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Agricultural reforms thrust welcome

By DM Deshpande

The Atmanribhara Plan as enunciated in the economic package contains a few remarkable reforms. One of them pertains to agriculture. It is good to see that the some of the long standing fundamental reforms in agriculture being addressed. These changes, if carried out in the spirit of the announcements made by the Finance Minister, will usher in better prices for farmers without burdening the consumers.

The package for agriculture came with 11 major points of which the first eight pertain to agriculture infrastructure fund- Rs one lakh crore, Rs 500 crores for ‘top to total’ and another Rs 500 crores for bee keeping. They are welcome without doubt as they bring in much needed investment in Indian agriculture.

All these form various schemes of the government on the lines of others such as doubling the farmers’ income by 2022, completion of 99 irrigation projects by 2019. Unfortunately, studies show that the success rate of such schemes is less than 50 per cent. So unless something drastic happens that changes the trajectory, there isn’t great hope of them succeeding within a defined time frame. But the reforms hold a lot of promise.

The first one is the proposed changes in the Essential Commodities Act (ECA) of 1955. It is a legislative act of a different India. Ravaged by famines and wars including the Second World War, our dependence on imported food grains was so much that India was defined as ship to mouth nation. Production of all goods and services was short while burgeoning population and low incomes marked the features of Indian economy during those years.

Hoarding of grains and other goods was rampant and inflation was generally in double digits. But India has stopped importing grains long time back. In fact, it is now a major producer and exporter of principal food grains. Our granaries are over flowing which gave us the confidence to combat novel Coronavirus.

The biggest impediment in building storage capacity has been the ECA. No private investor showed any interest for building storage capacity as under ECA the government could place restrictions on holding of grains/goods at any time. Lack of adequate storage has resulted in prices of agricultural produce plummeting after the harvest. Erratic and huge fluctuation in onion price in India is owing to this reason which, at times, has led to fall of elected governments.

Secondly, reforms have been announced in APMC (Agricultural Produce Marketing Committee). It was restricting the choice of farmers to sell his produce outside the local mandi or the state. These designated market yards have become monopolistic and with commissions and levies, they have resulted in high intermediation costs for the sellers. Vagaries of monsoons meant agricultural production is not always a boon and marketing the produce has always been a bane.

Nothing can be more harmful to the interests of farmers than to place restrictions on where they can take their produce for sale. Since states couldn’t come to consensus, it is only in order that the centre is proposing a common legislation applicable to all states in this regard. It will lead to better integrated spatial prices in the country. Farmers of surplus producing region could look at selling in places of shortage, thus getting better price realizations. Similarly, scarcity hit region will get supplies certainty plus relatively lower rates.

The third relates to enabling legislation for allowing contract farming. This will help the farmer to get a slice of the urban Indian growth story. What is envisaged with legislative and policy support is that the farmer will be able to enter in to a contract to produce for a large retailer, aggregator, processor etc. The farmer will know even before sowing what price his produce will fetch.   

   Potentially it can bring about a sea change in attitude, work culture and productivity in agricultural sector-all to the benefit of farm community. It is generally felt that enforcing contracts in India is not easy. Even more difficult perhaps it would be to enforce contracts with farmers. Such pitfalls must be avoided because at stake is the credibility and sustainability of a model that can transform farmers lives and livelihoods.

Transportation network, improved digital platforms going forward and reliable supply of electricity will be crucial pre-requisites. While the intent seems to be good and noble, the fine print also needs to be seen. There is already some mention that if prices double, then government may re-impose restrictions on stocks. Does this mean that if onion prices go up from Rs 20 to Rs 40 controls will be back? This will undo all the painstaking reforms undertaken.

Further, it is not feasible for a large producer or a retailer to approach an average farmer who produces on small scale. Producers companies (FPO’s) have been formed in some states and they are proving to be successful. They are ideal for scaling up and dealing on large scale that is mutually beneficial to both growers and buyers. Governments should give a boost to these organizations that have the added benefit of nil interference from the political establishment.

Let us hope for the sake of Indian agriculture and farmers that these reforms see the light of the day soon.

The author has four decades of experience in higher education teaching and research. He is the former first vice chancellor of ISBM University, Chhattisgarh.

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