Repeal of the Farm Laws: What next?

All three farm laws stand repealed. Farmers, after an unprecedented struggle, have started going back home. A ‘victory of sorts’ for them, but still a long haul ahead for the country’s farmers!

Was it necessary to go through this ‘painful’ process to come back to “net zero” market reforms? Could a more participatory and consultative process have been adopted? Did the experts and intellectuals advising PM Modi let him down? Did over-enthusiasm stump the time-tested scrutiny and discussion process and instead rush the government to an ordinance mode? There are many lessons for the future. One hopes the ‘pain’ is not wasted.

Let us look at the status of the Acts now:

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (No. 21 of 2020) (referred to as the FPTC) and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 (No. 20 of 2020) (referred to as the FAFPS) have gone off the books.  

The Essential Commodities Act (ECA) stays in its pre-amended form. All the powers for imposing stock limits and other controls which were available to the government stand restored. The government can now invoke ECA provisions whenever they choose, adding to the unpredictable policy regime.

Does this mean the end of reforms in agriculture? Hopefully not! The government has agreed to constitute a large committee consisting of state government officials, farmers’ representatives and experts. The intention seems to be to widen and strengthen the Minimum Support Price (MSP) net. This will have clearly more political purchase than market reforms. Going by the look of the proposal, it looks like there will be a large committee which will take a long time to come to any conclusion. I do not expect any report any time soon! A ploy to postpone issues till 2024? Not sure!

With the withdrawal of the laws, is the government giving up reforms in agriculture? Hopefully not! But is there a way forward? Yes, there is, may be a painfully slow consultative process, but worth traversing.

The way forward to reforms in agriculture

First and foremost, market reforms are not the only intervention needed in agriculture. Stand-alone market reforms can only go thus far and no further. Agriculture needs a whole new approach focused on climate change, food, nutrition and farmer incomes. One way of solving this riddle is to start with a food systems approach with sustainability as one of the main pillars. This means that we move away from a centralized, high-input subsidy-driven agriculture to a more decentralized, planet-friendly agriculture which addresses local concerns more than national issues. This means a new paradigm of local planning, innovation and decentralized decision-making. The current centralized cereals (wheat and rice)-focused agriculture and procurement may have to give way to more state-specific interventions. This is likely to meet with resistance from current interests but necessary in the long run. How to design and implement this transition is the challenge. Once this larger plan is out in the open, market reforms can be part of that plan. This approach may take time, the way forward for market reforms could be as follows:

Of the three laws, the amendment to the ECA was the least problematic. A predictable format for imposing stock limits was necessary. This was opposed not so much due to its inherent flaws, but because it got bundled with other reforms. Even after the repeal of the ECA amendments, this approach may find favour with most of the states. The states have powers to impose stock limits even under the existing Act. The Union government can, by an appropriate order, delegate additional powers to state governments and restrict itself to import–export controls and stock limit deregulation for exporters. Such a policy has two distinct advantages: one, states which produce surpluses will not, usually, be interested in imposing stock limits and may not impose these (such demands come from consuming states). Two, states can decide different limits for different commodities depending on local requirements. Such an approach will ensure a shared responsibility.

Contract farming is currently a reality. Contract farming is necessary for more reasons than one: bringing appropriate technologies and latest know-how, cultivating crops required in the market, growing specialty crops like aromatic plants, spices, and specialty foods, orderly harvesting to lessen damage and waste, and getting a pre-determined price for the produce. Many processing companies, seed producers and, most important, poultry companies practise contract farming. These have been successful and have stabilized processes that have been accepted by farmers. Whether a separate contract farming law is necessary, therefore, is a matter of debate. It might be prudent to consider the introduction of a separate chapter (as was done in the Companies Act for producer companies) in the Indian Contract Act for contract farming. One could argue that this is a contract, like any other contract, to supply goods (albeit agricultural produce) at an agreed price to a buyer. This could also take away concerns about the alienation of land, the main apprehension of farmers. This would also be within the legal competence of the Union government.

APMCs need major reforms

This takes us to the most controversial Agricultural Produce Market Committee (APMC) bypass law. There is no doubt that APMCs need major reforms. There are five important pillars for this reform: (1) farmers should have the freedom to sell anywhere in India to anyone they prefer at any time they choose; (2) there must not be multiple taxations on these sales or any restriction on movement before or after sales; (3) agricultural markets have been functioning successfully only in a few parts of India, and the large swathe of informal markets, particularly rural and tribal ones, need a major upgrade and a connect to the larger markets; (4) farmers need a better value capture in the agri-value chain and this needs better transparency and information; and (5) APMCs need to be transformed to farmer-owned institutions: both traders and government need to scale down their dominance and presence in the governance of these bodies. The stranglehold is difficult to break. And this is where the Union government can step in. States can be incentivized to reform as recommended by the Fifteenth Finance Commission. Better still, Central grants be tied to reforms as was done in other schemes like the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). It is possible to bring in conditionalities in all Central schemes to drive reforms in the states. A major investment programme in rural markets can be the first intervention.

What about the state governments? Since agriculture is a state subject, a bigger responsibility along with a larger role in decision-making needs to be appropriated by the states. Over-centralization has been the bane of many policies related to agriculture. This was justified at that time on the grounds of food security, better distribution of surpluses across the country and demands of the Green Revolution. Times have changed and so have the challenges. A shift to a more locally-driven agriculture and food management system is long overdue.

Resource-poor farmers living in rainfed areas have faced more challenges and have remained comparatively poorer. Subsidies, which are largely high-input-based, have eluded them. From an agro-ecology point of view, they have a rightful claim on government grants for preservation and regeneration. It is time their efforts were recognized and rewarded. An equity-based system also demands that their efforts be rewarded.

A new architecture for agriculture

This would mean a new architecture for agriculture based on the following: food and nutrition for our people, i.e., healthy and varied diets; economic sustainability and well-being of farmers, sustainability of soil, water and ecology, and an incentive structure in favour of regenerative agriculture.  Such an architecture calls for a decentralized approach based on providing ‘adequate space’ for local challenges, solutions and innovations. These need not be restricted to the state level but can go down to panchayat, village and community levels. ‘Local for local’ could be the new mantra. The overall policy framework can lay down clear objectives and priorities and link all incentives and disincentives to measurable outcomes based on these core objectives.  

Once local aspirations and capabilities are recognized, the key market reform needed will be to remove impediments to the creation of a unified national market that is not restricted to the National Agriculture Market (e-Nam). Such market reforms as give primacy to the freedom of the farmer to sell anywhere at any time to anyone has to be suitably supported by a big push for rural infrastructure.

The current situation could be the big opportunity to rethink agriculture.

(T Nanda Kumar is a former Secretary, Food & Agriculture, Government of India. The views expressed here are his own.)