The farmers’ movement has become the biggest political crisis of the Modi government’s second term. Withdrawal of agricultural laws would mean accepting the defeat of the Prime Minister, who promised to reform the agricultural sector. But if the movement continues, there will be chaos in the food market, urban consumers will feel isolated and the economy returning to the path will be lost again.
Take the Growth Cycle
There is no doubt that to get out of the lower-middle-income category, agriculture has to be removed from the cycle of growth rate below 3%. Therefore, to increase the productivity of labor, land, fertilizer, and water, as well as to increase India’s 2% share in global agricultural exports, large-scale private investment is needed in the field of storage and processing.
Modi’s inclination towards markets
The issue is which strategy to adopt: markets or institutions? This is an old complication, mentioned by economist Ronald Koss in 1937. Modi’s inclination is towards markets that have promised to make the entire country a free trade zone, benefiting the country’s 11.9 crore farmers and 14.4 crore agricultural laborers and their families. Many people believe that this step has been taken to end the institutional support given by the government to farming and this will run into profiteering companies to fill the void created in the system.
Mutual interaction is needed
There is a need for mutual negotiation to find a middle path, which was found to be lacking when in September the government passed the agricultural bills presented in Parliament by voice. Those defending agricultural reforms also believe that its motives and benefits could have been better explained, but now there is no time for public relations on this. Now, perhaps another law needs to be given concrete concessions.
What are the farmers agitating about
Now to understand what measures can be taken, first of all, it has to be seen what the farmers are agitated about. In particular, a very small section in Punjab is dependent on the sale of paddy and wheat at the government’s minimum support price and purchases are made in the Mandis. A bill related to farmers allows them to sell their produce outside the Mandis without paying any taxes or fees to the state government. Such farmers are worried that if the Mandis are been removed, the government should not stop buying their crops at a guaranteed rate.
Fear of farmers is not baseless
Their fear is not completely baseless. The Food Corporation of India (FCI) godowns are full of grain. It has an additional reserve of $ 25 billion, which could have been used in other post-Covid-19 situations. Farmers know this and want legal cover for the minimum support price. The government declares a minimum support price for 23 agricultural products but is redundant in all but a few states except for crops such as wheat, rice, and cotton.
Punjab is the biggest beneficiary of MSP
Punjab enjoys a major benefit of the MSP system. According to Ashok Gulati, an agriculture professor at ThinkTank ICRIER in Delhi, 10 million farmer families here get subsidized fertilizer worth 1,600 dollars a year and get free electricity to extract water from the land. They get the minimum support price along with these facilities in return for the promise of saving the country from starvation almost half a century ago.
A basic income system needed
A change in this social settlement is necessary. Paddy cultivation is not good for Punjab as it consumes a lot of water. Withdrawal of water from the ground is decreasing the groundwater level and burning stubble causes air pollution in North India. In such a situation, the government will have to make arrangements to protect them from loss to assure the prosperity of the market. This can be done by enacting a law to ensure basic agricultural income benchmarked from the Agri Value Added of every state.
The beginning can be $ 500 per acre
Given $ 500 per acre, 19 million hectares would cost $ 95 billion annually, which would be 3.5% of GDP before Covid-19. This may be the beginning of the gradual abolition of the minimum support price that spoils the market, and this payment will begin to be automatically repaid later. The challenge will be to reach the shareholder farmers. This problem also came in the distribution of income subsidy of $ 80 per annum announced by Modi for small farmers before the 2019 Lok Sabha elections.
Take away the fear of small farmers
The government may try to remove systemic flaws. There is also the problem of not allowing the farmers to take the matter to civil court in case of dispute with private buyers. The contract farming law will not be popular until the fear of exploitation is removed from the minds of small farmers. The last part of agrarian reforms ie liberalization of strict rules of storage will benefit the farmer organizations with adequate storage capacity. According to IIM professor Sukhpal Singh, the biggest benefit will be for trading companies. The government should consider this power imbalance.
Need to reduce interest in the MSP system
Agrarian reforms in India will not only dominate the market but also the dominance of both markets and institutions. Politicians should make an offer that reduces the interest of farmers in the old system. Modi’s presidential system a system in which members of the legislature and its chief are elected separately and the right to remove the chief Members do not have due to work, a mole of a mole has been formed, but there is a way to turn this crisis into opportunity.