“If I doubt your intentions, I will never trust your actions.”
This quote attributed to bestselling author Carlos Wallace probably sums up the predicament that the Government of India finds itself in on the farm laws issue.
Three sensible pieces of legislation that the agriculture sector needs are being projected as anti-farmer, not for what the laws contain in letter, but for what sections of farmers perceive as the intent of the government in bringing these laws.
The law to allow farmers to sell their produce wherever they wish in India logically opens up the market for them. They are not barred from selling to Agriculture Produce Market Committees (APMCs) and can continue to do so. Nor does the law suggest that the APMCs will be closed or that the Minimum Support Price (MSP) will be done away with. The assumption is that when farmers can sell to private traders without paying commission or other charges at the APMCs (which could save them up to 10 percent) why would they still want to sell at the mandis?
So, the argument is that the APMCs will slowly die out (as they have in Bihar) and the farmer will be left at the mercy of the private operators. Also, the MSPs which often are artificially high prices given to famers for their produce are not linked to global prices, and so the grain purchased cannot even be exported. So it rots in godowns and sizable parts of it are stolen, eaten by rats or become unusable.
Linking MSPs with global prices may be one sensible solution but the farmers’ lobby will have none of it. So the system of the government giving subsidy on seeds, fertiliser, farm equipment, electricity, water and pretty much everything else related to agriculture, and then buying the produce back at artificially high MSPs continues. How is such a system sustainable?
Eventually, the MSPs will have to go or be linked to global food prices, but the government reiterates that the MSPs will stay. The agitating farmers don't believe such assurances, and feel that the government is not telling them the truth.
The second law on contract farming is meant to allow farmers to enter into long term contracts with companies to sell their produce. The primary opposition to this law comes from the clause that prohibits farmers from approaching the courts. The government has now indicated that it is willing to give in on this issue.
The third law deals with modifications to the Essential Commodities Act. The law moves some items off the essential commodities list and restricts government intervention to certain exigencies or emergency situations. The government argues that this is essential to build economies of scale for those in the food storage, processing and related industries as they often find themselves at the mercy of government in terms of how much they can stock.
Events beyond the control of the industry cause abrupt government intervention leading to business uncertainties. Investments in large warehouses are unlikely to be made because no one knows how much they will be permitted to store. All these are extremely valid arguments. The agitating farmers counter this saying that it will lead to hoarding by the private players, prices will spiral out of control and the government would have lost its hold in stabilising the prices.
Since the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) came to power in 2014, some laws have been simplified and archaic laws have been done away with. However, bold reforms are expected from this government, and not many have come about so far. Another area where decisive and quicker action is expected is over its approach towards white elephant PSUs.
The farm laws are meaningful liberalisation-oriented reforms aimed at reducing government control over the agriculture sector. Buckling to pressure on this issue, as was seen in the case of the land acquisition law, will set the clock back on reform by several years. The government needs to dig in for the long haul and stay the course. Most of the needed amendments to the laws have been agreed to during the talks with the farmers.
Another area where the government needs to work is to assuage the fears that these reforms will put the farmer at the mercy of the private sector. The allegations of cronyism against the government are also affecting the farm reforms initiated through these laws.
For too long the Indian farmer and reforms to better their lives has been the elephant in the room. Their pitiable state despite decades of government support not having lifted them out of poverty significantly is being romanticised again. The time is long overdue for courageous reform of the sector. The Modi-led government must not yield now.