Relevance: GS-3: Transport and Marketing of Agricultural Produce and Issues and Related Constraints

Key Phrases: Farm reforms, GST council, APMC mandi, MSP, Schedule 7 of the Constitution, Article 246 of the Constitution, Concurrent list, Agricultural, and Food Marketing (AFM) Council, Integrated direct benefit transfer (DBT).

Context:

• The government began bold reforms in 2020 when it enacted two new farm laws and amended the third one.
• These laws were expected to provide remunerative prices to farmers by providing pan-India competition to the oligopolist APMC markets, give opportunity for quality management through contract farming, and facilitate assured input supply and scale economies in the value chain. Eventually, these policies would have made minimum support prices (MSP) redundant.
• But a quick succession of events leading to the scrapping of the laws is a classic example of governments getting the science of reforms right but missing out on the art of implementation.

Major reform issues in Indian agriculture

• Remunerative prices to farmers;
• Balanced growth in the production of cereals, pulses, and oilseeds;
• Facilitation of value chain in production and processing; and
• Negating the adverse impact of subsidies and price supports on the deficit, environment, and farmers’ health

What went wrong?

• Mandi fees factor:
  • While one may realize the futility of MSP and APMCs, one must remember that this combination was offered to farmers for decades to address the issues of hunger and food security. The existing cropping pattern is the result of these past policies.
  • The government must also recognize that mandi fees have been a big source of revenue for the APMCs.
  • Studies show that revenue from APMC mandi fees was close to ₹10,000 crores in 2019-20 and States such as Punjab, Haryana, and UP had earned mandi fees over ₹1,000 crores.
  • In Punjab, the APMC market fees rate has been as high as 2.5 percent and APMCs have also resorted to taking loans against potential APMC revenues.
    o Therefore, instant implementation of the farm reforms was bound to cause stiff resistance to it.
  • Stakeholders accustomed to the existing incentives could not have changed their behaviour immediately. They need time and support to alter their worldview and behaviour.
  • Traders and big farmers who lose out due to reforms are relatively few in numbers, their per household losses are high, and they can effectively lobby in organizing protests.
  • On the other hand, while gains may be larger, the disparate small farmers are thinly spread across the country unable to organize an agitation to support their individual gains.
• Overlapping of jurisdiction:
  • Another important facet the government missed was the overlapping jurisdiction between the Centre and the States on issues related to agriculture. Schedule 7 (Article 246) of the Constitution makes agriculture a predominantly State subject.
  • Up until 2013, the Planning Commission was in existence, and States could voice their opinions, respond to incentives, and get funds from the Commission. However, the Planning Commission was replaced by the NITI Aayog in 2014, which neither has funds to give to the States nor has a regular mechanism for interaction between the Centre and the States on agricultural issues.
  • Moreover, the Centre-State relations regarding agriculture are complex, for the Concurrent List of Schedule 7 has provided powers to both to control production, trade, commerce, supply, and distribution of goods of any industry, including agriculture.

What needs to be done?

• Center-states cooperation:
  • The responsibility of negotiations on agricultural trade at WTO and fixing of MSP are vested with the Centre.
  • Therefore, both Centre and the States are equal stakeholders in the development of the agricultural sector, and, only a spirit of cooperative federalism will ensure the success of farm reforms.
• Establishment of Agricultural and Food Marketing (AFM) Council
  • The government should establish an Agricultural and Food Marketing (AFM) Council along the lines of the GST Council for furthering farm reforms.
  • An AFM Council can be chaired by the Union Minister of Agriculture, and Agriculture Ministers of all States and Union Territories can be its members.
  • Since negotiations on agricultural liberalization at forums such as WTO are entrusted with the Ministry of Commerce, the Union Minister of Commerce should also be part of the Council.
  • In AFM Council, despite divergent public postures and grandstanding, lawmakers of different parties and ideologies can frankly discuss issues in a collegial atmosphere in close-door, off-camera meetings.
  • They can consult experts and experienced civil servants without hesitation.
  • Reform bills that get drafted in such a manner turn out to be a non-zero-sum game among the lawmakers with a high rate of success.
  • Under the aegis of AFM, a structural adjustment and direct benefit transfer (DBT) program may be initiated.
• Gradual implementation:
  • The farm reform Acts may be implemented in a staggered manner. For example, changes introduced through reform Acts could first be introduced in the fruits, vegetables, and other horticultural crops where MSP was not prevalent and States had already initiated contract farming.
  • The reforms can be introduced in cash crops such as cotton and sugarcane, followed by oilseeds and pulses, and, finally in cereals.
  • Concurrently, a plan for devolution of funds to APMCs for their lost revenues can be implemented as well. Such an adjustment program can be staggered over five years so that there are no policy surprises.
• Integrated direct benefit transfer (DBT):
  • An integrated direct benefit transfer (DBT) to farmers and sharecroppers should be initiated instead of MSP and subsidies.
  • While the MSP reach is limited, DBT can reach all farmers and sharecroppers.
  • A fixed amount of DBT per household helps the poor far more relatively.
  • Once DBT is introduced and MSP and subsides are out, market prices will give signals to farmers for optimal selection of inputs and crops. This will prevent excessive use of inputs and lop-sided growth in the production of cereals.
  • DBT transfers to Jan Dhan Accounts will also prevent leakage and delays in disbursement.

Conclusion:

• The journey of reform is never easy. Substantive and structural reforms pose electoral challenges but crises always create opportunities for change.
• While implementing the next set of farm reforms government should not miss out on the art of implementation on a path of getting the science of reforms right.

Source: The Hindu BL

Mains Question:

Q. How can a GST-like council be a tool to iron out political differences on key agricultural sector reforms and their implementation?