Protests by thousands of farmers against a set of land reform laws that they say will harm their interests have been simmering for the seventh day in a row, with talks stalled.
While farmers want all three laws repealed and a new law passed that guarantees state-set minimum prices for all important agricultural products, the government has said the new laws will lead to better price discovery and bring investments in the agricultural sector.
On Thursday, the government will meet with farmers for the fourth time. The ending seems complicated, but there are several solutions the government can implement to resolve the crisis without necessarily having to withdraw the reforms.
Markets
In the free markets proposed by the laws, traders do not have to pay any fees. Farmers are concerned that the move to open free markets in competition to notified markets controlled by state governments could lead to a collapse of traditional markets.
Traditional markets serve as a great source of state revenue. In Punjab, they charge a 6% fee (3% each as market fee and rural development fee) on wheat purchases. A rate of 6% was also paid on non-basmati rice, while a rate of 4.25% was charged for basmati rice. In September 2020, after the new laws of the Center came into effect, Punjab was forced to reduce the market rate and rural development rate of basmati rice from 2% to 1% each.
Established in the 1960s, these markets initially served as critical infrastructure for farmers to sell their produce and discover prices under government supervision, thus helping to avoid emergency sales.
Over time, these markets have become opaque and monopolistic, with prices manipulated to the benefit of middlemen, according to a 2010 investigation by India’s legal antitrust agency, the Competition Commission of India.
These markets are also interconnected, meaning that merchants often lend money to farmers but secure purchases for them, albeit below the minimum prices set by the federal government, creating a dependency that is entrenched. Since 90% of the wheat and rice in Punjab are bought and sold in these markets, the state government, farmers and middlemen alike are threatened.
“The government can propose rules under the new laws to say that government purchases will be mandatorily made in traditional markets, while other private exchanges can occur simultaneously in free markets,” said RS Mani, an economist at the Agricultural University of Tamil Nadu. This will show, over time, which markets best serve farmers, he said, while mitigating farmers’ fears that the new laws will kill notified markets.
Minimum prices
Farmers have demanded a law guaranteeing minimum support prices (MSP) for all important agricultural products. The goal is to make it illegal to sell any agricultural product below its EMP threshold. There are economic limitations to such a law, such as its impact on inflation. While farmers want price guarantees, the government has focused on reforms to result in better price discovery.
Experts say there are several ways to ensure profitability, such as a price deficiency mechanism, that the government could put in place during negotiations. “The price deficiency (mechanism) has been tested in Madhya Pradesh. It needs to be refined, but it can be a way to compensate when markets fall, ”said Rohini Mali, an independent consultant, who was previously FAO’s food systems adviser in Rome. Under the price deficiency system, the government pays the difference between the market price and the MSP to the farmers.
Stubble burning
In October, the government enacted an ordinance to establish the Commission for the Management of Air Quality in the National Capital Region and the Surrounding Areas. The new law aims to reduce pollution in New Delhi, of which the burning of crop residues is a leading cause for about a month.
This ordinance has angered farmers because it provides heavy penalties for polluters, including farmers, with a 1-year jail term and fines of up to Rs 1 crore. “This ordinance further reinforces farmers’ fears that the central government is more interested in taking enforcement action rather than finding real solutions, despite court instructions to provide farmers with alternatives for handling rice straw. “said Kiran Kumar Vissa of All India Kisan Sangharsh Coordination Committee.
Farmers have been demanding an incentive of Rs 200 per quintal of straw to make alternative disposal economically viable. The Supreme Court has already said that the government could consider giving Rs 100 per quintal. Given that rice covers six million hectares in three states, Punjab, Haryana and Utter Pradesh, a federal “production subsidy” such as a direct cash transfer per quintal of rice to stop burning stubble will allow the government to remove farmers. from the scope of the new anti-pollution law, said Kavitha Kuruganti of the Alliance for Sustainable and Holistic Agriculture.
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