Context: Recent farmers' protest against agricultural reforms is well-calibrated minority having vested interests.
Benefits of the reforms:
Ends the monopoly of the Agricultural Produce Market Committee (APMC):
Farmers can sell their produce directly to warehouses, cold storage units, agricultural processing plants, or consumers like restaurants and households.
It eliminates the monopoly control of middlemen.
Eliminating fees and other charges: State governments are now prohibited to levy fees and other charges that they levy at APMC mandis
Majority of India's agricultural community will benefit: Currently, the mandi system is captured by a politically well-connected minority within the farming community
Will expand the size of the market for farmers produce: Current system reduces the size of the market for farmers' produce due to restrictive APMC mandi system and requiring licences to operate.
Benefit to the consumers: Under the new system, consumers can directly buy from farmers and will gain greater control over their supply chains.
Opportunities for Contract farming: Creates a framework for contract farming between farmers and potentially large buyers.
Stakeholders can contract specific quantities and prices for products to be delivered on a future date, assuring the farmer of an agreed-upon price.
Challenges to the reforms:
Opposers of the reforms are challenged by the Transitional Gains Trap: It states that a transition from an inefficient system to an efficient one is not easy because a small minority, which has paid money to access special rents, will try to block the change.
Various Opposers are:
Middlemen, along with a minority within the farm community: They created a lobby to make it difficult to eliminate the old system.
Recent licence acquirers: They paid a lot of money to get the licence, but the steady income stream associated with these licences is now at risk.
Large farmers in states covered by large government procurement systems:
They fear that this is the first step towards eventually eliminating government procurement of food grains and minimum support prices (MSPs).
According to the Department of Agriculture's Price for Kharif Crops (2020), more than 95% of rice farmers in Punjab and about 70% of rice farmers in Haryana are covered by the government procurement system.
But only 11.8% of all the rice farmers across the country are covered by the procurement system.
Way Forward:
Buy-out the losers blocking the reforms: In the case of farmers, this would entail working with state governments and ensuring MSPs for a few years before phasing them out.