Budget 2017: States may get sops for adopting centre's agricultural reforms

NEW DELHI: The government is planning to incentivise states that implement agricultural reforms mooted by the Centre as it steps up efforts to help the sector register over 6% growth after two years of slowdown.

The incentives, which would include price insurance for some crops and higher interest subventions among others, will also pave the way for private players to enter the sector.

A senior government official told ET that agriculture is going to be the focus area of the government in this budget and in the coming months, and a series of announcements could be made.


“The announcements could be spread over the next six months starting from Union Budget 2017-18 and go up to July when the deadline ends for states to implement the model APMC Act,” the official added, requesting anonymity.

The model Agricultural Produce Market Committee (APMC) Act has proposed direct purchase from farmers by private players, direct sale by farmers to consumers, single trader licence, single point levy of taxes and getting fruits and vegetables out of mandi laws.

According to the official, states will be first persuaded to notify and implement the model APMC Act as this will go a long way to facilitate the entry of private players and fetch higher returns for farmers. “However, if states continue to resist the change long overdue, the Centre will have to incentivise states that perform,” the official added.

States willing to adopt the model APMC Act may also benefit from the ongoing interest subvention scheme for farmers while non-performers may be left out. Around 21 crops are still not covered by minimum support price (MSP) and states which roll out agricultural reforms could benefit. MSP is a form of market intervention by the government to insure agricultural producers against any sharp fall in farm prices after a bumper crop or glut in the market.

“Besides marketing reforms, the government may set up more farmer producer organisations (FPOs) across the country to facilitate entry of private players,” the official quoted above said. There are only 900 FPOs across India’s five lakh villages, a miniscule number compared to the output from India’s agricultural sector.

As part of a three-prong strategy to usher in reforms in agriculture in the short run, government’s think-tank NITI Aayog had proposed land leasing and forestry reforms along with agriculture reforms to push the sector onto a higher growth trajectory. Agricultural growth in India has been nearly stagnant over the past two or more decades in the absence of any major reforms in the sector.