Indian economic policy has always been urban biased. Supporting early industrialization by keeping food prices low or providing rural savings to finance industrial growth, the rural and therefore agricultural sector is in the process of adopting a bad bargain. As food items for retail inflation (by weightage) account for more than half of its reference index, the shift to the inflation-targeted mandate given to the Central Bank in 2016 is also inflation for agriculture. It is known that trade regulations are stacked against agriculture. It was also officially included in the All India Measurement Support (AMS) calculation for joining the World Trade Organization in 1995. For most countries, especially in the West, AMS is positive, but for India it is and still is negative. Over the years, this imbalance has been sought to be corrected through input subsidies for fertilizer, electricity, water and agricultural loans. Output price support is provided through government procurement and its Minimum Support Prices (MSP) policy. It is a patriarchal yet huge arm trying to help farmers. Not to forget the frequent bans on imports and exports of various agricultural products, disguising stock restrictions as “anti-hoarding” laws and creating geographical areas for specialized input sourcing, such as in the case of sugarcane for sugar mills. Basically, peasant life is defined by state infiltration. That is why the cry of the Shetkari incident, one of the leading farmer organizations across the country, is “Give us freedom”. Its founder, Sharad Joshi (1935-2015) coined the slogan “Bhik Nako, Gamache Dam Have” (We do not want alms, we want a fair price for our sweat and labor). For more, see ‘Remembering farmer Sharad Joshi wearing jeans‘, Mint, 14 June 2017.
Joshi realized that it was not enough to demand high production prices through the MSP regime. Any state intervention in the market will lead to another counter-intervention to undo its unintended side effects and the cycle will continue. The entire statistical system had to be demolished. This means removing the shackles of the Essential Commodities Act, removing compulsory collection, allowing rental farming and land leasing, improving credit flow, legitimizing moneylenders, initiating direct contact between buyers and sellers (including contract farming), and exporting products. Controls and allows ulation passages. He was one of those who suggested simplifying the agricultural sector.
One wonders how Joshi, once a member of the Rajya Sabha, will react to the agriculture bills that India has just passed. He was disappointed with the process, and important reforms were first pushed into ordinances and later by voice vote in Parliament. Although agriculture is a state matter, there is no discussion, no mention of a selection committee or consultation with the states. But he also welcomes the spirit of reform; That is, to dilute the power of intermediaries used by agriculture, to reduce marketing arbitrage committees (APMCs), arbitrary stock restrictions on private traders, and to initiate trade agreements between companies and farmers.
It is instructive to recall an agitation led by Joshi in 1981 for tobacco growers in Nippon. Many had small plots of land and suffered at the hands of the oligopolistic cartel of traders, who not only reduced prices, but also resorted to illegal practices such as arbitrary reductions. In weights or amounts paid. Payments are usually late. Joshi described it as almost feudal exploitation, which is still prevalent in many APMCs today for a variety of crops. So the Joshi-led Shetkari event demanded a 30% increase in the fair price as input costs increased. They carried out road blocks as part of the civil disobedience protest, yet issued appropriate notice and cleared all other avenues to get some relief to the farmers. Unfortunately, despite the peaceful nature of that concern, it lasted for about two weeks and attracted 40,000 farmers, who faced the brutality of killing ten of them. It is clear that the struggle of the peasants for economic freedom and fair agreement is inextricably linked with the political economy. Wested interests wanted the status quo. Diehard reformer, Joshi also looked at the ance picture of the state’s role in ensuring affordable prices for farmers.
This is the bulge of angst on MSPs. The current concern is not against APMCs becoming irrelevant, but MSPs disappearing. These offer price insurance, which is available only through efficient and liquid forward markets connected to global markets. But it is a bridge far away from India. Until then, the country will need a financially supported MSP regime operating under government-owned APMCs (as MSPs cannot be forced on private buyers). While the bills passed were a market-friendly reform, the government had earlier banned the export of onions in a knee-jerk manner. It denies profitable prices to farmers and is another example of urban bias. In the last three months, India’s import duty on lentils has been reduced from 30% to 10%, increased again to 30%, and then again to 10%. With such volatile and intrusive policies, are farmers anxious to completely eradicate APMC dilution endgame MSPs? Nothing less than a written legal promise can assess this concern. Joshi agrees.
Ajit Ranade is an economist and Senior Fellow at The Takshashila Institution, an independent center for research and education in public policy.