The government's predicament is a result of its own doing: That of not ensuring adequate buy-in by the stakeholders before passage of the laws, notes Vivek Gumaste.
The strident agitation launched by the farmers against the new farm laws is a tragedy of errors and ignorance; a narrative driven by unfounded apprehensions based on deliberate misinformation, unscrupulous political machinations and vested interests.
Facts, logic and honest negotiations have been relegated to second place. And to some degree the government's predicament is a result of its own doing: That of not ensuring adequate buy-in by the stakeholders before passage of the laws.
Agriculture in India occupies prime of place. Despite a steady attrition in the numbers engaged in agriculture over the years, it remains a formidable employer, accounting for nearly 42 per cent of the total workforce and contributing to 15.96 per cent of the GDP (2019).
Nevertheless, the agrarian sector remains a dysfunctional entity plagued by myriads of issues and unpredictability -- dependent on climatic vagaries for its success.
As per the Economic Survey 2019-2020 (external link), the average annual growth rate in real terms in agriculture as well as its allied sectors has remained static in the last six years leading to a negative impact on farmers's incomes. ().
Below are some data that reflect the fiscal distress of the Indian farmer:
The Niti Aayog in its report, Doubling Farmer's Income, indicates that more than one-fifth of rural households with self-employment in agriculture have an income less than the poverty line.
A 2018 study (external link) by the National Bank for Agriculture and Rural Development showed that 52.5 percent of all agricultural households were indebted with an average debt of $1,470.
Between 1995 and 2006, 166,304 farmers committed suicide in India at the rate of 16,000 per year.
So, there can be no argument that the agricultural sector badly needs reform. Accordingly, the Modi government passed three Bills -- the Farmers (Empowerment & Protection) Agreement of Price Assurance and Farm Services Bill; the Essential Commodities Act (Amendment) Bill; and the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill -- to address at least some of the ills plaguing the industry.
The main aim of the legislation was to allow greater market play in order to attract private investment and technology to better the infrastructure (storage facilities), increase productivity and improve farm incomes.
Agriculture experts have lauded these proposed changes. Ashok Gulati, the Infosys chair professor for agriculture at the Indian Council for Research on International Economic Relations, writing in the Indian Express, elaborates on the utility of each of these laws (external link).
He calls the Farmer Produce Trade and Commerce (Promotion and Facilitation) Bill a 'game-changer' that would create 'multiple channels for farmers to sell their produce outside the APMC mandi system and also helps towards an unfettered all India market for agri-produce.'
With regard to the Farmers (Empowerment & Protection) Agreement of Price Assurance and Farm Services Bill which encourages contract farming, Gulati surmises that contract farming would lead to sowing decisions becoming 'more aligned to the likely demand and supply situation' instead of the current scenario in which 'sowing decisions are more influenced by last year's price' and 'often leads to the problem of boom and bust'.
According to Gulati, the Essential Commodities Act 'can come handy to instill confidence in the private sector for building large scale storage' to accommodate the 'mountains of grain' that the Food Corporation of India has accumulated.
He explains: 'As on June 1, FCI had unprecedented grain stocks of 97 million metric tonnes (mmt) in the Central Pool... against a buffer stock norm of 41.12 mmt that are required for the Public Distribution System (PDS), and some strategic reserves.'
'So, compared to this norm, on July 1, FCI will have 'excess stocks' of at least 50 mmt, the value of this 'excessive stock', beyond the buffer norm, is Rs 150,000 crore. This is unproductive capital locked-up in the Central pool of FCI.'
'Unlock this by liquidating 'excess stocks' through open market operations as much as can be done by inviting the private sector in a big way to hold these stocks, at whatever reasonable market price it can get.'
'It will not recover its full economic cost, as they are much higher than the prevailing market prices, but by not liquidating it, FCI will keep incurring unnecessary interest costs of about Rs 8,000-10,000 crore per annum. This is simply dumb food policy.'
Farmers have been sceptical of these new farm laws. Their greatest fear is that safety nets like the current mandi system or APMC (Agricultural Produce Market Committee) and the MSP (Minimum Support Price) would collapse, leaving them at the mercy of big corporation.
The APMC is a marketing board established by state governments in India that ensures farmers are not exploited by large retailers; the caveat being that the first sale must occur in the market yard.
The MSP is a price set by the government to guarantee the farmer a minimum profit.
How do we resolve the current impasse between the farmers and the government?
The maximalist position of total repeal of all laws adopted by the farmers is blackmail plain and simple and does not make for sincere negotiations.
The government on its part has shown good faith by offering the farmers on December 9 a proposal with a wide range of amendments that address most of the concerns voiced by the farmers.
Included in this proposal is a written assurance on the MSP, parity between APMC markets and private markets through similar cess, registration of private traders, dispute resolution via civil courts, continuation of electricity subsidies and others.
The farmers must climb down from their maximalist position and accept the government's offer in the larger interest of all farmers and the country.
Stubborn intransigence and vows to continue the protest complete with a threat to block all highways into New Delhi would mean that the farmers are more interested in humbling the government and egoistic grandstanding than seeking an equitable solution to their woes.
The farm laws are not perfect or 100 per cent fool-proof. However, with added amendments, they have the potential to provide a much-needed framework of change for the agricultural sector while simultaneously protecting the farmers' interests.
Saner heads must prevail.
Academic Vivek Gumaste, who is based in the United States, is the author of My India: Musings of a Patriot. You can e-mail the author at firstname.lastname@example.org