Farm reforms crucial in ushering investment for agri supply chain, improve farm-to-table efficiencies

Protests against the three recently-passed farm laws continues, with farmer groups demanding that these be repealed. Protesting farmers in and around the Delhi-National Capital Region have increased pressure on the government and are refusing to withdraw their protests. This is unfortunate as the farm laws will usher in much-needed reforms in the farming sector, it has the potential to make farming a lucrative endeavour and also open the floodgates to private investment and innovation into a sector which still employs  more than half of India’s population. Protesting unions have termed the laws anti-farmer, claiming it will result in withdrawal of the minimum support price (MSP) and weaken the government procurement system through Agriculture Produce Market Committee’s (APMCs). They further allege that farmers would be left to the mercies of corporate houses/traders, which would reduce them to price-takers. With every passing day the trust deficit between the government and the protesting farmers is increasing. The ruling Bharatiya Janata Party (BJP)-led NDA is reiterating its stand that these new laws are the reforms that the agriculture sector requires, and that much of the current protests are Opposition-driven. After all, the Congress and some regional parties have promised the same in the past, especially to repeal the APMC Act. It is important to note that industry players and participants in the agriculture value chain agree that the farm laws are progressive and visionary. More importantly, it will help the government achieve its mission of  doubling farmer incomes by 2022. The farm laws have been likened to the 1991 economic reforms. Just like the liberalisation policy ushered India to a new path of development and progress, these laws are expected to free famers from the clutches of middlemen, provide choice to sell produce anywhere in India, and, in the process increase income from agriculture.

Over-regulation in the agriculture sector — controlling prices, banning exports, restrictive trade — has hampered its growth. The laws break the decades-old monopoly of the APMC and allows farmers to sell directly to anyone/anywhere, thus rescuing agriculture from the dominance of arthiyas. This is also a step towards realising the goal of one nation-one market. By matching supply with demand, the farm laws would lead to improvements in supply chain infrastructure and result in better price discovery. This will help both the farmer as well as the consumer. Most of the farmers protesting are from the two states of Punjab and Haryana who have benefitted from the existing MSP system. The dynamics of large-scale farming are very different from small farmers with marginal landholdings. More than three-fourth of India’s farmers are small and marginal farmers. They need demand as well as price visibility to mitigate their post-harvest loss and wastage risks. The recently-introduced farm reforms addresses these concerns. The emphasis on the APMC and the MSP system by protesting groups is misplaced. A  NITI Aayog study of 2015-16, shows that awareness about the MSP remains low and the regime favours only a small proportion of farmers (6 percent). According to the  NSS 70th Round, only 25 percent of agricultural households sold their produce in the APMC mandis. Punjab and Haryana have been major procuring states where 80-90 percent of farmers sell their products at the MSP. Allowing the entry of private players would increase competition and even force mandis to overhaul their entire operations. The laws provide a leg up to many agri startups working to digitising parts of the process, provide data-led crop advisory, enhance market linkages and build procurement infrastructure near the farm gate. India needs massive investment in supply chains as our post-harvest loss stands  at 40 percent annually. Successive governments have been unable to build a web of warehousing/cold storage across India. Privatisation and participation of large organised players will lead to increased investments in the supply chain infrastructure, and improve farm-to-table efficiencies. The structural reforms will incentivise farmers to think beyond rice and wheat for which we have huge stockpiles and surpluses each year, and move towards more remunerative dairy, horticulture, poultry, floriculture and fisheries. The Centre has agreed to introduce amendments like creating a level playing field between private and government mandis to address farmer union concerns and give a written assurance on the MSP. However, it has ruled out taking back the farm laws. Socio-economic issues like strong  regionalism and changing demographics have resulted in stagnancy in agriculture in Punjab with farm laws proving to be the tipping point for the protests. That said, the government should not budge from its position and buckle under pressure, like it did during the land acquisition Bill.

This article was originally published in  Moneycontrol.