New farm laws liberalised Indian farm sector, the presentation evaluates history of liberalisation farm policies in India.

1. Assuring farmers income in the
context of New Farm Laws in
India
A AMARENDER REDDY
PRINCIPAL SCIENTIST(AGRICULTURAL ECONOMICS)
ICAR-CENTRAL RESEARCH INSTITUTE FOR DRYLAND AGRICULTURE, HYDERAB AD
EMAIL: AMARENDER.REDDY@ICAR.GOV.IN
CONTACT NO. 7042361439
IMPRI #WEBPOLICYTALK JANUARY 15, 2021

2. Outline of presentation
Reasons for low farm incomes
Current status of MSP implementation
Current status of APMC markets
Inter-state differences in govt support
Efficiency of procurement operations of paddy and wheat
Bias against other crops
Shift in policy and new farm laws
Way forward from assured price to assured income scheme

3. Reasons for low
incomes of the farmers

4. Long run commodity prices (deteriorating terms of trade for farmers)

5. -5000
0
5000
10000
15000
1 2 3 4 5 6 7 8 9 10
Decile wise monthly income and consumption and
income gap (Rs.) of hhs-2012-13
Income(Rs.) Consumption(Rs.) Income gap(Rs.)
40
34
36
48
42
45
60
51
55
68
46
56
53
43
47
30
35
40
45
50
55
60
65
70
agricultural
households
non-agricultural
housholds
All households
%
indebtedness
Incidence of indebtedness by decile class of
MPCE (%) in 2015-16
1 2 9 10 All households
Income source
Agricultural
households
Non-
Agricultural
Households
All
Households
Cultivation 3140 1494
Livestock 711 338
other enterprises 489 851 679
wage labour 3025 3940 3504
Govt/pvt. Service 1444 2326 1906
Other sources 122 152 138
All sources 8931 7269 8059
Income sources of farmers (2015-16)

6. 1643 1957
4568 3950 4950
9108 7984
18283 17688
36449
10717
16
20
25
28
31 31
35
38
41 47
31
0
5
10
15
20
25
30
35
40
45
50
0
5000
10000
15000
20000
25000
30000
35000
40000
1 2 3 4 5 6 7 8 9 10 All
Decile class of hh asset holding
% of rural households reporting fixed capital expenditure & average amount (2012-13)
Average amount(Rs.) % of hhs reporting
Public
22%
Private
corporation
2%
Household
76%
Sources of GFCF in 2017-18
Smallholdings
Low prices
Low incomes
Indebtedness
Low
investments

7. Current status of MSP
implementation

8. 0
20
40
60
80
100
120
Punjab
Telangana
A.P.
Chhattisgarh
Odisha
Haryana
U.P.
Tamilnadu
West
M.P.
Bihar
Maharashtra
Uttrakhand
Kerala
Jharkhand
Assam
Karnataka
Chandigarh
Gujarat
NEF
J&K
H.P.
Rajasthan
Procurement of Kharif Rice 2020 (lakh
tonn)
0
20
40
60
80
100
120
140
Procurement of wheat 2020 (lakh tonn)
DCP
Non-DCP

9. -17.3
-10.4
-7.4 -6.9
-4 -2.3
1.3 2.4
-20
-15
-10
-5
0
5
Assam Chhattisgarh TN UP Telangana WB Punjab AP
Average difference (%) between market price & MSP (Kharif paddy 2020)

10. Current status of APMC
markets

11. Non-uniformity in APMC charges
51
20
23
51
26 29
0
20
40
60
80
100
120
Marginal Large
Disposable pattern of crop sold
Local Mandi Others
• Higher mandi charges even for small volumes
• Predominantly outside APMC sales with no regulation resulted in exploitation of small farmers

12. Huge Inter-state
differences in Govt
support

13. 1528
3707
6156
0
1000
2000
3000
4000
5000
6000
7000
Fertilizer subsidy per ha of GCA (2014-15) (in Rs)
State-wise
Awareness of
Farmers about
Minimum Support
Price (MSP) of Crops
in Major Crop
Seasons (%)
Inter-state differences in MSP operations and subsidies

14. Efficiency of
procurement

15. • The estimated economic cost of rice in 2020-21 is Rs 37,267/tonne and that of wheat is Rs
28,838/tonne.
• 50 MT excess stock worth about 1.5 lakh crore, interest is about Rs.10,000 crore
• Food subsidy bill for 2020-21 amounts to Rs 3,70,170 crore (Rs 1,15,570 crore budgeted plus Rs
2,54,600 crore credit taken from National Small Savings Fund (NSSF))
• Reduce the coverage under PDS; link issue price to at least half of the procurement price; and move
gradually towards cash transfers. These steps will save a minimum of Rs 50,000 crore annually.
Open ended procurement operations

16. Economics of buffer stock operations
Rs.29,180
(MSP)
Rice
Rs.7846/tonne
(Mandi fee and Aarthiya
commission, logistics,
storage, handling,
distribution, damage and
interest)
Rs. 37,026/tonne
(Economic Cost)
international price is Rs. 28,000/tonne,
(loss of Rs.9,026/ tonne over EC)
(24.4% loss)
Open Market Sale Scheme
(FCI reserve price of rice is Rs.
22500/tonne)
(i.e. Rs. 14,526/tonne less than EC)
(39.2% loss)
Rs.19250
(MSP)
Wheat
Rs.7776/tonne
(Mandi fee and Aarthiya
commission, logistics,
storage, handling,
distribution, damage and
interest)
Rs. 27,026/tonne
(Economic Cost)
international price is Rs.
16,400/tonne,
(loss of Rs.10,626/ tonne over EC)
(39.3% loss)
Open Market Sale Scheme
(FCI reserve price of wheat is Rs.
21350/tonne)
(i.e. Rs. 5676/tonne less over EC)
(21% loss)

17. Procurement policy
biased against oilseeds
and other crops

18. Year Production
Procurement
(% of production)
2012 17.09 0.01
2013 18.35 0.52
2014 19.26 0.26
2015 17.15 0.17
2016 16.32 0.00
2017 23.13 0.03
2018 25.42 6.37
2019 22.07 18.94
2020 23.16 6.52
Pulses production and procurement
Year
MSP
(Rs/quintal)
Avr rate of
disposal
(Rs./quintla)
Volume of
OMSS Disposal
(lakh tonne)
Loss %
over MSP
Tur 2019 5675 3583 4.1 36.9
Gram 2019 4620 4236 9.6 8.3
2020 4875 4014 3.9 17.7
2021 5100 4862 7.3 4.7
Moong 2019 6975 4545 3.0 34.8
2020 7050 5949 2.1 15.6
2021 7196 6752 0.6 6.2
Masur 2019 4475 3566 0.9 20.3
2020 4800 4428 0.3 7.7
Urad 2019 5600 3350 2.0 40.2
2020 5700 4875 1.5 14.5
2021 6000 5360 1.3 10.7
Disposal of pulses under open market sale scheme by NAFED
Pulses

19. Edible oils
Crop Average sale price
Soybean 6-15% less than MSP
Groundnut 25-40% less than MSP
Sunflower 35% less than MSP
Mustard 15-20% less than MSP

20. Shift in policy

21. Long period of agricultural policy paralysis
Famine situation 1943, 2nd world war, low agricultural productivity (ship to mouth)
Almost 100% under small petty traders (small, feudal)
Essential Commodities Act , 1940s and 1950s (stock limits)
Restrictions on inter-state trade (Punjab- wheat price Rs.1925; Bihar- Rs.1700)
APMC Act, Green revolution, FCI, STC of India, ware housing corporation of India - 1960s and 1970s (big
government, but capabilities?)
Policy paralysis (1980s to 2020)- inspector raj/rent seeking
High cost of intermediation (cost of intermediation up to 3/4th)
Retailors margin (25%) or 60% of consumer price
46% leaking from FCI-PDS system; 30-35% grain never reach consumer
Green revolution/White revolution- mostly central government initiative
1990s- economic liberalisation (industry and services-but not agriculture)

22. Stagnant agricultural markets
APMCs under state control and regulated
Monopsonistic power
Market fee, CESS, Commission
ECA stock limits
Suppression of market signals, revert to imports in scarcity
No private storage
Low post-harvest infrastructure/under-investments in APMCs- high wastage (35%)
Govt is not efficient in private trade
Price stability =f(storage, processing)= f(price signals, market intelligence)
Mandi price rigged, farmers did not have choice
Harvest prices crashing and off-season prices sky rocketing (regular phenomenon) which feeds in to local
politicians.
90% trade is in petty private sector, but laws distorted price signals

23. ✓Agricultural Produce Marketing (Grading & Marketing), Act, 1937
✓The Essential Commodities Act, 1955
✓National Cooperative Development Act, 1962
✓Food Corporation of India Act, 1964
✓Prevention of Black Marketing & Maintenance of Supply of Essential Commodities Act, 1980
✓The Bureau of Indian Standards Act 1986
✓Model APMC Act (Agricultural Produce Marketing Committee) Act 2003
✓Forward Contract (Regulation) Amendment Act 2006
✓The (Warehousing Development and Regulation) Act, 2007
✓Model Agricultural Produce and Livestock Marketing (promotion and
facilitation) Act, 2017, electronic national agriculture market (eNAM),
Model Contract Farming Act, 2018 and Model Agriculture Land
Leasing Act, 2016.
Legal and Regulatory Framework (Laws and orders)

24. Context of new farm laws
One nation –one market
Barrier free inter-state market
Market function right-private participation
Freedom and choice to farmers
Agricultural marketing in state/concurrent list
Physical market-state list(now eNAM)
Regulated market-state list
Marketing-state list
Retailing-concurrent list
Trade in food stocks/cereals –central govt(FCI)
Direction of govt. policy
Policy environment
State/central initiatives
(consultation process)
Essential commodities Act
formulated by cenral govt,
but implemented by state
Moving from state to centre

25. The Farmers’ Produce Trade and Commerce
(Promotion and Facilitation) Ordinance, 2020
Creates multiple channels for farmers to sell their produce outside the APMC mandi system in
trade area
Ensuring level playing field between APMC markets and operators in trade area and encourage
competition between APMCs and private traders
Attract private investments in markets
Barrier free inter-state trade
Market access

26. The Farmers (Empowerment and Protection)
Agreement on Price Assurance and Farm
Services Ordinance, 2020
Legal frame work for contract farming
Shifting of price risk from farmers to private sector
Farmers’ sowing decisions should be made in view of the expected prices of those crops at the time
of harvest.
Varying models of contract farming hedging the price risks of farmers.
Dairy is best case example
Unequal bargaining power
Mostly informal contract farming/contact farming

27. Essential commodities (amendment) act,
2020
Removal of stock limits
Predictability of imposing stock limits (like war and famine; 50% rise for food grains; 100% rise for
F&V)
Large scale investments in storage capacity, cold chains, logistics
Register storage facilities to know how much stock is there with the private sector, and where.
Reduce price fluctuation (inter-temporal and inter-state)
The dismantling of such controls under ECA would expand India’s agri-exports and enable private
investment in supply chains.
This could facilitate private investment in the food processing industries, strengthening the farm-to-
fork chain, and benefiting both producers and consumers.

28. Pre-requisites for implementation of Acts
Encourage FPOs
Local level institutions, farmers collectives, SHGs in local level collection and aggregation, village
storage structures and bargaining
Registration and tracking of transactions in TRADE AREA
Efficient price information system
Strengthening APMC markets
Expanding eNAM

29. Gainers and losers
Gainers
◦Farmers
◦Consumers
◦Large corporate houses
Losers
◦Small-scale middlemen, commission agents
◦States lose revenue
◦APMC market committee

30. Way forward from
assured price to assured
income scheme

31. Gradual shift towards Price Deficiency
Payment/Income Insurance
✓Alternatives to MSP operations (Alternative-1)
◦ Procurement of paddy and wheat
◦ Price deficiency payment for remaining 21 crops
◦ Price signal for scattered markets
✓Crop insurance to be modified to income insurance scheme (alternatives)
◦ Crop insurance scheme (PMFBY) should also cover price risk in addition to yield risk
◦ Bench mark price indicators to be adopted from international price indices or NCDEX price
indices
◦ Agricultural Insurance Corporation (AIC) needs to be strengthened

32. Budget under agricultural subsidies may be pooled under Agricultural
Insurance Corporation) and used for providing income insurance

33. Thanks
Acknowledgements: the tables/data drawn freely from NSSO reports/NABARD reports and CACP reports
A Amarender Reddy
Principal Scientist(Agricultural Economics)
ICAR-Central Research Institute for Dryland Agriculture,
Hyderabad
Email: amarender.reddy@icar.gov.in
Contact No. 7042361439