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Indian Economy

Agricultural Sector Reforms

  • 04 Jun 2020
  • 6 min read

Why in News

Recently, the Cabinet has approved a proposal to promulgate three separate ordinances to push agriculture marketing and commodities trade reforms in the country.

Amendments to Essential Commodities Act (1955)

  • Background:
    • India has become surplus in most agri-commodities but farmers have been unable to get better prices due to lack of investment in cold storage, processing and export.
    • The imposition of the curbs on stocking of farm produce and regulation of the prices of commodities, etc. under Essential Commodities Act (ECA) are some of factors responsible for less entrepreneurial spirit and thus less investment in the farm sector.
  • Benefits of Amendments:
    • The amendment would deregulate the commodities such as cereals, edible oils, oilseeds, pulses, onions and potatoes. It will help to lessen the fears of private investors of excessive regulatory interference in their business operations.
      • Any limits under ECA over these commodities will be imposed only in exceptional circumstances such as war, famine, extraordinary price rise and natural calamity.
    • The freedom to produce, hold, move, distribute and supply will lead to harnessing economies of scale and attract private sector/foreign direct investment into the agriculture sector.
      • It will help drive up investment in cold storages and modernization of the food supply chain.
  • Significance:
    • The announced amendment is expected to help both farmers and consumers while bringing in price stability.
    • It will also create a competitive market environment and also prevent wastage of agri-produce that happens due to lack of storage facilities.
    • It is considered as a step towards transformation of agriculture and raising farmers’ income.

Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020

  • Background:
    • Currently, there are restrictions for farmers in selling agri-produce outside the notified Agricultural Produce Market Committee (APMC).
    • The farmers are also restricted to sell the produce only to registered licensees of the State Governments.
    • Further, barriers exist in free flow of agriculture produce between various States owing to the prevalence of various APMC legislations enacted by the State Governments.
  • Benefits of Ordinance:
    • It will create an ecosystem where the farmers and traders would enjoy freedom of choice of sale and purchase of agri-produce.
    • It will also promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State agricultural produce marketing legislations.
    • The ordinance also proposes an electronic trading in transaction platform for ensuring a seamless trade electronically.
    • It also proposes to set up a separate dispute resolution mechanism for the farmers.
  • Significance:
    • It will open more choices for the farmer, reduce marketing costs for the farmers and help them in getting better prices.
    • It will supplement the existing Minimum Support Price (MSP) procurement system and both will help to provide stable income to farmers.
    • It will also help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.
    • It is expected to pave the way for creating One India, One Agriculture Market in the country.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020

  • Background:
    • Indian Agriculture is characterized by fragmentation due to small holding sizes and has certain weaknesses such as weather dependence, production uncertainties and market unpredictability.
    • It makes agriculture risky and inefficient in respect of both input & output management.
  • Benefits of Ordinance:
    • It empowers farmers for engaging with processors, wholesalers, aggregators,wholesalers, large retailers, exporters etc.and thus eliminating intermediaries resulting in full realization of price.
      • Farmers have been provided adequate protection. Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery.
      • It also provides an effective dispute resolution mechanism for with clear timelines for redressal
    • It contains mechanisms which would transfer the risk of market unpredictability from the farmer to the sponsor.
  • Significance:
    • It also enables the farmer to access modern technology and better inputs. It will reduce the cost of marketing and improve income of farmers
    • It will help to attract private sector investment for building supply chains for supply of Indian farm produce to global markets. .

Way Forward

  • These ordinances are expected to build necessary agrarian infrastructure in the country which are expected to resolve a number of issues of the agricultural sector.
  • It is considered as a visionary step towards transformation of agriculture and raising farmers’ income.

Source: IE

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