‘Business Of Agriculture’: How The States Must Build On The Centre’s Reforms

It’s that time of the year when most of India makes educated guesses about whether the monsoon is normal, and what its possible impact will be on the farm sector. Of course, we also know that rainfall matters little, in making farmers’ lives better, as do the various subsidies. Now, after Minimum Support Price (MSP) was finally increased by the Narendra Modi government, there are assertions that even that will matter little. The fact is, whatever said and done – and that includes loan waivers and other handouts – nothing will really change farmers’ lives.

What can bring about improvement in their circumstances though are better prices, better access to water, capital and other inputs, the power of bargaining, and the adoption of efficient technology. In short, when agriculture is seen as a business.

And yet, the kind of reforms that would enable the “business of agriculture” – so that farmers get a good price without the intervention of the middleman, legalisation of land leasing, that would make landowners and tenants secure as well ensure they get access to formal credit, insurance and inputs, among others – are yet to be initiated in India on a serious scale.

Centre’s Role

The Centre has been doing its bit, however. A comprehensive agenda to transform agriculture includes among other things:

- marketing reforms and the creation of an electronic national agriculture market (E-Nam) that would integrate all the mandis (APMCs);
- working on a model law for contract farming;
- setting up a panel to promote derivative trading in farm commodities;
- crop insurance so that farmers go in for new crops;
- schemes to ensure improved access to irrigation under the Pradhanmantri Gram Sinchai Yojana.
- For land issues, NITI Aayog has had in place a model law for land leasing that states can adopt; as well as a digitisation programme of the Centre that includes computerisation of land records and integration with settlements and surveys.
- NITI Aayog has also proposed the scrapping of the Essential Commodities Act that would help the cause of stable prices.
- Union Budget 2018 further saw funds for improvement of infrastructure of the agri markets, the introduction of a scheme for organic farming, and so on.

However, in the absence of crucial reforms that the states need to carry out to link to the national plan, all these initiatives come to a naught.

State-wise Comparison Of Agricultural Reforms

In 2016, NITI Aayog had brought out an index called AMFFRI, to capture all the Agricultural Marketing and Farmer Friendly Reforms across Indian States, and provide a comparative measure. This would reflect the level of adoption of market reforms and farm-friendly policies in states – or the ease of doing agri-business.

Though the first index came out in 2016 October, and the cover of the report titled “The first report in the series. Propose to bring periodic updation and revision” talked about updation, there has been no news reports related to the index in 2017. Upon checking with a NITI Aayog official, we were told that none came out after that. This is not surprising because states had, for a long time, really not done enough to warrant a new compilation. The official mentioned that now, to the best of his knowledge, work is on to compile revised data, while adding nevertheless: “Very few states have taken any steps in that direction; loan waivers and direct benefits to farmers, even though they are ways to help the farmer, do not count as reforms.”

Indeed, states have been dragging their feet on reforms. Under pressure from Prime Minister Narendra Modi, NITI Aayog has been working with states to implement reforms in marketing, futures trading and contract farming. Yet, as Ramesh Chand, NITI Aayog Member, said in October last year, they have been “slow, patchy and absolute.”

Uttar Pradesh - Catching Up Fast

From the available sources of information on reforms undertaken by states, the big surprise was Uttar Pradesh.

In 2016, the status was that the state allowed leasing out of land only by certain categories of land owners (those suffering from disability, widows, unmarried, separated or divorced women, members of armed forces, etc), along with Bihar, Karnataka, Madhya Pradesh, Chhattisgarh, Uttar Pradesh, Uttarakhand, Himachal Pradesh, Tripura, Telangana and Odisha, as categorised in a report of the Expert Committee on Land leasing of the NITI Aayog.

However, things have changed since: Uttarakhand and Uttar Pradesh have amended their land laws, as chairman of the above committee, Tajamul Haque told IndiaSpend earlier this year.

While Uttarakhand has done it quite comprehensively, Uttar Pradesh has done two things that improve the situation: a) deleted the clause that allowed the tenant to occupy land after operating on it for more than 12 years, and b) included people such as businessmen, those in the services, MPs and MLAs, etc. in the list of people who are eligible to lease out their land.

Haque also said that Maharashtra and Madhya Pradesh had also passed a new law on the lines of the model land leasing act that NITI Aayog had prepared.

Uttar Pradesh, again, also scores high on the E-Nam agenda. As per the data taken from the E-Nam website, UP has as many as 100 APMC mandis integrated on E-Nam.

Gujarat, Maharashtra, Madhya Pradesh and Haryana were among the other fast workers in this area.

Telangana’s Tale And Other Sorry States

Certain other states that arouse curiosity are: Punjab, traditionally known as the face of progressive agriculture in India. Though it is expected to pass a law relating to land leasing, it is going very slow on the market reforms front, with only 19 APMCs integrated on E-Nam.

Karnataka is the other one: Despite having all land records digitised as well as the registration system, which could have made land leasing easy because the land titles are clearly recorded, it has not moved in this direction. Karnataka had also declined to join the agriculture ministry-promoted E-Nam, but then it already had its own Rashtriya e-Market Services Private that also allows trading across states.

Telangana deserves special mention because Chief Minister K Chandrasekhar Rao has claimed that his recent pro-farmer schemes are the answer to India’s farmers’ problems and need to be emulated by other states. Certain economists also seem to be in agreement with him. The Rythu Bandhu scheme, for instance, is supposed to be a farmer investment-support scheme. It provides Rs 8,000 per acre to all Telangana farmers every year (Rs 4,000 per crop, per season) towards purchase of inputs like seeds, fertilizers, pesticides, and for labour charges and other investments.

However, as a policy expert at NITI Aayog points out, “Though it is one way to help the farmer, so that he can buy inputs, its diversion to non-farm expenditure cannot be ruled out. In that sense, it is not a reform for the sector, but a support.”

In addition, this is only meant for the landowners; the tenant farmer does not benefit at all. In fact, in April this year, a protest was staged by an umbrella organisation comprising several farmers’ unions, to demand inclusion in the scheme; they claimed that 60 per cent of the farmers that had committed suicide were tenant farmers.

Telangana also became the first state in the country to supply 24-hour electricity to the farmer. However, we learnt from the farmers themselves that this was unnecessary as it led to wastage of water due to callousness – for instance, when the pump for drawing water was left switched on through the night. They said that 9-10 hours of water was enough, and everyone worked as per electricity timings. This, in fact, was leading to depletion of water table in the region.

These examples go on to prove the disparate levels of state government initiatives in agriculture across India. Often, steps taken are incremental, whim-based and sporadic. More often than not, states are wary of reforms because they hurt their politicians’ interests. Add to that, the problem of activists who oppose land leasing, for instance, saying this will not solve landlessness and that instead, land should be redistributed.

These hindrances at several levels – lack of markets, capital, presence of middlemen, low prices, land issues, poor productivity owing to technology and irrigation handicaps and many other factors – keep the morale of the Indian farmer low and also deter the entry of agribusinesses. Contract farming and collectivisation could be the answer to many of the small farmers’ problems. Further, marketing reforms would give an incentive to the private sector to invest in agri logistics, cold chains, etc.

But the land-leasing rider alone can hold up many of these, by preventing the entry of the private sector. And those reforms are held ransom to local politicians’ vested interests.

Meanwhile, Elsewhere

As India inches forward with basic-level reforms, time and the world of developments in agribusiness wait for no one. All it takes is one look at a report of the World Bank, Enabling the Business of Agriculture 2017 (EBA) to realise that we’ve gotten left behind on the universal canvas of farming.

To grow food efficiently and more productively, we need to make farmers self-sufficient, need to make supply chains robust and we need investment in technology. The world has also gone on to include the discourse of “reducing the environmental footprint of agriculture and food sectors”.

EBA indicators advocate efficient regulatory processes that support agribusinesses, and capture the quality and efficiency dimensions of business regulations in countries that have significant correlations with agricultural productivity.

The report studied 62 countries on topics such as seed, fertilisers, machinery, finance, markets, transport, water and Integrated Communication Technology (ICT). EBA had selected four Indian states for the study, and in case of discrepancies across states, went by Maharashtra as the proxy. India ranked especially poorly on markets, transport and water. Considering the prominence of agriculture in India, as a sector, as an employer, and as a culture, this certainly needs to be improved upon.

Some Good News From The EBA

Two good practices that India got a special mention on, are significant and deserve mention in this context. One, is gender equality. Says the EBA:

The other highlight is ICT and the private sector’s role in expanding mobile coverage:

These two strengths – digitisation and women’s participation – are all set to lead the way, and what we need to build on. The reforms, nevertheless, still need to be in place first.

Perhaps, the realisation must first dawn on state governments that the farmer as a person matters – and not just his vote – and that he needs to be encouraged and given a chance to earn his living in a respectable manner. The rest will follow.