Smallholders Long Way

Context: Agriculture reforms, influence the country’s food system, but more importantly all smallholders, comprising 85% of 138 million farmers, for whom policies are an intrinsic component of their business proposition.

Public Policy in Agriculture

• Amendment in the Essential Commodities Act (ECA) and the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020. 
• ‘Farmer First’ mission for creating jobs in agri-services
• Bring choice in marketing channels
• Strengthen a national market
•  Attract investment into infrastructure
• Bring predictability in stock management of food crops.

Agricultural Policies and Its Impact on Smallholder

• Policies for production: directly impact the smallholder’s competitiveness and ability to sustain herself. 
• Impact of public policy: is inversely proportional to farm size.

Plight of Smallholder 

• Smallholder per-capita income (?15,000, or $200 a year) remains one-fifth the national average despite of their large contribution in farm produce: 
• Half of India’s one billion tonnes of annual farm produce (worth about $220 billion) is grown on one-hectare farms.
• Do not benefit from the better price discovery: due to lack of access to large and regulated markets
• Logistics, time and effort in taking a few quintals over a long distance is not worth.
• Reduced returns: due to physical distance from large markets and cities. 
• Inaccessibility to: well-regulated markets that are liquid and deep
• Trustworthy repeat customers
• Safe and affordable storage to avoid hasty sales 
• Commercial intelligence
• Quality management technology; working capital; and someone to underwrite the inherent riskiness of farm production, climate change and prices.

Agricultural Reforms/Policies

• Electronic platforms: will make customer-search easy
• Remove information asymmetry
• Handle large volumes and transactions
• Bundle credit, risk management

• Provide weather information and crop management services 

• Permission for farmer sales at warehouses and cold storages: and reform in ECA, improve the business case for modern storage near farms. 
• Storage attracts bigger processors, retailers and coordinated modern supply chains. 
• Technology based storage-credit: by fintech, blockchain and AI.

Way Forward

• Unleash burden of commercial dispute settlement: from the district administration.

• Proper clearing and settlement mechanism: for addressing counterparty risk management
• Five food standard laws and various trade standards: must align to provide everyone an understanding of ‘good delivery’. 
• Innovation in risk and credit products: to be suitable for non-cereal crops, where smallholders dominate. 
• Efficient functioning of markets: for livestock, which contributes 30% of India’s agricultural GDP.
• Inter-state coordination: for a state-specific subject like agriculture.
• Integrate the APMC-regulated market system with the digital ‘free’ market system: for mutual gains and scale. 

Conclusion: Agriculture reforms can transform business for smallholders weighed down by size limitations and falling off-farm incomes.