Agricultural reforms: Breaking the glass ceiling in favour of farmers

September 19, 2020 6:50 AM

The new agri-marketing reforms are a progressive step, and release the farmers from the quagmire of restrictive trade practices and cartelised operations

The latter is enabled by increasing the production loan size to Rs 15 lakh crore for the year 2020-21, extending the facility of KCCs to all farmers including livestock and fishery farmers, and focus on post-harvest loans via eNWR system.The latter is enabled by increasing the production loan size to Rs 15 lakh crore for the year 2020-21, extending the facility of KCCs to all farmers including livestock and fishery farmers, and focus on post-harvest loans via eNWR system.

By Ashok Dalwai

In February 2016, prime minister Modi shared a vision with the nation, of doubling farmers’ income by 2022 when India celebrates the 75th year of its Independence and the 150th birth anniversary of Mahatma Gandhi. To the Mahatma, true independence meant wiping every tear from the face of every Indian. With 48% of India’s population dependent on agriculture for its livelihood, the welfare of this section hence assumes great sensitivity.

Over the decades, the country has transitioned from food-deficiency to a state of being food-surplus, challenging the realisation of profitable returns on farm investments. In essence, the farmers needed to be supported by a post-production environment that let them sell all their marketable surpluses at remunerative prices. It is this clarity that has progressed government policies onto efficiency of monetisation, comprising agri-logistics, agro-processing and marketing. This has set the goal for creating supply chains that connect the production and consumption zones. The new strategy also shapes agriculture as an agri-enterprise, wherein the farmers make production decisions based on the expected demand and prices in the market. The new agri-business model is pitched not just as a ‘farm-to-fork’ but also as a ‘fork-to-farm’ approach.

It is against the backdrop of several production- and risk-management-oriented reforms that the country has recorded historic high production across all the agricultural sub-sectors. However, the initiatives that are considered most responsive to the contemporary challenges of the sector relate to post-production segment of the value chain.

In April 2016, on the birth anniversary of Babasaheb BR Ambedkar, eNAM was introduced to integrate all the physically dispersed APMCs. This first step towards “one nation, one market” has brought both farmers and different trade functionaries on a single platform, resulting in more transparent and competitive price discovery. The world over, agricultural markets are not perfect. As a positive response, the new MSP policy has been adopted, which adds a minimum of 50% profit on the cost of production. Deficit commodities like pulses, oilseeds and millets have gained the most. This policy has found true value with a broad-based new procurement policy called PM-ASHA. Its success is best illustrated by the total procurement of 138.14 million tonnes of pulses and oilseeds at Rs 66,238.73 crore during the six years from 2014-15 to 2019-20, compared to 7.17 million tonnes valued at Rs 3,052.41 crore during the preceding comparable period of 2008-09 to 2013-14.

The latest basket of reforms, comprising the three Ordinances of June 5, break the glass ceiling in favour of the farmers. These are: i) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance 2020 (in short Direct Trade Ordinance); ii) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020; and iii) The Essential Commodities (Amendment) Ordinance, 2020.

The direct trade law provides for the creation of an ecosystem wherein the farmers and traders enjoy the freedom of choice relating to sale and purchase of farmers produce. This provision for a direct intra- and inter-state trade across the nation is an alternate channel to the APMCs. It lets the farmers sell produce anywhere and to anyone. It includes all food-stuff generated on the field, as also in the livestock and fishery sectors. The trade zone, with no trade barriers, is seamlessly connected by several electronic trade platforms, making India a single market. This is the only secret to mobilising a larger number of bids for farmers’ produce, engendering competitive and remunerative prices. The complex of purchasers will now include traders, processors, exporters, etc, enriching the value chain. Keeping the transaction costs in mind, the ordinance bars levy of any fee, which will help the traders pass on better prices to the farmers. Alongside this, dis-intermediation that comes from direct trade will minimise the price spread and rationalise consumer prices. Other progressive features include simple and hassle-free registration of traders and electronic trading and transaction platforms; traders to pay the farmers on the same day or within maximum three working days of the transaction if procedurally so required; price information and market intelligence system; and quasi-judicial dispute resolution mechanism including scope for appeal.

The Price Assurance and Farm Services Ordinance is a bold initiative to help the farmers negotiate future price risks that come from fluctuations, apart from benefiting from multi-party contracts for various services at the production stage. The earlier enablement for contract farming under the Model APMC Act 2003 suffered from a conflict of interest. The Model Contract Farming Act, 2018 that redressed this, apart from introducing several progressive measures, now finds more robust and legal foothold under the ordinance. It provides for a pan-India uniform law for multi-party agreements by the farmers, including farmers producers organisations (FPOs). The strength of the ordinance lies in protecting the ownership of the farmers over land, even as they enter into agreements with sponsoring companies. The spin-off advantages are scales of operations and more confident investments in technology and capital, having negotiated the post-harvest price and demand risks before making a production decision. It is the sponsor who is obliged to pay as per the Agreement, and also be responsible for produce delivery vis-a-vis the farm gate. The provision for adherence to quality, grades and standards of the farming produce, will bring in the visibly missing quality dimension into production. A simple dispute resolution mechanism has also been incorporated and the order passed by the appellate authority, the District Collector, in this case, shall have the same force as that of a decree of a Civil Court. Both these ordinances keep away provisions that criminalise deviations, as most legislations have tended to do so far.

In addition, the reform cafeteria encompasses the targeted formation of 10,000 FPOs, the establishment of 22,000 GrAMs (Gramin Agriculture Markets) as aggregation platforms and strengthening of the farmers’ financial muscles to overcome distress sale. The latter is enabled by increasing the production loan size to Rs 15 lakh crore for the year 2020-21, extending the facility of KCCs to all farmers including livestock and fishery farmers, and focus on post-harvest loans via eNWR system.

While all these initiatives provide a facilitative policy framework, the physical highway finds support in the Rs 1,00,000 crore ‘Agriculture Infrastructure Fund’, Rs 20,050 crore for fishery development, Rs 15,000 crore for animal husbandry sector, and Rs 10,000 crore for upgrading the technology of 2 lakh number of micro-food enterprises. This massive capital investment will reduce food loss and reach out the agricultural produce to far-range markets.

The free and fair trade environment is complemented by the amendment effected to the Essential Commodities Act, 1955. It deregulates the foodstuffs, removing the power to impose stock limits, and to be imposed, if at all, only under rare circumstances which too are to be quantifiable & transparent. The processors & value chain promoters not exceeding the overall ceiling of installed capacity of processing or the demand for export in case of exporter are exempted even under such contingencies. This amendment was most critical for the market reforms to yield the intended results in favour of the farmers.

The three pieces of law together are set to do to agriculture, what delicensing of industry did in 1991.

The effected reforms are a progressive step forward, that release the farmers from the quagmire of restrictive trade practices and cartelised operations by a few. The fragmented markets of India are now stitched together to the advantage of the farmers & consumers. In supplement with continued MSP and reformed APMCs, the three new laws will bring into operation the full play of farmers in contributing to the country’s goal of $5-trillion-economy by 2024.

The author is CEO, National Rainfed Area Authority (NRAA) and Chairman, Empowered Body, Doubling Farmers Income, Ministry of Agriculture & Farmers Welfare

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