Kneejerk reforms & blowback


Dr Muhammad Khurram

MASSIVE protests by farmers in Northern India have made headlines across the globe. In this article I have tried to give an overview of this developing situation. The article discusses the farm laws, stance of government, fears of farmers and political economy of reforms. In September 2020, India’s Parliament passed three laws amid relative calm and tranquillity. Lok Sabha passed the bills on 17 September 2020 and Rajya Sabha on 20 September 2020. Presidential assent was received on 27 September 2020.

Agricultural sector can by no means, be underestimated in India’s political economy. The agriculture sector contributes nearly 15 per cent of India’s $2.9 trillion economy but employs about half of the country’s 1.3 billion people. 68% of farmers own less than one hectare of land. Only 6% of them actually receive guaranteed price support for their crops and more than 90% of the farmers sell their produce in the market. The sheer size of work force employed by agricultural sector underscores its immense sensitivity. The farmer class despite its vast membership has limited disposable income as far as individual households are concerned. According to the 2016 Economic Survey, the average annual income of a farming family in more than half of India’s states was a measly 20,000 rupees.

But what was in these three farm bills which has caused farmers to erupt against the reforms? The ‘farmer’s produce trade & commerce act’ expands the scope of trade produce from select areas to any place of production, collection, aggregation. It also allows electronic trading for farmer’s produce and prohibits state governments from levying any tax on farmer’s produce sold outside of local area. Previously, under the Agriculture Produce Marketing Committee (APMC) Act passed in 1964, it was compulsory for farmers to sell their produce at around 7000 government-regulated markets, or mandis, where middlemen helped growers sell harvests to either the state-run company or private players. The mandis are run by Committees made up of farmers, often large land-owners and traders or “commission agents” who act as middlemen for brokering sales, organizing storage and transport, and even financing deals.

Second law, ‘farmer’s agreement on price assurance & farm services act’ lays the basis of pre-arranged contracts between farmers and buyers. It also provides a legal framework for dispute resolution between farmers and buyers. Third law ‘essential commodities act’ removes certain items from list of essential commodities removing stockholding limits on these items. Opposition has pounced on the opportunity castigating Narendra Modi for his insensitivity towards poor farmers. Congress has called the bills “black law” and “pro-corporate”. Rahul Gandhi has openly accused Modi of “making farmers ‘slave’ of the capitalists…”.

Narendra Modi has vehemently defended the reforms asserting that it was a watershed moment and the laws would liberate farmers from tyranny of middlemen. “For decades, the Indian farmer was bound by various constraints and bullied by middlemen. The bills passed by Parliament liberate the farmers from such adversities,” was the mantra propounded in a tweet by Prime Minister. Farmers led by their community in Punjab and Haryana have flatly refused to accept the new laws. They genuinely fear that they would be inevitably harmed by reforms and behemoth agricultural corporations would appropriate all the benefits of farm laws.

Undisputable fact is that around 86% of farm holdings in India are of farmers owning less than five acres of land. These small land owners have scant education and limited financial resources. The farmer’s genuinely feel that they would have limited, if any, bargaining power against omnipotent agricultural corporations. Another thorny issue is minimum support price (MSP) which historically has been failsafe for farmers but is not guaranteed by new laws. MSP is primarily applicable in the case of wheat and rice whereby the government agrees to pay a minimum price for produce of farmers. Abolition of MSP would remove a safety valve for small farmers.

However, it would be naïve to assume that there is no other dimension of this crisis. New laws would adversely affect some other sectors. Under old regime, farmers were limited to selling within the state. State government earned a fee for products sold through their mandis. Under new regime farmers are allowed to sell across state borders bypassing state mandis. As sales through mandis would plummet so would the revenues. Also, middlemen who control mandis are shuddering from fear of being left out if the new system succeeds. After several rounds of negotiations stalemate between farmers and government persists. It is not possible to predict the outcome of this crisis. Yet the crisis is a vivid manifestation of how introduction of half baked reforms can play havoc with stability of political economy of country.

—The writer is LLM (Harvard Law School), LLM (WIPO academy/University of Turin), MSc University of Oxford.

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