THE GIST of Editorial for UPSC Exams : 19 October 2020 Market failure: On agriculture sector reforms (The Hindu)

Market failure: On agriculture sector reforms (The Hindu)

Mains Paper 3: Economy 
Prelims level: Minimum Support Price
Mains level: Government policies and interventions for development in various sectors and issues arising out of their design and implementation


  • The ambitious initiative of the government to bring about far-reaching reform in agriculture has run into severe problem.
  • There are fears that the free market philosophy at its core could spell the end of MSPs for produce that has so far been centrally procured by the government.
  • An allied party’s Minister, Harsimrat Kaur Badal (Akali Dal) has resigned in protest.

Tinkering without consultation:

  • There is a strong pushback from farmers against three Bills that seek to replace ordinancesissued in June.
  • Problem is on key aspects of the farm economy — trade in agricultural commodities, price assurance, farm services including contracts, and stock limits for essential commodities.
  • The opposition to the Bills, particularly on trade, flows from the position, articulated by Punjab, that agriculture and markets are State subjects, and there should be no tinkeringwith the MSP and Agricultural Produce Market Committees (APMC).
  • MSP and APMC form the backbone of existing trading arrangements.
  • Several States have already liberalised agricultural marketing, amending their APMC Acts, and some have allowed regulated private commerce including direct marketing.
  • Yet, provisions in the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, providing for unfettered commerce in designated trade areas outside APMC jurisdictions without levy of any fee has cautioned states.
  • Also the fact that the provision empowers the Centre to issue orders to States in furtherance of the law’s objectives, have alarmed States.
  • A challenge has been mounted by Rajasthan, declaring central warehouses as procurement centres under its APMC Act, and therefore required to pay a market fee to the State.

Misplaced decision:

  • Mr. Modi has characterised the arguments as misleading, promising that the MSP system will continue.
  • This is welcome, but the new dispensation cannot bring cheer to small farmers, who form the majority and whose access levels to markets under the APMC system are at the rate of one for an area of 434.48 sq. km on average.
  • Access levels are well below the recommendation of the National Commission on Farmers (NCF), at one market for 80 sq. km.
  • There is evidence also that mere liberalisation does not lead to private investment in new markets.
  • When Bihar removed the APMC system, markets suffered loss of fee revenue, with no significant private investments in the sector.
  • If the Centre’s intent is to strengthen competition, it should massively fund the expansion of the APMC market system, removing trade cartels, and providing farmers good roads, logistics of scale and real time information.
  • Rather than opt for heavy centralisation, the emphasis should be on empowering farmers through State Farmers Commissions recommended by the NCF, to bring about a speedy government response to issues.
  • Without strong institutional arrangements, laissez-faire policy may harm lakhs of unorganised small farmers, who have been remarkably productive and shored up the economy even during a pandemic.


  • New deal for agriculture needs good regulated markets ahead of private competition.

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Prelims Questions:

Q.1)With reference to the Kisan Rail, consider the following statements:
1. The first Kisan Rail was started between Devlali in Maharashtra and Danapur in Bihar.
2. India’s second and South India’s first Kisan Train commenced its inaugural run from Anantapur in Andhra Pradesh to Adarsh Nagar in New Delhi.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: C

Mains Questions:

Q.1)What do you mean by the Minimum Support Price? What are the concerns associated with the bills that have been introduced in the Parliament? What are their objectives?