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Friday, October 30, 2020

Explained Ideas: Why the farm bills are a step in the right direction

The Opposition is misguided but the government must get its act together, writes Ashok Gulati

By: Explained Desk | New Delhi | Updated: October 1, 2020 8:00:30 am
Farmers shout anti-government slogans as they march during a protest in Amritsar, India, Friday, Sept. 25, 2020. Hundreds of Indian farmers took to the streets on Friday protesting new laws that the government says will boost growth in the farming sector through private investments, but they fear these are likely to be exploited by private players for buying their crops cheaply. (AP Photo/Prabhjot Gill)

The passing of the farm bills in both the Houses of Parliament has sparked a major controversy in the country.

The economic rationale of these pieces of legislation is to provide greater choice and freedom to farmers to sell their produce and to buyers to buy and store, thereby creating competition in agricultural marketing.

This competition is expected to help build more efficient value chains in agriculture by reducing marketing costs, enabling better price discovery, improving price realisation for farmers and, at the same time, reducing the price paid by consumers.

It will also encourage private investment in storage, thus reducing wastage and help contain seasonal price volatility.

 Also from Explained Ideas | Why are farmers unwilling to trust the govt’s farm reforms?

“It is because of these potential benefits that I had compared these pieces of legislation to the de-licensing of industry in 1991,” writes Ashok Gulati, Infosys Chair Professor for Agriculture at ICRIER, in his opinion piece in The Indian Express.

But he cautions that sometimes good ideas/laws fail because of bad implementation.

Just to cite an example, late Arun Jaitley had announced a scheme called TOP (tomatoes, onions and potatoes) to stabilise the prices of these farm products through processing and storage. He also allocated Rs 500 crore for it. The scheme was entrusted to the Ministry of Food Processing for implementation.

But even after three years of the scheme, not even 5 per cent of the money promised has been spent. No wonder, the government is back to export bans of onions, fearing a spike in onion prices.

Also from Explained Ideas | Why the govt should not have railroaded the farm bills

This is contrary to the signal that the government wants to give through the farm bills that farmers have the freedom to sell.

“It seems the government has one foot on the accelerator to liberalise agri markets, and the other foot is on the brake (ban on onion exports). All this dents its credibility,” writes Gulati.

As for the Opposition, Gulati calls them misguided and finds them guilty of changing the goalposts.

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“(The Opposition) is asking MSP to be made legal, implying that all private players buying below this price could be jailed. That will spell disaster in the markets, and private players will shun buying,” he argues.

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