Farmers protest: Deconstructing the debate around India’s farm bills

The three Indian farm laws have ignited a rather animated debate in the last few months. Virtually every agri-expert in the country agrees that the farm laws are steps in the right direction.

Most policymakers in the last two decades have been advocating these laws and extensive consultations under various governments have variously advocated the same farm laws that have now been legislated under the current government.

One might ask — why the protests then?

At the crux of the issue is the big farmers versus the small farmers debate.

According the 1971 agricultural census in India, the proportion of farmers with micro land holdings — less than 1 hectare — was 51%. In the last census done in 2011, this number increased to 68%.

The proportion of micro and small farmers as per 2011 census — land holdings less than 2 hectares — was a staggering 86%. This number translated in absolute terms to almost 120 million farmers.

As former Prime Minister of India, a still respected farm leader, Charan Singh said, “no matter how hard these farmers toiled, they could never sustain an honest living from such small land holdings. In fact, I would suggest that we should not call them farmers at all”.

In the intervening 40 years since the 1971 census, the green revolution took place and India became a self-sufficient nation when it came to food security. However, the small farmer got smaller, the farmer with micro land holding lived on the margins of subsistence while a small proportion of elite farmers emerged — those who had larger land holdings.

Who benefited from India's agricultural policies?

It is these larger farmers who benefited from most of the agricultural policies during these four decades.

For example, low interest farm loans. But who would get the loans in the first place? A farmer who would have a bank account. In 2014, before Prime Minister Modi’s government came to office, only 58% Indians had bank accounts.

Those left out — the poor and the marginalised which obviously meant almost the entire lot of the small and the marginal farmers.

When a particular government felt benevolent, they wrote-off the farm loans. But who would benefit from this benevolence? Those who had taken the loans in the first place. But who taken these loans?

Those who were the large farmers because only they had the bank accounts. The fanfare of announcing these farm loan waivers was always huge, the advertisements glitzy and the beneficiaries — the same pool of small elite farmers, most of them localised in a small geographical area.

A farm insurance scheme to cover the risks of farm produce would go to whom? Again, to a farmer who had a bank history to begin with.

Who could afford mechanisation to bring economies of scale in farming? Who could experiment with better seeds? Again, the large farmer.

And finally, who benefited disproportionately from the Minimum Support Price regime? Those who had large land holdings, produced in bulk and then had the logistics to take it to the tightly controlled government approved mandis (markets) and them had the negotiating power against the middlemen and the cartels in these mandis.

But what about the small farmer? He neither had the logistics ability nor the negotiating power. He was at the whims of these well networked middlemen.

To add to this, the government policy since India’s independence (and indeed much before that) prevented the farmer from selling anywhere other than a government approved Mandi (market). The farmer had no choice other than to sell in these closed markets where the large and politically influential middlemen ruled the roost.

The result — the agricultural sector steadily declined. It employed more than 50% of India’s workforce but contributed to only 17% to its GDP.

The small farmer was caught in the vicious and perpetual debt trap of private moneylenders who gave loans at, impossible to repay, exorbitant rates. Every year, there were thousands of farmer suicides. All papers reported this tragedy, yet no one willing to reform the system.

Why? Because like every policy that perpetuates, a status quo had developed with its own vested interests which benefited the political and middlemen nexus.

It is in this backdrop that Prime Minister Modi assumed office in 2014. His first major initiative was the Jan Dhan bank accounts. Till then, almost 50 years after bank nationalisation, only 58% Indians had bank accounts.

Within months of the launch of the scheme, almost every Indian had a bank account (more than 410 million such new bank accounts have since been opened).

A credit history was then assiduously built in these accounts through the Direct Benefits Transfer (DBT) regime. Subsidies that earlier reached the beneficiaries through a leaky circuitous route now reached directly in the bank accounts.

Soon it became the largest DBT programme in the world with almost 400 central schemes routing their subsidies through these accounts and till now a cumulative amount of $200 billion transferred.

The unbanked who were now banked were largely the poor and from rural areas — most of them from farming families. Now that they had a banking history, loans through the formal credit system became accessible at rates which are sane and subsidised and not the insane rates that moneylenders charge.

A new farm insurance scheme was launched in 2016 which especially focused on bringing in fold these small farmers and succeeded in enrolling over 60 million such farmers.

And before the 2019 elections, Modi announced another milestone imitative — the PM Kisan scheme. A smartly designed, targeted direct intervention scheme, PM Kisan was meant to transfer direct cash to the small and marginal farmers.

The now universal access to bank accounts and the perfected DBT regime meant that the cash reached the farmers always in time and just when they needed it. To marginal farmer could invest this cash in new seeds variety, or to utilise the in-between period between the traditional crops to grow some seasonal cash crops or similar other usages.

Many other hugely successful schemes were introduced as well that primarily benefited the small and marginal farmers. The focus on ethanol increased its procurement five times during the last 6 years.

During the same period, honey production increased by 242%. Pulses cultivation had never been a priority area for the previous government. This changed in 2014.

Ending restrictions on farming trade

The result — procurement quantity shot up 74 times during the last 5 years as compared to the 5 years before that, while the money spent on this procurement increased from a mere 100 million dollars between 2009-14 to over 7 billion dollars between 2014-19. Most of this went to the small farmers, since the larger farmers were trapped in the traditional paddy-wheat cycle.

Then came the three farm laws of 2020. The first law ended the restrictions on farming trade. The farmer, big or small, was now free to sell anywhere in India and not just his local market, and to anyone — the government Mandi or private market — and at whatever price he could command.

The second law ended the tyranny of essential commodities act and incentivised private industry to invest in farm gate logistics and supply chain.

And the third law allowed contract farming in India. The small farmer could now retain control of his farm land and yet pool his land with adjoining small lands into a large contracted farm land producing one single crop.

Economies of scale, mechanisation, better technology, better seeds, improved yield, better returns. It is a tried and tested model that has worked everywhere it has been tried and this model was now available to Indian farmers as well.

It is this background of Modi’s six years in office that is now playing out variously during the protests. A very small section of farmers, in a localised area around Delhi are protesting. Who are these farmers? Those who have disproportionately benefited variously from the policies of the past 40-45 years and have a vested interest in preserving status quo.

What is their proportion? 14% as per last census. Punjab, the state at the forefront of the protests has 1.1 million farmers. India has 150 million. Most of whom are marginal or small farmers — 86% of them.

That is why, despite the concerted efforts of a highly well-funded and organised group, with even global busybodies pulled in, rest of India is not protesting. It is not as if it has not been tried. States like Tamil Nadu, Bengal, Maharashtra, Telangana do not have BJP or Modi friendly governments. Many of these states have never returned a BJP government. Yet, no one is protesting anywhere, not in these states or any other state. And it is because of two reasons.

First, no one in their right mind has been able to point out what is the flaw in a policy that allows the farmers the freedom, rather than restriction, to sell wherever they want, to whosoever they want and whatever price they can command.

No one has been able to argue why incentivising private investment in logistics and supply chain will harm farmers. And no one has been able to tell the small farmers as to how contract farming, which would bring in economies of scale, would be harmful for them.

And second, the small farmers, who are 86% of all the farmers in India, have 6 years of track record of Prime Minister Modi to judge him on, in addition to his 13 years of Chief Ministerial record.

That record inspires trust through lived experience and an unshakeable belief that he will not ever undertake a policy that would not be beneficial for them.

What we are witnessing during these farm protests is actually a small group of vocal farmers battling to preserve the status quo and maintain their way of life versus an almost 86% silent majority anticipating a better tomorrow. Who will prevail will perhaps determine how this decade plays out for India.