ECA, APMC changes may hurt farmers’ interests

Kushankur Dey | Updated on May 18, 2020 Published on May 18, 2020

Private oligopolies may end up forcing small and marginal farmers to accept poorer terms for their produce

A big-bang reform claimed to usher in the farm sector as Finance Minister announced ₹1-lakh crore funding support for strengthening of farm-gate infrastructure such as cold chains and post-harvest management infrastructure. Additional measures include a ‘facilitative legal framework’ to enable farmers for engaging with modern food chains in a fair and transparent manner. A Central law is to be formulated to provide adequate choices to farmers to sell produce at attractive price, barrier-free inter-State trade by defanging the Essential Commodities Act, 1955 (ECA) and e-trade of agricultural produce by abolishing the monopoly of APMCs.

Will this multi-pronged agenda infuse a real reform into the farm sector? Will such reform be a boon for more than 85 per cent of smallholders and ensure doubling of their incomes? Will corporate agriculture be the saviour of the agrarian crisis? A critical assessment of National Agriculture Policy framework and related administrative policy reforms held after 2014-15 is important to address some of these issues. We need to appreciate the existing facilitative Acts, discuss the ramification of privatisation in agriculture, and review the feasibility of e-trade.

Agri value chains

First, two facilitative Model Acts introduced by the NDA-I government, namely the Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act (APLM), 2017 and Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act (APLCFS), 2018, will certainly reduce the role of archaic APMCs in agriculture trade and enhance private participation in agriculture value chains.

This can also necessitate the structural changes to informal (domestic) agricultural value chains by augmenting the standardised and cross-border trade, enforcing adoption of electronic traceability system and private standards at the farm/processor level for ensuring food safety, for example, formalisation of about two lakh unorganised micro-food entrepreneurs. All these expected outcomes, however, depend on how the state responds and implements or amends the existing agriculture policies.

Second, if a facilitative legal framework binding the Model APLM and APLCFS Acts is put in place, private sector participation will undoubtedly gain ground — that can prop up oligopolistic competition and privately controlled food chains. Given the political economy of corporate/contract farming, the concerned States need to enforce a safeguarding mechanism for their farmers such as fair price, mechanism for dispute resolution, and grievance redressal. Is such mechanism or regulatory structure ready to implement in presence of the Contract Farming Facility Group?

Trade practices

Third, the relaxed stock holding order on essential commodities can further intensify the spirit of cartelisation and collusive trade practices. Traders and multi-national corporations may store more or hoard commodities, harness their arbitraging prowess in seasonal agriculture market and drive food price inflation. As the public distribution system may be controlled by a cartel, smallholders, village traders, and general public might be left in the lurch. In other words, market failure can be an expected outcome under such scenario.

Fourth, data reveals that only 2.6 per cent registered farmer companies (7,374 as of March 31, 2019) can utilise such benefit of contract farming and contract services, and infrastructure as cold chains and other post-harvest facilities. They can also be integrated with the technology-driven value chains. On the other hand, 86.4 per cent collectives are striving to rationalise their business model with a less-than-₹10 lakh paid-up capital, and they are yet to transition from the inter-community trade, input business to value addition and aggressive marketing.

Fifth, institutionalising e-trading of agricultural produce is a welcome move, but not a new one, as e-NAM has been in existence since early 2016. As of now, about 1.7 crore farmers as about 11 per cent of farm populace have registered on e-NAM and more than 80 lakh members of farmer collectives benefitted in either material or non-material way-price realisation and price discovery. However, a State-wise distribution of these farmer organisations’ participation on e-NAM is yet to be known. So, can e-trading emerge as alternative mode of sale for farmer collectives? Does the government want to roll out a different model? If so, what will be fortune of existing 785 e-NAM-integrated odds-regulated APMCs? Therefore, rationalisation of such decision is needed by designing modalities and developing a comprehensive evaluation framework.

Sixth, agricultural production and extension reforms have hardly been taken place in recent years. For example, agri-business and agri-clinic and ATMA schemes as initiated in 2001-02 could have received a stimulus package as the farm sector requires trained professionals to enhance the capacity of famer collectives and strengthen secondary agriculture. Input intensification and capital investment into the integrated farming system is rather important to climate change adaptation and sustain smallholder agriculture.

The writer is faculty at IIM-Lucknow, associated with the Centre for Food and Agri-business Management. Views are personal

Published on May 18, 2020

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