January , 2021
Farmers protest and dynamics of India’s agricultural economics
01:06 am

Rajiv Khosla


On January 7 this year, thousands of farmers on nearly 3500 tractors and trolleys carried out a tractor-march against three agricultural laws. Leaders of different farmers unions stated that the protest march was just a rehearsal for their proposed January 26 tractor parade that will move into the national capital from different parts of Haryana, Punjab and Uttar Pradesh. The controversy over the three agricultural laws even reached the international corridors of power when the United Nations backed the farm law protests remarking, “people have the right to demonstrate peacefully.”




Experts are analysing farmers’ protest from different perspectives. Three categories have been discussed in this section - namely political, legal and economic. Those debating on the political viewpoint state that political parties are trying to manoeuvre the conditions as per their penchant. Shiromani Akali Dal (SAD) led by former Deputy Chief Minister of Punjab, Sukhbir Badal was glued to the National Democratic Alliance (NDA) with his wife Harsimrat Badal as a Cabinet Minister when the Union Cabinet adopted the draft of the three new farm legislations and the Parliament passed these bills. SAD ceased to be a part of NDA only when farmers’ protests intensified in Punjab. Similarly, Shiv Sena and the Nationalist Congress Party (NCP) had a hypocritical stand in the Parliament. Shiv Sena supported the bills in Lok Sabha but walked out of voting from Rajya Sabha. On the contrary, NCP opposed the bills in Lok Sabha, but mellowed down its stance in Rajya Sabha by walking out. In another case, the Aam Aadmi Party’s (AAP) government notified one of three new farm laws in Delhi on November 22 but when the farmers’ agitation started heating up, MLAs of AAP tore the copies of the new farm laws at a special State Assembly session in Delhi.  


Those deliberating from the legal viewpoint have an assertion - if the central government has encroached upon the state subject or not. The argument is that at least two Acts i.e., Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 which have become laws and yet the centre had no power to introduce them in Parliament and pass them as laws. These two Acts facilitate farmers to enter into agreement with the buyers of their produce as well as selling their produce outside the designated Agricultural Produce Market Committees. Two Members of the Parliament - Manoj Jha (RJD) and Tiruchi Siva (DMK) – approached the apex court citing constitutional violation by the central government. The Bhartiya Kisan Union (Bhanu) filed an application in the apex court against these farm laws apprehending cartelization and commercialization in agriculture.   


Experts holding discussions from the economic perspective discoursed upon the fact that small farmers (nearly 86% having less than five acres of land) get successful in selling their produce through a well-established network of ‘Arhtiyas’ (middlemen). In the absence of the Arhtiyas, small farmers are projected to face the problems relating to the transporting and selling of their produce. Further, it is also being debated that complete autonomy to the big private players may lead them to turn the fortunes on their side by procuring the food grains from small farmers from states like Bihar (where APMC was scrapped in 2006) at throwaway prices, storing them in their warehouses at different places and then selling them at exorbitant rates when the time is ripe.


Similarly, in the context of minimum support price (MSP), it is argued that the government need not procure everything for the 23 crops on which MSP is determined as per Swaminathan's recommendations. It’s merely the presence of the government in the market that helps to stabilise the prices. The presence of the government as a buyer incentivises farmers to sell at a little extra over MSP to the private players in states like Punjab. Otherwise, as per the report submitted by Shanta Kumar headed Committee on Restructuring of Food Corporation of India in January 2015, only 6% of total farmers in the country are able to sell their crops at MSP. In the absence of the government as a buyer or abating MSP, the problem of procurement may further accentuate.


Apart from the political and legal battle, here lies the bone of contention. On one hand, the government is increasing MSP every year, spends a considerable amount on different types of subsidies to farmers and above all, providing PM-Kisan benefits, yet, the farming community is largely dissatisfied or miles away from contentment. Simple economics behind this is the non-lifting of the produce of farmers or non-remunerative selling of the produce by the farmers.




It is a crude reality that despite being the world's largest producer of milk, pulses, jute, spices, fish, poultry, livestock and plantation crops and the second largest producer of rice, wheat, sugarcane, groundnut, vegetables, fruit and cotton, yet, India is on the path of becoming the ‘farmer suicide capital of the world’ with 42480 farm suicides (including farmers and labourers) reported between 2016 and 2019 only. The rudimentary problem is of a high mismatch between demand and supply of agricultural produce which is compelling the farmers in India (except in Punjab and Haryana) to shun agricultural production and move towards non-agricultural activities. Astonishingly, a NITI Aayog report published in 2017 brought out that about two-third of rural income is now generated in non-agricultural activities. Since the majority of the farmers are operating on a small piece of land, hence they produce just as much as is required for subsistence and not for commercial selling. In addition, they supplement their income by working as labourers for others or from livestock rearing. Lack of mandis is another obstruction which prevents them from producing for the market. Experts have already debated upon these issues. But unless and until a tangible resolution to the problem is not offered, Indian agriculture will remain entrapped in this web like state of affairs wherein the government like an inexperienced doctor will keep on giving the pain-killers - instead of performing the surgery.


Need of the hour is to promote the agro based industries in general and food-processing industries in particular. Treading the path of developed countries, the consumption of processed foods is poised to grow in India. However, we are processing even less than 10% of our agricultural output (around 2% of fruits and vegetables, 6% of poultry, 21% of meat, 23% of marine and 35% of milk). Further, most of the processing is primary in nature and primary processing offers lower value-addition vis-à-vis secondary processing that includes processing of high value items i.e., fruits and vegetables, dairy, bakery, chocolates etc. Besides, average food inflation in India being high (nearly 6% since 2012) vis-à-vis other countries of the world (nearly 2%), hence, additional high rate of GST on food items acts as a discouraging force in the mass consumption of processed foods. Interestingly, the estimates project food inflation to be around 5% in next two financial years’ which calls for an urgent pro food-processing policy.


We can emulate the development model adopted by other countries of the world which hinges from increasing the internal demand for high value products to export of processed goods to other countries of the world. Both the centre and state governments will have to play a catalytic role in this process. Governments will have to work with different stakeholders to procure all that is produced by the farmers at a reasonable price and simultaneously ensure uniform quality of produce. Further, better storage and processing technology will have to be provided at affordable costs at the local level which will enable farmers to store and do the primary processing. To the extent financial implications are concerned, direct payments and subsidies being extended to the farmers are required to be used here as in the wake of remunerative prices - there is hardly any need for superfluous financial backing. Also, with the large-scale development of food processing industries at small, medium and large scale as per the suitability of the region (keeping into consideration the cost factor), additional population from agriculture will get gainful employment in industries which will lift the disguised unemployment from the agricultural sector, thereby facilitating increased real income. Last but not the least, meaningful training facilities will have to be provided to farmers as well as processors. Instead of arriving at complicated solutions and compromises, the need of the hour is to understand the basics of agricultural economics and apply them as per our economy’s requirement.

 The opinion/s expressed in the article are that of the author's and do not necessarily represent or reflect the policy or position of this magazine.






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