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Assessing Farm Policies

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November 21, 2017

What is the issue?

  • India is witnessing continued farmer agitations in different states and the country's capital.
  • It is vital at this juncture to assess the structural and policy concerns that plague India's agricultural sector.

What are the policy shortfalls and possible solutions?

  • PMFBY - The Pradhan Mantri Fasal Bima Yojna (PMFBY) was designed to provide crop insurance.
  • The Central government shares part of the premium subject to certain conditions.
  • The states have to wait for the Central government’s share, irrespective of the cropping density in the region and irrespective of whether the region is rain-fed or irrigated.
  • Allowing states to design their own crop insurance schemes and yet providing the Central government share of the premium would yield better results.
  • E-NAM - An incentive of Rs 75 lakh per mandi is given by the Centre to the states for linking each market with E-NAM.
  • However, some states log in all FCI purchases as E-NAM transactions and so, much of the recorded turnover is made up and not real.
  • Incentivising each state to have the electronic platform which meets the basic criteria of interoperability with other states would be better.
  • Trade negotiations - As per the Constitutional provisions, trade negotiations are under the purview of the Centre.
  • However, the anomaly is that agriculture is in the domain of the states.
  • The Central government should try bringing the states into the decision making forum if international trade treaties involve agricultural aspects.
  • Trade policies - Every time food prices rise, the Centre intervenes to rein in inflation.
  • It responds by facilitating the unhindered import of agricultural commodities.
  • However, increased imports work against the profitability of the farmers.
  • The Centre should instead set a floor price for all such farm produce to reduce the impact of price fluctuations on farmers.
  • Bringing in place the “Price Deficiency Payment” mechanism, whereby the central government makes for the shortfall between the market price and floor price can help.
  • Credits - Scrutiny of the farm loan data, after a series of farm loan waivers, revealed that public and private sector banks have indiscriminately given loans to less credible farmers.
  • Evidently, loans were provided based on their asset value rather than economic viability.
  • The loans were arbitrarily given by the banks to also meet their own priority-sector lending target.
  • In all, the “one-size-fits-all” policy is becoming irrelevant for the farm sector and necessitates a more decentralised system for decision making, implementation and performance appraisal.

 

Source: Indian Express

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