COVID-19-Induced Policy Reforms in India: Overcoming Implementation Challenges

17 Juli 2020

Farmer ploughing the field: Source: Divya Pandey/IFPRI

By Suresh Chandra Babu and Vaishali Dassani
Jul 16 2020 (IPS)

The global outbreak of Covid-19 has disrupted the food system throughout the world. From initial lockdown by the national governments to slow the spread of the Covid-19 to now opening of the economies have had food security implications for all players in the food system ranging for the farmers to consumers and the rest in between.

The responses of the countries have also resulted in changes related to food availability, access, affordability, food safety and price levels. In response to the increasing spread of Covid-19, the government of India took early action for a complete lockdown on March 25, 2020. The lockdown continues as of July in various forms and in various states depending on the intensity of spread of Covid-19.

In the Indian context, the pandemic has hit the most vulnerable population the hardest, especially in the informal sector who were unable to work and have little or no savings. In addition, infrastructure and transportation challenges disrupted the supply of food.

On the demand side, the loss of income, closing of food transfer schemes such as school feeding programmes and rising food costs made access to food difficult leading to decline in dietary quality by a majority of households. The exports of food and agricultural commodities have stagnated. Labor availability for production has come down as the migratory laborers have moved back to their hometowns.  The sum, the food system is in doldrums.

Indian policy makers have embarked on major policy reforms and have broken down regulatory challenges in food and agricultural markets in ways no one thought was possible for the past 70 years

In this context, a key policy question has been how to revive the agricultural markets that can enable both the producers and consumers by converting the challenges posed by COVID-19 into opportunities?

In response to this question, Indian policy makers have embarked on major policy reforms and have broken down regulatory challenges in food and agricultural markets in ways no one thought was possible for the past 70 years. A quick response from the farmers is to increase the area sown by 40 percent for the next season.

While this supply response will have major implications for agricultural growth and transformation in the years to come, how did the government of India use this COVID -19 pandemic as an opportunity to usher major policy reforms in the agriculture sector?

The third tranche (first was on business including MSME and second on poor including migrants and farmers) of economic relief packages, the government of India introduced a set of policy measures that remove logistical barriers in agricultural supply chains and bring in the private sector to support development of ‘one national open market.’ Though these reforms will take time to reach the grounds due to implementation challenges ahead, it is a step forward for long-term gains for farmers, marketers and consumers.

First, the government amended the Essential Commodities Act (ECA) through an ordinance route to enable better price realization for farmers which will result in the deregulation of prices for food items including cereals, edible oils, oilseeds, pulses, onions and potato.

The ordinance assures that stocking limits will not be imposed on the private sector, except under exceptional circumstances such as natural calamity, and wars. The changes in the ECA will now allow private sector investment and making agriculture sector competitive. It will help drive up investment in cold storages and modernization of food supply chain.

Second, through barrier-free trade in agriculture, the government will provide adequate choices to farmers to sell their produce at an attractive price and through free interstate trade. It will also help farmers in regions with surplus produce to get better prices and at the same time, consumers in regions with shortages, can benefit from lower prices.

In addition, a framework for e-trading of agricultural produce will be established. The move aims to end market fragmentation farmers face forcing them to sell their produce only to licensed Agricultural Produce Marketing Committee (APMC) in their locality.

Third, agriculture in India is fragmented due to small holding sizes and is highly dependant on weather which makes it risky resulting in inefficient input and output management. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, will empower farmers for directly engaging with processors, wholesalers, aggregators, wholesalers, large retailers, and exporters to have a better say in defining the terms of the contract with the aim to remove middlemen.

In the fourth intervention, the government will create a Rs 1 trillion Agri-Infrastructure Fund for farm- gate infrastructure for small and medium farmers, which will include primary agricultural co-operative societies and farmer producer organizations. This will fix the current gap in value chains resulting from poor access to cold chain and post-harvest management near farm-gate.

Finally, through the Prime Minister Farmers Fund – Kisan Samman Nidhi (PM-KISAN), over 95.4 million farmer families (as on first June 2020) benefited disbursement of Rs. 195.15 billion and provision of Rs30,000 crores of additional refinancing facility by National Bank for Agriculture and Rural Development during the lockdown period. These measures are positive steps toward long-term growth of the high value agriculture sector.

On June 3, 2020 the President of India, converted some of the key policy announcements into ordinances through swift action. The final impact of these policies will crucially depend on their implementation on the ground at the state levels.

These policy changes have gone beyond the regular challenge of individual states taking policy action given the federal nature of policy making in India. However, it is necessary for states to step up on their role in the implementation of these policy interventions. There is also a need to understand the process of translating national ordinances into state level programs.

Yet such a translation process requires institutional and human capacity at the state and at the local levels. Decentralized and context specific interventions that address specific challenges of the famers are needed for realizing he full impact of the policy reforms.

Allocation of resources at the right time that is based on right strategic and investment plans is also needed to strengthen the necessary infrastructure for developing one national market. Developing cold storage facilities through such infrastructure facilities will also reduce wastages and enhance supply chain efficiency benefiting both farmers and the consumers.

Finally, establishing monitoring and evaluation systems for learning and modifying the implementation strategies is needed to gain maximum benefits from these reforms induced by the COVID-19 pandemic.

Systematic campaigns to inform and educate the district level authorities is one of the important factors to consider for the implementation. Even in countries where suitable capacities exist to meet with long‐ term planning and policy changes, but even the capacity for planning, and implementing policies and programs to bounce back (better) from recurring challenges may be too low.

Despite the pandemic, agriculture production has been consistently growing and is expected to grow 3 per cent in 2020-21. It is ironic that despite such growth, farmers continue to lag behind. One can say, the Covid-19 pandemic was a wake up call for the government of India, and they were quick to convert crises into opportunities. The overall benefit to the farmers will only be known in due course, but from the beginning the government needs to ensure farmers benefit from the reforms.

Suresh Babu is Senior Research Fellow, International Food Policy Research Institute

Vaishali Dassani is Former Communications Specialist, International Food Policy Research Institute

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