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Redefining Farming in India: New Agricultural Policy

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Pooja Paswan
August 28, 2021

“The farmer is the only man in our economy who buys everything at retail, sells everything at wholesale and pays the freight both ways.”

~ JOHN F. KENNEDY (35th President of the United States)

The process of economic reforms started in 1991. However, the Indian agriculture sector lagged behind and for the first time, India announced its new agricultural policy in the year 2000. The New Agricultural Policy of 2000 talked about giving industry status to agriculture and taking initiatives for corporate farming to achieve a growth rate of 4% annually on a sustained basis by increasing production and productivity. The new bills passed by the government are in line with the New Agricultural Policy. 

The Three Agricultural Reforms of the New Agricultural Policy 2020

In September 2020, three Agri reform bills—The Farmers ‘Produce Trade and Commerce (Promotion and Facilitation), the Farmers’ (Empowerment and Protection) Price Assurance and Farm Services Agreement and the Essential Commodities (Amendment) Act—were introduced by the government as a step to raise farmers’ incomes in the coming years.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

At present, Indian farmers face difficulties because of various restrictions, including limitations to selling their commodities only to the state government’s registered licensees and prohibition on selling produce outside the notified (Agricultural Produce Market Committees) APMC market yards. Along with this, due to prevalence of various APMC laws by state governments, there are hinderances in the free flow of agricultural trade between states.

The new bill seeks to build an environment where farmers and traders can enjoy freedom of choice regarding selling and purchasing of produce. This will facilitate remunerative prices through competitive, alternative trading channels to promote efficient, open and barrier-free interstate and intrastate trade. The bill envisions, “One India, One agricultural Market,” promoting barrier-free inter-state and intrastate trade with provisions of electronic trading. It goes on to address the issues of regional disparities and price stability in the agricultural market in the long run. Farmers would not have to pay additional taxes to regulated markets (APMCs) or commission to intermediaries. Farmers will no longer be subjected to any market fees or levies by state traders and electronic trading platforms for the sale of their produce conducted at an, “Outside trade area.” It will ensure that the farmer gets a bigger share of the price paid by the consumer and will, therefore, improve agricultural incomes.

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020

This bill aims at realizing forward linkages to the agricultural sector by allowing participation of the corporate sector in corporate farming. The bills also bring in a slew of benefits for agri-tech startups and organized players who connect farmers to agribusinesses, food processors and exporters; agri-warehousing companies and cold storage providers; supply chain and logistics operators that ensure transparency and timeliness; online agri-trading marketplaces and practically anyone in the agri-value chain that works towards eliminating inefficiencies in farm-to-table.

The Essential Commodities (Amendment) Bill, 2020

Although India has become a surplus in most agricultural commodities, the entrepreneurial spirit has dampened because farmers have been unable to get better prices due to the lack of investments in cold storage, warehouses, refining and export services. When there are bumper harvests, especially of perishable commodities, farmers suffer huge losses. The new bill aims to exclude items—from the list of essential commodities—such as cereals, pulses, oilseeds, edible oils, onions and potatoes. The ability to grow, keep, transport, distribute and supply will harness the economies of scale and draw direct private sector/foreign investment into the agricultural sector. The bills will bring the required private investment in agricultural marketing, processing and infrastructure. In the long run, this bill is expected to boost agri-storage infrastructure even in smaller locations.

Why the urgency for reforms in agriculture sector?

The urgency of reforms in the agriculture sector is also felt because the Green Revolution that led to the commercialization of agriculture in India and an increase in farmers’ income and labourer’s wages, apart from making India self-reliant in food grain production, has come to a plateau. The agricultural reforms in India are also necessitated because the farming occupation has increasingly become unremunerative as the cost of cultivation has risen, while farmgate prices of agricultural products remain very low. In some regions of India, farmers were compelled to take extreme steps like suicide because of increasing indebtedness, as their incomes did not cover their cost of cultivation, especially when crops failed due to vagaries of nature.

Author: Pooja Paswan is currently enrolled at the John.F. Kennedy School of Government, Harvard University. She is an Assistant Professor in the Department of Political Science at Jamia Millia Islamia University, New Delhi, India. She has Ph. D in Public Administration and specializes in Public Policy. She was recipient of the ASPA 2019 Founders Fellow. She has worked extensively in the area of development administration and policy. She can be reached at https://jmi.academia.edu/PoojaPaswan and [email protected]. Twitter @poojapaswan

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