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  • 21 Nov 2020 GS Paper 3 Economy

    Biggest reform in the distressed agriculture sector in India could be the reforms in agri-marketing and trade policies. Discuss (250 words)

    Approach
    • Write briefly about current agricultural distress in India.
    • Highlight the agri-marketing and trade policies that could reform the distressed agriculture sector.
    • Substantiate your points with some relevant examples.
    • Write a coherent conclusion.

    Introduction

    • Although agriculture contributes less than one-third of the output of the entire economy, it sustains about 55% of population directly or indirectly, rural centres are also key demand areas thus crucial for economic growth. However, in recent times farm incomes have been falling due to slower output growth, higher costs and increased vulnerability to a changing climate.
    • Recently policy think tank Niti Aayog’s proposed for an upfront direct income subsidy through DBT (direct benefit transfer) to farmers to provide relief to farmers facing agrarian distress. This will also help in enabling farmers to invest the finances in their required areas of need.

    Body

    Required reforms in Agriculture marketing and trade policies:

    • The present APMC Act restricts the farmers from selling their produce to processor/manufacturer/ bulk processor, exporter, bulk retailer outside the market yard and the produce is required to be channeled through regulated market according to provisions of the act.
    • Poor farmers may typically get as little as 25% of the prices that consumers finally pay for their produce. The intermediaries between farmers and consumers are the major beneficiaries rather than the growers and end consumers.
    • Contract Farming
      • Contract farming is crucial to promote food processing and to provide technical and financial support and quality input to smallholders.
      • The Model APMC Act circulated to States/UTs during 2003 provides for contract farming agreement and its model specifications. 20 states amended their APMC Act to make provision for Contract farming but only 12 notified the rules.
      • These rules should be notified by states which have amended APMC acts and those states which have not yet amended the act need to act swiftly.
    • Direct Sale by Producers to Processing Industries/Exporters/Bulk Buyers
      • The producer should be free to enter into direct sale without the involvement of other middlemen outside the market yard in the market area under the relevant provisions of the concerned Act.
      • These changes in marketing and trading will break the monopoly of middle men and will ensure farmers are able to get fair prices for their produce.
    • De-linking the provisions of compulsory requirement of shop/space for registration of traders/market functionaries
      • At present only the traders/commission agent owning a shop/godown in the regulated market are allowed to purchase produce in the market.
      • This practice of compulsory licensing of commission agents/traders in the regulated markets has led to the monopoly of these licensed traders acting as a major entry barrier in existing APMCs for new entrepreneurs, thus, preventing competition
    • Excluding fruits and vegetables out of APMC Act
      • Providing producers the right to sell to anyone they choose including integrator, village cooperative, or in APMC Mandi.
      • Currently restriction forces producers to sell their produce in designated Mandi only reducing their ability to get fair price from other places
    • Implementation of e-NAM and e-trading in all States
    • Promoting Cooperatives for marketing
      • The Amul Dairy Cooperative is an outstanding example of how farmers empowered themselves through cooperation.
      • In other states of such cooperation led by women’s self-help groups, initially for mobilizing credit and later for other activities have major success.

    New Agricultural Reforms

    • The Government with the aim of transforming agriculture in the country and raising farmers’ income have passed three important legislation from Parliament.
    • These legislations sought to bring much needed reforms in the agricultural marketing system such as removing restrictions of private stock holding of agricultural produce or creating trading areas free of middlemen and take the market to the farmer.
      • The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020,
      • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020,
      • Essential Commodities (Amendment) Act, 2020.

    Conclusion

    Direct Benefit Transfer has the unique benefit of helping farmers in distress promptly. However for a long term and holistic solution of the agrarian crisis, marketing and trading policies need to be reformed to bring a structural change in agricultural produce marketing.

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