Wanted: A Farm Policy

largely been untouched by the reform attempt, except to the extent that reforms in the manufacturing sector have indirect spillover effects. This is despite the fact that agriculture contributes 30 per cent of GDP and accounts for 64 per cent of the labour force. More importantly, poverty is primarily a rural phenomenon and liberalisation cannot make a real dent on poverty until a farm policy is in place. At a macro level, the ingredients of an agricultural reform package are already known make output prices market-determined and introduce similar reforms for input prices. The problem lies in sequencing the reforms and making them politically palatable.

 

As Dr Ashok Gulati, the noted expert on agriculture, has been arguing, one way to do this is by decentralising reforms. Irrigation is a case in point. Public investment in irrigation steadily declined in the 1980s. Twenty-three per cent of plan expenditure was on irrigation during the first plan. The share for the eighth plan is 7.09 per cent. State irrigation departments face a resource crunch. Forget about new canals, they do not have the resources to maintain existing networks. Revenues from water charges cover less than 25 per cent of the operating and maintenance charges. If farmers were to participate in the collection of dues through panchayats, collections should improve. Local level user associations can be roped in to manage canal networks. In a large and federal country like India, reforms cannot possibly succeed without such decentralisation and devolution.

At a philosophical level, this implies less state intervention. If the logic of reduced state intervention is accepted for industry, why not for agriculture? Such intervention is justified on grounds of protecting the interests of poor farmers, but in fact it does nothing of the kind. It exploits the farmer to pamper and subsidise the urban consumer. Additional examples of such needless state intervention are the Essential Commodities Act and restrictions on futures trading. These need to be dispensed with. The Centre can liberalise futures trading on its own. Scrapping the Essential Commodities Act and various orders under it will require the cooperation of the states. If such changes are introduced, the benefits of agricultural liberalisation will cease to be elusive.