These reforms will not only professionalise the entire value chain but also allow the farmer to access both capital and technology to modernise farming.
The economic reforms that India witnessed since the early nineties left agriculture largely behind. As a result, the professional reordering of Indian agriculture has remained a task which has been left not just largely unfinished but scarcely begun. Now under the compulsion created by the COVID-19 emergency, the government has announced reforms which have the chance to go a long way in professionalising and modernising Indian agriculture.
This should do wonders to the income of the Indian farmer. Since agriculture is the source of livelihood for half of Indian workers, the new reforms promised can make a massive dent on the remaining poverty in India and allow it to move from being a middle income to a high income category state.
The Indian farmer has been constrained by not being able to secure the best possible price that the market can offer and the market itself has been hugely imperfect as the farmer has had little choice as to who he could sell his produce to. A single market covering the entire country has remained a dream as there have been restrictions on the inter-state movement of produce.
The Essential Commodities Act, through which a lot of the constraints have been enabled, will be drastically amended. This will deregulate a range of agricultural commodities like cereals, pulses, oilseeds, edible oils, onions and potatoes. Stock limits imposed on farmers and agricultural market intermediaries will go.
Along with this, the compulsion for farmers to sell their produce only through the agricultural produce marketing committees (APMC) will go. New legislation has been promised which will allow the farmer to sell his produce to whoever he wishes. Simultaneously, the restrictions on the inter-state movement of agricultural produce will go. Additionally, a framework will be laid down to facilitate the e-trading of agricultural produce.
As the farmer will be able to engage with whoever he likes, it will allow him to, say, enter a contract to supply his produce at a pre-determined price and the buyer, aggregator, processor will in turn have the ability to sell to whoever he likes, be it in India or abroad. This will eliminate the huge fragmentation that exists in the agricultural value chain, from farmgate to fork.
As a result of this, private investment, in particular of the corporate kind, will find it beneficial to come forward. This will not only professionalise the entire value chain, but also allow the farmer to access both capital and technology to modernise farming. Till now, bold individual initiatives have been allowed by organisations like PepsiCo to tie up with farmers to produce the right kind of potatoes for their mass marketed snacks and ITC has decades ago set up e-choupals to buy produce from farmers at a price and predictability beneficial to them. In the new dispensation, these exceptions will become the rule.
The scope for value addition in the production and marketing of cereals has become limited (the country is now an abundant producer of food grains) and real scope for substantial value addition lies in horticulture. As horticultural produce is perishable, the name of the game is for the farmer to be able to transport his produce quickly and place it in the lap of a cold chain.
A pilot scheme will be started by offering 50 per cent subsidy for transportation and 50 per cent subsidy for enabling cold storages. Once the business model is developed, the farmer should be able to get a good price for his horticultural produce and the urban consumer should be able to have on his table fresh fruits and vegetables. Critically, the markup between farm gate and fork will be drastically reduced and the farmer will get a handsome share of what remains.
The biggest success in Indian agriculture till now is Amul and the Anand type cooperatives which have brought about a White Revolution in the country, and Operation Flood taken to all corners of it by National Dairy Development Board. But this successful model is yet to penetrate the entire country with equal density. As a result, milk production and procurement prevails at different levels in Gujarat, Karnataka and Andhra Pradesh on the one hand and Bihar and West Bengal on the other.
To finish the task, a fund is being created to develop infrastructure to attract private investment in areas where till now mostly cooperatives have dared to tread like say, production of cattle feed and value addition through processing. A programme will also be initiated to tackle diseases in all domesticated economically valuable animals like cattle, buffalo, sheep, goat and pig. The aim will be to ensure 100 per cent vaccination for this entire animal population.
The result of all these initiatives (there are more for beekeeping and fishermen) will hopefully modernise agriculture (particularly save water through drip irrigation and sprinkler use), enable the farmer to gain the maximum value for his produce and reduce wastage. The whole focus is on looking at the farmer during times of adequate supply and even scarcity.
But greater clarity is needed in what the government seeks to do in deregulating cross border trade in agricultural produce. For example, will a corporate be able to honour his export contract even when there is scarcity in the country? Conversely, will a corporate trader be able to import say, milk power so as to bring down the domestic price?
Even more important: what happens when there is a bumper crop and farmers are dumping onions and tomatoes on the streets because it is not worth their while to hire lorries to take the produce to the mandi? Will the government, which wants to exit controls, have to come in at such junctures? A role for the government will remain and clarity is needed on official thinking on this score.(Subir Roy is a senior journalist and author. The views expressed are personal.)