Agitations and protests leading to traffic jams and chaos around the national capital in the name of protecting farmers’ interests are largely based on widespread misinformation. It is indeed surprising that most erudite economists, academicians and researchers who have long promulgated the doctrine of free markets choose to maintain an astounding silence on the issue.
Though the government is making every effort to dispel the misplaced fears of the farming community, the intellectual class, which enjoys much more credibility than the political class, refrains from revealing the truth about the real import of the measures to transform Indian agriculture.
Despite several rounds of negotiations between the protesters and the government, consensus on the core issue of farm laws remains elusive even as the arguments against the farm reforms are difficult to substantiate.
There’s no denying the fact that there could be some implementational issues in the new farm laws but that need to be dealt with separately.
However, the fact remains that the reforms in agriculture strike at the very monopolistic nature of mandis (the marketplace), and will usher in a new era of freedom to farmers who can now have unrestricted access to markets across the country and realise far better prices than earlier. This is, therefore, a matter of celebration rather than of getting agitated about.
The objective and intention behind the new regulations, to provide alternative marketing opportunities and increasing price realisation for farmers’ produce, are beyond doubt.
The very monopolistic nature of trading patterns of APMCs and their deep-rooted inefficiencies that have throttled farmers for decades have long been an open secret. The middlemen have always been so powerful that governments, irrespective of their political ideologies, could not dismantle the cartels primarily due to fear of political repercussions.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, and the Essential Commodities (Amendment) Bill, 2020, are not only bold steps but also transformational in nature to address farmers’ woes and enhance efficiency of the agricultural value chain.
Price support system
The price support system for agricultural produce did not exist in India prior to the establishment of Food Corporation of India in 1965 and the introduction of the Minimum Support Price (MSP) system. Even today, much of the procurement operations for paddy is confined to the States of Punjab and Haryana where 95 per cent and 70 per cent of the farmers, respectively, get the benefit compared with a mere 7.3 per cent in West Bengal, 3.6 per cent in Uttar Pradesh, and a negligible number in other rice-producing States, including the North-East.
This offers opportunities to unscrupulous middlemen to mint money by procuring paddy at ₹800-1200 per quintal from Uttar Pradesh and Bihar and sell them at ₹1,888/quintal in Punjab, the MSP. Such profiteering by middlemen does not add to the income of the farmers, instead it distorts the market.
Although some efforts were made to limit the monopoly by way of the Model APMC Act 2003, with trading licences were converted into pan-State licences, most of the reforms remained on paper and the monopolistic character of APMCs remained unaffected and the farmer continued to suffer, by not getting competitive prices for their produce. Apart from freedom to farmers to sell their produce anywhere, in mandis or outside, it virtually abolished mandi fee, making the local agri-markets more efficient.
According to FAO forecasts, the prices of most agricultural commodities such as wheat, rice, sugar, meat, milk-fat and cotton are not going to increase in the next 10 years; the agency, in fact, expects the prices during this period to decline slightly in real terms.
On the other hand, costs of inputs have been rising steadily rising, leading to the cost of agricultural production in India going up. This calls for achieving greater efficiency in production, logistics, marketing, storage and processing.
Agriculture accounts for 16 per cent share in India’s GDP. Moreover, 60 per cent of the country’s population is dependent on agriculture and related activities compared with 35 per cent in China, 3 per cent in the Netherlands and less than 2 per cent in the US.
This makes agriculture not only the prime source of livelihood of the masses in the country, but also extremely sensitive politically.
Despite the remarkable progress made by India in boosting agriculture production, productivity in the sector remains much lower than in major agri-producing countries. Also, India needs to sustain being atmanirbhar (self-reliant) not only to feed its 1.34 billion population whose economic standards and purchasing power are rising but also to ensure the country’s food security.
The decline in India’s agricultural exports from $42.51 billion in 2013-14 to $33 billion in 2019-20 calls for the urgent action to address issues related to agriculture across the value chain.
There seems to be communication lapses between the government and various stakeholder, which have led to widespread protests around the national capital and even in other parts of the country.
However, India needs to demonstrate its capability to transform its agriculture sector to a globally competitive one and remove deep-rooted inefficiencies in post-harvest handling, logistics, primary and secondary processing and marketing. It must also build its own international brands in processed foods and other agri products.
Ironically, despite the far-reaching implications of these landmark agricultural reforms, the communication failures at various levels have led to widespread turmoil and blockades. While going ahead with the reforms, the misplaced fears among the various stakeholders, especially the farmers, must be dispelled at the earliest.
The writer is Chairperson (Research), Indian Institute of Foreign Trade, New Delhi