Anyone who keeps up with current events has probably heard of India’s farm protests described by some as the largest ever in history. Hundreds of thousands of farmers have gathered in Delhi to ask the Indian government to repeal the three new farm laws.
Under Pressure, the Indian government has shown willingness to make amendments but has resisted the farmers’ call for a complete repeal of the contentious laws. As farm leaders have called for the protests to grow, the real battle is now for the hearts and minds of the Indian people.
What are the New Farm Laws:
Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act.
This law allows for the direct sale of agricultural produce between farmers and wholesale buyers. It allows for the creation of a venue for the sale of agricultural goods outside the existing system of mandated markets known as APMC
Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act.
Provides a template for contract farming. It has very little to do with “empowerment or protection,” but it does create a path for forging an unequal relationship with small farmers and giant corporations.
Essential Commodities (Amendment) Act.
Liberalises rules around storage of farm goods previously prohibited under APMC. This will allow big corporations to buy up farm produce and store it as required.
Existing System of Agricultural Procurement:
In the 1960’s and 1970’s, a system of agricultural procurement was introduced for select crops known as APMC (Agricultural Produce Market Committees), a marketing board that establishes a minimum support price. Under this system, the wholesalers are prohibited from buying directly from the producer. They have to buy through the Mandis where all farmers collectively market their crops at the MSP rate.
This system of marketing protects the farmer from market vagaries as it is based on the concept of one desk selling with a base price that covers the cost of production and allows a margin of profit.
The APMC works in concert with the Essential Commodities Act which prohibits buyers from hoarding produce. This measure protects the consumer by preventing big wholesalers from creating an artificial shortage and charging exorbitant prices.
The argument for Change:
The APMC system was established when India was not self-sufficient in food production. Today some of the crops covered by APMC have surplus production. This system has also led to overuse of fertilizer, chemicals, depletion of groundwater, and even indebtedness among farmers.
There is a valid argument that states that deregulation of markets will lead to better allocation of resources. The idea of opening up agricultural marketing to private channels has been long discussed. Even farmers agree that reforms to the current system of marketing, if properly introduced with all the checks and balances, can be good for the long term health of the agricultural sector.
Most economists believe growth in India’s agriculture sector can be accelerated through private investment. By enacting the new laws, the Indian government is enabling large corporations to have greater participation in agriculture and hence creating the incentive to invest in the sector and improving supply chain infrastructure.
What the Government is not telling
As a part of this process, there is a need for land consolidations to take place. The creation of a parallel private agricultural procurement system will weaken the existing APMC system. Increased competition and lower prices for farm goods will force the marginal farmer, the vast majority of them owning less than 5 acres of land, to sell out to bigger more efficient operators.
This is about creating bigger farms which will allow more mechanization. It is also about creating a labor force for India’s growing industrial sector by transitioning people away from agriculture. Sixty percent of India’s workforce is employed in agriculture, while in the west it is less than two percent.
The Modi government has maintained that these bills will be good for farmers, but it has not talked about the many farmers that will lose their livelihood. Potentially, this could be the beginning of a process that will see tens of millions of people leave agriculture to find employment in other sectors.
It is the marginal farmers, who are now making subsistence living, least able to survive in a highly competitive environment. They don’t have the capital to re-invest in their operations, nor the right skills to transfer to another sector; and moreover, no meaningful alternate employment awaits them that will improve their lot in life.
The three new laws do not come with any sort of income support or safety nets for the most vulnerable. It is an expectation when reforms of this nature are introduced, and that have the potential to impact the lives of hundreds of millions of people, a more comprehensive approach is taken to formulate policy.