Can India Afford to Repeal the Farm Laws?
At a time when India aspires to be a preferred foreign investment destination, India faces a key challenge to improve its global image of having the most complicated regulatory and taxation framework. The process and sluggish pace of removing these regulatory and legal hurdles have hardly been sufficient to compete with other countries, particularly countries like China, which is known for its sweeping reforms.
India’s recent attempt of bringing the reforms in the agriculture markets, and thereafter protests against these reforms with the demand of repealing these laws compel us to ponder over a series of questions. First: ‘can India really afford to repeal these reform laws’? Second – ‘are we overlooking the other critical aspects of the agriculture reforms in the current discourse’? Third question is – ‘where has the government failed while bringing the long-due reforms in the agriculture markets’?
Can India afford to repeal the Farm laws?
As an emerging country that faces stiff competition from other emerging economies like China (to attract foreign investment), repealing the reform laws will leave the daunting task to rebuild the reform path, and an impression to the global community to doubt over the intention and capabilities to carry out reforms. Even with the full majority democratic government, India will look handicapped if it cannot enact and implement its reforms. The cost of repealing these laws will outbalance the benefits it can reap, if it would have implemented with the due diligence. The only way to control the damage created by the haphazard way of enacting these laws is to bring the laws back into the court of parliament for wider discussions and deliberations; and allow other stakeholders to participate in the debate, so that the reforms will be more democratic and sustainable in the long run.
Missing Aspects of the Current Discourse
In the midst of these protests, some profound aspects of the needed reforms are either missing or sidelined from the current discourse that can have long run impact on the agriculture development and the farming community at large.
1. Concerns of the larger non-protesting Farming Community
Current protests are mainly from the farmers of Punjab, Haryana, western Uttar Pradesh and some parts of other states. It represents only those states that were part of the green revolution and greater beneficiaries of the various government schemes along with better infrastructure as compared to states that still lack basic infrastructure.
This set of representation (to discuss the farm laws) could be biased and may overlook the concerns of the small and marginal farmers (from non-protesting states), as they neither can afford to leave their farms to protest, nor they can have the political or social strengths to have collective bargaining power as compared to large and medium farmers of farming rich states like Punjab and Haryana.
2. Opportunities for the States
Agriculture is a state subject. The new reforms (assuming to be refined further) open new opportunities for the states to adopt or design their farm bills suiting best to their needs. This could be a good opportunity for the state governments to show proactiveness to bring their own laws based on the reform acts passed by the central government.
It is up to states to devise policies to attract new regional and national market players, especially the formal sector that can improve the linkage between farmers and consumers. States will also have the responsibility of enacting policies that create a level playing field for all players, including existing and potential entrants. Another important responsibility with the state would be to provide the requisite infrastructure in terms of better connectivity to farms through quality roads and land. Ease of doing business through less documentation, and fewer permissions and approvals, can smoothen and speed up the entry of new players. States would need to pay special attention to competition policies to promote healthy competition and to avoid any market capture or dominance.
3. Sustainable Farming and Environmental Damages
Out of several demands from the protesting farmers, two demands can have serious repercussions for: i) the sustainable farming, and ii) environmental damages. The first demand is to provide legal guarantee of the minimum support price (MSP) for the crops. So far, rice and wheat growing farmers from Punjab and Haryana have reaped maximum benefits from the MSP scheme. Both rice and wheat are water intensive crops that have resulted in drastic drop in the ground water levels in both the states. It has raised serious concerns about water-security and the sustainability of the current cropping pattern.
MSP is currently de facto, if it’s made de jure, it could pose two major challenges. First, the price discovery through market mechanism will become difficult; second, it will be a challenging task for the government to incentivize the farmers to follow the crop diversification for the sustainable farming.
Another demand from the protesting farmers is to repeal the Commission on Air Quality Management in NCR (National Capital Region). Given the situation when government is on the backfoot, rendering to such demand can be an environmental catastrophe for the NCR region that faces the problem of smog more frequently.
Where did Government fail?
Agriculture sector has been a subject to scores of regulatory and institutional shackles, and needed a series of reforms to increase productivity, hence raising farmers’ income. However, the recent initiatives taken in this direction has hit a roadblock as the main stakeholder of the reforms (i.e. farmers) are resisting these reforms. Though the agriculture reforms were due for the long time, but the way government enacted these reforms through three agriculture laws. It failed to recognize three crucial points related to reform design, due diligence, and participation of all stakeholders in the deliberation process.
1) Frail reform design: Agriculture has multiple facets such as input market, pricing or subsidy issue, credit market, mandi set-up, productivity, food security and environmental aspects. The entangled nature of this sector makes it complicated to design reforms. Current reforms attempt to address few aspects, but miss on a number of grounds. Moreover, a diverse country like India, ‘one size fits all’ may not work efficiently.
2) Lack of diligence and deliberation: The process of diligence and deliberation is a part of parliamentary scrutiny of passing any law. For the reasons, best known to government only, government rushed to pass these laws at the breakneck speed, and it grossly ignored to acknowledge and pass through all the scrutiny checks laid down in the parliamentary set-up.
3) Missing stakeholders’ participation: Agriculture is a state subject, and passing the laws on agriculture without taking the states on board (while designing and enacting) has raised several questions on the intention of the government about these reforms. Agriculture also involves millions of the working population in different capacities; central government missed the opportunity to allow other stakeholders to participate in the consultation process. Even after enacting the law, government perhaps missed to convey the spirit of the reforms to its main stakeholders, i.e., farmers at the right time. As most the points of farmers’ apprehensions are based on the potential fears that could arise with some probabilities, but not for sure. Hence, alleviating their apprehensions with proper dialogues and participation could have avoided such massive protests.
Missing the above three points has put the government on the backfoot, even though the actions taken by government were desirous. It has created a situation of ‘catch 22’ for the government, where the protestors are adamant on repealing the laws along with their other demands, but the government is finding it hard to find the amicable solution.
