Create a Common Agricultural Market, Pre Budget Expectations – Mr. Sanjay Kaul, MD & CEO, National Collateral Management Services Ltd (NCML)

With food inflation having come down in recent months it is hoped that focus will move more substantive action on addressing critical agricultural policy reforms.

The Shanta Kumar Committee has made several far reaching recommendations for reforms in the food grains management system. These include the creation of a more competitive framework that can provide an equal playing field for the private sector to operate. The private sector is today virtually crowded out on account of the all pervasive presence of the FCI and its agencies in the foodgrains market. The Finance Minster should immediately announce the Government’s intent to accept the thrust of the recommendations relating to opening of the grain market, engagement of the private sector to provide efficiency into the system, reform measures for the PDS including piloting of the direct cash transfers in lieu of grain, and procurement reforms.

Another key Manifesto promise is the creation of a common agricultural market. Previous initiatives in reforming the APMC Acts have not provided any relief to either producers or consumers. The development of a pan India Market needs two enablers – first, a swift introduction of a uniform tax regime through the introduction of the GST and, second, a common electronic depository through which agricultural commodities can be traded across the country.

Agriculture continues to be a State subject which makes it difficult to roll out reforms at a pan India level. However, the Finance Minister can announce several measures that can create an enabling environment for States to roll out necessary reforms in the agricultural infrastructure and marketing framework of the country. For giving a boost to agricultural markets, these measures should include recognition and incentives for setting up modern private agricultural agri market hubs (Mandis). In the area of infrastructure the recommended measures are reintroduction of the capital subsidy scheme for warehouse infrastructure under the Grameen Bhandaran Yojana (the scheme has remained suspended in 2014), measures to give a fillip to warehouse receipt finance, and, concrete measures for the creation of a liquid negotiable warehouse receipt market.