View: Policy shift in stimulus to serve farmers better – The Economic Times

These reforms were due long ago. An attempt was made in 2002 and 2003 to take agri commodities out of the ECA through government order. This attracted big investments in agri trade.

Part 3 of the economic stimulus package announced by the finance minister on May 15 for agriculture sector goes far beyond financial and investment initiatives. It includes three policy reforms – amendments to the Essential Commodities Act (ECA), 1955 to keep food commodities out of it; central law on agriculture trade to cover various market reforms and liberalise sale/purchase of farm produce; and facilitative legal framework for partnership of farmers with agri-business firms for accessing modern input, technology, capital and assured prices, and incentives for quality production.

These reforms were due long ago. An attempt was made in 2002 and 2003 to take agri commodities out of the ECA through government order. This attracted big investments in agri trade.

However, in 2006 this order was revoked and agri commodities were again brought in the ambit of ECA. This kept the private sector from making any big investments in agri trade. Similarly, the central government tried to push market reforms and contract farming through state level actions twice, first through Model APMC Act (2003) and then through Model APLM Act (2017) and Model Contract Farming Act (2018).

Though no state opposed the reforms proposed in the Model Acts during consultations with the central government, implementation of these Acts in states remained patchy, diluted and ineffective, except in one-two states.

The change proposed in ECA allows recourse to measures like stock limit in exceptionally extraordinary circumstances like war and severe natural calamity. Even this will be based on a transparent price trigger. Genuine stock by processors, value chain participants and exporters will remain exempted.

These changes will create a favourable environment for new investments in warehouses, modern silos, cold storage, pack houses, etc., which will in turn reduce wastage and price volatility, bring temporal and spatial price integration, and help in better tapping of overseas market.

The proposal to formulate a central law for free interstate and intra-state trade including framework for e-trading will create one nation, one market in true sense. Such a law will meet the goals expected to be met from reforms in APMC Act of states.

This law will provide freedom and choice to farmers to decide whether to sell in APMC mandi or sell anywhere outside APMC mandi either directly at farm gate to an aggregator, trader, company, farmer producer organisation, cooperative, processor, exporter or at any other place such as trading platform, warehouse, silo or factory gate anywhere in the country. The proposed central law will not affect the right of the state to regulate agriculture trade within APMC space.

Barrier free interstate trade proposed in the central Act implies a trader can buy and sell all over the country. Such liberalised trading environment will ensure competitive and remunerative prices for farmers and also promote modern commerce and trading practices. Still there will be one more option of sale on electronic platform which is expected to gain more popularity in all future transactions.

The third reform suggests creation of legal framework to enable farmers to enter into arrangements with value chain participants and agri-business firms. This will enable farmers to access modern capital, know how and technology with private sector players and have arrangements to protect farmers against market and price risk besides incentive for quality and high-value production. Legal backing for farmers’ partnership in value chain will get them benefit of high-end, niche and export markets.

These reforms would need to be passed by Parliament as an Act before their implementation on the ground. Hopefully this process will be completed soon. By all accounts these reforms are historic and swill give a big push to farmers’ income, create attractive employment avenues in pre and post-harvest agribusiness, promote agro processing and usher in a new era of agribusiness revolution in the country.

The writer is member, NITI Aayog.

via View: Policy shift in stimulus to serve farmers better – The Economic Times

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