The new farm laws and the resultant confusion

Recently the Indian government brought in three laws that attempt to provide farmers with the economic freedom to be able to sell whatever they want in whichever part of the country. These laws essentially opened up the prospects of farmers to be able to access private markets outside the Agricultural Produce Management Committee Management Committee better price. However, there is stiff resistance to these laws for various reasons.

To understand how Indian agriculture operates, we must recognise the existence of feudal production relations within Indian agriculture. That is, the large landowner is often also the seller for the fertilizers and seeds, an agent for procurement in the APMCs and often a key political player in the local area. It also tends to be the moneylender thereby giving it virtual control over critical inputs such as capital, seeds and fertilizers, and it also plays an important role in determining the price that a small farmer gets at the APMCs. This system results in a deadly cocktail whereby rich farmers have gained, and this gain has come at the expense of the small and poor farmers.

So, the new laws are essentially trying to free the system from these feudal production relations and attempt at establishing a more organised production system in the Indian agricultural sector. There have been many that have conflated the issue leading many to believe that the bill will do away with the Minimum Support Price (MSPs) but nothing could be farther from truth as the government will continue with the MSPs as it has stated several times. The new law simply creates an alternative mechanism that will provide farmers with greater choice with regards to where to sell their produce.

The issue now is essentially that MSPs-APMCs and private markets will co-exist and thus farmers will have the choice to either sell at APMCs or at private markets. Thus, farmers will pick the market, whether big or small that gives them a better price for their product. This is a reform that at its very core will bring a greater number of buyers into the market thereby enabling farmers to improve their price realisation.

The only people who will end up losing in the process are the middle-men and certain vested

interests that have managed to prosper due to a monopsony created by the erstwhile policy regime. Consider this, now a farmer will have the right to sell across the country without any restrictions – something that we consider as trivial was denied to the farmer for many years. Thus, a farmer could use the E-NAM platform to see the prices across the mandis in the country and decide to sell wherever he can maximise his profits.

The economic freedom granted by the Indian government to farmers came three decades after it granted the same to India’s manufacturing and services sector. The resultant growth of both these sectors since 1991 is a testament to the critical role of economic reforms in improving economic prospects and incomes.

Most countries have granted their citizens economic freedom, yet every attempt at doing the same for Indian farmers since the last three decades has been opposed be special interest groups. This is the reason why these reforms did not happen when the original economic liberalisation was undertaken despite political parties, academics and leading experts on the subject being well aware of their need.

It is also important to remember that there was a consensus on these reforms as several opposition parties including the Indian National Congress had it in its manifesto to implement the same reforms - in fact, they even suggested repealing the APMCs in early 2019. The United Progress Alliance (UPA) government too held similar views in 2010, 2011 and 2012. These reforms were also championed by several farmer groups who incidentally are also protesting against them simply because these groups are affiliated with various political parties. The sheer hypocrisy of these protests cannot be unmissed by ardent watchers and observers of Indian policy and political space.

Many have also claimed that farmers were not consulted before these reforms were undertaken but they ignore the parliamentary committee which recently submitted its reports advocating for the very same laws which had representatives for different political parties including the Congress.

The question thus is that why are farmers protesting? Because they have been told that the proposed laws will take away MSPs and APMCs thereby leaving theme at the mercy of the private sector. However, the law will bring greater competition into the market which will benefit the farmers and this is very intuitive, yet there has been a deliberate attempt to prevent such a critical economic reform from transforming Indian agriculture.

One hopes that everyone would see through the politically motivated protests and recognise the importance of these laws in liberating our farmers from the extracting shackles of the feudal production relations that have kept them poor for many decades.

Karan Bhasin is an Indian economist and Director, Global Young Action network