Why Punjab should not go the Bihar way on agriculture reforms
Bihar’s reforms have only enhanced market inefficiency that has led to lower and unstable prices of agricultural produce. Without regulated markets, agriculture markets are deprived of the required marketing infrastructure and fair prices to farmers and all other stakeholders in the economy.
The Centre claims the recent farm reforms are historic as they have the potential to bring a revolutionary improvement in the economic condition of farmers. Before analysing the prospective impact of the three new laws, particularly the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, which affects regulated markets, it is important to study the post-reform agriculture scenario in Bihar, where the Agricultural Produce Market Committee (APMC) Act was abolished in 2006.
At that time, it was believed that the introduction of the Bihar Agriculture Produce Market (Repealing) Act would enable massive investment to set up and run agri-markets, leading to the state becoming an agricultural hub. It was claimed that Bihar would be equipped with premier market infrastructure for enabling farmers to compete in the global market. But did these claims come true? What happened to Bihar’s economy after 14 years of agri-reforms? This testimony would guide us to know the future of Indian agriculture as a prospective impact of new farm laws.
Let’s take the case of new investment and farm infrastructure. In Bihar, the abolition of the APMC Act was unable to bring in new investment, consequently marketing efficiency deteriorated. The Bihar State Agricultural Marketing Board lost revenue due to the dismantling of regulated markets that led to the closure of the prevailing developmental activities in the state. Forget the setting up of a world-class marketing system, the state lost even pre-reform marketing infrastructure.
INFRASTRUCTURE, EARNINGS DOWN
The number of procurement centres in Bihar has declined by over 82%, from 9,035 in 2015-16 to 1,619 in 2019-20. However, during this time, the number of these centres increased in Punjab (4.73%), Haryana (48.27%), Uttar Pradesh (29.48%) and Madhya Pradesh (19.48%). Similarly, there was lack of cold storage facilities in Bihar as a substantial number of these storages shut down in the recent past.
Better price realisation was the most impassioned issue publicised by the government while carrying out agri-reforms in Bihar. In reality, the farm harvest prices of all major crops such as wheat, paddy and maize remained lower than the minimum support price (MSP).
During 2016-17, the MSP for wheat, paddy and maize was fixed as ₹1,625, ₹1,410 and ₹1,365 but the farmers could get ₹1,299, ₹1,113, and ₹1,140 a quintal, respectively. During 2019-20, the farmers got ₹350-450/qtl lower than the MSP for all major crops. This shows that the price mechanism under unregulated markets remained a harmful proposition for the farmers.
After the de-regulation of agri-markets, the market density, participation of government agencies in procurement, and the scale of procurement of grains also declined. Though marketing yards still exist, the bodies managing them were abolished and the staff employed there was deployed elsewhere. Unscrupulous traders illegally transport a sizeable quantity of farm produce to other states, which provide assured MSP. Under these situations, producer surplus and consumer surplus declined.
MISPLACED GROWTH PERFORMANCE
Unlike claims of becoming a farm hub, the agricultural sector of Bihar has seen misplaced growth performance. The average annual growth in agriculture and allied activities of Bihar from 2001-02 to 2007-08 was 1.98%, which improved shortly after that only to registered a decline at just 1.28% from 2012-13 to 2016-17.
Owing to the present scenario of the farm sector, the trend of land concentration seen after the number of large farmers increased in the state may have a negative impact on the livelihood of smaller farmers.
It was claimed that agri-market reforms would enhance competitiveness and improve the economic condition of the farmers. But this did not prove to be true. The income level of farm households declined in the post-reform period in Bihar as the real monthly income of these households fell from ₹1,810 from 2002-03 to ₹1,686 (6.85%) in 2012-13. Even at the all-India level, the real income level of farm households increased by 39.43% during the period. Bihar remained one of the poorest states of India.
HARMFUL FOR FARMERS, STATE AND ECONOMY
The prevailing worrisome scenario of Bihar’s agricultural sector offers a lesson in the aftermath of the market reforms in the country. Bihar’s reforms have only enhanced market inefficiency that has led to lower and unstable prices of agricultural produce. Without regulated markets, agriculture markets are deprived of the required marketing infrastructure and fair prices to farmers and all other stakeholders in the economy.
In such a scenario, it is apparent that the repealing of the APMC Act under the so-called agri-market reforms would be harmful for the peasantry, state exchequer and agrarian economy of our country. email@example.com
The writer is principal economist at Punjab Agricultural University, Ludhiana. Views expressed are personal.