India is strengthening its farmers: How about Ukraine?

Author : Serhiy Dzherdzh

Source : 112 Ukraine

The new agriculture laws provide for a "one India, one agricultural market" and promote barrier-free intra-state and inter-state trade. The bills align with the Indian government's commitment to double farmers' incomes by 2022. What about Ukrainian farmers?
22:39, 3 March 2021

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Agriculture plays an important role in the economy of India – a country with 1.4 billion citizens.

India has now entered into force three laws on agriculture. These are, in particular: the law on trade and commerce in agricultural products, the law on price support and agricultural services, as well as the law on basic goods.

By this time, the situation in the agricultural market led to the centralization of procurement and sales, market fees increased, and monopoly associations grew. This discouraged competition and the participation of smaller intermediaries, and as a result, the well-being of farmers was reduced and the development of the agricultural sector was hampered.

Related: Court unblocked $42 million of subsidies to farmers, - Minister of Economy

The adopted bills on agriculture are aimed at removing market restrictions, barriers, and intermediaries, assist the corporate sector in purchasing and storing agricultural products to ensure a balanced and optimal price level in order to make farming more profitable. This is in line with the government's plans to double Indian farmers' incomes by 2022.

Gita Gopinath, the chief economist at the International Monetary Fund, said the bills would help expand the market for farmers and allow them to sell their products in various retail chains without paying taxes, and she said: "it could increase farmers' income."

The advantages of the new solutions are as follows:

The Agricultural Trade and Commerce Bill will help achieve the "one country, one market" goal, which enables farmers to sell their produce in any market that offers them a better price, in any part of the country, without government regulation. A “one India, one agricultural market” approach will emerge to promote barrier-free cross-border and domestic trade using e-commerce. This will address issues of regional imbalance as well as price stability in the long term.

Farmers will not pay additional taxes or commissions to intermediaries, this will ensure that farmers receive most of the price paid by the consumer.

Related: 292 million USD of state subsidies to Ukrainian farmers: Who's got this money?

The Pricing and Agricultural Services Law provides a legal framework for transactions that will enable even small and marginal farmers to interact with agribusiness, retailers, exporters to service and sell products at a pre-agreed price, giving them access to modern technology and the best farming resources.

Agreements between farmers and corporate participants will be limited only to a contract for the cultivation of crops, and corporate participants will not have rights to land, since such a right will remain with farmers. The legislation provides for the promotion of start-ups that connect farmers with food processors and exporters, as well as provide benefits to warehouse companies, manufacturers of agricultural machinery and suppliers of refrigeration equipment, logistics operators that provide online trading platforms, that is, to all participants in the value chain in agriculture that eliminate inefficiency from field to table.

The Essential Commodities Act removes grains and pulses from the list of so-called essential commodities, encourages foreign direct investment in the production of these crops since investors no longer have to worry about excessive regulatory interference in business operations. Private investments are attracted in marketing, processing, and logistics.

Related: Ukraine's govt plans to allocate financial assistance to farmers for lost crops

The new agricultural policy aims to bring Indian agriculture to a new level of commercialization, but above all, it aims to strengthen farmers.

The dominant role of intermediaries in the current marketing system is not beneficial to either farmers or consumers. Commission agents pay farmers a very low price, and they themselves charge a high price for the product, selling it on wholesale markets. Thus, intermediaries receive the bulk of the benefits from trade. The presence of monopoly intermediaries, as well as various fees, results in a higher price for agricultural products, which consumers end up paying for.

The need for agro-reforms in India has also manifested itself as agriculture is becoming less profitable as the cost of growing grows while prices for agricultural products remain low.

Systematic participation of the corporate sector will contribute to better marketing of agricultural products to increase farmers' income, as well as create more jobs, especially given the presence of huge hidden unemployment in villages.

The development of the food and agroindustry is necessary because only 10% of food products are processed in the country due to the lack of proper links between farmland, agroindustry, and markets.

It is planned to provide institutional loans to farmers, in addition, there is an interest rate subvention policy when commercial banks provide loans to farmers at an interest rate 2-3% lower than that charged to other borrowers.

Related: Ukraine to celebrate Farmer's Day on June 19

Indian Prime Minister Narendra Modi, in his speech to parliament on February 8, 2021, strongly reassured farmers that a "minimum price support" (MCP) clause existed, exists and will continue to exist "to save small farmers from any oversaturation (and thus radical fall prices) in the agricultural market There is already a system of providing MCP for 23 crops annually, which acts as a minimum price for these products, below which prices will not fall. MCP actually becomes the base price even for open market prices.

The Indian government provides subsidies to the agricultural sector but seeks to reorient it towards building infrastructure and long-term assets in rural areas in order to increase agricultural productivity and create more employment opportunities outside the agricultural sector in rural areas.

And how does our government care about Ukrainian farmers? What is being done to increase the income of the villagers and, accordingly, to preserve the human potential in the villages? Moving to the city due to unemployment, lack of income, and decent wages often ends up in general migration to another country in search of work.

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The key structures that influence agricultural policy are the so-called agricultural holdings, which use hundreds of thousands of hectares of land. As a result, agriculture loses its natural fullness and integrity. Field cultivation has been reduced to the cultivation of several crops. Animal husbandry is abandoned. Due to unemployment, vast territories are losing people. Control over land and large parts of the country has declined significantly. The vision of the state on the agrarian policy should be that agriculture for the nation is more than just a branch of business activity.

For example, intermediaries (as in India) buy milk from villagers at a price lower than the cost of mineral water in a store. That is, peasant labor is not appreciated. Is there a comprehensive vision for helping farmers? The preservation of people in our villages is not only the functioning of agriculture as an industry, but it is also the employment of the population, and a more careful attitude to the environment than in agricultural holdings, this is a safety issue, because Ukrainians live on their own land, which they protect.

Sometimes we hear a discussion about which economic model is more efficient - agricultural or industrial? A strange argument, because one does not interfere with the other. Ukraine should be both an industrial and an agrarian state. Farmers do not prevent important ministers and industrialists from doing their job - building planes, ships, tanks, cars, and more. At the same time, why not contribute to the work of farmers, organize the processing of everything that the Ukrainian field gives us, and export value-added products?

Related: Ukrainian farmers harvest smaller crops due to drought

Industrialists note that the cost of 1 kg of grain for export is 20 cents, and the cost of 1 kg of an aircraft engine is $ 20,000. Great. The villagers, like everyone else in Ukraine, do not mind the production and export of a large number of aircraft engines. These are parallel processes. It is worth giving farmers the appropriate conditions, providing preferences for creating cooperatives, helping to start - then they will do everything themselves. This will change the quality and safety of the food market.

How can Ukraine achieve sustainable GDP growth? One or several factories, even if they are often shown on television, will not solve this global problem. If the villagers are provided with preferences, an appropriate legislative framework, legal protection, preferential loans, the opportunity to unite in cooperatives, contribute to the establishment of small-scale production, infrastructure, food and processing industries in villages, then millions of hands of Ukrainian villagers who are not afraid of hard work will make real economic changes will radically increase the national GDP, and as a result, the state and the national currency will become stronger, and emigration will stop. Family farming also solves the problem of employment in villages.

There is an opinion that family farms are losing out to agricultural holdings. But in fact, more than half of the products are produced by those who are not actually legally a commodity producer, those who are not protected in the legal field, those who are not helped by the state in their activities.

Despite the dogma about the efficiency of large-scale agriculture, the countries of Western Europe prefer family farms in terms of ownership and try to maintain small (up to 20 hectares) and medium (up to 100 hectares) farm sizes.

Family farms are focused on high yields and agribusinesses are focused on commercial efficiency. Family farms grow more different units of production per hectare, but agricultural enterprises have a large profit per hectare, but at the same time, the big question is who gets this profit. Higher yields create conditions for greater export potential, positively affect the foreign economic balance and help to accumulate capital for development.

Related: Program of affordable loans to be expanded to include farmers, - Zelensky

The Ukrainian historical tradition and the orientation towards European practices in the agricultural sector require a deep reform of agriculture based on the establishment of the farming way of life.

From July 1, 2021, it will be possible to legally sell and buy agricultural land. At the beginning of the last century, the ownership of land for the villagers was an opportunity to build their future, to provide their families with appropriate well-being. Will not in our time such legality become only an opportunity for a villager to sell land and leave, often outside the country?

Lifting the moratorium on land sales is an important issue for economic development. But it is much more important what structure of agriculture will be created after the opening of the land market.

There is a need for appropriate legislation and state programs that provide for the transformation of the existing agriculture of Ukraine into a modern agrarian system of the European type, in which an important element will be the protection and strengthening of farmers, the kind of protection that distant India creates for its farmers.

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