There has been a lot of debate going around Farm Reforms 2020, which includes, allowing farmers to sell their produces without any regional restrictions and ending the monopoly of traders and middlemen. Prime Minister Narendra Modi's cabinet had issued emergency executive orders in June to change the longstanding rules that govern the vast agriculture sector, which contributes nearly 15% of the output of the $2.9 trillion economy and employs around half of India's 1.3 billion people. It has also opened the window for private capital by allowing farmers to enter into deals with large buyers such as exporters and retailers. It is expected to increase private involvement in the agriculture sector and increase rural income. There is a lot of opposition to these reforms by opposition parties and some farmers’ groups, one of the points is that these amendments will lead to the entire removal of the mandi system and the opposition leaders also claim that the small farmers having less than 2 acres of land will not be able to attain any profit. Some producers believe that, when wholesale markets start to lose its relevance, private buyers could arm-twist farmers to sell at lower rates.
There has been a lot of injustice to the farmers in our country, whether in terms of late payments for their crops or the lack of implementation of the government schemes. The reforms 2020 has been identified as how these kinds of injustice can be reduced but there is a lot of opposition to these reforms.
The three reforms are, the farmers produce trade and commerce bills which enables the farmers to sell their produce anywhere and everywhere throughout the country and there are no barriers or restrictions in this process. This will help in engendering competition among buyers and mark the end of the monopoly of the traders. This will also help in increasing the income of the farmers as there will be no middlemen and the farmers can directly connect to the buyers. This will help in the creation of the national market and the demolition of the monopoly of the Mandi Samiti. This is also expected to be helpful for consumers who will get the products at competitive prices and also encourage FDI in the agricultural sector.
But also, Data from the ministry of agriculture shows that a rising cost of intermediate goods has been the biggest reason for stagnation and eventual decline of trade, for farmers. Given this experience, the suspicion towards the involvement of big capital leading to squeeze in earnings cannot be dismissed as dogma.
The second is an essential commodity bill 2020. This bill removes cereals, pulses, oilseeds etc from the list of essential goods and, besides deregulating production and sale of food products, the bill will not provide any stock limit except under exceptional circumstances like natural calamities. By declaring a commodity as essential, the government can control the production, supply, and distribution of that commodity, and impose a stock limit.
The third is about farmers' agreement about the price assurance and farm services bill. This one provides farmers with an assured price of their produces before sowing. This will allow them to engage in contract farming and would engage them to sell their products to large business firms and retailers. This will enable the transferring of the risk market failure to the buyers. This will help the farmers to be a part of global markets. APMC mandis are heavily politicized and the farmers were supposed to sell their produce there only. The selling of the agricultural produce involves mandi samitis, commission agent, and bureaucracy. The commission agents get a cut in the sale of these products and if these amendments are implemented the entire system will lead to complete desolation. A National Statistical Office (NSO) report based on a 2012-13 survey found that farmers have been selling a large part of their produce to private traders outside APMCs even earlier. For 31 crops sold between July 2012 and June 2013, local private traders were the single biggest buyers in the case of 29 crops.
Modi government has made certain changes in the past few days in the minimum support prices. The two charts display the results.
The changes seek to free agricultural markets from the limitations imposed by permits and mandis that were originally designed for an era of scarcity. The situation has changed now and India has become an exporter for a major of agricultural goods. This move is expected to attract private investment in the value chain of commodities that are removed from the list of essentials, such as cereals, pulses, oilseeds, edible oils, onions, and potatoes.
While the purpose of the 1955 Essential commodity Act was originally to protect the interests of consumers by checking illegal trade practices such as hoarding, it has now become a hurdle for investment in the agriculture sector. The private sector had so far hesitated about investing in cold chains and storage facilities for perishable items as most of these commodities were under the ambit of the EC Act and making them uncertain, and could attract sudden stock limits.
These amendments will be gathering private involvement and will be increasing income of the farmers but we have to wait and see how it functions to evaluate the negative side of the reform.
What do you think about this reform? Will it bring the opportunities it claims? Lets us know about them in comments below.