The impact of recent farm laws introduced by the Indian government –including the right to farmers to sell their produce anywhere as well removing stock limits on essential commodities — will begin to be realised in the next 2-3 years, according to global consultancy PWC.
The new laws have met with strong resistance in certain regions, including the key state of Punjab, although PWC said that the changes offer the potential to unlock growth opportunities in agricultural supply chains.
India has one of the largest arable areas under agriculture, but suffers from one of the lowest food productivity in the world as farmers are burdened by an antiquated supply chain system dominated by middlemen who skim off the profits. Low profits for farmers combined with small farm holdings leave little incentive to use the best technologies.
The changes that were introduced also include barrier-free interstate and intra trade ecosystem as well as provide a national a framework for e-commerce outside physical markets for agricultural goods.
An amendment to The Essential Commodities Act has launched deregulation of food commodities including cereals, edible oils, oilseeds, pulses, onion and potato.
Only under exceptional circumstances will stock limits — curbs on the amount of goods that can be stored — will be imposed such as situations of war, famine or exceptional price spikes.
FPOs to have key role
Prices of farm produce are to be pre-determined through an agreement between a farmer and a buyer. This will be over and above a minimum support price that the government pays for certain essential crops.
Besides the government has laid the foundation for development of farmer collectives or Farmer Producer Organisations (FPOs) under the recent new laws.
“The FPO initiative, coupled with the agricultural reforms, will create the required facilitative framework for direct sourcing from farmers, along with the required investment in infrastructure by the stakeholders for providing value-added services to the farmers at their doorsteps,” Ajay Kakra, PWC India’s Food and Agriculture leader said in the report.
He said the existing FPO network across the country will emerge stronger with the formation of 10,000 new FPOs in the next five years.
The stakeholders in the agricultural value chain, who would like to tap into the new opportunities, will have to have a clear vision for strengthening new and emerging networks, establishing synergies and digitisation, the report added.
Some of the key questions that the stakeholders would have to answer include how to improve efficiencies by establishing synergies as well as strengthen engagement with farmers.
The stakeholders will also need to re look at procurement of farm supplies as well as how to utilise the benefit of the recent laws over the short, medium and long term, the report added.