India is essentially an agrarian country and over a period of years, we have become self-sufficient with the help of increased food production. However, even though around 55% of our population is dependant directly or indirectly on agriculture; it’s contribution to GDP fell from 54% in 1950s to 16% in 2018-19. Furthermore, India ranks amongst the top 10 exporters of agricultural products in the world, yet people employed in the farm sector accounted for 7.4% of the total suicides in India. It is a well-known fact that farmers are unable to make the ends meet pushing them to take the drastic step of taking their own lives. These statistics paint such a grim picture. They clearly indicate that cost of agriculture production is much higher than income.
Three new laws introduced by the GoI have been a result of agricultural reform thinking ushered by 2001 Shankarlal Guru Committee report. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act provides for setting up a mechanism allowing the farmers to sell their farm produces outside the Agriculture Produce Market Committees (APMCs). Any licence-holder trader can buy the produce from the farmers at mutually agreed prices. Currently, there are around 7000 APMCs across the country from where government agencies including Food Corporation of India (FCI) purchase farm produces at MSP (Minimum Selling Price). FCI then sells these food grains to Below Poverty Line (BPL) families through Public Distribution System (PDS) at a concessionary rate. The MSPs have seen a consistent increase over a period of years, whereas PDS rates have largely remained the same as it is essentially a welfare-oriented scheme of GoI. Rising procurement translates into overflowing of FCI godowns whereas increase in MSPs means that FCI cannot sells its stocks in the international market at a profit. MSP system is financially unviable for Government and puts tremendous pressure on fiscal deficit in the annual budget. And every government in the past several years have tried to figure a way out of this catch-22 situation.
In 2015 Shanta Kumar Committee reported that only 6% farmers benefit from MSP scheme. It is interesting to note that this scheme has worked well for Punjab & Haryana wherein procurement of wheat and paddy is around 75-80%. In absence of any written guarantee regarding MSP, farmers are extremely apprehensive about their livelihood. They fear that allowing outside-APMC trade of farm produces would lead to lesser buying by the government agencies in the approved mandis. MSP system would eventually become irrelevant and they would not have any assured income from their farming.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act facilitate contract farming, under which farmers will produce crops as per contracts with corporate investors for a mutually agreed remuneration. Considering, that majority of the farmers are small and marginal whose average land holding size is less than 2 acre, contract farming can increase land holding and ensure some part of the currently engaged workforce migrates to other sectors of the economy. However, the protesting farmers fear that powerful investors would bind them to unfavourable contracts drafted by big corporate law firms, with liability clauses that would be beyond the understanding of poor farmers in most cases. This Act also states that that in the case of a dispute, farmers and traders can approach the subdivisional magistrate, with appeals being referred to the additional collector or collector.
The Essential Commodities (Amendment) Act is an amendment to the existing Essential Commodities Act. This law now frees items such as foodgrains, pulses, edible oils and onion for trade except in extraordinary (read crisis) situations. This removal of restriction on stocking restrictions on trade would essentially translate into unlimited buying and demand for farmer produce.
Considering that Indian agriculture and farmer is at unprecedented pressure; there is a dire need reforms in this sector in order to safeguard not just the livelihood of “annapura” but our source of food as well.
India has often looked at Kenya for its innovative poverty solutions; hence it is noteworthy to mention about a recent research. The London School of Economics examined a decade of high-quality farmer-buyer data from Kenya during a period when it introduced radical farm laws to encourage agri-businesses to determine impacts on small farmers. Essentially, farmers who were reliant on agri-business saw that their income fell by an average 6% and they had to sell their household assets to make ends meet. Whereas, agri-business saw their profit margins rise by 5%. It would be worthwhile to learn from this Kenyan experience and avoid the same pitfalls.
Mahatma Gandhi famously said that you cannot achieve durable reform by becoming impatient. Ultimately, the success of these reforms will be decided by the agricultural ecosystem and how receptive it is to the new reforms.