Economic Development - 4 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Report of SC Appointed Committee on Farm Laws

Importance of Agricultural Marketing

• Enables the farmers to buy agricultural inputs such as fertilizers, seeds etc. at affordable prices.
• Provides price signals to the farmers with respect to planning for sowing of crops.
• An integrated domestic marketing system would considerably reduce the price variations in the agricultural commodities across India.
• 25 to 30 % of fruit and vegetables and 8 to 10 % of food grains are wasted annually due to lack of postharvest losses.

Problems With Agricultural Marketing in India
Agricultural is a subject placed under State List and accordingly, most of the State governments have enacted the Agricultural Produce Market Regulation Act (APMC Act) to regulate marketing. 

Restrictive Regime: Under the present APMC Act, farm produce should be sold only at APMCs to the traders and middlemen. The farmers do not have the freedom to sell their produce outside APMCs directly to exporter, processor or end consumer. Hence, it leads to exploitation of the farmers by the middlemen and traders. Fragmented Agricultural Marketing with about 2500 regulated APMCs, 5000 sub-market yards and thousands of Rural Markets or Grameen Haats. Hence, due to this fragmented marketing the agricultural commodities pass through multiple middlemen and traders leading to escalation in prices and also prevents the farmers from getting remunerative prices. 

Lack of Access to APMCs: An average APMC in India serves an area of around 450 sq.km as against the recommendation of 80 sq.km given by M.S. Swaminathan Committee. On account of this, the farmers are forced to sell their produce at lower prices outside the APMCs. Against Interests of Small and Marginal farmers who are forced to sell at lower prices due to their low marketable surplus and poor bargaining power. Poor Infrastructure of the APMCs leading to improper storage and consequently higher post-harvest losses; No electronic auction platform Imposition of Multiple Fees in APMCs which is estimated to be around 15% of the value of the agricultural produce; Increased prices and affect food processing Industries Higher Post-harvest Losses in the range of 20-25% of produce accounting for Rs 92,000 crores loss

Restrictive Regime: Under the present APMC Act, farm produce should be sold only at APMCs to the traders and middlemen. The farmers do not have the freedom to sell their produce outside APMCs directly to exporter, processor or end consumer. Hence, it leads to exploitation of the farmers by the middlemen and traders.

Fragmented Agricultural Marketing with about 2500regulated APMCs, 5000 sub-market yards and thousands of Rural Markets or Grameen Haats. Hence, due to this fragmented marketing the agricultural commodities pass through multiple middlemen and traders leading to escalation in prices and also prevents the farmers from getting remunerative prices.

Lack of Access to APMCs: An average APMC in India serves an area of around 450 sq.km as against the recommendation of 80 sq.km given by M.S. Swaminathan Committee. On account of this, the farmers are forced to sell their produce at lower prices outside the APMCs.

• Against Interests of Small and Marginal farmers who are forced to sell at lower prices due to their low marketable surplus and poor bargaining power.
• Poor Infrastructure of the APMCs leading to improper storage and consequently higher post-harvest losses; No electronic auction platform Imposition of Multiple Fees in APMCs which is estimated to be around 15% of the value of the agricultural produce; Increased prices and affect food processing Industries Higher Post-harvest Losses in the range of 20-25% of produce accounting for Rs. 92,000 crores loss

Observations of SC Appointed Committee

Redundant APMC Regime

• Presently, Livestock and fishery form 40 percent of the Gross Value of Agricultural output. This sector is outside the procurement support through MSP. These sectors are also growing much faster than other crops. Hence, the argument that only the APMCs and procurement support through MSP can offer remunerative price to farmers is flawed.
• Even for commodities that come under the purview of MSP, only around 25-30 percent of the production is transacted through the APMCs/regulated mandis. So, already a major chunk of agricultural commodities are sold outside the APMC regime.
• Hence, the Central act seeks to regulate the sale of agriculture produce outside APMCs. Procurement of Rice and Wheat: Around 90 percent of rice production and 70 percent of wheat production is procured in Punjab and Haryana through the APMCs. This has in turn led to skewed cropping pattern with more emphasis on Rice and wheat and less focus on agricultural diversification in Punjab and Haryana. Higher Mandi Charges and Cess imposed by the state Governments lead to increase in prices of agricultural commodities. 

Observations of SC Appointed Committee

Success of Contract farming: Contract farming is not new in India and various variants exist in several sectors. For example, contract farming has transformed the poultry sector from a mere backyard activity into a major organized commercial one with almost 80 percent production coming from organized commercial farms. Similar, NESTLE's contract farming with the dairy farmers in Punjab has led to improvement in livelihood opportunities for the farmers.

Amendments to Essential Commodities Act (ECA), 1955 (Amendments- Repealed)

Essential Commodities Act and Its Rationale
Used by the Government to regulate the production, supply and distribution of commodities which are declared as essential under the act. The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products. The Central Government may add or remove a commodity from the schedule in consultation with the State Governments.

How Does it Work ? 
If the Centre finds that a certain commodity is in short supply and its price is increasing, it can notify stockholding limits on it for a specified period. Anybody trading or dealing in a such a commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity. This improves supplies and brings down prices.

How Essential Commodities Act Hinders the Agricultural Marketing

• With frequent stock limits, traders have not invested in better storage infrastructure.
• Adverse impact on Food Processing Industry since Stock limits curtails their Operations. Impact on agriculture exports: Whenever the Government declares an agricultural commodity as essential, it imposes several restrictions on it including ban of export of such commodities.

Amendments to Ec Act, 1955 (Repealed)
Reduced Scope of ECA, 1955: Agricultural commodities to be outside the purview of Essential commodities Act, 1955. They would be brought out ECA only under exceptional circumstances such as war, famine, extra ordinary price rise, and natural calamity of grave nature . Stockholding Restrictions: Stockholding restrictions to be based on price rise - 100 percent increase in retail price for horticulture products or 50 percent increase in retail price in case of non-perishable agri products;

Observations of SC Appointed Committee
The Amendment attempts to balance the interests of all stakeholders – farmers, traders, food processors, exporters and consumers – to enable agri-produce to move up the value chain. As agriculture is a seasonal activity, it is essential to store produce for the off-season to ensure smoothened availability of a product at stable prices throughout the year.

Broad Recommendations of the Committee on 3 Farm Laws

• Need for Farm laws: A repeal of these Farm Laws would be unfair to the 'silent' majority who support the Farm Laws.
• Flexibility to States: States may be allowed some flexibility in implementation and design of the Laws, with the prior approval of the Centre, so that the basic spirit of these Laws for promoting effective competition in agricultural markets and creation of ‘one nation, one market’ is not violated.
• Dispute Resolution Mechanism: Alternative mechanisms for dispute settlement, via Civil courts or arbitration mechanism, may be provided to the stakeholders.
• High level Coordination body: Agriculture Marketing Council, under the chairpersonship of Union Minister of Agriculture, with all States and UTs as members may be formed on lines of the GST Council to reinforce cooperative efforts to monitor and streamline the implementation of these Acts. 
• Compensation Mechanism: The implementation of Central Acts would lead to loss of revenues which states earn from APMCs. Hence, to compensate the states for their loss, a compensation mechanism on the lines of GST compensation mechanism may be incorporated. 
• Essential Commodities Act, 1955: The Government should consider in favour of completely abolishing the ECA Act, 1955 or take steps to substantially liberalize its provisions

Draft Policy on Battery Swapping 

Success Story
Bounce Infinity is a Bangalore based startup in the field of Electric Two-wheelers. It offers two choices to the customers -

• Purchase electric scooter with a battery
• Purchase Electric Scooter without a battery. Battery can be subscribed on a monthly or yearly basis. Apart from manufacturing electric scooters, this company also operates network of battery charging stations. Hence, customers can easily replace their drained batteries with the newly charged batteries. Recently, it has become the first Indian company to achieve the feat of 10 lakh battery swaps in India.

Benefits of Battery Swapping

• Reduce cost of Electric Vehicles: The Battery alone accounts for more than 50% of the cost of electric vehicles. Hence, Battery swapping policy would lead to decrease in the initial cost of the vehicles and encourage more people to adopt electric mobility. 
• Reduce Maintenance Cost: The Electric batteries can be recharged for only finite cycles. Beyond 4-5 years, the older batteries would have to be replaced with the new ones. This can lead to higher maintenance costs. In case of Battery Swapping, Customers do not own batteries and hence this maintenance cost gets eliminated. 
• Address anxiety issues related to Charging and Range: Normally, people are reluctant to buy electric vehicles due to lower range (250-300 km) of electric vehicles and higher time taken for charging batteries. The introduction of Battery swapping would enable seamless travel without the need to worry much about range and charging. As people move from one place to another, they can simply switch their drained batteries with recharged ones and continue their travel without hassles.

Problems and Challenges

• Demand-Supply Mismatch: Presently, we need one electric battery for one vehicle. However, with the introduction of battery swapping, the number of batteries needed would increase.
• Non-Removable batteries: Only few companies provide for removable batteries. If the batteries are in-built and cannot be removed, then battery cannot be swapped. For example, In case of Ola e-scooter, batteries cannot be removed from the vehicles and hence drained batteries cannot be replaced with the recharged ones. 
• Lack of interoperability standards: If the battery swapping policy has to be successful, batteries should be made interoperable across different manufacturers. For example, it should be possible for the batteries used in Ola e-scooters to be used in any other electric scooters such as Bounce infinity, Bajaj etc. Such interoperability standards would make it easier for the people to adopt electric mobility.
• Higher GST rate on Electric Batteries: Presently, the GST rate on stand-alone electric batteries is quite higher at 18% and hence higher tax rate can be a disincentive for the battery recharging stations.
• Waste Management: At the end of the battery lifespan, enormous amounts of electronic wastes such as cobalt, lithium, manganese oxide, nickel etc. get generated. Hence, there is a need to put in place efficient waste recycling programme aimed at optimum recovery and minimal destruction of environment.

Niti Aayog' Draft Battery Swapping Policy

Registration of vehicles with swappable batteries: The policy provides for easier registration of the vehicles without electric batteries.

Unique Identification Number (UIN) to be assigned to the electric batteries for their tracking and monitoring. Similarly, a UIN number will be assigned to each Battery Swapping Station.

Fiscal Support:

• Demand side incentives offered under FAME Scheme for EV purchase can be made available to EVs with swappable batteries.
• Subsidies may be given by the Centre to the entities setting up battery swapping stations.
• State Governments may provide additional capital subsidies for the setting up of battery swapping stations.
• Rationalise GST Rates: The GST council may recommend for the reduction in the GST rates on the electric batteries.
• Re-use and Recycling Ecosystem: The Policy aims to promote the re-use of swap batteries after their End-ofLife (EOL) and fix the Extended Producer Responsibility (EPR).
• Nodal agencies: The Bureau of Energy Efficiency (BEE) will be responsible for the implementation of battery swapping networks across the country. States and union territories (UTs) are responsible for the implementation and governance of the battery swapping ecosystem. Appointed state nodal agencies (SNAs) for EV public charging infrastructure will facilitate the rollout of battery swapping. 

Decoding Rbi’s Standing Deposit Facility (Sdf)

• The Reverse Repo is the rate at which the RBI absorbs liquidity from the economy. Under this route, the Banks can park their surplus funds with the RBI and earn an interest which is equal to Reverse Repo. However, when the Banks Park their funds under this route, the RBI would be required to give G-Secs as collateral to the Banks. So, the problem with the Reverse Repo route is that the RBI has to provide G-Secs every time the banks provide funds.
• During times such as recent Demonetization, the RBI may not have adequate G-Secs to absorb huge amount of liquidity from the economy. Hence, to handle such kind of situations, the Urjit Patel Committee had recommended for the introduction of new tool known as "Standing Deposit Facility".

Understanding Standing Deposit Facility (Sdf)
Introduced through an amendment to the RBI Act, 1934. The SDF works similar to Reverse Repo. However, SDF would be different from Reverse Repo in the following ways:

• Under the SDF route, the RBI would not be required to provide G-Secs as collateral to the Banks. Hence, it would enable RBI to absorb huge amount of liquidity from the economy without G-Secs acting as collateral.
• The SDF would be available for parking funds with the RBI on an overnight basis. But the duration of Reverse Repo could be longer. 
• Presently, Reverse Repo is 3.35%, while the SDF rate has been fixed higher at 3.75%.

Changes in the Monetary Policy Corridor 
The RBI has also decided to replace Fixed Rate Reverse Repo in the monetary policy corridor with the Standing Deposit Facility.