The government and farmers’ dialogue is good news
The sixth round of talks between the Centre and protesting farm unions has resulted in substantial progress: The dialogue process has been restored, ending a month-long, politically challenging impasse; the government has acceded to two of the four main demands of farmers; and both sides have agreed to meet again on January 4. Moreover, the government was wise to convince the unions to discuss the easier issues first. The Centre promptly agreed to spare farmers heavy fines for pollution-causing crop-residue burning and also acceded to the demand that the draft Electricity (Amendment) Bill, 2020, should not impact farmers. The farmers had opposed a provision in the bill to switch them to direct-cash transfer instead of subsided power for agricultural use, which they argued would increase irrigation costs. The onus is on the government now to devise cash incentives so that farmers can dispose of crop remnants in an environment-friendly way.
The trickiest two demands — a repeal of the new three farm laws, and a legislation guaranteeing minimum support prices (MSPs) for 23 farm commodities — have been deferred until January 4. The fate of the talks and their outcome hinges on these two issues. There are big hurdles still to be crossed.
The government is unlikely to repeal the three laws that ease restrictions on farm trade by creating free markets. Farmers say these laws will leave them at the mercy of big corporations. The government rightly offered to have a committee examine the laws again, which was rejected. The other demand is for a law banning sale of any farm produce below federally- fixed MSPs even to private traders. In Wednesday’s talks, the government suggested a committee to examine this demand because of its larger economic consequences. The farmers rejected this proposal too. The challenge is that if MSPs is made compulsory for even private traders, then it is sure to upend the normal market mechanisms of demand and supply, the immutable factors that decide price of any commodity. It could push up inflation and make agri-exports non-competitive, necessitating even more subsidies. Moreover, if buying at MSPs isn’t profitable for traders, they will simply exit the market rather than face penal action. This demand, therefore, isn’t amenable to a simple yes or no answer.
It is difficult to predict what will happen as the talks progress, but a start has finally been made. And one larger lesson is that if the government had adopted a more consultative approach since the inception of the laws, the big farm crisis may have been avoided.