KOCHI: The need for State governments to adopt reforms, such as implementing the Agricultural Produce Marketing Committee (APMC) Act for large-scale public-private investment, has been stressed by the southern regional council of the Confederation of Indian Industry (CII).

A study paper, released by the council here, says agriculture and allied activities are not only the largest employment provider but also the sector making the second-largest contribution to the country's Gross Domestic Product (GDP). Considering its huge stake in society and the economy, the sector is in urgent need of farmer-friendly policy reforms.

The recent years have witnessed a rise in trade in agricultural commodities in the Indian economy. The share of this trade has risen from 16 per cent in the Nineties to 20 per cent by the decade-end. However, the growth of the sector has been far from impressive. In the past 10 years, its contribution to the average growth of GDP has been just about 2.5 per cent.

The average growth in foodgrain and non-foodgrain production stands at 2.17 per cent and 1.75 per cent, respectively, while productivity of both food and non-food grains has been less than 1 per cent.

`Amend Act'

Though the increasing State and Central subsidies seem to have salvaged the situation to some extent, they cannot help the sector grow to its fullest potential the way sustained reforms and public investment in agriculture can. In the recent past, agriculture subsidies have ballooned to more than five times the public investment. Private investment, though increasing in recent years, has been less. The southern States that have not amended the APMC Act should do so. The APMC Acts of most States prohibits transaction outside regulated mandis and do not allow direct marketing and direct procurement of agricultural produce from farmers' fields.

There is a lack of uniform rate of excise duty/sales tax for all items related to agriculture produce, whether processed or not, which makes the farm sector uncompetitive. Distorted pricing policies of most States drive away farmers from growing oilseeds and pulses, thus leading to their imports.

However, southern States have to speed up their reform measures to give a boost to public and private investment in agriculture. Unfortunately, the public investment in agriculture in the past years (particularly from 1997-98) has been declining in the southern States.

In 2003-04, the share of agriculture in the total outlay stood at 4.6 per cent in Andhra Pradesh (Rs. 504 crores); 4.8 per cent in Karnataka (Rs. 470 crores); 5.1 per cent in Kerala (Rs. 226 crores); 7.5 per cent in Tamil Nadu (Rs. 525 crores) and 10.2 per cent in Pondicherry (Rs. 48 crores), marking a significant year-on-year reduction.

The model APMC Act proposes to remove the controls on the movement, storage and marketing of agricultural commodities, and encourages setting up of commodity exchanges to enable futures trading.

The Act envisages complete freedom for farmers to sell their produce anywhere and not necessarily through the existing markets administered by the APMCs.

The farmers and local authorities can establish new markets for agricultural produce in any area.

Notable feature

A notable feature of the model Act is that it makes provision for direct sale of farm produce to contract farming sponsors from the farmers' field without the necessity of routing it through notified markets.

The Act favours the imposition of a single point levy of market fee on the sale of notified agricultural commodities, including directly purchased produce in any market area. The State governments can fix graded levy of market fee on different types of sales.

The States should implement VAT at the State level, which is uniform for agricultural produce and processed agricultural produce and processed agricultural produce. And there should be no taxation on agricultural inputs of all kinds for five years.

Some of the other key amendments that should be taken up at the State level include abolition of Mandi taxes, which will create competitive markets and benefit both farmers and producers.

For achieving the objective of improving Indian agriculture, it is essential that improvements are made at all stages of the supply chain: every element must be strengthened and made viable. The best scenario is improved inputs, better credit, enhanced irrigation, a strengthened farmer, an improved procurement system agent, processor and marketer.

Contract farming

Southern States should encourage contract farming and allow private entities in the cooperative and corporate sectors to build and operate wholesale distribution centres. They must encourage different kinds of agricultural marketing systems through grower cooperatives, markets built and operated by the private sector, forward markets and future exchanges, and electronic auction houses outside the purview of the APMC Act.

The States must also amend the town planning laws to allow for modern distribution formats, which can bring in investment in infrastructure and efficiency in the whole agricultural produce distribution chain to operate from outside the designated market areas.

The State Governments can try to evolve a three-way model involving agricultural scientists in universities, farmers and the firm to collaborate in marketing and processing the produce. This model will help in the adoption and diffusion of new agricultural techniques.

Printer friendly page  
Send this article to Friends by E-Mail