Farm Bill Repealed: What is Next?

A civil conflict arose when three Farm Laws were introduced by the Ministry of Agriculture & Farmers Welfare. Farmers were upset as things were unclear around MSP (Minimum Support Price) and were unsure if the corporates would do justice to them when prices fell under their control.

The main parties were protesting under one name SKM (Samyukt Kisan Morcha). They were:

  • All India Kisan Sangharsh Coordination Committee

  • Bharatiya Kisan Union

  • All India Kisan Sabha

  • Jai Kisan Andolan

  • Lok Sangharsh Morcha

  • All India Krishak Khet Majdoor Sangathan

  • National Alliance of People's Movements

  • Other farmer's unions

This controversial law saw a rise in protests by the farmers' community which started on August 9, 2020, and continued for another year. The Farmers Unions believed that the Bill would make APMC (Agriculture Produce Market Committee) and is less crucial for trading as corporates can buy from outside APMC without a fee or cess charged on the transaction. The Act also excluded intermediaries in the system. The primary objective of the protest was to make the government revoke the farm laws. Further, they wanted a clear written word from the government on the MSP.

Farmers protested through various methods, viz.

  • Ghero – encirclement

  • Dharna – sit-in

  • Rasta Roko – traffic obstruction

  • Demonstration

  • even Suicide, et cetera.

This protest caused many casualties, and hundreds were injured on both sides, i.e. the farmers, the BJP members, and the police officers.

On November 19, 2021, the union government decided to revoke the law, which was repealed on November 29, 2021. However, the scenario is not much different even now. Here is why.

The farmers union met and discussed their further demands from the government. Farmers protesting said that the demonstrations would not stop until the law was scrapped and the government met the other demands.

The Popularity of Farm Laws

A survey conducted by CVoters showed some 'difficult to gulp' data. The first takeaway was that, despite Narendra Modi's surprising statement to repeal, vast segments of the Indian population approved of the three agriculture laws. More than half of the surveyed people polled 'yes' when asked if the agricultural laws were advantageous and fair to farmers. Over 47% of voters and supporters of the opposition thought that the agricultural legislation was favourable to farmers. In previous CVoter Tracker surveys, it was evident that a majority of the farmers in Punjab, Haryana, and Western Uttar Pradesh were resistant to the Farm Bills, but an equally large number of farmers outside of these two-and-a-half domains were in favour.

When respondents were asked if the protests were politically driven to damage the BJP, voters did believe it. Six out of ten were convinced of this controversial story.

Current Demands

Farmers' unions have moved their attention to the minimum support price (MSP), seeking a law on it, now that the government has decided to scrap the three agricultural Bills. Farmers are also asking for compensation for all those who died due to the demonstrations, the removal of criminal charges against some of the members, and the cancellation of outstanding electrical bills.

The Farmers' Union will write an open letter to the Prime Minister highlighting pending requests such as the MSP committee, its powers, functions and responsibilities; the Electricity Bill 2020; and the dropping of litigation against farmers.

Why MSP?

Farmers were apprehensive that the new economic agenda would enable the government to cease procuring essentials at legally set Minimum Support Prices (MSP), leaving them vulnerable to private bidders.

They now want legislation prohibiting the purchase of primary agricultural produce below state-set minimum prices or below the price floor set by the government. The government has reiterated that it would continue to buy essentials at MSP.

MSPs, which date back to the Green Revolution, are meant to provide a 50% return over the cost, but they primarily reward paddy and wheat producers since the government only purchases these two in bulk quantities.

Due to rising cultivation expenses, inadequate markets, and the government's aim of keeping food prices down, Indian farmers get lower-than-international prices for most of their produce.

On the other hand, the MSP scheme only favours farmers in a few states. Only 13.5% of rice producers and 16.2% of the total wheat farmers earned MSPs, as observed in the 70th round of the National Sample Survey.

While MSPs have benefited food grain producers over other crop production, they have resulted in significant water and land resource disparities and a shift of land away from crops like pulses and oilseeds, necessitating costly imports. MSPs also tend to influence market pricing since they are regulated prices. They frequently overlook the demand side, international pricing, export competitiveness, and environmental consequences of paddy crops.

Other Demands

Farmers in Uttar Pradesh are also calling for the resignation of Ajay Kumar Mishra, the Union Minister of State for Home Affairs, over the violence that erupted in the state's Lakhimpur Kheri district on October 3, when farmers were protesting the Deputy Chief Minister's visit to the native place of Keshav Prasad Maurya. Four farmers were killed when a car ran them over, and four more were slain in the subsequent violence, including a journalist, a driver, and two BJP volunteers.

A Bullet Dodges or an Opportunity Lost

The Modi government decided to withdraw the law in November, seeking to improve ties with the powerful agriculture lobby, which feeds over half of the country's 1.3 billion people and accounts for around 15% of the $2.7 trillion economies.

Economists had a positive approach towards the Bills and felt the heavy loss as the Bills were shelved.

India ranks 101 out of 116 nations on the Global Hunger Index, with malnutrition accounting for 68% of child mortality.

Despite this, as per various studies, it wastes roughly 67 million tonnes of food each year, costing around $12.25 billion - over five times the value of most significant economies.

The primary sources of waste creation include lack of cold chain storage, refrigerated transport shortages, and inadequate food processing facilities.

The Farm Bills intended to let private traders, merchants, and food processors buy directly from the farmers, skipping the over 7,000 government-run wholesale marketplaces where intermediaries' commissions and market fees add to consumer costs.

Traders and economists argued that repealing the constraint that food must pass through regulated markets would have increased private participation in the supply chain, providing both Indian and foreign corporations incentives to participate in the industry.

If MSP becomes mandatory, India's agricultural exports may weaken and significantly hinder competitiveness since the government's guaranteed prices are significantly higher than domestic and international market prices. No dealer would want to pay a more excellent price for something and then sell it for a lesser one.

As a result, the proposed adjustments are based on the concept that free-market competition in farm products would eventually lead to a market-clearing price where quantity produced and supplied equals quantity demanded, resulting in equilibrium.

According to economist Ashok Gulati, the cost of acquiring, storing, and delivering rice to the poor through PDS (Public Distribution System) is around ₹37 per kilo. Wheat costs roughly ₹27 per kilo. The Food Corporation of India's (FCI) labour cost to business or cost to company (CTC) is 6-8 times greater than private labour. As a result, market prices for rice and wheat are significantly lower than what the FCI pays to procure them.

The government's support for farmers should never be questioned. However, market-distorting support in the form of MSP poses challenges and crucial questions, such as 'whether we can switch to other means to support farmers that inflict less collateral damage,' according to Pravesh Sharma, a fellow at the Indian Council for Research on International Economic Relations in New Delhi.

The controversy over India's agriculture rules was an unavoidable short-term cost in exchange for long-term advantages.

There can be a middle path for further discussions regarding implementing the original idea. Allowing states to implement changes at the state level may be a preferable course of action for the government of India. Those who want to keep the existing structures have an option, while the more entrepreneurial and ambitious ones are not constrained.

The Future

It is difficult to predict the outcome of the protesting farmers for their further demands and even more challenging to predict the plans and actions of the government, but there cannot be a law with which the public is disappointed. Shelving would have given geopolitical advantages to the Centre, but it has to keep coming up with such laws and, more importantly, an even better narrative for the same, which might be easier to swallow by the audience.

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