The government must avoid sending out mixed signals on farm reforms

livemint.com:

The government on Friday lifted its ban on the use of sugarcane juice and B-heavy molasses for making ethanol less than a week after it was imposed in an attempt to ensure feedstock sufficiency for sugar. Instead, a cap on such use has been put in place, but the flip-flop seems an acknowledgement of concerns expressed by the industry. Sugar and sugar-based distillers had protested the ban as they risked losses on large investments made in cane-derived ethanol to serve demand boosted by India’s plan to increase its use as an input for biofuel.

With the curb now eased, the ill-effects of the intervention may have reduced. But what is still worrying is this tendency to interfere in markets for agricultural commodities seen to have a bearing on retail inflation in the country. Lately, the administration has lowered import duties on farm items, slashed the stock limit for wheat by half, and deployed export bans—the latest being on onions after a minimum export price failed to contain prices.

All this is aimed at boosting supplies so that our cost-of-living is held in check. With national elections nearing, the government looks ready to use any tool it can to minimize the risk of an inflation spiral, especially in essentials. But this means meddling with market forces of demand and supply, the distortion of which often has losers and can cause trouble in ways that are hard to foresee.

Ironically, this comes from a government that had made a bold move in trying to reform the country’s vast farm sector and free key aspects of it from state control. The three farm laws it brought in 2020 to enable bulk buying and storage by private parties, as well as contract farming, were broadly a step in that direction. These fell short on