- Indian Agriculture is characterised by millions of farmers cultivating more than 200 field, horticultural and plantation crops across the country in three distinct seasons ofKharif, Rabi and Zaid (summer) on over 141 million hectares of cultivated land.
- This generates more than 1000 million Tonnes of farm produce taking together foodgrains, oilseeds, sugarcane, and fibre crops.
Characteristics of the agricultural produce marketing in India:
- Over the period, the Marketed surplus ratio (MSR)of all the commodities has increased, so much so that in crops like sunflower and safflower the marketed surplus ratio is 100 and cotton and jute close to 100 (GOI, 2019). In other crops also, the MSR has increased substantially during recent years.
- These produces arrive in huge bulk in the market in a very short span of time, many a time, beyond the absorption capacity of the domestic demand and the management capacity of the existing market infrastructure and the system.
- The price discovery in the markets of APMCs except for those which are under e-National Agriculture Market (eNAM) has been opaque and heavily monopolistic, in the hands of select aggregators and commission agents.
- Contract farming in the past on crops like tomato, potato, barley, etc. in Punjab and Rajasthan and elsewhere had mixed response and farmers at large had reservations in entering the contracts.
- The investment and active private participation have been dismally low due to frequent imposition of the essential commodity act (ECA) limiting the storage. It cut on the larger private investment and proved prohibitive rather than facilitative.
On June, 2020, the Government promulgated three ordinances on farmers' produce trade and commerce; farmer agreement of price assurance and farm services; and essential commodity. Subsequently, the three Bills were passed by the Parliament on 20 September, 2020 to replace the ordinances.
However, a fraction of farmers, farmer bodies and experts started expressing the serious apprehensions about these Bills that these laws will lead to:-
- Withdrawal of MSP,
- Deprivation of the farmers from their lands in favour of big private players,
- Hoarding of essential commodities.
These apprehensions, though imaginative, have somehow percolated deeply in a section of the farmers, the largest being those who have been the biggest beneficiaries of APMC dominated procurements and the price realisation.
The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
- Post 1991 liberalisation, the income gap of the farmers and non-farm worker has been widening reflecting that the benefits of the reforms in farm sector were too little and fragmented and could not boost the income of the farmers.
- India is likely to produce huge surplus of agricultural commodities in next 10 years (NITI Aayog, 2018), much beyond the absorption capacity of the domestic market.
- For import substitution of edible oils, fruits and nuts and other agricultural items, we require investment for post-harvest infrastructure, and logistics which has not been coming due to restrictive regulations of the APMCs/ECA.
- Encouraging the small and marginal farmers (SMF) to diversify towards high-value crops.
- The agriculture markets are too sparse and fragmented leading to glut and the price crash in some markets while shortage and high prices at major demand centres.
- The agriculture census 2015-16 has put more than 86 percent farmers under small and marginal category with average holdings of 0.38 ha to about 68.5percent farm households. This means the likely surplus with them for offering to sale is low and much low to approach any APMC mandi individually due to lack of economy of scale.
- On an average one mandi serve about 472 sq km against the norm of one market yard at about 80 sq km area.
- The FPTC Act provides for the freedom to sell and buy farm produce at any place in the country, promote e-commerce and allows setting up of an electronic platform.
- It legalises all the transactions which were earlier put under the regulations and restriction by the APMCs.
- The direct purchase from the farmers at their farm as provided in the FPTC Act, 2020 will be empowering him to decide the price of his produce.
The need is to establish a robust and accountable market intelligence system packed with technology and well-trained scientific manpower to minimise the chances of any manipulation in prices of the produce. Higher private investment could happen with reforms in agricultural market leading to price assurances and unabated flow of food items from centre of production to major centre of consumptions.
The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
- Themajor apprehension about the Act is that corporates will take away the lands of the farmers forcibly by manipulating the agreement.
- The APAFS Bill 2020 will facilitate an assured price to the farmers for his produce as mutually agreed between farmers and sponsor before the commencement of production operations, and the technologies, services and inputs on mutually agreed terms and conditions for the production of desired quality produce.
- The sponsor neither permitted to lease-in the land of the farmers, nor he/she can erect any assets permanent nature on farmers' land or modifying it or acquiring the ownership rights. The farmers will be the sole custodian of all production operations as well.
The contract farming with Nestle, for milk in Punjab's Moga district operating since 1961 could be an example to cite. Over one lakh farmers are associated with the contract. Nestle has been providing the technical guidance, feed, vaccines and veterinary services to milk producers. A high order supply chain has been established based on a pre-announced weekly price based on the fat and solid content in the milk. The assets of the farmers have not been taken by the MNC.
The Essential Commodities (Amendment) Act, 2020
- The supply of the commodities enlisted in ECA such as cereals, edible oils and oils can only be regulated under extraordinary circumstances like war, famine, extraordinary price rise and natural calamities.
- The modifications in ECA will encourage the big investment in creating much needed infrastructure like warehouses, cold storages, pack houses, and logistics.
We must note that the gap between required and existing infrastructure is 70 percent in pack houses, 98 percent in reefer vehicles and 94 percent in ripening chambers. By creating these infrastructures, much needed income to farmers will be augmented to a large extent.
- The States have to take these proactively and the Centre should provide matching grants, if needed for creating alternative mechanism.
- The APMCs not only remain functional as a platform for marketing of agricultural produce but will be strengthened and become more transparent due to increased competition which is a pre-requisite for a well-meaning market.
- While the e-NAM and other initiatives will move on, most likely with the positive impact in long run, the immediate action should be creating the awareness amongst farmers about the positives of the amendments with some live examples and records of advantages based on the real learnings.