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Of all the controversial market reforms, Indian Prime Minister Narendra Modi has emerged, and recent farm sales liberalization laws may prove to be the largest.
In a distracted and disobedient session last month, parliament passed three laws that some say could pave the way for India to block world food trade, while others fear it would ruin the livelihoods of millions of farmers. A few days later, village groups and opposition leaders began public protests.
The move to a free market for farm sales is at the heart of a system that directly affects more than half of the country’s 1.37 billion people, changing government control that millions of families have relied on but that hampers the country’s efforts to productively of the largest areas of fertile land on earth. If they succeed, India can not only feed itself, but also become a major food exporter.
“We need private sector investment in technology and infrastructure for Indian agriculture to reach our full potential and compete better in the global marketplace,” said Sirad Chaudhry, managing director and CEO of agricultural services company National. Collateral Management Services Ltd., but the government must give a clear intention to defeat the skeptics. “This is a major policy change that affects a large and vulnerable part of the population.”
Why Fashion Agricultural Liberalization Laws Concerned Farmers: QuickTake
India processes less than 10% of food production and loses about 900 billion rupees ($ 12.3 billion) a year due to a loss from inadequate refrigerated storage, said Amitabh Kant, chief executive of the government’s NITI Aayog think tank.
Modi has a long summary of controversial political moves, including a ban on high value banknotes, the largest tax reform after independence in 1947 and the worst coronavirus in the world locking rules. The latter seems slight in comparison: a set of amendments to the laws governing the purchase, sale and storage of agricultural products.
Still, there were eight opposition MPs suspended for disobedient behavior when the new bill was passed, and groups representing farmers and political parties staged demonstrations, sitting races and tractor rallies in grain-producing countries such as Punjab, Haryana and Madhya Pradesh.
Shiromani Akali Dal, a longtime supporter of the ruling Bharatiya Janata party, which rarely contradicts the decisions of Modi’s coalition, leave the government. It says that farmers are afraid of the measures will eventually kill the government’s crop price support regime and leave them at the mercy of large corporations that will control the market.
Modi and his ministers say the concerns are unfounded and the price guarantee program will continue. His administration has even raised some minimum prices for winter crops to try to reassure farmers that price support is not in jeopardy.
This is a very emotional topic in India. The government sets minimum prices for more than two dozen crops and buys mostly wheat and rice for its welfare programs, along with some legumes and oilseeds, to prevent distress sales from farmers. Massive subsidies help distribute braces to the poor through a chain of more than 500,000 stores at fair prices.
The issue has been exacerbated by the pandemic. The disruption of farms and supply chains has revealed weaknesses in the state’s social assistance system, which is hampered by bureaucracy, underfunding and archaic distribution facilities.
Farmers point out that while government-guaranteed prices are often considered a benchmark, private buyers should not pay them.
“We are disappointed,” said Charanget Singh, who grows rice, wheat and vegetables on his farm in northern Haryana. “The government must ensure that all farmers, whether they sell grain in certain markets or to private buyers, receive at least the minimum support price.”
Analysts and industry experts say the new policy has the potential to change the face of Indian agriculture, which is hampered by low yields and inefficient small farms, by promoting more contract farming. This is a system in which private companies negotiate crop prices with farmers before the harvest or even before sowing and offer loans, provide quality seeds and promote mechanization.
The new rules would also make it easier to sell crops in other states or abroad. They say farmers will receive a more stable income and increased production will boost exports and revenues.
“In general, the reforms should benefit farmers and promote contract farming,” analysts at Motilal Oswal Financial Services Ltd. said in a report. “As the private sector involvement increases over the years, the supply chain and infrastructure of the Indian agricultural sector will improve.”
Agriculture lags behind other sectors of India’s economy. The poverty rate in rural areas is about 25% compared to 14% in urban areas, according to the World Bank. Insufficient investment makes food supplies vulnerable, a fact that is highlighted when the coronavirus spreads across the country.
Food inflation accelerated by 9.7% in September when Covid hit the country’s already fragile supply chains. While supporters of agricultural reforms say the changes will make the system more stable in the future, others say the crisis is exacerbating the need for a safety net for farmers.
‘End of the road’
“This will be the end of the food security program,” said Kanayan Subramaniam, secretary general of the Farmers’ Union of South India, which grows gooseberries, potatoes and other vegetables. “In the long run, corporations will monopolize trade, production and stocks. The government will succumb to WTO pressure and get rid of grain procurement. “
Prior to the new changes, farmers in most states were restricted from selling their crops outside government-facilitated wholesale markets and faced legal hurdles in transporting the crops to other countries.
Central to the reforms is an amendment to the Basic Goods Act, a 1955 law that some say is the root of India’s agricultural inefficiency.
“It was a policy against farmers,” said Atul Chaturvedi, president of the Association of Solvent Extractors in India, which represents vegetable oil processors. “This act is hampering the growth of Indian agriculture.”
As prices rose due to demand, the law’s price control measures began, discouraging investment to increase production, said Chaturvedi, who is also executive chairman of Shree Renuka Sugars Ltd. The government sometimes bans the export of certain agricultural goods in order to control local prices, as well as limiting the possibility of storing the harvest. Farmers suffered huge losses as production, especially of perishable goods, increased.
Some critics of the changes to the law say the new situation could be worse for farmers. Corporations and multinational companies buy agricultural products at lower prices and sell them at higher prices, “squeezing both ends through accumulation and undeclared trade,” said All India Kisan Sangharsh, a farmers’ pressure group. “There is no penalty for non-compliance with the contracts.”
If the government can push through reforms while maintaining the support of agricultural communities, it can create a platform for large-scale improvements in the country’s food production. The country is already the world’s largest producer of milk and the second largest producer of wheat, rice and some fruits and vegetables. It is also one of the largest exporters of cotton, rice and sugar.
If India manages to raise productivity to global standards, the country could become an “important link in global food supply chains,” Kant of NITI Aayog wrote in a newspaper. article. The new reforms, he said, set the stage for India to become a “food power plant”.
– With the assistance of Sanjit Das