The Root of Agricultural Crisis | Agriculture after LPG Reforms

Agriculture after LPG reforms:

Agricultural Crisis

  • The priority post-1991 has been given to industry as well as services.
  • Middle-class consumers have been favoured by at the expense of farmers.
  • This neglect of agriculture resulted in an equally unprecedented gap between the standard of living in the rural and urban parts of the country.
  • As a result, the urban/rural ratio, in terms of monthly per capita expenditures, has jumped from 1.84 to 2.42 between 2012 and 2018.
  • This means that an average urban-dweller today can consume almost 2.5 times more than an average person in a village.

Recent reforms by the government:

  • Government has decided to liberalise India’s agriculture by amending the APMC Act and the Essential Commodities Act.
  • Contract farming will also be introduced in such a way that the buyer can assure a price to the farmer at the time of sowing.

 APMC Act in the context of Shanta Kumar Committee report

  • The argument against the APMC Act is that it does not allow the free market to function due to government intervention.
  • It denies farmers the opportunity to determine the prices of crops in the marketplace.
  • In theory, this is a valid argument.
  • But, Shanta Kumar Committee observed in 2015 that only 6 per cent of farmers get the Minimum Support Price (MSP).
  • This is because of barriers to access for farmers as only 22 crops are procured under MSP.
  • Infrastructure is also inadequate as there are only an estimated 7,000 APMC mandis across India.
  • Procurement depends on the stocks required by the state.

Why should APMC not be blamed for all the problems?

Issue of farm pricing:

  • The living costs of farmers was considered while determining agricultural pricing by the Agricultural Prices Commission (APC).
  • CACP that replaced the APC in 1985 added a 10 per cent mark-up over the MSP to account for entrepreneurial costs.
  • Such practices have been gradually eroded post-1991.
  • The problem, therefore, is not state intervention but the way the government deals with agriculture.

How APMC Improved food security?

  • India managed to weather the 2008 global agricultural crisis only because it had enough food stocks as Indian agriculture was not linked to the international futures market.
  • This was possible due to the procurement done through the APMC Act.


  • Since agriculture is a state subject, the Act has been modified in 17 states.
  • On the contrary, the condition of peasants has often been affected when the APMC Act has been diluted.
  • Bihar is an example

The APMC Act was revoked in 2006 with the same rationale that further deregulation will attract private investment in infrastructure.

  • Not only has that not materialised, but the existing APMC market infrastructure was also dismantled.

Agricultural reforms needed: 

Need for reforms in subsidy:

  • Indian Agriculture is still too heavily subsidised in favour of the big players.
  • In the Union Budget 2019-20, the allocation for the Ministry of Agriculture was Rs 1,30,485 crore and the fertiliser subsidy alone was estimated at Rs 79,996 crore.
  • But these subsidies are concentrated on a few crops.
  • Agriculture economist Bruno Dorin has shown, only three crops receive more than 60 per cent of the so-called “non-product-specific” support to agriculture — rice, wheat and sugarcane.
  • This has led to environmental degradation like the depletion of groundwater levels and monocultures which are a threat to biodiversity.
  • It has also led to the industrialisation of agriculture, that results in the strengthening of a handful of multinational companies, which supply chemical inputs.
  • Liberalisation would only strengthen the role of large companies — including those in the agri-food sector.

Making agriculture ecologically viable:

  • Structurally, farming needs to be made economically and ecologically viable in India.
  • State intervention for better pricing, investments in water harvesting and an agroecological transition could ensure a more resilient system to weather shocks like the current one.
  • The government could draw inspiration from the Andhra Pradesh Community Managed Farming model.
  • It promotes agroecological principles with the use of locally-produced, ecologically-sustainable inputs focusing on soil health..
  • Since the agro-ecological system of farming is more biodiverse in nature, it will make the system more resilient overall.
  • It will provide a safety net for farmers in case of crop damage due to various factors such as climate change or droughts.

Way ahead: 

By investing again in agriculture and following, at last, the recommendations of the M S Swaminathan Committee, the Government of India would also help bridge the drastic urban-rural divide.

Q) APMC act is not always the culprit of the agricultural crisis. How can the recommendations of the M S Swaminathan Committee help in solving the agricultural crisis?