Farm it out, but keep the safety net in place

UP CM may have ordered the closure of stand alone retail outlets but figures show that Rs 12,230 crore is needed to infuse life into the stagnating farm sector. And, a major portion needs to come from private players.

Just three weeks after unveiling the new agriculture policy in the state, which among other things allowed private investment and contract farming in the agrarian sector, Uttar Pradesh Chief Minister Mayawati has ordered a rollback. In a related decision, she ordered the closure of stand alone retail outlets like Reliance Fresh and Spencer’s selling vegetables, fruits and groceries. But, retailers functioning out of malls have escaped the ban. While scrapping the new policy, the CM claimed 60 per cent farmers opposed it. She has also formed a team to look into law and order, health, hygiene, licence and locational aspects of retail chains. The state is the second after Kerala to ban organised retail. There is no doubt that both decisions were forced by what happened last Wednesday when traders led by the president of the UP Udyog Vyapar Mandal and Samajwadi Party MP, Banwari Lal Kanchhal, ransacked retail outlets, Reliance Fresh and Spencer’s. They were protesting against the entry of big firms in the sector. Similar protests have taken place in Kolkata and Ranchi.

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The decision to roll back the farm policy puts the focus back on contract farming. Retail companies are keen to enter into contracts with farmers because it assures them a steady supply of products that meets their quality and quantity requirements. In return, they promise farmers a better price than what they get at mandis, agricultural and technical expertise, an assured market and a chance to diversify their product basket. Figures show that Rs 12,230 crore is needed to infuse life into the stagnating farm sector. And, a major portion of this outlay needs to come from private players. The Centre has circulated the model Agriculture Produce Marketing Committee Act (APMC) that opens the way for private procurement for states to adopt.

There is no doubt that what happened in UP is a result of traders’ anger against a model that plans to bypass them and was also politically motivated; to masquerade it as a farmers’ cause is incorrect. Instead, the discussion should be on whether contract farming and unfettered private capital in farming is desirable. Theoretically, contract farming is a win-win situation for both parties. But we need to remember that it is a two-edged sword. For one, the government must set up cost-less dispute redressal systems at the district level so that neither party can renege on its promises. It should also make sure that farmers’ ownership of land is not threatened and they are not left vulnerable to the might of big companies. Plus, a crop insurance system must be made mandatory. Farmers must also have the option of bypassing this model and going back to the traditional method of selling via mandis. To do this, the government needs to shore up its rural credit system, procure a larger variety of crops for the public distribution system, set up cold chains and the strengthen the cooperative structure, especially for the small and marginal farmers. A parallel, transparent system will work as a counterweight and give agriculturists an option to choose the path they think is best for them.