The recent farm bills passed in Parliament caused a fair amount of uproar. The bills are radical in nature indeed. They aim to reform the current system where Indian farmers have to sell their produce at local markets, with minimum support prices (MSPs) decided by the government. Now, farmers can sell to and enter into contracts with private players.
Some may consider the existing MSP system as forcing farmers to sell to a monopoly. Others may consider the MSP system a safety net, where the farmer is at least assured of a minimum price. This is why the new bills have led to polarised reactions.
The new bills allow farmers to choose between several buyers and sell across regions. In other words, it liberalises the agricultural markets, historically heavily controlled by the state.
India has huge potential as a major agricultural powerhouse in the world. Supermarkets in major world cities stock milk, cheese, butter, vegetables and poultry from far flung nations. Thailand and Australia for instance, supply a lot of agricultural produce around the world. India doesn’t.
Peanut butter is almost a staple in the West. Many parts of India grow massive quantities of peanuts. We don’t however, export peanut butter like other countries. We don’t allow our farmers to do business like that. The Indian urban middle class wants low food prices. Hence farmers enjoy sympathy but not a free market. The government remains heavily involved. It ensures the Indian farmer survives, but never thrives.
This time however, the government is letting go. In what would be a major reform, the current bills pave the path for privatisation of Indian agriculture. Privatisation, enough empirical data shows, has almost always benefited the consumer in India. Airlines, phone companies, insurance – these were all government monopolies. Private players were allowed in, and the respective sectors took off and boomed. The original government entities – Air India, LIC, BSNL, MTNL are still around too.
Similarly, the long term, best case effect of these farmer bills can be enormous growth in India’s agriculture. We aren’t talking about microchips and artificial intelligence, complex industries that are hard to dominate. We are talking about milk, cheese, tomatoes, rice and oranges. Can’t India be the best in these compared to the world? We easily can.
However, for this we will need private players, which in turn will allow capital, competition among buyers, scale, branding and multiple opportunities to come to the sector. This doesn’t mean there are no issues with the new farming bills, or everything will go super smooth. There are genuine concerns, belonging to three broad categories.
One, the power differential between the (potentially) powerful private buyer and the farmer. While it is good to allow private deals and contracts for agriculture, a less powerful person cannot negotiate a fair contract. The only way out of this is some sort of rebalancing of power, which will come through farmer collectives, negotiating bodies on behalf of farmers, unions and other entities that ensure farmers’ rights.
This is where the various state governments should focus their efforts right now. The solution to a power differential is to increase the farmer’s power, not to stall his progress and keep him on government crutches for generations to come.
The second concern comes from the execution track record of this government. There seems to be a pattern – great intention, decisive announcement, praise all around on the announcement and then a range of implementation issues.
Attempts to change things and take action for it do deserve praise, compared to the ‘let’s discuss and crib but do nothing’ India of the past. However, perhaps due to the enormous number of sycophants of this government, every announcement is followed by so much praise that any anticipated implementation issues are ignored. As a result, a year or so later, reality hits, and the execution isn’t as amazing as the announcement.
The farmer bills could face that same fate too. Only this time, it involves the livelihood of hundreds of millions of people. If this goes wrong, it will really go wrong. Instead of waiting to see if that happens, it is better to be honest and anticipate the issues. Then, steps could be taken to minimise these issues. For this, the volume generated by sycophants should be turned down, and the sound of sensible feedback should be raised.
The last issue of the farmer bills is the inherent conflict between farmer’s welfare and the prices paid by the urban middle class for agricultural products. The urban middle class wants their prices low. Meanwhile, if we are giving the farmers more choice, and the farmer chooses to sell produce to Europe than in Jaipur because he gets better prices – are Indians OK with it?
This inherent conflict as Indian agriculture liberalises could become a major issue in times to come because of these bills. The government will have to handle this precarious balance really well. Maybe have a system of cap and floor pricing as we ease into free markets.
The farm bills are a necessary step in the evolution of the Indian farmer. Our farmers deserve the benefits of globalisation as well. The bills are a step towards opening up the Indian economy, which is the need of the hour. These bills give the farmers more choice on how to sell their products, and if done right, can enhance their returns. Our farmers have always had respect and sympathy from citizens. It is about time they also had something else – choice.