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Agri market reform hit by differences between farm ministry, Nabard
New Delhi | March 2018
Two government arms have simultaneously pitched proposals to the finance ministry to develop 22,000 agricultural markets — critical rural infrastructure aimed at raising farmers’ incomes. Now, the two can’t agree on how to get going.
These new markets, essentially village ‘haats’, are conceived as aggregation points for farmers with minimal rules. The aim is to provide an alternative to rigged farm-to-fork supply chains that drive down farmers’ profits.
 
The agriculture ministry and the National Bank for Agriculture and Rural Development (Nabard), administered by the finance ministry, have both offered to set up these markets.
 
“But they aren’t exactly on the same page. In fact, the approaches are quite opposite and we need to determine a way out,” a government official said on condition of anonymity.
 
Ahead of the 2019 general elections, the Narendra Modi government is seeking to address widespread farm distress caused by drought-induced crop failures and a decline in agricultural commodity prices in recent years.
 
The proposed new markets are a part of the effort for which the latest budget created a Rs 2,000-crore agri-market infrastructure fund.
 
A part of the fund could also be used to modernise the existing wholesale market network, the agricultural produce market committees (APMCs) controlled by middlemen, a legacy of the so-called licence raj.
The new markets are proposed to be kept outside the APMC system in a bid to liberalise farm trade.
 
The agriculture ministry has begun a national survey of these village markets strewn across states, which mostly operate on panchayat land. Nabard’s proposal is to give subsidised loans at 4.75% interest, for which it has sought an interest subvention grant of Rs 360 crore under the agri-market fund. It wants the states to guarantee these loans.
 
The agriculture ministry’s proposal, which does not mention any of the costs, merely states that mechanisms are being explored to develop these markets, a second government official said. The agriculture ministry doesn’t agree with the Nabard proposal; the ministry says state governments are unlikely to guarantee these loan because of “high possibility of default by panchayats”. The ministry prefers a private-public partnership mode.
 
Given that the project essentially involves building storage and trading infrastructure, the agriculture ministry wants to draw on some existing schemes such as the Pradhan Mantri Gram Sadak Yojana (PMGSY), the national rural road-building programme. It also wants to merge the scheme with the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) that offers 100 days of work to at least one member of every rural household each year. The PMGSY already gives priority to building roads that connect rural markets, the official cited in the first instance said, adding that MGNREGS funds could be used for building public facilities, like markets.
 
Lack of transparent markets is a key reason for falling farm incomes. As the marketable surplus of various commodities rises, reforming agricultural markets has become essential. For instance, The all-India average marketed surplus (total quantity brought to markets as a ratio of total quantity produced) for tur (pigeon peas, a pulses variety) was 88.21% in 2014-15, according to the Agricultural Statistics at a Glance 2016. The figure for rice and wheat for that year stood at 84.35% and 73.78%.
 
“Whatever the policy, removing inefficiencies is agricultural marketing cannot happen without states taking the lead role in it. The Centre, I feel, will have limited success if it can’t get states to agree on common norms, like it did for the Goods and Services Tax,” said Suresh Nath, an economist who served the erstwhile Planning Commission.
 
A committee formed to suggest measures to double farm incomes has proposed “placing agricultural marketing under the concurrent list (in the seventh schedule of the Constitution)”. This will enable both the Centre and states to legislate on the subject, which currently falls squarely in the states’ domain.