Would the farm laws help increase farmers’ incomes? Could farmers benefit from an expanded access to markets? Would they be more willing to engage in contracts with urban firms because of the law on contract farming? Would the changes in the Essential Commodites Act help to reduce distress sales for perishable commodities? Or, would the reform bear fruit only after some essential infrastructure is built? Would these laws help in diversifying agriculture?
In a symposium that will run through this week on I4I, six experts – Bharat Ramaswami, Sukhpal Singh, Sanjay Kaul, Siraj Hussain, Mekhala Krishnamurthy, and Shoumitro Chatterjee – will provide their perspective on these issues.
The introduction of the three farm laws and their quick passage through the two Houses of the Parliament, have generated much turmoil. Farmers, especially in Punjab and Haryana, launched massive protests. Many seemed convinced that this move was a precursor to the end of the present MSP (minimum support price) regime. Yet, no mention of MSP was made in any of the laws. As the fear spread to other states like Maharashtra and Karnataka, farmers from those states took to the streets. It makes little sense to dismiss these protests as simply misguided. Farmers must know their self-interest.
Most of us at arm’s length from agriculture have been puzzled by these events. Have farmers not been complaining about the chokehold of APMC (Agricultural Produce Market Committee) mandis that is preventing them from getting better prices? Why are they upset?
I remember an encounter several years ago with a farmer in Western Maharashtra who was complaining bitterly about the regulated markets for agricultural produce under APMC. I asked him: “But was APMC not created to protect farmers from monopsonist or crocked traders?” “Yes, once upon a time, we had little irrigation and for most farmers in this area, the yields were low. A handful of traders had divided the whole district among themselves. There was only one trader that I ever dealt with. I had to sell to him at whatever price he would offer. These regulated markets helped us a lot then. But things are different now. With more irrigation and better seeds, the output has gone up. A lot more traders come this way. If I do not like one guy’s terms, I can go to another. But with APMC regulation, it becomes difficult. I would get better prices if I could directly negotiate with these traders”. Yes, things have changed over time. But then why are farmers upset with the proposed changes that offer the option of deregulated trade?
Note that the astute farmer brings us to a key Econ 101 result: If a seller is selling in a competitive market, it is good for him. But not so, if the buyer he faces is a monopsonist. Interestingly, many critiques of these farm laws are fearful that individual farmers will face large corporate buyers against whom they will have no bargaining power. Is this fear justified? How likely is corporate takeover of agriculture trade?
There are many puzzling questions.
Clearly, the main goal of agricultural reforms is to improve farmers’ incomes. Indian agriculture consists of a multitude of small and marginal farmers. Would the farm laws help increase their incomes? How? Could they benefit from an expanded access to markets? Would they be more willing to engage in contracts with urban firms because of the farm law on contract farming? Would the changes in the Essential Commodities Act help to reduce distress sales for perishable commodities? Or, would the reform bear fruit only after some essential infrastructure (for example, cold storages) is built? Diversifying agriculture would help farmers improve their incomes. Would these farm laws help in diversifying Indian agriculture?
These questions can only be answered by people who have deep knowledge of agricultural markets and how agricultural marketing works at the ground level. We are lucky to have secured the consent of six eminent experts to offer their perspectives on the questions that puzzle us all. The I4I Symposium on farm laws will run through this week. It will be initiated by Bharat Ramaswami (Ashoka University) and followed by Sukhpal Singh (Indian Institute of Management, Ahmedabad), Sanjay Kaul (former Indian Administrative Service Officer), and Siraj Hussain (ICRIER), in that order. Mekhala Krishnamurthy (Ashoka University; Centre for Policy Research) and Shoumitro Chatterjee (Pennsylvania State University) will wrap up the symposium by presenting a gist of the posts in the symposium, as well as their own perspective on these issues.
A very useful reference for the farm laws is PRS Legislative Research, who have detailed the contents of the laws fully and precisely: Link.
If you would like to see the laws as they were presented without being weighted by anyone’s opinion first, this would be a good place to start.
Farm laws: First principles and the political economy of agricultural market regulation - Mekhala Krishnamurthy (Ashoka University; CPR), Shoumitro Chatterjee (Pennsylvania State University; CPR)
Farm laws: Potential for positive outcomes - Siraj Hussain (ICRIER)
Farm laws: Unlikely to bring transformative change - Sanjay Kaul (Former IAS Officer)
Farm laws: Design leaves much to be desired - Sukhpal Singh (IIM Ahmedabad)
Farm laws: Liberalisation of agricultural marketing is necessary - Bharat Ramaswami (Ashoka University)
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By: Sunil Bhandare 26 October, 2020
Undoubtedly, farm bills are game-changing reforms and would transform Indian agriculture in the coming years. For their widespread implementation and successes, it would be ideal if there is the active participation of the States in the spirit of Cooperative Federalism. For far too long the existing system and structure of agricultural operations and markets have led to a whole set of abuses and inefficiencies, including corruption and leakages of massive scale. In particular, small, marginal and medium farmers have been deprived of their legitimate opportunities to improve their fortunes. With progressive fragmentation of farmlands, the problems and pains of small and medium farmers have been more and more intensified. Now they will have better options of alternative trading and market arrangements and also facilities of modernisation and diversification of their farm practices with expected increased participation of the private sector and their investments in the farm sector. I am keen to participate in the E-Symposium and looking forward to listening to experts and educate myself on the vital aspects of the three farm bills and their implications for the Indian economy. Many thanks.