Not only multinationals, even Indian companies have long been active in the field of agriculture. Be it procurement, processing or exports, corporates have been regularly interacting with farmers to purchase and sell goods.
In agriculture inputs such as fertilisers, pesticides and seeds, the sector has been dominated by private companies. Of late, startups, many of whom are aggregators and solution providers, are also entering the sector in a big way.
Previous attempts to reform markets
The Modi government’s latest attempt to provide alternative selling options to farmers is not something new.
In fact, innumerable committees and panels have recommended reforming the regulated markets much before 2003, when the first model APMC Act
was framed to do precisely that in the country.
Several states have, during the past 15 years and more, brought a lot of items outside the APMCs, denotified fruits and vegetables from the mandis, allowed direct marketing, framed laws for contract farming and even promoted the setting up of private markets and yards.
Experiments such as Kisan Mandi or Apni Mandi in Punjab, Uzhaver Sandhais in Tamil Nadu, Krushak Bazaars of Odisha, the Delhi Kisan Mandi promoted by Small Farmers Agribusiness Consortium (SFAC) and the Rythu Bazaars of Andhra Pradesh where farmers sell directly to consumers without intermediaries, have been happening for quite some time.
More than 400 such farmer-consumer markets are operating across the country at present, but barring a few, none have managed to make a big mark in terms of volumes or price impact.
A big reason for this is that footfalls in these markets are limited, which cripples their future prospects.
“Any production that is in surplus to the absorption capacity in the market region requires physical connectivity with demand that is further afield,” the government’s own Committee on Doubling Farmers Income found.
This is primarily why, barring a few exceptions like Rythu Bazaars of Andhra Pradesh and Telangana, most other such experiments haven’t taken off in a big way in the country.
The other variant of direct marketing is direct sourcing by big processors and traders, which allows farmers to skip multiple layers of intermediaries. Here too, not many states have framed clear rules and reports show that just over 200 direct procurement licenses have been issued by 11 states in the country, with the maximum by Maharashtra.
Contract farming is the third option many talk about as an alternative channel to boost farmers’ income, but here too just over 15 companies are engaged in the practice, with the maximum once again in Maharashtra and in Haryana.
As far as the setting up of private mandis is concerned, of the private mandis, an analysis by the Committee on Doubling Farmers Income found that till few years ago, only 11 states had notified the rules thereunder to implement the provisions of private markets, while 82 private marketing licenses were issued. However, in the absence of proper rules and regulations their growth remains muted.
FPOs or Farmer-Producer Organizations or Companies do have the potential to change much of this and could become viable channels for alternative procurement and distribution.
However, as on date they are not substantial in number and suffer from economies of scale to undertake massive procurement and distribution options.
The critical difference between the previous attempts to reform agricultural marketing and the current one is that in most of them, state governments played a key role in the reforms. The current laws, on the other hand, completely bypass their jurisdiction and domain.
However, storage and logistics is an area in which Indian companies have not been very active due to the long gestation period of the project, problems in accessing credit and difficulty in storing in bulk.
It is here that the Centre’s new Rs ine trillion fund to create storage facilities could play a big role.
Agriculture Infrastructure Fund
Under the scheme, loans up to Rs 2 crore will be provided to entrepreneurs at three per cent interest subvention for seven years. The loans will have a moratorium on repayment that will vary from six months to two years.
The fund, called the Agriculture Infrastructure Fund, announced as part of the ‘Atmanirbhar Bharat Package’ in May by Finance Minister Nirmala Sitharaman, got formal cabinet approval on january 5, 2021.
The central government plans to disburse Rs 10,000 crore in loans at concessional rates to cooperative societies, FPOs, starups, and others in the current financial year under its ambitious Rs one trillion fund to create storage and processing infrastructure at the farm-gate level.
The fund along with the three facilitating Ordinances on freeing agriculture marketing, amending the Essential Commodities Act and framework for contract farming is aimed at providing an ecosystem to private companies and firms to encourage them to invest in storage and warehousing in a big way.
From the second year under the Agriculture Infrastructure Fund, that is, 2021-22 onwards, the government has set a target to disburse loans worth Rs 30,000 crore each over the next three years.
For eligible borrowers, the credit guarantee coverage will be available under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, while in case of FPOs credit guarantee can be availed from the facility created under the agriculture ministry’s FPO promotion scheme of Department
The duration of the ccheme shall be from FY2020 to FY2029 (10 years).
Agriculture infrastructure such as cold chains, warehouses, silos, and assaying, grading and packaging units, e-marketing points, ripening chambers will be created through the fund.
According to some estimates, around 15-20 per cent of India’s food production goes waste annually due to improper storage and warehousing facilities.