Prime Minister Narendra Modi on Monday clarified that Indian agrarian reforms would mean that farmers would lose the opportunity to sell their produce to the government at minimum support prices (MSP). The need for a clarification puts farmers at risk for rumors of a law designed to favor big business over them. Concerns seem to have erupted in Punjab, Haryana, Uttar Pradesh and elsewhere against the opening of the sector to private procurement and supply deals. Opposition leaders were outraged when the Akali Dal, a longtime ally of the Bharatiya Janata Party (BJP), broke with the ruling party over the issue. Quick suspicions arose that two bills had been passed in Parliament, but a closer look at the laws in question should reassure farmers that their primary goal is to give them what they have long lost. One law allows farmers to sell their produce freely to buyers, while the other allows farmers to enter into supply agreements with companies, without having to go to a market-controlled mandi for agricultural products. Combined with the lifting of restrictions on the private storage of agricultural produce, these measures push farmers towards a market system that rewards their efforts better.
The primary sector accounts for 15% of our economy, but somehow supports two-thirds of the population. For a long time we kept the farms under strict control in the name of food security. As with all over-regulation, it raises growing interest groups on the money earned as intermediaries, leaving growers with an unfairly small share of the final value perceived on what they harvest. Our farmers need empowerment with choice, democracy and market potential. With the monopoly of our Mandi network gone, they may turn to other buyers who are willing to bid more than state-determined prices. They can also store food grain or other perishable goods and wait for higher prices or strike bargains with companies that are willing to provide modern tools and learn for productivity improvement. In general, the theory suggests that multiple buyers increase demand and farm-gate prices. In the case of a rate-crushing episode of over-supply, the government may take the crop at MSPs to replenish its granaries. Why should anyone object?
A statement by Akali Dal minister Harsimrat Kaur Badal, who left the government in protest, may explain some concern. She cited the fear of the unknown farmer that after the entry of large private companies, the mandi system would fade and corporate buyers would fall heavily on their livelihoods working on their farms. This vague image replaces a state monopoly with a private one. There is no reason to expect such a decline in state responsibility. However, it would be reasonable if farmers could see early signs of real hostility among buyers. If global brokers are allowed to buy stock for foreign consumption, for example, it should be spelled out by the center — although this may raise some tough questions about the validity of input subsidies. We need to familiarize farmers with online platforms, which demonstrates the advantage of many bidders competing for their goods. Well-implemented, agricultural reforms can uplift millions.