Agricultural Sector Reform

Without going into the details of why, here is what I propose:
1. There should be no control price on procurement.

2. There should be no subsidies on inputs. All inputs must be governed by market prices. i.e., Fertiliser Corporation of India must continue to supply fertilizer, but it must be forced to cut its own costs to stay price competitive.
3. Food Corporation of India(FCI) must be forced to compete with other market players to procure at market prices. Minimum Support Price must be the least amount at which a sale can happen in a government regulated market.
4. There should be public-private partnership to create a chain of warehouses. The pricing mechanism should be such that the farmer does not pay for the storage – the procurer pays. What this means is that the longer a produce is in the warehouse, the more the bill of the procurer. This will transfer the pressure of selling from the farmer to the buyer. Also, since the farmer does not stand to gain anything by keeping the produce for long in the warehouse, and in fact loses liquidity and negotiation advantage, he will also be interested in reaching an early deal, but will not be under pressure to do so.

5. Once the procurement has been completed by the FCI(Food Corporation of India), the produce must be transferred to a central nodal distribution agency, which could be a part of FCI. There have to be 2 parallel distribution mechanisms – one for perishable primary produce like fruits and vegetables, and the other for staples and cereals.

6. The distribution is done at subsidized prices. The Govt. of India, along with the states, bears the differential between procurement prices and distribution prices. The more the demand-supply gap in a state, the more its burden of subsidizing.

7. Not every citizen should be expected to have a ration card. A ration card should be authorisation to get produce from the subsidized PDS. For identity proof, the voter ID card or an alternative for minors should be used.

8. Any leakage is the responsibility of FCI’s distribution wing, and the respective governments.

9. Until there is stabilisation of logistics on the ground, all speculative acitivity in these commodities should be made illegal.

What this arrangement will hopefully do:
1. Stop the starvation deaths of farmers.
2. Introduce corporatisation of agriculture that goes a step beyond contract farming.
3. Plug the multiple infusion of subsidy and introduce a single injection point of money form the government to the food distribution mechanism of India. This hopefully means less corruption, or at least all corruption concentrated at one point. This also means more accountability of the nodal agency and an ability to place the blame where it should lie.
4. Make available both perishable farm produce and staples at a less price to the BPL citizens of India. Currently, the public distribution system (PDS) only takes care of staples.