The focus of the newly passed farm bills is rightly on surplus management, as India has transitioned from a food deficit nation to a surplus one. Prime Minister Narendra has reiterated that farmers will benefit from the changes.
Amitabh Kant, NITI Aayog CEO, wrote in ET that with the passing of the agricultural ordinances, India’s agriculture sector has finally been unshackled and set on the path towards modernization. Kant points out that little effort was made in developing infrastructure for collection close to the farm gate. There were not enough incentives for investments across the cold chain and the food processing industry. He attributes this to policy which actively discouraged aggregation of produce and bargaining power of farmers.
With the new ordinances, he says India’s focus is rightly on surplus management. First, the local mandi system was in need of competition. Farmers required multiple avenues to sell their produce to wholesale and retailers, which the Agriculture Produce Marketing Committee (APMC) system discouraged. Second, contract farming needed an enabling framework to boost backward linkages with the food processing industry, Kant said. He explains that contract farming would allow farmers to plan investment decisions with assured income in the form of an enforceable contract. Kant adds that the regularity with which the Essential Commodities Act was invoked discouraged investments in the cold chain.
Kant says farmers, through the new ordinances, will be able to enter into agreements with food processors to grow processable varities and sell them at assured prices. The farmers will not be restricted in regards to whom and where to sell their produce. Moreover, the farmers can also enter into agreements with farm service providers. Kant explains that policy action in agriculture must be seen in conjunction with the initiatives taken in the manufacturing sector. He points out that production linked incentive schemes, the tabling of three labor codes in the Lok Sabha that rationalize the myriad labor laws at the central level, a thrust on ease of doing business and inviting foreign investment are aimed at generating jobs in manufacturing. Investments in infrastructure will further drive non-farm job creation and the development of food processing industries creates rural and non-farm jobs.