Before Mandsaur, PMO discussed protecting farmers from price volatility

Much before Mandsaur in Madhya Pradesh was on the boil, Prime Minister Narendra Modi's Office (PMO) had convened a meeting for liberalisation of agriculture sector.

PM's principal secretary Nripendra Mishra-led high powered meeting, held a few months back, deliberated on the need to set up a price deficiency payment mechanism to safeguard farmers against prices dipping very low – a cause for farmers to hit the streets in MP, Maharasra and other states.

Government sources aware of the brainstorming on agri reforms said  the price deficiency payment directly to farmers through direct benefit transfer was considered as the "most economical instrument" to protect them against a situation where bumper crop production yields nothing monetarily. The realisation to pitch in to check recurring agrarian crisis was over the fact that a large number of crops and state are facing discrimination in price support policy of central government as the minimum support price is effective only for three crops.

Though the centre has put this issue on the medium term reform agenda which would take about five years to role out, government sources, said if implemented it can take burden off the shoulders of governments from large scale procurement of rice and wheat. It will be beneficial for both since governments can directly pay to individual farmers the difference between the low price and reasonable price of a crop at the time of glut in the market, there won't be any distress due to volatility, government sources explained.

The government is also in favour of revoking Essential Commodities Act, 1955 and other control orders issued by the centre and states on agricultural commodities. The centre and the states uses this instrument to check hoarding and black marketing of items but has failed to check sharp rise in prices as it happened in the past in cases of onions, pulses and sugar.

At the meeting, top bureaucrats of Modi government acknowledged that it is difficult to monitor and track stock of thousands of small traders spread across the country. The restrictive regime invoked through such acts and rules has also discouraged private investment in large scale storage and marketing, it was felt during the confabulation Mishra had with other stakeholders from ministries of finance and agriculture.
The centre believes that the government should exit and leave it to private players to operate and manage this side of the agri sector. At best, the government may formulate rules of the game for market players, sources said.

Among the long term reforms the government intends to initiate is removal of restriction on future trading in agri commodities. And short term goals are liberalising contract farming, allowing direct sale by producers to wholesale buyers, industries and exporters, take fruits and vegetables out of the agricultural produce market committee (APMC) act and adopt model land lease law.