India’s New Farmer’s Laws Protests
By: Shagun Sharma
Tags: Policy, India, Protest, Agriculture, Diversity

What’s really happening

(note: simplicity does not equate to misinformation in this article)

Pre-reform situation

In spite of how it was conceived, the ‘Mandis’ (or the wholesale agriculture markets) operated very differently.

Farmer’s could only sell in ‘Mandi’ of their area, at a price ‘fixed’ by unfair practices, by a group of approved buyers. It was basically a monopsony disguised as a competitive market.

Its impact?

Farmers were getting less paid because it was basically a buyer’s market

They could not sell it to outside the designated 7,000 Mandis in India

Because most states, to protect their local interests, do not allow non-state farmers to sell their crops in their area, the farmers could not sell it to other states Mandis

Let alone, as the no. of Mandis are so limited and widely disbursed, any attempt to take their produce to any other Mandi except the closest one attracts high transportation cost. This is a completely non-additive component in the final price, as no sane Mandi would offer this ‘foreign’ farmer more price than what it offers to its ‘local’ farmers. This problem exaggerates for common crops such as wheat and rice. Therefore practically, the farmer could not sell it to any other ‘buyer’ outside of their nearest Mandi and its designated buyers. Only special crops such as strawberries can afford this transportation cost as it will not face any competitive price when it reaches to far off Mandis

Benefits?

They get MSP (Minimum Support Price) at Mandis. Meaning, the govt. considers some crops as essential items and promises the farmers that come what may, they will buy the crops not below at this price for the Public Distribution System (PDS) read, govt. subsided rations

No marketing, lobbying effort. Why market, when there’s only one place you can sell to. And practically at one price

In a nutshell, the major benefit was the sheer simplicity of doing farming. Some farmers knew it was not the best approach and not in their best favours, but it wasn’t discussed much as at least it avoided them to enter the fiery, complicated world of ‘doing business’ with private players.

How the government thought about it

But the policymakers are there for a reason. They all the while recognised it as an inefficient way. Therefore, committees were formed through the years, election parties (who are now protesting) put it as a ‘promise’ in their manifestos and all the economists agreed that reforms need to come to benefit the farmers. Enable them and give them the confidence to come back in the market to get a better price.

Basically, turn it into a seller’s market.

They also think from a holistic viewpoint and therefore they realise that removing MSP would disincentivise production of these ‘essential’ goods which had through time become nothing short of a shameful incidence for the country. These crops were brought at MSPs but had to rot because of insufficient demand/ management/ storage of these. Therefore removing MSP should ideally result in farmer’s picking up more non-traditional, ‘demanded’ crops resulting in higher incomes. This is a win-win as the consumers would also get these non-traditional crops at a reduced price.

Bam, the government hushes through the reforms

Thus, in June 2020, the current government introduced three bills and by September 2020, these bills had become acts.

The sheer swiftness! All the whilst when Corona was panning out.

Some saw it as a bold move. The economists were in particular happy. The reformist class in India was happy.

Strategy decisions, seemingly beneficial for the farmers, the country consumers, and promises dating back to the start of the decade were being fulfilled.

Up until the complications emerged.

Wide protests from major agrarian states

Almost suddenly protests emerged from leading agri-states. In particular, Punjab, which contributes the majority of the two leading essential crops to the country.

They were just not happy that their traditional way of farming was being snatched by the government, without proper consultation and was being shown as simplistically benefitting them.

But in more detail, this was fuelled by a number of factors.