Major agri reforms announced as part of PM’s COVID package

Last updated on February 13th, 2023 at 04:34 pm

Finance Minister Nirmala Sitharaman laid out the third tranche of measures for the agriculture and allied sector aimed at bolstering the pandemic-hit economy.

An 11-point action plan for the agriculture was announced on Friday by the Finance Minister as part of PM Narendra Modi’s 20 lakh crore COVID package. The last three of these were especially far-reaching market reforms, viz the deregulation of the Essential Commodities Act 1955, the option of farmers to trade outside the APMCs (agriculture produce market committee) and a legal framework to provide farmers price assurance at the time of sowing along with support to ensure quality.

The dismantling of APMCs has been happening to a smaller extent in many BJP-ruled states while others that had done them earlier have met with limited success. The APMCs have been created in order for the government to easily procure certain crops under the Minimum Support Price scheme. Other crops too started going through authorised traders operating from these mandis but were subject to the prices decided by these middlemen who naturally sought to maximise their profits. This led to profit-spread where traders and distributors would pocket much of the price difference between what the farmer sells it at and the consumer buys it at.

By no longer forcing farmers to sell to through these committees, the government has effectively opened up the farmer to markets across India. While this sounds good in theory, there is uncertainty about how well the government can connect millions of farmers and buyers through the e-trading system. It is understood that in order to better secure the connection between farm-gate to retail the government will have to institute long-overdue schemes like incentives for retail and delivery startups to aggregate products from farmers and setting up better storage and processing facilities that both farmers and buyers can utilise.

“The Rs 1 lakh crore agri infrastructure fund will be created immediately,” Sitharaman said, adding that the money would be spent on creating infrastructure projects at farm-gate and aggregation points (primary agricultural cooperative societies, farmer producer organisations, agriculture entrepreneurs and startups).

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The Essential Commodities Act has also been amended to remove cereals, edible oil, oilseeds, pulses, onions and potato from its purview. With no ceiling on the maximum amount of produce a trader/merchant can hold, it would enable merchants to purchase surplus from farmers. They were earlier unable to do resulting in farmers often dumping at wholesale markets or giving them away at throwaway prices. Now there are no permanent storage ceilings or commodities and the act will be brought into force only under pressing circumstances.

Finally, the government will facilitate direct private sector participation in farming activities by setting up a legal and regulatory framework under which farmers can be assured a certain price for their products at the time of sowing. Until now this was only available to crops that come under the purview of the MSP. This way, the buyers too would be invested in enabling better farming practices to ensure quality products. It is expected that this if this is implemented well with the use of big data and artificial intelligence, it could usher in a well-regulated national futures market for vegetables, benefitting farmers greatly.