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Are you for or against the farm laws in India?qrcode

Jan. 12, 2021

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Jan. 12, 2021

Are you for or against the farm laws in India?

The state legislatures of Kerala and Punjab have passed resolutions asking the Centre to repeal the three farm laws passed by Parliament in September. Kerala Governor Arif Mohammad Khan even read out the complete statement from the state government as part of his opening address during the Budget session. He had the option to omit portions which contained criticisms of the Union government in his speech but chose not to, in the spirit of cooperative federalism. 


The leader of the Opposition in Tamil Nadu, MK Stalin, is asking that their state Assembly, too, pass a resolution seeking a repeal. More Assemblies may follow suit. These actions are surely asserting the fact that agriculture is a state subject, and asking that the Centre let them form laws and policies that affect farmers.


Meanwhile, the farmers’ agitation on the highways leading to New Delhi, in the bitter, cold northern winter, is close to 40 days old. And the farmers show no sign of fatigue or falling back. While these are mainly farmers from the four northern states, farmers from other states, too, have joined in. There have been eight rounds of negotiations between the team led by central ministers, and the farmers’ union leaders, and more such meetings are planned. But no middle ground is visible, as yet. Positions might have hardened; It may have become a prestige issue for both sides. 


How to resolve this impasse? Is a solution possible which lets both parties feel that they have benefitted? Here are some suggestions.


First, the Centre should be ready to suspend the laws, or at least keep them in abeyance. Laws passed by Parliament become operational only when the detailed rules and regulations are notified. Much work on this aspect of the fine print remains. So just let it go into cold storage. The Budget session of Parliament is coming up anyway. Discuss the farm laws threadbare in that session, and get an amended version passed, which addresses the key concerns. Refer to the Parliamentary Standing Committee if needed, away from the glare of the media.


Second, set up a GST-type council with representations from all states by respective agriculture ministers, or even chief ministers. The agriculture council can be empowered to pass laws related to agriculture -- ideally by consensus or, if not, then at least after extensive discussions, just like the GST council. The model Agricultural Produce Market Committee Act of 2003 is an example of outcome by consultation and consensus. It has been used de facto, if not de jure, by many states. The stranglehold of APMC is considerably diluted for most crops, and fruits and vegetables in any case.


Third, announce a roadmap to gradually replace price subsidies with direct cash benefit transfers. For instance, the fertiliser subsidy on di-ammonium phosphate (DAP) was reduced to nearly zero, long ago. Whereas the urea subsidy is still 75 percent of the cost of production. The same is possible with subsidies on power and water. The more there is market-based pricing, the less is the distortion due to overuse. Highly subsidised inputs have increased soil salinity in Punjab, reduced water tables everywhere and of course led to over-production of rice in regions which are water-scarce. The overuse, not just of fertiliser but also other chemicals, have led to an increased incidence of cancer. So shifting to market-based pricing is overdue.


But it needs to be done with a well announced roadmap, maybe over three to five years, and must be accompanied by direct cash benefit transfers to smaller farmers. The centrally-funded PM Kisan scheme is already reaching about 12 to 14 crore farmers. The allocation under this transfer scheme can be increased. The Centre can learn from states like Odisha and Andhra Pradesh which have found ways to support tenant farmers too.


Fourth, allow private players to set up market yards to buy produce directly from farmers, as direct competition to APMCs. The country needs around 40,000 such yards, but has only about 5,000 APMC yards. The APMC will continue to offer a minimum support price (MSP), and the private market yards, which are competing with APMCs, will have to match that MSP if prices fall too much. Of course if prevailing prices are above MSP, then it is moot.


Fifth, modify the MSP scheme to work regionally, and let the state governments, too, play a role in it through the agriculture council. For instance, there should be MSP on jowar and bajra in Maharashtra, but not on rice since the state is largely drought-prone. There must be differentiated incentives which induce a cropping pattern more appropriate for water tables and agro climatic conditions across the country. For example, Kerala has a minimum price on coconuts and vegetables. But in general, MSP should work as a price insurance and not a generous offer always above free market prices. 


It is important to demolish the binary, are you for or against the farm laws? That’s a false and harmful positing. Of course more economic freedom is welcome to the farmers. But it has to be accompanied with better regulation, and a safety net for the small farmer against adverse contingencies. 


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