There has been a lot of discussion regarding the recent protest by a certain section of farmers around the national capital. The protests have ranged from fasts, blockages and attempts to disrupt services such as railways. Many have termed it farmers’ protest, a term which is used loosely and one that would suggest that farmers across the country are opposing these new laws.
Nothing could be further from the truth as this is not a farmers’ protest, but a protest by a certain section of rich landowners in the three key states of Punjab, Haryana and some parts of Uttar Pradesh. Recently, several farm unions across the country made a representation to the agricultural minister stating that they would go to the protest should these laws be repealed, thereby indicating a support for these proposed norms. It is, therefore, only natural to ask why a certain section of farmers is against these laws even as farmers across the country are supporting them. More importantly, can this be termed as a farmers’ protest when there are divergent views among farmers themselves with regards to these new laws?
The three proposed laws essentially deal with different and distinct aspects of our agricultural economy. The first law attempts at creating a private market system thereby allowing farmers to sell their produce even outside the regulated government mandis. Despite deregulation of most of our sectors in 1991, agriculture has continued to be subject to stiff regulations and government interference.
The new laws attempt to correct for this by granting the farmers their economic right to decide where to sell their produce. That is, a farmer can now either sell at the government regulated mandis or sell at the private markets that have been allowed under the new law. Critics have argued about the MSPs and what happens under the new laws to the regime of APMCs and MSPs.
Under the new law, farmers can sell at MSP at the APMC or sell at the market rate in private markets. Thus, the farmers will prefer private markets only when they get a better price than that being offered at APMCs. Only 6% farmers benefit from MSPs and MSPs are offered only on a handful of crops while procurement largely happens only for wheat and rice.
The second law is primarily for strengthening the rights of farmers and creating a legal framework that allows for contract farming. This is important as many have made the assertion that the new laws favour the corporate. However, the new laws allow the farmers the flexibility to exit a contract at any given time while corporates must pay a penalty in the event of termination of contract prior to the stipulated timeframe.
A look at the laws reveals that they are framed keeping in mind the need to provide our farmers with a legal framework that protects their interests. There have been many successes of contract farming and cooperatives such as the AMUL example however, they occurred as an exception as a majority of small and marginal farmers continue to have limited marketable surplus. The new laws are an attempt at building many such success stories across the country.
The third law deals primarily with the essential commodities act and it removes several items from the list to ensure that the private sector is rest assured that the government will not intervene and allow markets to function. This is important to ensure that private sector can to make a profit on their investments in the form of logistics and storage capacity across the country.
What many people state is that if cooperatives make a profit, it will be because it will underpay the farmers and overpay the consumers – however, the corporate sector can make a profit even as farmers gain due to better price realization and consumers get the products at a lower rate. This is possible as efficient supply distribution is created across the country which reduces both dead-weight-loss and transaction costs.
We must recognise that the government has created an online marketplace in the form of E-NAM which gives information of prices across different markets to our farmers. This information is vital and the new laws will allow farmers to act on this information and sell their produce across the country. Yet, many are viewing these norms in isolation and are arriving at conclusions without analysing the issuein a coherent manner as they suggest that trade outside the regulated mandis will not be subject to government regulation. This is completely false as any transaction within the country is bound by the standard terms of contract.
Further, it is important to ask the simple question with regards to the outcome of the three laws. That is, if there are more number of buyers and markets for the same number of sellers, then does the market power shift in favour of the sellers? The answer is a definite yes and this will benefit not just the small but also the big farmers – some of which are protesting at the moment.
While the issue gets politicised to a point that there is little reasonable discussion and logical arguments – counter arguments and debate left as we discuss this issue in popular discourse , it is worth remembering that several of the protesting organisations had asked for the very same laws till as recent as the start of this year. Several political parties, too, such as the Congress had the very same laws in their electoral manifesto. Thus, the protests have more to do with the confluence of politics and vested interests than with economics or the interest of the farmers. Here’s hoping the reforms stand as they are and our farmers finally get the much deserved economic freedom.
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