New Delhi: The Prime Minister’s Economic Advisory Council (PMEAC) on Friday suggested a series of measures including reforms in the state agricultural marketing system and granting tenancy rights to small farmers for boosting agricultural productivity.
Stating that granting legal tenancy rights to a large number of small farmers would expand their small land holdings, PMEAC in its in its economic outlook (2012-13) noted that “large farmers who would like to pursue non-farming activities may like to lease out their land if the risk of losing their ownership rights is averted.”
Calling for opening up of the state agricultural marketing system for better price realisation, the Prime Minister’s panel has noted ‘Agricultural Produce Marketing Committees (APMCs) have not been able to stop collusion among traders and opaque ways of price determination. “Farmers are subjected to taxes and levies without receiving commensurate benefits,” the panel has observed. Stressing that agricultural subsidies such as fertiliser and free power is putting fiscal burden on the government, PMEAC suggested the government to make “determined move” to dismantle the existing system.
“These subsidies are progressively losing their relevance and are becoming an unbearable fiscal burden. Their role in contribution to productivity enhancement is fast disappearing,” PMEAC stated.
The report also noted ‘as a vehicle for increasing income of the producers, subsidies have proved to be an inefficient and inequitable instrument.’
The council also suggested that “a beginning can be made in dismantling fertiliser subsidy.” It has also observed that the issue has been complicated and that fertiliser production in the country was not based on the comparative advantages.
Among various suggestions for reforming fertiliser sector, those offered by the Expenditure Reforms Commission and reiterated by the PMEAC needs to be examined for implementation, it added. In the current fiscal, the fertiliser subsidy is estimated at R65,592 crore.
Terming the rising power subsidy given by states to the farmers is ‘not going to solve problems’, the Prime Minister panel has observed there is a growing consensus among experts on removing it after reforming the power sector. A number of states have started implementing reforms in a phased manner. “But so far no perceptible results have been obtained. The Achilles heel in these reforms is inefficiency in power generation and huge transmission losses,” it said.
The PMEAC headed by C Rangarajan has observed that “while there is some thought, though not much action, on removing subsidies on fertilisers and electric power, removal of subsidies on canal water has not attracted serious attention of policy makers”.
Meanwhile, PMEAC also stated that the deficient monsoon rains this year is expected to pull down the farm sector growth in the current fiscal to a meager 0.5% from the 2.8% reported in the previous year.
This is the lower ever growth projection by PMEAC for the agricultural and allied sector as during 2009-10, when 338 districts were declared ‘drought affected’, the sector grew at 1%.
“A similar pattern is expected this year and the impact will be less severe than was the case in 2009,” the PMEAC stated in its report. “It is certain that crop output would be hit on account of the weak monsoon, of which one and half month yet remains to be seen,” PMEAC chairman C Rangarajan said.