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Will the farmers get justice?

By Dr TULIKA NARAYAN
December 19, 2020 11:12 IST
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The government has the upper hand in the ongoing negotiations, and it is unclear if a real debate will happen, observes Tulika Narayan.

IMAGE: Farmers protest against the new farm laws at the Ghazipur border in New Delhi, December 16, 2020. Photograph: Vijay Verma/PTI Photo
 

Thousands of farmers are on the New Delhi streets, which for a while has been the only way to be heard in India.

They are protesting the acts that were recently passed by the government to bring about reforms in the agricultural sector.

So far three meetings have occurred between the farmers and the government, but these talks have not been successful.

The officials say that the farmers are rejecting substantive offers, while the farmers say that the offers are not meaningful.

What is the disconnect? There are experts and economists also on both sides of the argument.

Sudha Narayanan (external link), Mekhala Krishnamurthy (external link) and others have argued why the three ordnances will not bring about the promised results.

Ashok Gulati (external link) welcomes the changes but asks the government to improve their communications with farmers.

Before evaluating the merit of the three acts, it is important to state that if there is anything that is unequivocally wrong about them, it is the process by which they were brought about.

By issuing ordnances rather than passing a law to bring about the changes, the government by-passed any parliamentary discussion on the reforms.

These ordnances were later passed as acts with a voice vote in the Rajya Sabha and no discussion in the parliament whose 2020 winter session was cancelled.

Agriculture is a state subject.

Yet the government did not engage in any discussion with the states about the planned reforms, leave alone engaging the farmers.

Imagine launching what the government calls the most fundamental reforms in the agriculture sector without any public discussion in the worlds' largest democracy.

This is not just a communication problem. It is an evasion of democratic process in policy making.

Leaving aside this rather fundamental issue, what is the verdict on the three Acts and why are farmers so dissatisfied? The answer to these questions are more nuanced yet raise foundational questions about India's agricultural policy.

Prime Minister Narendra Modi and his government have a vision for agricultural growth that is founded on bringing the efficiency of private sector to the agricultural sector.

They envision private sector managed land with investments in improved production practices, mechanization and warehouses that supply to their processing units.

The hope is that private sector investment will increase agricultural productivity, contribute to economic growth and also lift farmer incomes -- a trickle down hope.

The three Acts support this vision in full measure.

The first Act relaxes government regulations on traders to buy from farmers outside the mandis.

It is expected to increase farmer's access to new buyers, and also simultaneously reduce the cost that traders face in transacting with farmers.

The second Act sets a very high bar on stocking restrictions of essential commodities -- only if there is a 100 percent price increase for perishables and 50 percent price increase for non-perishables would the government announce stock limits.

It gives businesses the leeway to manage their stocks optimally and reduces the uncertainty they face about stocking limits imposed by the Essential Commodities Act (ECA).

The third Act expands contract farming to all states through written agreements between farmers and companies.

These Acts put together will no doubt, energiSe private sector investment in agri-business, including by the big industrial houses.

It is highly likely that this strategy will lead to agricultural growth and increase agriculture's contribution to the country's growth.

The Indian farmers are protesting because they do not see how they benefit from this vision.

They still hang in hope for an alternate vision for the agriculture sector in India.

One that sees agricultural reforms as a way to achieve the country's developmental goals and aims to use agricultural policy to lift smallholder farmers out of poverty.

The farmers see these reforms worsening their already tenuous position in the value chain by giving more power and freedom to the private players to operate in this sector.

They argue that farmers were always free to sell their produce to any buyer (National Sample Survey data indicates that almost 60 percent of the transactions are done outside the mandis).

It is the buyer who will have less restrictions under the first act.

The mandis provided a regulated space to transact and the they (together with the minimum support price -- MSP) also helped with price discovery or setting prices.

Now buyers can operate outside the mandis without any regulation by the government, which exposes the small fragmented farmers to private sectors' negotiation prowess.

Further, attracted by the lack of fees in the unregulated space, the same mandi buyers would emerge in this space unfettered by regulations to negotiate with the farmers without necessarily attracting new buyers.

This would be particularly true of areas that are economically depressed and unlikely to attract private capital.

Further, lack of regulations in this market means no data will be available on market transactions.

This means neither the government nor any actors in the value chain would have transparent and accurate information about the market.

This will limit everyone's ability to identify and addresses any issues that the farmers face.

On the second Act, the farmers argue that they did not have any stock limits for essential commodities in the first place.

This change, therefore, at the minimum, does not remove any restrictions for them.

Instead the change is not protective of them as consumers.

The contract farming act removes state regulations on companies to engage with farmers which, under the new act, would be guided by written agreements that the companies themselves draft.

The farmers are concerned about being shortchanged in these agreements once state's regulatory role is reduced particularly given the low literacy rates in rural areas.

IMAGE: Ex-servicemen join the farmers protest at the Ghazipur border in New Delhi, December 16, 2020. Photograph: Vijay Verma/PTI Photo

The Acts foretell the government's vision for agricultural policy also by the topics on which it is silent on: MSP.

Only after thousands of farmers blistered their feet in protest did the government provide assurance that MSP will not go away.

But at the time of writing this article, they were not as yet willing to put ink on paper on the promise by amending the language in the Acts.

Neither are these reforms consistent with the election promises of the government, which were as lofty as promising a minimum income to farmers and increasing their incomes by at least 50 percent.

Those who wince at the idea of government guaranteeing farmer incomes should recogniSe the unique characteristics of agriculture sector where a bumper crop is not necessarily good news: bumper crop means lower profits because it triggers lower prices that do not attract commensurate increase in demand because consumers are insensitive to changes in prices for agricultural produce, particularly staples.

This is what economists call inelastic demand.

Further, lack of storage solutions at farm level also mean that farmers cannot hoard until the prices normaliSe.

Precedence abounds in developed countries to protect its farmers given the unique nature of agriculture sector.

The idea of minimum income to farmers is implemented in the United States through its target pricing program: farmers get the difference between the target price and market price if the market price is lower than the target price based on the area cultivated.

A program like this would be hard to implement in India because it would require information on each sale transaction -- precisely what will be worsened by the new Act -- but it can be implemented by changing the laws and promising MSP to farmers.

This would obligate the government to ensure that all farmers can actually realize the sale of its crop at MSP, and not just announce the MSP without working to improve farmers' access to it.

To some degree having the MSP also creates a price floor in the market as also argued by Aunindyo Chakravarti (external link).

Other than ensuring MSP (for an expanded set of crops to reduce monoculture), the government should also invest in improving the infrastructure at existing mandis, particularly in economically depressed regions where private actors typically do not venture.

It should also increase its investment in strengthening farmer producer organisations to bolster farmers' bargaining power and improve their efficiency in both procuring inputs, particularly credit, and selling its products.

Over time India should expand its electronic platform (e-NAM) with a focus on increasing market transparency, efficiency, access and tracking of the markets to improve efficiency.

The private sector does have an important role to play in agricultural development, and the government should ease their restrictions in working with farmers, but the approach should be balanced and provide protection to the smallholders.

A poor and malnourished population drags economic growth.

India's latest malnutrition numbers (external link), which at best show modest gains in stunting with some states doing worse than before, are a warning that we cannot afford an agricultural policy that does not put the welfare of smallholder farmers at its center.

The most important ask is for the government to formulate policies after a robust policy debate that bring state governments, policy makers, farmers, economists and experts, private sectors at the table.

The government has the upper hand in the ongoing negotiations, and it is unclear if a real debate will happen.

Farmers at the end of the day do not have much power, not at least after the elections are over.

The question is if farmers will remember the broken promises when it is time to vote again, or if they will get sparkled by the next temple this government builds for them.

If yes, then they do deserve what they sow (no pun intended), and who they vote for.

In a democracy the onus is on us to remember, and not forget.

And we do get the leaders we vote for. This government was voted into power with overwhelming margins.

Dr Tulika Narayan is the director of agriculture and food security at Mathematica, a leading research and policy analysis firm based in the United States of America.

Feature Presentation: Aslam Hunani/Rediff.com

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