Finance Commission picks agri reforms for incentive to States

Adopting agricultural reforms would help States get more funds from the Centre as the 15th Finance Commission (FC) has for the first time included implementation of agri reforms as one of the parameters for gauging the performance of States, said Ramesh Chand, Member, Niti Aayog, and part-time FC member.

“One of the terms of reference to the FC was to give performance-based grants to the States. Since I was also part of the commission, I was able to persuade the Commission to consider agriculture as one of the categories. The Commission has agreed to include implementation of agricultural reforms as one of the parameters for providing incentives,” Chand said at a function to release India Commodity Year Book 2020 brought out by the National Collateral Management Services Ltd (NCML) on Wednesday.

Adoption of model laws – such as Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017, Model Agricultural Land Leasing Act, 2016 and Model Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, 2018 – will be considered reforms, he said. Finance Minister Nirmala Sitharaman in her budget speech last Saturday said, “We propose to encourage those State governments” who undertake implementation of these model laws.

Agri sector growth

Chand said the agriculture sector is witnessing growth, but with an increase in cost of production, and it is one of the reasons why India is losing export competitiveness. “When you increase the yield, average cost of production also increases and farmers will start asking for higher prices. This factor has started affecting the Indian agriculture sector,” Chand said.

The interim report of the 15th FC said that guidelines for performance-based grants include: implementation of agricultural reforms, development of aspirational districts and blocks, power sector reforms, enhancing trade (including exports), incentives for education, and promotion of domestic and international tourism. However, the Commission did not reveal the grant amount saying that it would be provided in the final report.

Investment potential

Earlier, introducing the book, NCML Chiarman Sanjay Kaul said agri reforms are an important step for attracting private investment in agriculture.

“Today, 80 per cent of investment in agriculture is done by farmers themselves, 17-18 per cent by the government and the corporate sector accounts for only 2 per cent of the investment. There is a need to attract more private investment in agriculture,” Kaul said. He also said the minimum support price (MSP) mechanism, the way it is being implemented now, does not help farmers but consumers. It is actually addressing consumer inflation, he said, adding that MSP is actually working against those farmers whose produce is not procured under the procurement scheme. The book, edited by Kaul, covers four broad themes – the present commodity space, the recent initiatives in technology and innovation in agriculture, the new emerging areas and the critical theme of managing commodity risk.

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