How the farm laws debacle is a lesson not revised by NDA government 2.0 which spells disaster for democracy and economy even as it provides momentary relief brought about by dissidence.The Government of India’s three farm laws have been the focal point of the political tidings soon after their passing as ordinances and later after being tabled and rushed through in the parliament has had a constant presence on the frontpages of dailies. The issue has been taken up in various parts of the country but the highest sense of sincerity was in the states of Punjab, Haryana and Uttar Pradesh. Public policy is multifaceted and a policy decision related to agriculture in India has a colossal effect on both politics and economy. Agriculture has been the single largest employer of the country with respect to industrial and service sectors. Despite its diminishing proportion over the past few decades, the recent “Periodic Labour Force Survey” still shows the dominance of agriculture as 45.6% of the total workforce is engaged in it for 2019-20. The large share of the population dependent on agriculture is the reason why policies centered around it have the power to benefit political entities by affecting demographics in a democracy.
Agriculture Markets in India
The Indian agriculture markets have been broadly organised by state support and an elaborate bureaucracy has been sanctioned for the operations of such markets. The farmers’ produce has been sanctioned to be marketed only in the mandi regulated by the Agricultural Produce Market Committee Act (APMC) enacted by the state governments. As of February 2021, there are 6,946 regulated APMC mandis in the country. The first sale can only be conducted under the aegis of the APMC and commission agents are licensed for carrying out the same. Such a placement of buyer and seller was adopted in India to ensure fair practices in the agri-markets under a regulated ecosystem. However, the APMC market yards have their own issues. These markets have a fee from both buyers, the mediating agents and functionaries like logistical and storage agents. Such charges lead to the increase in the price of farm produce leading to market distortion. Prior to the GST regime, the Value-Added Tax (VAT) on the first sale of agricultural produce was as high as 10 per cent (for paddy) in Punjab and Odisha. The regulated nature of such a marketing system increases the supply chain, brings market distortion to the pricing and obstructs competition. The issue of multiple charges and fees along with their high rates in the APMC markets was also mentioned in the Economic Survey 2014-15 as “non-transparent, and hence a source of political power”. The mandi charges are also collected with a tax but are not credited to the state exchequer and thus the funds collected pass through with relatively negligible scrutiny as other state taxes do.
In 2003, the Union Government brought a Model APMC Act in order to encourage the state governments to make their APMCs economically progressive and ensure higher degree of ease of doing business. It consists of provisions of setting up of private mandis, special markets for specified agricultural commodities, replacing the licensing to registration-based system, creation of modern agricultural marketing infrastructure, direct sale of produce to contract farming sponsors etc. However, there has been a hesitancy in adopting these reforms and states have introduced them partially.
Inducing Competition in the Agricultural Markets
One of the three acts - The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 aimed at changing the view on farming to just being the supplier for food security requirements, which has been the main focus, but also view it as the raw material supplier to “agro-industry which culminates into job creation and earning of foreign exchange through export” (Statement of Objects and Reasons of the bill). The act enables any person with a permanent account number (PAN) from the Income Tax Department, to be able to trade from a farmer with certain conditions. The act specifies the payment to be made within three days and also mentions a dispute resolution mechanism under the “Sub-Divisional Magistrate” (SDM) quasi-court. The appellate body is made under the “District Collector” and a boundary of thirty days to settle the dispute. However, the act puts a bar on the jurisdiction of any civil court.
In the terms of economics, it aims at shortening the supply-chain by linking the buyers to the farmers and making the process efficient and on the farmers’ side, it increases the market size by broadening the choice as trade barriers are substantially eased. The inter-state trade was another big obstacle which has been removed by the act.
Increasing competition is believed to make markets efficient and fair. After the COVID-19 pandemic’s shock to the Indian economy, policy makers have started giving more attention to achieve a higher growth rate which further increases the size of the pie (economy) rather than equal distribution of the pie (economic parity).
Despite the government’s claims of this act being a part of the tripartite panacea, it leaves questions unanswered. The provisions of this act undos the policy of the APMC market yards being the first point of sale of farm produce. These might sound restrictive or regressive in nature but it is believed that these markets are highly regulated and provide a sense of security to the sellers. The free market is not only unregulated but also the sellers i.e. farmers in rural India are sceptical if buyers would adopt fair practices, leading them hostile towards the buyers even before the implementation of the act. Another major issue lies with the dispute resolution mechanism. It defines the first point of response to be the conciliation board appointed by the SDM. The members of this board have to be nominated by the parties itself within seven days. The time limit for this board to resolve the dispute has also been set as thirty days but the laws fail to define the finances and infrastructure used by this board to carry out its proceedings. There are other ambiguities as well as to why the civil courts do not have a jurisdiction on the matters related to the act and as to why the immense share of decision making is given to the executives rather than the judiciary. The SDMs and district collectors are offices performing a wide range of operations, under such circumstances will the text of the act actually see reality is a question of great concern. India’s bureaucracy and judiciary has been long known for being overworked.
Inefficiency Costs
The APMC marketing system had another predicament to the farmers’ as well as the economy of delaying the trade due to inaccessibility, inadequate logistics, limited options for selling etc. This delay has a huge economic loss due to the low shelf life of farm products. According to the “Final Report of the Committee of State Ministers in Charge of Agricultural Marketing Reforms, Ministry of Agriculture, Government of India, 2013”, the post-harvest losses were estimated to be Rs. 44,000 crores at 2009 wholesale prices. These drawbacks have been mentioned in various government reports and studies and many of these recommended reforms. For instance, “Expert Committee on Strengthening and Development of Agricultural Marketing” under the chairmanship of Shri Shankerlal Guru (2001) recommended free marketing and encouraging private sector outside the purview of APMCs in agricultural markets, “Taskforce on Employment Opportunities” under the chairmanship of Shri (Dr) Montek Singh Ahluwalia (2001) recommended extension of the benefit of decontrolling to agriculture and advocated creation of a national market. Even the reports by the National Commission on Farmers under the chairmanship of Dr M.S. Swaminathan has stressed in various submissions of the “Serving Farmers and Saving Farming” report and “Draft National Policy for Farmers” for states to bring reforms in the marketing and provide a legal framework for greater contribution from private players.
Solving Market Unpredictability and Government Procurement Disparity
A prodigious challenge ahead of farmers is the unpredictability of market forces. The minimum support prices provided by the government are only for government procurement which covers a substantial farm produce only in some states. A glimpse at the government statistics gives an insight on the disparity in government procurement among states. According to the RBI’s Annual Handbook of Statistics on Indian Economy 2021-22, Uttar Pradesh was the largest producer state of wheat in 2020-21 and produced 355.03 LMT (Lakh Metric Tonnes) of wheat while Punjab produced 171.434 LMT and Haryana produced 123.58 LMT of wheat in 2020-21. However, on analysing the state wise food procurement data, the proportions change. According to the Food Corporation of India, government procurement of wheat in 2020-21 in Punjab has been a whopping 127.14 LMT and in Haryana 74 LMT while in Uttar Pradesh it was just 35.77 LMT. This means that in Uttar Pradesh, the government procured just around 10.07% of the total production while in Punjab and Haryana it was 74.16% and 59.88% of the total procurement respectively. The government procurement in Bihar is negligible as only 0.05 LMT was procured out of the total production of 63.369 LMT. Inadequate funds, infrastructure and small land-holdings are the major reasons for this discrepancy in the food procurement.
In absence or negligible presence of government interference, farmers in these states face a higher risk and market unpredictability. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 was brought to resolve such issues by enabling a legal framework and developing a conducive environment for farmers to engage with wholesalers, large retailers, exporters, processors and other players of the supply chain. It envisioned a sponsored farming model with the risk being transferred to the sponsor at the time of agreement. The act also provided protection to the farmers’ land by prohibiting any transfer of land ownership (sale, mortgage or lease) and against recovery. It has been obligatory for the sponsor to make the payment within three days.
Despite the progressive provisions of optimising efficiency and growth by the resolution which is almost same as the other FPTC Act.
Farm Produces Not Essentials Anymore
The third part of this tripartite panacea being offered by the Government of India is the Essential Commodities (Amendment) Act 2020 and it removes a range of commodities like cereals, onion, potatoes etc. from the list of essential commodities. The law has been categorized as an antiquated one and constricts agro-based industry via excessive regulatory interference. The Economic Survey of India, 2021-22 states: -
“The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and will attract private sector/foreign direct investment into the agriculture sector. This legislation will help drive up investment in cold storages and modernization of food supply chain.”
Farmers’ Protest & Repealing of the Acts
India’s farmers’ protest has been in the headlines internationally and garnered support from leaders and celebrities transcending national boundaries. Strong economic reasoning and the incumbent’s gigantic majority could manage the ordinances to become acts but had to face rage on the streets. The initial protests began in the states of Punjab and Haryana, but its heat could also be felt in the power-holding corridors of Lutyens’ Delhi when Union Minister Harsimrat Kaur Badal resigned from her office in protest against the three laws. Even when the bills were laid in the parliament, they were rushed through by both the houses without any substantial debate. The legislations which were going to bring one of the biggest reforms in the agriculture sector of the country after the green revolution were not even sent to any parliamentary standing committee. The protests started in the parliament itself where allegations of being manhandled were made by opposition MPs and Marshalls. Even the live proceedings of the Lok Sabha were cut for a brief period of time, from the erstwhile Lok Sabha TV. In the Rajya Sabha too, the opposition claimed that the government does not have the adequate numbers to get the majority for passing the bill and demanded a division of votes on the bill and not a voice vote. Despite a collective request from the opposition, the deputy chairman Shri Harivansh Narayan Singh refused. All these events culminated in a protest by the opposition MPs led by Trinamool Congress leader Derek O’Brian who sat in the parliament.
A large number of farmers’ unions across states combined to form the Samyukta Kisan Morcha and finally decided to march towards the capital. The sustainable practices of the protests included mobilizing support from communities which engaged in agriculture not for subsistence but for the market, which enabled managing adequate financial resources. These protestors adopted a relay method which ensures its longevity.
The protests have been supported by various political actors but remain farmer oriented and reject supporting any entity individually. The protest has been continuing for more than a year and spread over the country by organizing sit-ins, demonstrations and rallies.
There have been various efforts by the government to call for roundtable discussions but in vain. The sit-in on the national capital border has been repeatedly attempted to be repressed by hard power. Visuals of lathi-charge and water cannons have filled front pages but only led to strengthening of the movement. The government’s efforts to explain the provisions of the laws to the farmers as being pro-farmers have also been a failure and the sustenance and spread of the anti-farm laws movement is its live and spirited evidence.
Tireless and dauntless efforts, perseverance and unassailable will of the protestors ultimately made the government go back on its decision and the Prime Minister announced it himself symbolically on the day of Gurpurab i.e., the 19th November, 2021 at 9:00 a.m. The three acts were brought in without discussions and slapped unilaterally violating parliamentary conventions but ironically, its repealing was also done in the same way.
The Politics of Farm Laws
The government can be said to have failed for a few reasons that stand out glaringly in hindsight. First, the biggest shortfall has to be communication- be it in the parliament or with farmers directly. With the protests brewing in Punjab and Haryana, Akali Dal was in a precarious position and chose to distance itself from the NDA. This can also be seen as a reminder of how Punjab was largely unaffected by the Modi Wave in 2019 that the Hindi heartland was largely wooed by. Moreover, the way events unfolded following the hasty passing of the bills draws attention to the urgent need for revival of quality parliamentary debates over one-sided Mann Ki Baat.
Second, the disregard for consensus-building was apparent when the protesters were branded as Khalistanis and anti-national, jingoistic rhetoric that the government has been falling to ever so frequently they find their authority questioned that it stopped working when they needed it the most. The second term of the government did not take to their old warhorse a tactic of bringing people together against a common villain- corruption in the case of demonetisation which was met with little to no resistance despite being equally exasperating, if not more. In the context of the farm laws, possibly ever-soaring food prices or exploitative arhatiyas may have worked over the callous vilification of the protesters. We say so as we know that in a democracy for any policy to gain legitimacy, it must have consensus among the masses irrespective of how reformist a policy is in its character.
Third, the ‘at loggerheads’ approach of the government to jog the opposition and state governments’ memory of who’s boss at the cost of people’s voice in the parliament and cooperative federalism fell flat on its face which was arguably needed. The lack of states and stakeholders’ participation in the law-making of such politically sensitive subjects only added to the serious dearth of public discussions on the reformist or malafide intent of the laws.
The price will be paid with agriculture reforms getting stalled indefinitely as future governments shall look back to the protests with immense trepidation. The farm laws misadventure also concretises the image of the government as a “Rollback government” that pulls parachutes of repealing contentious laws each term when the winds are unfavourable like they did in 2015 with the Land bill. Furthermore, Dr B. R. Ambedkar warned successful protests, civil disobedience, non-cooperation and satyagraha in independent India are the “Grammar of Anarchy” in his last speech to the Constituent Assembly as it is a failure of constitutional democracy. Adding that we as a people should be wary of hero-worship by ensuring not “to lay their (our) liberties at the feet of even a great man, or to trust him with power which enable him to subvert their (our) institutions” and the last, to “not be content with mere political democracy”. As here the first warning is at odds with the other two, perhaps sometimes protests are necessary to bring up voices that are muffled in the institutions that are supposed to megaphone them.
In conclusion, the bills do not have prima facie malafide intentions as the reforms were due since a very long time. The agrarian crisis in the country has been known by all sections and action is required. The farmers – annadata, of our country are on notice. However, the government lost its iron footing over the laws due to suspicious behaviour while bringing the laws. Consensus-building cannot be overemphasised with a government over-enthusiastic about reforms and powerful enough to circumvent traditional processes. Such protests are lessons learnt to help keep the government in its tracks and a reminder to take it slow. The country had already seen a nationwide movement against the Citizenship Amendment Act earlier in 2020 and contributed significantly and effectively in raising questions on the integrity of the government. In a democratic welfare society, it is imperative to make policy not only for people’s betterment but also with their confidence. Ignorance of the power of demographics in a democracy shall be injurious.
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