By Mayank Bhardwaj and Rajendra Jadhav
NEW DELHI (Reuters) – India’s repeal of its agricultural law aimed at deregulation of agricultural markets will leave the country’s vast agricultural sector short of much-needed private investment and leave the government burdened with crippling costs. subsidies have tightened budgets for years, economists say.
Late last year, Prime Minister Narendra Modi’s government enacted three laws aimed at opening up agricultural markets to companies and attracting private investment, sparking the longest-running protests in India among farmers, who argue that reforms will allow corporations to exploit them.
With an eye on a key election in the populous state of Uttar Pradesh early next year, Modi agreed to repeal the statutes in November, hoping to soften ties with the rights lobbying organization. force, which is home to nearly half the country’s 1.3 billion people and accounts for about 15% of the $2.7 trillion economy.
However, by shedding the most ambitious overhaul in decades, Modi’s return now appears to remove the upgrades needed by shabby post-harvest supply chains to cut waste. promote crop diversification and increase farmers’ incomes, economists say.
“This is not good for agriculture, this is not good for India,” said Gautam Chikermane, senior economist and vice president at the New Delhi-based Observational Research Foundation.
“All momentum to move to a more efficient, market-linked system (in agriculture) has been extinguished.”
The change allays farmers’ concerns about the loss of a minimum price system for basic crops, which growers say ensures India’s grain self-sufficiency.
Devinder Sharma, an agricultural policy expert who has supported growers, said: “It seems that the government realizes that it has realized that opening up the area will leave them vulnerable. by large companies, affecting commodity prices and affecting farmers’ incomes. ‘ movement.
But the year-long stalemate also means that no political party will attempt to implement any similar reforms for at least a quarter of a century, Chikermane said.
And, in the absence of private investment, “the inefficiencies of the system will continue to cause waste and food will continue to rot,” he warned.
India ranks 101st out of 116 countries on the Global Hunger Index, with malnutrition accounting for 68% of all child deaths.
However, it wastes about 67 million tons of food each year, worth about $12.25 billion – almost five times more than most major economies – according to various studies.
Insufficient cold storage lines, lack of refrigerated trucks and insufficient food processing facilities are the main causes of waste.
The farm law promises to allow private traders, retailers and food processors to buy directly from farmers, bypassing the more than 7,000 government-run wholesale markets where middlemen’s commissions and market fees add to the cost of consumption.
Ending the regulation of food having to flow through approved markets, traders and economists say, would encourage the private sector to join the supply chain, giving both Indian companies and global demand for investment in this sector.
Harish Galipelli, director of ILA Commodities India Pvt Ltd, an agri-commodity trading company, said: “Agricultural law will remove the biggest obstacle to large-scale purchases of agricultural commodities by large corporations. . “And that will encourage corporations to invest in renovating and modernizing the entire food supply chain.”
Galipelli’s company will now have to reevaluate its plans.
“We had a plan to scale our business,” said Galipelli. “We will expand if the law remains in place.”
Other companies specializing in warehousing, processing and the food business are also expected to rethink their expansion strategies, he said.
REASONABLE PRICE SUPPORT
Poor post-harvest handling of farm produce also drives up the price of perishables in India. Just three months ago, farmers dumped tomatoes on the streets because of falling prices, but now, consumers are paying a staggering 100 rupees ($1.34) per kilogram.
According to the Confederation of Indian Industry (CII), an industry group will help the $34 billion food processing sector grow exponentially.
The demand for fruits and vegetables will increase. And that would likely cut surplus rice and wheat production, curtailing bulging stocks of staples worth billions of dollars in state warehouses, economists said.
“Crop diversification will also help curb subsidy spending and narrow the fiscal deficit,” said Sandip Das, an agricultural policy researcher and analyst in New Delhi.
Food Corporation of India (FCI), the state crop procurement agency, ran into a record 3.81 trillion rupees ($51.83 billion) in debt last financial year, alarming policymakers and inflated the country’s food subsidy bill to a record 5.25 trillion rupees ($70.16 billion) in the year to March 2021.
However, while the federal government currently has limited scope for change, local governments “can choose to reform as long as they have the political will to do so,” said Bidisha Ganguly, economist at CII, said.
Similarly, venture-funded startups have also expressed interest in India’s agricultural sector.
“Agritech, if allowed to take root, has the potential to enable farmers and consumers to better shake hands through their technology platforms,” said Chikermane.
(1 = 74.83 rupees)
(Reporting by Mayank Bhardwaj and Rajendra Jadhav; additional reporting by Aftab Ahmed; editing by Gavin Maguire and Kim Coghill)
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