THE Government of India (GoI) is working on creating a common agricultural market that will improve the lot of farmers and the efficiencies of India’s notoriously inefficient farm-produce markets.
A model law to reset the way agricultural markets operate is in the making. It proposes to replace existing fragmented and over-regulated markets for agricultural produce and allow farmers a wider choice of markets beyond the local mandi or wholesale markets.
As statement of purpose, this is what Ashok Dalwai, Additional Secretary at the Agriculture Ministry, who heads the committee that drafted the new model law has to say:
“Our goal is to create a one-nation, one-market model for farmers, similar to what GST (the goods and services tax) is to taxation… a model of creative disruption for an efficient marketing system.”
The model law aims at liberalising agricultural trade allowing farmers to access a wide range of markets to help them get better prices. Obviously, this initiative is part of the ‘Digital’ juggernaut and the process was set in motion after Prime Minister Narendra Modi launched an electronic National Agriculture Market (eNAM) platform in April 2016 and later set an ambitious target of doubling farm incomes by 2022.
While giving some details of this ‘one-nation, one-market model’, Dalwai lamented that the reform process beginning in 1991 largely ignored agriculture—a sector involving 140 million families and the largest private enterprise in the country. Ramesh Chand, member of Niti Aayog, echoed this when he said: “Agrarian distress has begun after reforms started in 1991, when focus shifted to the manufacturing and service sectors, which grew much faster. It was only a decade later that some reforms were undertaken in the sector…”
If this concern is really genuine, the eminent Think Tank and the Union Agriculture Ministry would do well to dig out the “Report of the High-Powered Committee on Agricultural Policies and Programmes–1990” submitted to the then Deputy Prime Minister, Ch. Devi Lal, just about a year before the onset of the 1991 ‘Liberalisation-Privatisation-Globalisation’ process.
THE committee was headed by former Union Agriculture Minister Bhanu Pratap Singh and had top farmer leaders, parliamentarians, eminent economists and an administrator (the writer) as members. The main Terms of Reference was to examine the feasibility and desirability of declaring/transforming agriculture as industry and suggest policies and programmes to make India an agriculturally surplus nation.
The committee looked at the issues from one large perspective—remunerative/stable income to farmers across the board while ensuring food security for all with the active involvement of key stakeholders.
The core issues identified were: need to rely more on the commitment of farmers, who are the producers, and the market mechanism that influences consumption; protecting the farmer and the consumer against the vagaries of production and the market forces in order to enhance agricultural productivity and ensure fair prices; reduction in the cost of foodgrain procurement, storage, transportation and distribution; an efficient delivery system under which those in genuine need of subsidies and support are properly targeted and given sufficient access to foodgrains; and, effective intervention powers in the hands of the government in times of need to protect the interests of producers or consumers.
The committee suggested a series of policy initiatives. The emphasis was on withdrawal of all controls—except that of quality—on movement, processing, marketing and export of farm products, except in years of scarcity. The concept of “triple pricing” was advocated in order to regulate the market and protect the producer, consumer and the trader. There will be a ‘parity price’ to fully compensate the farmers for a rise in the cost of inputs and their other necessities of life, a ‘support price’ below which prices will not be allowed to fall, and ‘intervention price’ beyond which prices would not be allowed to rise.
An important suggestion was to establish a chain of professionally managed rural and peri-urban warehouses with infrastructure and banking facilities. The farmers may, at any time, sell their produce to the warehouses at the support price and this stock will go in government account. The farmers will have the option to deposit the same in their own accounts and take bank loans against their pledged stock. It should be obligatory for all stockists who wish to stock more than 20 tonnes of foodgrains to do so only in these warehouses. Private sector could be involved in building and managing these warehouses.
As soon as the price of foodgrains in the open market rises above the intervention price (already fixed), all stocks or part of it would be acquired by the government agencies on payment of “parity” price. If the price would fall below the support price, the farmers would have the right to sell their stocks to the government at the support price already fixed. Storage charges paid by farmers would be compensated. This mechanism could be made to work effectively by establishing appropriate Food Security Regulatory Authorities at the Centre and in the States invested with adequate powers to implement and monitor.
Under this policy mechanism, farmers will be assured of minimum support price and consumers reasonable and relatively stable cost. Traders—private as well as cooperatives—will also know the limits within which they can operate. Small farmers will be saved from going in for distress sales and the government will have the facility to quickly locate and acquire foodgrain stocks in times of need.
OBJECT of the scheme was to empower and rely on the real stakeholders in the system instead of a bunch of “bureaucrat-employees” who are more interested in their job security than the nation’s food security. This is sought to be done by trusting the farmers and giving them incentives to stock foodgrains at the chain of government/privately-owned or contracted warehouses and draw sustenance and support from the same. In short, the committee’s recommendations were meant to make the farmers stand on their feet and be their own boss with a stable income instead of depending on government charity.
Had it happened, large parts of India would not have gone through the shame and agony of its small/medium farmers living in penury with thousands of them committing suicide. Because reforms suggested by the committee would have addressed the two critical causes for this distress—unremunerative/unstable farm prices and debt-trap. But that was not to be! Now, a quarter century later, pushing the farmers towards a ‘digital market’ with the force of law is like asking the bulk of them to fly before they can stand on their feet. Will this extreme be inclusive and sustainable? The jury is out!
The writer is a former Army and IAS officer