The new farm laws promise to 2x yes you read that correctly the income of farmers in the next 2 years by relying on the deregulation of the market. But most analysts and critics say this might not work and, in fact, the income of small to medium farmers (comprising 80% of the farmers) might reduce by upto 40% . Which is a substantial hit.
If you want to directly understand the problems click here
TLDR; The farmers’ concerns are genuine and India needs much more.
As you might know, Farmers are protesting in India near the capital of Delhi, since last November. Being totally confused by all the mainstream news, I tried to dive into the topic and understand the actual whole issue.
This is my quest to understand the laws and the concerns…
The sign says “Take back the Black Laws”
The current agricultural sector
Basically, after Independence, India had a huge food deficit leading to famines and droughts, resulting in the government to pass several laws to improve the production, which collectively was known as Green Revolution. This green revolution resulted in 2 main things:
- Increased the production of Wheat, Rice, Sugarcane rise to record levels, making India a food surplus country. But due to the hiked prices of wheat and rice, the productions of moong, dal, pulses, etc. plummeted.
- On the contrary, this resulted in increased use of fertilizers and insecticides. Along with that, there was a huge increase in the usage of water. Resulting in shifting of the water table, infertility of land and much more long term ecological damages. (ex. flowing of water with fertilizers to get mixed into rivers/lakes/ponds, resulting in eutrophication and damage to marine life)
The Current Market
41% of the population has direct or indirect income from the agro-industry … but that population group contributed just 15.4% of GDP in 2020, even with massive portions of the annual budget allocated to agriculture…
This shows how inefficient India’s agricultural methods are and so much potential to grow.
It was 13% in 2014 which has slowly now risen back to 15–16% : India economic survey 2018: Farmers gain as agriculture mechanization speeds up, but more R&D needed — The Financial Express
The Laws which resulted in the Farmer Protests
There are 3 new Laws being proposed by the Government of India and what does government mean to address with each of them:
1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
To promote barrier-free inter-and intra-state trade, beyond the premises of markets or mandis notified under state agricultural produce market legislations. The farmers can sell their products to any person with a permanent account number (PAN) card, without any requirement of mandi license or certification, which otherwise was needed.
Promotes trading beyond the mandis.
2. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020
To promote farmers’ engagement with agri-business firms, processors, wholesalers and exporters.
Promotes contract farming.
3. The Essential Commodities (Amendment) Act, 2020
To remove commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.
Promotes foreign companies and foreign direct investment into agriculture.
This is what the Indian Government intends to with these new laws or making us think it will do. So what are the problems?? Continue reading on!
Link to PDFs for the new laws
How big is the Problem?
In the above charts, we see that small farmers, who are in a larger proportion, have a very little output. This gives them little bargaining power and hence lower prices compared to bigger agriculturists. Thus, the annual income of farmers with huge land holding grew astronomically.
The income of the farmers with the largest land-holdings rose from seven times that of those with the smallest land-holdings in 2002-03 to nine times in 2012-13, a 2015 study by NABARD showed
Concerns & Problems
1. In all of the above 3 laws, MSP is not mentioned
Lack of support in the bills for the MSP (Minimum Support Price – It is basically a guaranteed price that the government agrees to pay for the produce) is a major point of concern. Farmers are definitely angry without MSP, especially for farmers from Punjab and Haryana, where 65% of wheat (2019) is procured at MSP by the Food Corporation of India and state agencies.[citation]
For most of us, we expect a consistence cash flow and income. Every working individual expects to get a particular paycheck at the end of the month. But a farmer just gets the income once a year, without any guaranteed price, which does scare the farmers. Currently, the government only enforces MSPs for Wheat, Rice and sometimes Cotton. So most farmers are already suffering. And farmers don’t like that. They want radical changes and at least a REAL guaranteed price.
2. With the deregulation of the market and addition of private players with a lot of capital, they will first give a bait and then trap the farmers.
The ironic thing about these laws is that the private players will not have to pay the 3-5% cess that the farmers have to pay if they sell at mandis.
As you might have guessed this will result in private players first alluring the farmers with higher rates (esp. small farmers without much info) and then as mandis will die and they will be the only single buyer, they can demand any rate even lower than the MSP that government supposedly “guarantees”
Also, after watching several interviews I realised farmers do want the mandis and that “middle-man” at all. Let us consider they want a loan for marriage or some event. If because of a systemic breakdown of mandis, who will then be giving them the loan. They don’t particularly have a credit score. If there was a mandi then the “middleman” knowing the farmers’ yearly average produce will just give that loan and mostly with NO interest.
3. No address on contract-based farming
Let us consider you are manufacturer for Lays/Balaji chips and for those you need Potatoes / Bananas. So, these companies will do contracts with farmers in those regions to sell their produce at a specific price as decided in the contract. Let us consider that the farmer is just barely not able to meet those quality standards as mutually agreed in the contract.
In those cases, the farmer will be said that the company cannot buy the product at the said price. This is will result in the company getting the harvest for less or farmer just not being able to sell it profitably as there is just one buyer. This can also happen even if the harvest is perfectly fine.
Let us consider, the farmer wants to dispute the corporation’s claim. To solve that dispute the maximum position you can go to is an SDM or DC, which are very difficult to get to if, from a small district, or generally inexperienced officers siding with the Private Huge Corporations (because of lobbying or being unaware). Farmers are not given access to the proper judicial body to complain to aka Courts.
4. Storage of food will not be regulated.
Earlier government ensured a limit on how much food a corporation or individual could hoard. The limit that was earlier set is now removed. So now, capitalists with enough funds (this can just be Amazon who enters India) can easily hoard huge amounts of food. Everyone knows who controls supply can also control the prices, resulting in increased prices to us consumers ALSO.
This to me is the most concerning bit as even foreign entities registered as Indian companies can use foreign capital to hoard food and then sell it at higher prices. WHICH IS JUST WRONG
Who is Correct? – Opinion
I believe that none of them is fully correct. Government is correct in its way that deregulating the market will perhaps help in growth. But there are several loopholes in the new laws that the private sector can easily exploit and they need to be fixed.
Farmers have definitely become a little comfortable with getting this income (which is particularly high for wheat/paddy as they are being exported). This has lead to a steady stall of innovation in the agro-sector. Along with many ecological issues; like those, I mentioned earlier; we definitely need stiff competition and innovation in the sector to remain competitive on a global scale or we will be left behind and this is probably the goal of these new laws, who knows.
But farmers are also humans, and they also feel weird and left out on why they should innovate without any need to.
The problem is that the government with the introduction of private players wants that there should be more competition between startups and OG players in the market, giving farmers really good profits, and also stifle innovation as new sub-industries (like IoT startups) will flourish.
But, the real problem is: with the vast nature of India, these private corporations might just have internal deals and agreements making them not compete as they should in particular states/districts. Making only one buyer available to the farmers. And without any APMCs (Mandis) left [Remember the systemic breakdown of these mandis], they are definitely at a loss.
I will also be not commenting on any violence that took place in the most peaceful protest because both the parties mishandled it terribly, especially on republic day and subsequently the government’s suppressive methods. I hate Internet bans and attempts to stop communication.
Also, convectional Indian media outlets need to improve.
People might argue that in China the deregulation resulted in growth. But the thing is it had control over those other buyers directly or indirectly. Which we probably are missing.
We can also argue about how privatisation of dairy or cellular (not considering 2G😆) has highly benefited both the end consumers and the suppliers.
But if we look at a past example like Sugarcane plantations. India’s sugarcane industry was declining in the 1990s, so govt. allowed private establishments in the hope to increase exports and make crops that much better to sustain weather. We find that even though the production was up by tiny bit, the overall productivity has not changed nor has farmers’ income. Which is concerning.
Conclusion — What do we NEED?
We need a lot more.
After all, deregulation early on has resulted in New Zealand having one of the highest crop efficiency with the use of advanced techniques while the same in the United States is having an adverse effect. It must be done right and with long term thoughts. We do need another Green Revolution, but this time to plan for the next century.
We need deregulation but where everyone has the same playing field. You cannot play proper cricket if the stadium changes the contours every inning. The private players should be given the same treatment government established ones get. (aka same taxes and restrictions) Also, there should be more of APMCs established with advanced soil testing, crop predictions, medical & other facilities to help farmers.
There should be incentives for farmers to advance their infrastructure and make policies that help them to do so. The environmental concern is not even addressed in these laws. There should be stricter laws on how much amounts of fertilizers that can be used (this has serious health impacts ) and how the water should be treated. India should have proper long term plans for increasing water-table to prevent running out of water.
The farmers should be able to establish their own NGOs and FPOs (farmer’s producer organisations) where they can help in facilitating better contracts for contractual farming and also where across the nation they have the same price for each crop. Even the farmers should have abilities to go to judicial courts of India to solve their issues and small farmers should have better bargaining power and marketing channels to get better prices for their crops.
Bigbasket which we believed was helping to remove the middle man while ensuring proper prices for farmers, already got acquired by Tata (mostly). This much power should not be given to private corporations and they must be regulated.
Why Farmers Are Worried About New Laws; It’s The History (indiaspend.com) //Massive thanks to indiaspend.com for the amazing responsive graphs in the post.
50th Day of the Farmers’ Protest ft. Samdish — YouTube //A must watch video for real talk with the farmers and BTS on what conventional news outlets show
Farmers Explain Their Issues With The Laws ft. Samdish — YouTube // It is extremely insightful on how farmers are managing the whole protests and their demands. Their kindness is so pure
Thanks to my friend Aryan for helping edit this post. He writes some amazing poems.