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Resource centre on India's rural distress
 
 

The tying of farm aid
-The Business Standard

Use central funds to push agri-reform in states

The agriculture ministry’s reported decision to tie the state-wise allocation of funds from the National Agriculture Development Plan (NADP) to the states’ progress on agri-marketing reforms seems likely to benefit both farmers and consumers. Yet the gains from releasing central assistance only conditionally could be substantially augmented. If the Centre is serious about reform, it should expand this conditionality to other critical areas — incentivising land consolidation and reworking technology transfer. After all, agricultural marketing reforms have been in focus for a long while, even though they’ve made limited progress. Since 2003, the Centre has been urging states to amend their agricultural produce marketing committee (APMC) Acts on the lines of the model APMC Act it was circulating. Barely half the states have amended their marketing laws; in none of those, barring perhaps Maharashtra and Karnataka, does the new statute really liberalise agricultural marketing, ending the market committees’ monopoly. Moreover, most amended laws don’t even bother to legalise contract farming or out-of-mandi transactions of farm produce. The Centre’s frustration is thus understandable. Yet it should look beyond marketing to enhancing supply too.

India’s 60-year quest for land reform, for example, remains incomplete. The age-old obsession with land ceilings should now be replaced with methods that aid land consolidation, without which supply will remain constrained and productivity and wages low. Average farm size has already shrunk to less than 1.2 hectares; most are tiny pieces that are uneconomical to till. The consolidation of these minuscule portions of land into viable holdings can spur investment in productivity-enrichment measures, notably irrigation, which will boost overall farm production. Remember, it was the effective implementation of a land-consolidation drive in the undivided state of Punjab in the 1950s that triggered the mushrooming of tubewells — which eventually catalysed the green revolution. Legalising land lease is another reform that should be examined closely. It will allow absentee landowners – who currently keep their land untilled – to lease it out to others for cultivation without fear of losing ownership. Equally rewarding will be measures to revamp the agricultural extension system, which has become virtually defunct in most states. As a result, hardly one-third of the technology generated by the country’s vast farm research network actually reaches farmers. Effective and speedy transfer of this technology and know-how will, obviously, increase farm yields considerably.

Since agriculture is a state subject and state governments have generally been found wanting in the political will to implement reforms, central intervention, in whatever manner possible, seems unavoidable. Krishi Bhawan will now have, in the 12th Five-Year Plan, over Rs 7,800 crore of NADP funds to divide among states. This is too good an opportunity to waste. That money can be made to perform double work: pump resources into agriculture and push for much-needed reform.