Stimulus 2.0: Reforms good, implementation a challenge, say food firms

Finance minister Nirmala Sitharaman’s move to give farmers the “choice” to sell their produce anywhere in the country is a welcome step, feel food and agri companies. However, this may not be easy to implement, say executives at some of the top firms that Business Standard spoke to.

The reason is the “well-oiled system” that exists right now, preventing farmers from approaching buyers directly.

Even if a central law was introduced to change the current system, they say, farmers are unlikely to use it for fear of upsetting commission agents or arhtiyas, a powerful lobby of brokers in rural India.

“Farmers are currently bound to sell their produce only to commission agents or licensees in mandis,” said Siraj Chaudhry, managing director (MD) and chief executive officer (CEO), National Collateral Management Service, an agri-and-commodity services player.

“Even if this changes after the new law is introduced, farmers are unlikely to know who to approach. This means that buyers such as large companies and retailers may have to set up procurement centres to facilitate easy delivery of farm produce to them. This will take time. Also, commission agents may not like being kept out of the process altogether,” he said.

Companies such as PepsiCo India and Coca-Cola India said they would have to study the fine print and had no comments to offer on the reforms announced on Friday.

ITC Chairman Sanjiv Puri said amendments to the Essential Commodities Act and reforms in agricultural marketing would empower farmers.

“The reforms will encourage investments in food processing, and together with infrastructure outlays, contribute in shaping a competitive agri-value chain, reduce wastage and raise farmer incomes,” he said.

But the promoter of a popular food production company, based in the east, said the announcements would benefit farmers and firms “prospectively.”

“The Essential Commodities Act had outlived its utility. At the district level, it was being misused. Amending the Act is a move in the right direction,” he said.

“Similarly, the government said that a central law will be formulated, which will essentially render the APMC or mandi toothless. But these are long-term measures, benefits of which will be visible in 2-3 years,” he added.

It is unclear whether retailers such as Reliance and Future as well as companies such as Patanjali and Adani Wilmar would look to set up procurement centres immediately, sources said.

Cereals, edible oils, oilseeds, pulses, onions and potatoes would be deregulated and stock limits would be imposed under exceptional circumstances, said Sitharaman on Friday.

This means that those in the value chain — such as processors, millers, importers, exporters and traders — could now hold as much stock of these commodities as they want to, said sector experts.