Answering farmers’ knock

Context:  In the light of recent agitations by the farmers' groups against the new farm laws, Centre must carefully consider options, do the groundwork, close the communication gap.

Benefits of the new farm laws:

• Ending the commission of arhtiyas, mandi fees and cess collected by states:
  • It accounts for as much as 8.5% over the Minimum Support Price (MSP) in Punjab, amounting to roughly Rs 4,500 to 5,000 crore each year.
  • A substantial chunk of this is never audited by the Comptroller and Auditor General (CAG) of India.

Reasons for the farmers’ agitation:

• Gross communication failure: Government failed to explain the benefits of the laws to the farmers, which was exploited by some political parties and social activists to spread misinformation.
  • Farmers are misinformed that the new laws are sell out to corporate houses, will abolish the Minimum support price(MSP) system and capture farmlands.

Issues with the farmers’ demands:

• Repealing the new laws: will result in bringing back the controls, license-raj and resultant rent-seeking. (State socialism)
  • For e.g. milk, poultry and fishery don’t go through the mandi system and their growth rates are 3 to 5 times higher than that of wheat and rice.
• Making MSP statutory and legally binding: is not a wise step because of the following reasons:
• Economic inefficiency in grain management: Food Corporation of India (FCI) is overloaded.
• No assurance of MSP by the private sector: in case of excess production, since out of the 23 crops, only wheat and rice enjoy MSP in a meaningful manner.
• It will distort markets: and make Indian agriculture non-competitive.

Way Forward:

• Price stabilisation scheme: Pro-actively buying a part of the surplus whenever market prices crash, implemented through the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED).
• Utilising Commodity Derivative Exchanges where farmers can buy “put options” at MSP before they even sow their crops;
• If the market prices at the time of harvest turn out to be below MSP, the government can compensate them partly for lower market prices.
• Decentralisation: The Centre should get off from MSP, Public Distribution System (PDS), fertiliser subsidy, and MNREGA; since agriculture is a state subject.
• Finance Commission to develop tangible indicators for subsidy allocation: Centre shall allocate money to states based on poverty, vulnerable population, wheat and rice production.
• Allow states to decide MSP: handle procurements and stocking costs.

Conclusion: Price stabilisation scheme and decentralisation of agriculture are the possible methods to solve the present crisis in the Agriculture sector.