SBI Ecowrap Report Proposes Key Agricultural Reforms

After PM Modi’s unexpected announcement to repeal the 3 farm laws, SBI Ecowrap which is better known as the State Bank of India's Economic Research Department published a research report that identified five essential agricultural changes that might operate as enablers instead of the 3 bills that are going to be rolled back soon. 

Firstly instead of legalizing MSP which the farmers have outlined in their letter to the Government recently, Centre can start by giving them a Quantity Guarantee for a minimum period of 5 years i.e the procurement to production proportion of crops (now procured) be at least equal to the previous year's percentage (with safeguards in exceptional events like droughts, floods, etc).  

The reason being the negative impacts on the Economy that might take place if MSPs are legalised. As the current people who procure produce from the Farmers are either the Government or the Private sector people and a law like this will discourage the Private sector from striking deals and buying a lot while the Government will be put in a position where it has to procure more of the produce than it actually can. This will lead to a lack of funds when it comes to fueling Government welfare schemes for the poor and other parts of the Indian community that are below the Indian poverty line. 

“Historical trend in case of procurement indicates that the average procurement of wheat has jumped from 26 per cent in FY14 to 36 per cent in FY21 and that of paddy from 30 per cent to 48 per cent during the same period,” Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India, wrote in the report. 

It will also lead to a bigger disappointment for farmers when the Government can’t procure all the produce an example of this would be the case in Telangana where the Government actually didn’t have enough funds to buy the Paddy produced in this Kharif cropping season. This Legal boundation will also lead the people from other nations who are looking for exports to actually shift to other markets where they can get the same amount of goods at a cheaper rate. 

Secondly, consider changing the Minimum Support Price to the Auction Floor Price on the National Agriculture Market (eNAM). 

Thirdly, efforts should be made to develop the APMC market infrastructure.  “Based on a Government report, as per our estimates, the monetary loss for cereals is almost ₹27,000 crore due to harvest and post-harvest losses. The losses for oilseeds and pulses are ₹10,000 crore and ₹5,000 crore, respectively. 

Fourthly, establish a Contract Farming Institution in India that will have the exclusive right to oversee price discovery in Contract Farming. Contract farming has been instrumental in many countries by providing growers access to supply chains with market and price stability, as well as technical assistance. The experience of Thailand shows market certainty (52 per cent) and price stability (46 per cent) were prime factors due to which farmers participated in contract farming,” the report said. 

Lastly  Ensuring that the Procurement of crops is actually done in a symmetric fashion, the recent procurement of Crops after the cropping season showed that the top paddy producing states saw less paddy procurement compared to the states of Punjab and Haryana which are not even the top paddy producing states. 

The procurement of paddy in Punjab and Haryana was a whopping 83% compared to the other states which even saw procurement of paddy in the single digits. 

If the Centre actually takes care to take these recommendations into consideration then Indian agriculture will surely flourish in the coming days.