The presentation tracks evolution of agricultural reforms in India over the last 300 years with especial emphasis on famines, PL-480 (ship to mouth situation), green revolution, agricultural market reforms, APMC markets, evolution of Food Corporation of India, Central Warehousing Corporation, State Trading Corporation (with big government), which undermined the development of private capital and markets over the years. Then it tracked the efforts of government in liberalising agricultural markets and pre-conditions for liberalisation.

1. Agricultural Reforms in India @75
A Amarender Reddy
Principal Scientist(Agricultural Economics)
& Head, Section of Design and Analysis
ICAR-Central Research Institute for Dryland Agriculture, Hyderabad
Email: amarender.reddy@icar.gov.in
Contact No. 7042361439

2. Outline of presentation
• Evolution of agricultural policies
• 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
• Way forward from assured price to assured income scheme

3. Evolution of agricultural policies

4. Up to 1950s
• Almost 100% under small petty traders (small, feudal)
 India's first regulated market (Karanja) 1886
 First legislation being the Berar Cotton and Grain Market Act of 1887.
 Royal Commission on Agriculture, 1928:
 Agricultural Produce Marketing (Grading & Marketing), Act, 1937
 Model Bill in 1938.
 Famine situation 1943, 2nd world war, low agricultural productivity
• PL-480 (1961-69). Ship to mouth; every 15 minutes one ship 1965(Indo-
Pak war).
• Essential Commodities Act 1955 (stock limits)

5. From 1960s to 1970s (active policies)
 HYVs tested in 1962-64, Released across India in 1965 (Jai Kisan slogan: Lal
Bahadur Shastri).
 National Cooperative Development Act, 1962
 Food Corporation of India Act, 1964
• Import of HYVs (18,000 ton 1965)
• No place to store (1967), stored in schools.
• Restrictions on inter-state trade.
• APMC Act, Green revolution, FCI, STC of India, WCI - 1960s and 1970s (big
government, but capabilities?)
• Operation flood started in 1970 (cooperative movement, 2002 private sector)
• Prevention of Black Marketing & Maintenance of Supply of Essential Commodities
Act, 1980
• The Bureau of Indian Standards Act 1986
• GM crops (cotton) private sector led in 2002. (JaiJawan/JaiKisan/Jai Vignan: Vajpai)

6. 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)

7. Not changing with times 1990s to 2000s
• APMCs under state control and regulated (no elections: nominated)
• Monopsonistic power
• Market fee, CESS, Commission
• ECA stock limits
• Suppression of market signals, adhoc ban on exports
• No private storage
• Low post-harvest infrastructure/under-investments in APMCs- high wastage (35%)
• Govt is not efficient in private trade
• Good price policy =f(price signals, market intelligence, storage, processing)
• 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

8. Testing waters (encouraging states): 2003 to 2019
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
Model Agriculture Land Leasing Act, 2016.

9. 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

10. 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

11. 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

12. 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)

13. 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

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

15. Reasons for low incomes of the
farmers

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

17. 1643 1957
4568 3950 4950
9108 7984
18283 17688
36449
10717
16
20
25 28
31 31
35 38 41
47
31
0
10
20
30
40
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

18. Current status of MSP
implementation

19. 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

20. -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)

21. Current status of APMC markets

22. 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

23. Huge Inter-state differences in
Govt support

24. 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

25. Efficiency of procurement

26. • 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

27. 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)

28. Procurement policy biased
against oilseeds and other crops

29. 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

30. 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

31. Way forward from assured price
to assured income scheme

32. 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

33. Budget under agricultural subsidies may be pooled under Agricultural Insurance
Corporation) and used for providing income insurance
1.32
0.68 0.64
0.07
5
1.96
0.01
1.11
2.4
0
1
2
3
4
5
6
Ministry of
Agril
PM KISAN Crop
insurance
R&D Food
subsidy
Rural Dev Land
resources
MGNREGA Fertilizer
subsidy
Union Budget 2022-23 (Rs.Lakh crore)

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