From UPSC perspective, the following things are important :
Prelims level : e-NAM,PM-KISAN, PM-AASHA
Mains level : Paper 3- Issues with agriculture market reforms.
The article analyses the issues with the reforms in the agricultural marketing policies.
Recent reforms in agricultural marketing
- The 3 recent reforms in agricultural marketing bring major changes in policy.
- The removal of restrictions under the Essential Commodities Act (ECA) should help attract private investment in agriculture.
- The two new ordinances are expected to enable inter-State trade and promote contract farming, thereby providing a large number of options to farmers.
Concerns that need to be addressed
1) Policy credibility problem
- The first problem is ‘time-inconsistency’ problem or the policy credibility problem.
- This situation arises when a decision maker’s preferences change over time in such a way that the preferences are inconsistent at different points in time.
- Because the policy signals are not very clear in the last few years as relates to agricultural marketing, as we will see below.
- This clarity of clear signal is reflected in rollout of multiple schemes: e-NAM, PM-AASHA, PM-KISAN.
- In 2016, the electronic national agricultural market (e-NAM) was launched with a lot of fanfare.
- States needed to amend their respective Agricultural Produce Market Committee (APMC) Acts.
- Several States could not or did not carry out these amendments and the e-NAM proved to be far less effective than desired.
- As a result, the government reverted back to public price support by launching an ambitious programme, PM-AASHA, in September 2018.
- The programme was confined to pulses and oilseeds to limit the fiscal costs.
- However, the initial budgetary outlay did not match the level of ambition of the programme.
- In addition to the PM-AASHA programme, two Model Acts were formulated by the Central government in 2017 and 2018 to promote agricultural marketing and contract farming in States.
- States were required to legislate these Model Acts.
- However, progress has been tardy and many States have not adopted the Model Acts.
- This uninspiring performance of PM-AASHA necessitated a more radical and direct approach.
- Thus evolved the PM-KISAN, a direct cash transfer programme, in the interim Budget of 2019-2020 (February 2019).
- This programme involved a fixed payment of ₹6,000 per annum to each farm household with a budgetary outlay of ₹75,000 crore.
- The frequent flip-flops in farm policy — from a market-based e-NAM to a public funded PM-AASHA and now back to market-based measures — may not inspire much confidence in the minds of private investors about the continuance of the present policies.
2) Centre-State and State-State relations
- Recent Ordinances were passed by the Central Government using the constitutional provisions but the implementation of the same vests with the States.
- Also, inter-State trade involves movement of goods across the State boundaries.
- Thus, coordination between the Central and the State governments, and also among various States becomes crucial.
- Also, the States must have faced several problems in legislating and implementing the earlier Model Acts.
- Thus, the Centre must engage with the States about these constraints in order to iron out the potential problems in the implementation of the ordinances.
3) Multiple market failures and the resultant inter-linkage of rural markets
- Absence or failure of credit and insurance markets may lead a farmer to depend upon the local input dealer.
- This, in turn, may tie him to these intermediaries and constrain his choice of output markets.
- Similarly, the widespread restrictions on land leasing in many States lead to an inefficient scale of production.
- Thus, reforms in the output market alone are not sufficient.
- Reforms in output must be supplemented and complemented with the liberalisation of the lease market and better access to credit and insurance markets.
Consider the question “What are the reform measures taken by the government to deal with the issues in the agricultural marketing by farmers? What are the concerns with such measures?”
In conclusion, consistency in policy, collaborative approach and complementary reforms are necessary for the success of the recent agricultural market reforms.
Back2Basics: Agricultural reform
Read in detail about the 3 reforms form here-