Repealing farm laws: How did farmers miss the bus?

In this article…

• Why did these laws fail to achieve legitimacy?
• How did farmers miss the bus?
• What is the opportunity cost of repealing farm laws?
• What farmers can learn from dairy farming?
• What should have been done by the government?

In 2020, the government of India brought three new farm laws to reform the agricultural market – (1) The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 which remove the barrier to sell grains within the Mandis and allow to sell outside mandi as well, (2) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, seeks to provide a system for contract farming, (3) The Essential Commodities (Amendment) Act, 2020 to remove certain items from essential commodities. Unfortunately, the Union government has decided to repeal the three new laws on agriculture amid the long and intense farmer’s protest.

Why did these laws fail to achieve legitimacy?

These reforms were announced as a part of the Atma Nirbhar campaign to support the Indian economy and increase the income of farmers in totality. The first point of error was witnessed during the legislation. Such reforms need perseverance and there was no need to legislate through the ordinance route. The ordinance is not a daily staple food but a medicine that should not be taken regularly, otherwise, it may reflect the side effect of the medicine. It created a sense of suspicion of benefiting the wealthy class.

A conservative party is always seen through the prism of benefiting the wealthy class. However, almost all parties irrespective of ideology gets party fund from the wealthy class but the conservative party becomes a ‘scapegoat’ in this context. This suspicion confirms when the government in power decided to skip parliamentary scrutiny of the Bills by a parliamentary panel and dismissed the reasoning in parliament. Thus, it also lost the confidence of the opposition members of the parliament.

Subsequently, the government of India failed to communicate her ideas to the farmers. It leads to a series of confusion among the farmers. It took a political flavor to create a thrust against the existing government. IT cells of the interested parties started creating negative information – (1) It was seen as an attempt to end MSP despite the assurance given by the government. (2) Farmers feared that the existing APMC Mandis, where they sell their produce. (3) These reforms were seen as the corporatization of agriculture in a negative sense.

How did farmers miss the bus?

Just after independence, the then Indian PM, Pandit Nehru was very much concerned with agricultural development. That’s why he chose Agriculture development in the first five-year plan. India was benefiting from PL-480 of the US but it was misused for geopolitical purposes as well. Under the leadership of Lal Bahadur Shastri and Indira Gandhi, India decided to become self-sufficient in the field of agriculture. Seeds of the green revolution were sown and India has not only become self-sufficient in grains but it starts exporting to other countries.

At the production level, Indian agriculture was reformed and the situation of farmers is also revamped comparatively. Just after the green revolution, India adopted a new economic policy based on liberal principles. Now, a race started between agriculture and industries. Growth is seen in both sectors but the pace of industrial development was higher than in agriculture. It created a sense of resentment and relative deprivation through the emotional notion ‘Annadata’ instead of competing with the market.

Relatively, a man working in industry seems economically better than the farmers. It is because the Indian economy is modernized but the agricultural system is still traditional. Green revolution addressed the issues at the production level through HYV seeds and technologies but didn’t address the market side. Consequently, supply was very high but the demand for the gains was not as per requirement. This demand-supply mismatch creates stress on the government to buy grains from the farmers. Electoral politics adopted an easy way of MSP instead of reforming the market issues.

The three new farms laws were an attempt to address the challenges of the market. But the negative notions of electoral politics, political protests, and powerless intellectual class forced them to take a back seat. Thus, we can say that situation of the farmers will be status quo for a few decades because the political class would refrain from taking such decisions in near future.

What is the opportunity cost of repealing farm laws?

The opportunity cost of repealing the laws would be the profit lost when it is decided to repeal the laws instead of stressing upon ‘urgent reforms.’ First, politically, prospects of farm reforms would not be a happy moment because politically class may refrain from such decisions and the agri-market would be rigged. Second, the dream of diversifying agriculture would stagnate since the cropping pattern would remain skewed in favor of rice and wheat. Rotten grain at FCI Godown and large leakages would not change.

Third, environmentally, the groundwater table in northwestern states will keep receding. Mother nature suggests that water hunger crops like sugarcane and rice are unsustainable for north-western states. It is more suitable for wheat due to ‘western disturbances.’ That’s why, unlike Tamilnadu, straw of the paddy of the crop of Punjab and Haryana are so hard that it doesn’t decompose on their own. Subsequently, stubble burning leads to polluting the capital city of India.

Fourth, Farmers also missed their increase in income. Their hike in income is neither dependent on production nor government through MSP but depends on the creation of demands. Eminent agricultural economist, Ashok Gulati claims that farmers also missed ‘High-value agriculture and efficient functioning value chains from farm to fork by the infusion of private investments in logistics, storage, processing, e-commerce, and digital technologies.’

What farmers can learn from dairy farming?

Farmers have limited land and they can’t multiply production by 2X factor to double their income. Their production will also be more or less consistent over the period of time. Apart from production. there is one more way i.e., pressurizing the government to increase MSP which could increase their income. But the problem is that the government has also a limited capacity to buy and store grains. Even if the government buys all gains by legalizing MSP, then what would the government do with those grains?

It would be an unsustainable system that may benefit in the short term but harm in the long run. On one hand, the government buys grain by spending large money which lacks a demand system and on the other hand, it imports other grains which farmers don’t grow. E.g. edible oil and onion. This may also exhaust India’s forex reserve.

Grain farmers are focusing on ‘volume’ instead of ‘value.’ Consequently, they get a less price for the total grain. Like the dairy sector, farmers need to focus on high-value agriculture through diversification instead of higher MSP so that their income could be increased. For e.g. India is facing a crisis in the edible oil sector. Thus, instead of wheat, some farmers may shift to growing oil seeds which would enhance their profits. For example, in Bihar, some farmers started farming Peppermint and they are getting relatively better profit. That’s why they have been continuing it.

What should have been done by the government?

The government made one more error in reforming markets of agriculture. Shanta Kumar committee claims that only 6% of the farmers are benefitting from the MSP, especially farmers from north-western India. For them, Rudolph and Rudolph coined the word “Bullock Capitalist.” Dominant farmers paint all farmers with the same brush. Asymmetricity in agriculture has been prevailing since the green revolution. Dominant farmers protected the benefits of the green revolution from trickling down to the east despite the fact the eastern region is more suited for paddy crops climatically.

This trend has still been continuing. A report at Business standard says that only three states Punjab, Haryana, and Andhra Pradesh corner 50% MSP rice procurement. “Ironically, West Bengal and Uttar Pradesh, the top two rice-producing states, account for less than 10% of the total procurement.” That’s why the farmers of Punjab and Haryana agitated against the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 which removes obstacles of the farmers to sell grains in any Mandis.

The government should have followed the subsidiarity principle. It means the union government should perform only those tasks which cannot be performed effectively at a state level. The government should let the state to decide whether they want to adopt these reforms or not. After all, Agriculture is also in the state list. But the total amount of MSP subsidies should be distributed to all states through finance commission instead of asymmetric distributions due to ‘dominance of the certain region.’ Let them decide whether one wants to keep Mandi or not.

Footnotes

1. The Hindu | Three farm laws will be repealed, says PM Modi
2. Decoding World Affairs | Three new farms laws and different perspective
3. EPW | Indo-US Food Agreement 
4. Indian Express | What farm law repeal means for farmers
5. The Print | Only 6% ‘elite’ farmers opposing the bills
6. Business Standard | Punjab, Haryana, and Andhra Pradesh corner 50% MSP rice procurement

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