The government of India has enacted three laws to ‘reform’ the country's agriculture. Taken together, they will radically alter how India’s agrarian economy works. Whether this radical change will be for better or worse is up for debate.
Many farmers think these laws will be their ruin, and are currently laying siege to Delhi. They have set up protest sites on Delhi’s borders. It takes a lot to leave the comfort of your home and say you will live on the highways, for weeks and months if needed, in the middle of a pandemic and braving water canons.
India’s Green Revolution
Attempts to defame these farmers have not worked. The allegations have been criminal, because these are the farmers who toiled very hard to give food security to a nation which once had to spend precious foreign exchange to import basic foodgrains and feed its hungry millions. Solving that problem is known as India’s Green Revolution, circa 1960s.
To give India food security, these farmers in Punjab and Haryana grew paddy in places that were not suited for it. Their groundwater has been vanishing away in the paddy crops. The fertilisers and chemicals they use to increase their yield has caused high rates of cancer. Today we are labelling these hardworking farmers as terrorists. Shame on us.
These farmers undertook the Green Revolution exercise not out of charity. They were promised fixed incomes, known in bureaucratic lingo as Minimum Support Price. While given for around 22 crops, the bulk of the budget is spent in procuring wheat, rice and pulses. The procurement is done by the Food Corporation of India. The FCI ends up procuring more than what the people of India can consume, so some of the foodgrains rot. The MSP rates and the amount of procurement the government does is a political issue heating up before every election, since it affects the income of farmers.
Not all farmers sell their produce to the FCI for the fixed MSP. But how many do? An old estimate says only 6% farmers benefit from the MSP system but a recent estimation by Harish Damodaran in the Indian Express has shown the figure is at least 15% and could be as much as 25%.
There’s little doubt that most beneficiaries of the MSP system are in Punjab and Haryana. That’s why they are the most prosperous farmers in India. An average farming family in Punjab earns five times an average farming family in Bihar, according to 2013 government report. That’s why it is mainly farmers from these two states who are protesting, though if you are willing to see beyond propaganda you will see groups of farmers across India who are expressing apprehensions about these new laws.
A complicated process
Farmers sell their produce to the government through marketplaces known as the Agricultural Produce Marketing Committees, or APMCs. It is difficult for the private sector to procure crops through these APMCs. They need a separate license in every state, and that’s only the beginning of the complicated process.
It is laudable that the government wants to make it easier for the private sector to enter foodgrains procurement. It would give farmers more choice, infuse private capital in agricultural marketing, the investments could help improve supply chains and exports. Farmers are not opposed to this.
What they are opposed to is that the new laws virtually make it unviable for the APMCs to function. No, the government isn’t banning APMCs or shutting them down. The fear is that the clever bureaucratic language of the laws is designed to make the APMCs economically unviable. In other words, farmers won’t have choice. They’ll only have the private sector. Used to the certainty of MSPs, they could now be at the mercy of private companies. A seller’s market could become a buyer’s market.
There is some evidence of this: Bihar abolished APMCs in 2006, and no, the private sector hasn’t brought great prosperity to Bihar’s farmers. No farmers from Punjab and Haryana are rushing to Bihar to enjoy the free market.
Under the new laws, a private player needs nothing more than an Income Tax registration to go and buy foodgrains anywhere from any farmer in India. Fabulous ease of business. But please note that in other sectors the government wants to record data of pricing and sales through a complex and much-maligned Goods and Services Tax.
One extreme to another
The farm reforms the government is proposing take us from one extreme of government deciding prices to another extreme where the government may not even know how much a private company is buying crops for. This has great implications for farmers’ incomes, as farmers will be weak in dealing with big corporations. Worse, it has implications for managing food inflation, crucial for a poor country like India.
The government insists the APMCs and the MSP system will continue but you can’t blame farmers for not believing the government when it enacts a law that says farmers won’t be allowed to approach a civil court for dispute resolution with a private buyer. That sounds unconstitutional.
The government says it is now willing to remove this clause but the fact that it was there in the first place tells you why farmers were apprehensive. It was clear the government wanted the balance of power to be in favour of the private companies, tilted against the power. What kind of a democracy creates a law saying the writ of courts don’t apply to commercial disputes in agriculture?
In the end, it boils down to lack of trust. Farmers want nothing less than a complete repeal of all these 3 laws. They are not willing to believe a government that imposed these laws overnight through ordinances and later hurriedly pushed them through parliament. That the government didn’t consult farmers, try to create a consensus or listen to the opposition’s objections has added to the woes. We ought to treat our food providers with a little more dignity.