India, through the newly passed agricultural bills, ensures free market will be the rule
Rather than impose caps on incremental jitters, the government will tame only excessive price increases
With the three new agricultural bills, farmers across India can sell their produce at farm gates, factories, warehouses, silos and cold storages. The market cannot charge any fee on transaction outside its physical space. Trades can also take place online.
According to an article in the Japan Times, farmers can enter five-year, fixed price contracts with corporate buyers. Rather than impose caps on incremental jitters, the government will tame only excessive price increases. Free market will be the new norm. This also means that Indian agriculture is undergoing a big transformation.
Hemant Gaur, an entrepreneur, told the Japanese media outlet that Prime Minister Narendra Modi has finally thrown out the old furniture by pushing through legislation through the parliament, and thus, growers don’t have to take their produce to the mandi. Gaur is the owner of SV Agri Pvt, which brings technology to potato farming in India. The company produces and markets seeds, and inputs to farmers, buys back and stores their potatoes in modern warehouses. With the new bills in place, Gaur doesn’t have to pay 2.5 per cent mandi tax. He says the efficiency gains will be shared by farmers, processors and consumers. Gaur said it will in fact lead to more investments in cold chains and less wastage.
But with no fees and commissions, there will be a chain of negative reactions, the report points out. It says market yards may atrophy, and the local elites that have thrived off the system could also lose its swap. And this will leave the farmers at the mercy of traders’ cartels, which are controlled by corporate monopolies. This could be true in the grain-producing belt of Punjab and Haryana, where the percentage cut in mandi taxes and other levies is in double digits. Opposition parties have voiced their concerns in regards to the bills claiming that it will fail since the freedom from the regulated yard in the poor eastern state of Bihar 14 years ago brought the market to the road side, the report says. Furthermore, the cultivators’ biggest fear from deregulation is losing their most important bargaining chip, which is the minimum price guaranteed by the state.
However, PM Modi has assured farmers that the support will stay by announcing prices for the winter crop. Farmers need to establish large sales organizations of their own. This is because if state support could empower them with bargaining power, they wouldn’t be selling cotton to private traders for a quarter less than the guaranteed minimum.