Reforms News

What is the News?

US Department of Agriculture(USDA) has forecasted 1.8 million tonnes of wheat and 14.4 million tonnes of rice to be imported from India. This will be the highest ever wheat export from India to the US in the last six years. Despite the Indian government’s various steps to improve agricultural exports, there are few challenges associated with the exports. 

Status of India’s agricultural exports:  

The 2019-20 Economic survey mentions a few important figures of India’s agricultural exports. Indian agricultural/horticultural and processed foods are exported to more than 100 countries/regions in the world.  

India is one of the 15 leading exporters of agricultural products in the world.  

India’s major export destination for agricultural products are the USA, Saudi Arabia, Iran, Nepal, and Bangladesh.  

India’s major agricultural export basket includes rice (both Basmati and non-basmati), spices, cotton, and wheat apart from this India also exports marine products and buffalo meat.  

As per APEDA (Agricultural and Processed Food Products Export Development Authority), India exported pulses worth US$ 163.90 million and dairy products worth US$ 89.50 million from April–September 2020. 

Initiatives to encourage Agricultural exports in India:  

Firstly, India encourages agricultural exports by creating a dedicated body named the Agricultural and Processed Food Products Export Development Authority(APEDA). The government created APEDA under the APEDA Act 1985.   

• • Under the Export Promotion Scheme of APEDA, the government is providing assistance to the exporters of agricultural products. 

Secondly, The Government has introduced a comprehensive Agriculture Export Policy in 2018. The policy aims to double farmers’ income by 2022 by doubling agricultural exports from the country. The policy also aims to integrate Indian farmers and agricultural products into the global value chain. 

Thirdly, The Government has also brought out a Central Sector Scheme – ‘Transport and Marketing Assistance for Specified Agriculture Products’. The scheme aims for assisting the international component of freight handling and marketing of agricultural products.  

Fourthly, As per the present FDI Policy, 100% FDI is allowed in the following activities of agriculture through the automatic route.  

However, the total agricultural export basket accounts for only a little over 2.15 percent of the world agricultural trade. This is because of various challenges associated with the exporting of agricultural commodities. 

What are the challenges associated with Agricultural exports?  

Firstly, The yield levels of the majority of crops in India remains much lower than the world average. This is compounded by fragmented landholdings. The average farm size in India is only 1.15 hectares.  

• • Majority of the Indian farmers belongs to small and marginal category. The agricultural products produced were used majorly for own consumption. 

Secondly, In India, no study has been conducted to assess the long term impact of exports on the agricultural and horticultural sector by the Department of Commerce.  

Thirdly, exporters of agro-commodities are not successful in due to uncertainty in the foreign trading regime  

Fourthly, The government’s pro-consumer bias in India’s farm policy is unfair. Indian government putting export restrictions on imported food items to prevent inflationary pressures in the domestic economy. This hurts Agricultural exports.  

• • The policy deprives farmers of higher prices in the international market and also adds an element of income uncertainty.   
  • For example, If the government is going to impose export restrictions when international prices are at a peak. Farmers would lose part of the incentive to cultivate exportable crops.  

Lastly, there is an International demand & supply situation, international prices and quality concerns also restrict India’s agricultural exports. 

How to improve agricultural exports?  

Firstly, the Government can provide Infrastructure status to agricultural value chains, such as warehousing, pack-houses, ripening chambers, and cold storage, etc.  

Secondly, As per NITI Aayog recommendation, the Government can create village level procurement centres. This will benefit small and marginal farmers to improve agricultural exports.  

Thirdly, Government can Re-invigorating agricultural research and education, this will increase lab to land connectivity.  

Fourthly, APEDA has suggested augmenting cargo handling facilities at airports, ports, etc. This will reduce the waiting time.   

Along with this government can create a Green channel clearance for perishable agro products in toll, air, and freight cargo stations.  

Fifthly, the Government can establish regional production belts. This can be achieved by linking the Mission for Integrated Development of Horticulture and Self Help Groups. 

Way forward: 

India occupies a leading position in the global trade of agricultural products. But the share can be improved to a greater level if certain bottlenecks are resolved. The key to doubling farmer’s income is not only focusing on internal agricultural productivity but also encouraging India’s global share in the agriculture export basket. 

Synopsis: Present agriculture reforms have not considered the ground level issues faced on the regional level and vertical level. 

Introduction  New farmers laws

Recently, the current government has opened up the output market with the purpose to let market forces improve effectiveness and create more value for farmers and the economy.  

• New farm laws state that farmers are now free to sell all their products anywhere and to anyone beyond the APMC markets.  
• The laws also promote contract farming by creating partnerships between farmers and food-processing companies and license unlimited notice of food except in special conditions. 

However, reforms cannot be forceful and should be implemented as per the requirement of farmers. 

What do the farmers want? 

The farmers gave 3 main suggestions in the enquiries held with them: 

• Firstly, the selling price of their produce should include the cost of production and reasonable profit margin. 
• Secondly, rise and fall in prices should be nominal. 
• Thirdly, Farmers are not comfortable in dealing with legal or administrative officials, so there should be little or no interface between them.  

What are the issues with new laws? 

There will be no control over the new markets by anyone which creates a lot of uncertainty.

• First, concerns related to Mandi-market system: 

• • • Farmers could go to local leaders in case of malpractices in Mandis but there is no authority to report to in the new system. 
    • There is no certainty over the continuation of the mandi-MSP system as if the alternative traders offer better prices, farmers will go there and not to the mandis.

• Second, Issues related to contract farming:

• • • There is an advantage to the corporate-buyers as they can choose to not buy the full quantity and delay payments. The corporates have access to several lawyers, so the poor farmers can’t complain or compete against them.

• • • This is a contract between unequal and will result in unequal outcomes. Farmers do not have the resources or are not educated enough to deal with traders or corporates. 

• Third, Issues related to similar solution for different problem  

• • • The conditions of different regions are not similar as country is diverse with some 15 agroclimatic zones and has over 50 crops grown.  
    • It is also the reason behind farmers from outside the wheat-rice belts in northern India are not protesting.  
    • Thus, a comprehensive law for all the regions with different cropping patterns and climatic conditions might create troubles for farmers later. 

What are the steps should be taken? 

• The problem of lack of progress and high input prices in agriculture can be resolved through an efficient approach suggested in the M.S. Swaminathan Commission and/or the Ashok Dalwai Committee.

• • • For example, a solution should be worked out for farmers to switch from water-soaking paddy crops to other crops in Punjab and Haryana in the next five years. 
    • They would reduce the area under paddy by 25-30%, and the loss they suffer in the short run, will be compensated for by the government. This could also be done for sugarcane in western Maharashtra.

Context: Procurement of 23 crops at MSP which will amount to ₹17-lakh cr and to support this annual allocation, rich farmers should pay tax.

What is the farmers ’demand?

• The protesters have rejected the offer of amendments to farm laws and are firm on their demand for repeal of the three laws.
• Farmers want MSP guarantee.

Is it feasible to accept demand of MSP guarantee?

• Not economical: India has about 14 crore farmers (as per PM-KISAN enumeration). Cost of procuring all 23 crops is 50 per cent of India’s annual expenditure
• Unsustainable burden: The cost of MSP and subsidised food supplies are being met by heavy borrowings from the National Small Savings Fund (NSSF).
• Rising subsidies: In 2019-20, 11 per cent of the country’s total budget was spent on farmer welfare schemes. Subsidies on food and fertiliser and expenses on irrigation schemes in 2019-20 noticed a 65 per cent jump from 2017-18.
• Direct benefit: introduction of the PM-KISAN scheme resulted in leap in food subsidy.
• Rise in procurement: Procurement of food crops including paddy, wheat, pulses and oilseeds under MSP has seen a dramatic increase. For example, compared to 1,395 lakh tonnes of wheat procured between 2009 and 2014, 1,627 lakh tonne of wheat have been procured in the last five years.

What are the other issues?

• Disparities: MSP’s poor implementation has created problems of equity with large farmers of just two States Punjab and Haryana.
• Faulty policy: As per CACP, more than 95 per cent paddy farmers in Punjab and about 70 per cent farmers in Haryana are covered under MSP operations. States such as Uttar Pradesh (3.6 per cent), West Bengal (7.3 per cent), Odisha (20.6 per cent) and Bihar (1.7 per cent), have only a minuscule number of farmers benefit from procurement.

Why blanket exemption on taxing agriculture income is bad policy?

• Agriculture income including that from sale of farmland is exempt under Section 10 (1) of the Income Tax Act, 1961 without any limit.
• Rich farmers and politically influential people use the provision to convert black money into white.
• Rich farmers include many corporates who run seed companies and whose profits run into crores.
• In 2019, a Comptroller and Auditor General report red-flagged the irregularities in exemptions given by the taxman on agriculture income.
• It said that claims of tax exemption on farm income were given based on “inadequate verification or incomplete documentation” in more than a fifth of the 6,778 cases.
• Exemption was granted in hundreds of cases where land records or proof of farm income was not available.
• According to an article published in the Economic and Political Weekly by Govind Bhattacharjee, a retired Director General from CAG, assesses who had reported agricultural of more than ₹5 lakh each between 2014-15 and 2016-17 were 22,195.

The blanket exemption on agriculture income should be stopped and it should continue for roughly 86 per cent of the peasants of the country. The 14 per cent rich farmers should come forward to help the rest get MSP support.

Source – Click Here

Context: Green Revolution states are required to shift their focus from MSP crops to high-value crops and Non-farm activities due to the consequences

Punjab, Haryana, and western Uttar Pradesh were early adopters and major beneficiaries of Green Revolution technology and enabled India in becoming a nation close to self-sufficiency in food in just 15 years.

How green revolution states benefitted from the MSP system?

Due to the following factors, the share of rice and wheat in the total cropped area rose from 48% in Punjab and 29% in Haryana in the early 1970s to 84% and 60%, respectively in recent years;

• Firstly, farmers were insulated against any price and market risk due to the Government procurement of marketed surplus of paddy (rice) and wheat at MSP.
• Secondly, the best resources were allocated for technological advancement for rice and wheat crops by public sector agriculture research and development for technological advantage.
• Third, free power, and fertilizer subsidy together with MSP resulted in higher income per unit area from wheat and paddy cultivation.

The above factors made the cultivation of Paddy and Wheat beneficial in terms of productivity, income, price, Land-labour ratio, and yield risk, and ease of cultivation among all the field crops (cereals, pulses, oilseeds).

Then, why green revolution states must shift to Non-farm activities?

Since the Mid-1980s, many reports and policy documents started suggesting the following serious consequences of the continuation of the rice-wheat crop system in general and paddy cultivation in particular;

• On the demand side, Per capita intake of rice and wheat is declining in India and consumers’ preference is shifting towards other foods. For ex; average spending by urban consumers is more on beverages and spices than on all cereals.
• On the supply side, rice production is rising at the rate of 14% per year in Madhya Pradesh, 10% in Jharkhand, and 7% in Bihar.
• On the government procurement side, Rice and wheat procurement in the country has more than doubled after 2006-07 and buffer stocks have expanded to an all-time high, with fewer options available to dispose of such large stocks. It is putting a heavy burden on the government exchequer.
• On the farmer’s side, More than 50 Years of the MSP system has affected the entrepreneurial skills of farmers required to sell the produce in a demand-supply based market system.
• On the resources side, paddy cultivation and availability of free power for pumping out groundwater for irrigation, has resulted in the drastic decline of the water table in 84% of observation wells in Punjab and 75% in Haryana. At this pace, both these states might run out of groundwater in a few years. Stubble burning is also a consequence of this system.
• At present, most of the farm work in green revolution states is being undertaken by migrant labor as the younger generation is not willing to do manual work and looking for better paying salaried jobs in non-farm occupations.

All the above-listed factors do not favour an increase in MSP, which is demanded every year by farmers.

How to shift to non-farm activities?

The government in these states must facilitate the private investment in a large number of area-specific enterprises tailored to State specificities by

• Promotion of food processing in formal and informal sectors;
• A big push to post-harvest value addition and modern value chains;
• A network of agro- and agri-input industries;
• Setting up high-tech agriculture;
• A direct link of production and producers to consumers without involving intermediaries.

Besides agriculture-based industries, State needs large-scale private investments in modern industry, services, and commerce.

Thus, the demand of time is that these traditional Green Revolution States of Punjab and Haryana should focus on innovative development strategy in agriculture and non-agriculture to develop a better future for the farmers and aspiring youth of the state.

Context: The next Green Revolution 2.0 will come through in-depth research, better investment opportunities and access to the market.

What led to the green revolution?

• Scarcity of grain: After the China war, when India was standing at the cusp of economic destruction, Pakistan attacked India. There was an acute scarcity of food grains in the country.
• Change in farm sector: Scientist Norman Borlaug brought a revolutionary change in the farm sector in Mexico with his semi-dwarf varieties of rice and wheat. Borlaug analysed the farm sector in Punjab and concluded that production can be doubled.
• Beginning of green revolution: Subramaniam promised the farmers that if they implement the new farming techniques, the central government will compensate them. This scheme was initially implemented in around 150 farm holdings with the assistance of Punjab Agriculture University, Ludhiana.
  • The Green Revolution worked on three fronts: better seeds, irrigation and optimum use of fertilisers.

The new laws have set the tone for second green revolution. Discuss.

• For the rich farmers of Punjab, Haryana and western Uttar Pradesh: Things are different; but for crores of small landholders in Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, West Bengal, Odisha, etc., it is now possible to feed their families.
• Landholdings in many states have shrunk: In eastern UP, the cultivators are largely marginal farmers now.
  • Farmers with less than an acre of arable land are identified as marginal farmers.
  • Small farmers are those with landholdings between 1 acre and 2.5 acres.
  • It is difficult for a farming family to sustain themselves with just an acre of arable land. The farmer will have to explore other avenues to improve his financial position.
• Agrarian transition development: The latest farm policy reforms of the government are also called agrarian transition development and were implemented in Europe and the US early on. Today, around 45 per cent of the country’s workforce is involved in agriculture.
• Agriculture after independence: When India attained Independence, the contribution of agriculture to the country’s GDP was huge, which today has come down to around 15 per cent. The old model has been a drag on the economy as well as the villages.
• Develop models of contract farming: It is an avenue to develop an organised corporate model of agriculture in the country. This will speed up urbanisation in the villages and the development of industries and the service sector there.
  • These sectors will be able to absorb the excess workforce in the farm sector.
• Structure and potential of contract farming: For instance, if a village has a thousand farmers who have an acre of arable land, then, through contract farming, someone can sow crops on the entire 1,000 acres of land.
  • The land continues to belong to the farmer, while on the other hand, he/she will earn the profit from the sale of produce generated from his/her part of the landholding. This also frees him/her to pursue other employment opportunities.

Way forward

• The next revolution: Green Revolution 2.0 will come through in-depth research, better investment opportunities and access to the market. The three farm laws are a revolutionary step in that direction.

Context: A minuscule minority of farmers is protesting against the farm laws. They don’t want an end to the system that has benefited them.

Background

• The creation of the Agricultural Produce Marketing Committee (APMC) came into existence almost 150 years ago to feed the colonial master’s raw cotton for their Manchester mills.
• The farmers were forced to sell to the masters in a regulated market whose regulation was set by, the colonial masters.
• The corrosive monopoly power held by the APMCs has been recognised by almost all political parties and farmer unions. For example, the Bharat Kisan Union took out a protest in 2008 arguing for the right of farmers to sell produce to corporates.
• Till now, Farmers are forced to sell their marketable produce only through a mandi regulated by the government.
• However, the new Farm bills allows the farmer to sell through the APMC, and to sell outside the APMC.

Why the protest for farm bills is skeptical?

• Only Fraction of Farmers rely on APMC: The government procures all of its food through APMCs but only about 6 per cent of the farmers in India sell through the APMCs to the government.
• Serves the Interest of few states only: Those 6 per cent are all large farmers, primarily residing in the two states of Punjab and Haryana. These two states typically account for close to 60 per cent of wheat procurement and close to a third of rice procurement.
• Leakages in distribution: The government procures from farmers in order to re-distribute the food via ration shops to the bottom two-thirds of the population. But there are leakages. For example, former Prime Minister Rajiv Gandhi in 1985 stated that only 15 per cent of the food procured by the government reached the poor.

Why Farm Bills are needed?

• Neither APMC, nor subsidies, has resulted in higher output growth in Punjab-Haryana, the pioneers of the Green Revolution.
• Subsidised electricity to farmers has destroyed the water table, the extensive use of fertiliser has destroyed the environment.
• None of the Developing and Developed countries prohibit an individual farmer from selling their produce in the market.
• It does not serve the Interest of very small and small farmers in India.
• Unlike the Industries which are freed from regulation agriculture was not freed or thereafter, until now.

Context: The present farm laws alter the bargaining landscape in favour of the corporate players to the detriment of the farmers.

What is current issue with farm laws?

• The three recently enacted farm laws assented have led to a showdown between the peasantry and the Union government.
• No consultation undertaken by the central government at the time of promulgating the ordinances and then pushing the bills.
• Despite repeated demands of the oppositions to refer the farm bills to the standing/select committee for reconsideration and necessary consultation with all stakeholders.
• Present dispensation believes that its shock-and-awe methods are to be the main medium of governance.
• The Union government has bypassed the federal structure by legislating on subjects that exclusively fall within the domain of the state government under the state list of the Seventh Schedule of the Constitution.

What are the salient features of the bill?

• Reducing role of MSP: The farm laws open the field to an alternate set of markets/private yards, where the buyer will have no statutory obligation to pay the minimum support price (MSP).
• No fee: Markets/private yards will not be charged any market fee/levy. The agricultural sector will see the gradual shifting of trade from the APMC mandis to these private yards.
• Reduce APMC role: The shifting of trade to avoid payment of any levy/market fee by private players and the Food Corporation of India (FCI) will eventually witness the redundancy of the APMC mandis, leaving the famers at the mercy of the corporate sharks.
• Exclude the jurisdiction of the civil court: It will leave the farmers remediless and with no independent medium of dispute redressal mechanism. The farm laws empower the Sub-Divisional Authority (executive) to adjudicate on disputes between the farmers and traders.
• Increased bureaucracy: The increased bureaucratic control over the adjudication of disputes between the farmers and corporate players will open the floodgates for corruption and rent-seeking.

How the bills are anti-farmers?

• There are several pro-corporate and perceived anti-farmer provisions in the farm laws.
• The global experience across agricultural markets demonstrates that corporatisation of agriculture without a concomitant security net in the form of an assured payment guarantee to the farmers results in the exploitation of farmers at the hands of big business.
• The primary cause for concern is the systematic dismantling of the APMC mandis which have stood the test of time and have provided farmers the remuneration to keep themselves afloat.

What needs to be done?

• The legality of laws should be expeditiously decided by the Supreme Court to halt the central government’s repeated encroachment on states’ rights.
• There is need of robust system to annually re-calculate the MSP keeping in mind the rising input costs of diesel, fertilisers, etc to make farming a viable and lucrative vocation.
• A statutory regulator in the field of agriculture akin to regulators in other fields would fill the gap to address information access and market distortions.

The three legislative nails in the farmer’s aspirations might lead to a bitter harvest.

Context- The government’s dismissal of the concerns of farmers and workers with bold reforms is not only bad for democracy, it reduces quality of policies and also makes them harder to implement.

What is the core problem in agriculture sector in India?

Largest source of livelihood – there are too many people employed in agriculture.

• The agriculture sector contributes 17 per cent of India’s GDP. As per estimate, about 57 per cent of the working population is engaged in agriculture.
• 70 percent of its rural households still depend primarily on agriculture for their livelihood.

Possible solution-

• Increase productivity– India needs to shift from basic farming to more efficient, sustainable, productive farming.
• More technology and automation will be required to improve productivity.
• Reduce the number of employed– The agriculture sector should employ only 17 per cent of the workforce as to become more productive like other sectors.
• India must figure out a way to provide meaningful employment to hundreds of millions of people outside agriculture.

What are the issues with new farms and labour laws?

1. Issues in new Farm reforms-
2. Agriculture is a state subject and regulation of agri-markets is very much in the domain of the states. Yet states have not been consulted on changes in agriculture laws.
3. Deregulation– The new farm laws that aim to double farmers’ income in two years by deregulating agricultural markets may further widen the inequalities in the sector,

• The deregulation of Bihar’s APMC led to no significant changes.
• These changes will affect the small farmers the most because their low output does not allow them any bargaining power.

1. Issues in new Farm reforms-
2. Worker’s right of association in unions– In the labour reforms underway, it is the dilution of this fundamental right of collective representation that bodes badly for India’s workers
3. The rights of the trade union to go on a lightning strike is sought to be curtailed heavily.

Therefore, new farm and labour reforms laws are the examples of diminishing democracy in India.

What are the set of reforms required to make India’s growth more inclusive?

1. Policymakers must listen to the institutions that represent small people — associations and unions of farmers, informal workers and small enterprises.
2. Formation of cooperatives of producers and workers- By aggregating the small into larger-scale enterprises.

• Government regulations must encourage the formation of strong cooperatives, and improve the ease of doing business.

3. Indian agriculture marketing reforms should derive inspiration from Barbara Harriss-White, a scholar of India’s agricultural markets, who once observed, “deregulated imperfect markets may become more, not less, imperfect than regulated imperfect markets.

Way forward-

• Policymaker needs acknowledge public fears and reassure people, especially in periods of uncertainty.
• The concept of democracy should not be reduced to elections and political parties. Democracy is also a process of listening to all stakeholders.

Source- The Indian Express

Syllabus- GS 3 – Land reforms in India.

Context- Farmers and state governments across India don’t want APMCs.

How many farmers are there in India?

1. Based on the self- declaration- Almost 111 million farmers are registered for the Pradhan Mantri Kisan Samman Nidhi(PM-Kisan). The eligibility criteria for this scheme are-

• Registration requires the family to hold cultivable land, duly registered.
• If a family member is relatively privileged (MP/MLA, pension exceeding Rs 10,000, an income-tax payer, or a professional), one can’t opt for the PM-Kisan benefits.
• For any false declaration there are penalties also.

Therefore, 111 million is a lower bound figure. Other than some categories being barred from PM-Kisan benefits, not every eligible farmer has necessarily registered for PM-Kisan.

2. Based on Agriculture Census- In India, in every five years people have an agriculture census.

• 2010-11 – There was 138 million holdings.
• 2015-16 – It gave 146 million holdings which is a result of further fragmentation.

If the agricultural landholding is conditional on being a farmer, apart from a possible further increase since 2015-16, 146 million is possibly the upper bound.

3. Based on various acts-

Every definition of “farmer” is not contingent on the ownership of land.

For Example-

• The Protection of Plant Varieties and Farmers’ Rights Act, 2001– Where status as a farmer depends on cultivating land (or supervising cultivation), not owning it.
• Draft National Policy for Farmers, 2006–That issue was also flagged by the National Commission on Farmers, such as in the Draft National Policy for Farmers (2006), where “farmers” included agricultural labourers, sharecroppers and tenants and so on. When talking and generalising about farmers, it is necessary to specify which set one has in mind.

What is the quality of land records in various states when land is a prerequisite for defining someone as a farmer?

1. The Committee on State Agrarian Relations and the Unfinished Task in Land Reforms, 2009-

• Absence of land holding data – The last extensive survey and settlement in India was conducted two to three decades prior to Independence which means in the 1920s.

2. Department of Land Resources has a Digital India Land Records Modernisation Programme (DILRMP) –

• DILRMP is often about digitising/modernising existing land records.
• The DILRMP dashboard tells that digitisation of land records have been completed in only 11.5 per cent of villages.

For Example- Gujarat, West Bengal and Tripura score high on this (over 90 per cent). Punjab’s track record is 0 per cent.

What is 2015-16 Agricultural Census report?

According to the Agricultural Census report 2015-16 –

1. Highest operated areas-The highest operated areas are in Rajasthan, Maharashtra, UP and MP, in that order. 86.1 per cent of holdings are small and marginal (less than 2 hectares) and only 0.6 per cent is large (more than 10 hectares).
2. FCI procurement-There is increasing FCI procurement of rice from Telangana, Andhra Pradesh, Chhattisgarh and Odisha and of wheat from MP, UP and Rajasthan.
3. E-NAM(National Agricultural Market) has more coverage from MP, UP, Rajasthan, Maharashtra and Gujarat than from Punjab or Haryana.

Way Forward

The face of Indian agriculture has changed and is no longer what it was in the Green Revolution days, centred on Punjab, Haryana and western UP. With realistic input costs, that form of agriculture is no longer viable in those Green Revolution tracts.