Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

The roots of the agricultural crisis run deep


From UPSC perspective, the following things are important :

Prelims level: Not Much

Mains level: Concerns of farmers other than MSP

The standoff between farmers and the government continues even after a few rounds of discussion.

Un-timely reforms

  • Currently, the country was struggling with novel coronavirus-caused lockdowns, supply disruptions, job losses and falling incomes in an economy.
  • The reforms embedded in the three Acts are unlikely to help resolve the structural issues facing Indian agriculture, even their withdrawal is unlikely to change the ground reality.

Farmers protest continues

  • The immediate trigger for the current protests is the enactment of the three Acts, on agricultural marketing, contract farming and stocking of agricultural produce, which deregulates the existing Acts on these.
  • Farmer unions have rejected the proposal and continue to demand complete withdrawal of the three Acts along with making MSP a guarantee.

Government for negotiations

  • The latest proposal by the government indicates its willingness to amend the three agriculture-related Acts passed in September.
  • The government has proposed amendments which will empower the States to frame rules the contentious issues of registration of private traders, levy of taxes on trade outside the Agricultural Produce Market Committee (APMC) mandis.
  • Similar assurances have been given on access to the judiciary for dispute resolution and continuation of the Minimum Support Price (MSP) mechanism.

Many protests, one thread

  • The last four years have seen a series of large protests in most of the States.
  • For example, a group of farmers from Tamil Nadu camped in Delhi for over 100 days, Maharashtra was witness to the ‘Kisan Long March’ of farmers on more than one occasion, protests erupted in Rajasthan, UP, Haryana and MP.
  • The latest round of protests may have seen spirited protests from farmers from Punjab and Haryana but has found the support of farmers from the other States as well.
  • The common thread in all these protests — of declining agricultural incomes, stagnant wages and withdrawal of state support to agriculture.

Changing faces of agriculture

  • The real issue is the lack of remunerative prices for a majority of agricultural commodities, a sharp increase in price variability in recent years, and an unpredictable and arbitrary government policy regime.
  • The other major problem is the changing nature of agriculture which has seen increased dependence on markets, increasing mechanization along with increasing monetization of the agrarian economy.
  • The increased dependence on markets has contributed to increasing variability in output prices.
  • Limited government intervention in protecting farmers’ income and stabilizing prices through MSP-led procurement operations made the increased variability in frequency as well as its spread.
  • Other than rice and wheat — and to some sporadic instances, of pulses — most crops suffer from inadequate intervention from MSP operations.
  • Even these procurement operations are unable to stabilize prices with falling demand and a slowing economy. For example, wheat has seen a steady decline in year-on-year inflation based on Wholesale Price Index (WPI).
  • Uneven nature of procurement in some states is also responsible to arrest the decline in prices. Crops like paddy, maize have seen in many States significantly lower market prices than the MSP.

Factors behind vulnerability

  • Increasing mechanization and monetization have led to an increase in the cash requirement.
  • Most of these are met by non-institutional sources including middlemen which have contributed to the rising cost of cultivation and an increase in loan defaults.
  • The demand for loan waivers is unlikely to subside with the rising cost of inputs.
  • These trends have accentuated after 2010-11 when the Nutrient Based Subsidy (NBS) for fertilizers regime led to an increase in fertilizer prices.
  • The withdrawal of diesel subsidy and a rise in electricity prices also contributed to making agriculture unviable.
  • The government has declined the agricultural investment in the first four years which resulted in rising input costs and falling output prices.
  • The shocks of demonetization and the lockdown only increased the uncertainty and vulnerability in the agricultural sector both on input and output prices.

What lies ahead?

  • The demand for making MSP a guarantee for private trade is meaningless if the government is unable to ensure procurement for a majority of the 23 crops for which it announces MSP.
  • Thus, the withdrawal of the three Acts by the government will only seem to offer a temporary truce.

Policy overhaul needed

  • The existing policy framework with an excessive focus on inflation management and obsession with the fiscal deficit will likely lead to lower support from the government either in price stabilization or reduction in the cost of cultivation through fiscal spending.
  • The agricultural sector needs a comprehensive policy overhaul to recognize the new challenges of agriculture which are diversifying and getting integrated with the non-agricultural sector.
  • This not only entails a better understanding of the structural issues but also innovative thinking to protect farmers’ livelihood from the uncertainty of these changes.
  • Above all, it requires financial support and institutional structures to support the agricultural sector and protect it. Only this can lead to the government’s dream of doubling the farmers’ income.

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