The controversy created by the three new farm bills, enacted by the parliament of India without due deliberation and consultation, has culminated in a widespread protest by the farmers of Punjab and Haryana, who are now joined by the farmers from all over the country. Whilst these bills were hailed as a watershed moment for the agricultural sector by the government, farmers, state governments and traders alike, feel the other way round. So, what is so controversial about these bills?
The three bills, Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (FPTC, 2020), Essential Commodities (Amendment) Bill, 2020 (ECA,2020), and Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 (FAPAFS, 2020), tries to bring some radical reforms in the existing structure of our agricultural sector which hitherto was considered as hand to mouth activity in India. Thus, these bills are trying to make it more remunerative and profitable.
However, despite so much hoopla from government’s side regarding these bills, they have attracted the rage of the farmers. To start with, the main contention of farmers pertains to FPTC, 2020 in which the provision of encouraging private players to set-up mandis has attracted much attention. Whilst the farmers contend that the present model of APMC regulated by the state governments, which ensures MSP for their produce, is more favourable to them, the government has pointed out the unscrupulous profit which middlemen, commonly called Arhatiyas, gain due to the current practice of the agricultural system. Further, the consternation is also regarding no mention of MSP under the proposed system, which the farmers contested by opining that instead of them getting the benefit, corporates will earn profit from the new system. The furore is also regarding the dispute resolution mechanism under the FAPAFS, 2020 wherein executives like district collector and SDMs are assigned this duty, but the farmers contend that due to a new system they will face problems in the first place. Not just this, various state governments have opposed the laws fearing that this will debilitate their revenue models, which are already constrained by the COVID crisis. Whilst it seems that the apprehension of concerned parties are well-founded, but how much are these well-placed?
Whilst the fact remains that the existing structure of Agriculture is neither a viable model due to its over-dependence on monsoon nor a sustainable one due to negligent use of resources like water and electricity, the fact also remains that despite these, there have been no major reforms in the agricultural sector since the 1960s. The LPG reforms of the early 1990s brought a major change in India by opening its markets, but the same did not materialize in the realm of Agriculture which was considered as too wholly to be touched then. The condition of farmers has been degrading which can be inferred through the increasing number of farmer suicides in India. The intransigence of successive government by helping consumers instead of producers (read farmers) has turned the agricultural sector, what it is today.
But the question remains, Will these laws bring a turnaround to the present conditions of farmers and help in doubling their income by 2022, as espoused by the GOI, or will they bring down the agricultural sector to its nadir? Going by basic economics, it is the matter of the fact that competition is generally good for both consumers as well as producers, which makes the market overall competitive. Given the recommendations under FPTC, 2020 of liberalizing the marketing structure by reducing the stronghold of monopsonies (read APMC), this bill is trying to encourage competition and helps in giving choices to the farmers to sell their produce at the time and place of their choice. To further aggravate its effect, it proposes to change the present norms of stockholdings, which will help the farmers to sell their produce when better prices will be offered, which will in return improve the prospects of private investment into cold-chain storage, the lack of which results into a loss of approximately $ 9.7 billion in post-harvest loses.
According to the Food and Agricultural Organization (FAO), India has one of the lowest agricultural productivity around the world, mainly due to archaic methods of farm practices and low mechanization. The bill FAPAFS, 2020 helps the farmers to adopt new technologies, have new hybrid seeds and take the benefit of research for better productivity in their farms. According to 10th agricultural census of 2015-16, almost 126 million farmers i.e., 86.2% of the total in India, are either small or marginal farmers. With such a big chunk of farmers having small landholding, they are being alienated from the technologies and methods to improve their ways of farming, but the bill FAPAFS, 2020 proposes contract farming at an assured price determined during the pre-harvest period. It does two things, first, it helps improve their access to resources which will improve their income, and second it incentivises them and increases their prospect of employment by giving them the freedom to work in alternative sectors which will be developed due to the participation of corporate players.
One of the major impediments in the Agricultural sector of India has been the excessive interference of government in the Agri-market, which accentuates apprehensiveness among foreign and private player to invest in the market and restrict the farmers to take the benefit of market conditions. The ECA, 2020 provides a way for it wherein the intervention of government in the market will be limited as they cannot ban the exports of farm produce except under extraordinary circumstances, thereby giving more leeway to market forces to work as they deem fit. It makes the environment more conducive and coherent for foreign firms to invest in this sector. Today, the major impediment is not the supply-side but demand-side constraints in this sector, and this law has the potential to curb this very problem by providing new avenues of markets to the farmers.
As far as MSPs are concerned, we presently give MSPs for 22 crops in India, out of which Wheat and Paddy are the predominant ones. The major beneficiaries of this system are states like Punjab and Haryana, where water-guzzling crops are debilitating the resources as well as affecting the productivity of the farmlands. To give a brief example, according to NAFIS 2016-17 when the income of farmers from states of Punjab, Kerala and Bihar were juxtaposed with their landholding, farmers of Kerala emerged winners with an income of INR 34910/hectare, followed by Bihar with an income of INR 4,236/hectare, followed by farmers of Punjab with an income of INR 3,448/hectare. Not only the MSPs are hurting the market output by compelling farmers to produce a selected crop, but they are also affecting the incomes of the farmer in the long run by incentivizing them to grow non-remunerative crops instead of profitable ones. The ramifications of this scenario are evident by the fact that, in India, malnutrition is the main problem mainly due to eating habits of the people, who, instead of incorporating nutritious, non-staple crops (Fruits, Barley, Corn etc.) in their diet, consume staple crops (wheat and Paddy) for their sustenance.
However, as they say, the devil is in the details, one cannot rely overly on the market players in a sector which are highly biased due to intervention by the governments, and to give you an example, India’s subsidies fell well short of what is given by the developed countries, which makes the agricultural market more competitive for the Indian products. Various WTO ruling points out the use of highly subsidized crops by the developed countries to make the market more competitive for developing countries. So, to say that the idea of laissez-faire in the agricultural sector would reap benefits to the farmers is still doubtful to some extent. Also, conflict of interest and no bounding of moral responsibilities among corporates make farmers more vulnerable to biased deals under contract farming. Unless we have an insured structure, any destabilization in the market might cause disastrous effects in the Agricultural sector.
A Model for India
To deal with this continued negligence and the archaic model inherited by us for so many years, reforms are the only way to move forward in the right direction. The government is providing an impetus to this process by defenestration of our present obsolete models, which are unsustainable as well as non-profitable. Taking a cue from the dairy sector of India, it is one of the few success stories which India has in Agricultural sector wherein tremendous and sustainable growth has been observed, we can replicate this to our existing agricultural system by amalgamating this system with contract farming, wherein the fear of decreased bargaining power of small and marginal farmers can be mitigated through cooperatives or large body of farmers (farmer produce organizations), who collectively held a high bargaining power when coming into contract with a private player.
Further, to ensure the safety of the farmers from greedy corporates and future market turmoil in an open-market model, the present subsidies in electricity and fertilizers could be diversified and accounted for a separate fund to curb any future tumultuousness and insuring the produce of the farmers from any natural calamity. The need is the government to lead this road to reform through pure intention and investment, as has been promised by the government to invest INR 1 Lakh Crore in Agri-infra, and put rest emphasis on more competition and openness. For having a more elastic model in this sector, leeway to the state government in terms of formulation of policies based on the ground realities should be given which can mitigate the risk of “One size fits all” approach.
Conclusion
Instead of marketing a labour-intensive and low-productive agriculture system, we need a more modern, mechanized, market-led system with a twitch of government’s insurance through direct cash subsidies and more independence to farmers. The need is for a remunerative as well as sustainable farming structure to deal with the repercussions of climate change. The model of countries like Israel and Netherlands, which points out the importance of adopting technology and resource-friendly policies, can prove a game-changer for a system as strangled as an insect in a cobweb. The time has come to change our paradigm by pursuing the reforms, and these new farm bills exactly do that very thing. But as they say, between every policy formulation and its success, there is a long-narrow road called implementation. Unless implemented with caution and with high regard to stakeholder’s concerns, even good policy is bound to fail. Now, it remains to be seen that will these policies make or break the prospects of our Green Revolution 2.0.
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