Farmers need access to markets that will get them the greatest price in a system that is well-run. Farmers' anxieties of corporate takeover of India's agro markets would be alleviated by the Prime Minister's declaration. The more important issue is whether the current scenario of over-dependence on intermediaries is preferable.
On November 19, Prime Minister Narendra Modi stated that the government would abolish three agriculture regulations that have sparked a year of demonstrations by farmers camped around Delhi's borders.
The agricultural demonstrations will almost certainly be called off as a consequence of Modi's decision, with agitated leaders claiming triumph for forcing the government to reverse its policies. The purpose of enacting the three agricultural laws, according to the Prime Minister, was to empower farmers, particularly small farms. The three laws benefited farmers, and many farmers throughout India applauded them, but the government "couldn't persuade that portion of farmers despite best efforts," according to the administration.
Several questions remained unaddressed after laws were repealed. What alternatives do you have to the laws? Is the Agriculture Produce Market Committees (APMC) model, which is based on the status quo, outdated, inefficient, and distortive, the greatest alternative for serving farmers' interests? What would it take for farming to become a lucrative profession in India?
Farmers need access to markets that will get them the greatest price in a system that is well-run. Markets, in an ideal environment, serve as the finest middlemen. For far too long, though, India's agricultural narrative has been one of market distortions. These apparently insurmountable impediments vexed previous officials, whose repeated advice to remove them frequently met with political opposition, as it does today.
As part of a broad strategy to reform India's agriculture, the government passed three laws in September 2020: the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020; and the Essential Commodities (Amendment) Act, 2020. The government maintained that the legislation were meant to help farmers by eliminating dishonest intermediaries and entrenched interests who skewed markets.
The Farmers' Produce Sell and Commerce (Promotion and Facilitation) Act of 2020 aims to make it easier for farmers to trade their products outside of the marketplaces designated under state APMC legislation.
Farmers must only sell to registered intermediaries at notified marketplaces, which are frequently in the same neighbourhood as the farmers' homes, rather than in an open market, according to APMC rules. Farmers' ability to sell their crop outside of their local APMCs was hampered as a result.
The APMC markets were established in the 1960s with the primary goal of preventing farmers from selling their crops in distress and enabling improved price discovery for their goods via the creation of vital infrastructure. However, when farmers were obliged to sell their goods via these committees, these APMC-driven marketplaces became impediments to getting a fair price for their produce over time.
Layers and layers of intermediaries and middlemen have been telling farmers what price their product should fetch, harvest after harvest, crop after crop, season after season. Over time, the APMCs have resulted in interconnected oligopolies dominated by the same number of local business families.
The Competition Commission discovered in December 2010 that one business accounted for over 20% of total onion trade at the Lasalgoan APMC, Asia's biggest onion market in Maharashtra's Nashik. As a consequence, there was a wide 'price spread,' which meant that numerous groups of middlemen collected their share before it reached the ultimate consumer, creating a huge disparity between the amount the farmer got and the final retail selling price.
Collusion was recognised as a key barrier to fair trade in a 2012 study by the National Council of Applied Economic Research, with a few of dealers monopolising practically all important marketplaces. Farmers' Produce Commerce and Commerce (Promotion and Facilitation) Act, 2020 sought to reduce obstacles in inter-state trade by enabling farmers in Uttar Pradesh to sell to buyers and merchants in Gujarat using an e-trading framework.
Farmers fear losing negotiating leverage if major businesses and individual merchants may join uncontrolled agricultural product marketplaces, which is at the heart of the demonstrations. For the time being, the Prime Minister's declaration will allay these anxieties. The more important issue is whether the current scenario of over-dependence on intermediaries is preferable.
Agriculture, in the end, is India's most unreformed sector.
(source: MoneyControl)
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