Observations on the 3 farm bills-A thread

1/n. How the bills will impact small & marginal farmers- 86% of India’s farmers own less than 2 hectares of land. They‘re subsistence farmers- growing mostly for themselves & selling whatever is left over in the village or nearby city...

2/n. They also rely on village commissioning agents to take it to APMCs in case they want to earn more.

Let us be absolutely clear- the farmer is (and always has been) free to sell his produce elsewhere. It’s a lie that they couldn’t do so earlier.

3/n. These small & marginal farmers will lose out when big corporate firms negotiate with them. Why?

Because there are roughly 4-5 lakh farmers in a district. Firms will invariably hire agents (or aggregators; invariably the same village agents) to deal with farmers.

4/n. Earlier these agents/aggregators would play a dual role- conceding a slightly higher price to the farmers so they maintain good relations for next year & then maximising both their profits at APMCs.

Now they negotiate only on behalf of the corporate firm.

5/n. Firms inevitably play hardball with farmers. Driven by the imperative to make profits, they (thru aggregators) tell farmers that you take our price or we move elsewhere. In places like Maharashtra & Karnataka, where cooperative movements are very strong, whole villages...

... held out, but the firms just moved to the next village. In a free market, that’s their prerogative.

But farmers (esp. small & marginal farmers) can’t afford that. They can’t hold out for even one season, let alone a year. So they go into debt or worse, sell their land.

6/n. And this is in those states where firms are willing to go. In states like Bihar, which also deregulated in 2006, no firm went because of no infrastructure.

APMCs atrophied. From 9000 APMCs, Bihar now has only 1600! Farmers couldn’t sell either to firms or to the Govt.

7/n. What’ll be the net result of this? 5-10 years down the line, many small+marginal farmers won’t be able to hold out & will be forced to sell their land, either to bigger farmers or to the firms themselves. Some states are already introducing bills to enable this (quietly).

8/n. Once farmers lose their land, they’re going to migrate to cities. Now, about 56% of India’s workforce is in agriculture.

If because of these pressures, even 4-5% of farmers are forced to migrate to cities for low or unskilled work, it’ll exacerbate India’s job crisis.

9/n. To absorb our existing workforce, we need to create 10 million jobs p.a. In the last 5 years, we’ve not done so & India’s now facing the highest unemployment in 46 years.

Imagine when an additional 6-8 million people seek jobs over the next 10 years. Demographic time bomb?

10/n. Of course, land consolidation will enable economies of scale to kick in since more will be produced on less (like China). This means more export & earnings for India. We‘ll be able to build on India’s status as the number 1 exporter of rice & wheat.

But at what cost?

11/n. Moving on to the 14% farmers whose land holdings are above 2 hectares.

The MSP helped them primarily (not all of them). Where the MSP is provided, it acts as a sort of floor price for the market. The bills threaten to remove that floor price.
And why is this problematic?

12/n. Punjab & Haryana’s farmers are literally the backbone of our PDS. If they don’t get an incentive (in the form of MSP) to continue growing rice & wheat, what happens to the 900 million people who depend on PDS?

Most of the wheat and rice comes from these states.

13/n. Look at Bihar’s example. Because APMCs collapsed, state procurement of grain collapsed.

Today 80% of the foodgrains disbursed under the PDS in Bihar is procured from other states.

The state is no longer atmanirbhar!

14/n. The MSP must continue. Why? Because the centre’s spending on MSP is about ₹24K crores p.a.

If you add state Gov’s expenditure+ credit+ crop insurance, the State is still spending less than $1 billion p.a.

In return, India earns $8-9 billion p.a. just from wheat & rice!

15/n. Also, if the State doesn’t keep a buffer stock, it can’t regulate the price of crops. Currently, this buffer stock acts like a price regulation tool. When prices jump, the Govt releases some surplus crop to bring down prices.

No buffer= higher prices for all of us.

16/n. Finally, India’s subsidies to our farmers are about $26 billion p.a.

This is a pittance compared to the US’ $46 billion farm subsidies p.a. or the OECD countries’ 54 billion euros p.a.

Those who’re asking we cut farm subsidies really need to look around.

Postscript: yes, structural reforms in agriculture are needed.

But a democratic Govt. needs to nudge behavioural changes, not impose disruptive changes.

In contrast, the BJP Govt. has undermined India’s federal structure, bypassed Parliament & not even consulted farmers. Shame!