Expecting agro-reforms without central support is pointless

Expecting agro-reforms without central support is pointless
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Story Dated : October 22, 2016

With the central government failing to act on the far-reaching farm reforms suggested by the Shanta Kumar committee, the focus seemed to have shifted to trying and convincing state governments to do the reforms on their own, in much the same way that labour and land reforms have been left to the states.

According to a report in The Economic Times, NITI Aayog member Ramesh Chand has come out with a three-pronged strategy that involves contract-farming, allowing direct purchases from farmers and taking fruits and vegetables out of the mandi laws—having got the PMO’s approval for the plan, NITI will now try and convince states to do the necessary reforms.

What the approach doesn’t keep in mind that while states can still be expected to change labour/land laws as this will bring them industry/services and therefore create jobs and give more taxes, they have no interest in farm reforms since the farmers can go nowhere—if states cared about farmer welfare, they would have freed up movement of farm produce a long time ago, removed the exorbitant 14.5% mandi tax in the case of states like Punjab and Haryana, and freed up farmers from the cartel of arhatiyas who fleece them in the mandis.

Even in BJP states like Maharashtra—or Delhi when it was under President’s rule—which have removed fruits and vegetables from the APMC Act, this has come to naught since, with no alternative land given for new mandis, farmers still sell in the old cartelised ones.

While prime minister Narendra Modi decided not to limit FCI’s role or move towards futures or even cash transfers instead of food in ration shops as suggested by Shanta Kumar, these are critical if any state-level reforms are to take place.

If, for instance, the Centre moved towards futures or cash transfers, it can afford to limit wheat/rice procurement. It is only then that, for instance, it can tell Punjab or Haryana that it plans to limit procurement unless they remove the 14.5% mandi tax.

Since a large part of the cheap electricity given by states to farmers is based on cheaper supplies from the central quota, this is another lever to get states on board for far-reaching agriculture reforms.

Direct cash transfers to farmers, from the money saved by reducing FCI’s role, similarly, can build up a critical mass of farmer support for reforms. Whether Modi likes it or not, unless he moves on the Shanta Kumar recommendations, the chances of the states acting on their own are quite limited.