Agriculture Reference
In-Depth Information
the farmer has an option to sell his stocks at any later date. Still another policy
instrument that can benefit farmers is the introduction of futures trading. This
market would help farmers to form expectations about future prices, for exam-
ple, three months in advance, and they may participate in the market through
the warehouse receipt system. In a way, a futures market would give farmers
the option to exploit market opportunities as traders. This opportunity may ini-
tially require educating farmers about these new policy instruments and how
they can benefit from them. Furthermore, one can also use the tariff policy to
dovetail with the futures market with a view to stabilizing the domestic prices
within an acceptable price band, which one hopes is an export-import-parity
price band. With these multiple policy instruments, farmers can hopefully see
gains in the new system and become supporters of change. Such changes would
be easy to bring in when the open market prices are somewhat on a higher side,
as they were during 2006/07.
Finally, what happens to the massive workforce of FCI, which grew from
3,900 employees in 1965 to about 70,000 in the 1990s? In 2004, it had 55,000
regular employees and about 170,000 casual workers enlisted in its procure-
ment centers and warehouses around the country. In addition, the country has
about half a million ration shops, almost a quarter billion ration-card holders,
and more than 6,000 state marketing and regulatory agencies. If these employ-
ees see serious and sudden threats to their jobs, and many will, they are likely
to oppose moves that contain or minimize the role of FCI. In addition, they are
likely to be supported by political parties with socialist ideologies. Thus, any
reform that affects their employment (and rents) will have to be carefully cali-
brated. First, fresh appointments may have to be frozen. Second, FCI may be
asked to move much of its procurement operations to the eastern states, which
need the sort of support that Punjab-Haryana-Western Uttar Pradesh farmers
were given in the late 1960s and 1970s. Third, those employees not ready to
take on new roles may be offered a generous severance package. Fourth, pri-
vate-sector companies, many of whom will take over the functions of FCI in a
reformed scenario, may be encouraged to take on the employees of FCI, who,
incidentally, have a great deal of experience. Luckily in India today, with over-
all economic reforms paying handsome dividends, the private sector is being
preferred by many erstwhile government employees. One can learn more from
the successful voluntary retirement schemes in the earlier nationalized banks,
and how it has led to enormous growth of private banking. One would expect a
similar explosive growth in private-sector grain companies, once FCI decides
to play a limited and secondary role.
Each country has its own dynamics, political sensitivities, and governance
structures. For any policy reform, the policymakers have to navigate their po-
litical terrains carefully, all the more so when changes relate to basic staple
foods. Any major false move can invite large-scale opposition that jeopardizes
reforms even in other sectors. Thus, a reform strategy has to be carefully de-
