Liberalisation of the agriculture sector, as many consider, was an impending decision since the times of Narsimha Rao. Despite the ongoing farm laws showdown, Prime Minister Modi seems to have emerged as a leader with true reformist credentials.
Three Farm Laws: The 1991 Moment of Indian Agriculture
Narendra Modi took over as India's Prime Minister in May 2014 at a time when there was a mammoth task of reviving the Indian economy which had taken a beating under the United Progressive Alliance (UPA)-II regime. After six years at the helm of affairs, Modi’s one of the biggest challenges is how to assure farmers who have been protesting since August 2020. Out all the reforms undertaken by the present government, the farm liberalization impacts highest number of citizens; greater than the GST.
As per the ground report, there is rising anger against the Modi government over its approach against farmers who are protesting across the country In Punjab, small-scale protests had started in August 2020 when the farm bills were made public and demanding the rollback of the three farm laws. What are these laws – Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and the Essential Commodities (Amendment) Act, 2020. The protest begins in Punjab when the bills were made public. It was only after the enactment of it that more farmers and farm unions, mostly of the region, increasingly joined the protests.
Protest, protest, protest!
Farm unions all over India called for a Bharat Bandh on 25 September 2020 to protest against these farm laws and demanding their rollback. The most widespread protests took place in Punjab, Haryana and Western Uttar Pradesh but demonstrations were also reported in some pockets of Uttar Pradesh, Karnataka, Tamil Nadu, Odisha, Kerala and other states. Railway services were suspended in Punjab for more than two months due to the protests, starting from October. Following this, farmers from different states marched to Delhi. Farmers also criticized the national media for misrepresenting their protest. In certain parts of India, bullock-cart rallies in support of farmer's protest have also been organized by small and marginal farmers.
So far several rounds of talks have taken place between the Modi government and farmers represented by the farm unions between 14 October 2020 and 15 January 2021; all were inconclusive. Even farm leaders have rejected a Supreme Court of India stay order on the farm laws as well as the involvement of a Supreme Court appointed committee as farmer unions and their representatives have demanded that the laws be repealed and will not accept anything short of it.
The Unions and Their Demands
The farmer unions believe that the laws will open the sale and marketing of agricultural products outside the notified Agricultural Produce Market Committee (APMC) mandis for farmers. Further, the laws will allow inter-state trade and encourage hike electronic trading of agricultural produce. The new laws prevent the state governments from collecting a market fee, cess, or levy for trade outside the APMC markets; this has led the farmers to believe the laws will "gradually end the mandi system" and "leave farmers at the mercy of corporates". Further, the farmers believe that the laws will end their existing relationship with artisans (commission agents who act as middlemen by providing financial loans, ensuring timely procurement, and promising adequate prices for their crop).
Additionally, protesting farmers believe dismantling the APMC mandis will encourage abolishing the purchase of their crops at the minimum support price. They are therefore demanding the minimum support prices to be guaranteed by the government.
Farmers' demands include:
Make minimum support price (MSP) and state procurement of crops a legal rightAssurances that conventional procurement system will remainImplement Swaminathan Panel Report and peg MSP at least 50% more than weighted average cost of productionCut diesel prices for agricultural use by 50%Repeal of Commission on Air Quality Management in NCR and the adjoining Ordinance 2020 and removal of punishment and fine for stubble burningRelease of farmers arrested for burning paddy stubble in PunjabAbolishing the Electricity Ordinance 2020The Three Agri Bills
The BJP-led government’s agenda of doubling farmer incomes by raising productivity and cutting down costs, and going for diversification towards high value agriculture, is potentially a welcome departure in this context and we are guided by this shift. But given the many challenges facing the current government, why should agriculture and food be a top priority?
First, more Indians depend directly or indirectly on agriculture for employment than on any other sector, with 80% of India’s extremely poor people living in rural areas and most of them being marginal farmers, farm labourers. Second, agriculture holds a key to reducing India’s double burden of under- and over-nutrition, directly affecting public health and worker productivity. Third, agriculture has the potential to spur, rather than be a drag on India’s overall gross domestic product (GDP) growth. Agricultural growth of 4% and more is achievable with the right reforms and would add at least a percentage point to GDP, increase exports and improve India’s trade deficit. Fourth, India’s vital land and water resources, which farmers used for agricultural production, must be utilized more sustainably, especially in the face of mounting scarcity, environmental degradation, and climate change.
A set of three complementary bills was rushed through parliament by the Modi government in September 2020. The first seeks to erode the role of the regulated mandis in marketing farm produce by allowing parallel trade, including electronic trading, outside the mandi system within and across states. The second loosens the restrictions on private sector storage and stocking of produce, allowing restrictions only in case of strong price spikes when hoarding becomes a strong concern. The third bill sets up a framework for direct formal contracting between farmers and the agribusinesses that buy from them. Taken together, these bills are a radical departure from the tightly regulated system for marketing agricultural produce that existed before. The bills would curb the regulatory power of states, allowing the central government to set the agenda more firmly.
The reforms provide a significant fillip to the operation of private enterprise, especially large agribusiness in India. The expectation of the government is that the strengthening of these parallel market channels will create competition for the farmers’ produce from both within and across states, leading to improved remuneration for farmers. However, India’s farm policies still reflect the priorities of the 1960s, when the Green Revolution brought high-yielding wheat and rice seeds to a country struggling with shortages and pervasive hunger.
Reforming agriculture, which supports about half of India’s rural population directly and indirectly, is a perennial demand of politicians, economists and even farmers. In much of the country, productivity remains low, farmers lack options for trade and produce rots before it reaches consumers because of broken supply chains.
The new laws aim to allow private trade outside state-regulated market yards and open up contract farming between producers and companies. To encourage subsistence farmers to invest in cultivating in the hybrids, government procured food grains from farmers at prices that made it profitable for them, and then distributed those cereals to the poor for a token fee.
Since then, farmers have prospered by selling wheat and rice to the state. But decades of intensive cereal cultivation have come at a heavy ecological price, including draining the water table and air pollution as they burn crop residues.
The Food Corporation of India (FCI) has accumulated huge surplus grain stocks, at a hefty cost to the public exchequer. It has about 80m tonnes in its custody — double the government’s target.
Other crops such as lentils, oilseeds and fresh produce are sold by farmers to private traders, mostly at government-regulated markets where farmers get only a fraction of the end price paid by consumers. So for the poor, nutritious foods other than grains are still out of reach.
Modi Should Directly Listen to Farmers
But the moot question is: By ignoring farmers’ demands, can the government find a solution to the problem if it continues to not even recognize the problem and simply ignore it? Political pundits hold that the PM must listen to farmers’ Mann Ki Baat instead of depending on political advisors or other ministers. Most believe that the PM maintains more a great charm among the farming community in entire region around the national capital and his direct conversation with the protesting farmers will not just help clear the brewing misconceptions about the laws but also disallow the vested interests to unite against the economic reforms or pose a political threat to the government. And this will also hasten the government’s efforts of ‘doubling farmers’ incomes’ by 2024. Some farmers are angry that Modi government has stumbled in rushing the passage of the bills without building a political consensus and garnering support from all stakeholders.
Most economists are of opinion that the reforms in four areas should be the priority for doubling farmer incomes in the coming years. First, the focus of agricultural policies must shift from production per se to farmers’ livelihoods. Second, policies to improve the allocation and efficiency of land and water are essential if these critical resources are to be conserved. Third, reforms are needed to help farmers cope with the growing risks of weather and price volatility. Fourth, agricultural markets must be opened to greater competition and provided with better infrastructure if farmers are to realize better returns for produce, without trading off the low-income consumers’ nutritional security.
This Article First Published In Our Magazine