13 April 2020
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On March 24, as soon Prime Minister Narendra Modi announced a 21-day lockdown to curtail the spread of Covid-19, many city residents queued up at grocery stores to stock up on food and other essential items. Panic spread everywhere.
As a result of the bulk buying that night, the prices of food items started rising almost immediately. Within two-three days, supermarkets and grocery stores in Delhi found it difficult to source provisions from wholesalers. For the vulnerable sections of society – daily wage earners, migrants, petty traders and hawkers – the situation has been dismal ever since. Many of them are far from their homes, separated from their families, and unable to access essentials.
It is clear that the imposition of the lockdown was a necessary but hasty measure. It has all but shut down the economy and could lead to demand-supply mismanagement of food items. To avoid this, both the Union and state governments must take prompt steps to ease the supply of essential items while regulating the prices to keep them affordable.
Food availability
The good news is that there is adequate foodgrain in the country. According to the Food Corporation of India, the government agency that buys grain from farmers, it had a stock of 585 lakh metric tonnes in March. But the sudden lockdown and panic buying have led to supply shortages and price rise. The main reason for this is the lack of responsiveness of supply chains to the sudden surge in demand. Temporary bottlenecks in the flow of goods – labour shortages, restricted inter-state mobility and transportation hurdles, among other things – are distorting supply lines.
Rabi harvest
Farmers too are facing obstacles. The country’s rabi crop is ready to be harvested, but farmers don’t have enough labour and machinery, partly because they are not getting credit. In normal times, these farmers would have got credit from commission agents, but now those agents are wary for fear of not being repaid. As if this wasn’t enough, there is also a post-harvesting problem looming large. With most mandis closed, farmers are not sure if their produce will be procured by the government.
Anxious and in dire need of credit and storage facility, restless farmers may promise their produce to traders or commission agents at lower than Minimum Support Price as against credit support. This would result in foodgrains getting deposited with private players and government reserves getting depleted. In such a situation, the government will have little command over the price and supply of foodgrains.
Perishable food
The producers of perishable products – such as milk, fruit and vegetables – are suffering because of the distortions in supply chains. Their products fetch higher prices in cities, but at the same time, the demand from hotels and restaurants has plummeted. In Punjab, for instance, dairy farmers are reportedly spilling milk on roads because their usual clients, hotels and restaurants, are shuttered. There have also been reports of farmers selling milk in nearby cities at a measly Rs 20 per litre.
If the lockdown is inordinately extended, and the prices do not stabilise, some dairy farmers may permanently close down their business. When the situation normalises, the renewed demand may lead to a sudden rise in price.
Rabi procurement
The government is in a dilemma on how to maintain social distancing during the procurement of rabi crops in mandis. India has 2,477 principal regulated markets and 4,843 sub-market yards regulated by APMCs. In these mandis, post-harvest operations – transportation, cleaning, grading, packaging and loading – are conducted manually by workers. The embargo on movement means there will be fewer workers available this year.
Even if mandis operate normally, how will the government ensure social distancing among large numbers of labourers, farmers, traders, government officials, transporters? A plausible solution for this problem could be the cooperative-/cluster-based activities at village level.
Procurement could be done through Farmer Producer Organisations, which help aggregate farm produce using the bottom-up approach. Farmers can take their produce to the local FPO and procurement agencies can directly deal with the FPO. This may lower the risk of interaction among various agents at a single time.
Apart from foodgrain, FPOs can also procure perishable products and sell directly to government agencies, especially at this time when there is a huge demand-supply mismatch. Empowering FPOs with necessary support can keep the supply chains working, ensure food security and protect farmers from distress sales of their produce while maintaining social distancing.