Under the scheme envisaged by the landmark act, around 67 percent of India’s population will be able to get rice for Indian Rs 3 per kg, wheat for IRs 2 per kg and coarse grain for IRs 1, within the limit of 5 kg of grains to each individual per month.[break]
To enforce the highly ambitious and challenging act, the Indian government has targeted to annually procure and store 62 million tons -- some 25 percent of the country´s food production.
Massive commercialization and significant reduction of cost of production in the farming sector are required to strengthen the food security situation in one of the largest consumer countries of food in the world.
With the introduction of the food security act in India, which is largest market for Nepali food grains and source of food grains for Nepal´s domestic market, Nepali business people and experts have hinted at possible adverse impacts in Nepal.
Given Nepal´s increasing dependence on India for food and other farm supplies, introduction of the food security law is all set to weaken the competitiveness of rival products in Nepal. As the newly passed law is aimed at reducing farm costs, Indian products will be available at far cheaper prices in Nepal itself, compared to the prices of locally produced products.
“The newly introduced food security law in India will hit Nepali farmers, who are already facing soaring cost of production in absence of sufficient protection from the government.
“Amid eroding of competitive edge among our farmers, Indian products will flush our products out of markets,” Suraj Vaidya, the president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), told Republica.
Nepali farmers are already compelled to sell their products at cheaper prices in the absence of effective mechanism for minimum support prices from government buy farm produces. Poor market infrastructure and storage facilities have forced farmers to sell their produces at throw away prices during harvest season.
FNCCI, the representative body of the private sector, has also drawn attention of political parties toward a possible crisis in the country´s farm sector.
At a recent meeting with CPN (UML) leaders, Vaidya urged the party to incorporate programs that can counter the challenges posed by the Indian food security act.
“The act has highlighted the vulnerability of Nepal´s agriculture sector and urgency to deal with the problem,” added Vaidya.
A study commissioned by FNCCI shows that the cost of production is already higher by as much as 30 percent in farms in Birgunj compared to that right across its borders in Indian.
On the back of soaring cost of production, the private sector has asked the government to support farmers with subsidies in farm inputs and market infrastructures.
India is also increasing investment in research and development, extension of services, and irrigation to bring down the cost of production.
Effects of the planned reform will reach the door of Nepali farmers who are still facing lower productivity and higher cost of production, say experts.
Agri-business expert Deva Bhakta Shakya also sees multiple effects impending Nepal once the Indian food act is implemented fully.
"Cheaper Indian food grains are likely to replace the produce of Nepali farmers, posing a huge threat to the overall agriculture sector which contributes over a third of the country´s Gross Domestic Product (GDP),” said Shakya.
Indian farmers are already enjoying huge subsidies in inputs along with better infrastructure which has already cut their cost of production.
Under the food security act, there will be 270 million people just in the five states that bordering Nepal who the Indian government plans to distribute food grains to.
“Cheaper food grains which will be available at subsidized prices will flood the markets in Nepali and kick local grain out of the market,” added Shakya.
Subodh Kumar Gupta, a food-grain trader in Birgunj, also expressed worry over the possible inflow of heavily subsidized food grains through the porous Nepal-India border.
“Unauthorized inflow of food grain from India will not only sideline Nepali food grains but affect the formal channel of food trading,” added Gupta.
Shakya, however, suggested that the government shift its priority to other products that Nepal has comparative benefits over Indian products. “We have to look for other products than food grains which have more competitive strength compared to India products,” he added.
This year´s budget has emphasized on modernization, commercialization and development of infrastructure for the agriculture sector, by hiking budget for them by 76 percent to Rs 21 billion.
However, Prabhakar Pathak, the spokesperson for the Ministry of Agricultural Development, acknowledged that the existing programs being launched by government are not sufficient enough to address the emerging challenges in the agriculture sector.
“We have policies, plans and programs for boosting the farm sector but we are still weak in terms of financial incentives and subsidy issue to farmers,” said Pathak.
There are three proposed guidelines meant for providing incentives to farmers that has remained pending at the Ministry of Finance for over six months. The guidelines are for subsidizing the interest on agricultural loans, purchase of farm machineries and various food processing technologies.
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