What are Modi's farm reforms: All you need to know

Chaitra Anand
·5 min read

The widespread agitation across the country over the government’s new legislations on agriculture has induced several doubts about the Modi-governments intent towards farmers and the farming sector.

Addressing the nation about the farmers agitation at an event in Kutch, Gujarat, Prime Minister Narendra Modi said that the farmers are being misled by the opposition and that “the Government of India is always committed to farmer welfare and we will keep assuring the farmers and addressing their concerns.”

But what really is the truth about Modi’s farm reforms. Take a look:

What will not happen

-MSP’s will not go away.

Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices. The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP). MSP is price fixed by Government of India to protect the producer - farmers - against excessive fall in price during bumper production years. The minimum support prices are a guarantee price for their produce from the Government. The major objectives are to support the farmers from distress sales and to procure food grains for public distribution. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.

-APMC Mandis will not be closed

An Agricultural Produce Market Committee (APMC) is a marketing board established by state governments in India to ensure farmers are safeguarded from exploitation by large retailers, as well as ensuring the farm to retail price spread does not reach excessively high levels. APMCs are regulated by states through their adoption of a Agriculture Produce Marketing Regulation (APMR) Act.

-Farmer’s land will not be taken away by anyone for any reason

-Buyers cannot make any changes to farmers lands

-Buyers cannot cheat farmers

What will happen

-MSP system will continue

After passing farm bills, government announced MSP increase

-APMC Mandis will continue to work

-Farmers can sell in APMC Mandis or outside - it is their choice

-Farmers can fix prices for produce even before growing it

-Buyers must pay on time or face legal action

-Farmers can end agreements any time they wish

-More investment and infrastructure will come

-Better lives for farmers and jobs for rural youth

Aatmanirbhar Farmer for Aatmanirbhar Bharat

The latest wave of pro-farmer reforms, advocated by many experts for decades, fulfilled the demands of many farmers and farmer unions. These reforms give farmers the freedom to sell anywhere and to anyone. Farmers can sell in APMC Mandis as well as outside them. Further, these reforms also strengthen farmers with a protective legal framework when dealing with buyers, ensuring that they get an assured income for their produce. These reforms have seen decades of consultations with stakeholders, multiple committees and clear cross-party consensus about the way forward. Prime Minister Narendra Modi’s track record and his government’s actions give confidence that the life of the Indian farmer is transforming for the better, with an elaborate safety net being created for farmers while also increasing their avenues of income generation. As the nation responds to Prime Minister Narendra Modi’s call of ‘Aatmanirbhar Bharat’, Aatmanirbhar farmers will lead the way.

The issue of making agriculture profitable for farmers has been discussed and debated for decades now. Multiple committees, consultations and stakeholder reviews have been held. But what was missing was decisive action based on these consultations. While farmers have made India extremely productive with their sweat and toil, the issue of profitability was always being sidelined because reforms in agriculture and agricultural markets never got priority

Disparity between Agriculture and Other Sectors

Despite economic liberalisation in the beginning of the nineties, agriculture as a sector was left out. The difference in annual income of farmer and nonfarmer worker, which stood at Rs 25,398 in 1993-94 further widened to Rs 54,377 in 1999-2000 and in the next decade it further increased to more than Rs 1.42 lakh. The dairy and fisheries sectors are growing at an annual rate of 4% to 10%, while the growth in food grain sector, where regulations were seen as excessive, has been at an average of 1.1% annually after 2011-12. Hence, it was always known that agriculture sector too needed pro-farmer reforms, just like the reforms in other sectors, to double the income of farmers.

NEED FOR PRO-FARMER REFORMS

Fragmented Markets

Each market functioned as a separate entity, hampering intra and interstate trade.

Insufficient Markets

At the same time, there were not enough markets to deal with growing produce.

Market Fees & Charges

Taxes, various commissions raised the cost of final product, while reducing returns to farmers.

Inadequate Infrastructure

Despite market taxes, infrastructure in markets remained underdeveloped and not in tune with modern supply chains.

Post-Harvest Losses

This inadequate infrastructure led to high postharvest losses, estimated at Rs 90,000 crore in 2014.

Restriction in Licensing

Entry as a licensed agent was restricted, discouraging competition and encouraging cartelisation.

High Intermediation Costs

The fragmented system led to high intermediation costs, raising costs for consumers, while depressing prices received by farmers.

Information Asymmetry

Farmers often lacked market information, which traders & commission agents withheld from farmers.

Inadequate Credit Facilities

Informal credit channels still dominates formal channels.

Source: https://finmin.nic.in/

Full government report