Ashok Gulati On Agri Reforms – APMC Act, Essential Commodities Act

Government of India proposed landmark reforms in the essential commodities act & APMC act. These changes are going to be a game changer for Indian farming, procurement, supply chain networks. In this interview given to Print, Ashok Gulati, renowned agri policy expert explains the importance of these reforms. Here is a quick summary.

Essential Commodities Act

While it is a big reform, let us wait for the fine print. Government babu’s can spoil  it at the last moment. They are thinking of putting a clause wherein, if prices shoot up by 100% then they can put up a storage limit. Essential commodities act has its roots in 1943, when india had shortage / famine. Today we have a surplus. So a renewed view must be taken.

  • It is more of a price stabilization reform & getting back markets to function again.
  • The Essential commodities act gives the government to power to impose stocking limits on any agri commodities. 
  • The Private sector was not willing to invest in upgraded storage capacities. 
  • Now post harvest prices won’t fall radically. Price stability throughout the year. 
  • Farmers can choose between private sector & government MSP.
  • Farmers did not have choices. Mandi prices are rigged.

Win Win For Farmers & Buyers –  Current APMC Act

  • You can’t buy directly from the farmer within a particular APMC’s jurisdiction. 
  • Now APMC’s jurisdiction is reduced to their courtyard. 
  • Now private players can establish their supply chains!
  • One license is enough to buy from any farmer across the country.
  • Private buyers want to procure at scale, hence they will create aggregation points / co-operatives / farmer-producer organisations.
  • Amul didn’t go to every individual farmer requesting for milk. Farmers will go wherever their is assured pricing & payments on time.

Arun Jaitley Once Quoted

“If there is one area where biggest returns ( apart from GST ) can come to the economy, it is the agri marketing reforms.”

Finally it has come. Central law has to be passed through parliament.

The Nexus – 

Go to Azaadpur / Vashi market and we will see the real picture. Aadtiya’s can take 8% commission officially ! Unofficially they were taking commissions from both sides. 14-15% for facilitating a 2 minute transaction. Who decides the commission & cess  ? It’s the market committee i.e. politicians – former MLA’s or future MLA’s or their kins.  This act will break the monopoly of inefficient corrupt systems.

Next Step – Allow Contract Farming 

Farmers sow in herds & leads to sudden price shocks. To prevent that, farmers must know the estimated prices on harvesting. Contract farming can facilitate a fixed selling price to farmers, and provide certain quality

In fruits & vegetables – farmer is getting 1/3rd of the price consumers are paying. Farmer is at the receiving end. If a farmer gets 60% of what the consumer is paying, we have done a great job. It has already happened in sugar & milk. 

Our public distribution system leads to 46% leakage as per Shantakumar committee. We should go for direct benefit transfer & give a choice to poor people. Let them receive the cash & decide what they want to do. Let them decide if they want to eat eggs, bread or drink alcohol ! If we do direct benefit transfers in the name of women, can lead to interesting patterns. 

Again, the reforms are really big. But let us wait for the fine print.

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