NEW DELHI: Restoring the way agricultural products are traded within India, Parliament on Sunday passed a series of bills aimed at liberalizing agricultural markets. Despite repeated agitations by farmers and the resignation of food processing industries minister Harsimrat Kaur Badal in protest, the passage of controversial bills marks a new beginning: farmers will now have the freedom to sell their products to Any buyer outside of the state regulated wholesale markets and such transactions will not generate taxes or fees.
The new set of laws allows for the direct purchase of produce from farmers outside of state-regulated mandis (also known as Agricultural Products Market Committees or APMC) that have enjoyed a monopoly until now, and where merchant cartels have They often manipulated wholesale prices to the detriment of farmers. Products can now travel freely between states and farmers, the government hopes, will receive a better price as trade opens up to competition. After amendments to the Essential Commodities Act decades ago removed stock limits for traders and exporters, agribusinesses are expected to invest in post-harvest infrastructure such as warehousing, transportation, and value chains.
However, farmers fear being left at the mercy of large corporate buyers without any regulatory oversight or control. This has sparked a wave of protests in Punjab, Haryana and western Uttar Pradesh, the former states of the green revolution.
“The haste with which the bills were passed in Parliament shows the government’s lack of confidence to open this up to debate and scrutiny. I knew that delving into the details would have shown that the bills were against farmers, “said Kavitha Kuruganti, coordinator of ASHA, an agricultural policy advocacy group.
The changes are going in the right direction, but unfortunately the debate took a political turn, said Siraj Chaudhry, CEO of National Collateral Management Services Ltd. and former chairman of Cargill India. “Now that all trade barriers are gone, corporate players have to invest in building a trusting relationship with farmers. It may take a few years (to show results) since the states must be aligned and the investment capacity of private actors is limited. “
Farmers are really worried, said Ajay Vir Jakhar, chairman of the Punjab Farmers Commission. They fear that by weakening the mandis and leaving them to market forces, the government will gradually withdraw from open (unlimited) buying of rice and wheat at minimum support prices (MSP), the mainstay of farmers in Northwest India. .
While there may not be an immediate impact on PEM operations, experts are concerned about the impact of the new laws on agricultural markets. “The laws appear to be more business-friendly and it is unclear how farmers will benefit,” said Sudha Narayanan, associate professor at the Indira Gandhi Institute for Development Research, Mumbai.
According to Narayanan, trade in agricultural products is likely to exit regulated CPAs (to save on taxes and fees), but if off-mandi transactions remain invisible (transactions between a private buyer and a farmer are not recorded) it will be difficult. to determine if farmers are benefiting or losing.
“In the absence of data, it is easier to push the narrative that farmers are doing very well … but a greater concern is that the state is withdrawing from its regulatory role. There is no clarity on how price discovery will occur and the proposed dispute resolution mechanism is weak and difficult for farmers, “Narayanan said.
In addition, after all stock limits are removed following the amendments to the Essential Commodities Act, the lack of data on privately owned stocks can seriously affect inflation management and trade policy decisions.
Within a month when the kharif crop reaches the market, it may be easier to assess the impact of the new laws on farm prices, if free markets help farmers get a better price. As of now, reports from the field suggest that prices for freshly harvested wholesale basmati rice are significantly lower year-over-year despite higher international prices.
It may be sobering to recall the experience of Bihar, which abolished regulated mandis in 2006. A November 2019 study by the National Council for Applied Economic Research showed that a liberal regime in Bihar (with little or no public procurement at support prices) does not bring private investment in the creation of new markets or strengthen the facilities in existing ones. Bihar farmers are often plucked by traders and sell their crops at prices significantly lower than MSPs, the study showed.
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