Before India Breaks Its Promises, The Cautionary Tale Of The American Kisan

                                                                                                                                                                        -Thomas Jefferson 

Some 5,000 years later and 131 km south of Dharmakshetra Kurushetra, two forces of nature are again eyeball to eyeball. At stake is, again, is the earth—who owns it. The three farm laws at the centre of the debate have thus become symbolic of a much deeper fight. The government has given feelers that it is willing to amend the contentious clauses. But the farmers want nothing short of a full repeal. They wish to drive home the point that these laws are fundamentally anti-farmer and even deny them the principles of natural justice as enshrined in our Constitution. From their perspective, it looks clear-cut that the Centre rode roughshod over India’s have-nots—without even engaging them in a consultative process—to benefit India’s haves. On Kisan Diwas today, let’s examine the core questions with both a close lens and in a tangential perspective that will throw light on what they really entail.

The protests are, in a sense, an expression of dissent by Bharat against India. Against a consistent step-brotherly treatment post liberalisation. The gap in agricultural and non-agricultural per capita income has increased five times in these three-decade—from approximately Rs 40,000 per annum to Rs 2,00,000 p.a. Consumption in rural India hit a 7-year low in 2019.

There was an agrarian distress even before Covid-19. In fact, the signs of crisis have been clear for at least two decades. Census 2011 told us 2,000 farmers gave up farming every day as farming income is 1/5^th of a non-farmer. And 28 farmers commit suicide. Every day! 

In the summer of 2017, Tamil farmers protested at Jantar Mantar while we were swooning over Despacito and Bahubali 2. The Kisan Long March in 2018 saw 35,000 Maharashtrian farmers swarm into Mumbai but we were busy debating Padmavat. They were marching again in 2019.

But what ails farming?

It’s simple. Liberalisation benefited the English-speaking elite of this country. The ‘1 per cent’ figuratively and the ‘3 per cent’ literally.  The ‘progress’ we take to be ubiquitous is simply not a living reality for Bharat. Check the figures again, in case you are in doubt. India—a country of 138 crore people—has only 3 crore cars, 5 crore credit cards, 1.5 crore income-tax payers, a total of 4 crore demat accounts of which only 1 crore are active, and 2 crore wired broadband users. Even the total English newspaper readership is only around 3 crore. As Thomas Picketty said, we have come from the British Raj to Billionaire Raj. One could think of their millionaire minions as add-on beneficiaries.

So when the government professes that the three laws herald a transformational 1991 moment for agriculture, that does not exactly unleash a tidal wave of joy among farmers. To them, it only confirms the gloom, appearing to increase the stranglehold of the Billionaire Raj over Bharat.  

Let’s take the first law, The Farmers Produce Trade and Commerce Act, 2020, or as it is popularly known, The ‘APMC Bypass Act’. The APMCs or mandis are essentially marketplaces. The price discovery process occurs when buyers and sellers come together in a marketplace. You remove the marketplace and you remove the stable price discovery mechanism.

The government denies this law will lead to the end of APMCs, but just in November 2019, the Finance Minister said on record that states have earlier been “cajoled to reject” APMCs. Arrivals in Madhya Pradesh’s mandis have already fallen 60% after the amendments in the MP Krishi Upaj Mandi Adhiniyam, 1972, and passing of the Model Mandi Act, 2020.

For better understanding, let’s take an analogy. Say, if a law were to be passed that tax would be levied on all food and grocery sold through General Trade (GT) outlets but that Modern Trade outlets shall be exempt. Would the consumer feel liberated if all high street markets were shut down and one could only shop in malls?

Or take another analogy. Would India’s 4 crore shareholders feel liberated if BSE and NSE are shut down and they could sell their shares to anyone, anywhere? You can’t get a purer ‘market’ than the stockmarket, can you? Would you trust pure market forces there?

APMCs were envisaged with 2/3^rd farmer representation precisely so as to keep a check on unscrupulous traders distorting the market. A private mandi would mean it is just run by one big trader controlling prices. And in case of any dispute over price or payments, the farmer is barred from approaching the courts. The SDM becomes the authority for settling disputes—what’s more, s/he can impose a penalty or pass an order for recovery through “arrears of land revenue”. We explain this in detail later—suffice it to know that Sir Chottu Ram would be rolling in his grave.

Now you get the farmer angst.

Of course, like every democratic setup, everyone agrees that APMCs have scope for improvement—and not just in their functioning, also in their numbers. The ‘liberation’ cry anyway seems insincere when you consider that 50% of India’s agricultural produce is sold outside mandis.

Consider what the last big official report on India’s agriculture—the totality of it—diagnosed and prescribed.

The National Commission on Farmers headed by M.S. Swaminathan, the ‘Father of the Green Revolution’, put out its Second Report in 2005—the Swaminathan Report. What it recommended is that India set up five times more regulated mandis than the existing 7,418 so that we can ensure ideal price realisation to farmers. It was open to the private sector but wisely said it may not invest in remote areas, where these mandis are needed, and that the public sector would be needed to establish rural market yards. By handing over this task of making and running mandis to the private sector, the government is abdicating from its duties. 

What’s the corollary to APMCs being given a death by thousand cuts? Simply, that the MSP, or Minimum Support Price, goes out of the window too. Now, MSP has many failings. Most farmers don’t get it. Nevertheless, it leads to price benchmarking and acts like a lodestar. The Niti Aayog MSP Evaluation report 2016 says 81% farmers are aware of MSP and it “has been playing a critical role in stabilising market prices” and “protecting farmers from middlemen and fluctuating market conditions”.

Like APMCs, what the MSP regime needs is an improvement, not extinction.

The government has repeatedly said that MSP is not going to be removed, but there is evidence to the contrary. In 2018, the Niti Aayog wanted to set up an Agri Tribunal to replace MSP with auctions in mandis at reserve price. Also in September 2018, the government cleared a new procurement policy—PM AASHA—which included a Price Deficiency Payment System. Here, there is no physical procurement and the price difference between MSP and mandi selling price is given to the farmer by Direct Benefit Transfer (DBT). This was based on the much-touted Bhav-antar Bhugtan scheme in MP started in 2017. It was brilliant on paper but, within a year, farmers were not signing up for it and CM Shivraj Chouhan had to concede it was a flop. By 2019, it was scrapped.

All of this is ironic considering that PM Narendra Modi, during his 2014 campaign, had promised the Swaminathan formula of Cost Price plus 50% as MSP.

So when farmers feel that BJP governments are scrapping APMCs and MSP, they are not entirely unfounded. Not procuring foodgrains so as to save on giving MSP is part of that abdication. What’s really worrying, such a trajectory could also mean the end of FCI procurement and the Public Distribution System (PDS). Look at the whole chain of factors. It’s the foodgrains bought through APMCs at MSP that get distributed through the PDS—which provides food security to 23.4 crore households or 80 crore beneficiaries, including 6.5 crore BPL families and 2.5 crore poorest of the poor households, through a network of 5.34 lakh ration shops.

It’s prior action, driven by new-fangled notions, that buttresses the suspicions. In lieu of food rations through PDS, the GoI rolled out DBT in Chandigarh, Puducherry and Dadra & Nagar Haveli in 2015. In 2017, Niti Aayog evaluated the project and found that it holds ‘long-term promise’. Now see that in conjunction with the new Essential Commodities (Amendment) Act 2020, in which stockholding limits are removed for participants in the value chain. Would you be wrong in speculating that the government intends to move out of procurement and PDS altogether? Yes, it has all the looks of the State wishing to hand the whole thing over to the free market—which in India would be a handful of conglomerates—and just be in the business of DBT.

Smart, eh? Makes all the past government efforts to construct APMCs, FCI silos and warehouses, PDS shops and printing ration cards seem so dumb! Would we be as forgiving if the government absolved itself from running other services and handed those over to the private sector? Schools? Hospitals? Wait, prisons? Or how about the army—a la Blackwater?

American Cream

Now let’s look elsewhere for comparison. How do countries with a ‘free market’ in agricultural commodities fare? Let’s look at the mothership of free trade, the US. 

Start from 1971, when President Nixon appointed Earl Butz as Secretary of Agriculture, with the mandate to control food prices. By then America was already worrying about corporate farming and its effect on rural America, but Butz viewed agriculture as big business and a sector the government should get out of. He discouraged farm subsidies given under the New Deal—somewhat similar to MSP—and advocated a free-market approach of consolidation, and corporate and industrial farming to increase production. Surpluses were to be managed by exports. He famously gave the slogan ‘Get Big or Get Out’.

And what happened? Here’s a real cautionary tale.

After a couple of growth years, crop prices slumped and farmers across the US went on strike in December 1977. The ‘Get Big’ phase had led to high farm credit. When commodity prices crashed, it led to farm foreclosures and further corporate consolidation—leading to the 1980s farm crisis. Concerts like Farm Aid, organised by country stars Willie Nelson, John Mellencamp and Neil Young, came up as a response to the crisis. The suffering of farmers there is hardly over. Since 2013, American family farms have again been hit by a crisis—some 100,000 farms shut down between 2011 and 2018, including 12,000 just in 2017-18.

The quintessential American family farm is no longer viable. As family farms are winding up, it’s leading to a closure of village stores and farm support services like schools and vets. Some 4,400 rural schools shut down in 2011-15. The family farms that are left now find life even more difficult to manage and thus entire farming communities have shrunk and villages are turning into ghost towns. Farmer suicides have become so prevalent that the National Farmer Union and Farm Aid now run Suicide Prevention Helplines. The 2018 Farm Bill even has a $50 million budget for mental health. Some 30% farmland in the US is now owned by non-operators who lease it for farming—this includes 2% with foreign owners. Large farms in the USA—with sales over $1 million—account for just 4% of all farms but their output is 66% of the total farm produce. 

That speaks of the extreme attrition outside of them. The percentage of America’s workforce employed in farming has fallen 2/3^rd from 1970 and over a quarter of the farms have shut shop. Globalisation and technology are blamed. If this happens in India, who will provide alternate employment to all members of our 14.6 crore farm-owning households and another 14.4 crore agricultural labourers?

Consolidation has happened in the US in procurement also. Just four companies account for 80% of corn and 79% of soyabean purchased, the two biggest crops. (Even worldwide, 70% of the world’s trade in agri commodities is controlled by four companies, known as the ABCD quartet—ADM, Bungee, Cargill and Louis Dreyfus.) With farms consolidated, buying of produce in the hands of a few, and no government involvement, it’s a classic oligopolistic situation.

In 1969, farmers got 41 cents on every dollar spent by the consumer. Now that’s tumbled to 8-15 cents. Roughly put in the Indian context, it would be equivalent to atta retailing at Rs 200/kg, instead of the Rs 45/kg it presently sells for, while farmers continue to receive Rs 20/kg for wheat. So privatisation was supposed to remove middlemen and reduce prices for consumers? 

It’s not as if we, as consumers, are only affected by prices. The BBC documentary The Men Who Made Us Fat blames Nixon and Butz’s 1971 decision to focus on corn and the cheaper industrial sweetener High-Fructose Corn Syrup (HFCS) for the cola and fast-food boom, leading to the obesity epidemic of the modern world. Obesity leads to diabetes and cardio-vascular diseases. Just the cost of ‘conditions related to obesity’ to the NHS in the UK is £6-8 billion—for the US, the obesity capital of the world, it’s $147 billion annually. Incidentally, HFCS imported from China was the adulterant in the recent ‘Honeygate’ scam unearthed by India’s Centre for Science and Environment.

The upshot: how some of our policy decisions affect society is only known after a generation or two.

‘The Small Get Out’

Sonny Perdue, Secretary of Agriculture under Donald Trump, summed it up when he said, “In America the big get bigger, and the small get out.” That connects the thread to our third farm law—the Farmers Agreement on Price Assurance and Farm Services Act, 2020 (FAPAFS), or the contract farming law. Indian farmers fear that privatisation of procurement and PDS, along with globalization, will push them out of farming, and their only escape would be contract farming where the price of their final produce shall be guaranteed—on paper.

The intent appears to be to consolidate farms to achieve economies of scale and usher in the industrial age of farming. Brilliant! But the law is tilted in favour of the corporates. As with the Farmers Produce Trade and Commerce Act, 2020, and even in this Act, as per Chapter 3 on dispute settlement, clause 14(7), the amount payable by the farmer in case of breach of contract may be recovered “as arrears of land revenue”.

Now, “arrears of land revenue” is a term used in the Revenue Recovery Act, 1890. That Act instructs the “Collector” to recover from a farmer in his district dues payable elsewhere, certified by another “Collector”, as if it were an ‘arrear of land revenue’ in his own district. It authorises him to prohibit any sale or alienation of the property through a proclamation and, as per clause 6(2), withdraw the proclamation “when either the amount stated in the certificate has been recovered or the property has been sold for the recovery of that amount”.

While Chapter 3(15) of FAPAFS 2020 prohibits action for recovery against the farmer’s agricultural land, what it means in practice is left to be seen. On top of that, in case of any dispute, the farmer again has no recourse to civil courts—the fundamental right available to all citizens of India. The farmer can go back again only to the SDM—whose superior, the Collector is the one executing the recovery of money—or further appeal the “Collector” himself! After 248 years since the post ‘Collector’ was created (to do institutionalised collections for a company in India), we seem to have come full circle.

In the land of Mother India and Do Bigha Zameen, farmers view loss of land as not just the loss of an asset, but a loss of identity, heritage and self-esteem. Even such a thought is unforgiveable! Also, having attempted the Land Acquisition Bill in 2015, the government doesn’t really instil confidence in the farmers. The metaphor of the Pandavas being denied their five villages lives!

Privatisation is supposed to help farming, but not farmers? Even the states are saying these laws are against the federal spirit. Legal eagles feel the laws do not follow the spirit of separation of powers, and are a case of executive overreach—since the executive plays the role of ‘enforcer to adjudicator and interpreter of the law’.   Too much democracy? Neither farmers nor state governments nor the legal fraternity agrees.

Laws passed without constitutional authority, against the spirit of the Constitution (both in the context of federalism and separation of powers between branches), without any demand for it from the primary stakeholders, without consultation, without even a debate, when they threaten to usurp the farmer’s land, when it threatens the very existence of farmers when fundamentally the law is anti-farmer in every sense, how does one accept anything less than a repeal?

We seem to be at our own 1971 ‘Get Big or Get Out’ moment in agriculture. Those who fail to learn from history are condemned to repeat it. Big is not necessarily beautiful, especially in agriculture. And what’s good for ‘Jagat Seths’ may not be good for India. The ruling dispensation was known as a party of traders. They have a brilliant opportunity to prove their wider credentials by repealing these laws like they have repealed 1420 ‘obsolete’ laws in their first term. Most of all, following raj dharma, is an honourable way to avoid Mahabharat.

(Manu Kaushik is a management professional specialised in the rural sector. Views are personal, and do not necessarily reflect those of Outlook Magazine.)