The Hindu Business Line : A rich harvest

NEVER BEFORE HAVE the country's policymakers bestowed so much attention on agriculture and agri-business as they are doing now. Tuesday's Cabinet decision — latest in the series of announcements since the beginning of the year — to allow the private sector to procure foodgrains directly from farmers alongside the Food Corporation of India (FCI) and grant WTO-compatible subsidy to promote grain exports is something the market has been waiting for. Thankfully, the uneasy `disconnect' between primary producers and processors has at last been bridged.

The decision, long overdue, is in tune with the recommendations of both the Expenditure Reforms Commission and the high-level committee on long-term grain policy headed by Prof Abhijit Sen. Besides help consolidate the country's emerging position as a notable exporter of grain it would not only integrate the domestic and global markets, but also help farmers obtain remunerative returns in line with world price trends. For the private sector — mainly, processors and exporters — direct access to the growers would translate into lower cost of procurement because of disintermediation, improved supply chain efficiencies and, hence, improved competitiveness. And, in the medium run, there would be the opportunity for players with capital, technology and market information to network with a large number of farmers and promote contract farming.

As agri-marketing is a `State' subject, the Centre has to ensure that all States fall in line and do not curb private trade's freedom. Importantly, the private sector entry in grain procurement would reduce the burden on the FCI, now really stretched in its wheat and rice procurement, storage and movement operations. Its high operating costs — way above that of private trade — have always led to ballooning of the food subsidy burden. Hopefully, there will be some relief now. It is unclear if the system of open-ended procurement would continue. The FCI's role needs to be clearly defined, especially on procurement and pricing aspects. Now, the parastatal should concentrate on neglected areas — the eastern and central regions — for grain procurement so that inter-regional distortions can be reduced. The proposed inter-ministerial panel should look into these issues. More important than grain exports is the servicing of domestic consumers. It would be a shame if the country continued to export grain at subsidised rates when millions at home are unable to access food at affordable prices.

On the face of it, the proposed National Commission on Farmers (NCF), to take a holistic view of various farm sector issues, ought to prove a useful initiative. However, the NCF's success would depend on the political will to implement changes. Will the NCF have the authority to cut through the bureaucratic maze and will its recommendations be binding on the government? The NCF's powers are unclear, but what it needs to address are clear: Raising crop yield, expanding the area under irrigation, encouraging crop diversification, bringing user charges for inputs, building rural infrastructure, and delivering commercial information to farmers to enable them take informed decisions on production and marketing.

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