Farmers listen to a speaker as they take part in a protest against the central government’s recent agricultural reforms at the Delhi-Haryana state border in Singhu on Friday.(AFP)
Farmers listen to a speaker as they take part in a protest against the central government’s recent agricultural reforms at the Delhi-Haryana state border in Singhu on Friday.(AFP)

Farm reforms must ensure price stability, food security

Any change in agricultural markets should use the farm development model of Punjab and Haryana and after improving upon the flaws, new enactments should be made.
By Lakhwinder Singh | Hindustan Times/Chandigarh, Chandigarh
UPDATED ON DEC 04, 2020 05:03 PM IST

The farmers’ protest at the doors of the nation’s capital has entered its eighth day. Talks with the Union government have not progressed as expected, but it is clear that this protest has received widespread support. This means citizens, including those abroad, are not happy with the way the ruling dispensation has been conducting the affairs of the country. The fear generated by the ruling class is counter-intuitive compared to the values established by the world’s largest democracy. The increasing participation in the protest despite using police force and unleashing disinformation has generated space to fearlessly express grievances against a hasty policy decision that adversely affects the livelihood of the masses.

The three farm Acts rushed through by the Union government without consulting the stakeholders have inherent flaws and need to be scrapped. The first and the foremost flaw is that anybody having an Aadhar card without paying any tax to the government can be engaged in the purchase of agriculture produce. It is pertinent to add here that the agriculture marketing infrastructure, such as rural roads for shortening the distance between the market yard and the location of agriculture production, is essential for the efficiency of agriculture markets. Punjab and Haryana are examples of creating such rural infrastructure for agriculture market clearance. Any new reforms regarding agriculture-related markets should propose a reasonable tax rate for ensuring revenue for developing rural infrastructure. The state governments should not abdicate their responsibility of generating basic rural infrastructure for efficient agricultural markets.

REMOVE FLAWS IN APMC SYSTEM

Agriculture is a case of imperfect and unorganised markets. The existing Agricultural Produce Market Committee (APMC) mandis are part of an organised and regulated agriculture marketing system. This marketing system is inadequate and suffers from flaws. Any new marketing system that is to replace it should be superior in terms of removing the flaws and inadequacies.

The three farm Acts are a regressive moment in terms of taking the farming markets to be unorganised and informal. Study after study has pointed out that the unorganised agricultural markets are exploitative and against investment in agriculture development. When we examine agriculture development of Punjab and Haryana, these two states are testimony of the impact of formalising agricultural markets. Therefore, any change in the agricultural markets should use the agriculture development model of these two states and after improving upon the flaws, new enactments should be made.

The vast formal institution infrastructure that has been generated can be harnessed to eschew the major flaws of the marketing system. When 86% of the farmers are small and marginal, they cannot compete with large companies with financial and political clout. Therefore, the contracts formation and enforcement mechanism need to be developed for a level-playing field. The member-based cooperatives should be part of the legislative enactments for ensuring the partnership and participation of small and marginal farmers.

An overarching issue is the constitutional provision that guarantees agriculture as a state subject. The state governments and stakeholders’ rights on any change should, in principle, be their prerogative. In case of a need, the Union government should establish a transparent consultative process, involving all stakeholders and proceed with the approach to build consensus. During this process of consultations, where big losses are expected to occur, a satisfactory means should be adopted to compensate for the sake of building a consensus.

HIGH DEGREE OF INDEBTEDNESS

At present, the agriculture sector of India is suffering from low public capital formation and high degree of indebtedness. The low public capital formation in agriculture is mainly due to low public investment throughout the period of economic reforms. The consequence of it is the resultant high degree of indebtedness of the farm sector. This has created an unprecedented agrarian crisis. For a long period, it has been manifested in terms of agri-suicides. The new form of intervention is urgently desired to save the occupation of farming and this requires pumping public investment in agriculture capital formation and institution building.

Time and again, the Food and Agriculture Organisation (FAO) has warned that the world is expected to face enormous food shortages due to environmental changes and reduction of area under agriculture production. Food security has continued to be a societal concern of India due to the large size of population, most of them poor.

Any uncertainty of price instability in agriculture can disrupt the agriculture production system and hence will jeopardise the hard-earned food security of the country. Therefore, new agriculture reforms must ensure price stability and that should also ensure food safety and security. The suggested measures, if adopted in right earnest, will not only ensure a peaceful environment but will also allow agriculture to be an occupation to earn a decent living.

The writer, Lakhwinder Singh, is a professor of economics and coordinator, Centre for Development Economics and Innovation Studies at Punjabi University, Patiala.
The writer, Lakhwinder Singh, is a professor of economics and coordinator, Centre for Development Economics and Innovation Studies at Punjabi University, Patiala.

The writer is a professor of economics and coordinator, Centre for Development Economics and Innovation Studies at Punjabi University, Patiala. Views expressed are personal

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