How reforms are imperative for strengthening the growing basket of high value agriculture

With or without Farm Laws 2020, agricultural markets will benefit from reforms, which have been on the radar for several decades. Markets have played an important role in shaping agricultural diversification in India — from cereals, pulses and coarse grains to high value, protein and nutrient-rich commodities including fruits and vegetables, dairy, meat, eggs and fisheries. Driven by market demand, high-value commodities account for 48.2 percent and cereals and pulses account for 18.5 percent of the value of the output of agriculture and allied activities in TE 2018-19. High perishability, quality and safety concerns call for improved logistics, supply chain management, and skilled manpower for scaling up these commodity markets.

Marginal and small farmers who account for 86.1 percent of all farm holdings are heavily engaged in the production of high-value commodities. Fragmented markets, long chains of intermediation result in higher wastage and lower price realisation for the farmers. Hence, in the context of agricultural diversification with smallholders being an integral part of this process, and opportunities for scaling up agribusiness, policy reforms cannot be ignored and calls for clear actions.

Policy provisions such as giving farmers the freedom to sell beyond APMC regulated markets; encouraging direct marketing, contract farming, private markets; rationalising marketing fees and charges; moving towards a unified digital marketing platform; creating farmer collectives; incentivising private sector participation in agricultural markets have been at the core of previous reform agendas proposed in 2003, 2017, 2018, among other years.

There have been serious gaps in the adoption and implementation of earlier policy reforms and not all states could be onboarded in the true spirit. Reforms have been rather piecemeal and states have muddled their way driven by their individual state priorities and goals. Also, certain states have been successful in creating provisions for contract farming, private markets, direct marketing, delisting fruits and vegetables from APMC list, among others. However, the impact of these paper reforms on ground practices has not been very heartening and there is clearly a need for more work in making these reform proposals actionable.

Markets for high-value commodities are more demand-driven; not tied to food security concerns; not backed by support price and assured procurement; dominated by marginal and small farmers; attractive to private investment in logistics, food processing, exports; witnessed innovations and technology interventions infusing sustainability and scalability. Hence implementing the policy reforms will create win-win situations for farmers, consumers, and other stakeholders.

Before the Farm Laws 2020 were announced, the government launched flagship programmes like e-NAM in 2016, farmer producer companies in 2010, enforced the warehousing Act in 2010 and introduced e-NWRS in 2019. The government has been encouraging technology interventions through start-ups to move towards direct farmer-market linkages, greater transparency and efficiency in marketing practices. e-NAM, now functional in 1,000 mandis across 18 states and 3 UTs, is about extending digital marketing across all markets and commodities. This requires uniform laws of marketing, modern infrastructure facilities, assaying and transportation services. Without a clear policy environment, the impact of e-NAM in helping farmers find larger markets for their produce, bringing in transparency in auctioning, payments, and eventually creating a direct trading platform for the farmers will be a reverie.

Despite policies aimed at making warehousing accessible and affordable to farmers and transitioning to electronic platforms for greater transparency, it has not clicked with the farmers. Now dovetailing e-NAM with e-NWRS is promising but to make it happen there are several ground challenges that need policy attention. For many of these outcomes to be realised, reforms aimed at broadening the market area, bringing in uniform rules and regulations of marketing, creating ease of licensing, and rationalising market fees and charges are important prerequisites.

Farmer collectives — co-operatives, self-help groups, farmer produce companies (FPCs) — have enabled farmer mobilisation and accorded greater scale and bargaining power to member farmers. The inclusive dairy model linking milk producers to markets was pioneered by co-operatives in the 1970s. Mahagrapes established in 1991 demonstrated how a farmers’ organisation empowered its member farmers to crack stringent export markets for grapes.

Sahyadri FPC, which started with 140 member farmers in 2010, grew to 8,000 member farmers in 2020. It is a leading example of how a farmer organisation successfully leveraged technology to link farmers to markets and graduated to a federation of FPCs and a champion of agri-technology.

During the pandemic, when mandis closed down, several FPCs were able to market the produce of their member farmers either through e-retailers, or directly to the consumers. With the government’s vision to expand the FPO network and add 10,000 more by 2023-24, marketing will go beyond APMC markets, and there will be more farmer-FPC-business, farmer-FPC-consumer models emerging. Clear policies and rules of doing business will help address many challenges that emerge and allow this network to grow and flourish.

Private sector participation in agriculture is not just big agri-business companies and corporate entities but also start-ups, and agripreneurs who have been foraying into this sector with innovations in pre-and post-harvest, marketing practices, among others. There are currently 600-700 agri-tech start-ups in India and the potential to drive agriculture towards greater efficiency, sustainability and scalability is immense. The concept of decentralised value chains has gained momentum with farmers directly selling to e-retailers.

Be it regional or national players, the USP of these ventures is technology-driven responsible value chains which include on-demand harvest, sustainable value chain management practices, faster no-contact doorstep delivery to the customers. Start-ups like Ninjacart, Otipy, Dehaat, Milkbasket, GoLife, Eggoz, among others, are creating greater market opportunities for farmers. As this ecosystem consolidates, policies will have to guide the rules of the game.

It has been argued that farmers always had the freedom to sell anywhere and to anyone but in the absence of enabling institutions, alternative marketing channels, farmers have not been able to exercise this freedom consistently to their benefit. Time and again, they have had to depend on mandis to sell their produce subject to exorbitant cost of intermediation as well as take to distress sale due to lack of access to formal credit, storage facilities, and small marketable surplus. Many farmers cultivating fruits and vegetables consider mandis as the last option if they have the choice to sell directly at fair prices, consistently during the season. There are apprehensions about buyers not honouring price and buyback agreements, citing quality and prevailing price issues.

The experience of contract farming has been a mixed bag in India. There are instances where farmers have gained from higher prices and assured buyback as observed in the case of tomato, potato, exotic vegetables, and grapes for the export market. However, there are concerns that farmers often do not have strong bargaining power, there are weak safeguards for the farmers in the event of breach of contract, and the grievance redressal mechanism does not inspire confidence.

Implementation of policy reforms has always been tough and not without opposition and agitation. Prudence lies in drawing lessons from what has worked well and the challenges that need to be addressed rather than discarding the reforms and starting afresh.

The writer is Senior Research Fellow, Indian Council for Research on International Economic Relations. Views expressed are personal.