Opinion
Market-oriented farm reforms remain a challenge yet to be met
Summary
- The demands of protestors are largely untenable but a paradigm that treats our farmers as captive suppliers to the state must be shifted and farms given freedom to maximize earnings.
Farmer groups from Punjab have seemed bent on a confrontation with the Centre, and Tuesday’s clashes with police betrayed no evidence of their backing off. Their threat of storming Delhi—in a replay of earlier farm-bill protests—just before national polls looks like a ploy to maximize bargaining power. Their list of demands is long, and many of them are untenable. Their call to withdraw from the World Trade Organization and freeze all free-trade pacts, for instance, can be dismissed as over the top. They also want the Land Acquisition Act of 2013 to be reinstated, a pension of ₹10,000 a month for every farmer aged above 60, the limit on rural job-guarantee work-days to be doubled to 200, its daily wage upped to ₹700, and the dropping of all cases against last time’s protestors. They have other asks as well, but the main one is for a law to back a minimum support price (MSP) for all commodities as a government assurance. This list, though, is not the only reason the agitators could be mistaken for employee unions asking for a better deal. And therein lies both the irony and nub of it.
To be sure, this agitation differs from last time’s in its participation and aims, but that does not obscure the need for a big-picture view of farmer discontent. Agriculture is a laggard sector at risk of stagnancy, with adverse consequences in store since it supports a big bulk of our population. Structurally, the sector’s paradigm is one of farmers at work for the state, which lends a shoulder to their plough with subsidy support, all of it aimed at national food security. The easing of food scarcity and the emergence of our economy, however, have made space for a shift that recruits market efficiency to revive the sector’s fortunes. A market embrace would mean a greater role for price signals that emerge from the interplay of demand and supply. In this case, it would encourage farm supplies acting in response to prices that capture de facto demand, as derived from actual diets (healthy ones, ideally, with carbs balanced by protein, fibre, etc), rather than being guided by what the state procures. No doubt, the state will have to remain a bulk buyer of foodgrain and other farm produce so long as it needs to offer free or cheap food under its legal mandate. But state buying can distort cropping patterns. It can incentivize the over-production of carb-heavy staples like wheat and rice, for example, while a better-fed populace may want protein-rich edibles and vegetables cheapened by better acreage and cold chains (for perishables). For evolving demand to be satisfied more efficiently, farm incentives must align better with market forces. And for this, we would need various old restrictions eased and markets bustling with multiple buyers.
Since price flexibility cannot do its market job with price floors and caps in the way, MSPs for mandatory state procurement (instead of optional) cannot be baked into Indian law without turning our back on reforms. But then, the old paradigm still prevails. State-set MSPs for nearly two dozen commodities do suggest a purchase promise. Another sign of the Centre’s comfort with state-controlled farming popped up recently in the form of export bans. Imposed on non-basmati rice and onions, for example, it reinforced the conception of farmers as captive suppliers. While such moves may help cool inflation, they deprive farmers of a chance to maximize earnings—which is the very pitch reformers must make to solicit their buy-in for greater market-orientation as we go along.
