Farm Sector Reforms

GS 3-AGRICULTURE :Marketing of agricultural produce and issues and related constraints; Issues related to direct and indirect farm subsidies and minimum support prices

Introduction 

       1991 is remembered as a watershed moment in India’s history. The licence raj was dismantled. India opened its markets to international trade, investment and competition. India’s agriculture sector remained regulated by the archaic Agriculture Produce Marketing Committee (APMC) Acts. India’s agriculture sector was finally unshackled and set on the path towards modernization.

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  • Farmers have been protesting against the Bills ever since it was promulgated as ordinances in JUNE. The Bills are-
    • Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
    • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
    • The Essential Commodities (Amendment) Bill, 2020.
  • Aim to do away with government interference in agricultural trade.
  • Creating trading areas free of middlemen and government taxes outside the structure of Agricultural Produce Market Committees (APMCs).
  • Removing restrictions of private stock holding of agricultural produce.

Agricultural Produce Market Committees (APMCs):

  • Geographical area in the State is divided and declared as a market area.
  • Markets are managed by the Market Committees constituted by the State Governments.
  • Account for less than a fourth of total agricultural trade.
  • Play an important role in price discovery essential for agricultural trade and production choices.

Contemporary Issues:

  • The Food Processing Industries Minister resigned after the introduction of Bills.
  • There is excessive political interference and there is need for reform.
  • Government has failed to have any discussion with the various stakeholders.(with farmers,middlemen.)
  • Subject of trade and agriculture are part of the State list– States have not been consulted.
  • Farmer organisations see these Bills- corporatisation of agriculture and a withdrawal of government support.
  • May not be direct evidence of crony capitalism:- But the entry of biggest corporate groups (Adani and Reliance) to food and agricultural retail.
  • Ad hoc interventions by the government raise suspicion about the intent of the government to leave the price discovery mechanism on the market.
    • ( eg: ban on onion exports,raising import duties on masur)
  • A lack of regulation in these non-APMC mandis.
  • The preference for corporate interests at the cost of farmers’ interests raise concerns.

The Bihar Example:

  • Bihar which abolished APMCs in 2006.
  • Farmers in Bihar on average received lower prices compared to the MSP for most crops.
    • (Eg: Against the MSP of 1,850 a quintal for maize selling their produce at less than 1,000 a quintal.)
  • Farmers still see the APMC mandis as essential to ensuring the survival of the MSP regime.

Data:

  • Wholesale Price Index (WPI) suggest a deceleration in farm gate prices for most agricultural produce.
  • Increased procurement through the MSP-based regime for paddy and wheat.
  • Decline in basmati rice prices by more than 30% – despite higher international prices suggests the limitation of market intervention in raising farm gate prices.
  • Cash crops such as cotton have seen a collapse in prices in the absence of government intervention.

Additional points:-

  • The tractor protest by farmers of Punjab and Haryana in July was in opposition to these Bills.
  • The Punjab Assembly on August 28 passed a resolution rejecting the Centre’s ordinances.
  • Agriculture and markets are State subjects.
  • Trade and commerce in food items is part of the concurrent list.
  • The Cabinet has approved MSP hikes for six crops, including a 2.6% increase -rate for wheat. Last year, MSP for wheat -a 4.6% increase.
  • Contract farming
    • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Ordinance relates to contract farming
    • providing a framework on trade agreements for the sale and purchase of farm produce.
    • The mutually agreed remunerative price framework envisaged in the legislation is touted as one that would protect and empower farmers.
  • The Essential Commodities (Amendment) Ordinance removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.
  • Critics anticipate irrational volatility in the prices of essentials and increased black marketing.

President Ram Nath Kovind gave his assent to all the three farm bills.

  • The Essential Commodities (Amendment) Bill
  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 
  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill.
  • Encouraging tax-free private trade outside the APMC mandis will make these notified markets unviable.

PROS

  • Have the power to sell their fruits or vegetables to anyone and anywhere.
  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
    • to give freedom to farmers to sell their produce outside the notified APMC market yards (mandis).
    • aimed at facilitating remunerative prices through competitive alternative trading channels.
  • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020
    • give farmers the right to enter into contract with agribusiness firms, processors, wholesalers, exporters, or large retailers 
    • for the sale of future farming produce at a pre-agreed price.
  • The Essential Commodities (Amendment) Act, 2020
  • to remove commodities like cereals, pulses, oilseeds, onion, and potato from the list of essential commodities.
  • will do away with the imposition of stock holding limits.

History:

  • FCI ,formed in 1965 as a response to significant food shortage-made progress in food production.
  • In the early 1990s, we were not facing food shortages.
  • Problem of hunger was not addressed.
  • Post-liberalisation-private players and capital have a much greater role to play in the economy.
  • Need regulations for those players.
  • MSP-more complex, and deserves a very serious consultative process.

Conclusion

We need to enlarge the market for agriculture produce while preserving the ‘safety net’ principle through MSP and public procurement.

     For most crops where MSP-led procurement is non-existent, the decline has been sharper.      With rising input costs, farmers do not see the market providing them remunerative prices. The protests by farmers are essentially a reflection of the mistrust between farmers and the stated objective of these reforms.

        Without strong institutional arrangements, the free market may harm lakhs of unorganised small farmers, who have been remarkably productive and shored up the economy even during a pandemic.

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