The twists and turns of the farm laws

The saga of the evolution of agri-marketing reforms, which have sparked the ongoing agitation by farmers on Delhi borders, makes a fascinating, as also somewhat intriguing, reading. While most of these need-based measures were mooted by the M S Swaminathan-headed National Commission on Farmers in its report in 2006, these were incorporated into the country’s first-ever National Policy for Farmers, brought out by the Congress-led United Progressive Alliance (UPA) government in 2007. But, these have finally been put on the statute book by the present BJP-led National Democratic Alliance (NDA) government. Most, if not all, political parties, being the constituents or allies of either the UPA or the NDA at some point of time, have directly or tacitly been associated with the formulation of these reforms. Nationalist Congress Party supremo Sharad Pawar was the UPA’s agriculture minister when the policy for farmers was crafted to reflect the government’s commitment to open up the farm sector. However, while many of the commission’s recommendations were included in the policy, some critical ones, such as the minimum support prices (MSPs) of crops to be 50 per cent above the production cost, were left out. But those finding a place in the policy included involving the private sector in agricultural trade, establishing private agricultural markets and promoting contract farming — all of which are now being opposed by the agitating farmers with the UPA’s backing.

A striking, but not adequately appreciated, fact is that the MSP, which has emerged as the irritated farmers’ core demand, along with the annulment of new laws, has not been unambiguously defined either by the Swaminathan panel or by the UPA and NDA governments. Even while stipulating the MSP to be 50 per cent above the “weighted cost of production”, the commission added an element of vagueness by saying that it should be different from the procurement price. “The grains must be procured not at MSP but at market price,” the commission had asserted.

Explaining the underlying logic for this plea in its final report, released on October 4, 2006, the commission had said: “The MSP, like the minimum wage for labour, should be indicative of the bottom line for the government and should also take into account the changes in production cost after the announcement of the MSP (such as rise in diesel price).” This, in fact, further compounded the confusion over the concept of MSP. To make it worse, the commission itself interpreted this concept variously in different contexts in its interim and final reports. At one place it maintained that MSP and procurement were two separate initiatives and should be operated as such. At another place it asserted that the staple grains “should be procured at the prices the private traders are willing to pay to farmers”. In yet another context, it said: “The procurement price could be higher than the MSP and could reflect market conditions.”

However, the UPA government, under Manmohan Singh, rejected the cost-plus 50 per cent formula for determining MSP as well as the plea for separating support and procurement prices. The government felt that it might “distort the market and prove counterproductive in some cases”. An explanatory note on the rejection of these and certain other suggestions of the Swaminathan panel had this to say: “MSP is recommended by CACP (Commission on Agricultural Costs and Prices) on objective criteria considering variety of relevant factors. Hence, prescribing an increase of at least 50 per cent on cost may distort the market. A mechanical linkage between MSP and cost of production may be counter-productive in some cases.” Regarding treating MSPs and procurement prices differently, the note said it would be difficult to implement.

Nevertheless, the UPA dispensation had wholeheartedly backed private participation in agricultural marketing and contract farming. The Section 5.10.1 of the National Policy for Farmers dwelt at length on these issues. It said: “Several significant market reforms have already been initiated by the Central and the State governments. These reforms provide more options to farmers for selling their produce, allowing the private sector, including cooperatives, to develop markets; promote direct sales to consumers, processors, retail chain suppliers and exporters; and remove scope for corruption and harassment.”

On contract farming, the commission observed in Section 1.8.3 of its fifth and final report that the trend of pre-production agreements between farmers and corporate houses or processing companies had been on the rise. However, in the absence of formal contracts such arrangements could be biased in favour of agribusiness organisations. “The need is to develop comprehensive, clean, equitable and farmer-centric model agreements which cannot be abused against the farmers. Special care needs to be taken regarding clauses dealing with quality standards, withdrawal conditions, pricing standards, paying arrangement, natural calamities and arbitration mechanisms.”

All this talk on the liberalisation of agricultural marketing and regularisation of contract farming seems strikingly similar to the language the NDA government’s spokespersons are speaking today to defend the contentious new agricultural laws.


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