It is not often that farmers take to the streets, blocking highways and railway tracks and calling for an all-India strike. What provoked them was changes to rules governing how farmers sell grains and other crops, which triggered fears that the Minimum Support Price at which the government purchases grains could be phased out.
Government reforms aim to loosen rules around the sale, pricing and storage of farm produce – rules that have protected the country’s farmers from the free market for decades.
The farmers believe the government wants private companies to start buying directly from farmers, even purchasing standing crops on contract. They also believe it wants companies to own and run large farm holdings. The government, however, says the opposition parties have misled the farmers.
Fueling their fear and distrust is a lack of clarity. The government has been imposing changes, initially by a stealth order in June at the height of Covid-19 pandemic and lockdowns, and last week by steamrolling protests by all opposition parties, including some of its own allies. The opposition demand for a physical vote count was ignored, when it should have been granted, and a voice vote was passed in a melee. This made farmers and independent observers even more suspicious of the government’s intentions.
A detailed discussion by a Select Committee of all major parties in parliament (and allocating sufficient time for discussion) would have cleared any doubts and concerns raised by the opposition.
A minister of Punjab-based Shiromani Akali Dal, the oldest ally of the Bharatiya Janata Party, resigned from Prime Minister Narendra Modi’s cabinet in protest, calling the move anti-farmer. The usually neutral Biju Janata Dal from Odisha, and Telangana Rashtra Samithi from Telangana state also expressed disapproval.
New Delhi insists farmers will enjoy greater flexibility and independence when selecting buyers, reducing its dependence on the government’s Agriculture Produce Market Committee.
The government has also enabled large private buyers to buy directly from farmers and hold large quantities. They wouldn’t attract any action from the government as used to be the case during periods of scarcity several decades ago.
The root cause of the controversy and unrest is the absence of a written government commitment to purchase crops at an assured Minimum Support Price. In the past, the MSP acted as a floor price that insulated farmers from market price variations. The government purchased significant quantities of wheat and rice at the MSP in states such as Punjab, Haryana and Madhya Pradesh, and to a lesser extent in other states.
Agriculture experts say the MSP drained the government’s resources. It had to perforce buy much larger quantities than needed. As a natural process of economic evolution, farmers would have to move to the free market. The government’s assurance that the farmers will gain from open-market pricing added to their suspicion and anger.
Observers point out that the government had to buy larger quantities, so it was often stored in the open and therefore exposed to the elements, and ended up rotting after the rains. Government agencies often face a shortage of enclosed silos.
Opponents of the new rules argue that almost 86% of farmers own or cultivate crops on farms of two hectares or less, and are not in a position to bargain with corporate agents or go long distances to get the best price. So, the proposed rules benefit less than 20% of farmers. Economists say that over time the new rules could drive farmers to sell off their land and become farm or factory laborers.
This is exactly what happened in the state of Bihar, which dismantled its MSP system in 2006. Having to settle for prices much lower than the MSP, many farmers gave up farming and moved to cities to become laborers. The migration of workers during the lockdown from cities provided clear evidence of the large number of workers moving to and from Bihar.
“The government must learn a lesson from similar failures in the United States and Europe, where governments had to support farmers,” said Devender Sharma, a Chandigarh-based agriculture expert. “Agriculture [has been] in distress for decades, and one expected new policies to usher in changes for their prosperity.’’
As economies evolve, agriculture’s contribution to gross domestic product and employment is bound to shrink, as it has in more developed economies. Indian farms support more than 40% of the population and account for about 15% of the GDP. Three decades ago, the land supported more than 60% of the population and accounted for about a third of the GDP.
Measures pushing farmers away from the land would be less painful if they had alternative skill-sets and jobs were available. However, the Indian economy, which contracted 23.9% in the June quarter, does not offer farmers opportunities to obtain either. Economic growth has steadily slowed to 4.2% in the year ended March 2020 from about 8% five years ago.
The Centre for Monitoring the Indian Economy (CMIE) estimates that about six million white-collar jobs were lost between May and August. Estimates of workers returning to their villages after the outbreak of Covid-19 range between 8 and 10 million, although some have returned to their jobs.
Farmers associations across states, and national and state-level opposition political parties of all hues plan to escalate actions to pressure the government to review the policy changes.
The government is already grappling with serious issues: China is occupying Indian territory in Ladakh, forcing it to spend more on defense, and the economy is in a dire state, with unemployment at its highest point in half a century. Under the circumstances, dealing with the latest issue could have been put off to a later date.