AGENDA
OF AGRO- PRIORITIES FOR NEW GOVERNMENT
TEJINDER NARANG
Food
Security Act (FSA), food inflation, farmer’s profit on Minimum Support Price
(MSP), FCI’s restructuring, export policies, GM crops, sugarcane prices are
some of the vital matters that need immediate attention of the new
Government.
Food
Security Act:
Though
FSA was conceived for political populism of UPA-2, it found no takers in 2014
elections. After 35 days of its passage in September 2013, Act’s implementation
was deferred for a year for various reasons including non-readiness of the list
of the targeted beneficiaries in various states.
Apparently,
FSA is a doctrine of substantive undeliverable entitlements, which increases
fiscal deficit from 1% of GDP to 2-2.5% of GDP and will result into higher food
inflation than existing 10% per annum because 45-50% leakages in PDS
continue to thrive. The WTO considers FSA as violation of India’s
commitments because it distorts domestic market and provides unfair competitive
advantage in exports. Any imports triggered by FSA can create global price
spikes. Thus nation’s fiscal
deficit, agro trade, food inflation and WTO compliance have intimate
implications in the manner FSA is pursued in future.
India
was excluded from any punitive action till 2017 in WTO’s Bali conference of
December 2013, provided listed details on “domestic support” are furnished to
WTO. Since this data remains unsupplied by Indian side, such a reprieve
may not be maintainable. Controversies on raw sugar incentive and
wheat exports have already cropped up.
Since
BJP’s manifesto mentions “review of all laws and schemes under food security
system as a priority”, FSA in its existing form may not be operationalized. Thus over-stocking of grains by FCI must
come to an end.
MSP
(Minimum Support Price)
Mr.
Modi in its 2014 election campaign has mentioned about 50% return to the
farmers over MSP without clarifying whether such returns will be applied on all
expenses in cash and kind plus family labour—(technically jargoned as A2+FL) or
on total cost-which also includes rental foregone and interest on fixed capital
asset (termed C2 cost). Profits to the farmers under existing MSP in most
of the crops are above 50% as per A2 +FL formula but not if C2 conditions are
applied. If MSPs are inordinately raised inflation, fiscal deficit and exports
of agro commodities will be adversely impacted. A cautious approach is required
in this aspect.
FCI
reforms
A
BJP led Government also assures unbundling of FCI into three corporations each dealing
with functions of storage, procurement and distribution. These are long-term
reforms and may take years to implement. On a shorter time line-- stopping open
pended procurement of grains and limiting to need based acquisitions;
disciplining states from bonuses and local taxation to 2%-3% only; purchasing rice
from millers only; insulating FCI physically and financially from paddy
procurement and stop acting as processor of paddy to rice; can be prioritized.
The current dispensation to first procure paddy,
store it with millers and get it custom milled by paying fixed tolling charges
is exposed to massive financial abuse that needs correction by the new
Government without affecting farmers’ interests.
To offset fear of farmers that millers may not remunerate
them as per MSP for paddy, can be safeguarded by Government arming itself with
a right to intervene in the paddy market to lift its prices to the MSP as in
the case of Maize, where authorities undertake intervention under specific
circumstances.
Export
Policy
In
last two years, India exported about 40 million tons of grains
(wheat/rice/corn) which is unprecedented. Open and unrestricted exports
policies as a default model in this sector have helped. El-Nino is a weather
event and should not impact policy prescription. Exports will come to a halt if
inflation gets induced due to El-Nino, then why interfere with the policy?
If
the new Government intends to expand agro trade aggressively it must take a
view on the GM crops. GM Soya and Maize have revolutionized
the yield and overall production in Brazil and Argentina. China is major
importer of such GM crop. The use of GM crops is riddled with controversy
of health concerns and damage to the existing crop etc. A balanced view is
needed so that benefits of technology are leveraged to all sections of the
society.
Sugar
State
Advisory Prices (SAP) of Sugarcane is announced by various states annually in
an arbitrary manner, leading to unpaid cane arrears. BJP’s suggestion of having
a “National Agriculture Policy” could be
the way forward in rationalizing the system that is controlled by States where
Central intervention has been quite frequent.
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