Tinbergen (1952: 2) distinguishes between a qualitative policy and a quantitative policy.
A qualitative policy seeks to change the economic structure through the creation of new institutions, modifi cation of exist ing institutions and nationalisation of private fi rms.
A quantitative policy seeks to change the magnitude of certain parameters; for example, change in the tax rate. An example which represents both qualitative and quanti tative policy is the introduction of an education system free of charge, if previously tuition fees were charged. It is qualitative because it repre sents a change in the economic structure, and is quantitative because it represents a change in the fee, from something to zero.
Heady (1965: 15) classifi es agricultural policies into development poli cies and com- pensation policies. A development policy seeks to increase the supply of commodities and resources, and to improve the quality of products and inputs. A compensation policy is aimed at compen sating its target group in various manners—through subsidies, price support, and so on.
India has a long history of government intervention in the rural sector of its economy.
In the pre-independence era, the British government inter vention was aimed at promoting the export of food and raw materials to the Great Britain. There was no state policy for the development of resources of India for the welfare of its people. Introduction of a land tenure sys tem, opening up of road and rail communications, and promotion of export trade in certain agricultural commodities were important mea sures taken by the British government. The other landmarks of that era were the creation of the Forest Department in 1864, and the Department of Agriculture in 1871, the appointment of the Royal Commission on Agriculture (RCA) in 1926, and the establishment of the Imperial (now Indian) Council of Agricultural Research in 1929. The report of the RCA was accepted as the basis for future development of agriculture in a conference convened by the Government of India in Shimla in October 1928. The report emphasised, inter alia, the importance of providing a minimum standard of life in villages and the modernisation of agriculture through research, extension and greater coordination of various departments dealing with agriculture, and development of coop erative institutions. However, due to the lack of fi nancial resources and the Great Economic Depression (1929–30), many of the recommendations of the RCA could not be implemented.
In January 1946, the GoI issued a ‘Statement of Agriculture and Food Policy in India’, which spelt out the objectives to be achieved, the measures to be taken, and the respective roles of the centre and the provinces. According to the statement, the all-India policy was to pro mote the welfare of the people and to secure a progressive improvement of their standard of living (GoI 1976: 127–36).
Now we briefl y discuss the salient features of major national level public policies in the fi eld of agriculture and rural development.
National Forest Policy (NFP)
India is one of the few countries in the world that has had a forest pol icy since 1894.
After independence, in recognition of the importance of forests in the national economy
and to ensure the best possible use of land, a new forest policy was enunciated in May 1952. The new policy pro vided, inter alia, that the area under forests should be at least one-third of the total geographical area, and that the forest areas should not be brought under cultivation of crops indiscriminately. The National Commission on Agriculture (NCA) (1976) recommended a further revision of the 1952 forest policy. The forest policy was revised in 1988. The main plank of the revised forest policy of 1988 is protection, conservation and develop ment of forests. The salient features of the revised policy are as follows:
1. A minimum of one-third of the total land area of the country has to be brought under forest or tree cover.
2. Total protection of tropical rain/moist forests.
3. The extent of forest use for grazing and extraction will be deter mined on the basis of the carrying capacity of the forests.
4. Involvement of tribals/forest dwellers in protection, regeneration and development of forests to be encouraged.
5. Forest-based industries would have to raise their own plantations to meet their requirements, and the practice of supplying forest produce to industries at con- cessional rates would cease.
These principles are necessary to ensure that the forest area can increase from its present level of 75 million hectare (mha) to 110 mha (33 per cent of the total land area).
The revised forest policy has several implications for various sec tors of the economy like energy, industry and agriculture. Development projects now are carefully examined to ensure that the ecological balance is not destroyed. This is done through an assessment of their impact on the ecosystem.
However, in the past, India’s forest policy has not been congenial to promoting a sustainable use and management of forest resources. The current policy also needs to be overhauled if the link between scarcity of forest resources and their prices is to be reestablished. Now that we are facing a growing scarcity of forest resources, forest product prices should be rising to slow down deforestation and accelerate reforestation.
At present, not only are many of the forest products and services not priced at all, but even timber which is an internationally tradable commodity is priced below its true scarcity value due to implicit and explicit subsidies, and institutional failures. Forest con- cessions are typically inadequate to provide incentives for conservation and replanting.
Failure to value non-timber goods and services results in excessive deforestation, confl icts with local communities, loss of economic value and environmental damage. Promotion of local processing of timber often leads to ineffi cient plywood mills, excess capacity, wastage of valuable tropical timber and loss of government revenues. Replanting subsidies often end up subsidising the conversion of a valuable natural forest to inferior monospecies plantations, with the associated loss of the value of both tropical hardwoods and biological diversity.
There is also need to adopt a better system of Forest Resource Accounting (FRA).
The existing FRA system has several drawbacks. For example, there is no accounting of the free collection of fuel wood, grass and other non-wood forest products, benefi ts
from free grazing of animals in forest and a whole set of intangible benefi ts, such as soil and water conservation, maintenance of productivity of adjoining lands, biodiversity conservation, moderation of micro climate, carbon sequestration, release of oxygen, recreation, and so on. This leads to gross underestimation of the forestry sector to India’s GDP. In view of this, there is need to adopt the new system of FRA.3
Further, in view of the rising demand for forest-based products, there is a need to pay far greater attention to increasing the productivity of forests and to their scientifi c management on modern lines. The NFP should rest on two pivotal points, namely, meeting the requirement of raw materials for the forest-based industries; small timber, fuel wood and fodder for the rural community; satisfying the present and future demands for protective and recreative functions of the forests and for environmental amenities.
Social forestry and afforestation of wastelands should receive a very high priority.
In June 1990, the Union Ministry of Environment and Forests issued guidelines to the forest departments of all states and union territories, directing them to involve village communities and voluntary agencies for the regeneration of degraded forest lands on a usufruct sharing basis. Most of the state governments responded positively to the Ministry’s directive, and launched what have come to be known as Joint Forest Management (JFM) programmes. The Ministry of Environment and Forests had issued fresh operational guidelines for the formulation of a new programme called the National Afforestation Programme (NAP) for the Tenth Five Year Plan (2002–07). These guidelines seek to encourage a participatory approach to the development of forests for the GoI- sponsored afforestation schemes. Afforestation schemes operational during the Ninth Five Year Plan have been merged in the new NAP so as to avoid multiplicity of schemes with similar objectives and to ensure uniformity in the funding pattern and implemen- tation mechanism (see Chapter 11: ‘Joint Forest Management [JFM] and National Afforestation Programme [NAP]’ for details). The Tenth Five Year Plan provided for the universalisation of the JFM in the country.
Land Reforms Policy
To lay the foundation for a progressive rural society, it is necessary to reorder the agrarian structure. A sound land reforms policy can con tribute signifi cantly to agricultural and rural development, and therefore, deserves high priority. The land policy should be such that it ensures the scientifi c and intensive use of land, creates productive employment, reduces disparities in the distribution of land, provides incentives to increase the productivity of land, and induces changes in property relations and social structure, with a view to enabling the wider participation of landowners and tenants in the process of rural development. The agrarian structure should be based on peasant proprietorship, strengthened and supplemented by cooperative and joint farming systems, and backed by necessary supplies and services for optimum utilisation of land.
After independence, the GoI formulated a compre hensive national land reforms policy for the fi rst time in the First Five Year Plan. The main objectives of the policy were to remove such impediments to the modernisation of agriculture as were innate in the
agrarian structure inherited from the past, and the reduction of gross inequalities in the agrarian economy and the rural society. It accorded a high priority to programmes that increased agricultural production, promoted diversifi cation, reduced dis parities in distribution of income and wealth, eliminated exploitation, and provided security to tenants and workers. This policy has been followed in all the subsequent fi ve year plans with marginal reshuffl ing of the priorities of its components. Necessary land reform legislation has already been enacted by the state governments and is now in force. The policy and the programmes have been periodically reviewed and evaluated. One of the common fi ndings of the reviews is that the implementation of the programmes has been lax. Many glaring gaps have occurred between the objectives of the policy and the legislation enacted to achieve them, and between the laws and their enforcement (Singh 1997: 152–55). The programmes, therefore, need to be implemented more rigorously than in the past. For optimum results, the programmes of land reforms, con solidation of fragmented landholdings, land development, irrigation and drainage, and acquisition of surplus land and its distribution should be integrated and executed properly. Special attention must be directed at the restoration of degraded common property land resources and their proper utilisation for the larger benefi t of the rural masses. With the estab- lishment of the National Wastelands Development Board (NWDB), it is hoped that some 100 mha of India’s wastelands would be properly developed and utilised.
The National Agriculture Policy 2000 stipulated the following approach to land reforms:
1. Consolidation of holdings all over the country on the pattern of north western states.
2. Redistribution of ceiling surplus lands and waste lands among the landless farmers and unemployed youth with initial startup capital.
3. Tenancy reforms to recognise the rights of the tenants and sharecroppers.
4. Development of lease markets for increasing the size of the holdings by making legal provisions for giving private lands on lease for cultivation and agro-business.
5. Update and improvement of land records, computerisation and issue of land passbooks to the farmers.
6. Recognition of women’s rights in land.
The rural poor will be increasingly involved in the implementation of land reforms with the help of panchayati raj institutions, voluntary groups, social activists and community leaders.
National Water Policy (NWP)
Water is the most critical natural resource affecting the level and pace of agricultural and rural development. Optimum development and effi cient utilisation of water resources, therefore, assumes great signifi cance. Nearly 36 per cent of the total gross cropped area in the country is irri gated, and the irrigated area contributes over 55 per cent of the total agricultural output. The Union Ministry of Water Resources is responsible for laying
down policies and programmes for the development and regulation of the country’s water resources. India’s fi rst NWP was announced by the GoI in September 1987. It stressed that ‘water is a prime natural resource, a basic human need and a precious national asset. Planning and development of water resources need to be governed by national perspectives’ (GoI 1987). It recommended an integrated and multidisciplinary approach to planning, formulation and implementation of projects in such a way as to be able to meet the demands of water from various sectors and to free the country, as far as possible, from the scourge of recurring fl oods and droughts.
The NWP 1987 highlights the following points:
1. Need for effi cient use of water.
2. Need for a well-designed information system.
3. Need for preservation of the quality of the environment and the ecological balance.
4. Periodic reassessment on a scientifi c basis of the groundwater potential, taking into account the quality of water available and the economic viability of its exploitation.
5. Integrated and coordinated development of surface water and groundwater, and their conjunctive use.
6. Equity and social justice considerations in water allocation.
7. Involvement of farmers in various aspects of water management, particularly water distribution and collection of water charges through water users’ associations.
A new NWP was announced by the GoI in April 2002 (GoI 2002c). It also highlights the similar concerns as the fi rst NWP. The Policy highlighted, inter alia, the need for the effi cient use of water and for preservation of the quality of environment and ecological balance. This policy supersedes the 1987 Policy but it also echoes similar concerns.
The NWP 1987 and NWP 2002 do not clearly specify their goals, nor any operational guidelines as to how various provisions made in the Policy documents would be actualised.
In view of this, we could say that the Policy framework is ineffective. In our opinion, its main goal should be to attain water security for all and for ever through restoring, developing, conserving, utilising and managing the surface water and groundwater resources of the country in the socially optimum and ecologically sound and sustainable way. Besides, the policy should have a legal backup and operational guidelines to achieve its objectives. Also, the government must accept the access to water for survival as a basic human right and include it in the set of development goals and use it as an entry point for development work. A minimum of 40 litres of water per capita per day is required for meeting personal consumption, hygiene and sanitation requirement (Water Supply and Sanitation Collaborative Council [WSSCC] 1999).
Agricultural Price Policy (APP)
Before independence, there was no semblance of an APP in India. After independence, the government introduced a price policy mainly to protect the interests of consumers,
by making available to them food at reasonable prices, that is, the policy was consumer oriented. A broad framework for a price policy was specifi ed for the fi rst time in the Terms of Reference of the Agricultural Prices Commission (later renamed as the Commission for Agricultural Costs and Prices [CACP]), which was set up in 1965 for evolving a balanced and integrated price structure. The Commission was required to keep in view the interests of both the producer and the consumer while formulating a price policy.
The frame work of the policy was reviewed and modifi ed in 1980, and again, in 1986. The latest review was done in 1991, after India became a signatory to the new world trade arrangement, which, for the fi rst time, included agriculture also. The new price policy for the agricultural sector aims at setting the prices right and withdrawing the subsidies on inputs, target ing the public distribution system (PDS) to only the poor, abolition of the food management system and liberalisation of trade in agricultural commodities.
The main objectives of the government’s price policy for agricultural produce are:
1. to assure a remu nerative and relatively stable price environment for farmers for inducing them to increase their production, and thereby augmenting the availability of food grains;
2. to improve the physical and economic access of the people to food; and
3. to evolve a production pattern which is in line with the overall needs of the economy.
Towards this end, minimum support prices (MSPs) for major agricultural products are announced each year, which are fi xed after taking into account the recommendations of the CACP. The CACP, while recommending prices, takes into account all the important factors, such as
1. cost of production;
2. changes in input prices;
3. input/output price parity;
4. trends in market prices;
5. inter-crop price parity;
6. demand and supply situation;
7. effect on industrial cost structure;
8. effect on general price level;
9. effect on cost of living;
10. international market price situation; and
11. parity between prices paid and prices received by farmers (terms of trade).
Of all the factors, cost of production is the most tangible factor and it takes into account all operational and fi xed costs. The government organises the Price Support Scheme (PSS) of the commodities through various public and cooperative agencies such as the Food Corporation of India (FCI), Cotton Corporation of India (CCI), Jute Corporation of India (JCI), National Cooperative Agricultural Marketing Federation of India (NAFED) and Tobacco Board, for which the MSPs are fi xed. For commodities not covered under PSS, the government also arranges for market intervention on specifi c
request from the states for specifi c quantity at a mutually agreed price. The losses, if any, are borne by the centre and the state on 50:50 basis. The price policy has paid rich dividends. The government has raised substantially the MSPs in recent years. Food and input subsidies have been used as complementary instru ments of the APP. Contrary to the general impression that the price support programme, and input and food subsidies have bene fi ted only a few crops and farmers in only some regions, it is now well established that these instruments have played an important role in achiev ing the objectives of food security and accelerated growth of the economy, and have benefi ted all the sections of society (Acharya 1997: 26).
At present, 25 agricultural commodities are covered under the MSP programme.
Besides, some other commodities like onions, potatoes and ginger are included under the Market Interven tion Scheme (MIS). The FCI, which has been the nodal agency for implementing the price support policy for rice and wheat, was entrusted with the work of price support for coarse cereals also. As regards targeting the poorer sections, a revamped PDS was launched in 1992 with a view to extending the coverage of distribution of specially subsidised food grains to the population living in hilly and arid areas also.
It is important for rural development that the overall relationship between input and output prices within agriculture, and the terms of trade between agriculture and other sectors of the economy be such that growth is stimulated in the rural areas. The major aim of an APP should be to correct market distortions, which are generally socially harmful.
Being parts of the same policy, the interests of the producer should be safeguarded through price support (above the mar ket price) operations when there is a sharp fall in market prices, and the interests of the consumers, particularly the vulnerable sections of the population, should be protected through distribution of food grains and other basic necessities at a fair price (below the market price) when there is a sharp rise in market prices. Since the MSP is expected to take into account changes in input prices, widespread use of input subsidy as an incentive to increase the production should, by and large, be avoided except in the case of small and marginal farmers, and diffi cult areas. In the latter case, a transport subsidy will be more appropriate.
The National Agriculture Policy 2000 stipulates that the central government will continue to discharge its responsibility to ensure remunerative prices for agricultural produce through the announcement of MSPs policy for major agricultural commodities.
The food, nutrition, and other domestic and exports requirements of the country will be kept in view while determining the support prices of different commodities. The price structure and trade mechanism are continuously reviewed to ensure a favourable economic environment for the agricultural sector and to bring about an equitable balance between the rural and the urban incomes. The methodology used by the CACP in arriving at estimates of costs of production is periodically reviewed. The price structure of both inputs and outputs are monitored to ensure higher returns to the farmers and bring about cost effectiveness throughout the economy. Domestic market prices are closely monitored to prevent distress sales by the farmers. The government intends to enlarge the coverage of futures markets to minimise the wide fl uctuations in commodity prices as also for hedging their risks. The endeavour will be to cover all important agricultural products under futures trading in course of time.