‘Atmanirbhar Bharat’ initiatives, an attempt to free the farmer

| Updated on May 18, 2020

ECA dilution and a new Central law to replace APMCs are good moves, but implementation is key

The third tranche of the Atmanirbhar Bharat package announced by the Finance Minister contained a fairly predictable set of measures promising more credit to farmers, investments in agri-infrastructure and promoting ancillary activities to supplement agricultural income. But two key announcements in the package have the potential to substantially transform Indian agriculture, if followed through. One is the promise of a Central law to provide more choices to the farmer beyond the Agricultural Produce Marketing Committee (APMC) mandis. The other is the proposal to amend the Essential Commodities Act (ECA) to ‘deregulate’ commodities such as cereals, edible oils, oilseeds, pulses, onions and potatoes. If the government manages to walk the talk, these measures can go a long way in improving the terms of trade for farmers and allowing them the freedom of choice they have been long denied.

APMC Acts that force farmers to sell their produce only to licensed agents have been a key hindrance to the operation of free markets in agriculture, restricting the farmer’s ability to access the most lucrative markets and impeding efficient price discovery. The NDA regime has so far tried to fix this problem by pressuring States to repeal their APMC Acts and getting farmers onboard e-NAM. But this has proved less than effective, with many States (given the rent-seeking opportunities in the APMC structure) either dragging their feet or taking half-hearted stabs at it. In States that have attempted the repeal, farmers have been left without a well-structured alternative to market their produce. The promise of non-APMC alternatives is a welcome step to dismantle the APMC monopoly, but whether this translates into a better deal for farmers will depend on implementation. For this to succeed, credit and transport services presently provided by traditional intermediaries will need to be replicated and solutions found for farmers to aggregate produce and exercise collective bargaining power. The Centre will also need to refrain from ad-hoc market interventions such as trade curbs and buffer stock releases, whenever consumer interests are threatened.

The ECA is the vestige of an era where agri-commodities were subject to perpetual shortages and any attempt to dilute it is welcome in this era of surpluses. Draconian rules that allow the government to declare arbitrary products as ‘essential’, fix selling prices and prosecute players seen to be hoarding, have proved a big hurdle to the development of efficient go-to-market infrastructure for farm produce. But given the sensitivity of political fortunes to inflation in commodities such as pulses and onions, it remains to be seen if the Centre refrains from intervening when crisis strikes. It is also a moot point why it has not gone the whole hog to repeal the ECA instead of merely proposing tweaks to it. Long-term reforms apart, solutions also need to be found to the farmer’s more immediate problem of a bumper rabi crop, which will need to be sold into markets hit hard by demand destruction and lack of producer pricing power.

Published on May 17, 2020

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