Editorial Notes

[Editorial Notes] Incentivising agri-reforms in the states

With the triple whammy of climate change, malnutrition and the ongoing Covid-19 Pandemic, India’s food system needs to be sustainable and resilient.
By IASToppers
July 11, 2020

Contents:

  • Introduction
  • Administrative Reforms for Agriculture Sector
  • Expert group for performance incentives
  • Suggested areas for performance incentives
  • Conclusion

Incentivising agri-reforms in the states

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Introduction:

The Fifteenth Finance Commission in its interim report for the year 2020-21, has recommended implementation of a specific set of agricultural reforms by the states for liberalising agricultural markets, provide for seamless trading and catalyse private investment in the farm sector that would boost growth. The central government as a part of the Atma Nirbhar Bharat initiative, has brought Ordinances to push through reforms in agricultural marketing and contract farming.

Administrative Reforms for Agriculture Sector:

The following reforms have been announced recently:

1. Amendments to Essential Commodities Act:

  • The Government will amend Essential Commodities Act (ECA) of 1955 to enable better price realisation for farmers.
  • Agriculture food stuffs including cereals, edible oils, oilseeds, pulses, onions and potato shall be deregulated.
  • Stock limits will be imposed under very exceptional circumstances like national calamities, famine with surge in prices.

2. Agriculture Marketing Reforms:

A Central law will be formulated to provide:

  • Adequate choices to the farmer to sell their produce at remunerative price;
  • Barrier free Inter-State Trade;
  • A framework for e-trading of agriculture produce.

3. Agriculture Produce Pricing and Quality Assurance:

  • The Government will finalise a facilitative legal framework to enable farmers to engage with processors, aggregators, large retailers, exporters etc. in a fair and transparent manner.
  • Risk mitigation for farmers, assured returns and quality standardisation shall form an integral part of the framework.
  • The legal environment for contract farming, with the assurance of a price to the farmers at the time of sowing, will help them take cropping decisions based on forward prices.

Expert group for performance incentives:

  • The 15th Finance Commission has formed a panel in February 2020 to suggest measures to increase farm productivity and incentivise states to boost agricultural exports.
  • The committee—chaired by Sanjiv Puri will help the 15th Finance Commission prepare its report for 2021-22 to 2025-26 and suggest reforms in the agriculture sector.
  • The fields include:
    • Assessing export and import substitution opportunities for Indian agricultural products
    • Suggest ways to step up exports and reduce import dependence.
    • Recommend measures to increase farm productivity.
    • Enable higher value addition.
    • Ensure waste reduction.
    • Strengthen logistics infrastructure.
    • Identify the impediments for private sector investments in the agricultural value chain and suggest policy measures and reforms that would help attract investments.
    • Suggest performance-based incentives to state governments for the period 2021-22 to 2025-26.

Suggested areas for performance incentives:

The following areas can be included in the monitorable framework for incentivisation by FC-XV to states:

1. Climate-resilient agriculture:

  • Keeping in view the national priorities embedded in the National Mission for Sustainable Agriculture as also the SDG-2 and SDG-12, it is suggested that the relevant monitorable indicators developed by the NITI Aayog for the SDG India Index may be adopted.
  • The performance of the states in respect of two indicators under SDG 2.3 – (a) production of rice, wheat and coarse cereals per ha, (b) gross value added in agriculture per worker and one indicator under SDG 12.4—balanced use of chemical fertilisers-may be tracked.

2. Agri-input subsidies through DBT:

  • DBT in the agriculture sector could be incentivised for those states which systematically implement to benefit from the efficiency gains.
  • Agri-input subsidies provided by the states through DBT on a robust IT platform (preferably synced with Aadhaar seeding of land records; soil health card recommendations) would not only be transparent; it would promote efficiency in resource use as well.

3. Ease of doing Agri-business:

  • As promotion of agri-entrepreneurship, FPOs, post-harvest technologies (by availing agri-infra funds under Atma-Nirbhar Bharat) are priorities for the government.
  • Taking the idea of encouraging ease-of-doing business, an ease-of-doing agri-business index could also be developed for states by the NITI Aayog with specific indicators and sub-indicators.
  • The panel may suggest incentives to the states based on an objective scoring pattern in this area.

Conclusion:

With the triple whammy of climate change, malnutrition and the ongoing Covid-19 Pandemic, India’s food system needs to be sustainable and resilient. The agricultural research and development eco-system has also emphasised on crop diversification; bio-fortification; development of climate-resilient and nutritious cereals and productivity and production enhancement of pulses and oil-seed crops with suitable technologies to make India self-reliant on these commodities.

Incentivising states for better performance in the agriculture sector with a transparent implementation and monitoring system is expected to bring positive results for sustainable growth of Indian agriculture.

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