SYNOPSIS : IASbaba’s Current Affairs Focus (CAF) Mains 2017: Day 2

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1. Is it high time to tax agricultural income in India? Discuss its pros and cons. Also suggest measures to ensure an equitable, effective and efficient agricultural tax regime.

Introduction:

With increasing problems like farmer’s protests, suicides and migration of agricultural communities to other sectors, agricultural taxation will end up disturbing the whole country and cause large scale violence who consist of majority in country.

Body:

Effect of Agricultural taxation

Pros:

• Main stream: It will bring the majority population under tax bracket.
• Accountability: Of agricultural sector towards GDP and economic development.
• Formalization: It will bring agriculture and agricultural employment into formal sector.
• Income diversion: It will help in checking diversion of non-farm income to farm income because of tax benefits.

Cons:

• Food security: It will affect production.
• Price: The price to end consumer will increase drastically.
• Retention: Of agriculture community to other jobs affecting agricultural sector.
• Youths: Future will be in danger as youths will no more be interested.
• Commercial: Food crops will decrease leading way to commercial crops.

Measure for effective, efficient and equitable agricultural tax regime:

• Food crop: Exemption of food crops from taxation and taxing commercial crops.
• Low tax rate: Tax rate should be very low and slabs different from normal IT slabs.
• Tax year: Due to frequent droughts and floods affecting productivity, tax calculation can be average of two or three years than one year.
• Credit: Improved credit disbursal to honest tax payers.

Conclusion:

Recently released report of Bibek debroy committee suggested taxing agricultural income, but it is a sensitive issue in India as it will affect the political fortunes and no government will dare to take such step. Also, hardly youths are attracted towards agriculture as an employment option so it will affect the overall food security of the country.

2. What is cashless and less cash economy? What are its advantages? Discuss the challenges that India is facing in the ongoing transition. Also, in this regard, examine the effects of demonetisation.

Introduction:

Cashless economy refers to economies where there is no hard currency in circulation and everything is done through digital currencies through online transactions.

Less cash economy refers to economies where the hard currency transactions are very less compared to digital currencies i.e. majority of transaction is done through online/digital mode.

Body:

Advantages of Cashless economy:

• Accountability and transparency: Of each rupee spent and saved.
• Corruption: It totally eliminates corruption.
• Black money: It eliminates parallel economy.
• Formalization: Of all sectors and jobs in the country.
• Illegal activities: It leaves behind trails of transactions, so most of the illegal activities like terror funding, anti-national protests, naxalism will reduce due to lack of funds.

Advantages of less cash economy:

• Printing costs: It saves lot of costs in printing.
• Easier checks and controls: On circulation and restrict diversion to illegal activities.

Challenges:

• Financial cost: huge costs incurred in disposing old cash and inventories.
• Infrastructure: Lack of infrastructure at present stage to take up such huge task.
• Digital illiteracy: Majority lack knowledge about digital transactions.
• Banking facility: Many still lack banking facilities.
• Cyber security: Providing secure cyber facilities which is away from cyber thefts.

Effects of demonetization:

• Digital transactions: It increased digital transactions across the country.
• Awareness: It spread awareness about financial literacy and online transactions.
• Terror funding: It reduced funding for terrorism, naxalism and Kashmir unrest.
• Counterfeited currency: It reduced supply of counterfeited currencies from across borders.
• Financial inclusion: It brought in many into formalization of credit and banking sector.

Conclusion:

Short term effects of demonetization might have caused lot of troubles but it created awareness to country about the Banking system and brought majority of Indian to adopt online transactions. Cashless economy will create huge impact by increasing economic growth and development and keep check on many of the illegal activities in the country.

3. Agrarian distress has become a serious challenge for the economy and has grave socio-political repercussions. Examine the factors that have led to this situation. Also discuss the measures taken by the government to address the same. Do loan waivers offer a sustainable solution to this problem? Critically analyse.

Background:
In the last 20 years, according to the government’s statistics, more than three lakh farmers have committed suicide in India. The situation of the farmers has been steadily declining and has reached its new low.

Root causes of agrarian crisis:

• The intense pressure of population on land.
• The shortage of money: About 52% of agricultural households are estimated to be in debt.
• Multiple risks to which a farmer is constantly exposed: Weather, weak soil fertility, pests and plant diseases, price.
• The economy is not producing enough jobs to accommodate the migrants from farmer families. This leads to frustration, despair, unrest.
• Demonetisation: The Centre’s decision to demonetise high-value currency notes in November last year came as a severe jolt to farmers as cash is the primary mode of transaction in agriculture sector.
• Poor productivity: Farmers in India grow 46% less rice an acre than their Chinese counterparts.
• Agricultural market- Yet not reformed: The monopoly of traders over local agricultural markets is perpetuated by law, which bars farmers from selling directly to consumers. This kills any chance of farmers getting a fair price, lining the pockets of commission agents instead.

Steps taken by the government:

• The Pradhan Mantri Fasal Bima Yojana- The new crop damage insurance scheme is a vast improvement on the old crop insurance model in vogue since 1970s.
• Pradhan Mantri Krishi Sinchayee Yojana.
• Bringing green revolution to eastern India(BGREI)- in order to diversify the cropping pattern.
• E-NAM (National Agricultural Market) to ensure better price for farm produce.

Farm loan waiver:

Issues-

• The loans from banks cover only a fraction of the farmer- 30-50% of farmers.
• Most of the loans are extended to small, medium and medium large farmers and not to marginal farmers.
• Farm loan waivers disrupt “credit discipline” among borrowers as they expect future loans to be waived as well.
• It does increase the problem of moral hazard by penalising sincere and law abiding farmers.
• It gives rise to a tendency to default if the loan waivers are not a one-time solution but keep appearing every decade.

Thus, the banking loans waiver is not going to solve the crux of the problem.
What more needs to be done?

• The liberalisation of the existing land lease laws will help both marginal and sub-marginal farmers.
• Cooperative farming: It can help contain the adverse consequences of land marginalization.
• The Swaminathan Commission recommendations needs to be implemented: The committee had gone into this issue of MSP and had recommended that it should be extended to all crops and should be at least 50 per cent above the average cost price of farmers in each state.
• Organic farming: If farmers are to be rescued from this crisis we desperately need to change the whole agriculture policy.
• Expediting steps to reform the Agricultural Produce Market Committee system and introduce the model contract farming law would go a long way to free farmers from MSP-driven crop planning.
• The old, labour-intensive methods must give way to technology for efficiency and higher yield.

4. The central government has drafted the Agricultural Produce and Livestock Marketing (Promotion and Facilitating) Act (APLM), 2017 which will replace the Agriculture Produce Markets Committee Act, 2003. Discuss its objectives, provisions and significance.

Introduction:

In a major move to liberalise agri-markets, the Central government has drafted a model law- Agricultural Produce and Livestock Marketing (Promotion and Facilitating) Act (APLM), 2017.

Objectives:

• The purpose is to create a single agri-market where with single licence one can trade agri-produce as well as livestock.
• It seeks to end monopoly of traditional APMC mandis and allow private players and others to set up wholesale markets.
• The law seeks to set a separate authority to regulate all agri-markets including APMC and provide trading licences.

Significance:

• It would be a major agri-reform, if states adopt the new model law, as it provides wider options for farmers to sell produce and get better prices.
  At present, farmers can sell their produce at regulated APMC (Agriculture Produce Marketing Committee) mandis only. There are 6,746 such mandis and each one is located at a gap of 462 km. They are subjected to different kinds of fees.
• Under the new model law, traders will be able to transact in all markets within a state by paying a single fee and sell fruits and vegetables outside existing wholesale markets
• The new law will end the monopoly of APMC and allow more players to set up markets and create competition so that farmers can discover prices and sell their produce accordingly.
• The law promotes multiple market channels like private market yards, direct marketing and even godowns and silos can be notified as markets.

Provisions:

• The government’s aim is to set up a wholesale market at every 80 km.
• It caps market fee (including developmental and other charges) at not more than 1 per cent for fruit and vegetables, and 2 per cent for foodgrain.
• It caps commission agents’ fee at not more than 2 per cent for non-perishables and 4 per cent for perishables.

Conclusion:
The new model law comes on the back of other initiatives by the centre to reform India’s farm sector. The electronic national agriculture market (eNAM) platform for trading of farm produce and a model land leasing law which seeks to record tenant farmers and help them receive benefits such as insurance and credit are the other such inititatives.

5. The food processing sector in India has got immense potential and the government has taken many initiatives to tap the same. In this light, examine the need, objective and significance of the SAMPAN scheme for the food processing industry in India.

Why is food processing industries significant?

India is a land famous for food production. More than 50% of Indian population work in Agriculture related activities. If there are good food processing industries in India, raw materials like grains or meat can be converted into food for domestic and foreign consumption.

Food processing units acts as a link between agriculture and industries.

Food processing industries can absorb a major share of workers from the agriculture sector, who face disguised unemployment. It can lead to better productivity and GDP growth.

Food processing prevents food wastage and help in attaining food security.

Processed food requires less space for storage.

Processed food can be exported. This may help us in getting foreign exchange reserves.

Government Initiatives

100% FDI in this sector

Agri Export Zones

National Mission on Agriculture

Vision 2015 for food processing

National Mission on food processing

Mega food parks

Modernization of abattoirs

Cold Chain Infrastructure

R&D, QA, Codex and Promotion

SAMPADA SCHEME

The new scheme SAMPADA (Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters) is nothing but the restructuring of Ministry of Food Processing Industries (MoFPI) below new Central Sector Scheme.

It was approved by Cabinet Committee on Economic Affairs (CCEA), which was headed by the honourable Prime Minister Shri Narendra Modi for the period of time 2016-2020.

Scheme Combined With SAMPADA

Many existing schemes will be combined under this major scheme. Namely, schemes of the Ministry of Food Processing Industries (MoFPI) like Mega Food Parks, Integrated Cold Chain and Assessment Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, etc.

It will also comprise of the new schemes like Infrastructure for Agro-processing Clusters, Creation of Backwards and Forward Linkages, as well as Creation / Expansion of Food Processing & Preservation Capacities.

Objective

The main objective of this scheme is focusing on the increase in agriculture, modernising processing methods of agri products and decreasing their wastage.

Significance

The new scheme gives renewed push to the food processing sector in the country. Its intention is to progressing the modern infrastructure to facilitate entrepreneurs in setting up of food processing divisions based on cluster approach and deliver effective and seamless backward and forward integration for processed food industry.

It suggests to accomplish this by plugging gaps in supply chain and development of infrastructure facilities for processing and preservation and modernization of existing food processing units.

As a result, this programme will result in the formation of modern infrastructure tied with effective supply chain management from farm gate to a retail outlet.

It would deliver better prices to farmers and would help in doubling their profits.

The scheme, if implemented properly, will create a huge employment opportunities, exclusively in rural areas.

From the viewpoint of the consumer, it would promote the availability of safe and convenient processed foods at a reasonable price.

This sector added around 9.1% & 8.6% of Gross Value Added (GVA) in the field of manufacturing & agriculture, respectively in the financial year 2015-16.