A Comparative Inquiry into Farm Laws: Valuable Lessons to be Learnt?
The recently promulgated Farm Laws have attracted criticism and protest from across the board and especially from the people who are most affected, farmers. The moniker of ‘Farm Laws’ is essentially the introduction of three different legislation(s), namely, The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 and The Essential Commodities (Amendment) Act, 2020. The first Act seeks to open the sale of agricultural produce outside the notified APMCs and provides a framework for electronic trading of agriculture produce. The second law provides a framework to introduce the concept of ‘contract farming’ into the Indian agriculture market. It facilitates a ‘written farming agreement’, which shall be entered into before the commencement of rearing or production of any farm produce. The last law seeks to deregulate the production, storage, movement and distribution of food items such as cereals, pulses, oilseeds etc.
The government has reiterated that these laws shall not lead to any disadvantage being accrued to the agriculturalists. But the farmers are adamant on their demands and champion the repeal of these legislations on the grounds of it being passed on the premise of corporate vested interests. To ensure that their demands are echoed throughout the nation, they have embarked on a seemingly unending protest and have stated this stalemate shall not end unless the government accepts their demands. The protests have gone to such an extent that the Supreme Court has decided to suspend the implementation of the controversial legislations till a solution is meted out. In light of these developments, we seek to undertake a comparative study of farm laws and how different economic setups manage their farmers and produce. Through this analysis, we seek to extrapolate what could be a possible way out from this stalemate. We seek to understand how these countries have reacted to similar legislation(s) and whether the stance of the government can be vindicated.
Agricultural Laws under Socialist Economies
A socialist economic system is based upon public ownership of the means of production. In such a system, goods and services are produced on the basis of their usage value. This usage value is dependent on the needs of the society with an aim to prevent over-production or under-production. Its main aim is to narrow the gap between the poor and the rich.
In the context of agricultural laws and policies, a socialist economy focuses primarily on governmental aid provided to farmers in order to develop the agricultural industry. Provision of subsidies is a fundamental way of supporting the agricultural industry. According to the WTO, there can be investment or agricultural input subsidies depending upon the level of income and resource availability in a country. Agricultural input subsidies aim to make inputs available to farmers at a lower rate than that of the prevailing market price in order to increase agricultural productivity and profitability.
Reduction of Poverty and Improving Access to Food
It also aims to increase availability of and access to food, thereby ultimately reducing poverty and stimulating economic growth. Socialist economies like India also offer Minimum Support Price (MSP), which refers to a price set by the government to directly purchase produce from the farmer in order to ensure a minimum profit for them. There are also provisions for mandis regulated by the Agricultural Produce Market Committee (APMC) under several state governments. In China, agricultural laws focus on green development, mainly in terms of increasing quality and efficiency, dry farming and saving water on key crops, trials to replace chemical fertilizers with organic ones, reforming agricultural technology and popularizing improved seeds and methods. Financial support is provided to farmers, new agricultural operators, and units and individuals undertaking the project tasks.
Protection of Interests of Farmers
To conclude, socialist economies primarily focus on making laws that directly or indirectly protect the interests of farmers from private companies. Previously, the main focus of laws was always on increasing productivity while enacting measures for minimal exploitation of farmers at the same time; however, the focus has now shifted to the ecological viability of agricultural practices and protection of farmlands.
Agricultural Laws in Capitalist Economies
A capitalist economy or a neo-liberal framework tends to focus on maximizing production and proliferation of profits. Therefore, it is reasonable to put forth that a capitalist economy runs directly in contravention of the principles espoused by a socialist legislative framework. With due analysis, some features of farming laws, which depict a common theme across all capitalist economies have been enumerated hereunder:
Maximisation of Production
The farming laws in capitalist economies tend to favour the creation of an agro-business industry. They are tailored in a form so as to yield production in order to increase the revenue. The same can be given perspective by stating the example of the New Deal, which gave farm subsidies to the agriculturalists. These subsidies were abolished during the Nixon presidency to induct industrial farming to increase production. We can take the example of price flooring, which ensured a minimum wage to the farmers, but the government gradually rolled out these measures and replaced it with a market-oriented production system. Therefore, a capitalist approach stands at contrast with socialist practices, which focusses on welfare practices such as that of subsidies to the farmers.
Gradual Withering of Family Farmers
Capitalist countries tend to move away from the traditional concept of family farmers. This is because of the consolidation practices that usually take place in such economies. In a market-oriented economy, the only way to earn profit is to ensure a large production. This is because there is no minimum price guaranteed to the producers. Therefore, a corporation usually ends up consolidating lands owned by the family farmers. These small farmers have little choice but to sell because they are unable to make profits in such low prices. Say, a producer gets a few cents per gallon of cow’s milk, the only way to ensure a profit is if you have thousands of cows. But what this entails is that these big producers have to buy large swathes of land owned by the small farmers leading to a gradual decrease of their numbers. These family farmers are usually rearing and eliciting their living from the same plot of land for generations. However, due to the low prices and increased competition, they have no choice but to part ways from their land. Another spillover effect of the same also leads to a gradual phasing out of indigenous communities.
Little Attention to Environmental Impacts
This avarice for maximization of profits entails degradation of environment. Factory farmed animals produce large amounts of manure in a day and this in turn, leads to spreading of disease and harm caused to local wildlife and flora. There have also been studies which have proved that it leads to spreading of viruses from animals to humans and extensive use of pesticides contaminates the soil and water causing irreparable harm to human health.
Way Ahead for India
By putting the two systems on scale, we would tender broad principles, which the Indian government shall adopt to ensure fairer farming laws:
Striking the ‘Perfect Balance’
The present scale of subsidies provided by the Government of India pose a high fiscal burden on it. High agricultural input subsidies lead to inefficient resource allocation, lower agricultural productivity and crowding out of public sector investment. Fertilizer subsidies have resulted in an unprecedented high usage further adding to environmental concerns. A correction in prices would thus encourage a balanced application of fertilizers across the country. On the other hand, irrigation subsidies are much needed considering that the supply of land is highly inelastic and the growth of net sown area has leveled off. Thus, the input subsidy programmes need to be in alignment with increased public sector investment. The Indian government’s protectionist approach in formulating laws has been changing to one adopted by capitalist economies. While there are benefits of this shift, the government needs to strike a balance between the two and ensure both, agricultural productivity and protection of poor farmers.
This has been the one of the most contentious changes that have taken place in the recent Farm Laws. The new legislation, namely, The Farmers Produce Trade and Commerce Act, 2020 seeks to bypass and obliterate the concept of APMCs. It is reasonable to assert that it deserves the censure that it has attracted. APMCs were envisaged as a means to ensure the protection of farmers from exploitative methods. These marketplaces offer a majority in representation to the farmers and stave off unscrupulous traders. In a private mandi, the market would be dominant and the smaller farmers would be exploited by multinational corporations. The best way to understand the repercussions of the same is to draw a parallel. The Bihar government had also abolished the concept of APMCs back in 2006. It was done in order to attract private investment to develop the infrastructure of these markets. However, since these measures have been adopted, it has been observed that the infrastructure has worsened and most of them are in a dilapidated condition. Moreover, it has led to Bihar being regarded as one of the most volatile agriculture markets wherein the producers getting a noticeably lower price when compared to the official MSP is nothing new. Therefore, instead of removing the concept of APMCs from the vocabulary of Indian farming laws, the government should undertake steps to improve its functioning and in their numbers.
The concept of APMCs is inextricably tied with the provision of MSP. MSP ensures that the farmer who is producing on his land gets a minimum amount of money for his produce. There have been numerous attempts to remove MSPs, like when NITI Aayog wanted to set up agriculture tribunals to auction off crops or when schemes such as PM AASHA were introduced. These measures do not find any place in a country such as India. Everyday about 28 farmers commit suicide in India owing to the insurmountable amount of agricultural debt. The government should strengthen these schemes and ensure price guarantees of produce by the Indian farmer. In a country with an ever-increasing income disparity, devolving agriculture to a market-oriented business would lead to dire consequences.
It is paramount for the Indian government to shift their focus to other economies, which took similar market-oriented practices and what effects it had on their economy and agriculture sector. A recent research done by the London School of Economics explains the issue at hand. In the following research, it analyzed the liberalism practices took by the Kenyan government. It saw a gradual decrease in the income received by the farmers and a subsequent increase in the revenue generated by agri-businesses. It became such a problem for the government, that Kenya had to revise its policy structure and reflected that if ease of doing business is prioritized, it leads to suffering of the smallest of the farmers, whose sole dependence for survival rests on his land. Therefore, it gives enough legis-prudence to the Indian policymakers to rethink their decision before the damage is inflicted.
This article has been authored by Shantanu Parmar, Compilation Editor and Tanishka Maurya, Assistant Editor at RSRR. This blog is a part of our Editorial Series, ‘Agricultural Laws: Breaking New Ground for Sustainable Futures’.