Farm policy:

 

Dis-ease of doing the business of agriculture As the Modi government completes three years, here are three potentially game-changing steps it could now take to harness the sector’s unrealised potential

Amidst the predictable tidal wave of opinion pieces to mark the Narendra Modi government’s third anniversary, one little event last week squeezed its way into the inside pages of a few newspapers. This was a call for a “farm strike” in Maharashtra from June 1, entailing, among other things, cutting off vegetable and milk supplies to Mumbai and Pune. Those behind the proposed stir have demanded a comprehensive loan waiver for farmers, fixing minimum support prices for produce at 50 per cent above production cost, free power, and so on.

Agricultural policy has, for long, been an arena for quick fixes. Recall how governments in the eighties and nineties could neutralise large-scale farmer mobilisations by Mahendra Singh Tikait in western Uttar Pradesh or, for that matter, Sharad Joshi in Maharashtra. In the current standoff, too, we are likely to see some messy compromise being made, with every side declaring victory.

However, there’s something beyond the usual populist demands Maharashtra farmers seem to be saying. It has to do with the ease of doing the business of agriculture. While the regulatory and operating environment for industry and services has been made progressively less stifling over the past two decades, agriculture still exhibits the worst of policy neurosis.

There is no visible sign that “ease of doing business” in agriculture even figures on the policy checklist of government, either at the Centre or in states. Even so, with the Modi government looking stronger than ever, it is tempting to suggest three potentially game-changing and pro-farmer steps for the sector that can be taken in the immediate term. These could, in turn, signal the government’s resolve to address more deeply-rooted problems over the long term.

First and foremost, leasing of agricultural land needs a total freeing-up. It shouldn’t matter whether the lessee is another farmer, an urban dweller or a company. Except for tribal areas and some eco-sensitive zones, which can be excluded for the time being, it makes no logical sense today to tie down resource- starved farmers to handkerchief-size holdings that keep them in eternal poverty. Safeguards against land grab and diversion to non-agricultural use can always be built into any liberal leasing policy. There could also be government agencies to act as intermediaries to create agricultural land banks and deal with lessees, in order to protect the interests of small landholders.

A liberalised leasing policy — sans any ceiling on the land an individual lessee or company can take up for cultivation — would enable large-scale mobilisation of capital, technology, machinery and inputs. Apart from realising the true productivity potential of now-fragmented land holdings, it can lay the foundations of an agro-processing revolution to create millions of unskilled/semi-skilled jobs. The Centre’s current draft model land leasing law is too restrictive and not ambitious enough to achieve the above vision.

The second immediate reform relates to agricultural marketing liberalisation, which many policymakers and commentators oppose, citing food security concerns. But why at all assume the two as mutually exclusive goals? What stops the government from maintaining critical food buffer stocks, simultaneous with the removal of fetters on internal trade, movement and export of farm produce? Poor and vulnerable households can, and should, continue to benefit from targeted subsidised food entitlements. But why strangle value addition and job creation for an entire sector for that? The government can further resort to imports, direct or through private trade, to tackle situations arising out of weather or market-induced shortages. Recent World Trade Organisation studies on “revealed competitive advantage” comparisons point to India’s huge untapped agricultural potential over both the US and China. We happen to be the lowest-cost producer in a wide range of farm goods, which can be harnessed to gain global market shares. But for this, marketing of agri-produce has to be kept as open as that for software or automobiles.

Finally, just as freeing up land-lease markets is necessary to promote consolidation at the production end, incentivising organised business at the front-end is essential to close the loop. The existing fragmented agri supply chains not only add to costs and contribute to wastages, but also deprive primary producers of a fair share in the final consumer price. A favourable policy towards organised retail, including foreign players, will help create more efficient supply chains. The experience with milk and poultry product marketing shows that compression of value chains needn’t be at the small producer’s expense. On the contrary, both these industries, with large organised entities as system integrators (Amul, Venky’s, Suguna, etc), have turned out to be inclusive job creators. There’s a dire need today to extend “ease of doing business” – which industry and services have benefitted from since 1991 – to agriculture. Three years into this government, the sector still awaits its champion who would, indeed, pave the way.