Azadpur Mandi-Wholesale Market, New Delhi, India, Credit: Vaishali Dassani, IFPRI.

By K Nirmal Ravi Kumar and Suresh Chandra Babu
ANDHRA PRADESH, India / WASHINGTON D.C., Sep 30 2020 (IPS)

Farm policy in India is in its own conundrum. If you ask, “what are the major challenges for increasing farmer income?”, any farmer in India would tell us that it is the low remunerative prices for their produces and he or she will add that most of the market margins goes to the middlemen.

Finally, the Government of India is getting the policies right to address these problems through passing three Ordinances viz., Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020; the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020; and the Essential Commodities (Amendment) Ordinance, 2020, which may have far-reaching implications for agricultural transformation in India.

Though progress in Indian agricultural market reforms has been slow, these ordinances could be a watershed moment for Indian agriculture if they are implemented well. Yet, their implementation solely rests with the state governments making the next move through developing their own contextualized strategies

And yet, the general public are at awe to see that farmers are protesting these policies, which may indeed be a boon to them in the long run. Among the myriad of writings on this issue in the media recently, we seek to inform the reader, “why these legislations have become so contentious and why the farmers are protesting them? We look at them in turn.

Ordinance 1 relates to The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020: The provisions of this ordinance intends to create an ecosystem, where farmers and traders enjoy the freedom to sell and buy the farm produce outside the markets notified under the Agricultural Produce Market Committee (APMC).

No market fee will be levied on any farmer or trader in these designated non-mandi trade areas. It also permits free intra-state and inter-state trade movements of farm produces.

The supporters of this legislation argue that it facilitates farmers to transact the produce anywhere in the country. The creation of non-mandi trade areas will provide farmers the freedom of choice to conduct trade for their produce.

The absence of market fees will reduces transaction costs in selling the farm produce. So, this legislation offers a win-win situation for all farmers, consumers and entrepreneurs and will further motivate APMCs to improve their efficiency of operations substantially to serve the farmers better.

The following are seemingly the reasons for the protests. As per Section 2(m) of this Ordinance, the creation of an additional non-mandi trade area may confine APMC mandis to their physical limits and allow big corporate buyers to operate freely.

As per Section 2(n) of this Ordinance, farmers contend that a “trader” cannot be trusted, as the “Arhatiyas” in mandis have the licence approval from APMCs.

Further, due to removal of market fees, it leads to loss of revenue to APMCs and this does not provide a level playing field to compete with private traders. This may lead to gradual collapse of existing APMC mandi system and may end up the MSP based procurement system. The failure of Bihar experiment (which repealed the APMC Act in 2006) may be repeated with this new law.

Ordinance 2 relates to The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020.

Through its provisions, the farmer or an FPO may enter into a contract with a sponsor only by written Farming Agreement and there is no provision for verbal agreement between them. This facilitates farmers to transfer market unpredictability to the sponsor and in the process, farmers can enjoy access to cost-effective production technologies, high-quality production systems, direct marketing of farm produce, full price realization and effective dispute resolution mechanisms.

This Ordinance promotes organized agriculture with assured buy-back arrangement with the sponsor, unlike the existing APMC system (led to a cartel formation by traders). This system further ensures regular supply of pre-determined quality of a produce on a steady seasonal basis to meet both domestic demand and international requirements.

However, the farmers opine that they will be the weak players in this sort of agreement, as they must deal with big corporate companies or sponsors. Further, the provisions allow dispute settlement at the Sub-Divisional Magistrate level, which is difficult for the farmers to fight against the big corporates.
Ordinance 3 relates to: The Essential Commodities (Amendment) Ordinance, 2020.

Provisions of this ordinance empower the Central Government to designate certain commodities (such as food items, fertilizers, and petroleum products) as essential commodities and to regulate the production and supply of certain food items including cereals, pulses, potato, onion, edible oilseeds, and oils, only under extraordinary circumstances like war, famine, extraordinary price rise and natural calamity of grave nature.

Stocks limit may be imposed only if there is 100% increase in retail price of horticultural produces and 50% increase in the retail price of non-perishable agricultural food items. Thus, there will be no storage limit or movement restriction for these commodities.

Supporters of this bill argue that it can help liberalize business operations of private investors, promote ease of doing business, enhance market competition, safeguards the interests of farmers and consumers against irrational spikes in prices of essential commodities etc. It will promote investments in processing, cold storages and thereby, modernize the existing food supply chains.

However, the farmers fear that this ordinance will give corporates the trade advantage through hoarding of commodities and quoting higher prices. The terms used such as ‘extraordinary circumstances’, ‘extraordinary price rise’ or ‘natural calamity of grave nature’ in the Ordinance are subjective in nature which may result in interpretational disputes.

There we have it. While these policy moves are broadly in the right direction to make Indian agricultural sector competitive, they can be the sources of contention in a democratic set up.

Though progress in Indian agricultural market reforms (1990s and 2000s) has been slow, these ordinances could be a watershed moment for Indian agriculture if they are implemented well. Yet, their implementation solely rests with the state governments making the next move through developing their own contextualized strategies.

K Nirmal Ravi Kumar, Professor & Head, Department of Agril. Economics, Agricultural College, Bapatla, Acharya NG Ranga Agricultural University (ANGRAU), Andhra Pradesh, India

Suresh Chandra Babu, Senior Research Fellow, International Food Policy Research Institute, Washington, D.C.

Farmer ploughing the field: Source: Divya Pandey/IFPRI

By Suresh Chandra Babu and Vaishali Dassani
Jul 16 2020 (IPS)

The global outbreak of Covid-19 has disrupted the food system throughout the world. From initial lockdown by the national governments to slow the spread of the Covid-19 to now opening of the economies have had food security implications for all players in the food system ranging for the farmers to consumers and the rest in between.

The responses of the countries have also resulted in changes related to food availability, access, affordability, food safety and price levels. In response to the increasing spread of Covid-19, the government of India took early action for a complete lockdown on March 25, 2020. The lockdown continues as of July in various forms and in various states depending on the intensity of spread of Covid-19.

In the Indian context, the pandemic has hit the most vulnerable population the hardest, especially in the informal sector who were unable to work and have little or no savings. In addition, infrastructure and transportation challenges disrupted the supply of food.

On the demand side, the loss of income, closing of food transfer schemes such as school feeding programmes and rising food costs made access to food difficult leading to decline in dietary quality by a majority of households. The exports of food and agricultural commodities have stagnated. Labor availability for production has come down as the migratory laborers have moved back to their hometowns.  The sum, the food system is in doldrums.

Indian policy makers have embarked on major policy reforms and have broken down regulatory challenges in food and agricultural markets in ways no one thought was possible for the past 70 years

In this context, a key policy question has been how to revive the agricultural markets that can enable both the producers and consumers by converting the challenges posed by COVID-19 into opportunities?

In response to this question, Indian policy makers have embarked on major policy reforms and have broken down regulatory challenges in food and agricultural markets in ways no one thought was possible for the past 70 years. A quick response from the farmers is to increase the area sown by 40 percent for the next season.

While this supply response will have major implications for agricultural growth and transformation in the years to come, how did the government of India use this COVID -19 pandemic as an opportunity to usher major policy reforms in the agriculture sector?

The third tranche (first was on business including MSME and second on poor including migrants and farmers) of economic relief packages, the government of India introduced a set of policy measures that remove logistical barriers in agricultural supply chains and bring in the private sector to support development of ‘one national open market.’ Though these reforms will take time to reach the grounds due to implementation challenges ahead, it is a step forward for long-term gains for farmers, marketers and consumers.

First, the government amended the Essential Commodities Act (ECA) through an ordinance route to enable better price realization for farmers which will result in the deregulation of prices for food items including cereals, edible oils, oilseeds, pulses, onions and potato.

The ordinance assures that stocking limits will not be imposed on the private sector, except under exceptional circumstances such as natural calamity, and wars. The changes in the ECA will now allow private sector investment and making agriculture sector competitive. It will help drive up investment in cold storages and modernization of food supply chain.

Second, through barrier-free trade in agriculture, the government will provide adequate choices to farmers to sell their produce at an attractive price and through free interstate trade. It will also help farmers in regions with surplus produce to get better prices and at the same time, consumers in regions with shortages, can benefit from lower prices.

In addition, a framework for e-trading of agricultural produce will be established. The move aims to end market fragmentation farmers face forcing them to sell their produce only to licensed Agricultural Produce Marketing Committee (APMC) in their locality.

Third, agriculture in India is fragmented due to small holding sizes and is highly dependant on weather which makes it risky resulting in inefficient input and output management. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, will empower farmers for directly engaging with processors, wholesalers, aggregators, wholesalers, large retailers, and exporters to have a better say in defining the terms of the contract with the aim to remove middlemen.

In the fourth intervention, the government will create a Rs 1 trillion Agri-Infrastructure Fund for farm- gate infrastructure for small and medium farmers, which will include primary agricultural co-operative societies and farmer producer organizations. This will fix the current gap in value chains resulting from poor access to cold chain and post-harvest management near farm-gate.

Finally, through the Prime Minister Farmers Fund – Kisan Samman Nidhi (PM-KISAN), over 95.4 million farmer families (as on first June 2020) benefited disbursement of Rs. 195.15 billion and provision of Rs30,000 crores of additional refinancing facility by National Bank for Agriculture and Rural Development during the lockdown period. These measures are positive steps toward long-term growth of the high value agriculture sector.

On June 3, 2020 the President of India, converted some of the key policy announcements into ordinances through swift action. The final impact of these policies will crucially depend on their implementation on the ground at the state levels.

These policy changes have gone beyond the regular challenge of individual states taking policy action given the federal nature of policy making in India. However, it is necessary for states to step up on their role in the implementation of these policy interventions. There is also a need to understand the process of translating national ordinances into state level programs.

Yet such a translation process requires institutional and human capacity at the state and at the local levels. Decentralized and context specific interventions that address specific challenges of the famers are needed for realizing he full impact of the policy reforms.

Allocation of resources at the right time that is based on right strategic and investment plans is also needed to strengthen the necessary infrastructure for developing one national market. Developing cold storage facilities through such infrastructure facilities will also reduce wastages and enhance supply chain efficiency benefiting both farmers and the consumers.

Finally, establishing monitoring and evaluation systems for learning and modifying the implementation strategies is needed to gain maximum benefits from these reforms induced by the COVID-19 pandemic.

Systematic campaigns to inform and educate the district level authorities is one of the important factors to consider for the implementation. Even in countries where suitable capacities exist to meet with long‐ term planning and policy changes, but even the capacity for planning, and implementing policies and programs to bounce back (better) from recurring challenges may be too low.

Despite the pandemic, agriculture production has been consistently growing and is expected to grow 3 per cent in 2020-21. It is ironic that despite such growth, farmers continue to lag behind. One can say, the Covid-19 pandemic was a wake up call for the government of India, and they were quick to convert crises into opportunities. The overall benefit to the farmers will only be known in due course, but from the beginning the government needs to ensure farmers benefit from the reforms.

Suresh Babu is Senior Research Fellow, International Food Policy Research Institute

Vaishali Dassani is Former Communications Specialist, International Food Policy Research Institute