Farm talks: No end in sight yet
The regulating of free markets so that farmers feel more secure may be a workable proposal
The major farm unions protesting a set of agricultural reforms have agreed to restart negotiations with the government. This comes as a relief, but not a breakthrough. Of the four demands of farmers, two are easier to accede to, while the other two are tricky and these are the ones that will determine the fate of these talks. Let’s look at the easier ones first. The farmers want changes to be made in the draft Electricity (Amendment) Bill 2020 to protect their interests. The bill proposes to provide cash instead of subsidised power for agricultural use. The farmers say the switch from subsidy to cash transfer could increase power costs for them. They also want amendments in an ordinance so as to completely exclude farmers from any penalties for cropresidue burning, a major cause of air pollution.
Both these demands are likely to be met whenever they come up on the table. The government has, in no uncertain terms, said it will make appropriate changes to laws to ensure both issues are addressed.
It’s the other two demands — the farmers want these discussed first — that pose the real test. The farmers are adamant that when they meet the government’s negotiators again, the talks must be geared towards a complete repeal of three agricultural laws that farmers say will hurt their livelihoods. The laws essentially change the way the country’s farmers do business by creating free markets, as opposed to a network of decades-old, government market places, allowing traders to stockpile essential commodities for future sales and laying down a national framework for contract farming. Farmers say these laws will allow big corporations to dictate prices and erode their bargaining power. The Modi government is unlikely to scrap the laws altogether, but has advanced a clutch of amendments. These include some mechanism of regulating proposed free markets so that farmers feel more secure as they face big buyers and a written assurance on minimum support prices (MSPs). The unions have spelt out why the assurance on MSPs was not enough. Indian farmers receive lower prices for most produce than global averages.
Farm unions want the government to adopt a comprehensive measure of cultivation costs that includes the imputed cost of capital and the rent on the land, called “C2” in economic parlance. Since both these demands are unlikely to be met, according to most economists, the government should keep a less market-distorting model of compensating farmers ready. For instance, some suggest India should move towards direct income support to farmers. A lucrative income support programme that can be funded by consolidating all subsidies into cash may do the trick.