Announcing her third tranche of stimulus measures to rejuvenate Indian economy, finance minister Nirmala Sitharaman cut the Gordian knot of controls on the Indian farmers’ rights to sell his produce. This move would, at the same time, stir a hornet’s nest of protests from at least some state governments and Left-minded politicians.

If the GST system has produced one integrated market for goods and services in the country, the proposal to allow farmers’ unhindered right to sell his produce should create a single market for farm products in the entire country. Both these moves, admittedly, result in detraction from the states’ rights to control — in this case, the farmers freedom of marketing their produce.

Currently, under the existing laws, farmers can’t sell his produce outside of the state in which he is farming. Besides, farmers are obliged to sell to licence holders of village level market committees —mandis— under the APM Act.

As such, the reform proposed is nothing new and the proposal for bypassing the APMCs, mandis and their licensed buyers was well-known for years. This has been urged for many many years, but never really attempted. The minister has taken advantage of the current crisis to introduce the most difficult and yet urgent reforms of the farm operating environment.

The vested interests are huge and deeply entrenched. There are reports that some Maharashtra APMCs would pay Rs 3000 crore annually to select politicians. Little wonder that an entire class of rent seekers would oppose dismantling of such perfected system of making away with earned incomes. Maharashtra is not unique, rather typical. This is the pattern everywhere.

These changes would call for concomitant amendments in laws and also somewhat cajoling the state governments into accepting the changed reality. How far the forces opposing such changes yield ground, one has yet to see. Agriculture is a state subject and APMCs and their restrictive practices were directly in league with the state politicians.

Sitharaman is now vesting rights on the Indian farmers to sell his produce the way he chooses, at the price he decides, to whoever he wants to sell and the quantity he wants to sell. This move over the coming years should create an integrated market for agricultural products throughout the country.

The Modi government is proposing to bring a new central law for inter-state trading in agricultural products which should empower the farmer to sell his products wherever he chooses. The justification offered this will relate to trading in food items and trading is a central or concurrent subject.

If at all achieved, it should radically improve the price realisation for the farmer and also help avoid the uncertainty about the quantities which he would be able to sell. At least the intermediation changes of the APMCs and their middlemen could be wiped out.

Along with this change, it is also important to nature the network to allow the farmers to sell his produce at the time of sowing and at agreed prices and the quantity. A digital e-market platform will have to be created to facilitate such transactions.

This is a kind of forward market in farm products which should enable the farmer to get an idea and commitment on price as well as off take while he is planning his next crop at around sowing time. Once again, forward selling at the time of sowing is also an established practice and takes away a lot of uncertainty. Greater participation of corporate agriculture goods trading houses should also be allowed for building up market and for price discovery.

In the days of smart phones, these facilities are available right on the ground and I have seen how some farmers, with only small holdings, are directly benefiting from connectivity for selling their products.

These are part of modernisation of Indian agriculture. It is also in step with the changing perspective of farm sector in the country. Indian agriculture has transited from an era of shortages to an era of plenty.

IN tune with this changed reality, the minister promised amendments to the Essential Commodities Act, 1955, to restrict its applicability to select items like onions, potato, cereals, oilseeds and pulses.

Deregulation of these products from ECA, 1955, would remove uncertainties about their exports and also facilitate their use by the food processing industry. Being under the act, food processors often faced harassment and raids on their holding of stocks for processing.

The act being a relic from the days when India’s production of food items were always short of requirements, severe restrictions could be imposed on stock holding and exports of food items. As a result, India could not retain hold on global markets for food.

These three reforms of the framework in which the farmer presently works should free up income levels of the farming community and create additional income streams.

Along with the legal and operating environment changes, major investments for creation of farm gate facilities and infrastructure for the better functioning of Indian agriculture could become catalysts for growth. Hopefully these should also curtail post harvest wastage of perishable items.

Investment of Rs1 lakh crore for strengthening farm gate infrastructure is proposed. Under this scheme, funds should be available for setting up cold storages, cold chains, post harvest management of farm products for export markets, start ups for agro-processing. (IPA Service)