The Hindu Editorial Analysis
30 November 2021

1. The three farm laws were never a solution. True agricultural reform rests with local governments, and States need to go back to the basics and expert suggestions

  • Source: Page 8/Editorial - The three farm laws were never a solution

  • GS 3: Agriculture

 Expected Question: The agricultural reforms are best suited to the local needs when a bottom-up approach is adopted. Comment (150 words)


Context :  On November 29, the first day in Parliament, the Farm Laws Repeal Bill was passed in the Lok Sabha without discussion. Regardless of how this specific step is viewed and the motivations attributed to it, the prolonged protests by farmers and extended impasse offer a rare teachable moment for policy making for Indian agriculture.

 

About the Farm laws:

    1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020: To allow private sector participation in the trade and commerce of agriculture commodities. It meant bypassing the APMC mandis to conduct purchase of farm produce.

      • Via this Act, the Centre essentially wrested control of market areas outside the 'market yards', now called ‘trade areas’, from the States.

      • The dominant popular narrative was that the Centre was doing what the States had failed to do, i.e., free agricultural trade from the clutches of the APMCs, an idea that finds support in the Economic Survey 2014-15.

    2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020: It aimed to regulate and govern the contract farming in India.

    3. Essential Commodities (Amendment) Act (ECA), 2020: to remove the limit of agri-stockholding, allowing private players to buy farm produce in large quantities. This was largely the prerogative of the Centre.

 

Wisdom of these laws:

    • Private investments: The underlying premise of these three Acts was that freedom to operate in agricultural markets would attract capital-rich private players to a sector in sore need of rejuvenating investments; and

    • That the proliferation of efficient value chains and competition would enable benefits to be passed on to the farmers in the form of higher, and perhaps more stable prices.

    • Greater portion of revenue to the farmer: Global evidence based on data from 61 countries between 2005-15, after all, suggests that farmers receive, on average, just 27% of consumer expenditure on foods consumed at home, the share falling significantly as national incomes rise.

 

Problems with these laws:

    • Centre-State agri-relations: These issues were under the State-level Agricultural Produce Marketing Committee (APMC) Acts, therefore under the purview of the States. In the 7th Schedule, the Entry 14 - Agriculture, Entry 26 - Trade and Commerce and entry 27 - Production supply and distribution goods and services, are part of the state list.

    • Ordinance route: Little is known to the public even today on who authored these laws or who was consulted before their introduction as ordinances.

    • Passed with voice vote: These were passed in Parliament in haste by voice vote, in what is viewed by experts as a violation of established procedures. That Acts with serious ramifications for States should be passed without deeper discussions even within Parliament, let alone with specific inputs from stakeholders and experts, is bewildering.

    • Farmers’ Produce Trade and Commerce Act particularly hurt States that had the most deregulated systems. A State that had no APMC Act, for example, suddenly found that all deregulated areas within the State would now come under the Centre’s regulatory ambit and control, subjecting private players hitherto operating freely in a deregulated environment to the regulations of a whimsical Centre.

    • Controlling power of the state reduced: Further, by absolving private players from adhering to any State law in agricultural marketing, it effectively nullified the power of States to shape the nature and functioning of agricultural markets.

    • Centre's control has not been ideal in the past: For example, barely weeks after the ECA was amended, the Centre imposed restrictions on stocking, in October 2020 for onions and July 2021 for a range of pulses, apparently undermining the purported spirit of the reformed ECA it championed.

    • Centralization never works: States, regardless of the ruling parties, offered a more timely, relevant and nimble response to manage the fallout of the COVID-19 lockdown on agriculture than the centre. Beyond agricultural marketing, the central government’s efforts in the past such as One Million Ponds, 10,000 FPOs and One District One Product are often disconnected from local needs for robust and sustainable solutions for agriculture.

 

What needs to be done

    • Bottom-up approach: While the Centre has the capacity to make landmark changes, true reform and action rests with local governments. States are better placed to assimilate and respond to the diversity of institutional and socio-economic contexts and agroclimatic regions. They are often better placed to incorporate local concerns for robust and sustainable solutions.

      • However, this wouldn't create a unified agri-market: The central national challenge is that different States have different regulations and a different pace of reform in part due to the political stakes involved in tackling trader collusion in these markets.

    • Delinking the regulatory and operational roles of the APMCs.

    • The Centre for its part should turn its attention in the short term to offering a stable and predictable policy environment vis-à-vis imports and exports, the functioning of national commodity exchanges and futures markets, and providing inclusive platforms for discussions on State-level market reform, public procurement and price support, designing safeguards against consolidation of corporate interests and framing data policies.

 

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2. A launch window for India as a space start-up hub. The sector is in an embryonic stage and there is scope to build a feasible business model

  • Page 8/Editorial

  • GS 3: Science and Technology, Economy

Expected Question: Enumerate the several challenges that India's Private sector faces in the space sector. (150 words)


Context: For the first time in the space race, private players are on the power field to take the next leap for mankind and democratise space usage to build commercial value. This has huge implications for original equipment manufacturers (OEMs) in the space sector in India and is a promising venture for global investors.

 

India, a very marginal player

    • In 2021, the Government of India created a new organisation known as IN-SPACe (Indian National Space Promotion and Authorisation Centre) which is a “single window nodal agency” established to boost the commercialisation of Indian space activities.

    • A supplement to the Indian Space Research Organisation (ISRO), the agency promotes the entry of the Non-Government Private Entities (NGPEs) in the Indian space sector. The agency will also felicitate a swift on-boarding of private players in the sector through encouraging policies in a friendly regulatory environment and by creating synergies through already existing necessary facilities, the report says.

    • The Space Economy size: Today, the space economy is a $440 billion global sector, with India having less than 2% share in the sector. This is despite the fact that India is a leading space-faring country with end-to-end capabilities to make satellites, develop augmented launch vehicles and deploy inter-planetary missions.

    • Investment scale: While total early-stage investments in space technologies in FY21 were $68 billion, India was on the fourth place with investments in about 110 firms, totalling not more than $2 billion.

 

The hurdles:

    • Extensive brain drain in India: which has increased by 85% since 2005. This can be linked to the bottlenecks in policies which create hindrances for private space ventures and founders to attract investors, making it virtually non-feasible to operate in India.

    • Absence of a framework to provide transparency and clarity in laws:  The laws need to be broken down into multiple sections, each to address specific parts of the value chain and in accordance with the Outer Space Treaty (or the United Nations resolution, the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies). Dividing activities further into upstream and downstream space blocks will allow legislators to provide a solid foundation to products/services developed by the non-governmental and private sectors within the value chain.

    • Licences, liability: with the technicalities involved in the space business, timelines on licensing, issuance of authorisation and continuous supervision mechanism need to be defined into phases, like in France, where there are four obtainable licences in addition to case-by-case authorisation, with lack of clarity surrounding costs.

    • Insurance and indemnification clarity: Clarity particularly about who or which entity undertakes the liability in case of a mishap is required. In several western countries with an evolved private space industry, there is a cap on liability and the financial damages that need to be paid. In fact, space operators are required to hold insurance of up to AUD$100 million under Australian space law.

    • Intellectual Property: Currently, many of the private entities are involved only in equipment and frame manufacturing, with either outsourced specifications or leased licences(without any innovation of their own). However, to create value, Indian space private companies need to generate their intellectual property for an independent product or service (e.g. satellite-based broadband) with ISRO neither being their sole or largest customer nor providing them IP and ensuring buy-backs. 

 

The Global Practice:

    • Mature space agencies such as the National Aeronautics and Space Administration (NASA) of the United States, China’s China National Space Administration (CNSA), and Russia’s Roscosmos (Roscosmos State Corporation for Space Activities) seek support from private players such as Boeing, SpaceX and Blue Origin for complex operations beyond manufacturing support, such as sending crew and supplies to the International Space Station.

    • These companies have revolutionised the space sector by reducing costs and turnaround time with innovation and advanced technology. For such purposes, NASA and the CNSA award a part of their annual budget to private players.

    • For example: Until 2018, SpaceX was a part of 30 missions of NASA, getting over $12 billion under contract.

 

Way forward:

    • Status of India today: India currently stands on the cusp of building a space ecosystem and with ISRO being the guiding body, India can now evolve as a space start-up hub for the world. The sector is in the embryonic stage where the possibilities are limitless with a scope to build a feasible business model.

    • Indian Start-ups: Already 350 plus start-ups such as AgniKul Cosmos, Skyroot Technologies, Dhruva Space and Pixxel have established firm grounds for home-grown technologies with a practical unit of economics.

    • However, we need investments:  to continue the growth engine, investors need to look up to the sector as the next “new-age” boom and ISRO needs to turn into an enabler from being a supporter.

    • Better regulation to boost investor confidence: To ensure that the sky is not the limit, investor confidence needs to be pumped up and for the same, clear laws need to be defined.