Another Farm Law could Quell Farmer Protests in the Country

Context: Ongoing farmers protest against Farm Acts could cause chaos in food markets, alienate urban consumers, and potentially derail the post-COVID recovery. Government needs to find a middle ground while ensuring that the spirit of reforms is not lost in the process.

Farms Acts: Finding the middle ground

• Need: For India to get out of lower-middle-income trap, farming must come out of its sub-3% growth rut.
  • Productivity of labour, land, fertilizer and water have to improve.
  • Massive private investments need to take place in storage and processing.
• Present social contract: Presently, farmers get subsidies at both the input and output levels.
  • For example: in Punjab, each of its 1 million farming households gets $1,600 a year in subsidized fertilizer and free electricity to pump groundwater. They get these privileges, plus the minimum assured price, in exchange for ensuring food security.
  • This results in the overuse of groundwater are depleting aquifers, and the burning of paddy stubble, causing hazardous pollution.
• Farmers concern:
  • End to institutional state support: the government will stop buying from farmers at guaranteed prices if the mandi falls into disuse.
  • Denying farmers, the right to take disputes with private buyers to civil courts.
  • Relaxing strict rules on hoarding may benefit farmers’ organizations with sufficient warehousing capacity, but the big winners will be trading companies.
• Changing present social contract: Introducing downward protection for farmers
  • Introduce an additional law guaranteeing a basic farm income, benchmarked to every state’s agricultural value-added.
  • A $500 per hectare commitment, when implemented over 190 million hectares of the gross planted area, works out to $95 billion annually, or 3.5% of pre-COVID gross domestic product.
  • May gradually dismantle the market-distorting support prices. The challenge will be to make it reach tenant farmers.

Conclusion: Government must strike fresh bargains that will make farmers lose interest in old arrangements. The guarantee of a basic farm income could give them a safety net.