Critically analyse the potential of agribusiness to address agrarian distress in India. (200 Words)
Agribusiness is the business of agricultural production, which involves all the activities in the value chain right from input supply, production, processing, marketing and retailing. In India, the farmers are effectively delinked from processing and marketing activities. The result is that the profits are hauled away by the multinationals and the farmers are distressed to a point of committing suicide.
Farmer Producer Organizations (FPOs) are farmer owned producer companies which aggregate, process and market their produce. Their expansion beyond few well established FPOs is a nascent step to counter the plight of the farmers, which has the potential of increasing farm incomes from subsistent to prosperous.
Positive scope of agribusiness
- Protection from market risks-: Contract farming protects farmers from market risks for those crops whose price is determined by market forces in case of price crush.
- Productive farming due to use of innovative technology and expert support regarding soil care, right use of fertilizers farming becomes more productive.
- More profit -: Value addition provides more profits to farmers. Profit directly reaches to farmers instead of intermediaries.
- Enhance business-: By plugging there stocks in banks farmers can get easy loans for enhancing their business getting loan for various activities
- Development of farming skills When farmer turned into a manufacturer from a producer then he will turned into an innovator who will tried to find profit even into farming waste
However, such companies face a variety of challenges to their growth.
- Firstly, they are unable to raise enough capital from the member farmers. After the companies are listed, their shares are not allowed to be traded in order to prevent takeovers by affluent private companies. However, this also prevents them from raising capital in the share market.
- Working capital is limited because of the preference of the buyers to pay at later stages, while farmers need it desperately during harvest.
- High Taxes: Agriculture processed foods are taxed at higher rate which increases cost of manufacture , The proposed GST when it comes into effect will help solving this problem
- A company requires managers to oversee smooth running which owners can‘t participate in. High paid managers can be hired only by well-established FPOs. Growth of the agribusiness demands a multi-pronged strategy involving increased finance to bridge capital needs, provision of lower interest loans in order to increase profits, categorizing FPOs as a priority lending sector. Introduction of GST is likely to reduce the multiple taxes paid by such companies.