A friend forced me 2 go this CTC on farm economics by @shekhargupta. Most of it is well known. There are 2 logical fallacies in the arguments that SG advances which are important & so I will confine myself to them.



1/n
Firstly, as SG points out, farmers don’t get value 4 owning the land which economically is a very significant part of the cost of production. If that were taken into account, as a notional rent, the imputed costs would be so high that you need 2 triple MSP.

Kudos to SG 4 that.
However, there is a related problem, that also ties into farmers suicides. This is not a subject I often take up b/c its very painful, but 4 this once I will make an exception b/c it is critical to understanding a farmers’ mindset & gauging why farmers are outraged by the bills.
Farmers not only are not compensated by the value of rental on land, but even the risks inherent in agriculture are ignored. These risks are humongous as compared to what an entrepreneur in industry faces ranging from price, weather, crop disease, health, political & economic.
You have all seen videos of farmers destroying a fully grown crop b/c price in the market doesn’t cover transportation from farm to Mandi. Price failure of this sort every 3 or 4 years can wipe to a farmers. But in MSP calculation, there is simply no provision 4 risk mitigation.
What happens when a disease takes a cotton grower’s crop? 2 things come into play simultaneously. Firstly, there is no saving b/c the inherent risk that a farmer bears was not compensated for when the crop was good. No capital therefore backs the assumed risk. But …
The crop failure generates an insolvency that triggers action against the land. Here the threat is that a lender may appropriate the farmers’ land. But as SG points, the official value of the land is small fraction of its free market value b/c of Govt regulation of land use.
So when disease takes a farmers crop he faces an existential crisis few appreciate. Not only has he lost income - something he can mitigate - but he face the loss of an asset to a lender at 10% of its actual free market value if the land could be put 2 alternate uses.
This sudden, catastrophic loss of family wealth that guarantees some level of security is what drives farmers to suicide. It his way of forestalling the appropriation of family wealth by a lender. Not that it always works but often it does.
Now look at what farmers in Delhi face. If they default on a contract with a corporate buyer, they face alienation of land as penalty. But at what price? The price of land will not be actual value but a fraction thereof given land use restrictions.
So a total catastrophe threatens 4 a minor default on a contract. Add to that, Modi takes away the right to appeal to a civil court. Does it require too much empathy & common sense to understand why farmers see it as existential threat? And are apprehensive?
There are many such unaddressed flaws in the bills that require detailed examination of all their ramifications. I have taken just one - the incongruence between official value of land & its free market value - 2 highlight just 1 catastrophic consequence.
So many thanks to @ShekharGupta. He has very ably highlighted the need to hurry slowly with the reform bills. Farmers reforms are necessary but not unintended catastrophes.

Remember this is 1 thing that is wrong with the bills. Many other flaws remain.
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