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Economic Survey's agricultural road map better than Budget's

July 15, 2014 15:23 IST

Farmers’ mandis can come up with private investment, for example, if these are included in the permitted list of activities under corporate social responsibility.

A farmerCompetition in the business of agriculture has been woefully eroded by the monopolistic agricultural produce marketing committees Act.

Restoring competitive discipline has, quite justifiably, been envisaged in the Budget as essential if farming is to be made profitable, and productivity is to be increased.

This is sought to be achieved through measures such as hastening the setting up of a barrier-free national market for farm produce, spurring investments in private market yards, and establishing farmers’ mandis for direct sale to consumers and other end-users. Regulated mandis, or centralised markets, run by APMCs were originally created to ensure orderly growth of farm marketing infrastructure and introduce fair trade practices to end the exploitation of farmers.

However, they have failed to achieve any of these goals.

On the contrary, APMC markets have tacitly endorsed trader cartels by denying farmers the right to dispose of their produce elsewhere.

Without a seamless national common market, these malpractices will continue.

A barrier-free market -- coupled with removal of controls, licensing system, intermediaries and state-imposed levies on farm commodities -- will benefit both sellers and buyers.

It will lead to the smooth flow of food items from surplus to deficit areas, easing supply-side constrains and softening food inflation.

Unfortunately, the Budget speech’s road map towards this laudable goal doesn’t inspire much confidence.

Finance Minister Arun Jaitley said the Centre will work closely with state governments to reorient their respective APMC laws.

That isn’t enough.

The states have been consistently prodded for over a decade to align their APMC statutes with a draft model law circulated by the Centre in 2003.

Yes, some states have amended their marketing laws; but they haven’t done so on the lines suggested.

Their intent is to retain control over the APMCs, which yield handsome revenues.

The Economic Survey, presented to Parliament a day before the Budget, has a far better and more practical road map.

It advocates a constitutionally valid central law to create a national market, overriding state marketing laws that remain on the states’ statute books.

Under the new law, APMC mandis will become one among several trading avenues in a competitive market.

To be effective, the central law should provide for direct sale and production of farm goods through contract farming.

In addition, it should legalise farmers’ mandis, rural marts and other local markets.

Farmers’ mandis can come up with private investment, for example, if these are included in the permitted list of activities under corporate social responsibility.

Farmers’ bazaars allowing direct interaction between farmers, consumers, retailers and processors have, in fact, been running successfully in several states.

Much-needed private participation in augmenting agricultural marketing infrastructure can be encouraged also by giving investors the freedom to charge a reasonable fee from both sellers and buyers for facilities and services.

These initiatives, evidently, will help make agricultural marketing efficient, transparent and cost-effective, besides laying off multiple intermediaries who cause a cascading effect on prices.

The government would, thus, do well to club the proposals mooted in the Budget and Economic Survey to ensure an enduring solution to high food inflation.

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BS Bureau
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