Markets without borders

The recommendation by the National Commission on Farmers (NCF), headed by Professor M. S. Swaminathan, to make India a single common market for agricultural produce is not new. Indeed, the government is already committed to doing so. But the elaborate blueprint outlined by the Commission to achieve this objective is markedly different from the piece-meal manner in which this issue has been addressed so far. What is novel in the report is the proposal to have an Indian Trade Organisation (ITO) which will administer or supervise domestic 'boxes' for agricultural support "" on the model of the World Trade Organisation's Blue, Green and Amber boxes. The argument by the NCF is that most of the country's agricultural production, estimated at over Rs 5,60,500 crore in 2002-03, is traded and consumed locally, the export component being hardly around 6 per cent. The budgetary support extended to farmers is very modest in comparison with international levels and, as such, needs to be segregated into categories like livelihood support and global trade-distorting support. An even more important task mooted for the ITO pertains to monitoring international and domestic marketing trends, to help checkmate adverse external trade trends through timely domestic action. All this is unobjectionable, but the question to ask is whether the same objectives can be served without creating another large government organization.

With regard to creating an Indian common market, on paper there is no problem as there are no customs duties or quantitative restrictions on the inter-state movement of goods. But the ground reality is that those engaged in inter-state trade have to cope with a vast diversity of controls, exercised by multiple authorities at different levels; lack of uniformity in the standards laid down by different authorities; and multiple taxes and levies at various stages of trading in different states. Inter-state transportation, too, is bedeviled by sundry hurdles, in the form of the permit system, road tax and other state and municipal levies. Moreover, outdated laws such as the Essential Commodities Act and the Food Adulteration Act and the various orders issued under them have still not been deleted from the statute books, though the process of diluting some of these has been set in motion. All this breeds corruption, adds to costs and therefore comes in the way of a smoothly functioning common market.

It is in this context that the NCF's plea for focused action assumes urgency. The Commission has suggested that the Essential Commodities Act should be placed in suspended animation. Besides, it has suggested making the national permit meaningful by allowing vehicles with such permits to travel anywhere in the country. At present, for getting a national permit, a transporter has to register in at least four states and pay road tax in all of them. Such irritants need to be removed. Moreover, under the present circumstances, there is hardly any justification for allowing the states to have different agricultural marketing norms and multi-level taxation. Similar, if not identical, marketing laws should prevail throughout the country, ensuring proper marketing facilities and transparency in transactions based on adequate information with regard to market arrivals, stocks and prices. The ultimate beneficiary of these reforms will be the trade, of course, but also the farmer who will get better returns.