The important issue that affects Indian agriculture today is the fact that the livelihood of the majority of the small and marginal farmers is at stake. The so-called “subsistence agriculture” or “traditional rain-fed farming” practiced by more than hundred million people of India is no longer economically viable. This has led to grave national issue of thousands of farmers committing suicide and many farmers leaving farming to join industrial or unorganized labor force for a better livelihood.
Agriculture is no longer considered an economically viable profession. It requires big policy reforms promoting much needed massive investments and linkage of agriculture with industry to change this scenario.
I had proposed “Corporatization of Agriculture” at the First International Agronomy Congress, New Delhi (1998). Therefore, I am happy that the present Government has understood the problems plaguing Indian agriculture and has come out with game-changing reforms, which will go a long way in revolutionizing farming.
The three-crucial long pending agriculture reforms recently announced by the Government and promulgated into ordinance on 5th June 2020 are as follows:
- Amendment to Essential Commodities Act (ECA), 1955
- Central law to amend provisions in Agricultural Produce Market Committee (APMC) law
- Legal framework to enable farmers for engaging with processors, aggregators, large retailers, exporters, etc.
The analysis and impact of these key policy reforms are given below:
The age old Essential Commodity Act (ECA), 1955 reflects pre-independence mindset when India was ravaged by famine and scarcity of agricultural commodities. But, today India is the largest producer of milk and spices and second largest producer of rice, wheat, sugar, fruits and vegetables in the world. Our food production is at an all time high (>300 million tons) and so is the buffer food stock (>56 million tons). Supply side limitations are minimal and it’s a good time to encourage industry / entrepreneurs to undertake processing and value addition in a big way. Therefore, the proposed amendment in ECA on deregulation of prices and stock limit of agriculture foodstuff (cereals, edible oils, oilseeds, pulses, onions and potato) shall encourage development of farm gate infrastructure, processing, packaging, value addition, storage, cold chain logistics, transportation network, etc.
The stringent APMC procurement law compels farmers to compulsorily sell their produce to the licensed agents / traders operating in the market within their defined market limits. These licensed traders often form a cartel and dictate the price to the farmers making it a buyers’ market as against sellers’ market, which is characterized by open auction or real price discovery. The agents intentionally create conditions to slow down the buying process, which often leads to distress sale by the farmers. Furthermore, the farmers are deprived of selling their produce to buyers from other states (the ban imposed by the Government of West Bengal on sale of potato to Odisha in 2014 is still fresh in our memory). In the absence of free flow of agriculture produce and fragmentation of market & supply chain, realization by farmers is much lower than the real price. Such restrictions are unknown for any industrial produce. Therefore, de-limitation of APMC along with providing adequate choice to the farmer to sell his produce through e-NAM (Electronic National Agriculture Market), direct sale to consumers / supermarket chains and forward sale through Multi Commodity Exchange / National Commodity and Derivative Exchange / Indian Commodity Exchange, etc. will lead to better price discovery along with hedging of risks. Further, a barrier free Inter-State Trade will bring several new opportunities along with promoting the concept of “One nation one market”.
Currently, there is no mechanism for farmers to directly engage with the processors / aggregators / large retailers / exporters, etc., in a fair and transparent manner. The farmers are unable to foresee the crop prices at the time of sowing (other than the minimum support price of 22 food crops as declared by the Government). Therefore, development of a legal framework that will enable farmers to enter into agreements with the above agencies will be advantageous to them. Risk mitigation for farmers, assured returns and quality standardization shall form part of the framework. A legal partnership / contract farming between the two will lay the foundation for the success of agribusiness start-ups and Farmer Producer Organization (FPO).
Therefore, the announced reforms by the Government can be a defining moment in agriculture similar to the innovative economic reforms initiated in 1991 by the then Finance Minister Dr. Manmohan Singh. These reforms shall go a long way in attracting investment for the much needed farm gate infrastructure development, promoting processing & value addition, creating massive job opportunities in the rural sector and realizing the Government’s goal of “Doubling of farmers’ income” in the next five years. A good beginning has been made and many more are expected soon to promote export of processed & branded foods. Various corporate leaders, including foreign fund houses interested in food processing / retail business are keenly watching the moves of the state governments in implementing the promulgated reforms. New business and job opportunities that will emerge for agriculture professionals are given below:
- Registering a FPO – The number of FPO in India is likely to grow from current 6000 to more than 100,000 in a decade. Agriculture professionals will have definite advantages in organizing farmers into FPO’s to optimize cost of production (bulk procurement of inputs), better adoption of improved technologies, arranging capital requirement, reducing marketing cost (aggregation of produce and bulk transport), attracting buyers at farm gate, promoting direct sale of produce to consumers, creating storage facilities, processing / value addition, product branding, etc.
- Starting agribusiness / start-ups / micro enterprises – The agricultural professionals will have huge opportunities in starting a new business / farm on their own or in partnership with small and marginal farmers.
- Employment opportunities in establishing backward supply chain for food processing industries – Agriculture professionals empowered with technical know how / good manufacturing practices, will be in high demand from industries and big corporate houses that are into mass scale processing & marketing of food items, running hotels & restaurants, etc. to secure supply of quality raw materials (through contract farming).
Career opportunities in agriculture research & development – There will be a big push to the development of need based agro-technology / intervention by agribusiness entrepreneurs and agro based corporate houses to promote their business interests through conducting farm research, demonstration and precision agriculture (use of information, communication technologies).