Agrarian economy — For the love of left and right.
By: Mukul Mishra
Tags: Farmers Protest, Rural Development, Agriculture, Farm Bills 2020, India

Agrarian economy — For the love of left and right.

While it’s perfectly fine to stick to one’s ideological convictions, but to extend it to the point of blind faith is something which creates ruckus. Unfortunately, this is what’s been happening with the recent farm bill controversy from both the sides of the spectrum.

Reputed people who term these measures as pro-capitalism, assert that it will lead to corporatisation of agriculture, will take away their land, will exploit farmers in an unregulated free market and APMCs will be abolished. While capitalism and free market are two distinct topics, hence shouldn’t be used interchangeably. However, this is not the point of concern.

On the other hand, pro-reform guys assert this as a watershed moment for Indian Agriculture, liking it to 1991 reforms (which saw us growing by more than 6% for 30yrs). In some sense they deem these reforms to be unquestionable and assert that APMCs be abolished . I’ll explain the flaw in the arguments of both sides.

1. APMCs develop monopolies of rich farmers and traders (cartelisation) in market which makes price less for small farmers by levying very high mandi charge( Punjab charges 8.5%!) on them, restricting their profit.

Why have they been able to become monopolists? Lack of competition. (The key to success in anything in life is competition. Competition brings out the best in us, right?) Almost every post harvest activity, from buyer or trader registration, to recovery of dues, to warehousing facility, to dispute resolution came under APMC's ambit. Even pvt market yards and contract farming came under them. They thus had unfettered powers over the life of a marginal and small farmer.

You will not see poor farmers protest, they aren't a vocal lot anyway, but will hear when they commit suicide.

Nowhere in the act it is specified, that APMCs will be abolished. Then why is the fuss? Is it because pvt mandis will not be taxed, but APMCs will?

No. Corporates in India pay taxes up to 30%, APMCs pay much lesser. APMC structure may get highly diluted as they are highly inefficient and exploitative, and if this sector frees up, farmers may stop relying on them.

2. Farmers aren't a homogenous group. Unlike any other professional class, the class varies from the ones who drive Audis of the world to the ones who are barely able to get two squares meal. The second lot was anyway worse off. 41% farmers were unaware about the existence of MSPs, points out Economic survey, 2016-17.

Thus, to think any policy will have a uniform impact across the class boundaries, is far-fetched.

Similarly, what pro-reform guys assert is qualified.

1. An Act won't change everything. While it is highly desired that a farmer now has the freedom to sell, but it is still not clear who will regulate(no designated agency) the private markets to ensure that farmers have access to payment guarantees, price information and that all transactions are recorded etc

2. APMCs give price signals as they are the largest places where the produce was being handled, bought and sold - a benchmark to be compared against. Other than Maharashtra, in no state we have a private wholesale market till date. In the absence of aggregated pricing info, how will farmers know whether what they are being paid is fair, esp if several segregated pvt mandis pop up w/o being effective regulated and APMC structure being highly diluted. E-nam offers a way out,but still it is at a pretty nascent stage.

3. Farmers are tied to these mandis because they borrow from there-non institutional, informal sources. Will take time and effort to break such linkages by expanding the reach of MFIs, Small Finance institutions, democratization of credit etc.

Ps- no matter how much a academician write that with the onset of liberalisation in agriculture, APMCs will be diluted considerably in the short term, it won't happen. They will remain much longer because ppl are used to them, and it takes time to develop habit.

The key then isn’t dismantling APMCs but making them efficient by allowing more competition and creating conditions supporting infrastructure, modernising APMCs, supporting investments, formation of FPOs, developing food processing industry, lowering the cost of production etc etc to make agri economy inclusive. Remember, while 91 reforms have been labelled as watershed moment, but they have also led to Jobless growth, due to subsequent lopsided policies.

To sum up, don’t be blinded by any economic ism. Figure out whether any proposed policy will increase competition or not, and whether or not we have a neutral agency to enforce the rules of the game in a reasonably free and fair manner. Quite similar to how a sarkari (which we all are fanatic about) and a private exam is conducted. The key is not to gain in an inefficient system, but to increase efficiency.