Modi Government’s Major Agri Reforms Drive The ‘Final Nail In The Coffin’ Of Outdated Regulatory System

The Union government today (15 May) took three huge steps to change the outdated regulations in the agriculture sector that will likely lead to improving farmers’ economic status and provide them access to better technology.

Union Finance Minister Nirmala Sitharaman announced that the Agricultural Produce Marketing Committee (APMC) Act and the Essential Commodities Act would be amended to help farmers, while they will get agriculture produce price and quality assurance.

The announcement came when she declared the third tranche of the government’s initiative under the Rs 20 lakh crore Atmanirbhar Bharat Abhiyan. These measures unshackle farmers from the outdated regulation system. That way these reforms are a big push towards injecting the much-needed impetus to rural economy.

In what an expert termed “the last nail in the coffin of the old system”, the Finance Minister said the government will pass a central law that will provide “adequate choices” to farmers to sell produce at attractive prices, barrier-free inter-state trade, and framework for e-trading of agricultural produce.

Reforms in APMC Act are long overdue but it is for the first time that the Centre has come forward to crack the whip.

Since the Atal Bihari Vajpayee regime, the Centre has been pleading with the states to reform their APMC Act so that farmers would be out of the mandi system and have the freedom to sell to buyers of their choice.

The Vajpayee government even linked additional allocation under the Horticulture Crops Development Fund for making changes in APMC Act but not many states ventured to carry out the reforms.

Right now, farmers’ sale choice is restricted as they can sell only to those who have APMC licences. This, automatically, puts them under the mercy of middlemen, who are the real gainers.

The Modi Government’s approach is simple: why restrict farmers’ sale to a buyer of their choice when the industry doesn’t face a similar problem?

The APMC system has also given rise to corruption and local political leaders, who dictate the price for agricultural products as they naturally head the mandi marketing committees.

Automatically, farmers didn’t realise good prices or did not benefit from any sharp hike in the prices of a particular commodity.

For example, during the surge in onion prices due to supply woes, customers at the retail outlets paid double the price at the mandis close to the growing areas. While farmers didn’t benefit much, the middlemen benefitted immensely as they even raised their margins without any value-addition.

Also, the Centre’s move will now, for the first time, concentrate on the output side since governments had till now looked at only issues such as fertilisers, seeds and insecticides.

The move to amend the Essential Commodities Act is also long overdue, especially to pull out crops that are not actually critical from the list.

The objective of opting for such an amendment is simple: why impose stock control when there is a glut in production?

Sitharaman said that cereals, edible oils, oilseeds, pulses, potato and onion will be deregulated and the Essential Commodities Act, 1955 will be amended.

This will mean that a retail trader or a wholesaler or a producer can now hold additional stocks. The quantity that each can hold differs from commodity to commodity.

The Essential Commodity Act on the products that are to be deregulated did not make sense as the country always has ample stocks of cereals and pulses besides potato and onion.

On the edible oils and oilseeds sector, India has been importing more quantity of cooking oils than domestic production. On the oilseeds front, it will help oilseed crushers to procure more.

That Sitharaman said the stock limit will be imposed during times of natural calamities, famine and surge in prices means the government reserves its right to intervene as and when required.

The third significant decision is to bring in legal provisions for farmers to engage with processors, aggregators, large retailers and exporters. This will give a fillip to contract farming.

The inbuilt advantage of this is that farmers will benefit from risk mitigation, assured returns and standardisation of quality.

Amith Agarwal, co-founder and chief executive, AgriBazaar (India's largest AgriTech Marketplace) said these decisions will help bring long-term investments, world-class agri-assets and infrastructure that will benefit small farmers.

In the final analysis, this will pave the way to agri-entrepreneurship.