Farmer’s protest

Context – Massive communication failure on the part of the central government to explain to farmers what these laws are, and how they are intended to benefit them.

What is the farmer’s and States concern with regard to new farm laws?

1. Farmer’s fear- This could corporatize agriculture, threaten the current mandi network and State revenues and dilute the system of government procurement at guaranteed prices.
2. States fear- Due to this bill, the revenue earned by the states in the form of market fees will drop drastically. About 13 per cent of the total revenue earned by the Punjab government comes from these mandis.

What are the demands of the farmers?

1. Repeal of new agriculture law-Punjab farmer leaders, including two major political parties, demand repeal of these laws.

• However, repealing would mean bringing back mandi system, licence raj and the resultant rent-seeking.

2. MSP to be legally binding– Farmers’ second demand is a written assurance in the form of a bill that the MSP and conventional food grain procurement system for the central pool will continue in future.

• Farmers want a legal guarantee that no procurement will happen below MSP anywhere in the country.

However, The Food Corporation of India is already overloaded with grain stocks that are more than 2.5 times the buffer stock norms.

What are the policy options does government have?

1. Use of Price Stabilization Scheme – To give a lift to market prices by pro-actively buying a part of the surplus whenever market prices crash, say more than 20 per cent below MSP.
2. Decentralization of agriculture system – Decentralization the MSP, procurement, stocking, and public distribution system (PDS). Since agricultural marketing is a state subject.

• The food subsidy can be allocated to states on the basis of their share in all-India poverty/proportion of vulnerable population, all-India wheat and rice production, all-India procurement of wheat and rice

What is the way forward?

• Farmers protest in India is an indication of larger complex issue. Pressure groups play a vital role in generating awareness and reaching a consensus and sustainable solutions to farmer’s problems.

The Finance Commission can work out a formula for distribution funds amongst States, based on some tangible performance indicators and the Centre should get off from MSP, PDS, fertilizer subsidy, and MNREGA.