Impact of Agricultural Marketing Reforms on Procurement Operations and PDS Supply Chain

Introduction Recent reforms in the agricultural marketing sector, notably the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC Act), aim to enhance market efficiency and farmer incomes. These reforms have significant implications for procurement operations and the supply chain dynamics of the Public Distribution System (PDS). Understanding these impacts requires analyzing both the positive outcomes and potential trade-offs involved.

Reforms and Their Objectives

1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:
   • The FPTC Act is designed to create a unified national market for agricultural produce by allowing farmers to sell their produce outside the Agricultural Produce Market Committee (APMC) markets.
   • It aims to eliminate the monopoly of APMC markets and facilitate direct trade between farmers and buyers, including large retailers and processors.
2. Essential Commodities (Amendment) Act, 2020:
   • This Act deregulates the stocking of essential commodities, aiming to attract private investment in the agriculture sector and reduce price volatility.

Impact on Procurement Operations

1. Increased Market Access and Competition:
   • Enhanced Market Access: Farmers can now access broader markets beyond traditional APMC mandis, potentially receiving better prices due to increased competition. For example, Punjab and Haryana have seen efforts to build alternative marketing platforms.
   • Direct Transactions: Platforms like e-NAM (Electronic National Agriculture Market) facilitate direct transactions between farmers and buyers, bypassing intermediaries. This can streamline procurement processes and reduce transaction costs.
2. Price Discovery and Farmer Incomes:
   • Better Price Discovery: The opening of markets encourages better price discovery. Bihar has already experienced positive outcomes with higher prices for crops as a result of market liberalization.
   • Increased Farmer Incomes: With access to multiple markets and reduced dependence on APMC mandis, farmers potentially receive higher prices, as evidenced in pilot states.

Impact on the Supply Chain Dynamics of PDS

1. Procurement and Stock Management:
   • Challenges in Procurement: The shift in market dynamics may affect the procurement operations of the PDS, as fewer farmers may choose to sell through APMC mandis, potentially disrupting the traditional procurement channels.
   • Stock Management: The PDS relies on procurement through APMC mandis for stocking essentials. A reduced flow of produce through these channels could complicate stock management and disrupt supply to beneficiaries.
2. Supply Chain Efficiency:
   • Improved Supply Chains: With the growth of private sector involvement and alternative marketing avenues, the overall efficiency of supply chains may improve, potentially benefiting both farmers and the PDS.
   • Risks of Market Fragmentation: The proliferation of multiple markets and platforms could lead to fragmentation and inefficiencies in procurement and distribution networks for the PDS.

Trade-offs Between Farmers and Consumers

1. Farmer Interests:
   • Increased Profit Margins: Farmers benefit from better price realization and reduced market dependence. However, small and marginal farmers might face challenges accessing new markets or dealing with new market dynamics.
   • Investment and Infrastructure: Private sector investment in infrastructure could further benefit farmers but may require supportive policies to ensure equitable access.
2. Consumer Interests:
   • Price Stability: While farmers may benefit from higher prices, consumers might face higher prices if procurement and distribution are disrupted. The PDS plays a crucial role in stabilizing prices for essential commodities.
   • Subsidy and Equity: The potential reduction in PDS procurement could impact the availability of subsidized goods, affecting lower-income consumers who rely heavily on the PDS.

Conclusion

The implementation of the FPTC Act and related reforms represents a significant shift in India’s agricultural marketing landscape. While these reforms promise increased market access and better prices for farmers, they also pose challenges for the procurement operations of the PDS and introduce potential trade-offs between farmer profitability and consumer welfare. Balancing these interests requires careful policy design and ongoing evaluation to ensure that both farmers’ and consumers’ needs are addressed effectively.