Why farmers are not keen on agri reforms
The farmers’ agitation in Punjab, Haryana and western UP against the agricultural reforms, initiated to help none other than the farmer himself, continues unabated. Why is this so? Doesn’t the farmer know what is good for him? Is he being led up the garden path by the politicians and political parties, which are there only to fish in troubled waters?
Of the two main parties leading the agitation, the Shiromani Akali Dal has been feeling increasingly marginalised in Punjab and, according to some commentators, the farm reform issue has come as a godsend. Ditto with the Congress which is seeking to use the issue to become nationally relevant again.
But it may be wrong to think that the farmer does not have a mind of his own. He is likely without any knowledge of formal economics, but he is intuitively seeing what is good for him and voting with his tractor if not feet.
The reforms have been described by agricultural economist Ashok Gulati as a 1991 moment for agriculture, drawing a parallel with the reforms led by Narasimha Rao-Manmohan Singh combine which ended the licence-permit raj for manufacturing. But agriculture remained untouched.
Essentially, the latest reforms will allow the farmer to sell his produce to whoever he likes wherever in the country, by not having to take his harvest to the APMC yard. He will be able to engage in contract farming which will fetch him a better price. Removal of stock restrictions will enable private sector investment in warehouses and cold storages which will create a more efficient supply chain. This will reduce wastage and eliminate some middlemen, bringing greater price stability and, possibly, price reduction for the consumer. Plus, contract farming will pave the way for farm investment and improvement in productivity and quality.
Why is the farmer looking a gift horse in the mouth? Yogendra Yadav, an academic-turned-government adviser-turned-grassroots activist-turned-politician, has come up with some answers. His point is that economists like Gulati have their ears to the economic theory and data, whereas you need to keep your ears to the ground and understand what is driving the farmer.
Yadav’s first point is that ending the so-called monopoly of APMCs is a non-issue as only a quarter of all agricultural produce is sold through APMC mandis. In Maharashtra, there is extensive contract farming between sugarcane growers and cooperative sugar mills. Besides, the reform of APMCs has been a continuous process in many states for several years now. Yadav asserts that he is yet to meet a farmer who complains about not being able to trade outside the mandis. What farmers want is better run mandis.
His second point is to question the assumption that the reforms will save farmers from exploitation by arhtiyas (commission agents). This is because big businesses will not deal directly with farmers but rely on middlemen as aggregators. So, it is unlikely that delayering of the supply chain will take place. In fact, there may come a time when both the arhtiya and the new middleman-aggregator will operate.
He also questions the assumption that under the new system, the farmer will be able to operate in an efficient market and thus get better value. To benefit from the new system, farmers will have to command market power. Currently, farmers, mostly small, are price-takers. Proper market regulating mechanisms will take time to develop. Farmers will be able to command market power when they organise under farmer producer organisations. But again, these will take time to come up.
Yadav says it will be naive to take the government at its word that it will maintain and raise its investment in agricultural infrastructure. He sees the new laws signalling the withdrawal, over time, of the government from agriculture in terms of investment, regulation and extension work. The new private players will invest in warehouses and cold storages and also carry out extension work by helping farmers adopt new technology.
One manifestation of the farmers’ lack of faith in government promises is to raise doubts over how long the system of minimum support price (MSP) will continue. For them, the giveaway is the government assuring verbally that the MSP will continue, but refusing to write that into the law. In the last few days, the MSP of crops has been announced, but how long will it last is another matter.
The MSP-supported government procurement of wheat and rice have, over decades, become the cornerstone of agricultural operations in the north-west. The farmer in this area not only helped make the country self-sufficient in food, but also today, there is a huge excess in the buffer stock. Now there is a need to diversify, move away from cereals and into coarse grains, cash crops and pulses — crops which are not water-guzzlers — and also to encourage dryland farming. The MSP has to lose its primary focus on cereals.
The MSP-supported procurement of cereals gave the north-west farmers a sense of security. As a result, productivity has stagnated.
Decades after the Green Revolution, the farmer has to confront the marketplace of private buyers and live in a world where the MSP and procurement are not primarily focused on cereals, but other crops. So, the agitating farmers know intuitively that assured procurement at the MSP of what they produce is set to end. Hence, they are insisting on maintaining the status quo.
