Farm reforms: Now, a three-act tragedy

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Farm reforms: Now, a three-act tragedy

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• The new farm laws: The new laws in 2020 aimed at - (i) allowing farmers to sell to anyone anywhere, (ii) freeing prices of cereals, pulses, oilseeds, edible oils, onion and potatoes from stock limits, and (iii) allowing farmers to get into contract farming. The promise is a fairy tale world with better infra and markets, and shining rural incomes.
• Present situation: The old laws made farmers sell (most products) only to licensed traders in APMC mandis near them. Allegation is that politicians control the dynamics, eating up profits from this operation. Once freed, farmers will earn more (hope). And contract farming will get technology an capital to farmers (dream). Millions have accepted this due to mass advertising. Sadly, crores of farmers have not, who are now agitating.
• Serious implementation issues: No matter how this plays out (resolved or not), the govt. has to soon grapple with countless ground issues. 

1. If the union govt. pushes these at state level (against many state govts' wishes), the union has to build a struture to replace the existing APMC structure (restrictive, no doubt). 
2. The new price discovery system ought to be fairer, but price is just one aspect.
3. Farmers have to physically deliver goods, and an end-to-end physical setup is needed to fulfil orders.
4. The contracts have to be very tough (iron-clad). An agency has to enforce them "easily, quickly and cheaply". 
5. This is not at all easy, if financial sector experience is any indicator.

• The nightmare of financial sector contracts: In consumer financial sector, contracts exist for mutual funds, stocks, insurance, fixed income and loans. 

1. Each segment has a regulator, and each player has to compulsorily register, with well-defined rules.
2. Technology runs the show, with full transparency and records. Competition is strong, with fines and penalties!
3. Regulators have set grievance redress mechanisms too, and all players too have those.
4. Net result of all this? Consumers always are at the receiving end, and big players (companies) never pay for their follies!
5. Ways to cheat consumers - big firms are selling harmful products deceptively, distributors are incentivised to fool the buyers, at times over-charging is done (and low fines paid in the end), etc.
6. Lesson - rules and regulations don't matter, enforcement and a culture of honesty does.
7. Punishments have to be strong and exemplary, so others can be deterred.
8. Sadly, regulators are almost captured by the big players, and do not do all this.

• Fairy tale rural agri markets: So now in a rural area, far from any city, a small farmer is about to deal with a large corporate (or big trader, contractor). There are no safeguards, checks or ways to stop cheating by the big guy. And when cheated, courts are out of the equation (by law). This is a recipe for one-way exploitation, far from the media's eyes. And no pilot projects have been done either.
• A different approach: What is needed is a feedback-driven purposeful approach to economic issues (just like it's being done for social-cultural ones). Without that, the Acts will simply lead to collapse of the small and marginal farmers' interests. 

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