Finance Minister Smt Nirmala Sitharaman announced third set of measures focusing on agriculture sector in as comprehensive way as possible to include governance and administrative reforms. I would say, this was more an opportunity grabbing to initiate long pending agriculture sector reforms than just some support to tide through the economic impact of Covid-19 related lockdown.
As they did for the first set of measures announced on 13th May, 2020, here too they released only a pdf file of the powerpoint presentation. The disclaimer which goes without saying is the detailed document, not released yet, of the relief measures will reveal the operational effectiveness of the measures announced at granular level.
At the cost of repetition third time, myself being someone who has tremendous faith in Indian Bureaucracy to mess up matters at details level creating confusion and followed by series of clarifications, I would like to wait out and reserve some of my views.
The presentation is hosted at this link: Atmanirbhar Presentation Part – 3: Agriculture including Governance and Administrative Reforms.
The page 2 and 3 of the presentation recaps the measures announced by finance minister on 14-05-2020 regarding additional emergency working capital finance support and expanding coverage of Kisan Credit Card.
Agriculture : Additional Steps during COVID
The government has maintained a very steady focus on sector on which significant portion of our population is dependent on. Post the Rabi season and with start of Kharif season, the government as already provided a support of almost a lakh crore through minimum support price, PM Kisan fund transfer and payment of crop insurance premium. Do note that every year, center and state governments together remain largest procurers of farm produce and the above support seems to be in addition to the routine procurements which happen.
Animal Husbandry : Additional Steps during COVID
With almost up to 4% interest subvention – 2% direct and additional 2% incentive on prompt payment/interest servicing – is by far best the support any sector must have got so far.
Fisheries: Additional Steps during COVID
Extension of Sanitary Import Permit is critical. The permit itself is very critical for health safety of our nation. Importers of live stock are required to obtain license from DGFT as live stock remain under restricted category. This is “to prevent ingress of exotic diseases through import of livestock and livestock products” as the website of SIP puts it. Similarly, quarantine cubicles are facilities are designated livestock import ports where the imported livestock are quarantined and certification services are provided. This is how democracies operate – we care for health safety of people.
All these extensions are not just required from business loss and compliance perspective, they represent India’s food safety and sanitary standards.
AGRICULTURE
The measures relating to agriculture sector are categorised under two heads:
- Measures to strengthen Infrastructure Logistics and Capacity Building
- Governance and Administrative Reforms
PART 1: Measures to strengthen Infrastructure Logistics and Capacity Building
Rs 1 lakh crore Agri Infrastructure Fund for farm-gate infrastructure for farmers
Without any doubt the father of Cold Storage Scheme in India will remain our beloved Prime Minister Shri Atal Bihar Vajpayee. His Cold Storage Scheme in 1999 till 2002, was the first most ambitious plan to recognise the need for making our farm sector yield more efficient. It also triggered almost 3.75 times more investment by private sector against the government spent on immediate basis. This was rightly matched by massive push in infrastructure projects like North-South Corridor, East-West Corridor and Golden Quadrilateral Network, New National Seeds Policy and National Agriculture Policy.
Fast forward 2020, another BJP leader, current Prime Minister Narendra Modi is now making a single-push massive capacity expansion which most likely remains unseen in Asia in past 2 decades. Also, when it comes to technology, the latest entrants adopt superior systems and enjoy a longer technology viability advantage.
To my mind, in medium term, this has potential to turn India into a major export center and be self-sufficient in atleast few categories of farm produce through simple market-force mechanism.
Rs 10,000 crores scheme for Formalisation of Micro Food Enterprises (MFE)
An opportunity rightly tapped to make our food safe, inculcate consciousness of food safety and standardisation to our bright entrepreneurial societal mindset.
This one is as big and landmark as financing street vendors which I had written in my earlier blog. The sheer volume these micro enterprises generate have so far oscillated between organised and unorganised. This initial support to formalise these identified target groups, which will see better price realisation and exploration of new markets, will automatically make it lucrative for individuals and families who undertake such similar ventures locally, selling papads, pickles, chocolates, sweets and savouries, et al, to voluntarily obtain food safety standard certificate.
Rs 20,000 crores for Fishermen through Pradhan Mantri Matsya Sampada Yojana (PMMSY)
We have been seeing support to fisheries sector since God-years through annual union budgets and state budgets. This focusses much at policy and infrastructure level. The investments presented would go about to elevate fishery business to a more structured industry sector level. The focus on taping on-land resources is the case in point. I would ignore the production, employment and value numbers here, yet there is no doubt that this will give a good push to all the three.
National Animal Disease Control Programme
Covid-19 indeed has shaken up every system for good. Till date only about 3% ie. 1.5 crore out of 53 crore animal population (cattle, buffalo, sheep, goat and pig) have been vaccinated. Our survival is indeed a divine intervention, which government seeks to change and assume what is their responsibility. Though, as with most other schemes, only states can administer this initiative, the center only has a few union territories under them.
Animal Husbandry Infrastructure Development Fund – Rs. 15,000 crore
Prioritising private investment in dairy processing has come a lot late. Better late then never though. The cooperative movements have peaked their utility and can only survive at their existing product profile and service standards. All the next innovations and adventures, in the sector dominantly influenced by various state and central government subsidy policies, have to be from private sector.
Promotion of Herbal Cultivation : Rs. 4000 crore
I am so sure this would be the most satisfaying day for Swami Ramdev – he has held the fort of traditional medicine through massive investment in medicinal plant cultivation. Yet, the scale which the might of national government can achieve, no individual organisation can. The wider implication of this investment would be even greater – it will make business sense for private sector to fund scientific research to tap global market of nutrition supplements and ayurvedic medicines. A low hanging fruit, ripe and was waiting to be plucked for so long.
Beekeeping initiatives –Rs 500 crores
Honey maintains its medicinal and nutritional value in domestic and international markets. Increasingly more people are experimenting replacing sugar with honey and jaggery. Any push to augment capacity is always a welcome move. This is another low hanging fruit, already ripe, was waiting to be plucked.
From ‘TOP’ to TOTAL – Rs 500 crores
The diversity of geography, climate and produce variety India has, only three items – tomatoes, onion and potatoes – remained incentivised for decades. I am not sure if I would call correction of historical wrong as a reform. Yet I will call it a major reform given these three notorious veggies have played political havoc in this country. My only wish at this point would be the subsidy in transportation and cold storages should not continue beyond say 2-3 years.
PART 2: Governance and Administrative Reforms
Amendments to Essential Commodities Act to enable better price realisation for farmers
This is by far biggest reform India has done since independence till date. To my mind this is bigger than even the 1991 reforms.
Deregulation of food stuffs in simple language means India investing its faith in free markets and that the prices won’t be regulated by the government, rather determined by the market forces. This only means fair price for farmers and consumers when we read this with the another regulatory amendment proposed in the next slide below.
Not imposing stock limits to processors or value chain participants is equally a big reform. This was the only real support needed for food processing industry which was wary of entering the sector due to socio-political-legal risks with respect to the agricultural inventory they would hold. I distinctly recall a good friend dropping plan to set Onion, Tomato and Garlic powder processing plant in Maharashtra as that year the government literally went around markets and food processing companies to force them release their onion stock only because prices saw a jump for a few weeks only to stabilise back naturally. It scared the promoters off the business plan.
Though in absence of any detailed document, for any announcement relating to governance and regulatory changes, I would advise exercise of extreme caution. We remain a socialist nation. Significant portion of our politics remains social-emotion driven. Let the draft amendment be out and see how different states react to this proposed change.
Agriculture Marketing Reforms to provide marketing choices to farmers
Farmers of India will celebrate this day as their true independence day for they can freely sell their produce to any one they wish to by entering into mutually beneficial voluntary consensual contractual agreements. This is exactly what free markets mean.
This has potential to break the monopoly of powerful middlemen cartel and influence of state politicians on the supply chain. This is GST’s ‘One Nation, One Market’ equivalent in the agriculture commodities world. Brilliant in theory for the time being.
Again in absence of any detailed document, it would be very difficult to comment on what shape and colour the proposed national law would take. Let the draft amendment be out and see how different states react to this proposed change.
Agriculture Produce Price and Quality Assurance
In absence of land reforms, this is the best way out to overcome ills plaguing our agricultural sector – fragmented land holding resulting in low yield and higher unit costs; and denial of agricultural land-ownership to non-farmers which currently literally is a hereditary phenomenon than actual act of farming.
Entering into arrangements with processors, aggregators, large retailers, exporters, etc. is again India trying to take a leap of faith towards free markets.
Only point which makes me wary is ‘assured returns’. Farm sector is too politically sensitive for politicians to leave it alone and very ‘lucrative’ too. This is a good announcement. I am sure industry will definitely welcome this move, though they would tread with utmost caution for foreseeable time into the future.
Conclusion
The measures relating to agriculture sector undoubtedly appear landmark reformist. Indian political landscape has rarely mainstreamed the discussion around the announcements made on these front. Hence, to my mind, this is the single biggest reform independent India as ever seen even bigger than famed 1991.
The points discussed under the first part titled ‘Measures to strengthen Infrastructure Logistics and Capacity Building’ have deep dependency on last mile delivery of the measures announce; and also supply-chain logistics and infrastructure ensuring last mile connectivity. The Central and the State Governments have to work in tandem, more so efficiency of the State administration would determine the pace of success, success being guaranteed here.
The points discussed under the second part titled ‘Governance and Administrative Reforms’ depend on two factors: the legal framework drafted by the policy makers; and political response by the states as constitutionally agriculture remains a state subject. The diversity in geography, climate and produce variety we have in our nation, shift of control over agriculture to union government would not be desirable. The states have to retain their localised view and control over policy. Hence the debate on state list and concurrent list on this matter would be interesting to track.
I would say these are very promising measures. They will take some time to fructify. Political will now has already assured certainty of action. Hence it is only about the time when we will see the action.
(Also CA in me can’t resist noting that adding private participants to agriculture sector would only eventually add more to direct and indirect tax kitty.)