Will Government move to allow direct marketing of agricultural produce truly liberate the Indian Kisan?
AGRICULTURAL PRODUCE MARKETING: THE NEW LEGAL FRAMEWORK - A quick recap
- Amendment to the Essential Commodities Act.
The Press Information Bureau says the amendment is based in the logic that while India has achieved a surplus in most agri-commodities, farmers have not gained. This is on account of lack of investment in cold storage, warehousing, processing and exporting. According to the government, the entrepreneurial spirit for these is dampened by the “hanging sword” of the Essential Commodities Act. Eventually, farmers incur dramatic losses when there is a bumper crop, especially with perishable commodities. The amendment removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities, thus allaying investors’ fears about excessive regulatory interference in operating businesses surrounding these products. There will now be freedom to produce, hold, move, distribute and supply these goods, with the economies of scale expected to attract private sector/foreign direct investment into agriculture, drive up investment in cold storages and modernization of the food supply chain. However, the government has kept its foot in the door — in situations such as war, famine, “extraordinary price rise” and natural calamities, the regulations may be re-imposed.
- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 or the FPTC Ordinance
Promulgated on June 5, this ordinance brings into view the possible end of the Agricultural Produce Market Committees’ (APMC) virtual monopoly over all major trade of agri-produce. A farmer can now turn his farm into his marketplace, access intra-state and inter-state buyers. These buyers could be wholesalers / retailers / food processors / value addition entities / exporters / end-use consumers. Electronic trading is allowed, electronic trading platforms and transaction gateways will require to be set up, various methods for physical delivery of electronically traded goods will evolve. The ordinance specifically states that the eectronic transaction platforms may be set up by companies, partnership firms, registered societies with a PAN, farmer-producer organisations, etc. Norms for these platform operators may be prescribed by the government. State governments will levy no fees or cess for such trade.
- The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 or FAPAFS
Promulgated on June 5, this ordinance seeks to regulate and promote contract farming, through farming agreements signed before a crop season is initiated, with the stated objective of providing a guaranteed buyer to a farmer. The sponsor of such a contract could be individuals or companies or even societies, and the ordinance also permits three-way contracts where an intermediary or aggregator may be a party. These contracts will be registered, though details regarding this are still to be announced. Contracts may detail conditions regarding quality and price. How such contracts will be dovetailed with state-supported crop insurance or crop loan schemes remains to be seen. No contract or agreement will be allowed to make any changes in the ownership or possession of the farmer’s land.
MARKETING THE FARM, FROM THE FARM GATES - What our speakers will touch upon
- Reforms in the sector are overdue, and to that extent the idea of delinking farmgoods marketing from the APMC regime has been welcomed. Freeing up farm produce from the Essential Commodities Act was a long-standing demand. Most heartening is that it could empower farmers by giving them multiple choices of markets and buyers, hopefully putting them in a better bargaining position in the overall terms of trade.
- The APMCs are politically and financially powerful entities, and they also hold traditional linkages with farmers and the arhatias or the network of middlemen who liaise with traders. New marketing platforms will also undergo a trial and error period, and will take some time before they are fully operational. This means the APMCs continue to remain relevant, and in fact may also see this as an opportunity to reimagine their role in the new structures. Several leaders have said this is a chance for APMCs to reform.
- Maharashtra is a good example where previous efforts to reform agri-produce marketing did not have the desired impact, mainly for want of structures that are alternatives to the APMC system. Direct selling by farmers of farmer-groups to housing societies, for example, was already permitted before the ordinance was promulgated but failed to take off except in very, very small numbers. The gap was a set of new systems through which farmers in remote areas too can access urban markets through networks of aggregators, quality graders, pack-houses, transporters, etc. The new ordinances offer a roadmap for the creation of such service providers, though the laws themselves do not automatically guarantee their creation. There will also be opportunities for those offering technology and financial technology platforms to farmers and buyers.
SELLING AT APMCs, SELLING FROM THE FARM, CONTRACT FARMING — Our experiences
- Mann Deshi’s network of women farmers have a wide range of experiences in innovating on the farm and in the field of marketing. They have had exposure and familiarisation trips to various farm innovators in the country; they have attended the hugely successful Mann Deshi Mahotsavs in Satara and Mumbai where they have sold produce directly to urban consumers; they have experimented with food processing and packaging and more. Their accounts are about the difficulties with the current regime, and also the challenges in the fine print of any new structures.
- FPOs have had diverse experiences, while some have achieved success rapidly, others continue to struggle. We will hear their experience of the markets until now, their big successes and also their failures.
- The challenge of market-driven farming practices is huge, especially for small and marginal farmers with little or no credit and poor farming techniques and no irrigation. The new systems will automatically incentivise those farmers whose farming caters to the specific demands of a particular sub-section of the market. For a farmer tilling one acre of land located 100 km from the nearest big market, this can be a new deal only if new networks of aggregators and group farming / FPO systems take root, but also only if she is able to access some capacity-building in her approach to farming and marketing. training and empowering individual farmers will be critical too.
- The ordinances are open-ended on such critical capacity-building. The role of state governments and of ensuring better reach for existing schemes will be significant.
The overarching question at our web dialogue is about what kind of capacity-building various stakeholders need to do in order to truly reform agriculture produce marketing. We hope to discuss the roadmap for various diverse stakeholders. Some
further questions to ponder:
- Is there a need for widespread training of farmers / FPOs/ aggregators / traders in what new systems will be set up and how to make best use of these? Who takes on the mantle of capacity-building?
- Who will protect the farmer’s interests? Who will educate the farmer before he signs contracts? What role will farmer organisations and civil society play?
- What further reforms will / can APMCs start implementing? How will these provide more choice to the agriculturists?
- Is the dispute redressal system in the new ordinances adequate? It leaves this in the hands of mid-level bureaucracy.
- What will be the long-term impact of large-scale contract farming on food security? The big companies may want a handful of crops — none of them wants millets or sorghum, for example. What will be the impact on indigenous seeds and crop diversity? What will be the impact on water availability and water scarcity and ground water levels? Who will monitor and ensure crop suitability for dryland farming or crops in drought-prone regions?
- How can we create a horizontal ecosystem for farmers? What will be each stakeholders role in the horizontal system?