Landmark Reforms in Indian Agriculture

Notes from a Live Webinar co-hosted by Axis Bank and agribazaar

The panel was represented by senior government officials, investors, developmental agencies, agri-industrialists and a banker. The reforms undertaken by the Government were outlined and explained by the four Secretaries to the Government of India. These reforms have been variously called the "watershed moment", "1991 moment", and the "unshackling" of Indian agriculture, especially since they converted the Covid-19 crisis into a massive opportunity.

A good start with many reforms

With almost half a billion people associated directly or indirectly with Indian agriculture, any change here impacts incomes, jobs, social status, and prosperity for them. These changes fit in well with the Government's commitment to double farmers' incomes.

The three big changes that have taken place are: (1) abolition of the monopoly of local mandi, or agriculture yard, where the farmer was required to sell his produce, (2) doing away of the stocking limits on the private sector, and (3) encouragement to contract farming. Enabling schemes of government of India like promoting 10,000 new farmer producer organizations (FPOs), Digital Agri Stack and Rs 1 trillion (US$13 bn) Agri Infra Fund.

What are the key implications of the changes?

•                     No monopoly of APMC mandis at the local level means that for the farmer, the nation becomes his market - and digital platforms can connect farmers to buyers and processors.

•                     Private entrepreneurs and investors now have many more avenues to invest: no stock limits mean larger holding capacity, leading to bigger warehouses and associated infrastructure for logistics and processing.

•                     Contract farming opens up the possibility of land-pooling allowing small, fragmented farmers to come together to grow high-quality food and cash crops.

With these changes now, scale will be the key determinant of success for Indian agriculture. Scale will require capital, technical know-how and supportive regulations.

An investor-friendly government

A fundamental shift in the thinking of the government was highlighted when it was mentioned that the focus now is not on “managing the shortages” but on “processing the surplus”. This was picked up by industry participants to highlight that the sector is now moving from being "production-centric" to "demand-centric". The investors highlighted that it is now time to move from a thinking of subsidy to welcoming a wide range of capital (from debt to mezzanine to equity).

The government representatives committed to answering all the questions live and those that remained they promised to respond to the registered participants over email. The role of Invest India in promoting and facilitating foreign investment was highlighted and so was the concept of Empowered Committees. Many segment that are open for 100% foreign direct investment, especially in the food processing sector, were brought to attention.

On a specific ask for a policy and government support on palm oil (one commodity in which India is not self-sufficient), the government reached out to the industry to co-create opportunities.

Opportunities identified

A wide range of opportunities were identified and highlighted including crop advisory, crop marketing, smart irrigation, leasing of equipment, new avenues of financing, aggregation of inputs and/or output chains, etc. Sectors like food processing and fisheries were highlighted as "sunrise sectors".

The key mantra is that any industry needs to be able to compete in the global export market - only then it can serve the local market efficiently. The world is now moving towards plant-based products and India has a natural advantage in this market. The animal husbandry market was noted for the changing dietary preferences locally and globally. India should set an audacious target of US$100 billion of agri exports - the sector should look at all seven billion people on the planet as its customers and not just the one billion people in India.

Science and technology

The Indian farmer is very tech-savvy. Many of them quickly learnt and came on to the various webinars and other apps that agri-input and agri-finance companies organized during the lockdown. It was noted that the farmers are very flexible and willing to adapt to new ideas and technology.

Technology research in India still lagged many other countries. Many new ideas in ag-tech are cutting-edge technologies like digital agri stack, gene editing, plant-based meat, etc. India, with its fantastic agri research universities, should step up to take advantage.

Climate change is an area of concern and will require significant adaptation. Patterns and intensity of rainfall are changing and that will impact the output of agriculture. Sustainability has to be kept in mind for long-term business models.

Some open areas

The initiative of the Central government was lauded by all. However, some concerns were raised on whether the States will be completely on board? Ideas like creating a GST Council like body or moving agriculture to Concurrent List were highlighted. It was noted that 16 states have already started to issue their notifications in line with the central initiative.

Price is a key economic variable and one of the big reforms is to let price discovery take place easily without any restrictions. However, it was pointed out that certain commodities still operate under price control and the futures market still requires regulatory support for development. It was noted that creating a robust price information system was a key initiative of the government reforms.

Unshackling of more sectors to make them sunrise sectors was highlighted: key among them were palm oil and poultry.

Overall comments

The event was very widely attended. It had received full support of the government and the private sector. A total of 9,543 participants registered for the event and 4,686 attended the event. The event was noted for its smooth flow, equitable time distribution between all participants, live question and answers sourced from the audience, and an interactive panel.

Panelists:

·       Mr. Sanjay Agarwal, IAS, Secretary, Department of Agriculture, Cooperation & Farmers welfare, Ministry of Agriculture and Farmers Welfare

·       Ms. Pushpa Subrahmanyam, IAS, Secretary, Ministry of Food Processing Industries

·       Dr Rajeev Ranjan, IAS, Secretary, Department of Fisheries, Ministry of Fisheries, Animal Husbandry and Dairying

·       Mr. Atul Chaturvedi, IAS, Secretary, Department of Animal Husbandry and Dairying, Ministry of Fisheries, Animal Husbandry and Dairying

·       Mr. S. Sivakumar, Group Head - Agri & IT Businesses, ITC

·       Mr. Balram Yadav, Managing Director, Godrej Agrovet

·       Mr Srini Nagarajan – Managing Director and Head of Asia, CDC

·       Mr. Anuj Maheshwari, Managing Director, Agri business, Temasek International

·       Mr. Akhilesh Tilotia, Head, Strategy and New Initiatives, Axis Bank (Moderator)

·       Mr. Amit Mundawala, MD, agribazaar (Vote of thanks)