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Indian Economy

Last month, the NITI Aayog released the Three Year Action Agenda (TYAA) for the government, a roadmap for reforming the various sectors of the economy. Here we look at its agenda for the agriculture sector, and how best it can rescue the sector whose growth has plunged to just 1.8 per cent annually in the first three years of the NDA government.

In doing so, we also touch upon the recommendations of some important committees constituted by the current government in the realm of agri-food. These are the High Level Committee (HLC) on Management of Foodgrains and Restructuring FCI (headed by Shanta Kumar, January 2015), the Task Force on Agriculture headed by the Vice-Chairman of the NITI Aayog (May 2016) and the four volumes (out of 14) of the Committee on Doubling of Farmers' Income (August 2017). The government, thus, has ample reference points for reforming the food and agriculture sector.

The TYAA basically talks of action pertaining, first, to increasing productivity of land and water, second to reforming agri-markets on the lines of e-NAM, third, reforming tenancy laws, and finally, relief measures during natural disasters. There is nothing new - and nothing wrong - in these recommendations; they have been made by the committees cited above. The TYAA, however, does not prioritise policy actions, nor does it talk about the role of trade policy in agriculture, or reforming the massive system of food and fertiliser subsidies. Nevertheless, the hard question is whether the government is ready to bite the bullet.

We think urgent action is needed on five fronts and list them in order of priority. First, the government needs to improve the profitability of cultivation by "getting markets right", second, it needs to invest in water to fulfil its slogan of "har khet ko pani" and "more crop per drop", it's third priority should be Direct Benefit Transfer (DBT) of food and fertiliser subsidies to the accounts of targeted beneficiaries, which can release resources for investments, fourth it should ensure that the new Pradhan Mantri Fasal Bima Yojana (PMFBY) delivers compensation to farmers in time, and finally, it should free up land lease markets. Let us elaborate on these points a bit.

By now it is clear that the policy of minimum support prices (MSPs) - and the promise of 50 per cent profits over costs in the BJP's election manifesto of 2014 - has not improved profitability of cultivation in the last three years. In fact, farmers' returns have gone down in the case of most crops. The situation is worse for producers of basic vegetables like potatoes, onions and tomatoes. Prices of these crops during harvest time plunged to about Rs 2 per kg in the last season while the consumers were still paying Rs 15 to Rs 20 per kg. Attempts to reform the Agricultural Produce Marketing Committee (APMC) markets on the lines of the model act of 2003, and now through the Agricultural Produce and Livestock Marketing Act, 2017, have not achieved much success.

However, India has shown in the case of milk, through Operation Flood - a la the AMUL model - that farmers can get 70-80 per cent of the price paid by consumers. Why then can't we have "Operation Veggies" on similar lines? A beginning can be made with at least onions, potatoes and tomatoes. That would require buying directly from farmers' groups (FPOs), setting up logistics from grading, storage to movement, and linking them to organised retail (including e-retail), large processors and exporters. But to do all this, the government will have to commit not only enough resources as it did for Operation Flood but also change certain laws, including the Essential Commodities Act (ECA).

The e-NAM scheme, which is supposed to create an all India market, in order to ensure better prices to farmers, has not succeeded in its endeavour so far. Software is still being installed in mandis to enable them to switch auctions from the shouting platform to the electronic ones. Inter-mandi and inter-state transactions are very rare. However, an easier way to improve farmers' profitability is to open up exports of all agri-products, without any restrictions, and allowing private trade to build global value chains, keeping the ECA in abeyance. This would require a change from the current pro-consumer approach to one that is focussed on farmers.

Second is the issue of investments, especially in water. The Pradhan Mantri Krishi Sinchayee Yojana is mandated to complete 99 irrigation projects by 2019, which will bring 76 lakh ha additional area under irrigation. NABARD, with Rs 40,000 crore as Long-Term Irrigation Fund, is to help states in completing these projects. It would be a commendable achievement for the government if it can complete these projects as planned. But open canal systems with flood irrigation don't give high water-use efficiency.

It is time to accord higher priority to micro-irrigation (drip and sprinklers) to achieve the objective of "more crop per drop". Israel and the US could be good examples to follow: Israel has the highest proportion (99 per cent) of its irrigated area under micro-irrigation while the US has largest absolute area (15 m ha) under micro-irrigation (See graph).

The third area for action should be DBT of food and fertiliser subsidies. The HLC has already provided a roadmap in this respect. Rs 30,000 to Rs 50,000 crores can be saved each year, which can be invested in water resources and upgrading marketing infrastructure.

The fourth area is ensuring that the Pradhan Mantri Fasal Bima Yojana (PMFBY) delivers. Currently, several states don't pay premium in time, don't conduct crop cutting experiments, and as a result, farmers suffer long delays in getting any compensation. These lacunae can be fixed through modern technology and better governance, provided there is a champion in the government to deliver.

The last suggestion would be to free up land lease markets for long periods. China allows land lease for 30 years so that corporate bodies can work with farmers, bringing in their best expertise, inputs and investments. Can India do it?

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