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Laws to free up farms for leasing – Finance Commission of India

Laws to free up farms for leasing

A bunch of politically controversial reforms have been recommended by the 15th Finance Commission of India to free up land leasing and introduce change to the farming sector. It proposed the cash transfer of subsidies instead of subsidized power for agriculture and the switch of crops from cereals to pulses and edible oilseeds for self-sufficiency, in support of the three controversial agricultural bills.

The committee recommends that  Rs 45,000 crore be given to States as performance-based rewards to implement agricultural reforms. It disagreed on exemptions from farm loans because of the negative effects on the fiscal condition of States.

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The committee observed that out of the three agricultural policy reforms that it proposed in its first 2020-21 report, two laws were passed by the Centre. It noted that the third recommendation, the ‘Model Agricultural Land Leasing Act’ for the creation of legal provisions to liberalize and accept agricultural land leases, remains on the agenda.

‘We recommend that States adequately amend farm laws in line with Niti Aayog’s Model Law that allows for short and long-term lease of agricultural and agro-industrial land, agricultural trade, logistics and supply chains,’ the Finance Committee has said in a statement.

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It proposed replacing subsidized power with direct transfer of benefits for greater “judicious use” of water and moving from “water guzzling crops” to better technology. Incentive grants have been suggested for states that “maintain and increase groundwater stock and keep a check on any decline in the groundwater table.”

In order to make India autonomous in commodities, the committee recommended increasing production of protein-rich pulses, oilseeds, wood and wood-based commodities. Since 2014, the committee has focused on the slew of state and local government farm loan waivers. This was not, however, complimentary of income support schemes such as the Kisan Samman Nidhi Pradhan Mantri. It called such programs “relatively more inclusive” and without the implicit “moral hazard” in waivers.

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It claimed that J&K, Karnataka, Punjab, Rajasthan, TN, Telangana and UP waived farmers loans totaling approximately Rs. 79,000 crore from 2014-2020 and pointed to the Reserve Bank of India (RBI) State budget report that showed the effect of waivers on state finances.