Shut down this ministry2 min read . Updated: 21 Jan 2010, 09:59 PM IST
Shut down this ministry
Shut down this ministry
On Wednesday, when Union agriculture minister Sharad Pawar said milk prices may rise, he created a political furore for stoking inflation through his irresponsible comments. Uttar Pradesh chief minister Mayawati promptly called for his ouster. We’ll do one better: Why not oust the entire ministry?
In the old days, before the Green Revolution, there may have been a case for such a ministry at the Centre, even if it wasn’t constitutionally mandated. But now that agricultural supply has overcome technological bottlenecks, only to encounter regulatory ones (that too when demand for food crops is rising), it’s time to unshackle this sector from centralization.
Consider how Central fiddling will hurt the market for milk. By saying that “there is a demand that we should hike the prices", Pawar is fulfilling his own prophecy. Buyers and sellers will assume the government knows that prices will rise: A seller will hoard his product, awaiting this higher price; a buyer will rush to buy, before prices become too high. Supply and demand mismatch equals inflation.
This isn’t the first time the ministry has worsened inflation by ignoring expectations. This month, Pawar remarked that sugar prices could remain high for three years, sparking similar problems.
What is worse is the impunity with which the ministry shrugs off any responsibility after making matters worse: “It is a state subject. We don’t take decisions here," Pawar said. Indeed, minister, that’s why New Delhi should stay out of it.
And there’s a reason the Constitution empowers states to deal with agriculture. State governments can target local farmers better. And if governments must choose to interfere, we’d rather states save taxpayers the higher costs—more bureaucracy, more pilferage—that come with Central diktat.
This diktat has meant arbitrarily shutting down futures markets or disrupting imports and exports. It has also meant a steady annual increase in minimum support prices (MSPs), the floor price the ministry sets. Rice’s MSP rose 31% last year.
With such short-term political palliatives, it’s little wonder India gets distorted farm incentives. For instance, if the rice MSP is higher, why would farmers grow pulses? India also gets a national market at the mercy of a Union government that hoards crops in rat-infested warehouses and then fails to disburse them when it should.
Instead, like other commodities, food should be allowed to move from areas of supply to that of demand through freer markets. The best argument we can make for a centralized authority is one that can help tide over coordination costs. But do we really need a full-fledged Union ministry for that?
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