A 1991 moment for agriculture

GOVERNANCE/ ECONOMY/ AGRICULTURE

Topic: General Studies 2 & 3:

• Government policies and interventions for development in agriculture sector
• Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

A 1991 moment for agriculture

Context: In the wake of COVID-19 induced crisis, Union government announced set of reforms aimed at farm sector.

Did you know?

• 45 per cent of India’s labour force (agricultural) generates only 14 per cent of GDP
• India is the largest exporter of rice in the world and the second-largest producer of both wheat and rice, after China
• The project to double farmers’ incomes by 2022 and the programme to complete 99 irrigation projects by 2019, have had a success rate of less than 50 per cent.

What were the major components of agricultural package announced?

1. Agri-Infrastructure: ₹1-lakh crore fund to finance agriculture infrastructure projects at the farm gate and produce aggregation points

• It will ensure creation of adequate cold-storage facilities
• This would prevent wastage of agri-produce, especially in perishables

2. Effective Fund delivery: These funds are channelled through agricultural cooperatives, farmer producer organisations, rural entrepreneurs and start-ups

• This ensures that benefit & responsibility of fund utilization lies with principal beneficiaries (farmers)

3. Formalisation: A ₹10,000 crore scheme to promote the formalisation of micro food enterprises

• It will assist unorganised enterprises in scaling up food safety standards to earn the products certification and build brand value

4.Amending the Essential Commodities Act (ECA) of 1955

• The legislation helped government cracks down on hoarders and black-marketeers of such commodities (by putting stock limits) to ensure normal supply of goods.
• It is a scarcity era legislation enacted when India was facing famines and droughts, however India is a surplus producer today.
• This law has been abused multiple times which has stifled private investment in agriculture and stunted agri-exports
• The amendments proposed allows for deregulating cereals, pulses, oilseeds, edible oils, onions and potato, encouraging greater participation by private players in the agricultural sector.

5. Agri-Market reforms: Bringing a Central legislation to allow farmers to sell their produce to anyone, outside the APMC mandi yard and having barrier-free inter-state trade.

• It will bring greater competition amongst buyers, lower the mandi fee and commission fee, benefitting both farmers and consumers
• This would provide enhanced marketing freedom for farmers and enable better price realisation.
• Allowing for free inter-state trade could lead to better spatial integration of prices.
• Finally, India will have one common market for agri-produce.

6.Creating a legal framework for contract farming

• It will help farmers take cropping decisions based on forward prices
• This will enable farmers to engage with processors, aggregators, large retailers thus reducing the dependency on APMC monopolies

Challenges ahead

• The package may be more beneficial in the longer term than providing any immediate relief from the lockdown-caused distress in the rural areas.
• Total deregulation for foodgrains has the risk of future inflationary food price spikes
• Agri-market reforms means privileging market forces without necessarily safeguarding food security.
• Building farmer producer organisations (FPOs), based on local commodity interests, is a necessity for empowerment of farmers

Connecting the dots:

• Critically analyse the 1991 economic reforms
• Second Green revolution