Even Montek panel wanted to reform Punjab farming like Modi govt. But Amarinder got cold feet

The committee, appointed to recommend post-Covid economic strategy, criticised APMCs’ hold on agriculture and wanted more private players in its marketing.

Montek Singh Ahluwalia, former deputy chairman of the Planning Commission | Photo: Commons

Chandigarh: Captain Amarinder Singh’s Congress government in Punjab has vociferously opposed the three central farm laws, against which thousands of farmers are protesting on the outskirts of national capital Delhi. This opposition also reflects in its decision to ignore a report it had commissioned from a panel — headed by UPA-era Planning Commission deputy chairman Montek Singh Ahluwalia — that recommended many of the same things the new laws do.

CM Amarinder had, in April last year, tasked the committee with preparing a post-Covid economic strategy for Punjab, and Ahluwalia submitted the first part of its report to the government in July last year. But the government did not warm up to its contents.

The committee’s 80-page report, accessed by ThePrint, was submitted to the government in July last year. It had said, for example, Punjab’s agriculture produce marketing committees (APMC) were “restrictive” and provided for “high licence fees”, and that agricultural marketing should move beyond them.

This is one of the major points of contention among farmers — they are demanding a repeal of, among others, the Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Act, 2020, which allows sale of farm produce outside APMC jurisdiction, bars civil courts’ jurisdiction, and overrides state APMC laws. The farmers contend that the Act will expose them to exploitation by unscrupulous private players.

The report caused quite a furore over its opposition to the government’s law of giving free power to farmers, and an embarrassed Amarinder had to shun the recommendation publicly. However, the government did ask its various departments to go through the report and pick out the “doable” recommendations for implementation.

More echoes of new farm laws

Ahluwalia, an economist and former civil servant, gathered a group of experts for the committee, including Dr Ashok Gulati, Infosys chair professor of agriculture at ICRIER, who is now a member of the Supreme Court-appointed committee that has to find a way out of the impasse between the agitating farmers and the government, and Rajendra Gupta, chairman of the Trident Group whose tenure as vice-chairman of the Punjab State Planning Board was recently extended by the Amarinder Singh government.

The first part of the report, titled ‘Medium and Long Term Post-Covid Economic Strategy for Punjab: A Multi Sectoral Approach to Building Resilience and Recovery’, made several other recommendations that find resonance in the central farm laws passed last year.

Continuing its criticism of APMCs, the committee stated that the Punjab State Agricultural Marketing Board or mandi board had a “conflict of interest” in being the licencing authority, and that high mandi board fees did not allow for a fair playing field. This is another issue on which the farmers are adamant on a status quo, which they believe is essential for the procurement of crops on MSP.

The Ahluwalia committee also recommended promoting contract farming and allowing private companies to have a bigger foothold in agriculture. The Farmers’ (Empowerment And Protection) Agreement On Price Assurance And Farm Services Act, 2020, which provides a framework for contract farming, has been severely criticised by the farmers.

Similarly, the Essential Commodities (Amendment) Act, 2020, which allows the government to regulate the supply only a few items during emergencies, is seen by the farmers as an attempt to facilitate large corporate houses to hoard agricultural produce. The panel has not directly addressed this issue, but farmers are anyway opposed to attempts to bring private players into the agriculture market, which the committee broadly recommends.

Punjab’s fall as an agriculture power

The report traced how Punjab went from a leader in agriculture to having half the agriculture growth rate of the entire country in the last four decades.

“Agricultural GSDP in Punjab grew at 5.7 per cent per annum in the period from 1971-72 to 1985-86. This was almost two and a half times the all-India growth rate in that period. Punjab was clearly a leader in those years. However, agricultural growth in Punjab slipped to about the same as the growth rate for the country as a whole in the second period, from 1986-87 to 2004-05. In the most recent period, agricultural growth in Punjab was only 1.9 per cent per year, which is only a little over half the growth rate in agriculture for the country as a whole,” it said.

“This slowdown in agricultural growth in Punjab is often explained by the fact that Punjab had reached very high levels of productivity in cereal crops and the other states are catching up. But that only means Punjab should have aimed for higher growth by diversifying into other high value crops. Although the need to diversify has been recognised for years, Punjab has not done nearly as much on this front as it should have,” the committee concluded.

Recommendations for Punjab in report

The report recommended that the strategy for agriculture needs to be radically altered to shift away from the wheat-rice cycle that Punjab has followed traditionally, and diversify rapidly into high-value crops and modern agro processing.

“From a sustainability point of view, the basic agricultural objective should be to reduce the area under common paddy by about 1 million hectares (out of total 3.1 million hectares under paddy) over the next 6-7 years, along with a blueprint for diversification into other crops over the same period,” it suggested.

“Punjab should also consider gradually reducing procurement of paddy from the extremely water-stressed areas. Since the government already has a proposal to incentivise farmers in 27 extremely water-stressed blocks to diversify into maize, the diversification plan can be extended to high-value crops, particularly horticulture. This should be accompanied by incentives for private investments in marketing as well as in value addition/processing of commodities,” the report went on to recommend.

“Promoting food parks, cold chain investments, cluster based FPOs/FIGs, contract farming, etc. would help to support the farm diversification efforts while also reducing the market risk in case of high value perishables,” it added.

In order to achieve this, Montek Ahluwalia and his panel suggested the opening up of agricultural marketing beyond the APMCs. “The government has taken steps to amend the Punjab APMC Act, but the rules and regulations still contain too many restrictive provisions in terms of high licence fees, exclusion of many of the crops into which diversification is likely, uncertain period of the validity of the licences, and also having the mandi board as the licencing authority which involves a potential conflict of interest,” their report said.

“We recommend that Punjab government should conduct a careful comparison of the provisions in Punjab with those prevalent in other states. If Haryana and Uttar Pradesh move to a more liberal arrangement, Punjab runs the risk of losing potential investments by processors, exporters, organised retailers etc,” it added.

“This diversion also implies a loss of jobs and tax revenues. The Punjab government should therefore quickly frame the rules and notify the amendments related to levy of market fees, commission fees, licencing, etc. which make Punjab competitive with other states.”