The solution to the farm impasse lies in federalism
India must break out of the cycle where states escape their responsibilities and the Centre then pushes in, accumulating more power in the process. Let states take ownership of state subjects
The current imbroglio over the farm laws highlights the Centre’s growing intrusion into what are constitutionally state subjects. But they also highlight another uncomfortable reality. Many of the most serious economic afflictions facing the country — agriculture, water, power, land, health and education — are state subjects. And the failures of the states to do justice on subjects that are well within their constitutional obligations have created space for an activist Centre to weigh in.
Take power. The bleeding of the distribution companies (discoms) has had enormous opportunity costs for state finances. The attempts to stem the bleeding are a veritable alphabet soup – the Accelerated Power Development and Reform Programme (APDRP), the restructured-apdrp, Integrated Power Development Scheme, Financial Restructuring Plan and Ujjwal Discom Assurance Yojana (UDAY). But, despite the enormous resources poured into them, their impact is, at best, modest and, at worst, an abject failure. The Fifteenth Finance Commission (FFC) has once again attempted to clean the Augean stables of state power finances by recommending extra annual borrowing space based on certain performance criteria in the power sector. Hope springs eternal.
Take another example. “Public Order” and “Police” fall under the “State List” of the Seventh Schedule, putting the onus on state governments for the maintenance of the law and order in their respective states. In 1999, the Parliamentary Standing Committee on Home Affairs (chaired by late President Pranab Mukherjee) observed that “of late the dependence of State Governments, all over, on the Central Para Military Forces in dealing with difficult situations arising on the law and order front has increased significantly… This changing trend over the years has given rise to a situation of dichotomy wherein while on the one hand the State Governments tend to demand more and more power and autonomy, on the other hand they appear to be prepared very inadequately to perform..one of the most primary duties of maintaining law and order and peace and normalcy in their respective State. On every incident of minor or major proportion they tend to seek help of the central police forces, which only throw poor light on the preparedness of their police forces in dealing with adverse situations.”
Little has changed. Over the past two decades, even as the states continued to underinvest in their police, the size of the Central Armed Police Forces (CAPFS) doubled, thereby ensuring the creeping federalisation of a state subject.
The story is similar in agriculture. For the vast majority of India’s farmers, the tiny size of their farms means that there is simply no way they can make a decent income on farming alone unless their incomes are artificially boosted by a plethora of input subsidies, price or income supports — or if they are part of the privileged few who have large farms. All the policy options being debated and passed as saviours are — for the vast majority of farmers — “post-dated check on a crashing bank”, as Gandhi once said of a British proposal.
The only viable long-term answer for the majority of India’s farmers, as BR Ambedkar observed a century ago, is to get out of farming. At that time, India’s population was a fifth of what it is today and land fragmentation correspondingly less. Public policies of input subsidies (especially on fertilisers and water) that underpinned the Green Revolution certainly benefited the country broadly, in terms of both aggregate output as well as farmer incomes. But their sell-by date is well-past. Once farm incomes rose, the rural surplus should have provided the springboard for structural transformation, especially in industry. Instead, it has become a trap slowly asphyxiating the sector.
The basic thrust of the farm laws was in the right direction. But their specific details and the manner in which it was done without broad deliberation and building consensus — let alone the manner in which the government has lashed out at critics — has been completely self-defeating. Public policies need to have broad legitimacy among those that it affects and the reality is that these farm laws simply don’t.
A way out of this turmoil might lie in respecting India’s federalism more fully. The Centre should not pass farm laws that affect agriculture markets within states, but this should also mean no central government Minimum Support Price (MSP) and no central government procurement. The states say that agriculture is a state subject. It is. And they should have complete say in what subsidies they want to give their farmers, for which crop, and how. The states that strongly believe in MSP and procurement should have complete ownership of both.
The Centre’s involvement in procurement today is inextricably linked to its obligations under the Right to Food Act. That Act had the right intentions but its cereal obsessiveness is having deeply damaging consequences for agriculture and agro-ecology. As FFC notes, within agriculture, the more the government intervention, the lower the growth. Crops, especially cereals, are lavished with subsidies while fisheries, livestock and horticulture have grown much faster — and are more nutritious.
The Centre should move to replace the Act with a Right to Nutrition Act that eschews specifying the exact cereal and instead offers broad nutritional guarantees from a basket specific to different regional contexts. That change will take time. Until then, the Centre should buy, in the open market, the rice and wheat needed for the public distribution system after the kharif and rabi harvests and maintain buffer stocks for price stabilisation. If states think that the private sector will be exploitative, they can and should do their own procurement. It is only then that they will think hard about crops and costs.
The Centre’s involvement in agriculture markets should be to smoothen pan-india commerce — no state should be able to block inter-state movement of a commodity. For its part, the Centre should not be able to ban agriculture exports if prices rise. Why should farmers not get the upside of prices when they have to suffer the downside when prices go down? If the government is worried about consumer reaction, it should either compensate farmers commensurately or subside the consumer directly, but not force the farmer to do so. And if agriculture is truly to be a state subject, either the Agriculture Infrastructure and Development Cess (AIDC) in the new budget should be discontinued or whatever money is raised should be handed over to the states.
But all this cannot be done overnight. There needs to be an exit ramp for farmers and states to adjust. Here, the Centre should provide a clear road map along with performance-based incentive financing to ease the transition over three to four years.
The farm laws are illustrative of an uncomfortable reality. There are many important issues that states are fully empowered to handle. But they don’t. Problems arise. Then there is a clamour that “the government” should do more. But, inevitably, that means the central government. Of course, the Centre loves this, because it then exercises more power. And that has slowly, but surely, tilted the already imbalanced Union-state relationship even more in favour of the former.
The best bulwark against a hegemonic Centre is stronger federalism. But, for that to occur, states will have to up their game. Fundamentally, unless they bite the bullet and move to develop their non-farm sectors, most farmers will have increasingly precarious livelihoods. And the Centre can best help farmers by assisting states make that transition.