Market failure: On agriculture sector reforms
- There is a strong pushback from farmers against three Bills that seek to replace ordinances issued in June, on key aspects of the farm economy which are trade in agricultural commodities, price assurance, farm services including contracts, and stock limits for essential commodities.
What are the three Bills?
- The Centre passed three Bills
- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill
- Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill
- Essential Commodities (Amendment) Bill.
What does the government say about the Bills?
- The government claims the legislation will transform the sector and raise farmers’ income.
- The Centre had promised to double farmers’ income by 2022.
- It says the Bills will make farmers independent of government-controlled markets and fetch them a better price for their produce.
What are the new provisions in the three Bills?
- The Bills propose to create a system where farmers and traders can sell and purchase products outside ‘mandis’.
- They also encourage intra-state trade and propose to reduce transportation cost.
- The Bills formulate a framework on agreements that enables farmers to engage with agri-business companies, exporters and retailers for services and sale of produce while giving the farmer access to modern technology.
- They provide benefits for small and marginal farmers with less than five hectares of land.
- The Bills also provide for removal of items such as cereals and pulses from the list of essential commodities and attract FDI.
What are the farmers’ concerns?
- Farmers are apprehensive about getting Minimum Support Price for their produce.
- Other concerns include the upper hand of agri-businesses and big retailers in negotiations, thus putting farmers at a disadvantage.
- The benefits for small farmers from companies are likely to reduce the engagement of sponsors with them.
- The farmers also fear that the companies may dictate prices of the commodities.
Criticism of the bills
- Agriculture and markets are State subjects, and there should not be any tinkering with the MSP and Agricultural Produce Market Committees (APMC), that form the backbone of existing trading arrangements.
- Provisions in the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, providing for unrestricted commerce in designated trade areas outside APMC jurisdictions without levy of any fee, and more generally, empowering the Centre to issue orders to States in furtherance of the law’s objectives is a cause of concern.
Liberalisation does not lead to private investment
- For instance, when Bihar removed the APMC system, markets suffered loss of fee revenue, with no significant private investments in the sector.
- To strengthen competition, the centre should massively fund the expansion of the APMC market system, removing trade cartels, and providing farmers with good roads, logistics of scale and real time information.
- Instead of opting for heavy centralisation, the emphasis should be on empowering farmers through State Farmers Commissions recommended by the NCF, to bring about a speedy government response to issues.
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