Making agricultural market reforms successful

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 Making agricultural market reforms successful

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• Two new ordinances: Removal of restrictions under the Essential Commodities Act (ECA) should help farmers of cereals, pulses, oil-seeds, onion and potato who have not benefitted from private investment due to policies that discouraged it. Two new ordinances are expected to enable inter-State trade and promote contract farming. 
• Three key issues: Before full benefits of the policies can be realized, three issues need to be resolved. a) Policy reversals and inconsistency b) Centre-State and State-State disconnect c) Lack of credit or insurance for farmers. 
• Policy reversals and inconsistency: Centre vacillates between market-based and public-funded policies failing to instil confidence in investors who thus adopt a wait-and-watch approach. 

1. Electronic National Agricultural Market (e-NAM) was envisaged as a market-driven mechanism in 2016 for efficient price discovery by farmers. States were asked to amend their Agricultural Produce Market Committee (APMC) Acts to enact a single State license, a single point for levying market fee, and electronic auctioning in all markets. Many States failed to do it and e-NAM has not been as effective as expected. 585 markets were covered in the first phase. With renewed focus on market improvement during the pandemic, 415 more markets have been included. 
2. With PM-AASHA, the government shifted back from market-driven mechanism to public price support in 2018. The objective of this program was to provide assured return that was at least 50% more than the cost of cultivation. Three important aspects of this program were public procurement, deficiency payments, and private procurement. But deficiency payments stalled after a pilot and private procurement did not even start. The budget for the program has also not been sufficient. 
3. Two Model Acts were formulated by the Centre in 2017 and 2018 to promote agricultural marketing and contract farming in States. But many States did not legislate the Acts. 
4. PM-KISAN was introduced in February 2019. It involves a direct cash transfer of Rs. 6000/- p.a. to farmer households and an outlay of Rs. 75000 cr. The program has worked well so far. 
5. Other reforms: With the scaling up of e-NAM, farmers can now sell and transport directly from registered warehouses and Farmer Produce Organizations (FPOs). Apps for transportation have also come up. The government announced some more reforms in May 2020. 

• Lack of Centre-State and State-State coordination: The Centre formulated the policies but States had to carry out the implementation. Inter-State trade involves movement of good across State borders. Coordination among States has not been the best. States also faced issues implementing the Model Acts. The Centre must understand the States’ constraints and iron out conflicts before the ordinances come up in the Parliament.
• Lack of credit and insurance: Farmers have to depend on local input dealers or middlemen in the absence or failure of credit and insurance markets. This limits farmers’ choice of output markets. Land leasing restrictions in many States also result in inefficient scale of production. Thus, reforms in the output market are not sufficient, they must be complemented with credit and lease market reforms. 
• Summary: Two new ordinances are expected to enable inter-State trade and promote contract farming. But to reap the full benefits of the ordinances, the Centre must iron out existing issues. Consistency in central policies for higher credibility, State-State and Centre-State collaboration, and measures that complement output reforms are needed. 

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