Agri reforms 2.0

In the latter part of its first term, the Modi government had made the agri sector its prime focus, rolling out a series of reforms such as e-NAM and the price deficiency payments scheme to deal with farmers’ distress over falling prices. Finally, the Centre, taking a leaf out of States such as Telangana and Odisha, introduced income support, indicating a paradigmatic shift in the direction of farm support policy. With income support being permissible under the WTO, it would now be possible to reduce the scrutiny over ‘producer support subsidies’. In its next tenure, issues of overproduction may continue to pose challenges to the Centre. As a statistical analysis by BusinessLine (May 27) points out, farming has become drought-resilient, with food and horticulture output rising since 2015-16, despite a succession of below-normal or deficient monsoons. The output of milk, fish and eggs have increased sharply over the last decade. However, farmers’ income has not improved in the absence of demand and more so, a supply chain that can ensure viable farm gate prices while reaching the produce in time to the consumer. Hence, agri-marketing reforms need to be foregrounded, going beyond the e-NAM initiative. Measures to promote self-sufficiency in crucial crops such as pulses from a nutritional point of view need to be kept up. Pulses are a big plus for soil fertility and for their low water requirements. The sharp spurt in horticulture output should be sustained by improvements in marketing channels as well as in crop insurance. It is possible to introduce product differentiation in crop insurance schemes.

Despite record-high food production, policy mis-management has seen agri imports growing at 9.8 per cent CAGR in the last five years while exports growth has been muted at 1.1 per cent CAGR. Institutional reforms such as creation of farmers’ producers organisations can help in breaking credit, logistics and marketing bottlenecks. It should also be ensured that all States implement the Model Agricultural Produce and Livestocks Marketing Act, 2017, and encourage investments in agri-processing. Doing away with APMC yards, without anything to take their place, is not a good idea as Bihar’s experience has shown. Cold storages need more attention than ever before with rising horticulture potential. The state of food processing parks needs to be reviewed.

Subsidies for paddy and cane in rainfed regions, such as free electricity, have led to inappropriate crop choices. The Centre must adopt a holistic approach towards water management and agriculture. Haryana’s incentive scheme for shifting away from paddy is worth emulating but there are few signs that the Centre is thinking along these lines. Finally, very little can be achieved by just increasing the MSP. While the Centre obviously can’t revive food demand or prices globally, it can certainly come up with long-term policies on exports and imports that help producers deal with non-tariff barriers. The Centre is on the right track in its farm policies; its policy mix needs to be fine-tuned.

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