Second shot: Could cooperative federalism revive Indian farm reforms?

To reduce the state’s role, enable private procurement of farm produce and grant market forces more space to shape outcomes, the Centre enacted a trio of laws in 2020, but only to roll them back in the face of farmer resistance.

The first law would have let farmers sell their harvest anywhere, not just at state-regulated wholesale mandis under Agricultural Produce Market Committees (APMCs). With the monopoly of local intermediaries gone, direct buyer-seller deals would have meant efficient price discovery (at least on paper), and the rise of national markets for each crop.

The second law, by lifting movement and storage curbs on cereals, pulses, onions, potatoes and other essentials, would have acted in conjunction with the first.

The third law laid out a legal framework for contract farming, so that farmers could strike deals with food processors and other private procurers. But then, rumours of state procurement being axed for farmers to be put at the mercy of private bullies got in their way, and all three enactments were repealed in November 2021.

Can the spirit of cooperative federalism achieve what the Centre’s legislative effort could not? A recently published draft policy for agricultural marketing reform suggests that such an attempt is afoot.

Also read: Market-oriented farm reforms remain a challenge yet to be met

Among the brickbats aimed at the 2020 push for a structural rejig was the charge that how farm output is marketed is a state-level subject of legislation.

The revised policy approach not only tries to persuade states to do their own reforms, it takes a cue from the GST model to propose a panel of agriculture ministers who could work out how best to converge towards a single market with all rules in harmony.

The draft policy urges states to ease restrictions and enable market purchases by private parties, though it also covers a digital upgrade that can improve existing mechanisms, even as it envisions an all-India market portal on the internet with live data-feeds and useful tools for farmers.

On contract farming, the draft advises its promotion as a way for farmer-producer organizations to strike supply deals with bulk buyers at locked-in prices.

Given the broad thrust of the draft policy, it’s no surprise that critics have called it a cynical endeavour to resurrect dead laws, abridge the autonomy of states and expose farmers to exploitation by large enterprises.

Also read: PM Modi must forget the past, revive farm reforms; it’s the only way to repair rural economy

And that’s the crux of the matter: the fear of a few profit-motivated bulk buyers replacing a public buyer. To assuage this worry, India’s antitrust authority could make it clear it will not let power gaps crush the interests of farmers.

But even the Centre must pledge not to distort market forces. Unfortunately, the government’s use of export barriers as price-control tools has fanned suspicions among cultivators that their interests count for little.

Yet, India simply has no option but to revitalize farming for the sake of farmers and the rest of the economy. Market reforms could plausibly be rekindled by talks among political leaders, which is why the idea of a politically diverse panel holds some hope.

A key challenge is to convince farmers of sufficient rivalry among would-be buyers of their output. A test of competition sufficiency in one reformist state could inform the approach of others. Fixing Indian farming was always going to be a long haul. Let’s not give up the quest.

Also read: The government must avoid sending out mixed signals on farm reforms