The Undersold Promise of Indian Farm Reforms

Livemint     7th December 2020     Save    
QEP Pocket Notes

Context: In the context of ongoing farmers protest, It is prudent for all the parties to find a midway where reformist agricultural laws are implemented in letter and spirit while ensuring that farmers interest is secured.

Entry of Market to help uplift India’s languishing agricultural sector

  • Background: Prominent features of farm Acts:
    • Detailed provisions for contract farming.
    • Liberalizing the stockholding limits by axing governments control.
    • Ending the APMC monopoly: Opening trading in farm products by allowing farmers to sell their products outside APMCs striking better bargains.
  • Associated fears:
    • Dismantling MSP mechanism in favour of market forces: discontinuation of MSP system and farmers would be left at the mercy of corporates.
    • Fear of cartelisation by private players leading to low prices of agricultural produce.
  • Rational behind farm acts
    • More choices to farmers will result in more competition yielding better prices for farmers.
    • It will end the procurement biases in favour of few crops like Rice and Wheat, resulting in:
    • Diversification of crops.
    • Better groundwater management.
    • More sowing of protein rich crops, in line with changing dietary shifts of New India.
    • Lack of quality procurement capacity: as overstuffed central granaries can be compensated with private participation leaving more fiscal resources for the government.
    • Fiscal viability: by ending inefficient APMCs monopoly along with corrupt agents (act as middlemen)
    • Rivalry among buyers for the best crop could raise quality levels, bid up farmgate prices, and get investment ploughed in.
    • If farms turn responsive to market price signals, it would let resources be allocated more efficiently.

Way forward:

  • Competition commission of India can play an active role eliminating fear of cartelisation by private players.

Conclusion: Government needs to win farmers confidence without yielding on reforms by giving a chance to market forces to help India’s languishing agricultural sector along with that clearer assurances could be made to the farming community that their interests will always trump.

QEP Pocket Notes