A setback to agriculture reform process

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The intention of the first Act was to provide an alternative market and create more competition in product markets so that farmers could get better prices.

By PK Joshi

The three farm laws to reform the agricultural sector were approved by the President in September 2020 after being passed by the Lok Sabha and the Rajya Sabha. Some groups of farmers challenged these laws, started agitations, and blocked roads leading to Delhi. The government and farmers have had 11 rounds of talks without any solution.

Farmers were adamant for repeal as they perceived these laws will adversely affect prices of agricultural commodities and they will be exploited by the corporate sector. A group of farmers also welcomed the laws and perceived that these will open the way for competitive markets. At present, agricultural markets are restricted due to the Agriculture Produce Market Committee (APMC) Act.

These laws were (1) Farmers’ Produce Trade and Commerce (Protection and Facilitation) Act, 2020; (2) Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020; and (3) Essential Commodities (Amendment) Act, 2020. The intention of the first Act was to provide an alternative market and create more competition in product markets so that farmers could get better prices.

The second Act was to promote contract farming for high-value agricultural commodities for agro-processing and export. These Acts were expected to have higher price realisation to farmers and better access to improved agricultural technologies. The third Act was to develop a transparent system for stocking of essential commodities.

The intention of introducing these reforms was to attract investment in agriculture and agri-business, modernise Indian agriculture and increase farmers’ incomes. Unfortunately, weak communication about the potential benefits of these Acts to farmers and general public led to apprehensions about these laws.

Repealing these laws is a setback to the reform process. It is just like that India missed the first and second industrialisation in 19th and 20th century. We also missed the third technology-driven revolution as policies and regulatory frameworks were not conducive, and India is lagging far behind. Industry and agriculture are two important pillars of Indian economy and together contribute about 45% to the GDP. With a business-as-usual approach, we shall be missing the emerging opportunities in the agriculture sector. Globally, the demand for high-value and processed commodities is growing rapidly.

The demand for agricultural commodities and their by-products is also rising for alternative uses, including green energy. We must learn from our achievements in digital revolution, which was made possible by creating an enabling environment for the private sector through need-based reforms.

There will be a setback to investment in agriculture. The sector needs huge investment for creating agri-infrastructure both at farm-level and at front-end for developing agri-markets, agro-processing, warehouses, cold storages, logistics, etc. The government announced the Agriculture Infrastructure Fund of Rs 1 lakh crore for creating post-harvest facilities, such as setting up storage and processing facilities, to ensure farmers’ higher prices for their produce. Repeal of these Acts will have lukewarm response from the private sector for investment in developing agri-infrastructure.

Repealing of these Acts will also have implications in attracting FDI in the sector. At present, 100% FDI is allowed through the automatic route for (1) floriculture, horticulture, apiculture and cultivation of vegetables and mushrooms under controlled conditions; (2) development and production of seeds and planting material; (3) animal husbandry, fish farming and aquaculture under controlled conditions; and (4) services related to agriculture and its allied sectors. It was expected that FDI will promote contract farming and develop alternative markets. The flow of FDI will slow down as a result of withdrawing these laws.

The way forward for the government is to discuss with all farm leaders (both against and favour of farm laws) on each point for the benefit of farmers and agriculture. The Centre may also develop model farm laws and states may be given some flexibility to modify as per their situation, but without violating the concept of ‘one nation, one market’. The government and farmers may consider suggestions given by the committee constituted by the Supreme Court on the three farm laws after a section of farmers challenged the legality of laws.

The author is former director, South Asia, International Food Policy Research Institute, and secretary, National Academy of Agricultural Sciences, New Delhi