From UPSC perspective, the following things are important :
Prelims level : MSP
Mains level : Paper 3- Delay in agri-reforms and politics
Reforms in agriculture have been overdue. But the passage of farm bills by the Parliament has evoked opposition from several stakeholders. However, the passage of bills by the Punjab Assembly is the first from any State Assembly. The article explains how politics dominates agriculture reforms and its implications for economic growth.
States trying the negate the farm bill passed by Parliament
- By passing its farm bills, Punjab has become the first state to legislate to negate impact of legislation enacted by Parliament last month.
- Other states like Rajasthan and Chhattisgarh, could follow suit soon.
- Notwithstanding whether President Ram Nath Kovind gives his assent to the state bills that undermine the central ones, the important issue is to determine how much of this conflict is about economics aimed at helping farmers and how much sheer politics.
Issues with Punjab’s farm bills
- Punjab’s farm bills prohibit private players from buying wheat and paddy below the MSP even outside the APMC markets.
- It doesn’t apply to other crops, say maize, cotton, pulses and oilseeds that are under the ambit of the central MSP system.
- The point is that this pertains only to wheat and paddy.
- The bill could even have been extended to milk and vegetables by declaring local MSPs for them, but it didn’t do that.
- Because the state government knows full well that it will create a fiasco in agri-markets, which might boomerang on it politically.
- Law for wheat and paddy will not help farmers as the Centre already buys more than 95 per cent of Punjab’s wheat and paddy at MSP through the Food Corporation of India (FCI) and state procurement agencies.
Economic roots of politics over MSP: Lessons from the past
- Demand that MSP be made a legal instrument (rather than indicative) actually exhibit deep distrust of the private sector and markets.
- In1972 government announced that the wholesale trade in wheat and rice (paddy) will be taken over by the government as traders were being unscrupulous in not giving farmers their due MSP and manipulating prices.
- The first marketing season of the government takeover of wholesale wheat trade, in 1973-74, saw a major fiasco.
- Market arrivals dropped, and wheat prices shot up by more than 50 per cent. It was a bitter lesson.
Long overdue reforms in agriculture
- Economic reforms in 1991 took some time to yield results, but, by the 2000s, India was taking 7 per cent.
- But even the 1991 economic reforms bypassed agriculture marketing reforms.
- It was only in 2003, a model act on agri-marketing was circulated to the states.
- But that model act did not go far enough.
- From 2004 to 2014 government did not pursue any major agri-marketing reforms.
- In food government enacted the National Food Security Act in 2013, giving 5 kg wheat or rice to 67 per cent of the population at Rs 2/kg and Rs 3/kg.
- A high-level committee (HLC) under Shanta Kumar was formed in 2014 to restructure the grain management system.
- The committee suggested major changes, including cash transfers in the public distribution system, and overhauling the FCI’s operations and free markets to make the system more efficient.
- But the government could not undertake bold reforms, except some marginal tinkering of labour rules in the FCI.
The COVID-19 crisis opened a window of opportunity to reform the agri-marketing system. The government grabbed it — this is somewhat akin to the crisis of 1991 leading to de-licensing of industry. Patience and professionalism will bring rich rewards in due course, not noisy politics.