Action takes time. So, the sensible thing to do would be to hold the laws in abeyance for a year, while accepting one crucial amendment: to move dispute resolution from babus to the courts, as the farmers want.
Farmers are stoutly opposed to the changes proposed. But the status quo is untenable. India is accumulating grain mountains in government stocks, 3.5 times the buffer stocking norm, wasting precious funds and letting grain rot in Food Corporation of India (FCI) godowns. At the same time, farmers lag fellow Indians in our collective slow march to prosperity.
Status-Quo Untenable
Ashok Gulati estimates that over 2002-03 to 2015-16, the real incomes of average farming households in India grew at a compound growth rate of 3.7%. The comparable growth rate of per-capita income of Indians as a whole was much more. Farming in the current form needs to change, not be preserved for prosperity. In an official survey of situation assessment of farmers in 2004-05, 40% of farmers stated that they do not wish to farm, but stay on in agriculture because they have no other alternative.
In that case, why are farmers so against change? For very valid reasons. The farm laws seek to integrate farmers into the market economy, possibly to win riches but without the backstop of the current system.
The current system of guaranteed procurement of grain (and a few other crops) at the minimum support price (MSP) gives farmers, at least in those few states where the government’s procurement machinery is present, some certainty about income, as they prepare their crop. If open-ended procurement at MSP stops, farmers would be plunged into uncertainty. The notions that large agribusinesses would come to their rescue might convince those who have never outlived fairy tales, but not hard-nosed farmers.
In the absence of certainty about offtake, every farmer would be like an entrepreneur producing goods without firm orders for her produce. Only a tiny proportion of educated Indians take the entrepreneurial plunge; most prefer to work for a solid enterprise. Why expect farmers to fancy being converted, by three farm laws, into reluctant entrepreneurs every season?
Can a lone farmer negotiate a good deal with a powerful agribusiness? Obviously not. However, farmers’ collectives do have the needed bargaining power. Amul offers a good example of how small farmers can elevate themselves to a plane where they are on equal terms with the biggest agribusinesses of the world. Amul is a confederation of cooperative societies of small farmers.
Cooperatives are big in farming in Europe, North America and Oceania. The world’s biggest producer of dairy, Fonterra, is a cooperative in New Zealand.
Cooperatives are not the only form of an effective farmer collective. Farmers could form companies, employ professionals and supervise them through effective boards. Ideally, sugar mills should be owned by cane farmers. That would end the dispute over cane prices and the farmers’ share of profits from sugar.
Walk the Talk
The government has announced Rs 1 lakh crore for farmgate infrastructure and other assistance to FPOs. Roll this out, so that the farmer sees the potential of more efficient integration with the market.
Let the commodity markets work without hindrance. Let the government not resort to export bans whenever farm prices go up suddenly.
The most useful thing the government can do to help farmers is to put an end to power theft and create stable power supply in rural areas. This will allow a food processing business to come up, allowing farmers to either capture additional value in the chain that links their produce to the end-consumer or simply gain a better price, by virtue of clarity on the price processed produce fetches, when that processing happens in the vicinity. Cotton farmers in Gujarat get a good price because ginning happens right in front of their eyes and they know the price ginners get for the fibre separated from seed in the bolls the farmers sell.
Farmers cannot make power supply stable or build the road network that would ensure that every farmer has the confidence that his produce can be moved to a market or a godown with dispatch.
Carry out these reforms as practice, then implement the farm laws and farmers would be far more receptive to change. And the government would be able to reconfigure farm and food subsidy. At present, food subsidy conflates producer subsidy and consumption subsidy, wrongsiding India at the World Trade Organisation (WTO). India should move to income support for farmers, outside WTO controversy, and pure consumption subsidy.
Reform is important, so is the sequencing of reform measures.