Cull coercive state laws, end monopolies

Agriculture: Poor rains immediate worry

The Economic Survey on Wednesday advocated a major overhaul of antiquated legislation such as those related to land tenancy and the Agricultural Produce Marketing Committees (APMC), to end the monopoly of wholesale markets and boost farm productivity.

On the immediate challenges facing agriculture due to the forecast of a below-normal southwest monsoon in 2014, the Survey said a delayed onset of rains and uneven distribution might affect crop growth, especially in kharif pulses and oilseeds.

It advised the government to use its constitutional and legislative powers to replace coercive state laws. Under such laws, the Survey said, APMCs would become one among the many trading venues in a competitive market. Parliament can also legislate the creation of a commission that monitors anti-competitive practices across the country. "Strengthening the agriculture sector is crucial for poverty alleviation, ensuring food security, increasing employment opportunities and enhancing rural incomes," the Survey said, adding that the government interventions used to build a marketing set-up have actually served as barriers to trade. "The Model APMC Act, 2003, is an inadequate solution as APMCs remain a non-level playing field. Model law, which was circulated to all states for adoption, failed to address monopolistic and uncompetitive practices in inter-state trading of agricultural products."

Other measures that would smoothen trading in farm products and help create a common market, it said, included inclusion of agri-related taxes under a Goods and Services Tax; encouraging direct marketing and contract farming; a stable trade policy based on tariff interventions and not non-tariff barriers like bans, and encouraging the private sector to scale up investment in agro-processing. "The key to investment and productivity growth on the farm is liberalisation of agriculture.... Farmers must have the same economic freedom to buy and sell their produce as other producers have," it added.

On the future role of Food Corporation of India (FCI), the Economic Survey said FCI suffered from diseconomies of scale and decentralised procurement should be expanded to all states. "The most comprehensive central planning system is in the market for cereals … where state controls inputs price (which distorts input choices) ... sets output prices and supplants private trade with an administrative machinery that undertakes procurement."

It said FCI should be encouraged to manage to procure grains more efficiently from markets and manage risks through futures market. "Currently, India is in an anomalous situation of being largely self-sufficient, with large stocks of foodgrain but registering high food inflation," the Survey said.

It also complimented the farmers for achieving great success in boosting farm exports and making India one of the leading producers of cereals. "Exports of agriculture and allied products in 2011-12 accounted for 9.08 per cent of India's total exports as against 6.9 per cent in 2010-11," the Economic Survey added.