Let’s Not Waste a Crisis

Context:  Challenges to new central farm bills, such as those posed by Punjab, harken to socialist era. They attempt to undo agriculture's 1991 moment.

Issues with the Punjab states farm bills

• Selective prohibitions: The bills prohibit private players from buying only wheat and paddy below the Minimum Support Price (MSP) even outside the Agriculture Produce Market Committee (APMC) 

• Other crops, say maize, cotton, pulses, oilseeds, vegetable and milk are excluded.

• No additional economic gain for farmers: Since the Centre already buys more than 95% of Punjab's wheat and paddy at MSP through the Food Corporation of India (FCI) and state procurement agencies.

• Bills are intended to protect state government (Rs 3,500 crore) and arhtiyas (Rs 1,500 crore) income that they squeeze annually from the FCI for wheat and paddy procurement.
• Bitter past experiences: The Agri-marketing Policy 1972 allowed the Centre to take over the wholesale trade in wheat and rice which led to a decline in market arrivals and an increase in wheat prices by 50%.

• Resonating "licence raj":  Demand that MSP should be made a legal instrument (rather than indicative) exhibit deep distrust of the private sector and markets. 

Evolution of Agri-marketing reforms since 1991: The 1991 reforms bypassed the Agri-marketing reforms.

• A model act on Agri-marketing, 2003: was an accommodative model, triggered by bulging stocks of wheat and rice with the FCI, but that model failed.

• Lack of major Agri-marketing reforms during 2004-2014: Turned socialist by enacting the National Food Security Act in 2013. (giving 5 kg wheat or rice to 67% of the population at Rs 2/kg and Rs 3/kg.)

• Recommendations of Shanta Kumar Committee 2014 – include 

• Cash transfers in the public distribution system.
• Overhauling the FCI's operations by labour reforms and encouraging free markets to make the system more efficient.

Conclusion: The COVID-19 crisis opened a window of opportunity to reform the agri-marketing system. Patience and professionalism will bring rich rewards in due course, not noisy politics.