The government has passed three farm bills in the last session of the parliament by resorting to voice vote. As per new farm bills, farmers can sell their produce anywhere they like. Rajat K Baisya examines these reform bills regarding how it can impact farmers and other stakeholders.
The government has passed in the last session of the parliament by resorting to voice vote three farm bills which has resulted in immediate protest and resignation of the Minister of Food Processing Industries, Ms Harsimrat Kaur Badal who has been serving in this ministry the second term in the running. She even left the parliament while the session was on in anger to join the protest rally organised by her party Shiromani Akali Dal (SAD), the oldest ally of BJP in NDA. She has said at the farmers’ rally the next day that she opposed the farm bills and she was not even consulted.
Later on, all opposition parties as well as some farmers’ organisations also have been organising protest rallies in various places demanding the withdrawal of these three bills. As per new bills, farmers can sell their produce anywhere they like. Let us examine these reform bills regarding how it can impact farmers and other stakeholders.
Although some confusion persists that Minimum Support Price (MSP) will be withdrawn immediately or it will be withdrawn in phases. Even PM also said that support would not be withdrawn. But MSP cannot continue for long if market-driven pricing has to prevail. There is other confusion regarding whether existing Fair Price Shops (ration shops) will cease to exist or not. About 75% of the rural population and 50% of the urban population depends on the Public Distribution System (PDS) to buy the staples and other agricultural products from ration shops. Govt normally procures grains at pre-declared MSP and keeps the stock in Food Corporation’s (FCI) warehouse.
And often warehousing capacity is not sufficient to hold the stock forcing FCI to keep that excess stock in open conditions, and a large part of that goes waste and spoiled. FCI is a loss-making, inefficient organisation, and its loss is mounting every year. FCI employees about 22000 people directly on their roll. There are more numbers employed indirectly who are mainly loaders, unloaders, and other logistic service providers. PDS is actually the Food Security System in India. We have about 5.4 lacs fair price shops in India that covers 80.75 crores people. What will happen to that system?
If PDS has to continue then MSP also has to continue; otherwise, Govt has to buy at market price and offer subsidised rice and wheat to people through PDS, which is not possible. So PDS also has to be discontinued. About 72% of our farmers are small and marginal farmers, and the average farm holding is only 1.08 hectares. And it has been said that 75 % of the farmers have to buy food grains from the open market. For this large segment of the farmers, market-driven pricing is not going help. To benefit from the open market-driven pricing, these small farmers have to join cooperative farming or collective farming to gain any muscle to bargain in the marketplace. Cooperative farming has not taken any roots in India as yet. So these large sections of the farmers all of a sudden will get into a situation that they cannot easily benefit from.
There were times when 75% of the country’s workforce was in agriculture, and Agriculture also contributed 75% of the Country’s GDP. Today, Agriculture contributes about 17% of the GDP and 50% of the country’s workforce. Farming, therefore, is not a preferred occupation or profession any longer. A survey indicated that about 42% of the farmers wanted to move out of the farming profession itself. But the number of farms increased significantly over the years. In 1970-71 we had about 71 million agricultural farms, but by 2015-16 the number of farms increased to 145 million, which is more than double. However, the average farm size also almost halved from 2.28 to 1.08 hectares.
This would mean that new landmass has not come into agriculture or wasteland has not been converted into agricultural land. And on the contrary, agricultural land got converted to other uses due to rapid urbanisation and industrialisation. If this is the size of the average farm holding and they constitute over 75% of the farmers how this market-driven forces will benefit them? Individually, these farmers have no bargaining power. Unless therefore cooperative farming flourishes these farmers have been exposed to market forces where buyers’ power is disproportionately higher. The government thus is not giving a level playing field for the stakeholders in this vital sector.
It is everybody’s knowledge that state agricultural marketing corporations as well as cooperative food processors are corrupt and inefficient, and they need to be either closed or drastically restructured. State-run APMC and processing units never made any profit, and they don’t have any concept of creating a surplus, and as such, they drain the resources of public exchequers’. Now with new farm bills in place what will happen to them? The only choice is to close down. With so many organisations are going to be impacted and the people employed in those will be rendered surplus? What is the immediate plan for those?
Everyone and all political parties talk about farmers’ welfare. BJP govt wanted to double farmers’ income, and that was their promise in the last general election but what really happened? The agricultural sector was growing 3-4% year on year for the last four years. Even in pandemic agriculture has grown 3.4% when the economy was down by 23.9% in April to June quarter. As per the figure in NABARD report which was also reported in NSSO, farmers’ income per family was Rs 8931 in 2016-17, an increase of just Rs 2505 per family per month from the base level of 2012-13.
The meager growth rate of 3 to 4 % in farmers’ income over this period if viewed against the agricultural growth rate, one can conclude that Govt has not done anything to double farmers’ income. Farmers are at the same level as before and in 2019 there were about 6000 farmers committed suicide. Where else such things happen? These farm bills may be yet another attempt by Govt to increase farmers’ income. But will that happen?
In a capitalist world, aligning prices with the market is always a desirable strategic direction. But for that, the ground has to be prepared. Our farmers cannot be compared with the farmers in Europe and the USA. While the intention was to increase the farmers’ income but will the new policy initiatives help in achieving that?
According to me, we are not prepared for it. Linking with the market force requires a suitable ecosystem, including education and training, physical infrastructure and backbone network, market maturity, technology absorption, administrative infrastructure, strategy for absorbing people rendered surplus in gainful employment.
Without any such preparation, it is bound to fail. It is going to be yet another experiment like hurriedly implemented Demonetisation and GST. They created havoc in the MSME sector; these ill-conceived farmer bills will also likely to fail. How it is going to impact food processing industries will be a subject matter to be discussed in the next issue of PFI.
The author is the chairman of Strategic Consulting Group and served as Professor and Head of the Department of Management Studies, IIT Delhi.