‘Agri reforms could yield results, but there are some grey areas and concerns’

June 10, 2020 4:30 AM

With the desired private investment, particularly in creating infrastructure like warehouses, cold stores, grading and pack facilities, farmers will be able to get better prices for their produce through the technology-driven market linkage.

agriculture sector, agri reforms, NCDEX, PAN number, GCFA, covid 19 lockdown, MSP, Essential Commodities actThe Ordinance on barrier-free inter-state trading will provide the necessary legal backing to direct purchase from farmers, which started in some states after the announcement of lockdown.

By Prabhudatta Mishra

The agriculture sector would receive massive investments in the next few years after three major long-pending reforms were undertaken at one go, experts said. With the desired private investment, particularly in creating infrastructure like warehouses, cold stores, grading and pack facilities, farmers will be able to get better prices for their produce through the technology-driven market linkage.

“The impact will be visible in a few years as the government has decided to undertake the reforms simultaneously and not one after another, which normally happens,” said Vijay Kumar, CEO of commodity exchange NCDEX, which deals mainly in agri products. “A clear signal has gone out to the private sector to come and invest,” Kumar told FE and added that a paradigm shift would happen.

However, there are some critical areas where the government needs to clear those aspects without ambiguity. For instance, traders said that there should not be any kind of tracking to find out the rates in the contracts even as there is provision to get those agreements registered with authority. There should be no pressure to buy at the minimum support price (MSP) when anyone entering into a contract with farmers, the traders said.

Unlike on MSP, the new Central law on contract farming — The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 — will override the Essential Commodities Act in terms of its area of relevance. It says ‘any obligation related to stock limit shall not be applicable to such quantities of farming produce as are purchased under a farming agreement entered into in accordance with the provisions of this Ordinance.

On inter-state trading, though there was a suggestion to allow it through a centralised registration, the government finally decided to make the trading completely free by mandating anyone having a PAN number to be eligible to buy directly from farmers and sell it anywhere in the country. However, the government has reserved its rights to prescribe any other document as well as option of registration for trading in future.

The Ordinance on barrier-free inter-state trading will provide the necessary legal backing to direct purchase from farmers, which started in some states after the announcement of lockdown. “We have started disseminating our purchase rates on a daily basis to about 250 chana farmers through SMS and the response is overwhelmed,” said Pawan Jindal, who has a processing plant of pulses at Bina, Madhya Pradesh. There is possibility of creation of infrastructure like cleaning and grading facilities at village levels, which farmers used to get at mandis, Jindal said.

Also, if the key foodstuff ‘de-regulated’ from the Essential Commodities (EC) Act show ‘extraordinary price rise’, the government could still impose stock limits and other restrictions on them, the relevant Ordinance issued last week stated. The rider could be dampener for potential private investors in capital-intensive warehousing and cold- chain infrastructure.

The Cabinet on June 3 decided to promulgate three separate Ordinances to usher in the reforms in agriculture marketing and commodities trade it had announced earlier, as part of the economic package to counter Covid-19 pandemic. The ordinances are to give effect to the amendments in the Essential Commodities Act, 1955 and two new Central laws – one on inter-state trading and another on contract farming.

The share of public investment in the gross capital formation in agriculture and allied activities (GCFA) was as high as 44% during the 1960s. But it has fallen to an extremely low level – 15% in 2014-15. Private GCFA accounted for 83% share, out of which corporate share was just 2% as farm households account for a major share in total investment, according to Dalwai committe report on doubling farmers’ income.

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