The Minister of Finance, Nirmala Sitaraman, announced Friday a series of financial, legislative and reform measures aimed primarily at increasing farmers’ pricing power – or the share of profit in farmers’ income -, proposing the removal of historic barriers to internal trade, introducing new laws for freer food and commodity markets, and improving infrastructure.
The third tranche of the Sitaraman measures, Lake 1.63. Rupee and part of a larger rupee 20 lac. tranche, did not include a direct cash or cash transfer program for farmers, but was a combination of new allocations and additions to existing programs essential for agriculture, some of which were announced in February in the 2020-21 budget.
Full Covida Pandemic Coverage 19Click here
It is also an attempt to push through important legal reforms that could free up Indian agricultural markets and increase farmers’ incomes. The farm, which is the main means of livelihood, feeds almost half of the Indians and is hindered by many archaic rules.
According to estimates by economists and securities researchers, the measures announced so far amount to around LVL 18.3 (including around LVL 5.7 of monetary policy measures taken by the central bank in March and the support package of LVL 1.7 announced at the end of March).
Department of Finance officials said there will be two more terms – one announced Saturday and another on Sunday.
said D.K. Shrivastava, Senior Policy Advisor at EY India: One of the most important features of this tranche is that the cost of direct taxes (or cash costs) accounts for almost 30 percent of estimated profits, which is much higher than in the previous two tranches.
It refers to the fact that the fiscal value of the previous tranches is partly estimated by economists – in the Credit Suisse report, the fiscal value of the social security package of LVL 1.7, the monetary policy measures of LVL 5.7 and the first tranche of LVL 5.94 announced on Wednesday is about 55,000 rupees.
On Friday, the Minister of Finance announced that Rs. 1 will finance new infrastructure at the farm gate or simply markets for agricultural products, crop management tools and a law allowing farmers to sell their products freely to any trader of their choice, which could put an end to the most recent barriers to trade in food products characterised by the Agricultural Market Committees (AMCs).
It sets up a mechanism to guarantee profitable prices to farmers, which is at least the basic signal for profitable prices at planting, Sitaraman said. This is called pricing, which allows farmers to estimate the price of their crop before making a sowing decision so that they can grow the raw materials they need.
A central law should be established to guarantee farmers a reasonable choice of products sold at attractive prices, unhindered interstate trade and a framework for electronic commerce in agricultural products.
It also proposed amendments to the current law on product quotas, the Goods Act, in order to facilitate trade between farmers. The government will amend the Commodities Act to ensure better pricing for farmers by attracting investment and improving the competitiveness of the agricultural sector, she said.
This indicates that the government will apply the law more economically, a proposal made in January by the Interministerial Commission for Sector Reform.
ESA allows public authorities to determine how much stock may be held by wholesalers or even retailers, which is called legitimate stock limits. Cereals, edible oils, oilseeds, legumes, onions and potatoes should be deregulated, she said. Restrictions on shares are imposed in very exceptional circumstances, such as national disasters or a fall in share prices.
In response to a question, the Minister of Finance rejected the opposition’s accusations that most of his advertisements had been redistributed as expenses and contained a discount for the taxpayer. We have included the announced plans in the budget. But the amounts are now being paid out. When was the budget set? In February. If we give an accelerated tax refund, that’s taxpayer’s money. I’m saying this on purpose, Seetharaman.
These agricultural reforms or Mandi system, which controls the purchase and sale of agricultural products, have been in place for a long time. Various government groups and economists have often argued in favour of changes in the existing structures of trade in agricultural products.
CMPA’s rules stipulate that farmers may only sell to authorised intermediaries on notified markets, generally in the same region as where they live, and not on the open market.
Judging by the evidence, they often behave like cartels. In December 2019, when prices peaked during the last big increase, a study by the country’s competition authority, the Indian Competition Commission (IPCI), revealed that one company accounted for nearly a fifth of the total onion trade that month in Lasalgoan APMC, Asia’s largest onion market, Maharashtra Nashik.
The CMPA rules, which were used in the 1960s, provide that farmers may only sell to authorised intermediaries on notified markets, generally in the same area as the farmer, and not directly to buyers established elsewhere. These rules should protect farmers from forced sales.
With CMPA, farmers have to go through small eye units to gain access to large customers. Over time, this has resulted in layers of intermediate products covering the entire supply chain from farm to fork. This leads to a large price difference or the fragmentation of profit shares due to the presence of several intermediaries. Farmers often get the lowest shares.
Mrs Shrivastava of the EC added that the focus on agriculture and related sectors in this third tranche of the recovery plan could be justified by their high employment content. These reforms improve both well-being and efficiency.
Trade conditions have been decoupled from agriculture. The government seems to have figured that out and is trying to fix it, said economist Alaha.
These are the total prices paid by farmers in the household compared to the total prices they receive from the sale of their products.
Agriculture in India suffers from negative total income or negative trade conditions, which means that more assets leave the sector than enter it. As a result, agriculture is increasingly becoming a loss-making activity, according to a groundbreaking study carried out in 2018 by the Organisation for Economic Cooperation and Development (OECD), involving 36 countries and the New Delhi-based think tank ICRIER.
According to the Minister, the government will create a legal framework that will enable farmers to interact in a fair and transparent way with processors, aggregators, large retailers, exporters, etc. This will provide guaranteed benefits for farmers and reduce risks.
An important law that allows farmers to sell to the buyer of their choice, including through online channels and markets, should greatly facilitate maximizing farm sales and minimizing transaction costs for intermediaries. Farmers will be able to benefit from price-fixing and sell their produce on both government platforms such as e-NAM and private online food platforms, said Arindam Guha, economist in Deloitte India.
To increase the income of the livestock, which generates higher net profits than the crops, Seetharaman said: We want to achieve 100% vaccination for nearly 530 million animals, one of the largest in the world. Despite the blockade of Kovid-19, 15 million cows and buffaloes have been marked and vaccinated. To combat foot-and-mouth disease, which paralyses the milk production of sick animals, the FM announced the allocation of 13,343 Croatian rupees.
The government will set up a fund for the development of the livestock infrastructure of Rs. 15,000 to support private investment in infrastructure for dairy processing, added value and feed production.
The government will implement a beekeeping infrastructure development programme to increase revenues for 200,000 beekeepers, the Minister of Finance said.
The government has extended Operation Green for tomatoes, onions and potatoes (TOP) to all fruit and vegetables. At the same time, 50% of subsidies are allocated to the transport of surpluses to deficit markets and 50% – to storage. The Minister of Finance has also allocated 4000 rupees for the planting of grass.
While these initiatives may be good in the long term, they do not solve the problem of farmers whose crops have been lost as a result of the embargo. It is clear that the government is not in the mood to compensate these losses directly, said economist Sudhir Panwar, a former member of UP’s former state planning committee.
On Friday, the government announced funding of 1.63 Lah-Crore rupees. This includes Rs. 10 000 for the production of micronutrients, Rs. 20 000 for fisheries, Rs. 500 for beekeeping and another Rs. 500 for the TOPs.
So far, following Prime Minister Nahrendra Maudhi’s call on 12. May to the nation announced measures that cost more than Rs 9.1 in the first two instalments.