Creating a new farm ecosystem
Reforms will help farmers, ensure self-sufficiency, and cement India’s position in the global market
With the passing of two landmark agriculture bills in Parliament, we have been able to take the next step towards our vision of transforming farmers into entrepreneurs with higher incomes and better quality of life, cementing India’s position in the global market and ensuring “Atmanirbhar (self-reliant) agriculture”.
Over the last few years, the government has launched initiatives for farmers and the agriculture sector, including a ₹6,685-crore scheme for the formation of 10,000 farmer producer organisations (FPOs); the oneof-its kind ₹1 lakh crore Agriculture Infrastructure Fund (AIF); the national Agriculture Export Policy; and the disbursal of more than ₹90,000 crore of direct benefit to farmers under PM-KISAN. Now, with The Farmers’ Produce Trade and Commerce (Promotion & Facilitation) Act 2020 and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020, we have created the foundation to build a world-class agriculture ecosystem that will benefit farmers, consumers, wholesalers, processors, and start-ups.
There are some who believe that these reforms will result in the end of procurement at minimum support price (MSP), closure of Agricultural Produce Marketing Committees (APMCs), and loss of farmers’ land to corporates. I would like to assure that whether it is MSP or APMCs, all existing systems will continue. We have laid down stringent safeguards to secure farmers from any malpractices. The reforms will introduce competition and efficiency and improve these systems, as well as create freedom and choice for farmers.
A FPO, which is an aggregation of farmers, provides higher bargaining power to farmers and helps them realise benefits from economies of scale. AIF and the market reforms have now provided additional enablers and opened up new opportunities for FPOs. They can invest in farm equipment and infrastructure and build forward market linkages by entering into agreements with agribusinesses. This will improve access to advisory, technology, and investment, aligning variety mix and quality as per market demand, and ensuring higher incomes. One of the best examples of a successful FPO is Maharashtra’s Sahyadri Farmers Producer Company Limited. At least 8,000 marginal farmers are registered under FPO, which exports more than 16,000 tonnes of grapes every season. It helps farmers enter into MoUs with leading
FMCG companies and access hightech infrastructure.
With improved market linkages, we will also see a shift in what our farmers produce. For a long time now, India has been self-sufficient in many crops, including rice and wheat. An increase in understanding of market demand and trends, through direct engagement with agribusinesses, will enable farmers to grow crops with higher market value and reduce dependency on imports. For example, due to low domestic production, India imports more than $10 billion worth of edible oils. Similarly, we are seeing an increasing demand for healthy foods such as kiwi and avocado in cities; this is primarily served by imports. With reforms, investments can come in and farmers will be able to gather the market intelligence to diversify crop mix, increase domestic productivity to substitute imported crops, and lead India to complete self-sufficiency.
The reforms will also provide an opportunity to agribusinesses to build consistent supply and standardised variety by direct procurement from farmers, run their operations more efficiently, and boost export volumes and share of food processing. This will also help eliminate other system inefficiencies such as high intermediary and logistics costs. For example, at least 1,000 seed potato farmers in Punjab, northern Haryana, and western Uttar Pradesh have benefited from an increase of 10%-30% in productivity and 35% margin above cost under agreement with Technico Agri Sciences Limited (a subsidiary of ITC). There are thousands of examples of agribusinesses working with farmers leading to higher farmer income and development of agribusinesses.
Beyond the investment in traditional agribusinesses, market reforms will drive innovation in the sector and allow new business models to evolve. Different businesses such as farm management services, quality grading and assaying centres, Grade-A warehousing companies, digital marketplaces, are nascent but growing. Innovative business models will attract more investor money and can achieve scale and improve productivity; improvement in post-harvest management will reduce wastage; and digital marketplaces will increase reach and market linkages.
Market reforms will also drive private capital formation in the sector and give a boost to the rural economy. Capital formation in agriculture and allied industries has been stagnant with less than 2% CAGR over the last five years and private sector investments are further declining due to gaps in access. With the new market reforms, we will see growth in private sector investment across the value chain. This will create new jobs in allied sectors such as logistics service providers, warehouse operators and processing unit staff. We will also see multi-generational agriculture jobs — children of farmworkers can now aspire to become FPO CEOs or managers for procurement and marketing, without having to go to cities for such opportunities.
India is at the cusp of a new frontier in agriculture growth and development — one that farmers, businesses, government and consumers will build together. Different government initiatives have been leading us down this path, and with the passing of the two Acts, we are now wellpoised to make the vision of doubling farmer income, building India as the food basket of the world, and providing livelihoods in the agriculture and allied sectors a reality.