Prior to setting camp outside India’s capital, farmers opposing the three contentious farm ordinances passed by the Bharatiya Janata Party-led government began occupying railway tracks in Punjab to ensure that the government took note of their displeasure. With the government showing disregard for dissenting voices and passing the farm reforms sans parliamentary debate, the farmers shifted to Delhi’s outskirts to up the ante.
In the months that have passed much has ensued – India witnessing one of the single largest protests in recent times, farmers succumbing to the harsh winters in the protest camps outside Delhi, organizing a farmer’s rally on Republic Day and clashes between a small faction of farmers and the police in Delhi. One thing, however, has not transpired – the government repealing the laws as demanded by the protesting farmers.
Irrespective of where you stand on whether or not the newly introduced farms laws will benefit the farmers, there are three key points of contention that cannot be ignored. First, the government ignored parliamentary and constitutional processes while introducing the three farm laws. Second, the real fear that in the absence of Minimum Support Price (MSP) the farmers might be forced to sell produce at untenable rates. Lastly, the agrarian crises that India faces is complex and grave; the sector urgently requires overhaul especially as nearly half of India’s population still relies on it.
What do India’s new farm laws say?
The three farm laws—the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act (FPTCA), Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act (FAPAFSA), and the Essential Commodities (Amendment) Act (ECA)—hope to reduce government control over farm trade and instead increase the number of agricultural produce buyers. The idea is that with more buyers in the market, the prices offered with be more favourable to the farmers.
The FPTCA, which allows farmers and traders to sell outside the existing state government-operated mandis (wholesale markets) and carry out electronic trading of agricultural produce, abolishes the existing market fees levied by state governments on farmers and traders selling/buying products outside the regulated mandis. It is also the most controversial element of the new laws for one main reason—the lack of a guaranteed minimum support price (MSP).
With the FPTCA law allowing sales to take place outside the mandi system, many farmers fear that buyers will purposely trade outside and impose disadvantageous terms on them. the case of Bihar scrapping its mandi system nearly 15 years back, for instance, has resulted in higher price volatility, reduced crop variety as well as below MSP prices for farmers. Without government oversight, farmers, particularly small and marginalized farmers who form the bulk of Indian famers, fear that they will be exploited by buyers.. Hence the protesting farmers’ demand that MSPs be legally mandated within and outside the mandis to protect the farmers’ interests.
The other fear is that as trade in the mandis reduces so will the tax collected by the respective states, resulting in a corresponding reduction in farm infrastructure investments by the authorities. With the legalization of contract farming, small and marginalized farmers feel that they will be sidelined by large corporations making their way into the agricultural sector. All in all, the farmers believe that the market will become more exploitative instead of more competitive.
The politics behind MSPs and New Laws
Despite the surging crowds around Delhi and protests by Indians around the world, the issue of MSPs largely impacts farmers of Punjab, Haryana and to some extent Rajasthan and Uttar Pradesh. The reason is that the MSP is set for only a select few crops and relies on government-backed procurement.
The gains from MSP are not uniformly spread across India, which is why the farmer protests have been geographically limited. As government agencies procure the grain, farmers benefit when their respective states buy the bulk of the state’s produce. In Punjab, 95 percent of paddy farmers benefit from MSP while in neighboring Uttar Pradesh, a mere 3.6 percent of farmers do.
However, even with MSP set for 23 crops, data shows that farmers receive these prices only when selling to the government, which procures primarily paddy and wheat to fuel its public distribution system (PDS), which brings the numbers to 5-6 percent of Indian farmers (although this figure has been debated, with recent research estimating that closer to 15-25 percent benefit from MSP). As per an analysis of 10 MSP crops done in September 2020, crops were sold below the MSP in 68 percent of cases.
The larger problem: A struggling farming sector
While one may argue that the MSPs do not benefit a significant portion of Indian farmers, one point cannot be ignored—India’s agriculture sector is in shambles. Despite 48 percent of India’s population relying on agriculture, the sector has seen poor wage growth. Decreasing soil fertility, excessive use of groundwater and chemicals, and reduction in crop diversity make the situation worse.
Consecutive governments have set a 4 percent growth target for the sector which it has failed to achieve time and again. Tangible data reveals the extent of the agricultural sector’s crisis: 52 percent of the agricultural households in the rural India are indebted. The average farmer shoulders a debt of INR 47,000 and earns a meagre monthly income of INR 6,426. Farmer suicides, sadly, have also mounted in parallel to the rising debts. It is estimated that 28 people dependent on farming in India commit suicide on a daily basis.
With 86.2 percent of farmers holding less than two hectares of land, most farming families do not even have produce surplus to sell to the market which means that in most cases it is a hand-to-mouth situation. Poor farmers are often forced to sell their land holdings or, worse yet, have their land be taken over by money lenders seeking to recover their loans. These landless farmers are forced to work as farm laborers and migrate to other states.
What can the government do?
The agricultural sector needs more than just three laws to reform India’s agricultural sector. A shift away from MSPs, as suggested by the new laws, must be replaced by a universal basic income (UBI) as a safeguard for farmers. Not only will a UBI provide social security to India’s farmers but it will also help reduce the high procurement, storage and transportation costs incurred by the government as part of the MSP-PDS system. Direct cash transfers will also reduce the cuts earned by agents.
The issue plaguing the sector does not stop at MSP and UBI. The issue of low productivity, small land holdings, limited use of modern technology, soil degredation and imperfect market conditions is a major challenge. The sector calls for reducing information inequity, introducing area planning and incentivizing small and marginalized farmers to take up floriculture, animal rearing and growing high-revenue crops. This requires policy intervention by the government, long-term planning and heavy investments.
Note: This article is based on an article published by the author for South Asian Voices.
