Farm distress stalks the growth story

November 26, 2021 5:00 AM

Farm-laws repeal notwithstanding, states will continue to pursue agri-reforms

The saga of the farmer agitation is yet another manifestation of the narrative of farmer distress that stalks the India growth story.The saga of the farmer agitation is yet another manifestation of the narrative of farmer distress that stalks the India growth story.

By N Chandra Mohan

The Narendra Modi-led NDA regime has relented on the three farm laws passed in Parliament in September 2020 due to a year-long farmer agitation on the borders of the nation’s capital. No doubt, political considerations dictated this retreat ahead of crucial assembly elections in Punjab and Uttar Pradesh. These laws were earlier hailed as a ‘1991 moment’ in unshackling the farmer to sell to anyone and anywhere, or enter into contracts to supply produce at pre-determined prices, and allowed traders and processors to buy, stock and move produce. If these laws captured the spirit of reforms 30 years ago, why were farmers from the vanguard agrarian regions of Punjab, Haryana and western Uttar Pradesh bitterly opposed to them?

Farmer opposition stems from pervasive fears that these farm laws negated the regime that nurtured the Green Revolution since the late 1960s. The country became self-sufficient in wheat and rice as the government provided high-yielding seeds, fertilisers and assured irrigation facilities to farmers. Minimum support prices (MSPs) were announced and the Food Corporation of India bought whatever farmers produced, from mandis or market places regulated by state governments under the Agricultural Produce Marketing Committee Act. As these reforms enabled them to sell their produce even outside the mandis, the farmers’ concern was that corporates may initially offer a higher price than the MSP but later purchase at lower rates.

The saga of the farmer agitation is yet another manifestation of the narrative of farmer distress that stalks the India growth story. To be sure, farmers in Punjab, Haryana and western UP are much richer than their counterparts in the rest of the country. In Punjab, they operate relatively larger farm sizes of 1.44 hectares when compared to 0.92 hectares at a national level. The average monthly income of an agricultural household in the state is Rs 26,701, roughly 3-times the national average of Rs 10,218 in 2019. But their indebtedness level is also much higher, according to the National Statistical Office’s Situation Assessment of Agricultural Households. Farmers from these regions protested as these laws portended future losses in incomes.

Unshackling the farmer is not the same thing as delicensing and decontrol of 1991 as the year-long protest signaled that agriculture is not a viable proposition. They produce more milk, fruits and vegetables than foodgrains. But their incomes take a huge hit with the across-the-board crash in prices in the wake of bountiful kharif (summer) and rabi (winter) harvests in recent years. Perhaps this explains their intention to continue their protest till the three laws are repealed in the winter session of Parliament and MSP regime is guaranteed in writing. However, extending MSPs to more and more crops introduces a cost-plus determination to prices that will be inflationary. Their impact is also notional if it is not backed by open-ended procurement.

For such reasons, although the government keeps reiterating its commitment to the MSP regime, it is wary of providing such assurances in writing as it would dilute freeing up the market. Although the PM has back-tracked on farm legislation, the reality is that the genie of reform is out of the bottle. The action will now shift to the states. Even before these laws were enacted, as many as 23 states permitted direct purchase from farmers, 21 allowed e-trading, 22 had allowed private wholesale markets, 20 permitted contract farming and 15 even freed fruits and vegetables from the APMC altogether. The task ahead will be to persuade other states to adopt model APMC laws that were promulgated some years ago, according to Business Standard.

There is also no rolling back the larger Digital India initiative pushed by the government that uses technology to transform how it delivers services to the population. The government is already directly transferring food and fuel subsidies, wage payments under the national guarantee scheme, income to farmers under the PM Kisan Samman Nidhi, and for wheat and rice procurement in a more targeted manner. Corporatisation in agriculture will also proceed apace as policies allow foreign investments in food retailing.

E-commerce is booming. Farm-to-fork linkages are being forged with thousands of farmers to procure fresh produce for outlets in cities.

However, ahead of important state elections, there will be more government initiatives to shore up farmer livelihoods. Even if it smacks of vote-bank politics, the fact is that most farmers continue cultivation on holdings that are diminishing in size as there are limited possibilities to move to towns and cities due to the absence of opportunities in industry. This is the road to modern economic development. The government, for instance, might step up its existing scale of transfers of Rs 6,000 to all farmers. But regardless of how the government persuades farmers to now go back to their fields, income support is perhaps more efficacious than price support.

The author is New Delhi-based economics and business commentator

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