Rather than just speeches and explanations, the farmers’ agitation against the government’s three new farm bills must be addressed through action on the ground. And by action, we do not mean a cannon of water. By setting up infrastructure and helping Farm Producer Organisations (FPOs) emerge, the government must show its good purpose.
Taking action takes time. So, holding the laws in abeyance for a year will be the fair thing to do while approving one key amendment: transferring dispute settlement from babus to the courts, as the farmers want.
Farmers are strongly opposed to the reforms suggested. But it’s untenable, the status quo. In the Food Corporation of India (FCI) godowns, India is accumulating grain mountains in government stocks, 3.5 times the buffer stocking standard, wasting precious funds and letting grain rot. At the same time, farmers in our collective slow march to prosperity lag fellow Indians.
State of affairs Untenable
Ashok Gulati reports that the real income of average farming households in India rose at a compound growth rate of 3.7 percent between 2002-03 and 2015-16. The comparable per-capita income growth rate of Indians as a whole was far higher. Farming needs to improve in its present form, not be maintained for prosperity.
In an official 2004-05 situation assessment survey of farmers, 40 percent of farmers said they do not want to farm, but remain in agriculture because they have no other choice.
Why are farmers, in that case, so against change? For reasons which are quite real. Farm laws tries to combine farmers into the commercial economy, likely to acquire wealth, but without the existing system’s backstop.
The current system of guaranteed procurement of grain (and a few other crops) at the minimum support price (MSP) provides farmers with some assurance of income as they prepare their crops, at least in the few states where government procurement machinery is present.
Minimum Support Price (MSP)
If open-ended procurement at MSP ceases, it will plunge farmers into insecurity. Those who have never outlived fairy tales, but not hard-nosed farmers, might be persuaded by the idea that big agribusinesses will come to their rescue.
Every farmer will be like an entrepreneur producing products without firm orders for their produce in the absence of certainty about offtake. The entrepreneurial plunge is taken by just a small proportion of educated Indians; most tend to work for a solid company. Why expect farmers to fancy being made into reluctant entrepreneurs every season by three farm laws?
Can a lone farmer negotiate a good deal with a strong agricultural company? Not obviously. Farmers’ collectives, however, do have the requisite bargaining power.
Cooperative Societies Role
Amul provides a clear example of how small farmers can elevate themselves to a plane where the world’s largest agribusinesses are on an equal footing. Amul is a confederation of tiny farmers’ cooperative societies.
Cooperatives in Europe, North America and Oceania are large in terms of agriculture. The largest dairy producer in the world, Fonterra, is a cooperative in New Zealand.
Cooperatives are not a single type of an efficient group of farmers. Farmers could form businesses, hire and supervise professionals through efficient boards. Sugar mills should, preferably, be owned by cane farmers. That would put an end to the dispute over cane prices and the share of sugar profits among farmers.
Practice the Preach
For farm gate infrastructure and other assistance to FPOs, the government has announced Rs 1 lakh crore. Roll this out so that the farmer sees the opportunity to integrate with the market more efficiently. Without hindrance, let the commodity markets work.
Whenever farm prices unexpectedly increase, let the government not resort to export bans. In order to benefit farmers, the most useful thing the government can do is to put an end to power theft and establish reliable power supplies in rural areas.
This would enable a food processing company to emerge, enabling farmers to either capture additional value in the chain that links their goods to the end-consumer or simply earn a better price when the processing takes place in the vicinity, due to the transparency of the price of the processed commodity fetches.
Gujarat cotton farmers get a good price because ginning happens right in front of their eyes and they know that the price ginners get in the bolls that farmers sell for the fibre separated from seed.
Farmers can not stabilise the power supply or build the road network to ensure that every farmer has the trust that his produce can be transferred with dispatch to a market or a godown.
As practise, introduce these changes, then implement the farm laws and farmers will be much more open to change. And the government will be able to reconfigure the subsidies for farms and food.
Food subsidies actually combine producer subsidies and subsidies for consumption, misleading India at the World Trade Organization (WTO). India should move beyond the WTO dispute and pure consumption subsidies to income support for farmers.