At the outset, let me clarify that according to my analysis the new agricultural trade related laws that have sparked protests are needed for the farmers and these will help them to adjust their cultivation to ensure sustainable income for them. The only segment which will get affected by these laws will be commission agents because now farmers will have a choice to select their buyers.
Main demands of the protesters
– Repeal all the three agri-trade acts means farmers should not get choice to decide where to sell their crops.
– Introduce transactions at mandatory MSP under the law without checking quality and assurance that government will buy 100 per cent from taxpayers’ money, if there are no other buyers in the market.
Ground realities and concerns
– These demands are illogical and undemocratic because these demands restrict the choice to farmers and demand taxpayers money without any assurance of quality and even if these surplus products are required by the society or not.
– Even today, there is not enough tax collection to meet the existing development priorities of India, now this demand of farmers’ to give assurance to buy 100 per cent of farmer produce is not only illogical but also beyond logic. Then why should the Government should not buy everything produced by MSMEs as well?
– Why MSP should be restricted to only a few selected crops as per wish of protesting farmer groups. Logically all poor farmers of all farm produce should be covered.
– The total tax collection of the Union Government is around Rs 16.5 lakh crores. Farmers’ demand will cost India more than Rs 17 lakh crore to support all crops, farmers of livestock and fisheries sector at the proposed mandatory MSP.
– MSP is not a static concept, it is an ever increasing liability for society because of political reasons. When MSP is higher than the world market, and when productivity and quality is poor, imports will flood the Indian market, exports will dry up. (Please check prices in the world market on the internet and compare with MSP).
– India has surplus wheat, rice and sugar. We do not want any more wheat, rice and sugar. The protesting farmers’ demand of more money for their crops which are not required will create massive liabilities in warehouses. Many states are now self-sufficient to meet their own demand. Till date, taxpayers money is used to buy crops which are already surplus and not required, but FCI was asked to buy to please some vested political interest. On the other hand, we are importing what is required by citizens like edible oils. As much as 70 per cent of edible oil is imported. There is no effort to support oilseeds cultivation.
Who will gain if laws are repealed?
With this background, the repeal of new agri-trade acts will only benefit the protesting commission agents and their well-wishers. The only winner will be the commission agents who do not want farmers to get the option to sell elsewhere to competition. They want their commission business to remain intact at the cost of farmers’ welfare. The other segment of those who will benefit from these demands will be marginalised political parties and vested interests groups, those who are losing their existence in changing society.
Who will lose?
– Small farmers because they will have no alternative except going back to commission agents and loan sharks. They will exploit more because now they know there will not be any reform and no alternative buyer in the market.
– The government cannot buy everything because there are no funds to buy. Total liability will be more than the total tax collection in India.
– It will be cheaper to import in all coastal states than to buy from the protesting farmers and bear the cost of commission, corruption, logistics and taxes and other overheads.
– If the private sector refuses to buy at mandatory MSP, by making trade associations like commission agents are doing and they prefer to import cheaper and better quality for urban consumers, poor farmers will be left to feed poor consumers in rural India. Will it help the farmers or the state government?
– Today there is demand for mandatory MSP for 23 crops, if the mandatory law is made for MSP then more and more farmers will demand MSP because they are also part of India. Every year demand to increase MSP will be there. This means every year an additional burden to Rs. 2.0 to 3.0 lakh crores on the taxpayer for the materials which are not required. With increase in MSP, imports will further go up. The whole economy will collapse.
Possible options before the Government
– Increase taxes by two to three times to meet the demands of the vested interest in the name of farmers by making MSP mandatory under the law. There will not be any investment in future in India due to the high taxation and existing business will collapse.
– Even industrial goods will come from international markets because it will be cheaper to import than manufacture in India due to excessive taxes.
– Exports will suffer because of high MSP and there are cheaper options in the world market. To promote exports the government has to increase the subsidy. It means, pay more MSP and then pay more subsidy for the same crops. Where is the money to meet all these illogical demands?
– Other agro-industries will suffer because imported products like grains, poultry, dairy, textile, sugar, rubber, species, etc will start coming into India. The demand for local agriculture produce will further suffer. This will further suppress prices. Farmers will suffer more. Agriculture will become liability for the nation.
– Now, these same protesting commission agents will not buy and will never give MSP to farmers because there will be suppressed prices in the open market. This will ensure farmers are fully trapped.
– Now farmers cannot demand reforms because they opposed it tooth and nail. No regional political party can bring reforms and no national party will have the courage to take the risk to make any changes in the agricultural laws. The suffering of farmers will continue and this will lead to social unrest in many places in India. No one should blame the government for that. The blame should go to people supporting illogical protest in the name of farmers.
– Law and order situation will further deteriorate. People who are opposing reforms will vanish from the scene by becoming ministers or may not exist in the world with time and will not come forward to help any farmer in crisis.
Ways forward
– Farmers must learn to produce as per market need, not for FCI because there cannot be enough money for procurement of all crops.
– Framers must demand freedom to decide the buyer and market.
– Review all subsidies because many are going to undeserving large and rich farmers and their income is much higher than other citizens paying taxes.
– Review functioning of FCI. Only BPL farmers should be entitled to sell to FCI. FCI using taxpayers’ money must not enrich the rich and wealthy.
– All farmers with four-wheelers, AC and affording luxury options should not be entitled to subsidy. They are capable and can start post-harvest management, processing and export activities and support small farmers and give them the right prices, which they are demanding from the taxpayers’ money from the government.
– Even if rich farmers quit agriculture in protest, it should be welcomed because small farmers will get a bigger space to produce more and prosper.
– Agriculture universities and departments must be made accountable to improve productivity and quality so that Indian agriculture can become globally competitive.
– MSP as the concept has lost its utility in a globalised economy. We have to work on alternate approaches to ensure viability for small farmers. The shortfall can be bridged by Direct Bank Transfer (DBT).
– Corruption in food quality and agricultural inputs departments leads to adulteration and farmers are suffering due to suppressed prices. Adulteration and substandard products must be controlled so that farmers get the correct price for their crop. Mustard adulteration with cheaper synthetic oil, mixing of maltodextrin in milk powder, fructose syrup in honey, yellow peas in gram flour are some of the examples.
Worst case scenario
– Central government should leave it to the states to decide whether they want new laws or not. Let them decide the destiny and future of their farmers.
– The Union government may ask states to adopt these reforms and link development funds from taxpayers’ money to the reforms.
– The States which are not keen for reforms should be asked to create their own development resources by raising taxes or cutting down the expenditures. Taxpayers’ money cannot be used to enrich commission agents and vested interests at the cost of small farmers and consumers.
– After that, buyers will decide from where to buy the agro-produce. They will prefer mandis without tax and without commission. FCI should be asked to use the taxpayers’ money to buy from BPL cardholder poor farmers only. This will ensure justice, equity and development in the required areas of India.
Role of Citizens:
– Today, India is at a turning point, You as a citizen have to express your views openly. A silent majority is a disaster for democracy. If you are silent when the country’s and small farmers’ future is at stake and few vested interests are hijacking the country’s development agenda, you and your kids have no right to demand justice, opportunities and development in the future. Your silence is supporting lawlessness, illogical demands and pushing this country to anarchy. Now, the ball is in your court as a concerned citizen – rise to the occasion and decide in which direction the country should go.
The author is an agricultural economist. Views expressed are personal.
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