Farm law rollback: Move may hit sourcing and expansion plans of food processing companies – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/agriculture/farm-law-rollback-move-may-hit-sourcing-and-expansion-plans-of-food-processing-companies/articleshow/87809474.cmsSynopsis

The Indian processed foods market is estimated at over ₹2.6 lakh crore, and large companies were drawing up fresh plans to benefit from sourcing directly from farmers.

The withdrawal of farm laws could impact sourcing and expansion plans and dash industry’s hopes of cheaper input costs, said executives belonging to food processing companies, while describing Friday’s development as a setback.

“The farm laws were good for small and big farmers, and would have definitely been good for companies like ours, but unfortunately, they could never get implemented in full measure,” said Angshu Mallick, chief executive officer and managing director of one of the country’s largest packaged and branded edible oil players Adani Wilmar. “Indian farm laws need changes; with a changing global scenario, it is very important to relook at the ancient laws,” Mallick added. Adani Wilmar sells edible oils, rice and pulses under the Fortune brand.

The Indian processed foods market is estimated at over ₹2.6 lakh crore, and large companies were drawing up fresh plans to benefit from sourcing directly from farmers.

‘Would have been a Win-win Situation’
They were also planning to leverage the₹Rs 10,900-crore allocated for food processing within the production-linked incentives (PLI) announced last year. But those plans will have to be revisited now, industry executives said. Nestle, ITC, Parle Products, Britannia, HUL, Amul, Adani Wilmar, PepsiCo and Marico are among the companies leading India’s processed foods market.

“The withdrawal of the farm laws will increase input costs of the industry and could create regulatory hurdles in some states which are ruled by parties in opposition,” said Subodh Jindal, president, All India Food Processors’ Association, which represents large packaged foods companies such as Nestle, Britannia, Marico and Haldiram.

In an address to the nation on Friday morning, PM Modi announced that the three controversial farm laws were being withdrawn.

If the farm laws had come into effect, farmers would have been free to sell their produce anywhere in the country. This would have helped companies to procure directly from farmers without going through intermediaries at mandis, lowering input cost. Private entities such as retailers, wholesalers, aggregators and exporters could have entered into contract farming agreements with farmers directly. At present, the agreements are mostly unwritten. They would also have attracted foreign investment in food chain supply and cold storages.

A senior executive at one of the country’s largest snack food companies said farm laws would have been a win-win for both them and farmers. “They would have allowed us to buy directly from farmers and get better prices. That leverage goes now,” he said.

farmer

Gujarat Cooperative Milk Marketing Federation (GCMMF) managing director RS Sondhi said the farm laws were enacted for the benefit of farmers and not for industry to make more profit. “Regarding input costs, farmers never exploit the situation and anyway, all food costs across the world have gone up. If we want our next generation to have sufficient nutrition, safe food at affordable prices and be self-sufficient in food as a country, we need to encourage the next generation of farmers to continue farming by paying remunerative prices for their produce,” he said.

Roller Flour Millers’ Federation of India (RFMFI) president Anjani Agarwal said the farm laws would have helped in removing middlemen from the supply chain. “This would have given farmers a better price for their products and better quality of produce to industry. Now all this will not happen,” said Agarwal.

An RFMFI member said the repeal of the laws would lead to withholding of investments. “We were planning to install 30 procurement centres after the implementation of farm laws. We would have directly procured from farmers giving them better prices and educated them about best practices. Now that won’t happen,” he said, requesting anonymity.

ITC, HUL, Britannia and Nestle declined to comment on ET’s queries on the impact of withdrawing the farm laws.

Last year, industry had welcomed the passage of farm laws. CII National Committee on Food Processing Industries chairman and Nestle India managing director Suresh Narayanan had said in December last year that agri reforms announced by the government would lead to reduction in wastage, increase in investment in extension services to improve productivity and returns as well as creation of on-farm post-harvest infrastructure. Narayanan had further said that the reform process would give a boost to the food processing sector with enhanced opportunities for strengthening and scaling micro food processing enterprises, an integral part of the agriculture sector.

Then Federation of Indian Chamber of Commerce and Industry (FICCI) president Uday Shankar, too, had late last year said that industry and potential stakeholders should back farm laws introduced by the government by “lending their voice” as the sector was in urgent need of reforms and the laws were in larger national interest. “By and large, these reforms are in the interest of farmers, agriculturists and larger national interest and hence all of us should lend our voice to the discourse,” he had said.

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