The agriculture sector is extremely important for the Indian economy. While it contributes about 17% to India's GDP, its importance stems from the fact the nearly 60% of India's population earns its livelihood from this sector.
The Agriculture Sector comes under the purview of the Essential Commodities Act and the model APMC act. I cannot go into full details of both but the rules provide for some form of Minimum Support Prices to the farmers and also help create a market for the farmers for all the fruits, vegetables, pulses and grains they produce. A key aspect of the APMC act is that the farmers cannot sell their produce outside APMCs (Agriculture Produce Market Committee). The plus side of the act is that farmers have one place where they can sell everything and do not have to worry about finding a buyer for their produce. The negative side is that the farmers are left to the mercy of the APMC members. Another worrying stat is that MSP or Minimum Support Price is availed only by the rich farmers and only 6% of the farmers are able to avail the benefit of this feature.
The govt. tried to earlier change this by allowing farmers to make FPOs or Farmer Producer Organizations. This allowed farmers to get together and form a co-operative. The co-operative could then act like a firm, pool all its produce and sell to whoever they wanted. However, finding big buyers overnight is not easy. The FPO act did help companies who wanted to work with farmers directly but setting up and registering FPOs required a lot of govt. help.
The Govt. of India recently came out with 3 bills that aimed to allow farmers to sell their produce outside the APMCs. It also allowed big retail chains to procure directly from farmers thereby aiming to remove 5 or 6 layers of middlemen that create retail food inflation in India. It sounds good on paper but private capital whether composed of 5 layers or 1 layer is all about profit. That is why the nation is now witnessing large protests from farmers all over India.
I have recently started an agri business and after the first crop failure, I am now sowing seeds again. The seeds have sprouted and some saplings have also been transplanted.
I worked under a registered company, so I am still not that impacted by these bills. I will figure out a way to sell what I grow to large buyers or directly to consumers. As a more informed farmer, if I can call myself that, I am not that impacted by the bill. It does make my life easier if I want to buy produce from a farmer and act as a middleman. In the long term scenario, if I can work with other farmers, then these bills make my life better as a businessman. However, for the poor farmers with very low land holding, this bill is going to only adversely impact their life. These bills will cause eventual consolidation of land holdings and the bigger farmer will get bigger and small farmer perish. Therefore, as a business owner, I need to aim to size up my land holding as fast as I can if I want to sustain in this industry.
What about you? Have you heard about these bills? What are your thoughts? Let me know in comments below.