Centre’s recent agrarian market reforms may lead to mismanagement of water resources

Recent changes in the agrarian market set-up will reduce the State’s role in the sector and promote entry of the private players. But, this may impact both the water and land resources of the country

Partik Kumar
| Updated: June 26th, 2020


In its recent decision, the central government has made some significant reforms in the statutory framework governing the agrarian market set up in India. Through an ordinance on June 5, the government has amended the Essential Commodities Act to remove the existing restrictions on stocking food produce with certain conditions subjected to price inflation of perishable and non-perishable food items.

Further on, it has also introduced two new laws — The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 or the FPTC Ordinance — to end the monopoly of the Agricultural Produce Market Committees (APMC) and allow anyone to purchase and sell agricultural produce outside market yards; and, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 or FAPAFS. Latter has been ratified to legalise contract farming in agriculture and its allied sectors.

These recent decisions, though linked to agriculture and crop produce, may significantly impact water resource management in the country. For instance, food grains, such as wheat and rice, will no more be bound by the minimum support price (MSP) regime of the Centre. The farmers can have an additional and/or alternative buyer, as well as a pre-assured market, and these factors will drive the choice of crop cultivation.

Agrarian experts warn the trilogy of these recent market reforms will give rise to private players, particularly the big food retailers. And, at the same time, it will limit the powers and revenues of the State. As such these recent agrarian reforms will not eliminate the MSP provision, but previous global experiences suggest the free market will help the agri-business industry to take hold of producers initially through massive financial returns, and, in the long term, leave farmers at mercy of the market and the State too crippled to intervene.

Food grains, such as wheat and rice, will no more be bound by the minimum support price (MSP) regime of the Centre

Importance of crop pricing

The vast literature and field studies confirm that price is one of the most influenceable drivers to determine the choice of crop cultivation in India. Its importance can be understood by the fact that it has significant potential even to ignore the agro-climatic conditions of the area. This is explicitly visible in the parts of Haryana and Punjab where farmers are growing paddy, a water-intensive crop, in semi-arid regions; or Marathwada in Maharashtra, which is prone to chronic droughts but still water-guzzling crop like sugarcane is prominent.

A close view of agrarian statistics of the past five decades crop cultivation and declared MSP establish a causality stating that the prominence of few crops is the effect of the assured price for the same. And this relation between the two is more visible in areas such as Haryana and Punjab that had a well-established market system primarily through APMC to procure these commodities at the pre-declared MSP.

A recent example of the same relation can be seen in the state of Odisha, where the state government had assured the procurement of ragi (finger millet) at MSP for motivating farmers to grow the same. In one of its recent studies, NABARD (National Bank for Agriculture and Rural Development) stated that the prominence of highly water-intensive crops in the country is primarily because of assured MSP to those specific crops only.

In its first appearance, these agrarian market reforms don’t seem to have any linkage with any water resource management, but a close groping suggests their substantial relation to water regulation primarily for agricultural purposes. Seeing the nature of water resources and extent of use in agrarian domain, economic and structural regulation tools are most efficient, that could include regulation tools in the form of price policy (MSP), subsidies (for pump and other inputs), technology (drilling, electricity supply) and physical design of water source.

A larger half of water used in agriculture is groundwater

Water regulation in the agriculture sector

At present across the country, most of the water regulation in irrigation is either through controlling the access to water and/or through product price policy. For example, in its historical decision, in 2006 the Gujarat government launched the Jyotigram scheme to have a restricted electricity supply to operate tube wells, which was further taken up by other states too.

Another example of regulating access to water is rice shoot policy operational in Haryana and Punjab, where rice sowing is restricted before mid-July (i.e. after the arrival of monsoon) and canal water supply is made available post that only. One latest example of water regulation through agrarian policy happened in Haryana where the state government has announced not to procure water-intensive crop (rice) at MSP. Instead, provide financial incentives for cultivating less water-intensive crops such as maize and millets.

These measures taken up by different state governments suggest that water regulation in the agrarian domain is mainly possible through managing agricultural produce and not directly the water resources. This is also because a larger half of water used in agriculture is groundwater and which is defined as private property and have individualistic operations. The very nature of groundwater resources as well as its mode of access makes its management as well as regulation a stimulating task for the authorities. The common goods nature of groundwater resources, but an individualistic mode of its access source has already led to its momentous depletion in the country.

The highest utilisation of groundwater is to produce crops like rice and wheat

Agrarian market reforms and impact on the water sector

In this scenario, the contemporary agrarian reforms will unbind the farmers from the price policy of the state governments, which will translate into very limited options for water regulation.

Groundwater is central to the life and livelihood of this country at present. The states like Haryana and Punjab are drastically hit and worst managed groundwater resources. The highest utilisation of groundwater is to produce crops like rice and wheat. Due to its scale of operation as well as the extent of livelihood associated with it, groundwater can be regulated through incentives and disincentives and not through policing.

But the recent agrarian reforms will provide the farmer a price option other than the state-operational MSP. The other price option will largely be governed by the free market, which means it will be seen through the short-term benefit, ignoring the long-term sustainability of water as well as land resources. So, in the days to come, when the water crisis will be on the brim and largely induced by excessive agriculture consumption, the state will not be in a position to regulate the degradation due to its lessen role in the agrarian domain. All this may lay the life, livelihood and ecology at a grave catastrophe.

Whether these reforms will benefits agriculture or not but they will surely leave the state with tough epochs to manage water resources.

Partik Kumar is a water policy coordinator associated with the Revitalising Rainfed Agriculture Network. Mohit Rangi is a senior research fellow (Ph.D scholar) associated with the Department of Public Administration, MD University Rohtak.

(Views are personal)