Montek wants agri reforms, pushes for market prices

SWEEPING MEASURES TO BOOST FARMVILLE

THE country's apex planning body has called for wide-ranging reforms in agriculture, while criticising the strategy employed by the government to increase farm output and tame soaring food prices. 

    The Planning Commission said the agriculture pricing system should be made more market-oriented by delinking support prices from procurement prices. It suggested measures such as abolition of levies and stocking limits, encouraging free movement of goods across the country and doing away with bans on exports and futures trading. 
    In its mid-term appraisal of the Eleventh Plan (2007-12) to be ratified by the full Planning Commission under Prime Minister Manmohan Singh on Tuesday, the panel pointed out that while the farm sector did well between 2005-06 and 2007-08 to grow at 4%, the performance in the past two years showed that the government's strategy was not effective and more needed to be done on the supply side to maintain growth. 
    "There is no adequate analysis of how much of this — growth in the three years starting 2005-06 — was due to increased allocation of public resources for agriculture under this strategy rather than to a favourable weather pattern or private investment response to better demand and prices in a booming economy," the document said. 
    The government's management of agriculture has drawn criticism from several quarters after its policies failed to rein in food price inflation, which is hovering around 18%, a level unseen in several years. Growth in agriculture production dropped to 1.6% in 2008-09 and is estimated to post a decline of 0.2% in 2009-10 due to poor rains affecting kharif crops. The government has targetted 4% agriculture growth for the plan period. Agriculture and allied activities account for less than a fifth of India's gross domestic product (GDP), but it provides livelihood to more than 60% of the country's 1.2 billion people. 
    The Eleventh Plan strategy for enhancing farm production stressed on improving farmers' access to technology, enhancing the quantum and efficiency of public investments, increasing systems support while rationalising subsidies and encouraging diversification towards higher value crops and livestock, while addressing food security concerns. Despite policymakers talking about the need to open up the domestic agriculture sector to encourage private investments, the Planning Commission believes that the system is still full of "strangulating controls" dissuading major private sector investments in logistics and storage. 
CROP OF CHANGE 
TROUBLE WITHIN 
Agriculture productivity has stagnated The system is still full of controls, dissuading private sector investments in logistics and storage MSP has become procurement price, discouraging farmers to diversify into high-value crops Fertiliser subsidy is not giving desired results. 
KEY SUGGESTIONS 
Delink support prices from procurement prices Remove stock limits on agricultural commodities Encourage free movement of goods across the country Do away with bans on exports and futures trading Abolish levies on rice and sugarcane Plan panel for a unified market 
RESTRICTIONSmade sense in the '60s and the '70s when the country was not self-sufficient and farmers needed protection. Now, in a globalised world market, such restrictions act as a disincentive to producers," said Surabhi Mittal, senior fellow at ICRIER. Price incentives would either motivate farmers to diversify to higher value crops or allow them to continue to produce what they have been producing more efficiently so that it fetches them a better price in the market, she said. 
    The suggestions did not go down well with non-government organisations, which have warned against any move to remove stock restrictions. "Removal of restrictions is a sure recipe for disaster," said Devinder Sharma, food analyst and chairman of the Forum for Bio-technology and Food Management, a New Delhi-based NGO. Mr Sharma said the main reason behind the success of the Green Revolution was the fact that farmers were given an assured price and market through a procurement system. 
    Pointing out that with the minimum support price (MSP) is becoming de facto procurement price, the document said farmers are discouraged to diversify into high-value crops that are not covered by MSP. It suggested that to make the pricing system more market oriented, support prices should be delinked from procurement price where the latter can be changed depending upon market conditions and in full competition with private trade. 
    The draft report called for abolition of levies on rice and sugarcane, free movement of goods across the country creating one unified national market, abolition of stocking limits, export bans and bans on future markets on private trade. On fertiliser subsidies, the draft suggested that fertiliser prices should be linked with MSP of wheat, rice and sugarcane.