Reforms the farmer needs (Raising farmer incomes in India)

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 Reforms the farmer needs (Raising farmer incomes in India)

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• States failing, Centre moving in: The Finance Minister announced in May 2020 the intention to legislate a new central law to enable farmers to sell to anyone, other than only licensed APMC buyers. The Centre was frustrated with useless "reforms" over the years at state level.
• Complex reality: The hurry is understandable, but reality on ground is very complex.

1. Legal reforms alone cannot bring economic freedom for farmers
2. Farmers' problems are not only due to vested monopolistic interests, but also structural factors
3. Vested interests can be tackled by new laws, but structural issues need local-specific policies and investments
4. Centre-State consensus and coordination is a must to get results

• Main problem: It is said that farmers are forced to sell only to licensed APMC traders, but truth is that most farmers (small and marginal) sell to local unlicensed traders and in local unregulated markets. Why so?

1. Lack of enough Mandis across India
2. Basic infrastructure not created for primary wholesale markets close to farmers
3. 2017 Report suggested additional 3500 Mandis in addition to existing 6676 ones (principal and sub-principal market yards)
4. 23000 rural Haats also are not upgraded
5. Action plan now: New allocations must go towards building up proper physical markets, esp. in remote regions.

• Monopoliser mandis: Where APMC mandis are well-established, they strive to kill competition by delaying new licenses (to anyone - MNC, FPO, trader, processor). States have to resolve this using regulatory methods.
• Total deregulation not good: Bihar repealed the APMC Act in 2006, but large corporates didn't start buying from farmers. They went to large traders and aggregators only. Infrastructure kept crumbling. Private markets for horticulture came up, run by local traders.

1. Reform not repeal: MP and Karnataka reformed, not repealed, the APMC laws.
2. Competition started happening. MP gave licence to ITC company to start procurement hubs outside Mandis.
3. So farmers got a better deal, and mandis upgraded soon.
4. But since ITC was not a permanent all-commodities buyer, the mandis' basic strength of a 12-month, multi-buyer, multi-commodity market was visible.

• What about intermediation: Brokers and small traders are considered evil, but they actually help farmers manage their needs by responding in cash, credit, time and place. The 4 domains of production, marketing, processing and consumption need their presence. They also exploit farmers, but their replacement via new systems will work only if they respond to ground needs for credit, inputs, storage, transport and timely payments.
• Freedom will be meaningless: Any new regulatory change that "grants" more freedom to farmers will be useful only when farmers overcome their own land ownership and access issues. And eliminating small traders is a dangerous idea, for they do play a big role.
• The right reform: Legal changes must not end up creating large companies, and creating barriers for agro-commercial MSMEs. The large number of small-scale producers, traders, agents, processors, wholesales, retailers and labourers need to be accommodated, and diversity retained.
• Summary : Wholesale agri law reforms must be undertaken carefully, ensuring they do not eliminate the necessary parts of the complex chain.

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