The entry points to the capital of the world’s fifth-largest economy will be blocked on 8 December 2020. The reason is a protest against three laws that attempt to give freedom of choice to farmers, a virtue in any other part of the world. Leaders of 11 political parties, from Congress president Sonia Gandhi and DMK chief M.K. Stalin, NCP leader Sharad Pawar to Samajwadi Party chief Akhilesh Yadav are lending their support for the ‘Bharat Bandh’. Residents of New Delhi will not be allowed on roads, they will not be permitted to do their business because a few middlemen and their political organisers will lose their monopsony power to buy from farmers. Illiterate motivations have attempted to turn this into a geopolitical moment, with Canadian Prime Minister Justin Trudeau following Indian leaders in politicising the issue.
In a sublime whataboutary, the former have nurtured the ideas behind the new farm laws domestically, and the latter has been fighting against the interests of the same farmers in WTO. The sole constituency that may lose a small part of their interest would be the middlemen now institutionalised, and meddling trade unions finally finding a cause. Both of these have offered the Opposition platforms from which to exploit and extract political capital. The currency of democracy has shifted its stance from principled and beneficiary-focussed debate and protests, to petty opportunism. Politics is skimming the cream off the economy. If the three farm laws are repealed, as the protestors are demanding, farmers will lose thrice over.
First, farmers lose the flexibility of selling their produce at better prices outside predesignated mandis. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, beaks the monopsony of Agriculture Produce Marketing Committees (APMC). This is an institution created during the economy of shortages and bound farmers to selling their output to the APMCs (mandis) and nowhere else. Over the decades, the economics of APMCs has gathered political power. This is an institution that as served its purpose and needs to dissolve or die in the 21st century. Simply put: the new law entitles farmers to sell their crop outside APMCs and across states (Chapter II, Sections 3 and 4). While this is clearly a benefit, it doesn’t stop them from selling to APMCs. But it — rightly — prevents APMCs from charging any market fee, cess or levy outside APMC areas. Further — again rightly — it prevents state governments from levying “market fee or cess or levy, by whatever name called” on any farmer, trader or electronic trading and transaction platform (Chapter II, Section 6). With a dispute resolution mechanism in place (Chapter III, Sections 8, 9 and 10), the law plugs potential exploitation of the farmer. Because agriculture is a state subject under the Constitution, but food is a national market, the law enables farmers to access that market while remaining within the Constitutional confines of Union-State relations. No rational farmer, or a politician seeking to benefits them, can oppose this law.
Second, loss of inventory of crop as cold chain infrastructure does not come up and return to the era of price controls. The Essential Commodities (Amendment) Act, 2020 brings an ancient 20th ancient law, the Essential Commodities Act, 1955, in tune with 21st century realities, flexibilities and aspirations. It aims to ease excessive controls over the production and distribution of agricultural commodities. It attempts to deregulate the prices of cereals, pulses, potato, onions, edible oilseeds and oils (Section 2); controls will come into effect “only under extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of grave nature”. These circumstances have been specified — 100 percent increase in the retail price of horticultural produce, or 50 percent increase in the retail price of non-perishables. The time period has been specified — the prevailing price over the preceding 12 months or average retail price over the preceding five years. Most important, given the criminal wastage of food year after year in FCI, this amendment paves the way for cold chain infrastructure to come up, thereby managing the problems of seasonality. Essentially, it allows cold chains to hold perishables to be able to sell them after the harvest period. This will help the storage of fruits and vegetables — and has no impact on rice and wheat. By repealing this law, the Indian farmer will be relegated back to the 20th century, function within a limited of prices and commodities, while the rest of the country, including wealthy farmers and middlemen protesting in their name, drive their SUVs into the 21st.
Finally, the repeal of the third law will ensure that any legislative mechanism that farmers get while dealing with non APMC buyers, such as agri-business firms, processors, wholesalers, exporters or large retailers, will end. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 is a closure of the two laws above. It creates a legal framework of agreements within which farmers can engage with companies and wholesalers. From defining a “farming agreement” (Chapter I, Section 2(g)), to detailing it (Chapter II, Sections 3 to 12) and finally creating a dispute settlement mechanism (Chapter III, Sections 13 to 15), this law legislates all components of an agriculture transaction — pricing, transparency, payment mechanisms and manner of delivery. It places compliances on quality and standards (Chapter II, Section 4), a power held by the middlemen in APMCs and to which the small farmer has no questioning recourse, that factors in farm practices, climate, pesticide residue and food and safety standards. Irrespective of the output and whatever the nature of agreement or dispute, the law prohibits sponsors (companies, processors, wholesalers) from acquiring ownership rights or making permanent modifications on farmer’s land or premises (Chapter II, Section 8), thereby protecting the farmer’s land. The law further enables the agreement with modern financial instruments like insurance and credit (Chapter II, Section 9).
The political economy of this bandh, this protest, is really the politics of vested interests that is steamrolling over farmer economics. Every reform has to pass through and either co-opt or side-line vested interests — the incumbents who resisted foreign entry into Indian businesses in 1991, the brokers who resisted electronic trading in 1994, the unions that have resisted the entry of private banks (and still do), the traders who resisted FDI in retail (and still do), the companies that found loopholes in the Insolvency and Bankruptcy Code (IBC) law such that it has had to be amended several times, the corrupt tax officials that have turned the goods and services tax into a compliance nightmare rather than a catalyst of convenience…the list of vested interests coming in the way of economic reforms is long.
Many of those protesting against these laws have been proponents of the same reforms earlier. There are more than 200 citizens from 12 states, including from Punjab, that have signed on “Farmers’ Manifesto for Freedom”, among which the APMC and Essential Commodities Act have been named as institutions getting in the way of these freedoms. Item No. 21 under Chapter 7 in the Indian National Congress (INC) manifesto of 2019 says the party will replace the Essential Commodities Act, which “belongs to the age of controls”; Item 11 under the same Chapter says the INC will repeal the APMC Act and “make trade in agriculture — including exports and inter-state trade — free from all restrictions”. This is what the Essential Commodities (Amendment) Act, 2020, and the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 have done. An August 2010 letter by Sharad Pawar (then Union Minister of Agriculture) to Sheila Dikshit (then Chief Minister of Delhi) called for amending the state APMC Act “to encourage private sector in providing alternative competitive marketing channels”.
All three — farmer bodies, the Congress and Pawar — can change their minds: a democracy and its interests are free to shift stances in tune with changing needs. Further, in a democracy, all voices need to be heard and protests are a valid and valuable tool. By negotiating with farmer representatives, the government is hearing them. If a new argument comes against the laws, the government must act on it with an amendment, as it has done with IBC. But if the dharna, the protest and the inconvenience to citizens is merely another reason to hold back important and crucial reforms because of a politics that supports small slivers of vested interests rather than the large swathe of small farmers, the government must not give in. At the same time, while digging its heels on the economics of farm laws, it must simultaneously reach out to genuine beneficiary farmers. If the potential benefits of these reforms are not articulated politically to those benefiting from them, the debate would be hijacked by the entrenched elite trying to hold them back. The wellbeing of farmers must be taken into account — it is the missing conversation in this political drama.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...
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