Shock treatment will not work in agriculture

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Shock treatment will not work in agriculture

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• New policy needed: Most policymakers and market participants accept that the MSP policies made in 1960s are not entirely relevant for today, and a new system is needed. Problems including slow growth in agriculture, crop composition's not widening, and investments in land not happening. [MSP - Minimum Support Prices]
• New laws come in: The govt. has opened the output markets via new laws, to let market forces improve efficiency and create more value for everyone. The claim is that now farmers are free to sell to anyone anywhere (outside APMCs too). They can go for contract farming with corporates, and traders can do unlimited stocking of commodities too.
• Farmers' suggestions: They want three things -

1. Their produce prices should be cost of production plus a mark-up
2. Fluctuations in prices should be minimal
3. Little or no interface needed with administrative officials, as the police and sahibs are not easy to deal with!
4. But the new laws have ignored all these basic ideas. And the farmers say that as govt. wants them to move from wheat to vegetables, the 3 suggestions must be applied to vegetables markets also (as on date nothing applies).

• The New Markets: Today, the MSPs are a functional and known devil, but with no MSPs, the new private markets will be out of anyone's control. The mandi related problems are known, and often resolved through MPs and MLAs, but the new private mandis will be out of all control. The time period till existing mandis will continue is clearly very short, as the private traders will start offering better prices initially. And in 2-3 years, regular APMC mandis will collapse. What next?
• What next indeed: Traders may reduce prices at will, finding defects in the produce. They may not buy at all citing a glut. They may not make payments in time at all. They can form cartels, which farmers cannot (being numerous). Farmers coming from long distances with tonnes of grains cannot wait to fight back. 90% of farmers are small ones, who need urgent cash anyway. So malpractices will be the norm.
• Corporate buyers one up: If the large corporate buyers refuse to buy the committed quantities, they can fight using their lawyers, which farmers cannot. A relationship between unequals doesn't work out. Both traders and corporates are far fewer, with deeper pockets, and ability to wait it out. Farmers are too numerous. 
• Why only Punjab: Some say that only farmers in north India (and Punjab) are protesting. That is because these laws hurt them the most, in the wheat-belt of India. The nation is vast and diverse, with 15 agroclimatic zones and more than 50 major crops. MSPs exist mostly for crops that are grown in Punjab and some other states.
• Other farm protests: The 1860 revolt against indigo farming happened in eastern India. Maharashtra farmers agitated from 1970s onwards under Sharad Joshi. Tamil Nadu farmers protested on the Cauvery water issue. Farmers aren't a homogenous lot in India, and protests happen as per what hurts them. (historical examples include Mappilas revolt 1921 or Warli Adivasi Revolt 1945)
• Why a uniform policy: So why is the 2020 policy being made uniform for all farmers, all lands, all crops, all agri markets? Is there any risk mitigation when farmers move from wheat to vegetables, as government wants? And what happens to migrant workers who have moved from Bihar to Punjab, say? There's no policy for these issues. The 3 new laws are thus, a shock treatment for agri-markets.
• A systematic approach: The agri stagnation can be tackled via the Swaminathan approach, or Dalwai Committee ideas. 

1. Give compensation to farmers in north India to move out of water-soaking paddy (and into other crops) over next 5 years
2. Do the same for sugarcane farmers in Maharashtra

• Shock treatment: After 1991, many industries shut down due to LPG's shock treatment. That led to a second de-industrialisation and lakhs of jobs being lost. The same story will repeat in agriculture with the new laws, and that's why scared farmers are firm on their demands this time round.

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