Exclusive: Ahead of Budget, here's a glimpse of what PM Modi may have planned for farmers

The PM’s Principal Secretary Nripendra Misra recently summoned top bureaucrats for the meeting in South Block through a letter to discuss “Measures to liberalize the agriculture sector from various kinds of controls and restrictions which are severely affecting farmers’ income and hampering growth prospects.” Among those who attended the meeting were Cabinet Secretary, Secretary Agriculture, Secretary Department of Food and Public Distribution, Secretary Consumer Affairs, Chief Economic Advisor and Secretary Ministry of Environment attended the meeting. The PMO note highlights that agriculture policy is riddled with problems including relic acts that are notoriously debilitating.

The measures suggested this time are intriguing because India has never adopted such a path since independence to reshape agricultural policy. In the wake of recent farmer suicides in Telangana (Medak district), Tamil Nadu (Erode District) and Punjab (Malerkotla District), the government’s move to introduce drastic reforms is a welcome step.

The government note exclusively accessed by Firstpost reveals short-term, medium-term and long-term plans.

Short-term reforms (2016-2018)

The first suggestion is to liberalise contract farming, which, as the note acknowledges, is crucial to promote food processing and to provide technical and financial support and quality input to smallholders. It also addresses scale and market constraints by producer farmers. The Model APMC Act circulated to States/UTs during 2003 provides for contract farming agreement and its model specifications. The document states that 20 states amended their APMC Act to make provision for contract farming but only 12 notified the rules. The note recommends that level authority may be set up for registration of contract farming and no market fee should be levied under it.

Representational image. Reuters

Representational image. Reuters

The second suggestion is the making of direct sale to processing industries, exporters, bulk buyers. The present Act prohibits this. The note suggests that the producer should be free to enter into direct sale without the involvement of other middlemen outside the market yard in the market area under the relevant provision of the concerned act.

The third point emphasises the de-linking of the provisions of compulsory requirement of shop or space for registration of traders or market functionaries. At present, the traders and commission agents owning a shop or godown in the regulated market only are allowed to purchase produce in the market. Monopoly of licensed traders acts as a major hindrance for new entrepreneurs and prevents competition.

The other suggestions are taking fruits and vegetables out of the APMC Act, an adoption of the model land lease law and the exemption of all kinds of tree species on private land from felling and transit regulation. This section of the reforms suggest the implementation of E-NAM in all States. It admits that so far its progress has remained quite slow and even the choice of commodities is restricted and in some cases wrong. The note has recommended that guidelines be developed to regulate agri-trade and avoid sudden ban on exports.

Medium Term Reforms (five years)

It begins by stating that no State government or Union Territory will permit the opening of any saw mills, veneer or plywood industry without prior permission of the Central Empowered Committee. It pointed out that ever since this order was issued, large scale agro forestry plantations have come up in various states particularly poplar plantations in North West India. With restrictions on setting up of the wood and plywood industry, the processing capacity did not expand to absorb the supply of timber. As a result, poplar prices crashed a few years back and are causing serious setback to agro forestry. The note made the admission that it is necessary to review the Supreme Court order to expand wood-based industries to keep pace with the demand.

The second suggestion is to implement price deficiency payment to protect farmers against price risk. This suggestion has been made, as the note goes to state that a large number of crops and States are facing discrimination in price support policy of central government as MSP is effective only for three crops. With the country moving towards direct benefit transfers, the note concludes that large scale procurement of rice and wheat will also not be required.

The third suggestion is the removal of restrictions on private sector in technology generation and sale of technology products including seed.

Long-term reforms

A revoking of the Essential Commodities Act, 1955 (EC Act) and plethora of Control Orders promulgated under this Act by the Centre and States on agricultural commodities. The EC Act is frequently invoked to check hoardings and black marketing. Despite this Act, the government note confessed, a sharp rise in prices could not be kept under control. The reason, it has been suggested, is that it is difficult to monitor and track stock of thousands of small traders operating in the country. The government, as the note recommends, may at best formulate rules of the game for the market players rather than controlling the system. The other long term reform suggested is the removal of restriction on future trading in agricultural commodities.

What the experts Say

For actual change, the discourse must shift from productivity to profitability, because behind an India that’s digital and corporate and in rhythm with global trends is an India whose hands are still touching its soil, a India that’s feeding India. Experts explain that the reason for failure of E-NAM markets reason is the lack of critical mass. Unless there is a large platform created across states, quality improvement and transparent and direct contact between the trader and the farmer won’t happen. For instance, cotton markets in Akola in Maharashtra, Vadodara in Gujarat, Faridkot in Punjab, Bijapur in Karnataka and Tirunaveli in Tamil Nadu should be accessible through one platform.

Agriculturalists advocate that unless we establish quality standardisation, a transparent and fair sale online (without touch and feel) is difficult. Like in the case of cashew kernels (an export item), quality standards are defined. The W280 means for one pound, 280 white kernels are available. Similarly, there are separate markets for jumbo nuts, broken nuts and premium nuts. Agriculture marketing experts say that the one thing that will drive the farmer to grade his produce according to quality is good price. In Ratnagiri, farmers grade Alphonso mangoes and brand their produce as ‘naturally ripened’.

Ravinder Singh Cheema, vice-chairman of Punjab State Agriculture Marketing Board, doubts that the farmers have the time to make direct sales and reach out to buyers and if at all they do, who will man their farms in the meantime? Food and trade policy analyst Devinder Sharma says what the government is calling radical reform is actually just a fanning of corporate interest. “Ask those 94 percent farmers who are selling directly if they are doing well? In Punjab, there are APMC mandis. Here farmers will get Rs 1,500 per quintal for wheat, but in Bihar where the APMC doesn’t control markets, they won’t get more than Rs 1,000. The question is, "If the absence of APMC is an advantage, then those in Bihar shouldn’t be suffering,” says Sharma, adding that he feels there is no convergence between economic sense and common sense.

Kishor Tiwari, leader of the farmers advocacy group -- Vidarbha Jan Andolan Samiti, asks if the government committed to buy 1.5 lakh metric tonne of tuvar dal, then why did it only procure five percent of that amount? “No stock permissions, no licenses, farmers continue to be hurdled by agents. The government should relax their conditions on purchases,” he points out.

“The solution is to create institutions that allow the farmers to add primary value. Instead of bundling up tomatoes, grading (which is being done with Karnataka, Tamil Nadu and Andhra Pradesh) is the only way to increase the farmers’ price in the commodity to 55 to 60 percent,” says Dr. Sreenath Dixit of the Agriculture Technology Application Research, Bangalore. Instead of selling tomatoes for instance, farmers from Kolar in Karnataka can benefit from puree making facilities and become a favourite with the jam and ketchup industry that is currently importing purees from China. There is no APMC in Chattisgarh, agriculture specialists ask why tomatoes are being dumped on the streets there.

While some experts feel that MSP helps the farmer take crop cultivation decisions because announcing the price beforehand means the government is making its buying intent clear. Recently, there was record pulse production and support programmes made seeds available and gave technical training to the farmers. The Krishi Vigyan Kendras trained farmers in new technologies across the country. Others feel that the scope of MSP must be increased. How will the government purchase crops it can’t store? Setting up of mass storage facilities is as necessary as fixing a rate when private players express the desire to step in and buy out the produce.

“There’s something called a model price in which the price fixed in the morning remains the same through the day. Now if the price has been fixed at 30 paisa, then what how is the farmer benefitting from it?” asks Sharma. Despite the MSP of toor dal being set at Rs 4,625 per quintal, it is being sold for much lesser. Its recommended MSP for 2016-17 is Rs 5,050.

Farmer rights activists continue to argue that India needs to create income for farmers and impose restrictions on purchase and sale price to ensure that both the farmers and the consumers shall remain secure, even when private players are required to intervene. The World Bank states: “Well-managed urbanization can bring innumerable benefits to the 600 million people projected to live in India’s cities by 2031. Accordingly, the new strategy aims to help India make the rural to urban shift as productive as possible in terms of growth and inclusion and to improve the livability of urban areas, especially secondary cities where a sizeable population increase is taking place. At the same time, given agriculture’s continued importance in the economic and social fabric of the country, the strategy will help India work toward raising agricultural productivity.”

However, experts feel that an increased emphasis on urbanisation and the constant miseries arising from keeping food prices low will eventually force farmers to give up on their farms, if not on their lives.

For full coverage of Union Budget 2017 click here.


Published Date: Jan 26, 2017 12:33 PM | Updated Date: Jan 27, 2017 10:02 AM

Also See