Editorial Analysis: Farm Bills latest step in sequential freeing up of farm sector

Farm Bills

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Freeing up farm sector
Farm Bills

Composition of Indian agriculture is changing:

  • The composition of the gross value added (GVA) in the agricultural sector is rapidly changing.
  • In the last decade itself, India has witnessed tremendous change in the GVA composition of the agri-sector.
  • The share of crops has decreased from 65.4% in 2011-12 to 55.3% in 2018-19, projected to further fall to 45.6% in 2024-25.
  • In the same period, value add of livestock and fishing & aquaculture is steadily increasing, as are the total value outputs of sub-segments like horticulture, milk and meat.
Farm Bills
  • Farmers and agricultural producers have diversified their product segments, cereals no longer dominate production, and the old control mechanisms no longer apply.

This is different from earlier focus on crops and cereals:

  • This is different from earlier when crops, specifically cereals, dominated the sector, and multiple controls were placed to ensure aggregation, distribution, and supply.
  • The Minimum Support Price (MSP) evolved as a mechanism to guard farmers against supply and demand shocks in the cereals segment.

Strategies around agriculture are also changing:

  • Now, connecting farmers directly to the market and consumers is increasing farmer incomes by 20-30%, as demonstrated by the 600+ agri-tech companies over the last 5-7 years. 
  • With differentiated production strategies that are less reliant on cereals and more on other segments, farmers are accruing better incomes.
  • By diversifying their produce, they are moving away from one-crop risks.

Agriculture in India needed structural reforms:

  • Structural changes were required in the agricultural system to improve the livelihoods of the Indian farmers.
  • For instance, keeping them dependent on subsidies and restricted by APMCs, and acts like the Essential Commodities Act wasn’t in the nation’s long-term interests.

Sequential reforms have been brought in the last few years to free up of farm sector

  • National Agriculture Market (e-NAM):
    • In 2016, the National Agriculture Market (e-NAM) was introduced to facilitate online trading of agri-produce.
    • Then PM-KISAN was introduced to provide minimum income support to nine crore marginal farmers, at Rs 6,000 annually.
    • These beneficiaries don’t benefit from MSP, which applies only to 6% of farmers, mainly in the legacy farming regions like Punjab and Haryana. An instalment of PM-KISAN, Rs 2,000 per farmer, was advanced during the Covid-lockdown to protect the interests of the farmer. This income support was crucial in harvesting the record rabi crop cycle in April and sowing the kharif crops.
    • Record procurement was also undertaken in April.
  • Creating credit histories with KISAN credit card:
    • Post Budget 2020, the government brought together the Kisan Credit Card (KCC) Scheme and the PM-KISAN.
    • All beneficiaries under the Kisan Samman Nidhi Scheme can now get a Kisan Credit Card.
    • The KISAN credit card with an allotment of a total of Rs 2 lakh crore credit is helping farmers plan and organise their harvests better, leading to increased production and incomes.
    • It also enables farmers to build formal credit histories linked to Aadhar that can be capitalised on to avail credit for expansion and diversification strategies.
  • Agri Infrastructure Fund (AIF):
    • An important recent announcement has been the Rs 1 lakh crore Agri Infrastructure Fund as part of Atmanirbhar Bharat Abhiyan.
    • This fund will focus on farm-gate and aggregation points, agricultural entrepreneurs, agri-tech companies, enhancing post-harvest management capabilities like cold storage and warehousing, and formalisation of micro food enterprises via a cluster-based approach.
  • Others:
    • Recognising the crucial differences in growth of sub-segments, targeted programmes towards the various sub-segments like fisheries, animal husbandry, and dairy were also launched.

Three new laws on agriculture:

  • On the support of these sequential supporting steps to the agricultural industry, the reformative farmer laws were recently brought in to enable farmers to pursue their own farming and diversification strategies.
  • These include:
    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC)
    • The Farmers (Empowerment and protection) Agreement of Price Assurance and Farm Services Act, 2020 (FAPAFS)
    • The Essential Commodities (Amendment) Act, 2020 (ECA)

These reform laws are important to harness the new trends in agriculture:

  • The new reform laws are liberating farmers at a pivotal juncture when composition of agriculture is changing.
  • The forward-looking policy environment brought in by the new farm laws will help harness the value of these new trends lines.
  • Freeing the farmers:
    • These laws endeavour to hand back agency to the Indian farmer.
    • They enable farmers the freedom to diversify their crops and produce, which reduces mono-crop dependence and increases income avenues.
    • They can also now sell their produce anywhere, to the highest bidder across the country.
    • Contract farming is now open to farmers, with a framework that enables them to boost the value-add of their products via contracts and assured procurement by the food processing industries.

Support to farmers has been increased while the new laws come into action:

  • Meanwhile, GoI has announced that the various subsidies that farmers avail will continue while these laws are put into action, thus, providing valuable support to farmers and ensuring continuity of relief as farmers pursue new strategies.
  • The government has retained the MSP system for certain crops to ensure farmers receive assured income for those crops.
  • Government of India (GoI) has procured 5.73 lakh tonnes of paddy worth Rs 1,082 crore at MSP since the last week of September.

All these steps will liberate farming in India and increase incomes:

  • Over time, this independence-with-support model will lead to increased incomes for farmers.
  • The overall contribution of the agricultural sector to India’s GDP will also increase, compared to the current 17%.
  • Crucially, it will liberate 43% of the national workforce that depends on agriculture for livelihood and sustenance.

Will give an export orientation to Indian agriculture:

  • This also gives India the long-awaited opportunity to orient its agriculture sector towards export markets.
  • By catering to just the Indian economy, the opportunity is hardly a $3 trillion economy (pre-Covid GDP).
  • On the other hand, export-orientation provides opportunities to cater to an $82 trillion global economy (pre-Covid), that is, a opportunity 27 times bigger.
  • Agri exports by the US in 2018 were valued at $140 billion whereas India’s at $38.5 billion. India can comfortably triple this by providing infrastructure for grading, sorting, and supply chain distribution, which is now possible due to the freedom given by the Bills.

Conclusion: Farm Bills

  • The nation and farmers have a generational opportunity now to break out of a 70-year sectoral stagnation and aim bigger.

Also Read: Amid opposition protests, LS okays bills on farm reforms

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