Partha Chakraborty is an Indian-born immigrant; a naturalized US Citizen since 2018. Educated in India and at Cornell University, Partha is currently an entrepreneur in water technologies, Blockchain and wealth management in the US and in India. The views expressed are his own.
False Ego and Missed Narratives Torpedo a Transformational Agenda in Agriculture.
You could misread the temperature to be warm, even festive, by looking at their faces. Near Singu on a stretch of highway leading to Delhi from Haryana, Mukesh Sanpat beams as he does God’s work – pouring diesel into a Roti machine, ready to keep a Langar humming where he serves 2500-3000 meals every day, free; there are dozens more like his in this twelve-kilometer span. Long lines snake out at port-a-potties, women walk miles to gas stations or strangers’ homes. Speeches and cultural events light up stages every few kilometers, there are makeshift gyms, there are clusters of washing machines running round the clock, even a pizza oven somewhere. Villagers from Punjab, Haryana and UP stretch themselves out for the night on their tractors and long-haulers under the open sky, but you can count on them to be on their feet tomorrow looking to bring their grievance against Farm Bills to the corridors of power atop Raisina Hill.
Their peaceful resolve was never in question. What strikes a reasonable observer as odd is that these prosperous farmers were not brought into confidence as Centre rolled out Farm Bills in September. Failure to do so exacerbated a tale of missed narratives that is about to scuttle long-needed agricultural reform that could be heralded as transformational if it were handled with care.
Decades after India’s march down the path of liberalization started, the agricultural sector remains notoriously hidebound. THE latest NSSO Survey points out that almost 96% of farmers hold less than 4 hectares, a threshold considered necessary to feed a family. Small farms are inefficient, bigger farms can produce 10X as much per unit of land. Tiny landowners supplement their income working as migrant labor, shopkeepers, artisans and so on; those working as contract farmers in others’ lands are even worse off. Even if 70 percent of Indian households record farming as their primary source of income, 82 percent of them are at best working on a subsistence level, even now. Lack of organized credit enables predatory lending, farmer suicides abound, especially in times like todays.
Agriculture Produce Marketing Committee (“APMC”) mandis (markets) are a critical bottleneck. Average mandi serves almost 500 square kilometers area, more than 6X recommended level of 80 square kilometers, thereby making it nearly impossible for a small and marginal farmer to find markets for their surplus. A smaller-footprint Gramin Haat scheme, smaller markets closer to producers, is better suited but ill-equipped as of now. Most APMC mandis are victims of cartels – existing operators organize themselves into associations denying entry to new players. The absence of a transparent, efficient and accessible market mechanism denies rightful remuneration to the farmer, a conclusion easily reached from the first principles of economics and was noted by numerous committees and commissions that looked into the matter.
A different story emerges in prosperous rural communities, especially in Punjab and Haryana. Green Revolution brought high yielding varieties of rice and wheat, average yield tripled from 1.2 tons per hectare in 1960-61 to 3.7 by 1990-91. Synergistic positive changes brought metaled roads to 98% of Punjab villages; electricity, organized farm credit, advanced irrigation techniques, broadband all followed. A new class of farmers with upward mobility emerged, marked by a confidence that is in stark contrast with the usual imagery of farmers in India. Many villagers moved to the West, or moved on to other professions, including transport and industry; those lefts ended up holding larger farmlands with higher yields. As Green Revolution brought food-independence to India, it also brought prosperity to farmers in India’s Granary states, agricultural income per family in Punjab is almost four times where it was before Green Revolution, adjusted for inflation.
It is quite understandable if farmers in Punjab and Haryana feel threatened by the Farm Bills of 2020. Farm yields have plateaued, unlikely to see improvements like what we saw before. Worse, at the current level there are tangible fears of flooding the market. What allays their fear is minimum support price (“MSP”), available only at APMC mandis. If mandis are allowed to wither away over time, leaving farmers vulnerable to market vagaries, it is quite possible in lean years farm bankruptcies will soar just as they do in the US. A farmer in Punjab or Haryana today looks more to maintaining the status quo, than promised riches with better market access. Therein lies the rub.
Farmers also have legitimate misgivings about how the whole thing unfolded. Very little time was spent in the Parliament and there was never an effort at bringing in stakeholders prior to introducing these bills. Once farmers took to the highway, trolls took over the Internet labeling them Khalistanis, an inflammatory insult that only hardened farmers’ resolve. Farmers were derided for their presumed affluence as if their hard-earned prosperity leaves them no option to protest, another ominous stereotyping. Through it all, thousands of men, women, and children slept under an open sky in blistering North India cold – peaceful but resolute.
Condemn such transgressions by detractors as much as we do, we are fully supportive of the quest for efficiency in the agriculture sector, especially in easing access from both sides. That is exactly what the Centre did in September. It eliminated punishment for sale outside of the precincts of mandis, established a standardized framework for direct contracting between farmers and final buyers, including contracts for future products, and limited powers of the state of intervention except in cases of war and famine. All in, these new laws are well-intentioned and well-considered initiatives in the right direction.
What brought farmers of Punjab, Haryana, and UP, and now of Rajasthan, to the streets is the abrupt way these laws were brought to bear, and that there was no fallback mechanism built into it, even for the transition period. What might help in addressing farmers’ fears are a commitment to keep the current framework alive as a last option for all farmers for a sizeable future. It is necessary to keep both options available to farmers, at the same time integrate market mechanisms as done in the Bill, maybe with a few tweaks.
Let us picture Centre as the last resort as was always implicitly intended. Pursuant to bills’ provisions, a farmer will have the option of contracting future produce. If the contracted price ends up below MSP available for any year, let’s imagine the Centre steps in and reimburses the difference to the farmer. In such a world, a farmer will take surplus produce to the mandi and get MSP, or sell it at market price to a third party. A reasonably small portion of the produce will trade outside of mandis at spot-price, helping determine future MSP and futures price for a new contract. In this framework, the farmer is assured of a future income long before sowing assured that they will not face market failure for the bigger part of their output. Still, price discovery will happen at the margin thus delivering the most important benefit of a market mechanism. The small tweak to the Bills that achieves this is explicit recognition of Centre as an explicit source of price support – ready, willing, and able to step in and reimburse differences between the contracted price for future delivery and MSP.
Destiny for India’s agriculture is closer alignment with market forces. However, we must not take farmers’ concerns lightly even if we are on an expedited path. It is their shoulders that support the thrones of those elected, and it is their soiled hands that feed the nation. A more considerate, and considered, the approach will bring the best of minds on both sides and work out a meeting ground that still keeps the spirit of market mechanism.
Good news is that a small tweak does the trick. Can it be on our wish list for New Year?