Budget 2020: A hint of food subsidy reforms?

Source:- financialexpress.com

Budget 2020 India: Finance minister Nirmala Sitharaman proposed a slew of measures for the agriculture sector in her Budget speech on Saturday, but was silent on reforming the public distribution system, something that the Economic Survey had made strong case for. However, Budget FY21 numbers show the government could be moving on this. Food subsidy is budgeted at Rs 1.16 lakh crore for FY21, down from the FY20 budget estimate (BE) of Rs 1.84 lakh crore. Though the Centre will have to deal with the Rs 1.36 lakh crore separately provisioned for the Food Corporation of India as loans from the National Small Savings Fund, it has sharply lowered the budgetary provision for FCI — Rs 78,000 crore against FY20’s Rs 1.51 lakh crore. However, it needs to shift away from open-ended procurement and the price support policy if the cuts are to be sustainable.

Sitharaman also talked of encouraging states to implement the Centre’s model laws on land leasing (2016), farm produce and livestock marketing (2017) and contract farming (2018). While land leasing has been talked about for two decades now, only four states have adopted the model law. T Haque, former chairman of Commission for Agricultural Costs & Prices, who had drafted the model land leasing law, estimates it could add 25 million hectare to the land under agriculture, “with a potential to generate 30 million tonne more of foodgrain annually”.

Sixteen states have already replaced their APMC Acts with the Centre’s model law — Maharashtra, West Bengal, Odisha, Gujarat and Andhra Pradesh have complied with the four key reforms mooted, viz deregulation of fruits and vegetables trade, allowing private markets that will compete with APMC mandis, single trading licence, and single-point levy of market fee. Only one state, Tamil Nadu, has adopted the model contract farming law. Ashok Dalwai, chairman of the Committee on Doubling Farmers’ Income, said, “These will take some time before states implement them. The finance ministry will decide if states are to be incentivised.”

Given how the leasing law offers security to landless labourers/sharecroppers and the contract farming law encourages private participation, the finance ministry must incentivise the states to adopt these if it hopes to raise farm income meaningfully.