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Subject: Agriculture

  • [pib] 15th Finance Commission submits report on Agricultural Exports

    The High-Level Group on Agricultural Exports set up by the Fifteenth Finance Commission has submitted its report to the Commission.

    Try this PYQ from CSP 2019

    Q.In India, which of the following reviews the independent regulators in sectors like telecommunications, insurance, electricity, etc.?

    1. Ad Hoc Committees set up by the Parliament
    2. Parliamentary Department Related Standing Committees
    3. Finance Commission
    4. Financial Sector Legislative Reforms Commission
    5. NITI Aayog

    Select the correct answer using the code given below.

    (a) 1 and 2

    (b) 1, 3 and 4

    (c) 3, 4 and 5

    (d) 2 and 5

    Why focus on Agri-exports?

    • India’s agricultural export has the potential to grow from USD 40 billion to USD 70 billion in a few years.
    • The estimated investment in agricultural export could be in the tune to USD 8-10 billion across inputs, infrastructure, and processing and demand enablers.
    • Additional exports are likely to create an estimated 7-10 million jobs.
    • It will lead to higher farm productivity and farmer income.

    Highlights of the report

    (A) The HLEG has made its recommendations, major among which are:

    • Focus on 22 crop value chains – demand-driven approach.
    • Solve Value Chain Clusters (VCC) holistically with a focus on value addition.
    • Create a State-led export plan with participation from stakeholders.
    • Private Sector should play an anchor role.
    • The centre should be an enabler.
    • The robust institutional mechanism to fund and support implementation.

    (B) State-led Agri Exports

    The Group has recommended a State-led Export Plan –  a business plan for a crop value chain cluster. It will lay out the opportunity, initiatives and investment required to meet the desired value chain export aspiration.

    The Group has also said that for its success, the following factors needed to be considered:-

    • Plans should be collaboratively prepared with private sector players and Commodity Boards.
    • Leveraging of state plan guide and value chain deep dives.
    • The private sector should play an anchor role in driving outcomes and execution.
    • The centre should enable state-led plans.
    • Institutional governance should be promoted across the state and centre.
    • Funding through the convergence of existing schemes, Finance Commission allocation and private sector investment.

    Back2Basics: Finance Commission (FC)

    • The FC is a constitutionally mandated body that decides, among other things, the sharing of taxes between the Centre and the states.
    • Article 280 (1) requires the President to constitute, “within two years from the commencement of this Constitution.
    • And thereafter constitute FC at the expiration of every fifth year or at such earlier time as the President considers necessary.
    • An FC “which shall consist of a Chairman and four other members”.

    Divisible Pool of Taxes

    • Under Article 280(3) (a) the FC must make recommendations to the President “as the distribution between the Union and the States of the net proceeds of taxes which are to be, or maybe, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds”.
    • Accordingly, the FC determines a formula for tax-sharing between the states, which is a weighted sum of the states’ population, area, forest cover, tax capacity, tax effort and demographic performance, with the weights expressed in percentages.
    • This crucial role of the Commission makes it instrumental in the implementation of fiscal federalism.

  • What is Green-Ag Project?

    The Union government has launched the Green-Ag Project in Mizoram, to reduce emissions from agriculture and ensure sustainable agricultural practices.

    Note the following things about Green-Ag Project:

    1)Core objective

    2)Implementing agencies

    3)Regions of Implementation

    Green-Ag Project

    • The Green-Ag project is designed to achieve multiple global environmental benefits in at least 1.8 million hectares (ha) of land in five landscapes, with mixed land-use systems.
    • It aims to bring at least 104,070 ha of farms under sustainable land and water management.
    • The project will also ensure 49 million Carbon dioxide equivalent (CO2eq) sequestered or reduced through sustainable land use and agricultural practices.

    Implementing agencies

    • The project is funded by the Global Environment Facility, while the Department of Agriculture, Cooperation, and Farmers’ Welfare (DAC&FW) is the national executing agency.
    • Other key players involved in its implementation are the Food and Agriculture Organization (FAO) and the Environment Ministry (MoEF&CC).

    Regions of implementation

    The project has been launched in high-conservation-value landscapes of five States namely

    • Madhya Pradesh: Chambal Landscape
    • Mizoram: Dampa Landscape
    • Odisha: Similipal Landscape
    • Rajasthan: Desert National Park Landscape
    • Uttarakhand: Corbett-Rajaji Landscape

  • Kashmir saffron gets GI certificate

    The J&K administration has issued the certificate of geographical indication (GI) registration for saffron grown in the Kashmir Valley.

    Must read:

    GI Tags in news for 2020 Prelims

    All time GI tags in news

    Kashmir saffron

    • It is cultivated and harvested in the Karewa (highlands) in some regions of Kashmir, including Pulwama, Budgam, Kishtwar and Srinagar.
    • It is a very precious and costly product. Iran is the largest producer of saffron and India is a close competitor.
    • It rejuvenates health and is used in cosmetics and for medicinal purposes.
    • It has been associated with traditional Kashmiri cuisine and represents the rich cultural heritage of the region.
    • Saffron cultivation is believed to have been introduced in Kashmir by Central Asian immigrants around 1st Century BCE. In ancient Sanskrit literature, saffron is referred to as ‘bahukam’.

    3 Types

    The saffron available in Kashmir is of three types —

    • ‘Lachha Saffron’, with stigmas just separated from the flowers and dried without further processing;
    • ‘Mongra Saffron’, in which stigmas are detached from the flower, dried in the sun and processed traditionally; and
    • ‘Guchhi Saffron’, which is the same as Lachha, except that the latter’s dried stigmas are packed loosely in air-tight containers while the former has stigmas joined together in a bundle tied with a cloth thread

    Whats’ so special about Kashmir Saffron?

    • The unique characteristics of Kashmir saffron are its longer and thicker stigmas, natural deep-red colour, high aroma, bitter flavour, chemical-free processing, and high quantity of crocin (colouring strength), safranal (flavour) and picrocrocin (bitterness).
    • It is the only saffron in the world grown at an altitude of 1,600 m to 1,800 m AMSL (above mean sea level), which adds to its uniqueness and differentiates it from other saffron varieties available the world over.

  • APMC Act is not the main problem

    The APMC Act, which is often blamed for the woes of the farmers is not the main problem. This article argues that the root of the problems of Indian agriculture lies somewhere else.

    Agriculture post-1991

    • The priority post-1991 has been given to industry as well as services.
    • Middle-class consumers have been favoured by at the expense of farmers.
    • This neglect of agriculture resulted in an equally unprecedented gap between the standard of living in the rural and urban parts of the country.
    • As a result, the urban/rural ratio, in terms of monthly per capita expenditures, has jumped from 1.84 to 2.42 between 2012 and 2018.
    • This means that an average urban-dweller today can consume almost 2.5 times more than an average person in a village.

    Reforms by the government

    • Government has decided to liberalise India’s agriculture by amending the APMC Act and the Essential Commodities Act.
    • Contract farming will also be introduced in such a way that the buyer can assure a price to the farmer at the time of sowing.

     APMC Act in the context of Shanta Kumar Committee report

    • The argument against the APMC Act is that it does not allow the free market to function due to government intervention.
    •  It denies farmers the opportunity to determine the prices of crops in the marketplace.
    • In theory, this is a valid argument.
    • But, Shanta Kumar Committee observed in 2015 that only 6 per cent of farmers get the Minimum Support Price (MSP).
    • This is because of barriers to access for farmers as only 22 crops are procured under MSP.
    • Infrastructure is also inadequate as there are only an estimated 7,000 APMC mandis across India.
    • Procurement depends on the stocks required by the state.

    Why the APMC Act is not the problem

    1) Farm Pricing is the problem

    • The living costs of farmers was considered while determining agricultural pricing by the Agricultural Prices Commission (APC).
    • CACP that replaced the APC in 1985 added a 10 per cent mark-up over the MSP to account for entrepreneurial costs.
    • Such practices have been gradually eroded post-1991.
    • The problem, therefore, is not state intervention but the way the government deals with agriculture.

    2) APMC Act helped India build up food stocks

    • India managed to weather the 2008 global food crisis only because it had enough food stocks as Indian agriculture was not linked to the international futures market.
    • This was possible due to the procurement done through the APMC Act.

    3) APMC Act reformed already by States

    • Since agriculture is a state subject, the Act has been modified in 17 states.
    •  On the contrary, the condition of peasants has often been affected when the APMC Act has been diluted.
    • Bihar is a case in point.
    • The APMC Act was revoked in 2006 with the same rationale that further deregulation will attract private investment in infrastructure.
    • Not only has that not materialised, but the existing APMC market infrastructure was also dismantled.

    Reforms that Indian Agriculture needs

    1) Subsidy Reforms

    • Indian Agriculture is still too heavily subsidised in favour of the big players.
    • In the Union Budget 2019-20, the allocation for the Ministry of Agriculture was Rs 1,30,485 crore and the fertiliser subsidy alone was estimated at Rs 79,996 crore.
    • But these subsidies are concentrated on a few crops.
    • Agriculture economist Bruno Dorin has shown, only three crops receive more than 60 per cent of the so-called “non-product-specific” support to agriculture — rice, wheat and sugarcane.
    • This has led to environmental degradation like the depletion of groundwater levels and monocultures which are a threat to biodiversity.
    • It has also led to the industrialisation of agriculture, that results in the strengthening of a handful of multinational companies, which supply chemical inputs.
    • Liberalisation would only strengthen the role of large companies — including those in the agri-food sector.

    2) Agriculture needs to be ecologically viable

    • Structurally, farming needs to be made economically and ecologically viable in India.
    • State intervention for better pricing, investments in water harvesting and an agroecological transition could ensure a more resilient system to weather shocks like the current one.
    • The government could draw inspiration from the Andhra Pradesh Community Managed Farming model.
    • It promotes agroecological principles with the use of locally-produced, ecologically-sustainable inputs focusing on soil health..
    • Since the agro-ecological system of farming is more biodiverse in nature, it will make the system more resilient overall.
    • It will provide a safety net for farmers in case of crop damage due to various factors such as climate change or droughts.

    Consider the question “Though the APMC Act has been blamed for the farmers’ issues, it has historically been part of the solution. Critically analyse.”

    Conclusion

    By investing again in agriculture and following, at last, the recommendations of the M S Swaminathan Committee, the Government of India would also help bridge the drastic urban-rural divide.

    To read more about the issue:

    Marketing of Agricultural Produce in India: Definition; Role; APMC Act, Model APMC Act, 2003

    Original article:

    https://indianexpress.com/article/opinion/columns/rural-india-coronavirus-farm-trade-ordinance-apmc-act-6515414/

  • Exporting agri-inputs

    Some changes could make India exporter of agri-inputs. The article examines bottlenecks that holds India back and suggests the policy changes in key agri-inputs-seeds, fertilisers and machinery.

    Context

    In the following 3 key agri-inputs India has the untapped potential. What is needed is policy changes.

    1) Seeds

    • India can emerge as an important seed producer and a large exporter of seeds to many developing countries in South and South-east Asia as well as Africa.
    • The country can produce very competitively-priced seeds for hybrid rice, hybrid corn, hybrid Bt HT cotton, and several vegetables including tomato, potato and okra.
    • For this to happen, we have to set our regulatory system right.
    • Let’s use the case of cotton.
    • India’s decision in March 2002 to allow Bt cotton made India the largest producer of cotton in the world and the second-largest exporter of cotton by 2013-14.
    • But due to policy changes since 2014-15 and issues such as trait fees companies stopped the introduction of new generation of seeds
    • Now there is an “illegal” spread of Bt HT cotton in Maharashtra.
    • This is partly because our regulatory system is complex.
    • And more so because the present government has ideological blinkers against modern science.
    • This is the biggest bottleneck holding India back from becoming the seed capital of the developing world.

    2) Fertilisers

    • India has been a net importer of fertiliser nutrients (NPK) for almost two decades.
    • In 2019-20, India imported fertilisers worth $6.7 billion, topping the list is urea $2.9 billion.
    • We are totally dependent on imports and likely to remain so in case of MOP and in the case of DAP.
    •  In the case of urea, India wants to be atmanirbhar by opening up five new urea plants in the public sector with a total capacity of 6.35 MMT.
    • Almost 70 per cent of the gas being used in urea plants is imported at a price much higher than the price of domestic gas.
    • The cost is going to be more than $400/tonne when the international price generally hovers between $250-300/tonne.
    • The government should allow existing private sector urea plants to expand and produce at a much lower cost.
    • The best way to achieve self-reliance in fertilisers is to change the system of fertiliser subsidies.

    Suggestion on changes in fertiliser subsidies

    • 1) Deposit equivalent cash directly into farmers’ accounts, calculated on a per hectare basis.
    • 2) Free up fertiliser prices.
    • 3) Allow the private sector plants to compete and expand urea production in a cost-competitive manner.

    3) Farm machinery

    • Before the Green Revolution, India produced only 880 tractor units.
    • It increased to about 9,00,000 units in 2018-19.
    • So, India is the largest tractor manufacturer in the world.
    • India also exported almost 92,000 tractors, largely to African and ASEAN countries.
    • Though Green Revolution gave tractor production a push, the real break-through came after de-licensing in 1991.
    • The new class of entrepreneurs and start-ups are coming up with special apps for “Uberisation of tractor services”.
    • In an economy of small landholders, owning a tractor is a high-cost proposition as it is not fully utilised.
    • This needs to be made more efficient by creating a market for tractor services.

    Consider the question “Despite having the potential to transform itself into the exporter of agri-inputs, India ends up being the importer of some of them. In light of this examine India’s potential to become the exporter of agri-input products and suggest the measures to achieve this.”

    Conclusion

    The private sector is our strength. The only thing the government has to do is to unshackle them from the chains of controls and webs of unnecessary regulations. They will make an Atmanirbhar Bharat.

  • Godhan Nyay Yojana to boost rural economy

    Chhattisgarh is set to launch ‘Godhan Nyay Yojana’. The scheme aims to put money in the pockets of people living in rural areas and also solve the problem of stray cattle.

    Try this question from CSP 2019:

    Consider the following statements

    1. Agricultural soils release nitrogen oxides into the environment.
    2. Cattle release ammonia into the environment.
    3. Poultry industry releases reactive nitrogen compounds into the environment.

    Which of the statements given above is/are correct?

    (a) 1 and 3 only

    (b) 2 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

    Godhan Nyay Yojana

    • Under the scheme, the Chhattisgarh government will purchase cow dung at the rate of Rs 2 per kg.
    • This scheme will turn cow dung into a profitable commodity.
    • The scheme also aims to make cow rearing economically profitable and to prevent open grazing in the state, as well as help with the problem of stray animals on roads and in urban areas.

    How will the scheme help the rural economy?

    • The scheme will generate additional income and increase employment opportunities.
    • The government will procure cow dung and prepare vermicompost in order to move towards organic farming.
    • There is a huge market for organic farming. Vermicompost will be sold by cooperative societies.
    • Distribution of vermicompost fertilizer to farmers will be done as a commodity loan by cooperative societies, banks.

    Preventing strays in urban areas

    • In urban areas, the scheme will prevent movement of stray animals on roads and highways, and also improve urban sanitation with proper disposal of waste produced by cattle.
    • Cattle will be tagged with the owner’s name, address, mobile number to the neck of each animal after the survey to ensure accountability of cattle owners if their cattle are found in the open.

  • Issue of Food subsidy in India

    Solutions to Problems in Food Subsidy Delivery

    The following solutions will help in addressing problems associated with PDS.

    1. Replacing Targeted Public Distribution System (TPDS) with Direct Benefit Transfer (DBT) of food subsidy. National Food Security Act (NFSA) states that the centre and states should introduce schemes for cash transfers to beneficiaries.Cash transfers seek to increase the choices available with a beneficiary, and provide financial assistance.  It has been argued that the costs of DBT may be lesser than TPDS, owing to lesser costs incurred on transport and storage.  These transfers may also be undertaken electronically. As per a report given by a high level committee of Food Corporation of India, DBT would reduce Government subsidy bills by more than Rs 30,000 crores.
    2. Automation at the Fair Price Shops is another important step taken to address the problem in PDS. Currently more than 4.3 lakh (82%) Fair Price Shops have been automated across the country. Automation involves installation of Point of Sale (PoS) devices, for authentication of beneficiaries and electronic capturing of transactions.
    3. Aadhar and introduction of Biometrics was recommended to plug leakages in PDS. Such transfers could be linked to Jan Dhan accounts, and be indexed to inflation. It  facilitates the removal of bogus ration cards, check leakages and ensure better delivery of food grains. In February 2017, the Ministry made it mandatory for beneficiaries under NFSA to use Aadhaar as proof of identification for receiving food grains.
    4. 100% ration cards had been digitised.
    5. Between 2016 and 2018, seeding of Aadhaar helped in detection of 1.5 crore fake, duplicate and bogus ration cards and these cards were deleted.
    6. Increase the procurement undertaken by states known as Decentralised Procurement (DCP), and reduce the expenditure on centralised procurement by the Food Corporation of India (FCI). This would drastically reduce the transportation cost borne by the government as states would distribute the food grains to the targeted population within their respective states. As of December 2019,17 states have adopted decentralised procurement.
    7. The Fair Price shops operate at very low margins as per findings of the Government. Hence the fair price shops should be allowed to sell even non-PDS items and make it economically viable. This will motivate them to not to resort to unfair practices in the distribution of Government subsidized food grains meant for beneficiaries of Government schemes.
    8. A greater and more active involvement of the panchayats in the PDS can significantly improve access at the village level.
    9. There is also an urgent need to set up a proper and effective grievances redressal system for both the fair price shops as well as beneficiaries

  • [pib] Central Sector Scheme: Agriculture Infrastructure Fund

    The Union Cabinet has given its approval to a new pan India Central Sector Scheme-Agriculture Infrastructure Fund (CSS-AIF).

    Try this question from CSP 2018:

    Q.Increase in absolute and per capita real GNP does not connote a higher level of economic development, if:

    (a) Industrial output fails to keep pace with agriculture output.

    (b) Agriculture output fails to keep pace with industrial output.

    (c) Poverty and unemployment increase.

    (d) Imports grow faster than exports.

    Agriculture Infrastructure Fund

    • AIF aims to provide a medium – long term debt financing facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through interest subvention and financial support.
    • Under the scheme, Rs. One Lakh Crore will be provided by banks and financial institutions as loans.
    • The beneficiaries will include Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, Farmer Producers Organizations (FPOs), SHGs, Farmers etc among others.
    • The moratorium for repayment under this financing facility may vary subject to a minimum of 6 months and maximum of 2 years.

    Management of AIF

    • Agri Infra fund will be managed and monitored through an online Management Information System (MIS) platform.
    • The National, State and District level Monitoring Committees will be set up to ensure real-time monitoring and effective feedback.
    • The duration of the Scheme shall be from FY2020 to FY2029 (10 years).

    Benefits of the scheme

    • The Project by way of facilitating formal credit to farm and farm processing-based activities is expected to create numerous job opportunities in rural areas.
    • It will enable all the qualified entities to apply for a loan under the fund.

  • Aatamnirbhar in Agriculture

    India has been the net exporter of agricultural commodities since 1991, however, there is scope for increasing its net export. This article suggests the strategy to achieve this.

    Foreign exchange reserve: then and now in terms of grains

    • In the mid-1960s the country had about $400 million.
    • If India had spent all its foreign currency reserves just on wheat imports, it could have imported about seven million tonnes (mt) of wheat.
    • Today, India has foreign exchange reserves of more than $500 billion.
    • Even if the country has to buy 20 mt of wheat at a landed cost of $250/tonne, it will spend just $5 billion it is just one per cent of its foreign exchange reserves.
    • In that sense, the biggest reform in the last three decades that has led to “aatma nirbharta” in food is the correction of the exchange rate.
    • Another factor is coupling and the gradual integration of India with the world economy.
    • This has helped India increase its foreign exchange reserves from $1.1 billion in 1991 to more than $500 billion today.

    India: Net exporter of agricultural products

    • India has been the net exporter of agricultural products ever since the economic reforms began in 1991.
    • The golden year of agri-trade was 2013-14 when net agricultural trade surplus was $24.7 billion.
    • In 2019-20, agri-exports were just $36 billion, and the net agri-trade surplus at $11.2 billion.
    • With this dull performance doubling agri-exports by 2022 looks almost impossible.

    Let’s look at what India exports

    • Marine products with $6.7 billion exports top the list.
    • The second is rice at $6.4 billion of which basmati is at $4.6 billion and common rice at $2.0 billion.
    • Next is spices at $3.6 billion.
    • Other items are buffalo meat at $3.2 billion, sugar at $2.0 billion, tea and coffee at $1.5 billion, fresh fruits and vegetables at $1.4 billion, and cotton at $1 billion.

    Strategy to increase export

    • If one chalks out a strategy we would need to keep in mind the principle of “comparative advantage”.
    • That means exporting more where we have a competitive edge, and importing where we lack competitiveness.
    • Together power and fertiliser subsidies account for about 10-15 per cent of the value of rice and sugar produced on a per hectare basis.
    • So, we should offer similar incentives for exports of high-value agri-produce like fruits and vegetables, spices, tea and coffee, or even cotton, as we do for rice and sugar?

    Decreasing the edible oil imports

    • On the agri-imports front, the biggest item is edible oils — worth about $10 billion i.e. more than 15 MT.
    • India needs to decrease imports through augmenting productivity and increasing the recovery ratio of oil from oilseeds and in case of palm oil, from fresh fruit bunches.
    • The maximum potential of increasing production lies in oil palm.
    • This is the only plant that can give about four tonnes of oil on a per hectare basis.
    • India has about 2 million hectares that are suitable for oil palm cultivation — this can yield 8 mt of palm oil.
    • But it needs a long term vision and strategy.

    Issue of subsidy to rice and sugar

    • Rice and sugar cultivation are subsidised through free power and highly subsidised fertilisers, especially urea.
    • It is leading to the virtual export of water because of their high water requirements.
    • One kg of rice requires 3,500-5,000 litres of water for irrigation, and one kg of sugar consumes about 2,000 litres of water.
    • This leads to increased pressure on scarce water and highly inefficient use of fertilisers.
    • It may be worth noting that almost 75 per cent of the nitrogen in urea is not absorbed by plants.
    • It either evaporates into the environment or leaches into groundwater making it unfit for drinking.

    Consider the question “While India has been the net exporter of agricultural products ever since the economic reforms of 1991, it is far from realising its potential to become the leading agri-produce exporter. In light of this, suggest the strategy that India should follow to increase India’s net agri-exports.”

    Conclusion

    The government must focus on augmenting export and decrease import dependence in agricultural products which will further its goal of aatmanirbharta and doubling the farmers’ income.

  • Agri reforms and way forward

    At a time when the economy is going through the crisis, anything that could provide revenue to the government will be a real godsend. This article suggests two such areas to tap into. It also examines the effects of recently issued 3 ordinances related to agriculture.

    Rs. 1,50,000 crore: Value of excessive grain stock

    • There is one area which the government can tap to raise more than Rs 1,00,000 crore.
    • As on June 1, FCI had unprecedented grain stocks of 97 million metric tonnes (MMT) in the Central Pool (see Figure).
    • Even on July 1, when the procurement of rabi ends, FCI is likely to have grain stocks of about 91-92 MMT.
    • This will be against a buffer stock norm of 41.12 MMT that are required for the Public Distribution system (PDS), and some strategic reserves.
    • So, compared to this norm, on July 1, FCI will have “excess stocks” of at least 50 MMT.
    • Even if one takes a conservative and lower ballpark figure of Rs 30,000/tonne  as the combined economic cost of rice and wheat, the value of this “excessive stock”, beyond the buffer norm, is Rs 1,50,000 crore.
    • This is unproductive capital locked-up in the Central pool of FCI.
    • Unlock this by liquidating “excess stocks” through open market operations.
    • It will not recover its full economic cost, as they are much higher than the prevailing market prices, but by not liquidating it.
    • But FCI will keep incurring unnecessary interest costs of about Rs 8,000-10,000 crore per annum.
    • This is simply not a good food policy.

    How will amendment to ECA 1955 will help

    •  Amendment of the Essential Commodities Act, via the ordinance route, can instil confidence in the private sector for building large scale storage.
    • Now, stocking limits will not be imposed on the private sector, except under exceptional circumstances.
    • The government, however, delete the clause of “extraordinary price rise”.
    • Removing it will lead to private sector building large and modern storage facilities (silos).
    • It will propel investments in building more efficient food supply lines.
    • The only condition could be to register large storage facilities under the Warehousing Development and Regulatory Authority (WDRA) to know how much stock is there with the private sector, and where.

    How will amendment to APMC Act will help

    • The ordinance on APMC creates multiple channels for farmers to sell their produce outside the APMC mandi system.
    • It also helps towards an unrestricted all India market for agri-produce.
    • Of course, it will be resisted by many states that are taking undue advantage of the APMC mandis’ virtual monopoly power.
    • But if the central ordinance is implemented in its true spirit, it will be a game-changer.

    How will the ordinance on contract farming will help

    • It aims to encourage contract farming.
    • The basic idea behind this is that farmers’ sowing decisions should be made in view of the expected prices of those crops at the time of harvest.
    • It is forward looking and more aligned to the likely demand and supply situation.
    • The current practice, where farmers’ sowing decisions are more influenced by last year’s price, often leads to the problem of boom and bust.
    • Although honouring an assured price remains a challenge when actual market conditions differ widely at the time of the harvest.

    Relook at food subsidy is needed

    •  In the Union budget of 2020-21, a sum of Rs 1,15,570 crore has been provisioned for food subsidy.
    • This number is highly misleading as FCI has been asked to borrow from the National Small Savings Fund (NSSF).
    • As on March 31, 2020, borrowings from the NSSF were Rs 2,54,600 crore, on which FCI pays an interest rate of 8.4 to 8.8 per cent per annum.
    • So, the real food subsidy bill for 2020-21 amounts to Rs 3,70,170 crore.
    • The Economic Survey has suggested- 1) reducing the coverage under PDS; 2) linking issue price to at least half of the procurement price; 3) move gradually towards cash transfers.
    • These steps will save a minimum of Rs 50,000 crore annually.

    Consider the question “There was a mention of reforms related to agri-sector in the recently announced stimulus package. Examine the issues with segments of agri-sector which necessitated these reforms.”

    Conclusion

    Liquidating the excess grain stock and rationalising the PDS could provide the government with much needed resources at a time when it needs it the most. Also, reforms in the related to agriculture could remove the stumbling blocks in the way towards the prosperity of farmers.