Agriculture

Economic stimulus package on Day 3 a repetition of budget: Experts

The announcement included some major policy shifts that may have far-reaching consequences

 
By Snigdha Das, Vivek Mishra
Last Updated: Saturday 16 May 2020
Photo: Wikimedia Commons

The third day of Union finance minister Nirmala Sitharaman’s announcements May 15, 2020, outlining what is supposed to be a Rs 20 lakh crore relief, was mostly a repackaging of her last Budget speech, a section of experts said.

Sitharaman has spelt out deals for specific groups every day since Prime Minister Narendra Modi, during his May 12 address, announced the package to help the economy tide over the effects of the novel coronavirus disease (COVID-19) pandemic.

The third tranche, mostly for the primary sector of the economy, included some major policy shifts that may have far-reaching consequences.

“As an immediate step, we will provide Rs 1 lakh crore to strengthen farm-gate infrastructure such as cold chains, storage centres and post-harvest management,” Sitharaman said.

Private entrepreneurs and start-ups looking to procure from farmers and “reaching out with value addition to the global market” will benefit, she added.

Her announcements included:

  • Rs 10,000 crore for micro-level food enterprises
  • Rs 20,000 crore for fisherfolk under the Pradhan Mantri Matsya Sampada (fisheries) Yojana for their vessels, mandis (wholesale markets), harbours and marketing
  • Rs 13,343 crore for vaccination of cattle against the foot-and-mouth disease
  • Rs 15,000 crore for dairy infrastructure development, particularly to support private investments
  • Rs 4,000 crore for herbal farming, particularly along the Ganga
  • Rs 500 crore for beekeeping
  • Rs 500 crore for ‘TOP to TOTAL’: expand the scope of stabilising the supply and prices of tomato, onion and potato (TOP) to all vegetables

A hogwash?

Some welcomed the announcements. A Amarender Reddy, director, the National Institute of Agricultural Extension Management, Hyderabad, called them timely. The government can use migrant labourers returning to villages to set up farm-gate infrastructure, he said.

But there were disagreements. “The package is a repeat of the Union Budget 2020-21,” Kaushalendra Kumar of Kaushalya Foundation, a non-profit working with farmers and farmer-producer organisations in Bihar, said.

‘TOP to TOTAL’ was the only new provision, said GV Ramanjaneyulu, executive director at the Centre for Sustainable Agriculture, Andhra Pradesh Agricultural University.

“While the Rs 10,000 crore for micro-level food enterprises may benefit small farmers, self-help groups or women entrepreneurs, most other provisions are futuristic and will benefit entrepreneurs and retailers,” he added.

Farm-gate infrastructure (storage facilities, processing units, etc) were needed, but will take six-eight months to be set up, Ramanjaneyulu said.

Farmers needed immediate relief and compensation for losses incurred over the past two months, since the nationwide lockdown to curb COVID-19. Sitharaman’s package did not spell out how it would be done, he added. 

According to Ashish Gupta, a Delhi-based marketing consultant working with smallholder farmers:

 We will have to wait for the fine print … the devil may be in the details.

“It remains to be seen who gets access to the funds: What is the eligibility criteria and who eventually gets it. But it seems doubtful the package will help small agri-businesses and farmers,” he added. 

Policy reforms

Sitharaman also announced three policy ‘reforms’. The first, an amendment of the Essential Commodities Act, 1955, will help fetch better prices for farmers, she claimed.

It will be used to de-regulate trading in cereals, pulses, oilseeds, potatoes and onions: No stock limits will apply for food processing units, value-addition corporations and exporters.

While amending an archaic law was welcome, the law in question was the only one to prevent hoarding of food grains, Ramanjaneyulu said.

Imagine the situation over the past two months had a handful of companies hoarded food grains or other essential commodities. It was important the government exercises some control over the food grain stocking while deregulating, he added.

The second intervention, related to agriculture markets, will provide more marketing choices to farmers, Sitharaman said: A central law will provide for barrier-free inter-state trading of farm produce and farmers will be able to sell at attractive prices.

They must, currently, sell only to licensees at Agricultural Produce Market Committees. The Agricultural Produce Market Regulation Act, 2003 mandates that notified agricultural commodities can bought and sold only in specified market areas or APMCs.

Such restrictions hindered the free-flow of agricultural produce and fragmented supply chain, Sitharaman said.

This lure of “access to more markets by removing trade barriers” was also offered to India with the advent of the World Trade Organization. But India, a high-cost economy, could not compete in the global market, particularly with other large economies and cheaper imports.

If the Union government lifted the inter-state trade barrier, this will be the fate of farmers in states like Andhra Pradesh and Telangana, Ramanjaneyulu said.

In these states, the costs of production were high, compared to Chhattisgarh and Odisha, where labour and land were cheaper and input use was low or Punjab and Haryana, where the cost of production was less due to more support from the government, larger holdings and higher mechanisation.

Farmers in high-production-cost states will actually lose their markets to big farmers or retailers. Instead, the government should try to reduce production costs in agriculture and make them competitive before opening up state borders, he added.

Sitharaman also said a facilitative legal framework would be created to enable farmers engage with processors, aggregators, large retailers and exporters in a fair and transparent manner. Risk mitigation, assured returns and quality standards will be integral to it, she added.

There was enough experience across the country to show that without proper safeguards for arbitration and guarantee, such contractual arrangements badly affect the weaker partner — in this case, the farmer.

e-NAM: Time to iron out glitches

An important announcement by Sitharaman was related to online trading of farm produce, even as mandis have emerged as hubs of COVID-19. The central law that the Union government plans to introduce to facilitate barrier-free, inter-state trade will also have a framework promoting e-NAM (Electronic-National Agriculture Market).

The pan-India trading portal has existed since 2016 with the aim of networking existing mandis on a common online market platform of ‘one nation one market’.

In fact, on May 15, the Union Ministry of Agriculture and Farmers Welfare announced the integration of 38 more mandis with e-NAM, taking its total to 1,000.

Farmers, however, won’t benefit merely from adding mandis unless buyers and big companies traded on the portal. And buyers won’t come unless mandated by the government or for some rebate or incentives, Yogesh Kumar Dwivedi, chief executive at Madhya Bharat Consortium of Farmer Producer Co Ltd, said.

According to him:

As of now, the success of e-NAM was only a bureaucratic gimmick

Right now, they pay the same mandi tax (two per cent of the cost of purchased produce) while trading on e-NAM.

Chhattisgarh recently managed a breakthrough, offering a 0.5 per cent exemption on e-NAM trading.

Kumar identified another problem of online platforms: Ensuring standardisation of products.

Suguna Foods India Suppliers, for instance, bought corn from farmers across India for poultry products. Bidding was online; it employed a third party to check product quality as claimed by farmers. Payment was credited to farmers’ account once the third party assured of quality.

The government should either introduce a provision like this on e-NAM or train farmers to feed in correct information on the portal. Trust is an important catalyst while trading online. Simply increasing the number of mandis won’t make much difference, Kumar said.

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