Home / Opinion / Farm reforms need not be a lost cause

A lawsuit related to the dismissal of a daily-wage worker by Patiala Central Cooperative Bank being heard by India’s Supreme Court drew incidental attention this week to an attitudinal problem in our farm sector. The bank sought to pay less compensation than was ordered by a high court on the argument that such cases would drive it to financial distress and possible collapse at a time when no farmer was repaying the loans it had extended in anticipation of a waiver once a new administration took charge after next month’s Punjab polls. The apex court saw merit in this, lessened the bank’s burden, and upheld the high court’s job reinstatement. What stood out, however, was the bank’s testimony on poor credit discipline in a field that has been kept strapped to the national mast of ‘food security’ for so long that many farmers tend to see their role as state-appointed, with inputs assured by governments that must in due course pay for the output of their farms to fill state granaries. Political signals over the decades have mostly reinforced this informal social contract. So often have farm-loan waivers been used as electoral hand-outs to win votes that farmers can hardly be faulted for viewing these as work bonuses they deserve, or as part of an unstated pact with the state. Yet, such a statist approach is not only bad for lenders, it ends up fostering attitudes that stymie farm reforms.

The big eye-popper of a farm-loan waiver declared ahead of India’s 2009 general election by the Congress-led Centre more than a decade ago remains unmatched for its impact. Worth 60,000 crore, it was packaged as distress relief and the party retained power, but various states run by assorted parties were quick to adopt that ploy and its lasting effect is visible in the handy tool of politics it has become. In some states, write-off promises spring from competitive campaigning. In others, the prospect serves as a chip for collective bargaining by tillers. In all, waivers leave loan books in a mess, at least while lenders wait for state exchequers to pick up the tab, and also impose fiscal costs that are usually unaffordable. If political parties were to eschew such write-offs, they would do our economy a favour for an even bigger reason. So long as our cultivators operate more like state suppliers than as business units that maximize earnings within market constraints, saving this sector from stagnancy will be difficult. That loans are not mistaken for grants would have to be an elementary aspect of any reform exercise.

With demand and supply increasingly mis-aligned, prices set by freely-traded agricultural crops need space to play the reformist role of signalling scarcities and overflows that would incentivize farmers to adapt their expenses and exertions to market reality. Insurers and future deals could cushion their risks. The Bharatiya Janata Party-led government’s 2020 push for a market embrace stumbled at least partly on its failure to prepare the ground for it. What was held out as freedom was seen by many farmers as a prelude to the termination of their services. Rather than give up, we should aim to reorient attitudes away from our statist system. Reform-minded states could take up a model bill drafted by the Centre in 2017 that wasn’t as flawed as the 2020 enactments on provisions designed to secure farmers from exploitation by private buyer cartels. Agriculture supports more lives in India than any other activity. We can’t let it languish. To give reforms a fresh chance, we must resist pre-poll displays of false generosity.

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