Q: The ordinances passed by the Centre regarding amendments in APMC and Essential Commodities Act have been hailed as path-breaking reforms in the legal framework. On the contrary, you have called these amendments a threat to Indian agriculture.
When several decades back a former US Secretary of Agriculture, Earl Butz, at the time when Ronald Reagan was the American President, had famously said farmers: “Get Big or Get Out” I thought it was a prescription, good or bad, meant only for American farmers. But when Dr Shengann Fan, the Director General of the International Food Policy Research Institute (IFPRI) a couple of years back spelled out the same strategy, almost same, as a readymade prescription to pull Indian agriculture out of the crisis, I never thought Indian policy makers would be more than willing to push it not even caring to know whether this prescription is what the country needs.
He had said: “Move Out, Move Up,” which as he explained meant basically bringing in economic policies to facilitate outward migration or ‘move out’ people from rural to urban areas and those who stay back to ‘move up’ in farming. After pursuing an unwritten policy of moving out a large section of the rural population over the past several decades to meet the growing demand for dehari mazdoor in the cities, I find the three farm Ordinances in line with the remaining part of the prescription – to ‘move up’. In other words, the three farm Ordinances point to a clearly laid out roadmap towards Corporate Agriculture, with the guidelines for FPOs if read in contiguity, paving the way for a build up of supply chains for the industry and that too at the Government expense !
I thought the massive reverse migration that the country had witnessed after the lockdown was imposed would open our eyes to how flawed the policy prescription of ‘move out’ was. Millions of people who had walked back to their villages were in reality what I call as Agricultural Refugees. They had moved out of the villages over the years when farming failed (and that was deliberate) to economically sustain their livelihoods. The pandemic provides us an opportunity to move in the reverse direction, which means instead of keeping agriculture deliberately impoverished bring in the extra emphasis to turn agriculture into a future powerhouse of India’s economy. This is what perhaps Prime Minister implied when he talked of Atmanirbhar Bharat.
Q: You have stated in an interview that the recent changes made by GOI in the agriculture sector are based on the US model. What similarities do we have with the US model?
Yes, I am surprised the way policy makers have simply gone for a cut paste. All that is now being spelled out as agricultural market reforms have been in existence in America for more than six decades. It has been ‘one country, one market’ in America; farmers can sell anywhere within and outside the country; there is contract farming; there is no stock limit on big retail and there is commodity trading. Despite all these market reforms in existence, American farmers are passing through a terrible crisis.
If market were so efficient, the question that needs to be asked is how come it failed American/European farmers? The Chief Economist of US Department of Agriculture (USDA) is on record having stated that the farm incomes have been a steep decline since 1960s. Majority of US farmers are bankrupt, with the total bankruptcy touching $425 billion. Rural suicides are 45 per cent higher than the urban centres.
American/European farmers in reality survive on subsidies. Ever since the WTO came into existence in 1995, US/EU agricultural subsidies had remained a bone of contention. In 2018, the OECD provided a total farm support of $246 billion. This huge subsidy support actually decks up the market inefficiency. Not only for production, even agriculture exports are heavily subsidised. I remember an UNCTAD-India study in 2007 which had shown that if the green box subsidies (protecting domestic support in agriculture) in the developed countries were to be withdrawn, agricultural exports from US, EU and Canada would drop by about 40 per cent.
Why therefore resurrect a failed policy? Why borrow a system that has crumbled in America and Europe? Why our policy makers can’t come up with policies that suit the national interest, conform to what the country’s needs are, and meet the emerging challenges of the future?
Q: USA ranks among global leaders in agriculture. The US model has been borrowed by India. American agriculture is considered to be in a terrible state of crisis. In Europe, every minute a farmer quits agriculture despite massive subsidies. Post the agricultural ordinances, how shall the dots join for India?
These are the questions that I have been seeking answers for. But I wonder whether our policy makers are even aware of these harsh realities. The reason is that they rarely step out of their air-conditioned offices, and at best are seen hobnobbing with agribusiness leaders. That is why the policy direction is taking us towards corporatisation of agriculture.
Several decades back, at a conference in London, I remember the UK Food Group telling us that every minute a farmer was quitting farming in Europe. Already less than 2 per cent of the American population is engaged in farming, which also is on its way out. This is primarily because of the economic design, a design that tells us that to attain a higher GDP growth people should be moved out of agriculture into the cities. Agriculture has to be sacrificed to keep economic reforms viable. The exodus from the cities back to the villages should now tell us how flawed that economic prescription was. It didn’t happen only in India, it happened in Bangladesh, it happened in Pakistan, it happened almost across the developing world although the scale may be not as large as India.
The answer lies in revitalising farming operations. And that would be possible only if farmers are ensured of an assured monthly income package. After all, they too have families to take care; they too need money to take care of family’s health expense, education, travel and so on. Farmers too have aspiration, and if markets could make that possible I don’t see any reason why OECD should continue to provide such massive subsidies year after year. Just because the ideology behind neoliberal economics is built on strengthening open markets does not mean we refuse to see where it has failed.
That is why among the several measures I have time and again suggested to prop up agriculture, I have been calling for setting up a Commission for Farmers Income & Welfare with the primary objective of ensuring how a farm family can be assured of at least an income package matching the monthly income of the lowest Government employee. My argument is very clear: Give farmers his rightful income, and he will turn farming into a powerhouse of economic growth.
Q: Noted industry leaders have called the recent agri reforms the "1991 moment for agriculture". They have said that the reforms shall open up the markets for farmers and lead to a huge transformation of the supply chains of agricultural output. But the 14-year-old Bihar experiment of doing away with APMC mandis failed.
You said it right. Those who compare recent agricultural reforms as the 1991 moment are in fact industry voices. They speak for what is good for the industry. It does not necessarily mean that what is good for the industry automatically turns out to be good for farmers.
In India, only 6 per cent farmers get the benefit of MSP. The remaining 94 per cent farmers in any case have been dependent on markets. If market were so benevolent I don’t see any reason why agrarian distress should have continued to grow. I don’t see any reason why thousands of farmers should be ending their lives every year. I also see no reason why an estimated 9 million people should be abandoning farming and migrating to the cities looking for a menial job.
Talking about the Bihar failure with market reforms. Let me explain here why the failure of market reforms in Bihar that should be a lesson for future. I remember the excitement all around when in 2006 Bihar threw away the APMC Act. We were told that Bihar would be the harbinger of a new agricultural revolution based entirely on the markets. Private investments will flow, private market yards will spring up and farmers will get able to get a price discovery, meaning will be paid a higher price. In short, it will usher in rural prosperity. For 14 years, the nation has waited for that miracle to happen.
It didn’t. In fact, even now some unscrupulous traders are transporting large quantities of wheat and paddy to be sold in Punjab and Haryana mandis where at least they get the MSP that the Government announces every year. If only instead Bihar had laid out a network of APMC mandis and provided farmers with an assured MSP every year I am sure the outward migration from Bihar would have dropped drastically.
Bihar is a classic example of the failure of agricultural markets, a lost opportunity. This experiment has already played out on millions of farm families in Bihar, for whom it was a lost decade and a half. Let’s not repeat the experiment again.
Q: What do you think is the role played by public sector in agriculture? Why is it vital and non-negotiable?
You are very right. If only India had continued with heavy public sector investment over the decades it would have laid a strong foundation for resurgence in agriculture. But unfortunately, with World Bank/IMF breathing down the neck, and with our own economists parroting the failed prescription of moving people out of agriculture into the cities, the easiest way was to reduce the investments in agriculture. According to RBI, between 2011-12 and 2017-18, public sector investments in agriculture had remained between 0.3 and 0.4 per cent of the GDP.
Now what miracle can you expect from agriculture, which involves roughly 50 per cent of the population, when the sector is deliberately kept starved of public investments?
Compare this with the industry, which receives 6 per cent of the GDP by way of tax concessions alone. In fact, I have always maintained that the industry thrives on subsidies. This was very cleverly covered by a switch in vocabulary. When financial support is given for agriculture, it is termed as subsidy, a word that has been demonised. But when massive subsidies are provide to industries, these are called incentives. The general impression that has been created is that subsidies are a drain on the exchequer whereas incentives are absolutely essential for growth!
It is all therefore a question of priorities. Since the intention was to move people out of agriculture, the investments were brought down. To restore the pride in agriculture, there has to be a renewed effort in boosting public-sector investments, large investments flowing in over the next few years. Private sector investments in agriculture will naturally follow once the Government makes its intent clear.
For a country like India, public-sector’s role in agriculture is non-negotiable. Agriculture is the biggest employer in the country, and the effort should be to strengthen farming, which in turn will revitalise the rural artisans and the farm-based rural industries. The way to boost demand lies in improving agriculture, sustainably and economically. As I have often said agriculture alone has the potential to reboot the economy. I have failed to understand why mainline economists fail to see this simple but vital connection.
Q: In wake of the three Ordinances, what is your suggestion for bringing prosperity to our farmers.
The three Ordinances have already been notified. The urgency to push so called reforms, without even consulting farmers in whose name these are being pushed, has received huge farm protests in Punjab and Haryana. Interestingly, while farm protests are growing, all that the industry, the economists and the Government is saying is that farmers are being misinformed while in reality these measures will boost farm incomes.
But before we move any forward let us be first clear. I don’t want Indian agriculture to forever remain in subsistence. Economic Survey 2016 had told us that the average income of a farming family in 17 States of India, which means roughly half the country, is only Rs 20,000 a year, which means less than Rs 1,700 a month. This is not even enough to rear a cow. I shudder to think how these families survive. As if this is not enough, another study by OECD-ICRIER had clacluated that Indian farmers had suffered a loss of Rs 45-lakh crore between the years 2000 and 2016-17. This is a clear pointer to an extraordinary crisis that prevails on the farm. Later, studies by Niti Aayog have shown that growth in real farm income after 2015-16 and 2018-19 have remained almost ‘near zero’.
This is not what Indian farmers deserve. Yes after year, farmers have worked hard to produce a bumper harvest. And yet, year after year, their incomes remain frozen or are on the decline.
They too need a bright future. Let us therefore think of policies and measures that can pull them out of the grave agrarian crisis they live in. It is primarily a crisis of income insecurity. As I have always said, the problem is not in the crop field, but in economics. The crisis is not because of productivity shortfalls but because we have denied farmers their rightful income over the decades.
To begin with, let’s first look at the three Ordinances. Well, if the three Ordinances are actually expected to give farmers a higher price for their produce, which means a higher income, then why a 4th Ordinance can’t be brought in which makes MSP a legal right for farmers? After all, if the reforms will lead to price discovery as everyone claims, why can’t MSP be a legal entitlement? This will assuage farmers concern, and since everyone feels the farm incomes will increase, I don’t see any reason why should the industry object to making MSP a legal right. If not, then it means the promise of a higher price is not a commitment.
I am looking for the day when instead of just 6 per cent farmers getting MSP, the entire 100 per cent farming population become legally entitled to it (whosoever is eligible). This step alone will make farmers a true stakeholder in the resurgence of India.
Secondly, since there are only about 7,000 APMC mandis the immediate need is to expand the network. If a mandi has to be provided in 5 kms radius, India will need 42,000 mandis. Third, the expansion of mandinetwork has to be accompanied by a nationwide programme to construct godowns at the village, panchayat and block level.
This in my understanding should be the blueprint for ushering in Atmanirbhar Bharat. #
Source: Why resurrect a failed policy? Agriculture Today, Aug 1, 2020.http://www.agriculturetoday.in/magazine/2020/magazine-aug-2020.pdf
