Invisible - 63

Injustice Invisible - 63

This is in continuation of previous write up “Doubling or Minimizing the Farmers Income”. In my previous write up I have shown that the Modi-Jaitley statement on doubling the farm income in terms of net income is a statement totally blasphemous to the small, marginal and semi-medium farmers in India. When farmers are committing suicide in thousands per year our Prime Minister and Finance Minister are making enticing but completely false and fatally misleading statements of unrealistic promises to cover up the fact that every time a farmer cultivates his land he is incurring irrecoverable loss and is unable to get enough net income even to meet his basic requirements in his life: Invisible injustice. This fact is proved not only by the increasing number of suicides among the farmers but also from the analysis of family income and expenditure given in my previous write up.

In this write up I shall show how Modi-Jaitley-statement of doubling the income is applicable to the agri-business people. It was reported that Rs. 35,984 crore was allotted for ‘Agriculture and Farmers Welfare’. The Finance Minister Arun Jaitley announced while presenting the budget that his government intends to address issues of optimal utilization of water resources, create new infrastructure for irrigation, conserve soil fertility with balanced use of fertilizer and provide connectivity from farm to market and so on so forth. Hence there will be huge investment to increase the irrigated area, to encourage use of fertilizer and other agro-chemicals, to develop better and more export oriented processing and packaging facilities, global marketing networks etc. Hence there will be some increase in the total agriculture production and much more in the total turnover in the national agri-business sector. But doubling the farmers’ net income is an impossible dream because the farm sector is governed by the law of diminishing return, while the agri-business is governed by the law of increasing return. Further in agri-business value addition and price control is possible whereas the same is impossible in farm sector: Invisible Injustice.  

Therefore all the agriculture improvements assured by Prime Minister and Finance Minister are diverted to agri-business people involved in procurement, processing, packing, distribution, marketing within the country and large scale export to other countries. Export of various agricultural and animal products in the raw and processed form is a major source of income to the agri-business people as well as for the nation. Even the broken rice is exported from India making it difficult if not impossible for poor people to survive on the same. In the export business the people who are involved in plantation crops, big and medium farmers and huge dairy and other animal farms deal with huge amounts of money and make enormous profit. The same or different people may be involved in the import of agricultural products mostly in processed form. Most of the allotted 35,984 crore will be diverted to these categories of people and there will be increase in the total revenue accrued from the marketing of agricultural products both within the country and to outside. Doubling can take place in the agri-business sector.

Product diversification and value addition is another great advantage for people involved in agri-business. For example there can be several products of rice, wheat, pulses, potatoes etc. Go through the “Haldiram’s or McDonald’s” menu. Just look at the price of any product for a particular weight and compare it with the price of the same and weight at the farmer level. The price will be at least with 100% net profit. Besides, the shelf life of each product is very long compared to the raw product at the farm level. For example bottled tomato ketchup or packed potato chips can be stored for a long time while the raw tomato or potato can be stored only for a few days.

Even at the small and marginal farmers level there can be some increase in the total production though it will not be beneficial at all to them. Because as the production increases the cost of production also will increase while the prices of products at the farm level decrease and the net profit will also become less and less. Again it should be remembered that the price of products at the farm level is not decided by the farmer-seller but the buyer. Also it should be remembered that all the agricultural and animal husbandry products at the farm level are perishable and the farmer is always a distress seller. Whereas, the agri-business people can process the farm products and make them non-perishable; hence they have a very high bargaining capacity to get 100 to 300 per cent net profit.

Now let us see the types of agri-business in our country. In India there are hundreds of agri-business companies in seed, fertilizers, pesticides, weedicides, insecticides, micro-nutrients, tractors, seed-drills, implements, harvesters, threshers, milling machines etc. There are different stages (primary, secondary and tertiary) processing as shown in table 1. Unlike the farmers all of them fix the prices of their products according to the cost of production and the required margin of profit they need to pay all their employees and their family to survive and develop. Again let me repeat that in the case of farmers not only someone else fixes the price of their hard earned products but also they are not paid for the survival and development of families. That is the key difference between farming and agri-business: Invisible injustice.

Table 1: Stages of processing of few major agriculture products

Category of Products

Primary Processing

Secondary

Processing

Tertiary

Processing

Fruits & vegetables

Cleaning, Sorting, Grading & Cutting

Slices, Pulps, Flakes, Paste, Preserved & Flavored products

Ketchups, jam, juices, pickles, preserves, candies, chips, etc.

Cereals and millets (there are a dozen types of cereals and millets)

Sorting & Grading

Flour, Broken rice and wheat, Puffed products, Malt & Milling

Biscuits, cakes, flakes, noodles, nankeens, wafers, soups etc.

Oilseeds (there are 13 oil seeds)

Sorting & Grading

Extraction of oil and Making Oil Cakes

Cakes and oils of  Sunflower, groundnut, mustard, soya, olive oil, etc.

Pulses (at least 10 pulses are there)

Sorting & grading

Milling, hulling,

Flours, wafers, mixtures, Several ready-to-eat products etc.

Beverages like tea, coffee, cocoa.

Sorting, bleaching & Grading

Leaf, Dust & Powder

Tea bags, flavoured coffee, soft drinks, alcoholic beverages etc.

Milk of cows, buffaloes, goat, sheep etc.

Grading & Refrigerating

Cottage Cheese, Cream, Simmered & Dried Milk

Processed milk spreadable fats (butter and cheese), yoghurt etc.

Meats of various types animals like cattle, buffaloes, chicken, duck, sheep and goats

Sorting & Slaughtering, skinning, separating the meaty parts, fat, bones etc. refrigerating

Various cuts, fried, frozen & chilled products and several ready-to-eat products etc.

Several ready-to-cook and eat types of products etc.

Marine and other aquatic products

Chilling & Freezing

Cut, Fried, Frozen & Chilled

Several ready-to-eat products etc.

 

Under each category of crops there are three stages of processing and there are successive value additions (increase in price) too taking place enhancing the profit margin of the processing industries several times. For example the total value addition achieved for fruits and vegetables at primary processing level by cleaning, grading, sorting, drying and preservation is 70.5%, for maize by shelling, dehusking, cleaning and storage 35.5% of value addition is achieved. The value addition for wheat under the primary stage is about 38% and for paddy and pulses for the same stage of processing gives 52.5% and 38.5% respectively. Further value addition takes place in the secondary and tertiary processing. Again value addition takes place in packing and attractive presentation. It should be noted that the above mentioned increments occur only at the primary processing and the increments in secondary, tertiary processing, packaging and presentations still remain. Thus the total value addition gives tremendous advantage to food processing companies increasing their net profit several hundred times and every year more and more people are entering into agri-business. In short for every additional work done at the agri-business level, value addition takes place whereas for every additional work being done at the farmer’s level a value-minimizing takes place: Invisible Injustice.  

India is one of the World’s major food producers contributing about two percent of international food trade. This implies that there is a vast scope for investment in agro processing for better value addition and job creation. In year 2016-17, the sales turnover of Indian food and beverage industries is estimated to Rs. 3.8 trillion crores with higher percentage of employment generation potential as compared to other sectors. It is estimated that 54,000 persons get direct employment per Rs.100 million of investment in the food sector as compared to 48,000 in textiles and 25,000 in paper industry. Currently in India, the average value addition to raw materials at different stages includes primary processing with 75 percent, whereas secondary and tertiary processing together accounts only 25 percent each. So the minimum average value addition at the end of the tertiary processing is 125 per cent. Hence there is a possibility of doubling the income of the agri-business which includes also the food process industry. But it is completely out of place for the farmers to get their income doubled.

A farmer takes three to four months to grow 100 kg of vegetables and sells them at a lower price than what he really spent in money, labour and time; whereas the man at the agri-business level can buy them 5 to 10 rupees per kg at the farmers field and sell the same in one day and get 20 to 30 per cent net profit. These days’ tomatoes are costing 80 to 100 rupees per kg in the market. But they bought at the farmers’ field for 10-12 rupees per kg. So too all other items; the net profit derived by people in agri-business is double or triple times the price they pay to the farmers. A farmer takes 8-10 years to establish and orchard and then takes one year to produce few quintals of fruits which may be sold at 15-20 rupees per kg; whereas an agri-business man sells the same in a day or two at the price of 80-120 rupees per kg. Hence on an average the income of the agribusiness people will be doubled while the income of the farmer is minimized or the net loss may be doubled.

(The writer is Retired Professor, Agriculture Economics at XIM, Bhubaneswar. Email: ktchandysj@gmail.com)

(Published on 07th August 2017, Volume XXIX, Issue 32)