This is a guest post by Ritu Singh.
The government brought about two sweeping reforms recently which are slated to improve the state of the agriculture sector drastically.
The first is an ordinance known as Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 that gives freedom to the farmers to sell their crops to any seller.
The second sweeping change is the change to the Essential commodities Act, 1955 that has deregulated various agricultural produce like pulses, oil etc from stock limits, except for the times when there is a natural calamity.
One thing that one has to be aware of to truly understand the change is to understand the system that exists right now. The selling of agricultural produce is regulated by the state government under the APMC act. Under the APMC act, all states have created various agriculture markets. The state government hands out licences to a few sellers who are the only one allowed to buy the produce from the farmers. Due to this system of licence raj, there is a creation of an unfair market wherein few sellers who have been allocated the licence dictate the price of the produce. This leads to the farmers earning significantly less than what they would earn under a free market. Also it leads to very restricted inter state selling of agriproduce due to different APMC acts in each state.
Also under the Essential commodities act, most agricultural produce was highly regulated. There were stock limits imposed to prevent hoarding and to ensure prices don’t rise excessively.
All of this and many other factors discouraged private investment in the agriculture supply chain and investment in infrastructure like Cold storage etc.
The new regulatory changes of deregulation under essential commodities act and the change leading to the freedom given to the farmers to sell to anyone will pave the way for modernisation of the supply chain of agriculture.
Already a lot of startups like Dehaat are working to link the farmers directly to the markets. This will open up a huge opportunity for B2B startups to come in the Agriculture supply chain sector and help link the farmers directly to the market thus increasing their earnings. The startups will also benefit from the change in regulation that has helped ease the inter state selling of agricultural produce which was currently quite tough due to the individual states APMC act.
This will also help online retail startups like Big basket to go deeper in the supply chain. This will not only help give higher returns to the producer but also help the consumers as they will get goods at a reasonable price which would be far less than what they would have paid if the goods would have passed through a group of intermediaries.
Hopefully a lot of startups will also seize the opportunity of creating infrastructure like cold storage etc.
When the farmers start benefiting from these reforms by getting higher price for their produce and things getting organized, it will also pave way for fintech startups to give credit to the farmers.The farmers will also be able to afford to invest in newer technologies like IOT and weather forecast apps thus paving way for more startups to help them with adoption of newer technologies.
Ritu Singh