The incumbent NDA government has repealed the controversial farm laws after more than a year of concerted protests by various farmer unions in New Delhi. The revocation of the contentious laws also reinstates ‘people’s power’ and a resounding victory for democratic polity since there were widespread criticism on the modus-operandi of the government in passing the bills hastily without debating its merits and demerits by constituting a parliamentary committee. In the upper house of Rajya Sabha, to the dismay of constitutional puritans, the bill was enacted by an arbitrary voice vote despite pleas for a division vote from the opposition parties, thus tarnishing the sanctity of legislative scrutiny. The ‘Three Farm Acts’, beneficial in theory, passed by the government of India in September 2020 had opened a Pandora’s Box, triggering farmer protests, mainly in the heartlands of Punjab and Haryana. Various farmers unions were galvanized under the agitation slogan “Delhi Chalo” (Delhi March), a clarion call to march to the national capital to seek redressal to their grievances in the enacted law.
Farmers are one of the most exploited workforces in the country. In a nation, where public and media outcry reaches a crescendo for major scams, scandals and non-news, a report by the OECD (Organization of Economic Cooperation and Development), published in collaboration with Indian Council for Research on International Economic Relations, indicates that between 2000-2016, Indian farmers lost 45 lakh crores. Yet, there was neither sensationalism in the vociferous media, obsessed with ‘breaking news’ nor any contingency discourses in the socio-political spectrum. The glaring negligence and nonchalance from erstwhile governments, think-tanks and other key stakeholders in addressing farmer distress over the decades is a testimony to the level of discrimination meted out to the Indian agricultural sector. According to Food and Agricultural Organization (FAO), more than 70% of rural Indian households depend on agriculture for their livelihoods and data published by Statistica Research Development, this sectoral contribution towards GDP is more than 18%.
The Necessity of Minimum Support Price (MSP)
The agitating farmers were demanding that Minimum Support Price (MSP) should be an addendum to the formulated Acts as a legal right, skeptical of verbal guarantees of MSP assurance by the administration. The eclectic and scholarly ‘Swaminathan Committee Report’ has elucidated guidelines in fixing MSP for agricultural produce, which is 50% more than the Weighted Average Cost of Production (WACP). This recommendation is yet to be implemented as the real price discovery, providing the unsophisticated and poor Indian farmers with decent income can only be benchmarked on MSP. Currently, only one crop among the 23 items in the mandated list, Bajra (Pearl Millet) is sold at a higher MSP.
The ‘Shanta Kumar Committee Report’ states that only 6% of farmers in India receive MSP, which warrants the expansion of MSP regimes across the country. MSP is not a deterrent to Indian agricultural sector as campaigned by some mainline economists, but a critical ingredient to uplift the rapidly deteriorating fortunes of the Indian farmer. How will the incumbent administration achieve its reform objective of doubling farmers income by 2022, if 94% of farmers in the country are subjected to exploitation through a discriminatory price mechanism, offering value much lower than the MSP? Another alarming statistic is that 68% of paddy growers and 60% of wheat growers are totally ignorant of the concept and provision of MSP! Information asymmetries plaguing this sector is beyond comprehension in an information age. The protesting farmers union are apprehensive of gradual dismantling of the MSP guarantees if unfettered free market pricing models are introduced.
APMC in Indian Agricultural Sector
The Agricultural Produce Marketing Committee (APMC) or Mandis that number approximately 7000 across the nation are considered lifeline for realizing MSP; yet more than 86% of the agricultural produce are traded outside the APMC. The farmers union are contesting that if the free markets were efficient, how could farmers income plummet in successive decades since the Green Revolution, when APMC’s had a lynchpin role in its success. Critics argue that APMC’s are fraught with corruption, cartels, mafia and inefficiencies, and these allegations are partially true, but there isn’t a viable substitute on price assurance for farmers to earn the minimum profit margin to run a household. The positive correlation of MSP and delivery through Mandi is no better manifested than in the states of Punjab and Haryana, where the state procurement through APMC for paddy and wheat is 88% in Punjab and 80% in Haryana.
The farmers in the state of Bihar, that abolished APMC in 2006, are a living testimony to the predatory pricing of free market forces. When a farmer in Bihar sells a quintal paddy for Rs.1,100 in the open market, a compatriot in Punjab receives the MSP rate of Rs.1,800, selling through the designated state Mandis. The state of Bihar procures only 1% of the farm output. For this very reason, a million tons of paddy are brought to the APMC’s in Punjab from Bihar to utilize MSP provision and garner the differential income. APMC’s are established on the principles of secular, social democracy and such institutions have catalytic influence in the creation of welfare societies.
In a developing country like India, millions of children have access to state-run primary and secondary schools, despite the inherent inefficiencies and incompetence in the system. Public health care systems across the nation, however inept and outdated the infrastructure, still provides the only avenue for healthcare to more than 45% of rural and urban poor. The long-term, sinister plans of abolishing APMC’s is akin to dismantling government schools, colleges, universities, primary health centers and hospitals whose catastrophic consequences to the social capital are unfathomable.
Reforming and probably re-organizing the APMC’s should be the logical step in improving the farmers income and raising their quality of life. Moreover, agriculture is part of the state list and weakening Mandi’s will erode the revenue collection of states. The taxes levied in APMC’s are mostly re-invested for rural infrastructure development by building roads, health centers, schools, hospitals and developing high yielding varieties of seeds and improving soil fertility. Since profit maximization and shareholder capitalism is the motto of private companies’ existence, such developmental programs of existential value could take a backseat.
The Risks in Copying Western Free Market Model
The open markets in US, Europe and other developed nations are in operation for more than 70 years, but the farmers are in severe crisis that require massive budgetary support from their governments. Rural suicides in the US are 45% higher than urban and semi-urban centers and the looming bankruptcy in the US agricultural sector is estimated to be $ 425 billion. The National Crime Bureau statistics estimates that approximately 3.64 lakhs Indian farmers have committed suicide in the past 25 years. The per capita subsidy of US farmer is $60,000 annually, in contrast to an Indian farmer, whose share is less than $200 per year. The outlay for subsidies in Europe is 100 billion dollars annually, of which 50% is a direct-fund-transfer.
If US farmers, notwithstanding well-developed agri-infrastructure, sophisticated technology, legislated contract farming and regulated commodity exchanges, finds agriculture unsustainable, imagine the plight of an average Indian farmer, who are the mercy of monsoons and hawkish middlemen. Corporatization is the malefactor for the doom of small-farmers in US, more than 17,000 ‘small and medium’ dairy farms had gone bust, which accounts for 93% of diary production, yet the aggregate milk production has increased. Behemoth corporations have taken over these family enterprises when they couldn’t compete with the economies of scale and subsequent price skimming of the corporates. In India the average land holding size of 86% of farmers is less than 5 acres as against 400 acres in US and more than 9500 acres in Australia.
It’s an irony that the free markets of the West are sustained by monumental Aggregate Measure of Support (AMS) to stay afloat, when in India, policy measures were initiated to deregulate farm commodity markets. By amending the Essential Commodities Act, the agribusiness traders, large wholesalers and retailers could engage in unethical hoarding to create artificial demand, causing price inelasticity and probability of food shortage. Revolutionizing, reforming and modernizing the agricultural sector assumes priority in India. The current conflict could have been consensually resolved by incorporating at least three guarantees in the farm acts. The first one is assurance of MSP, second is of minimum procurement and the third, partial or total waiver of farm loans. Doubling of farm income by 2022 will remain a distant dream if according to a NABARD study, more than 52% of debt-ridden farmers income is apportioned towards servicing the high cost of capital. The magnitude of the distress is highlighted by a NSSO survey in 2013, which revealed an annual average farm household income in India to be abysmally low at 20,000 rupees.
It seems that the Indian farmer was reverse-subsidizing the Indian population with such low prices, low wages and thereby preventing food inflation all these decades. Time is opportune to acknowledge their legitimate demands and reward them for their sacrifices, sweat, blood and toil. Improving the quality of life of the vast majority of blighted and impoverished Indian farmers is the true measure of progress to evaluate any government’s performance scorecard. Farmers are the essential humans!