Cooperative federalism: Towards reforms in agriculture

July 12, 2019 12:15 AM

Intense cooperation between the Centre and states is a sine qua non for implementation of reforms in the agriculture sector

The government, to deregulate and privatise agriculture marketing system, has ushered in a series of structural market reforms over the years.The government, to deregulate and privatise agriculture marketing system, has ushered in a series of structural market reforms over the years.

By Harsh Kumar Bhanwala & SK Dora

Three essential pillars of economic reforms are liberalisation, privatisation and globalisation. Liberalisation means removal of state restrictions on private individual activities; privatisation encompasses transfer of business, industry or service from public to private ownership and control; and globalisation is the transborder spread of products, technology and information through international trade and transfer. It is believed that though a large number of reforms have been introduced in the agriculture sector in the last few years, they have met with limited success in liberalisation, privatisation and globalisation of agriculture. Importantly, policy reforms in the sector have not yielded the anticipated benefits to farmers and consumers.

This is because, since 1919, when the Montagu-Chelmsford Reforms introduced diarchy and declared agriculture as a ‘provincial’ subject, agriculture has enjoyed the distinction of being a state subject. And when the Constitution was drafted, it continued as a ‘state’ subject. Thus, while the Centre formulates policy guidelines, advises and allocates funds, implementation of farm and market reforms lies at the behest of states.

For instance, reforms for liberalisation and privatisation of agriculture marketing system. In many parts of India, farmers do not have the right to make the first sale of their produce outside regulated market yards. There is no freedom for a farmer or an entrepreneur to establish private market yard/private market managed by a person other than a market committee. Both corporates and farmers show reluctance for entering into contract for production and marketing of a farm product or products as per pre-agreed conditions of the contract. The result is a marketing system that is inefficient and leads to exploitation of farmers by a chain of intermediaries, who siphon off a large part of the consumer’s pie that is highly disproportionate to their value addition. Consequently, price realisation by farmers is low and non-remunerative. Also, farmers in many states are exploited through a non-transparent and multipoint levy of market fee across the state due to the absence of a unified single trading licence valid across the state/UT.

The government, to deregulate and privatise agriculture marketing system, has ushered in a series of structural market reforms over the years. For enhanced transparency in trading, better price discovery and to provide multiple choices to farmers to sell their commodities to buyers online and in the markets of their choice, the government launched e-NAM in April 2016. The agriculture ministry also introduced the Agricultural Produce and Livestock Marketing Act in April 2017, which provides for alternative marketing channels, direct marketing, and setting up of private markets, farmer-consumer markets, commodity markets, and allows declaring warehouses/silos/cold storages as market sub-yards to promote agriculture marketing. In May 2018, the ministry released Agricultural Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018, which, in addition to contract farming, provides for service contracts all along the value chain, including pre-production, production and post-production. These are long-pending policy reforms that have the potential to deregulate agriculture marketing system, ushering in large-scale efficiency gains. Similarly, in the Budget 2018-19, the government announced for developing and upgrading existing 22,000 rural haats into Gramin Agriculture Markets (GrAMs). In these GrAMs, physical infrastructure will be strengthened. Also, GrAMs are electronically linked to e-NAM and exempted from regulations of APMCs, and will provide farmers a facility to make direct sale to consumers and bulk purchasers. But the progress in adoption of many of these market reforms at the state level has been painfully slow. Each state has its own set of priorities, socio-economic and political realities, cultural and historical legacy, budgetary compulsions and agro-climatic nuances, which come in the way of aligning the state policy with national policy.

An area that is crying out loudly for reform is land leasing. Most states have either legally prohibitive land leasing laws or adopt restrictive practices in different forms. These pugnacious laws manifest as period of lease, landowners’ right of resumption, conditions for termination of lease, tenants’ right to pre-emptive purchase of leased-in land, conferment of ownership right on tenants, recording of lease, heritability of lease, regulation on rent, etc. The effect is, almost one out of five farmers known by various names like tenant farmers, oral lessee, share croppers, benami farmers, etc, have difficulty in accessing credit, crop insurance and also are deprived of the relief benefits provided by the government for loss and damage due to natural calamities. An expert committee on land leasing constituted by the NITI Aayog, under the chairmanship of T Haque, came out with the Model Agricultural Land Leasing Act, 2016. Land leasing reforms, if carried out by state governments, will contribute immensely towards inclusive growth. However, the Model Agricultural Land Leasing Act, 2016, has been fully adopted in very few states.

Let us consider the third pillar, i.e. globalisation, and see how cooperative federalism is essential for integrating Indian farmers with the global agricultural value chain. ‘Trade and commerce’ are in the Union list and states often see no formal role for themselves in the nation’s agricultural exports.

The new Agriculture Export Policy by the ministry of commerce and industry exhorts greater involvement of state governments for creating agri-logistics and infrastructure, development of product-specific clusters, promoting good agricultural practices (GAP), working on quality assurance systems, while pushing for marketing reforms for doubling our agricultural exports from the current $30-plus billion to over $60 billion by 2022, and reach $100 billion in next few years.

There is no doubt that intense cooperation between the Centre and states is a sine qua non for expeditious implementation of reforms in the agriculture sector. Probably a structured mechanism based on the philosophy of cooperative federalism is the need of the hour. There are a large number of examples of successful cooperative federal institutions in India. Prominent among them include the Inter-State Council (ISC), five Zonal Councils, NITI Aayog, the Finance Commission and the recent GST Council. However, we require a dedicated federal and cooperative body for the agriculture sector, on the lines of the National Association of State Departments of Agriculture (NASDA) in the US—which is a non-partisan, non-profit association that represents the elected and appointed commissioners, secretaries, and directors of the departments of agriculture in 50 states and four US territories. NASDA grows agriculture by forging partnerships and creating consensus to achieve sound policy outcomes between state departments of agriculture, the federal government and stakeholders. One of its objectives is to develop a spirit of mutual teamwork between federal, state and territorial agencies with respect to programmes and activities related to agriculture. It is time we work towards creating a truly cooperative and federal entity like NASDA for expeditious implementation of reforms in the agriculture sector.

Bhanwala is chairman, Dora is senior officer, NABARD. (Views are personal)

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Powering competition through open access
2Needed: A balm for Bihar’s blues
3Political Posturing: Punjab’s anti-farm-reform laws are intended to make it seem like the Centre’s wanted to abolish MSP