Agri revolution 2.0: New ordinance set to revolutionise agriculture, but Centre needs state co-operation

The new Farmers Agreement on Price Assurance and Farm Services Ordinance 2020 is set to revolutionise agriculture, but Centre needs state co-operation.

Agri revolution 2.0: New ordinance set to revolutionise agriculture, but Centre needs state co-operation
By Ashish Kundra & Gyanendra Mani

Great reform often emerges unexpectedly from the shadow of a profound crisis. Green revolution, born out of a food crisis, was one such threshold in the journey of Indian agriculture. The nation, in the throes of another tumult, is poised to witness an equally momentous milestone. Two ordinances, signed by the president a few weeks ago, have paved the way for liberalisation of the rural farm economy. Indian farmers will seek redemption in these promulgations, which balance the scales between producers and buyers. India’s northeast stands to gain immensely if the states step in tandem.

Farmers, so far, were obliged to sell in designated wholesale market yards, controlled by usurious traders. ‘The Farmers’ Produce Trade and Commerce (Promotion & Facilitation) Ordinance 2020’ aims to free agricultural trade, empowering farmer to sell unfettered. Entrepreneurs can also establish private electronic trading platforms, with inbuilt market intelligence features, to benchmark sale with prevailing trends. ‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020’ has laid the ground for contract farming. Transparent price assurances, embedded in written contracts between farmers and ‘sponsors’ would guarantee protection. A commodity trader, wholesaler or even a food processing company can now enter into a mutually rewarding arrangement, with farmers. Pepsico had entered into a similar arrangement with potato farmers of Punjab several years ago to manufacture Lays. The experiment, of course, went through its own ups and downs.

So, how does northeast benefit?

The farm landscape is unique in the northeast. A biodiversity hotspot, the region is endowed with rich natural resource. Its agro-climatic conditions support the cultivation of high-value exotic crops. The average farm holding size is more than the national average, highest being in Nagaland and Arunachal Pradesh, making it more amenable for contract farming.

Northeast produces the finest kiwi, avocado, dragonfruit, passionfruit, strawberries, oranges and pineapples. Spices like large cardamom and turmeric are grown in abundance. The region is a plantation paradise, with exquisite varieties of orchids, tea, coffee and variety medicinal and aromatic plants. With one of the lowest fertiliser consumption, farming is organic by default. Northeast has a rich platter on offer. Quest for the right market and a fair price has remained elusive so far. This is set to change.

A legal basis now exists for entrepreneurs to enter into direct commercial arrangements with farmers. Incipient change is already visible. Palm oil cultivation is a case in point. A mismatch between domestic production and demand nudged companies to innovate. Ruchi Soya and 3F entered into contract farming arrangements with farmers of Mizoram and Arunachal Pradesh. Planting material was supplied to farmers, with assured buyback guarantees. In an unregulated space, the entire market risk fell on the farmer.

Similarly, Spice fresh, a subsidiary of Spice Jet, smelt an opportunity in juicy Dambuk mandarins and set up a hub at Digboi. Farm fresh oranges, sorted, graded and packed were airlifted from Dibrugarh to adorn the shopping malls in metros. The partnership with local farmers ruptured in less than a year. Absence of clearly defined rules of the game became a spoiler. The new ordinance would help create certainty for both buyers and sellers. Homegrown agripreneurs of the northeast are also venturing to build regional digital platforms for farmers with market linkages across the country.

The efforts towards collectivisation of farmers under “Mission Organic Value Chain Development for North Eastern Region” created 100 Farmer Producer Organisations (FPO), which yielded good results. These, if upscaled, can become the instruments of organised interface with aggregators and contract farmers alike. Capacities of FPOs also need to be strengthened to make them capable of handling the entire value chain for various agri commodities, which requires handholding and institutional financial support, at least in their initial period of establishment.
The ordinances alone will not suffice.

Crucial reforms, by state governments, must be introduced alongside. Land rights and tenancy laws are proving to be irritants. In the absence of a cadastral survey, no formal ‘ownership rights’ of cultivable land have been conferred on farmers in most states. Ownership continues to be based on fuzzy customary law, creating ambiguity for investors. Customary rights vary not only from one state to another but also within states, across tribes. A framework of land leasing would help monetise land and make contracting arrangements more robust.

Small states of the northeast in a fragmented market lack economies of scale. The region must transform into an integrated agricultural market. Planning for rural road connectivity and post-harvest market infrastructure–cold storages, rural godowns needs a regional lens. Government-led electronic National Agricultural Market (eNAM) has created a national network of mandis through an online trading portal. Buyers outside the State are free to participate in local trading. Sadly, none of the markets in the northeast have joined this framework yet. Riding on an existing technology platform would be a first starting point to infuse flexibility in marketing.

This is a historic moment for Indian agriculture and a great opportunity for farmers of the northeast. State governments must take a cue from the Centre and fix their regulatory frameworks.

Kundra is an IAS officer, and Mani is a senior officer with  NABARD. Views are personal 

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