Sops, reforms for farmers in third tranche of govt aid
Farmers to get rights to sell freely, govt to overhaul agri markets
NEW DELHI: Finance minister Nirmala Sitharaman on Friday announced a mix of financial, legislative and reform measures aimed largely at increasing the pricing power of farmers – or share of profits in farm incomes – by proposing to dismantle historical domestic trade barriers, bring new laws for freer food and commodities markets, and better infrastructure.
Sitharaman’s third tranche of measures, aggregating ~1.63 lakh crore and part of a larger ~20-lakh crore stimulus, did not contain any direct cash transfer programme for farmers, or money in hand, but is a mix of new allocations and top-up to existing agriculturally critical schemes, some them announced in Budget 2020-21 in February.
It is also an attempt to push through critical legislative reforms that can free up India’s agricultural markets and improve farm incomes. Farming, the largest source of livelihoods, supports nearly half of all Indians and it has been hobbled by myriad archaic regulations.
According to estimates by economists and securities research firms, the measures announced thus far add up to around ~18.3 lakh crore (including around ~5.7 lakh crore of monetary measures taken in March by the central bank, and the ~1.7 lakh crore welfare package announced in late March ).
Finance ministry officials said there will be two more tranches -one to be announced on Saturday and the other on Sunday.
DK Srivastava, chief policy advisor at consultancy firm EY
India, said, “One salient feature of this tranche is that the direct fiscal cost (or cash spending) accounts for nearly 30% of the estimated benefit, which is much higher than in earlier two tranches.” His reference is to the fact the fiscal cost of the previous tranches is estimated by economists at a fraction of the overall number – a Credit Suisse report put the fiscal cost of the ~1.7 lakh crore welfare package, the ~5.7 lakh crore monetary measures, and the first tranche of ~5.94 lakh crore announced on Wednesday at around ~55,000 crore.
On Friday, the finance minister announced ~1 lakh crore to fund new farm-gate infrastructure, or simply agricultural produce markets, harvest management facilities, and a law to permit farmers to freely sell their produce to any trader of their choice, potentially ending persistent trade barriers in food trade that have been characterised by so-called agricultural market produce committees. Sitharaman said a mechanism would be fixed to assure profitable prices for farmers, which means at least a baseline profitable price signal available at the “time of sowing”. This is referred to as price discovery, whereby farmers will be able to estimate crop prices before taking sowing decisions so that they are able to grow commodities with demand.
NEW DELHI: The government on Friday unveiled what it called an “empowering” ₹1.5 trillion farm sector package to free up India’s fragmented agriculture market from trade curbs and stock limits while offering a new framework to reduce risks and price uncertainties for farmers.
The biggest element of the fiscal package announced on Friday is a ₹1 trillion fund for entrepreneurs to set up facilities for procuring, storing and marketing of agriculture produce in a move aimed at improving the value realised by farmers. This fund will finance setting up cold chains, post-harvest management infrastructure and storage centres.
“The underlying principle (of the package) is to empower the people, give them resources so that they can produce for themselves and have livelihoods for themselves rather than going for entitlements,” finance minister Nirmala Sitharaman said as she announced 11 measures seeking to woo fresh investments into the agriculture value chain, including cold storages and other facilities and to unshackle the farm economy by giving farmers more freedom to access markets.
The plan includes amending the Essential Commodities Act (ECA), a more than six-decadeold law that empowers authorities to impose curbs on stocking of farm produce, to bring it in tune with the times and to help farmers get better value for their produce. Stock restrictions were needed in an era of food shortages.
“We have been waiting for these reforms for 30 years since 1991 (reforms). These measures will unleash unlimited investment and employment opportunities in agriculture production and post-harvest activities,” said Ramesh Chand, an expert in agriculture and member of federal policy think tank NITI Aayog.
The minister also announced a plan to bring in a central law to give farmers more choice in selling their produce rather than being at the mercy of licensed buyers and to remove barriers to inter-state trade.
“We also want to make sure there is a framework for e-trading of their produce. At present, you know, the farmer sells only to licence holders. This restriction has been one of the reasons for him not finding a fair price,” Sitharaman said.
The reforms are aimed at resolving some of the thorny issues in the farm sector, which adds to the pain of farmers who also have to deal with the vagaries of nature and price uncertainty. The broad idea is help establish ‘one nation one market’.
Rural distress has often snowballed into political storms, threatening electoral fortunes of parties. The Narendra Modi administration rolled out an income support scheme for farmers at the end of its first term, shortly before it went into polls in 2019.
The ₹1.5 trillion package will go toward financing farm-related infrastructure such as cold storages and post-harvest management facilities, support for fishermen aimed at doubling fisheries exports as well as for dairy farmers and bee keepers.
“Now the ECA needs an amendment. That amendment is largely towards making sure that cereals, edible oils, oil seeds, pulses onions and potatoes will completely be deregulated. Therefore, unless there is an extraordinary situation, there is no requirement to invoke ECA. Stock limits will be imposed only in exceptional situations such as national calamity, famine or if there is a huge surge in prices,” Sitharaman said.
No stock limit shall apply to food processors or value chain participants subject to installed capacity. The minister said the move will ensure that export demand for India’s farm produce is not affected.
For micro food enterprises, the minister said a ₹10,000 crore support will be given. This will help these units modernize their business. Most of the products covered under the scheme will be related to health and wellness, nutritional and organic products.
“Wherever entitlements are due, yes, they will be given. But largely our focus is to make sure India stands up on its own, generate its own jobs. You will see a lot more of empowering people through creating skills and logistics,” Sitharaman said.