Former Finance Minister of India, Arun Jaitley once said, "If there is one area where biggest returns ( apart from GST ) can come to the economy, it is the agri-marketing reforms." And now the Government of India is walking the talk by proposing landmark reforms in the Essential Commodities Act (ECA) & APMC act. These changes are going to be a game-changer for Indian farming, procurement, supply chain networks.
Due to ECA, the farmers had no choice but to sell through mandis only. The new reform will remove cereals, edible oil, oilseeds, pulses, onions and potato from ECAs purview. A new law will be framed to give farmers the option to choose the market where they want to sell their produce by removing inter-state trade barriers and providing e-trading of agriculture produce. The government is thinking of putting in a clause wherein if prices shoot up by 100% then they can put up a storage limit. This is to ensure that there is no mischief of hoarding to pump up the prices.
As per the APMC act you can’t buy directly from the farmer within a particular APMC’s jurisdiction. Now that clause has been done with. So one license is enough to buy from any farmer across the country. This will give a push to private players as they can establish their supply chains. Private buyers want to procure at scale, hence they will create aggregation points, farmer-producer organisations etc.
Till now the middlemen facilitating the sale used to get high commissions from both sides of the trade. These commissions were decided by local politicians, and there was enormous corruption involved. This reform will wipe out these kinds of inefficiencies.
Our public distribution system leads to 46% leakage as per Shantakumar committee. Our farmers receive only a third of the end price a consumer pays when they sell fruits and vegetables. Even if we can bring that up to 60%, it would have an enormous impact according to agricultural economist Ashok Gulati.
Key Takeaways:
These reforms will give farmers and consumers freedom from monopolistic markets. This reform was expected in the first term of the Modi government but came in at a time when lockdown has strangled the economy. So better late than never. All that's required now is that this bill is passed through the parliament.
This reform if implemented properly, will be a game-changer for farmers as well as the private players. Few more steps would be required to ensure our farmers get their fair share and are protected against any price shocks but this move is a step in the right direction. It certainly is a Teji move by the government.
