THINK RELIEF, NOT JUST REFORM

The announcements relating to fundamental reforms in India’s agricultural markets were a particular highlight of Union finance minister Nirmala Sitharaman’s recent stimulus-cum-reforms package, delivered in five instalments. Most commentators have received the agri reforms, three in particular, quite effusively: the decision to amend the Essential Commodities Act (ECA), 1955; a national law for agricultural markets; and a legal framework to enable contract farming.

Ever since India embarked on economic reforms in 1991, agricultural market reforms have been a vexatious issue. A big challenge is that both ‘agriculture’ and ‘market’ are state subjects, even though the Centre has overarching powers, via Article 301, to ensure that trade within the country is free of barriers. Thus, state-specific laws under the Agricultural), on payment of specified commissions and marketing fees. There is, however, substantial variation across states in the scope and stringency of these Acts, and this variation has led to fragmented markets that have impeded the emergence of a single national market. Consequently, on the journey from farmer to end-consumer, commodities change hands five to six times, and the farmer gets no more than 25-50 per cent of wholesale prices. Removing interstate barriers to trade, one estimate suggests, can increase farmer prices by 11 per cent.