Agriculture-related issues
Source: The Economic Times
Context:
The author talks about the implications of the repeal of farm laws.
Editorial Insights:
What's Happening?
The Indian Prime Minister has announced the repeal of the three contentious farm laws, which had witnessed protests from farmers, mainly from Punjab and Haryana, on the borders of Delhi for more than a year. A look at why the government had pushed these laws, and the implications of the move.
The 3 Laws that are repealed:
- The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, which is aimed at allowing trade in agricultural produce outside the existing APMC (Agricultural Produce Market Committee) mandis,
- The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, which seeks to provide a framework for contract farming,
- The Essential Commodities (Amendment) Act, 2020, which is aimed at removing commodities such as cereals, pulses, oilseeds, edible oils, onion, and potato from the list of essential commodities.
Bills to Law (journey of the 3 laws):
- Finance Minister had announced these laws as part of the third tranche under Aatmanirbhar Bharat Abhiyaan to support the economy during the fight against Covid-19.
- On June 3, 2020, the Union Cabinet chaired by Modi approved the three laws, then in the form of ordinances.
- On June 5, 2020, the President promulgated the ordinances.
- During the Monsoon Session of Parliament, the government introduced Bills to replace the ordinances, which were eventually passed.
Rationale behind the 3 Laws:
- There has been a long-pending demand for reforms in agricultural marketing, a subject that comes under the purview of state governments.
- The Centre took the issue up in the early 2000s by pushing for reforms in the Agricultural Produce Market Committee (APMC) Acts of the states.
- The Agriculture Ministry under the then NDA government designed a model APMC Act in 2003 and circulated it among the states.
- The subsequent UPA government, too, pushed for these reforms. But given that it is a state subject, the Centre has had little success in getting the states to adopt the model APMC Act.
- It was in this backdrop that the present government went for reforms in the sector by passing these laws.
The Implications of repealing:
On Agriculture:
- The agri will keep chugging along the path it has been on for about a decade or so.
- The present agri-growth of 3.5% per annum trend is expected to continue, with minor changes due to rainfall patterns.
- Cropping patterns will remain skewed in favour of rice & wheat, with FCI granaries bulging with stocks of grain.
- The food subsidy will keep bloating & there will be large leakages.
- The groundwater table in the north-western states will keep receding & methane & nitrous oxide will keep polluting the environment.
- Agri-markets will continue to be rigged & farm reforms will remain elusive for some time to come unless the promised committee comes up with more meaningful solutions.
On Farmers Income:
- The latest Situation Assessment Survey of the NSO reveals that the income of an average agri-household in India in 2018-19 was only Rs 10,218 per month, extrapolating in current conditions the average agri-househols income today will be Rs 13000 per month only.
- This is not a delightful situation & all-out measures are needed to be taken to increase rural incomes in a sustained manner.
- Since Indian agriculture faces the situation of fragmented land-holding of just 0.9 ha which is further shrinking over the years.
- This further reduces the income of farmers.
- Unless they shift from producing basic staples to high-valued crops, their income remains the same.
- The sector is crying for reforms both in the marketing of outputs as well as inputs including land lease markets & direct benefit transfer of all input subsidies.
Other implications:
- The agitating farmer leaders and opposition parties will surely be emboldened because of this victory.
- Farmer leaders are already asking for the legal guarantee of MSPs for 23 agri-commodities.
- Their demand could increase to include a larger basket of commodities.
- Similarly, there could be demands to block the privatization reforms of public sector enterprises such as Air India or to scuttle any other reform for that matter.
- The net result is likely to be slowing down the economic reforms that are desperately needed to propel growth.
- Competitive populism can give some succor to the poor in the short run, which they deserve, having suffered badly during the pandemic period.
- But going overboard in this respect could slow down investments, and thereby growth and job creation.
- So, it could turn out to be a trade-off between short-term freebies and medium- to long-term loss concerning the momentum of economic growth and job creation.
Concluding Lines:
The most important lesson from the entire process of farm laws is that the process of economic reforms has to be more consultative, more transparent, and better communicated to the potential beneficiaries.
It is this inclusiveness that lies at the heart of the democratic functioning of India. It takes time and humility to implement reforms, given the argumentative nature of our society. But doing so ensures that everyone wins.
