It was a sight to behold when hundreds of farmers in Punjab and Haryana took out a tractor march against the three agricultural ordinances passed by the central government. The new rules have also created conflict amongst political parties, both ruling and opposition: whether to support ‘opening up’ of the agrarian economy, or continue with a protectionist stand. Nevertheless, the ordinances pose deep contemplations and questions with regard to the method adopted, effects, and pre-existing structures.
The Trifecta of Ordinances
The Modi government passed some agricultural ordinances in June which were aimed at reforming the current system. However soon enough, these ran into controversy and faced wide-spread opposition from farmer unions and groups.
These new laws include: first and foremost, the government has done away with important provisions of the Essential Commodities Act, which amended the restrictions imposed on stocking of food, allowing the Centre to regulate certain agri-products during emergencies or otherwise. Second, a new law called the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 or the FPTC Ordinance opens up direct agricultural trade to outside players and businesses other than APMC stakeholders. Lastly, contract farming has been legalised.
There are many pros and cons of these novel ordinances, but one must first wonder as to why these laws were passed through ordinances bypassing Parliament rather than through the proper procedure. What was so urgent or controversial about these laws that they could not be subjected to proper debate and were passed hastily in the midst of a pandemic, when there are more pressing issues to deal with? Another important aspect is the fact that agriculture is a subject on the concurrent list i.e. both state and central governments have to legislate through cooperation. But the authority of the states and their right to regulate Agricultural Produce Market Committees (APMCs) of their respective states has been contravened. This not only undermines their authority but also reduces their right over revenue from this source significantly. So on the face of it, the second ordinance appears to be unconstitutional…It remains to see if it will be challenged in the top court by any of the stake-holders.
Evaluation of these ordinances requires a two-pronged vision: acknowledgement of their effect on the corporate sector, and on farmers. The first ordinance is the amendment of the Essential Commodities Act which allows the government to impose stock restrictions on certain agricultural products under special circumstances like famine, flood or any other emergency. The base for such restrictions is the rise of inflation to 100% for perishable items and 50% for the rest. Given the inflation trend in India, these conditions are all too often, as was proved by the staggering rise in onion prices last year. The ordinance also removes stock limit restrictions for value chain stakeholders provided that the stocks are within their storage capacity, and also for exporters who can prove that a large demand exists. This might encourage businesses to invest more in agriculture, but it also opens the door for large-scale hoarding which is already rampant in the nation. Plus there is no way for states to validate that stocks are being stored according to permissible levels, especially if private players are now allowed more freedom in the market.
The second law seeks to “do away” APMCs and open up the selling of agricultural produce to private businesses outside the established state mandis, and that too without any tax barriers. The aim is to liberalise the market in order to ramp up the competition and allow corporates to deal directly with farmers, promoting better prices for the latter. The pre-existing APMC system is riddled with inefficiency. Only 7% farmers manage access to MSP, and the rest go through rampant exploitation and are severely underpaid. There is a lot of monopoly at play, giving rise to a middlemen mandi-mafia which illegally regulates pricing. On top of this is the bureaucratic apathy, measly infrastructure and for name-only elections. Often farmers are forced to sell their produce below the Minimum Support price outside these mandis or dump their goods on the streets. Hence, there is a universal agreement that the system is in need of dire reform. This new ordinance will benefit the North-East which grows a range of exotic produce and will now able to tap into the international demand chain. But is undermining APMCs the way to go? The new ordinance will allow big corporates to exploit farmers, for it is evident that the farmers do not have much bargaining power. Instead of benefitting from this new competition, there are higher chances that they will become victims of the tug-of-war between mandis and corporates. Lessons learnt from Punjab’s doing away with APMCs and subsequent restorations have proved the same. Farmers from Bihar, a state that eroded APMCs in 2006, flock to Punjab to get fair prices for their produce. (In re second ordinance, it must be noted that many farmer unions have demanded an accompanying amendment that MSP be implemented in the deals outside APMCs to ensure fair-returns)
Uniformity of contractual forming provisions is what the third ordinance propagates, that too without any additional taxes, although many of its provisions are yet to be notified. Contract farming is not a novel thing: it is prevalent with proper rules in multiple states; many contractors and companies have had agreements with farmers through intermediaries. Even landlords and tenants have informal system centering around such a practice in many regions of the country. Newly formulated rules aim to regulate the practice and allow farmers to fetch higher prices by directly deal with corporations. The ordinance provides for a contract that specifies tenure, quality, agreed payment, etc., proper online registration and an official dispute resolution mechanism. All this seems good on paper, but in practice, there are many hurdles that blot this rosy picture. Large number of farmers, especially small and marginalized, would not have much bargaining power on the ground level when faced with big corporations. The same farmers also have unequal access to official dispute resolution forums as compared to hotshot corporates with top-class lawyers.
A Juxtaposition
Unlike industrially developed regions like the US and Europe, agriculture in India is not a very profitable affair. Majority of farmers indulge in subsistence farming to satisfy their own needs and are devoid of technology, HYV seeds, etc. (except for Green Revolution areas like Punjab, Haryana, and western UP). In such an agrarian economy capitalist policies aimed at opening the market ought to be implemented very carefully.
But even the US, largely considered the food bowl of the world, has not escaped the drawbacks that come from excessive agricultural liberalisation. Majority of American farmers rely on exports to fetch a good price for their produce. But the Covid-19 crisis along with a prolonged trade war with China has spelt losses for them. China was a major importer of American agricultural produce, and the tariff one-upping has deprived the farmers of the Chinese market. Apart from this, the entire American agri-business is controlled by a bunch of mega-corporations that increasingly control and manipulate the market, enabling them to dictate prices and push out small farmers and competitors out of business. Their eco-political clout also allows them to influence policymaking. The result is that today an alarming number of farmers want to leave the business, and family farms are over their necks in debt. Excessive industrialization and capitalism have led to over-production, which ultimately translates into poor returns.
Vietnam is a developing country where the agricultural contribution to overall GDP is almost the same as India, and it is on its way to becoming one of the highest rice producers. It has shifted from a collectivized model to deeper integration into the world economy. There is no doubt that technological advances and new liberalizing policies have led to immense development, but there is also a certain price to pay. The country is faced with an environmental crisis due to over-exploitation of resources in a bid to increase production and meet international commitments. There has been an increasing loss of farmer welfare, and the main beneficiaries are foreign companies and MNCs that benefit from lax labour laws and increasingly liberalizing thrust. Lack of transparent information and demand-supply regulation has unleashed a crisis, and hence the government has brought in new reform measures regarding land, food safety, etc. but many are of the view that direct state involvement will not prepare the country for international competition, and it is better to facilitate rather than lead reforms.
Conclusion
The ordinances, prima facie, cannot be said to be redundant or perfect. A policy needs a lot of groundwork and cooperative effort from various stakeholders to be effective. India is still a heavily agrarian economy with more than 40% of the population employed in the sector. But despite this, it does not have the profits to make up for such widespread participation. This is indication enough that the field is in need of dire reform, and the espoused policies seek to open up agriculture to capitalist forces aiming to liberalize farming and increase gains. Before this can be established, there is a need to bring the average farmer up to mark with the goal that the government seeks. Lack of education, capital and technology has forced farmers to cultivate meagre land-holdings. Even the existing framework of protectionist and fair-price policies like APMC and MSP is inaccessible to a huge section of the tillers, then how will they be able to deal with profit-based corporations. Rather than overhauling and creating an alternative space, there is a need to plug in the loopholes of the existing system in order to ensure efficiency and accessibility.
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Comprehensively wirtten and aptly targetted the core issues.