The agricultural marketing reforms brought about by the government through two new laws and an amendment to the Essential Commodities Act are in the right direction. These are overdue and should have come 20 years back.
Lack of effort to build consensus and ‘to sell’ the farm reforms to stakeholders like States, farmers organisations and Opposition parties has resulted in the current protests by the Punjab, Haryana and Western UP farmers and the stand being taken by different Opposition parties.
Agriculture is a State subject. While the primary responsibility for agriculture lies with the States, it is the Centre that sets the regulatory framework for the sector. Marketing of agricultural produce has been regulated by the APMC Acts of States. It is not easy to bring about reforms in agriculture across all States without involving them.
Farmer-consumer connect
Agriculture has moved from a production-driven to a demand-driven system. Connecting farmers with consumers is very critical which is now possible thanks to digital technology tools. Matching the demand and supply will ensure better prices for farmers.
Currently, the agricultural supply chains are too long. The farmer gets hardly 30 per cent of the price the consumer pays. The mandis , where the farmers have been mandated to sell his produce all along, have been exploited by cartels of middlemen who have been exploiting the farmer through improper quality assessments, faulty weighment systems, high commissions, etc.
While the MSP (Minimum Support Price) is supposed to prevail at t he mandis, it is not always so. Most of the crops operate at market prices, determined by the demand-supply dynamics in or outside the mandis .
Of the 23 crops covered by the MSP, it is only in rice and wheat that the government buys at the set price. Every year the government procures about 70 million tonnes of foodgrains (essentially rice and wheat) for the public distribution system and various welfare programmes.
Punjab and Haryana contribute about 52 per cent of the total wheat procurement and about 30 per cent of the rice purchased by the government. Almost 90 per cent of the rice and wheat produced in these States is procured by the government through the mandis at gthe MSP. This has been an assured outlet of rice and wheat for the farmers of Punjab and Haryana which made them prosperous but also dependent on this system.
Depleting water table
This has actually led to over-production of rice and wheat, thereby depleting water resources and reducing the fertility of soils due to over use of fertilisers. The commission agents, called Arhtiyas , provide credit to the farmers, supply them inputs on credit and also buy their produce back. They certainly do not like the idea of any reform to the current arrangement.
Of the 14 crore farmers in India, the majority (more than 90 per cent) are outside Punjab and Haryana. Farm distress is high in many of those States, especially in the rainfed areas. Reforms that benefit a large section of farmers across the country should be seen in that context. Misunderstandings, misinformation campaigns and politicisation of the issue have muddied the waters. It is essential that the current reforms succeed. However, since there is a deadlock, here is a 13-point programme on how to break it and create a path forward.
(1) The Prime Minister should call for an immediate meeting with the State Chief Ministers and clear the air about various concerns and misunderstandings. It is important to get the CMs on board. Some of the States have made progress with APMC reforms in the last five years. It should not be difficult to appreciate their efforts and seek their cooperation in making the current reforms successful.
(2) The Centre should announce a mechanism of compensating the States for any loss of revenue they may incur due to the reforms.
(3) The Centre can give in writing to farmers bodies and the States that the MSP system will continue as wil procurement of foodgrains through the mandis at MSP. These measures are essential for the country anyway.
(4) The government can announce a fund to upgrade and modernise APMC mandis . They should reinvent themselves, become more efficient, tech savvy with modern infrastructure and get rid of the cartels. This will make them competitive and modern.
(5) The Centre may announce the setting up of a regulatory body with adequate powers to keep an eye on oligopoly practices in these markets, especially among the big players.
(6) The government ca announce a National Digital platform that integrates private digital e-commerce enterprises with eNAM to help farmers to sell their produce to customers in far off places. Also capture all transactions on this platform, as per Section 5 (2) of the Act. A new system of logging price information from mandis and private players on digital platforms can be developed.
(7) The government may have to provide a transitionary support to the farmers for, say, three years till the new system establishes itself. Assuring the MSP is one of the measures. Instead of covering all crops from the beginning a gradual process of covering all crops in batches may be adopted.
(8) Make registration of all contracts with private buyers mandatory with a designated authority in each district — this is to be done by the State governments.
(9) Announce a massive capacity-building programme for farmers and FPOs — in conducting commercial operations, making contracts, digital proficiency, hand holding to help them use infrastructure fund and set up farm gate infrastructure. This is to be taken up by the State governments and private enterprises. The Centre may create a fund to help States to undertake this programme.
(10) A digital registration system for all private buyers of agricultural produce should be set up. The current provision that any one with a PAN number can buy from farmers has to be replaced with a digital registration system. This national register should be set up by the Centre.
(11) Integrate digital quality assessment technologies into the digital trading platforms. This is to be done by the Centre.
(12) State governments should set up a business advisory structure in each district/Taluk to help the farmers in negotiating contracts. A young, qualified, experienced Business Manager in each DM office can help farmers and FPOs in the district with making contracts with private parties. This support mechanism is to be set up by the State governments.
(13) Announce massive incentives to farmers to adopt crop diversification in Punjab and Haryana. Oilseeds, maize, vegetables and other crops should be promoted.
Let us hope all the stakeholders will work together and make these path-breaking laws succeed and create a new normal in agricultural markets for the benefit of farmers, consumers and the economy.
The writer is Director-General, Federation of Seed Industry of India. Views expressed are personal