The ongoing farmer protests near the national capital, while in the worst of times for large group gatherings that too with icy winds wafting through the cold Delhi nights, have evoked different reactions depending on who one is speaking to.
But then, any debate on Indian agriculture, with all its regional variations and nearly 60 per cent of cultivation done over dry rain-fed land with farmers producing mostly one crop and not three, is bound to evoke strong reactions. Agronomists and economists like C H Hanumantha Rao, have always underlined the importance of regional variations and the role of policies. For instance, the policy of minimum support price or MSP has been operating effectively in states without much multiple cropping like Punjab and Haryana but it is not the case in some other states. While the grain belt farmers link themselves to the APMC yards or mandis, other regions, like Kerala down south, has never had a system of APMC mandi.
The farmer protests have brought into sharper focus the fundamental flaws in handling of the Indian agriculture. Be it around the risks of mixing up of regulations with policy or attempting a one nation-one market solution, as is apparent in the currently debated regulations. Even the often stated challenge of fragmented and small farm holdings as the bane of Indian agriculture and as a sign of inefficiency is also debatable. Underlying all of these is of course the message on the degree of consultations needed in a sector that is a state subject. Veteran academician, economist and member of the Thirteenth Finance Commission Indira Rajaraman, who has looked at this sector closely says, “there is little doubt that Indian agriculture is far from being an efficient and remunerative activity for most farmers. But since it is very fundamental to the Indian economy and involves large numbers (about 150 million farmers) dependent on it for livelihood, changes need to be well thought through and debated to avoid scope for any misgivings.” Therefore, she feels, given the scale of the current agitation and the concerns raised, some of them quite genuine, it is perhaps time to revisit the legislation and tweak it to address the concerns.”
The Regulation Challenge
Professor Sukhpal Singh, former Chairperson of the Centre for Management in Agriculture at the Indian Institute of Management, Ahmedabad (IIMA), who has studied Indian agriculture closely over the years, says, the big problem is mixing up of regulation with policy in the current debate.
Regulation, he explains, is about setting the rules of the game and ensuring fair play and protecting the interests of all parties, especially the weaker party – farmers, in a transaction. Here, he says, most of the major agricultural states in the country have already put in place new agricultural marketing channels. These are in line with the APMC (Agricultural Produce Market Committee) Model Act, 2003 and with subsequent changes (the 2017 Model Act and separate Model Act on contract farming in 2018) to impart better market access for farmers, including creating provisions for direct purchase, contract farming, private wholesale market, and e-trading apart from single buying license for the entire state. But, these are all within a state whereas what the government has attempted with Union level Acts is achieving one nation-one market. That, however, is debatable for a diverse country such as India. Some for instance, see Centre’s focus being needed on inter-state trade, where there is little that states can do.
In fact, there is a January 2019 Parliamentary Standing Committee report on agriculture which spells out what each state has done already.
The Policy Imperatives
The other dimension is about policy, which unlike regulation, is really about facilitating and putting enablers in place for production and transactions for both farmers and the buyers. Here is where most leading agricultural states, including Punjab and Haryana and others, do not have a policy.
Other than the regulations around market access, pricing and procurement, the Indian agricultural sector needs attention on irrigation, credit, crop insurance and farm extension services. With clearly formulated policies in states, these could be dealt with especially those targeted at small and marginal farmers.
Today, a subject that is much in focus is Minimum Support Price (MSP), which is a policy matter – an administrative measure that the Union government have been taking over the years with an aim to support the farmers and to run the public distribution system and handle procurement of farm produce. If the MSP is made into a law instead of a policy, that it is currently, it could have long-term implications because if the government fixes a price and the private sector is not willing and opts to instead rely on imports and if the government is also unable to procure then it could be the end of the road for the farmer. Also, it brings in a contradiction as when the government is intending to give freedom to buyers, then price fixation becomes a step in the opposite direction. This is all the more when the MSP fixation is variable and could be impacted by an election year or get influenced by political priorities.
Incentives That Matter
To bring in the private sector we need incentives and not just de-regulation. For instance, Professor Singh says, “if you want to encourage contract farming, it should not be that you are free to go and contract with any farmer but instead involves putting in place incentives such as those that encourage procuring entities to engage with small farmers or have group contracts. In such arrangements, certain exemptions could be given or there could be lower cost credit provided to the contract grower or in such cases the government could meet the extension cost for the farmer. It could also encourage group contracts as well as working with small and marginal farmers.
“One of the major problems of the Indian agricultural sector is that neither majority of states nor the Centre, have a proper agricultural policy and therefore there is little visibility on the direction of changes that the sector has to deal with. The net result is that Indian agriculture has to fall back largely on schemes by the Ministry of agriculture and a bunch of ad hoc decisions by the centre and the states,” says Professor Singh. Some sector experts have also pointed out that though changes in Indian agricultural sector has been revisited from time to time, there is also tardy progress. For instance, even now the need to look at the recommendations of the MS Swaminathan committee report 2004 National Commission for Farmers is a subject under discussion.
Sector of the Future
From the perspective of future direction of the sector, Professor Singh reminds that the perception and faith in agriculture as the sector of the future can play a critical role. “If it is viewed as a liability (40 per cent of population involved in it and contributing to 15 per cent of the GDP) that needs to be constantly bailed out, then there will always be subsidies and ad hoc incentives along with the uncertainties and political interference that come with it.” Instead, he feels, agriculture needs to be defined within the realms of agribusiness so that anything that is based on agricultural raw materials is part of agricultural sector, and then its share in GDP (Gross Domestic Product) would even at current levels be in the range of 25 per cent, if not more, and suitable growth enablers can be put in place as then the public perception of the sector will also change.
Focus on Size Flawed
He also feels too much is being made of small size and fragmented structure of farm holdings that colours small farm holdings as a bane of Indian agriculture. “This is not true and in fact,” the professor says, “a small farm can be an efficient unit of production and the size of the farm does not matter. What matters is what you do on the farm, how much is produced and for whom and why, and that makes all the difference.”
This, as is apparent, needs to be viewed in the context of the rationale often proffered in favour of contract farming as a vehicle to consolidate farm holdings and thereby bring in greater efficiency.