Market failure: On agriculture sector reforms

The ambitious initiative of the Narendra Modi government to bring about far-reaching reform in agriculture has run into severe weather, mainly over fears that the free market philosophy at its core could spell the end of MSPs for produce that has so far been centrally procured by the government. An allied party’s Minister, Harsimrat Kaur Badal (Akali Dal) has resigned in protest, and there is a strong pushback from farmers against three Bills that seek to replace ordinances issued in June, on key aspects of the farm economy — trade in agricultural commodities, price assurance, farm services including contracts, and stock limits for essential commodities. The opposition to the Bills, particularly on trade, flows from the position, articulated by Punjab, that agriculture and markets are State subjects, and there should be no tinkering with the MSP and Agricultural Produce Market Committees (APMC), that form the backbone of existing trading arrangements. Several States have already liberalised agricultural marketing, amending their APMC Acts, and some have allowed regulated private commerce including direct marketing. Yet, provisions in the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, providing for unfettered commerce in designated trade areas outside APMC jurisdictions without levy of any fee, and more generally, empowering the Centre to issue orders to States in furtherance of the law’s objectives, have alarmed States. A challenge has been mounted by Rajasthan, declaring central warehouses as procurement centres under its APMC Act, and therefore required to pay a market fee to the State.