Disrupted supply chains need to be mended to revive rural economy

Rural economy has been hurt due to COVID-19 and the lockdowns. Migrant workers have had to return without savings from their wages. Marketing of fresh farm and animal produce has suffered very severe disruptions. Input supply chains have been hurt.

Due to preoccupation of banks with distribution of household subsidies under Garib Kalyan Yojana, no movement towards mounting farm credit operations appear to be happening. Most of discretionary spends of people (marriages, festivals and ceremonies) and livelihoods of the rural poor arising out of that have got dampened to a huge extent.

Even so, depending upon the extent the rural economy of a specific region was isolated, there the rural economy has escaped a severe a blow from COVID-19, as experienced by India’s urban economy.

Disrupted supply chain

The toughest challenge in rebooting the economy appears to be the complex task involved in mending the ruptured supply chains for rural produce. Supply chains act as conduits for flow of information, materials and money. March through August is the peak season for flow of fresh produce like vegetables and fruits.

The flow happens entirely through a huge web of interconnected nodes, each operating quasi independently. Transporters play a huge role in the flow of commodities from villages to transit markets, and from transit markets to terminal or consuming markets.

These movements were not restricted to intra-state but very often were inter-state. Due to stoppage of inter-state movement of trucks carrying fresh produce in the initial phases of lockdown, the entire supply chain got hugely disrupted.

Closure of markets

Then came the sad discovery of market players in terminal markets being diagnosed as COVID-19 positive, resulting in blanket closure of terminal markets like in Vashi in Maharashtra, and now partially in Azadpur in Delhi.

The truckers themselves suffered longer round trips and the truck crew faced huge difficulties in their usual needs for fuel, food and the like. Besides, each crew member, as a normal human being, has the same fear and misgiving, and also faces the same pressure from his family to return  and be safe at home as all of us do.

This has compounded the difficulty of smooth revival of trade operations. As is well known, there is a large and nested sequence of these actors in vegetable and fruit markets starting from assemblers and wholesale shippers at producer end, through brokers cum traders in transit and in terminal markets, then through a series of distributors who supply to shops which interface with consumers.

Lockdown has meant that a large number of these could not work from their usual places. Without that, the myriad transactions between market players at different levels, each needing information, bargaining and exchange of materials and cash have been hampered.

Affected animal husbandry

The situation in regard to animal produce is a shade worse if no different than the above. Even before the COVID-19 epidemic became a reality, rumors about chicken leading to possible corona infections had been doing the rounds. Perhaps some over-enthusiastic bigot of vegetarianism thought it a brilliant move to make people give up eating chicken.

The result for the poultry industry has been disastrous as the industry lost all its market in no time. Even formal endorsement and declaration by ministers and directors of departments concerned that chicken meat is safe could not reverse the fear.

Sheds of broiler and some layer birds are empty and thus the supply chain has to be started form the very producer side. READ Thousands of smallholder women poultry farmers lose business to coronavirus misconceptions

The situation regarding fish is also complex: while fish markets in Mumbai, etc. were affected by the lockdown, the very concept of social distancing does not go well with the way fish is harvested from the sea, transported and marketed.

The term fish market connotes noise, hustle-bustle and crowd. To convert the whole fish business to become compatible with the needs of social distancing and to make it jell in cities to revive consumption will take time.

Non-perishables and other commodities

The situation of non-perishables is a shade better. Food Corporation of India (FCI) intervenes on behalf of the government in the grain market. The government has insisted on procuring grains as usual, save for the care of maintaining social distance and avoiding crowds. The results have been good so far, with FCI procuring more grain than the target till date would expect them to do.

However it is not clear how the situation in the case of other commodities is evolving. The buzz is that the mandi operations are hampered by three factors: lockdown and restrictions on movement of traders, some shortage of manpower as a lot of headload workers were from migrant communities and there is an issue with long distance transportation.

Agricultural inputs

The situation in regard to supply chains of agricultural inputs is more difficult. This is the peak time for processing, packing, transportation and sale of seeds needed for coming kharif crops. All these operations were severely impacted during the first phase of the lockdown.

While some relief was available in the second phase, it would be bold to state that normalcy has returned in these supply chains. There are reports of government having lowered the standards for permitting sale of seeds this year, permitting lower germination percentage. While we do expect some issues when farmers buy seeds, there may be angst and anger when the seeds fail to germinate.

It is difficult to state what is needed to mend the supply chains. Some modicum of working capital infusion would help at some levels, particularly the traders who buy rural produce and the people who buy to cold store the potato and other produce.

A great deal depends on the extent of flexibility extended to mandi operations as they involve a large movement of goods, vehicles and people. It is also important to take measures for building the confidence of transporters in plying their vehicles in the usual manner without unnecessary stoppages and potential punitive measures from law enforcement agencies.

Sanjiv Phansalkar is associated closely with Transform Rural India Foundation. He was earlier a faculty member at the Institute of Rural Management Anand (IRMA). Phansalkar is a fellow of the Indian Institute of Management (IIM) Ahmedabad. Views are personal.