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BW Businessworld

Year Of Promises And Challenge

The pandemic inflicted year of 2020 be­came a watershed with the liberalisation of agro-marketing being unleashed with a bang, first by way of ordinances and then by Acts in the midst of lockdowns in different phases.

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Economies have turne rather volatile and unpredictable over the years but agriculture in India has been reasonably stable with a steady growth in production of cereals and a mild tendency to produce more pulses and horticultural crops. This steady growth though, was coupled with disturb­ingly low farm incomes as the sector remained bound by many policy strings. The year 2020 has been an unprecedented year for human lives and economies, owing to the pandemic that struck the world. Nevertheless, with the monsoons being reasonably normal, the re­sponse from agriculture was not out of track. 

Even though agriculture was yet to encoun­ter the liberalising economic reforms, it was introduced to a transition over the last decade. Information and communication technology (ICT) began reaching out towards agriculture, as the central government joined the private sector in playing an active role in allocation of public budget for computerisation, promo­tion of smartphones among farmers, passing on weather alerts to the rural sector and most remarkably, in creating an electronic portal (e-NAM) for marketing agricultural products.

Significant Policy Shift 

Second in importance was perhaps, the grow­ing public emphasis on food processing (FP), drawing not just the private and organised sector but also small, informal and less organ­ised enterprises. Even though the dietary hab­its of middleclass Indians have been changing towards non-cereal, processed, packed and hygenic food, driven by awareness and glo­balisation, the progress of FP has been slow. 

The most important change in farm policy has been a gradual shift in focus from higher production to higher farm incomes over the last four years, highlighted by the amendment of the name of the associated ministry (to Ministry of Agriculture and Farmers’ Welfare in 2015) and the announcement of a public objective of ‘doubling’ farm income.

The pandemic inflicted year of 2020 be­came a watershed with the liberalisation of agro-marketing being unleashed with a bang, first by way of ordinances and then by Acts in the midst of lockdowns in different phases.

The new laws profess to relax many shack­les in the operations of marketing and touch­ing functions of farmers, traders of all hues and consumers along the supply chain. While the outlook of production remains subject to climatic conditions, the freedom to sell at farm-gate free of hassles and costs of carrying the produce to the mandi out of compulsion, will possibly bring relief to the farmers and the traders. 

The loosely used word ‘traders’ will now broaden to include not just individual agents but corporatised businesses with resources to invest in marketing infrastructure. In ad­dition, the option to enter into contracts with businesses will comfort farmers, with the as­surance of guaranteed prices as well as bet­ter technology to carry on their business of production. Farmers now need to organise themselves officially into farmer-producer-organisations (FPOs) to bargain together, seek distant markets online and legally resist violations by buyers. 

Admittedly, all farmers may not be able or willing, to sell all their produce at the farm-gate but then, the option to sell at the APMC (Agricultural Produce Marketing Commit­tees) markets under regulations remains open. Traders too get a relief from their obliga­tion to adhere to stock limits despite prospects of gains in the future as the extent of taboo carried by the words ‘hoarding’ and ‘specula­tion’ diminish in a freer market. 

The purpose of the reforms is to assure re­munerative prices to the farmers, as well as to ensure that market signals reach them. The reforms do this by widening the choices of channels and allowing more interested buy­ers to compete for the produce of the farm­ers with prices that are more alluring than those prevalent in the old system. They also enable farmers to cater to the distant demand through ICT. However, the challenge will begin with the implementation of the laws to make the choices real so that new forms of power-oligopsonies fail to incubate.

Foreseeably, the government has to persist in explaining to farmers, traders and federal partners its righteous motives and help State governments with the required support to revive the APMC markets from decadence and start running competitively at the earliest. Data and information will have a towering role in the new mechanism. Prices are likely to face exceptional challenges and even roller-coaster rides. 

Challenges Ahead 

The economy needs to be continuously moni­tored in terms of weather prospects, farm­ers’ behaviour, production outlook and price movements and expectations so that logistics, storage and negotiations, if necessary, for im­ports and exports are made in time in order for prices to move in an acceptable tolerance range, to avoid a food crisis and gain from the global market. The education of small farmers to form FPOs and get well versed in the arts of marketing and cooperation will be another essential challenge. 

Resourceful food businesses will have to be persuaded to participate in the developmental aims by collaborating with farmers, perhaps drawing on the expertise of experienced trad­ers so as to facilitate high quality, and resource efficient production, and generate higher prices for viable and sustainable farming. Re­forms open new grounds for the private sector which needs to be alerted of its role in creating a lucrative and competitive business out of agriculture and to invest in infrastructure and agro-businesses for food processing and cre­ate employment and training facilities for the rural milieu not interested in tilling. 

While quick operations will be a key to gen­erating a larger and successful agro-universe, some trials, errors, trainings and price vola­tilities, especially in perishable goods, cannot be ruled out in the immediate future as the system struggles to adjust to the new set of rules, coming as they do after decades or even centuries. The coming year, therefore, holds both promises as well as challenges.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Nilabja Ghosh

The author is Professor at Institute of Economic Growth

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