NITI Aayog Member Calls for APMC and Power Subsidy Changes for Farmers

Ramesh Chand, a member specializing in Agriculture at NITI Aayog, and Jaspal Singh, a consultant working with the government think tank, has presented a potential alternative to the current Agriculture Produce Marketing Committee (APMC) marketing system in the agricultural sector.

In their recent working paper, these scholars highlight several drawbacks of the APMC system and emphasize the need to explore alternative approaches and marketing systems to address these concerns.

Ramesh Chand and Jaspal Singh have presented suggestions advocating for the utilization of app-based platforms by farmers or farmer groups for selling their agricultural produce. They also emphasize the potential benefits offered by e-commerce and digital commerce in terms of marketing opportunities. Another significant concern highlighted by these experts is the negative impacts arising from the provision of free or highly subsidized electricity to the agriculture sector, which leads to over-exploitation of resources such as the excessive use of groundwater and unsustainable management of water resources. To address this issue, they propose an alternative approach involving the direct payment of subsidy amounts to farmers and a transition towards a metered power supply system, where farmers bear the cost of their electricity consumption.

The paper published by NITI Aayog, authored by Ramesh Chand and Jaspal Singh, highlights that the provision of free power has resulted in distorted cropping patterns favoring water-intensive crops. This approach disregards the agro-climatic conditions of different states and regions. The paper further emphasizes that the extraction of groundwater beyond its recharge capacity is steadily increasing, and the severity of this issue is growing, which is alarming.

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Furthermore, the authors highlight the importance of modernizing agriculture through the adoption of new technologies, knowledge transfer, private and corporate sector investments, and establishing stronger connections between producers and end-users. They point out that a significant portion of agricultural investments, approximately 80%, comes from private sources, mainly farmers.

 To enhance the income of farmers having small landholdings, the paper suggests enabling them to engage in high-value crops and livestock activities, effectively utilizing the labor force within their families. It also recommends supplementing agricultural income with earnings from non-agricultural sources such as wages, salaries, business, and trade. The authors acknowledge that smallholders face challenges related to scale economies in input and output markets, necessitating specific institutional support.

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The working paper emphasizes the importance of ensuring that the Minimum Support Price (MSP) system does not create market distortions or hinder proper market signals and incentives. The authors propose a dual approach to paying MSP to farmers, consisting of procurement and price deficiency payment mechanisms.

They recommend that public procurement should be tied to the required quantities for the public distribution system, maintaining price stability, and establishing strategic stocks. Additionally, they suggest implementing MSP for mandated crops through price deficiency payments. This approach seeks to strike a balance and optimize the benefits of the MSP system while avoiding any adverse effects on market dynamics.

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