Strategy for balanced growth

The Assam Cabinet's decision to do away with the requirement of multiple permissions to set up Micro, Small and Medium Enterprises (MSME) in Assam for three years is a giant leap towards ease of doing business and is expected to attract massive investment in the sector. It has, however, come with a potential risk of an adverse impact in the agricultural sector in the long run. The State Cabinet has approved the MSME ordinance, which states anyone will be able to set up industry in MSME sector simply by submitting the application and no permission, clearance or licence will be required for three years. The ordinance also states that the land on which the industry is set up will also be deemed converted for industrial purpose. In its "State Focus Paper 2020-21, Assam", the National Bank for Agriculture and Rural Development (NABARD) states that the number of MSMEs in the state is 45,509 "which appears to be very low considering the potential assessment pegged at about 2 (two) lakh units." These MSMEs provide employment to 2.69 lakh persons. The NABARD has assessed the total MSME credit potential of Assam at Rs 7704.71 crore for the year 2020-21. This speaks volume of the huge growth potential in the MSME sector in the state in terms of investment as well as boosting industrial production and providing gainful employment. A Report on "Economy of Assam in the Backdrop of COVID-19 Pandemic", prepared by the State Innovation and Transformation Aayog (SITA), Government of Assam, in collaboration with OKD Institute of Social Change and Development, paints a gloomy picture on employment situation in the state. The SITA report, submitted to the State Government in May, states that the due to the pandemic, the unemployment in the state will increase by additional 15.7 to 27.1 lakh and unemployment rate will increase up to the range of 16 to 27 per cent from the present level of eight per cent. The Cabinet decision aimed at bolstering the MSME growth is a silver lining in rising unemployment scenario. However, the provision in the MSME ordinance of automatic conversion of land for industrial purpose carries the risk of rampant conversion of farmland for non-farm purpose, which is not desired. The investors, in order to avail priority sector lending, expectedly will look at purchasing land required for setting up their industries. Agricultural land being the cheapest in the prevailing land market and with farmers grappling with economic crises due to COVID-19 pandemic, the ordinance may result in sudden surge in sale of agricultural land by distressed owners of farm land to potential MSME investors. The Central government recently announced revised definitions of MSMEs. Units with investment up to Rs. 1 crore and turnover of less than Rs. 5 crore are now considered Micro units. It is Rs. 10 crore investment and turnover less than Rs 50 crore for a Small unit and Rs 20 crore investment and turnover Rs 100 crore for a Medium unit. To put in perspectives, the average investment in Assam per MSME unit, according to NABARD, is Rs 15.61 lakh. The raising of the investment and turnover bar has enlarged the scope for MSME investors to acquire more farmland for setting up industries. The onus lies on the State Government to protect the farmers from distress selling of their farmland. This is also critical to ensuring food security of the state by protecting agricultural land from rampant conversion. The loss of land ownership has the potential to make distressed farm families vulnerable to being reduced to landless and add to the existing number of six lakh landless sharecroppers of the total 40.61 lakh cultivators. The NABARD paper states that the sharecroppers have no access to institutional credit and have to depend on informal credit channel for crop loans. Under Rule 23 of the Assam Land Records Manual, 1906 and provisions in the Assam Agricultural Land (Regulation of Reclassification and Transfer for Non Agricultural Purpose) Act, 2015, "No Objection Certificate" is required for reclassification or reclassification cum transfer of agricultural land to non-agricultural purpose if the land area exceeds one bigha. Besides, only such agricultural land which has become unfit for agricultural activity for at least 10 years preceding the date of application for NOC can only be reclassified/reclassified cum transferred for intended non-agricultural activity with the prior approval of the Deputy Commissioner. Assam can least afford to any further land alienation as it has given rise to some of the intractable socio-political problems grappling the state for decades. A pragmatic solution could be adding a rider to the three-year permission that sale of farmland will not be allowed for setting up of an MSME industry. Priorities on units processing agricultural and horticultural produce will also neutralise the risk to a great extent.