The farm laws: How not to do reforms

Emergency situations call for prompt rectification. When we faced the foreign exchange crisis pledging 60 tonnes of gold reserves to foreign banks to raise $600 million, it led to the 1991 moment, the liberalisation.

However, when reforms pending for years are hurriedly pushed through executive laws, the ordinance, and thereafter in Parliament via voice vote at a time of the Chinese aggression and pandemic-enforced lockdown, it betrays a strategy of reforms by shock tactics, what economists such as Milton Friedman and Naomi Klein advocated. For them, a natural disaster, a pandemic or a war is the most opportune time to shove change. They prescribe speed, surprise, and shock as legitimate tactic to transform economies to money markets. There is no scope for discussion, debate or consensus; sheer fleetness would carry the day. One of the fallouts of this strategy is social discord and that makes reforms counterproductive because these first create a conflict and thereafter try to find a solution, as is being now attempted in the prolonged negotiations.

CORE ILLS OF FARM SECTOR REMAIN UNATTENDED

It is not disputed that agriculture needs transformation and private enterprise and capital could consort with the government to contribute in its development. But the way the reforms were structured and thereafter hurriedly notified, has created a toxic shroud regarding the motives and turned the entire process into corporates vs peasants, putting private participation in jeopardy even for future. Do the farm laws address the core ills plaguing our agriculture? Crop diversification, cultivation costs, subsidies or shift of population from agricultural to non-agricultural sectors, declining water table, soil health etc remain unattended.

The most serious issue is overcrowding: Over 50% of the population is dependent on agriculture, while farms contribute a paltry 17-18% to the gross domestic product (GDP). Consequently, the average farm household income is ₹6,500 a month, resulting in farm indebtedness and suicides. The solution is shifting a substantial population to non-agriculture professions.

GEO-POLITICAL CURSE FOR PUNJAB, HARYANA

Secondly, the cost of our produce of wheat, rice and sugar, to mention few, is higher than the prevalent international prices. The landed cost of wheat at our ports from Australia or Canada is lower than the cost of wheat transported from north India to south. The high price tag as fixed by the minimum support price (MSP), despite low labour costs, is due to the higher cost of agro-inputs, chiefly fertiliser (despite subsidy), diesel, and agro-chemicals.

Punjab and Haryana, now leading the agitation, suffer from a geo-political curse. The government investment eluded them due to hostile borders. This year, Pakistan is importing 2.9 million metric tonnes of wheat from far-off countries, and so is Afghanistan. Export via road from Punjab is competitive due to low transport and handling costs. China has also sought Indian rice. But we cannot deal with them for reasons of the national cause.

PAYING THE PRICE FOR FREE POWER

Thirdly, it is alleged that agriculture is highly subsidised, though subsidies in the US and other developed countries are higher. These have adverse consequences such as Punjab’s free electricity is causing a steep fall in the sub-soil water table. The problem begs a solution, but the reforms remain silent. Incidentally, Punjab pays the cost of free electricity from its budget and, thus ends up subsiding the national buffer food stock.

Fourthly, an impression has been given out that the central pool doesn’t need Punjab’s foodgrains any more as the government has 3.5 times higher buffer stocks than what is required. This bravado, however, is delusional because two successive failed monsoons would send all scurrying back to wheat and paddy. Besides, surpluses exist due to low purchasing power of the population. Otherwise, the per capita per day availability of rice in 2019 was only 189gm and wheat 178gm.

CROP DIVERSIFICATION NEEDED

Fifthly, what is needed is crop diversification. It needs capital investments but the annual allocation is a paltry ₹100 crore. Instead of dealing with it on a war-footing, the new laws presume that once private players enter agriculture, market mechanism would trigger diversification. The laws alter the existing agrarian social eco system and security, with the state progressively withdrawing from the field.

The reforms do not solve the basic agrarian problems and address only trading, contract farming and stock-hoarding. They lay down a legal regime to create unregulated and tax-free private markets in competition with the existing Agricultural Produce Market Committee (APMC) mandis that are subject to taxes, thus creating an unequal playing field in the favour of corporates.

The reforms will sound the death knell for rural development in Punjab and Haryana, which is sustained on market fee and rural development cess. Punjab’s annual income from these sources is about ₹4,000 crore and it’s used to fund rural infrastructure. The new laws don’t provide an alternate source of this revenue loss.

This, in fact, is the fundamental difference between the new laws and the existing laws of most of the states that already permit private markets to operate. Some states also allow contract farming, and virtually no state bans its farmers from selling anywhere in India. But a false narrative has been created that the new reforms create one nation one market, as if it did not exist before.

Punjab farmers have been selling kinnow, potato and cotton all over India, just as Bihar sends trucks loaded with paddy to Punjab and Haryana because its APMCs were abolished in 2006 and private markets are not remunerative.

DEFUSING THE SITUATION IS PRIORITY

In an unprecedented non-political unification of diverse forces, the farm agitation has remained remarkably peaceful, despite a concerted effort to cause cleavages and to paint them anti-national. The priority should be to defuse the situation. One solution is to enact the new laws incorporating the substantive demands of the farmers which the government has virtually agreed to and also incorporate a repeal clause in it, annulling the three existing reform laws. The new enactment and annulment shall happen at the same time, thus meeting the demand of the farmers, and the government retaining its seemingly fragile prestige.

Parallel to it, as suggested by the Supreme Court, a think-tank should go into the entire gambit of the agro sector problems and suggest reforms. The question of the legislative competence of the central government to enact on agriculture and agro- trade and commerce could be referred to the court under Article 143.

The writer is former Punjab chief secretary and chief information commissioner. Views expressed are personal