Govt rolls out agriculture reforms, $13 bn fund to boost farm infrastructure
Photo Credit: VCCircle

India on Friday freed its farmers to sell agricultural products to anyone, effectively allowing them to discover the best market price for their produce.

Finance minister Nirmala Sitharaman announced that farmers will be able to sell their produce to anyone offering the best price instead of just procurers who are licenced under the so-called Agricultural Price Marketing Committee.

She also said that prices of several important agricultural commodities will be deregulated so that farmers can earn the best rates.     

As part of its promised Rs 20-trillion stimulus package, the Narendra Modi government also unveiled a third set of proposals. Friday’s proposals were aimed at the farm sector, which, like the rest of the economy, has suffered on account of the nationwide lockdown that began on March 25. To be sure, not all the announcements made today and in the last two days are new, as several among them have been announced in the budget.

While there were no direct cash handouts to millions of India’s farmers, Sitharaman said the government will set up a Rs 1 trillion ($13.2 billion) fund to strengthen the country’s farm gate infrastructure that includes warehouses, cold chains and logistics. The fund will be managed by the National Bank for Rural and Agricultural Development (NABARD), which is the union government’s nodal agency for farm lending.

Apart from this, the finance minister announced a Rs 20,000 crore fund for the fisheries sector and allocated Rs 10,000 crore for marketing locally produced items like turmeric and saffron that are niche to specific regions in India, to global markets.

Sitharaman also said that the government will spend more than Rs 13,400 crore to vaccinate the entire livestock in the country, especially against the foot and mouth disease, and Rs 15,000 crore to ramp up dairy infrastructure.

Rahul Bajoria, chief India economist at Barclays, estimates that the government announced support measures worth Rs 1.63 trillion on Friday. This takes the total of support schemes unveiled so far to around Rs 17.37 trillion, leaving space for another Rs 2.63 trillion of spending as part of the government's stimulus package.

However, more important than Friday’s allocation of money were the agricultural reforms that effectively make India a ‘one nation, one market’. Not only have farmers now been allowed to sell their produce to anyone other than just licenced procurement agents, several important items including cereals, edible oils, potatoes and onions have been moved out of the ambit of the Essential Commodity Act, effectively freeing them from price controls.

Although agriculture in India is a state subject, the central government’s regulations are likely to prevail when it comes to marketing reforms as these provisions come under the constitution’s concurrent list. While both the centre and states have the power to legislate on the items in this list, in case of a clash, the central law takes precedence.

“Agricultural reforms have been long overdue in India,” said DK Srivastava, chief policy advisor at EY India. “A barrier-free genuine all-India market for agricultural produce should be welcomed as a key feature of India’s new normal.”

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