[ Dr Shri Prakash & Samit Sharma ]
Is the agitation by the farmers legitimate or unfounded? If the three laws recently enacted by the government harm the interest of the Indian farmers and aggravate the agrarian crisis then surely the laws must be bad? However, if the reverse is true, then the farmers’ agitation must be unfounded and damaging the interest of farmers.
A simple test can reveal the truth. Affirmative answers to the following questions will show whether the protest is based on facts and promotes the welfare of farmers or not. Whereas a negative answer shall prove the agitation to be illegitimate and motivated possibly by political or personal considerations.
Do the newly enacted agricultural laws – the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, The Essential Commodities (Amendment) Act and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act – (1) adversely affect the ownership and size of farmers’ holdings? (2) Adversely affect the level and stability of output of individual farm holdings? (3) Adversely affect subsidies currently available on seeds, water, electricity, diesel, water, interest on farm loans, purchase of fertilizers, pesticides, insecticides, agricultural implements and other items?
Do these agricultural laws do away with MSP (minimum support price) or reduce the MSP and affect the prices? Do these laws reduce or abolish procurement of food grains by FCI or other government agencies? Do the three agricultural laws impose any additional tax on agricultural inputs, incomes or output? Do these laws impose any restriction on sales of output in regulated mandis within or outside the limits of the district of farmer’s holding? Do these laws restrict sales of agricultural output within, outside district, outside, state or India?
To answer the above questions with any degree of objectivity, it is necessary to understand the basic problems and issues facing Indian agriculture that have been researched and well documented by academics and policymakers, apart from the farmers themselves.
(i) Size of farm holdings: Small and marginal farm holdings account for about 95 percent of total holdings. The remaining 5 percent of holdings are large, especially in Punjab, Rajasthan, Bihar and MP, allegedly owned by political cronies and erstwhile jagirdars and zamindars. For instance, land holdings were registered in such fictitious names as Bagan Singh, Tamatar Singh, Bhindi Devi (Tribune, 1978, Chandigarh).
(ii) Lack of capital: Small and marginal farmers, spread over states, do not have resources to invest for improving crop yields.
In Punjab, small farmers lease their land to big farmers and work as labourers on their own farms. Consequently, even farmers’ income from holdings of less than two hectares was greater than per capita income of India in the ’80s and the ’90s. In contrast, in Madhya Pradesh and Uttar Pradesh, small farmers take land on lease from big farmers and absentee farmers. In the Northeast, shifting cultivation is the major problem. It shows lack of resources with small farmers.
(iii) Low and uneven crop yields: Huge differentials in crop yields per acre exist between regions and crops. The Green Revolution has been confined to Punjab, Haryana and parts of UP and Karnataka. Further, the revolution benefited paddy and wheat, only resulting in a paddy-wheat culture in these states. Massive doses of investment are required for raising crop yields which neither the government nor individual farmers have.
Corporate investment can fill the investment gap. The new laws attempt to attract such investments.
(iv) Cyclical price fluctuations: Based on the output and price patterns, India sees inadequate rainfall every 3 years out of 9 years. This reduces output and raises prices. Currently, the FCI and other government agencies compete with big private stockists in regulated mandis. In such years, the procurement target is realized by higher than MSP prices. On the contrary, when the output is in plenty, the government purchases the targeted procurement output at MSP and the surplus is sold to private stockists.
So if the government accepts the protesters’ demand for a legally binding MSP, the farmers will not get the benefit of the price differential between procurement price and MSP and will have to purchase the full output, rendering wholesale stockists and traders redundant. This will virtually nationalize agri-trade – a policy that failed in the early ’70s in India.
If the new laws are kept as they are, individual farmers and their marketing cooperatives can directly export their produce to agriculturally less developed states and to other countries in the years of high output and expect to sell at higher than MSP in years of low output. The new laws do not attempt to eliminate MSP or reduce subsidies.
(iv) Adverse effect of oligopolistic- stockists on prices: Output prices of agricultural goods in general, food grains in particular, are determined by the big stockists who act as market-makers in regulated anajmandis.
The modus operandi of oligopolistic stockists in regulated mandis copies the stock market market-makers. Oligopoly is monopoly of a few sellers and monopsony is monopoly of a few big traders in grain markets. Thus, the big traders exploit farmers on one hand, and they extort high prices of agricultural goods from consumers on the other.
(v) Entry barriers and cartelized mandis leading to price volatility: As mandis are regulated, medium and small wholesale traders find their entry blocked by market leaders (perhaps in cahoots with the regulators of such mandis). Consequently, all such medium and wholesale small traders become sub-wholesale traders of the bigger traders. This lengthens the supply chain and at every step, each sub-wholesale trader adds his commission to the price. For example, arhar/tur dal passes through 36 hands before it reaches the final consumers through neighbourhood retailers. Farmers may get Rs 10-15/kg, though the consumer would have to pay Rs 80-100/kg. What sells for Rs 20 in Delhi will be sold to consumers of the Northeast at Rs 100.
The discussion above is based on our research studies on the workings of mandis in Punjab, UP, MP, Delhi and the Northeast.
This cartel’s stranglehold will loosen/disintegrate once competition is infused with the entry of new players. This is what the three agricultural laws seek to achieve. This is what these agitators/opposition politicians seem to be objecting to.
Land and labour reforms are an urgent need of India for Aatmanirbhar Bharat and a prosperous farm community. There is need for farmers to move away from low price and low yield crops to high price and/or high yield crops. Mono paddy-wheat cultivation based on high water use intensity has already resulted in dropping of water table by 20-30 feet below the level before the Green Revolution. Further, the crop yields of wheat and paddy have been stagnating in Green Revolution belts in recent years.
This requires another yield revolution through investment in new agricultural technology. Where will the investment and technology come from? Our agriculture scientists have already done a marvelous job; they may be trusted to develop new technology for triggering another yield revolution. But the required investment will need India to embrace the new agricultural laws. It’s suggested that the contract farmers should be provided with yield-raising technology.
A close analysis of the various clauses of these laws reveals that the answer to all above questions is an emphatic no. Despite this, the farmers’ protest continues. It has already resulted in a lot of violence on 26 January, 2021. Many citizens have already complained of hardship and suffering on account of the blockade of Delhi borders, trains and other means of transportation and many common everyday items have seen prices go up and supply shortages. Besides the above, the protestors’ demands do not address the real problems of Indian agriculture.
Based on above facts, the protest should be deemed as illegitimate and motivated rather than organic and well-founded. (Dr Shri Prakash is Professor and Head, Edl and Plg, NIEPA. Samit Sharma is the founder of IDA Ventures)
