Sequence Vital, As Reform

Context: The farm laws should be implemented after the necessary reforms in agriculture.

Issues with the agricultural sector in India:

• Low Growth per-capita: Over 2002-16, the real incomes of average farming households in India grew at a compound growth rate of just 3.7%.
  • According to an official survey in 2004-5, 40% of farmers stated that they do not wish to farm.
  • While the Food Corporation of India (FCI) has an excess buffer stock of up to 3.5 times, the farmers lag behind in per-capita incomes.
• Dependence on open-ended procurement: Guaranteed procurement of grain (and a few other crops) at the Minimum Support Price (MSP) gives farmers some certainty about income.
  • A lone farmer cannot negotiate a good deal with a powerful agribusiness
• Reluctant entrepreneurs: In the absence of certainty about offtake, every farmer is like an entrepreneur producing goods without firm orders for her produce.
• Farm and Food subsidy: conflates producer subsidy and consumption subsidy, wrong siding India at the World Trade Organisation (WTO).

Way Forward:

• Move dispute resolution from babus to the courts.
• Cooperatives should be promoted: and by the Government to help build farmer’s bargaining power, as is the case of Amul, which is a confederation of cooperative societies of small farmers.
  • The world’s biggest producer of dairy, Fonterra, is a cooperative in New Zealand.
  • Ideally, sugar mills should be owned by cane farmers, ending the dispute over cane prices and the farmers’ share of profits from sugar.
• Strengthening farmgate infrastructure and provide other assistance to FPOs that will help farmers’ integration with the market more efficiently.
  • The commodity markets should be allowed to work without hindrance of export bans.
  • Help farmers by putting an end to power theft and create a stable power supply in rural areas.
    • For e.g. Cotton farmers in Gujarat get a good price because ginning happens right in front of their eyes and they know the price ginners get for the fibre.
  • Reform food subsidy: India should move to income support for farmers and pure consumption subsidy.

Conclusion: Carrying out the discussed reforms as practice, then implementing the farm laws would make farmers far more receptive to change.