Reform in an entitled and entrenched system takes courage and commitment. The Narendra Modi government has demonstrated both — in the passing of three farm laws that were long overdue. Some states and their farmers have hailed the new laws as they have begun to receive immediate benefits. These include BJP-ruled Madhya Pradesh and, surprisingly, given the stance taken by the party against the new laws, INC-ruled Rajasthan.
The new laws, amongst other things, have cast doubt on the longevity of the minimum support price regime going forward. Though there are no specific words to say it will be abolished or diluted, the fact is that farmers do not have to sell their produce exclusively at government-controlled mandis any more. Mandis, where the minimum support price is operational on the procurement of all the wheat and paddy, brought in. The middlemen use their influence with the government to see to it that all of it, even if the quality of some of it leaves something to be desired, is procured. There are multiple bad practices ranging from fraudulent weighing-in to false counts, all to manipulate the commissions they earn.
So, not insisting on bringing in the wheat and paddy and indeed all other crops, to these government-controlled mandis is a potential blow to the people who control them and influence the MSP.
The farmers who had to pay the dictated commission to the middlemen on the MSP can now realise more by selling directly to other merchants, exporters, processors, and end users. And the union government can be proud of having done something to stem the terminal decline of the actual farming sector.
The middlemen are naturally upset. It is an entrenched system in place for over 50 years that is being upended. They lose both income and clout if these laws work against them. They well might, though the farmer is free to continue as always. He is likely to do so for a proportion of his crop of wheat and paddy to keep in with the old order in parallel.
But the new laws give the ordinary farmer some options. The middle-man’s hold is so extensive at present, that the government in the states outsource their inspection and regulatory functions to them for ease of operation and, of course, a commission. The state also charges a tax on transactions at the mandis. It is said the politicians receive kickbacks and commissions too.
Rich farmers, some 6% of the total in Punjab, are high consumers. They are both middlemen themselves and contracting overlords that engage poor farmers to work their own land for the lion’s share of benefits. They control remuneration and payments. They provide farming inputs and maintain never paid-up books of the poor farmers’ debt. It is another form of the abolished zamindari system of yore and essentially tyrannical.
The coming of the new laws has drawn attention to the MSP mechanism applicable to government procurement of just wheat and paddy.
It is an anachronistic rule left-over from an era of food grain shortages in the 1950s, 60s and 70s. There is no need for the government to buy and hoard so much wheat and paddy in a food surplus nation, even for strategic purposes. Much of it is sold to alcohol makers at huge losses when it becomes unfit for consumption.
In 2020 or 2021, when bumper surpluses of wheat and paddy production has been the norm from various states for several years now, it makes little sense to have an MSP mechanism at all.
But, like the varna system that was designed to facilitate occupational categories, it has solidified over time. Like the caste system, MSP too has morphed into something rigid, even as its purpose and need have vanished. Today, it supports a vast class of agents who live off the work of the farmers without doing any farming. The system disincentivises the production of other crops or vegetables too.
Paddy, in particular, consumes huge quantities of scarce ground water and much canal water in Punjab and Haryana. It has also created the stubble burning menace because of multiple annual crops. Paddy is a crop from heavily rain-fed areas of the country, and not native to Punjab and Haryana at all.
MSP now often acts as a maximum price, higher than the free market. It results in huge procurement costs estimated at over Rs 8 lakh crore. It artificially inflates procurement prices for the public distribution system.
The public distribution system itself, which once catered to many people from the middle-class in addition to the poor, is no longer as important.
It was, in the years of scarcity, a means of accessing price controlled, subsidised, food items. That its grain and sugar and cereals were often sub-standard was offset by cheaper than market offerings. Items such as heavily subsidised kerosene, was used widely for cooking and lighting in rural and semi-urban areas in those times. Now kerosene is not subsidised at all, and is in any case, no longer in vogue, after the wide advent of LPG and widespread electricity.
The PDS system or ration card is mostly history. Most people prefer buying their needs in the open market these days. While there can be an argument for the government maintaining buffer stocks in case of crop failure or another calamity, the proportions are not to the extent that MSP produces.
Systems put in place when India suffered from acute staple food shortages have no relevance now. Surplus wheat and paddy emanating from multiple states are rotting in Food Corporation of India warehouses.
Use of mandatory government mandis was once prescribed to prevent private hoarding. Now, it is just a mandi with out-of-date extraordinary powers. Money-Lenders (arthiyas), rule the roost and make a virtue out of their hand-holding. They provide inputs required by the farmer, some cash, but all of it at rapacious rates of interest. Besides they take the bulk of the profits via their commissions.
Farmers do face multiple hazards from the vagaries of the weather, pests, crop failure, need for money for the next planting, other expenses, including marriages. The relationship with arthiyas, like the village money-lender, is symbiotic. But it is also extremely exploitative. It can, of course, continue for its virtues and its familiarity, but not with the balance of power stacked so heavily in favour of the money-lenders.
Some of the slack may well be taken up by corporate demand and contract farming with better terms than the rich farmers. Digitisation and the introduction of high-speed internet into remote villages has given the farmer power to sell to whomsoever he likes. To say he is too ignorant to do a job of it is self-serving on the part of the arthiyas. To bully the ordinary farmer to support what is a money-lender agitation along with various other disgruntled elements such as Islamists and Khalistanis is inevitable. The Modi government has pledged that it will double farmer income. Partially, this is already happening via subsidies paid directly into the accounts of the farmers. These new farm laws may well enable farmers to grow lucrative crops and sell them directly at good prices to those who buy directly from them. Prime Minister Modi has recently declared in favour of standing firm over the farm laws. His government has decided to change the future for the ordinary farmer. Agitations by vested interests always occur when reform is afoot, but they rarely succeed.