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Need for Agricultural Reforms (16th December 2020)

Need for Agricultural Reforms (16th December 2020)

Context:

The Modi government has brought reforms, but has been met with stiff opposition from farmers. They remain firm on their demand to get the new farm laws repealed.

Background:

Agriculture in India faces growing challenges and also presents plenty of opportunities but successive governments have been hesitant to bring reforms fearing political ramifications. Crucial decisions needed to the sector an impetus have been delayed in the fear of losing votes. There has also been a lack of vision.

The Modi government has brought reforms, but has been met with stiff opposition from farmers. They remain firm on their demand to get the new farm laws repealed.

Prime Minister Narendra Modi on Tuesday said farmers were being misled about agriculture reforms and the reforms were exactly what farmer bodies and even opposition parties had been asking over the years.

Panellists:

1. Gautam Chikermane Vice President, Observer Research Foundation
2. Abhinav Prakash, Assistant Professor, Economics, University of Delhi

 

1. NEED FOR AGRICULTURE REFORM:

1.1 Need for agricultural reforms have been advocated over the past two decades by

  1. NATIONAL COMMISSION ON FARMERS
  2. EXPERT COMMITTEES
  3. TASK FORCES
  4. ECONOMIC SURVEYS
  5. UNITED NATIONS FOOD AND AGRICULTURAL ORGANIZATION
  6. PARLIAMENTARY STANDING COMMITTEES

They all came out with saying that agriculture desperately needs reforms among them there are two key reforms:

1. First is reform of the APMC infrastructure and

2. Second is easing out the Essential Commodities Act.

1.2 The political parties that until yesterday had signed on to those reforms in their manifestos are today saying that these reforms are not good and they need to be repealed.

1.3 2019 Parliamentary Standing Committee on Agriculture: APMC have become a hotbed of politics corruption and monopoly of traders and middlemen.

1.4 Industrialization and mechanization of the agriculture:  Dr. Ambedkar (he was an economist also) once wrote a paper on agriculture. He said the only solution to agricultural problem in India is industrialization and more mechanization of the agriculture.

2. ADVANTAGE OF THESE REFORMS:

2.1 Additional place to sell: All they are saying is that the farmers will get an additional place where they can sell their produce which means the monopsony of APMC will go away. Farmers will benefit through other entities like NGOs, Corporate entities. They can also sell to NGOs, Wholesalers and Corporates under new law.

2.3 Need to remove Corporates Phobia: If corporates are so bad and evil, they should stop using the pumps the tractors, the phones, the SUVS. Why are you using corporate goods? You can't have your corporate goodies and spit on them too.

2.4 Efficiencies and competition: Corporates have come and brought in efficiencies and competition in

  • Telecom
  • Automobiles
  • E-commerce etc.
  • Why will the same benefits not accrue to the farmers. We need to stop demonizing the job creators of India.

2.5 Achieved AIM of MSP and APMC: This MPS and APMCs were enacted during the time of scarcity when we had this massive food shortage in the country and we were trying to do Green Revolution in order to become self-sufficient in the food grains production.

2.6 Government is not removing MSP it is only giving you more options maybe you know in the long term they want to shift away from this inefficient agriculture caused by the APMCs and the MSPs in order to move towards a more sustainable kind of agriculture.

2.7 Warehousing & Cold Storage Chains: Amending the Essential Commodities Act so that warehousing can happen and cold storage chains can come up.

2.8 Bombay Club case study: In every reform that came starting with the industrial policy resolution 1991 was opposed by the Bombay club. They said that more than 51 percent should remain with Indian promoters but reforms went on all.

2.9 Fast Paced growth: The result of 1991 reforms was fast growth of the Indian economy, in the Indian economy was less than 300 billion dollars then today it is almost 3 trillion in 30 years.

2.10 Commercialization, Industrialisation, Mechanization of the Agriculture: The more you allow the commercialization of agriculture, mechanization of the agriculture and the entry of the corporates in the agriculture industry, the more efficient it does become.

2.11 Once the Essential Commodities Act is gone, you're going to see this investment in the agriculture in the supply chains in the warehousing because in rural infrastructure is very much needed.

2.12 Perishable good: The nature of agricultural produce is such that you have to sell it the moment you harvest it because it's a perishable good. So you do need supply chains warehouses which can make sure that the prices do not fall too much in the harvest season and they do not rise when the off season is going on.

2.13 Contract farming is going to come in a more formalized manner. We already have large-scale contract farming but are informal contracts because we don't have any laws as such to regulate them.

2.14 Inter linkages in rural agriculture economy: These old Arahtiyas are the bigger farmers, same person is the money lender same person is also running transport business so these people themselves have the capacity to become the new corporate entities. They can work with the bigger companies; they can join the supply chains.  It will bring lots of efficiency.

2.15 FARMER'S EMPOWERMENT AND PROTECTION AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES ACT 2020, It clearly provides Dispute Mechanism For Contract Farming. And under no circumstances, the land will not go away from the farmer, it's been written into law.

2.16 Market reforms: are always good, the spread of commercialization is good, the markets are good the capitalism is good, socialism is not good. Look at the entire world, tell me a single country which is a socialist country which is successful none of them.

2.17 Other Stakeholders in Agri Sector: Farmers are not the only stakeholders. In fact they are in a minority, the majority of the people are the marginal farmers, agrarian laborers. It's far better for those agrarian laborers mostly coming from lower castes is far better for them to work in a corporate, become a corporate employee than to work in the fields of the big farmers.

2.18 Entry of Start-ups: With these laws now we have better mechanism for Contract Farming, so more industrial houses, corporate houses will want to invest and literally have hundreds of start-up.

3. ISSUES:

3.1 Opposition parties: The political parties that until yesterday had signed on to those reforms in their manifestos are today saying that these reforms are not good and they need to be repealed.

3.2 Rumour of removing MSP:  It has been stated that these three laws will kill farmers, will destroy agriculture because they will remove the MSP. The facts is none of these laws mention even the word MSP leave alone legislate its removal.

3.3 Capitalist Farmers domination in Politics: Green revolution in the country gave rise of a new class of farmers especially in the areas of green revolution.

  • They own the means of production, hire waged labour, work for the profit motive and became prosperous and powerful so they started dominating the politics.

3.4 Subsidies as a display of Political power: From the 70s-80s onwards, this whole thing of providing subsidies on the chemical fertilizer, free electricity, free water, loan waiver was started because of simple play of the political power.

3.5 Subsidy as instrument of Political Control:  out there so what started as a legitimate instrument of making sure that India achieves food security has today become the instrument of political control.   

3.6 Farmers are apprehensive: Because they are responding to the policy structure which has been placed for decades. So, they don't know what is going to happen so they have genuine apprehensions about the future.

3.7 Reforms in China vis a vis India: When China started reforming, started from the agricultural sector itself and that ended up

  • Benefiting a large number of people in the countryside,
  • The farmers did benefit,
  • The poverty rates went down very sharply, and
  • It gave widespread legitimacy to the economic reforms in china which is lacking in India because we started reforms from the manufacturing sector.

3.8 Colonial Hangover: We are normally suspect of the market, that corporates, they will rob us, because we saw these things happening under the colonial rule so that hangover is still there.

4. WAY FORWARD:

4.1 These three laws are good laws and the Government must not back down because the street is not the place to debate laws the laws have to be debated in parliament.

4.2 Govt must go out and make it clear that the MSP structure is not being touched at all. Further, we need to debate if MSP is good or bad, required or not.

4.3 Manufacturing and corporate is the way forward. Just because of a few entrenched interests, we cannot hold back the industrialization of India.

  • India has missed the manufacturing bus but India has to ride that bus and riding that bus is going to bring us prosperity. 
  • Movement from agriculture which is now 17 % of GDP supporting 50 % of people needs to change.  More and more employment need to happen outside of agriculture for prosperity for growth for wealth that is the only way.

4.4 Strengthen Our Institutions: We need to strengthen our institutions because once we have corporates coming in what would really matter is the contract enforcement, the protection of the rights of the farmers and that we really need a very strong judicial system and institutional mechanism at grassroots. So, we need to focus on the frontline bureaucracy.

4.5 From MSP to UBI: In the long run, we have to have this gliding part away from the MSP towards direct income support which is less distorting and really does benefit the small and the medium farmers as opposed to the big farmers.

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