Farm Sector Reforms

Farm sector reforms

Last week, the Parliament passed three important piece of legislation with stated objective to reform and liberalize the production, trade, and pricing of agriculture produce in the country.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill

This law purports to allow farmers the freedom to sell their produce outside the regulated Mandi (APMC) framework. The idea seems to be enable development of a new ecosystem where farmers and traders would enjoy freedom of choice in sale and purchase of agri-produce; and the control of state over trade in agriculture produce would reduce to minimum.

It is important to note that this reform was initiated in 2003 with introduction of Model Act. Many states and union territories have already de regulated marketing of fruits and vegetable, trading on electronic platforms like e-NAM, setting up of agri produce markets (Mandis) in private sector, direct marketing of agri produce etc. The reason behind this new law therefore could be lack of adequate response to model law on part of many state governments.

The Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

This law aims to permit farmers to enter into supply contracts with large buyers. These contracts could be exclusive and long term and provide more predictability to income of farmers and help them plan better in terms of adopting better technology and inputs.

This bill effectively facilitates large scale contract farming, whereby large corporate consumers can engage farmers to exclusively produce for them as per given specification and at pre determined price. The bill provides for pegging of prices to the Mandi prices. The famers adopting this arrangement may not avail the protection of minimum support prices as they would be bound by the terms of the contract. All such contracts are proposed to have civil jurisdiction and breach of contract shall have no criminal implications.

Essential Commodities (Amendment) Bill 2020

This bill essentially allows large business consumers to maintain stock of agriculture commodities, purportedly to meet the objective of price stabilization. This may also help in building post harvest infrastructure like warehouses and cold storages etc.

The opinion about the long term implications of these bills is vertically divided.

The supporters of the proposed regime believe that these changes would bring transformative changes to the agriculture and food processing sectors in India. The noted agriculture economist Ashok Gulati, equated these proposals to the industrial reforms and liberalization in early 1990s. It is argued that removing the shackles of state controls and allowing private businesses and farmers to collaborate will lead to significant acceleration in development of farm sector in India, and aid sustainable and faster overall economic growth of the country.

The people and organizations opposing the legislative changes believe that the proposed laws are ill conceived and are being enforced without adequate consultation with the stakeholders. In their view, many of these provisions are already present on the statute book and have not brought any meaningful change to the farmers’ conditions in past decade.

It is also argued that these changes will bring back the pre independence colonial model in the Indian agriculture, where the large corporates will decide the crop and prices. The farmers will continue to be exploited; and the shield of MSP will also be removed.

In my view, the intent behind the proposed legislations is good. The farm sector in India definitely needs urgent and transformative reforms. But for reforms to have the desired impact, these needs to be comprehensive and holistic, not selective as proposed….to continue

Author: Midas Finserve

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