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Farmers need freedom, not just waivers  

Can we be bold enough to let the farmer sell his land to whomever he pleases? Can we allow the conversion to non-agricultural land use without a bureaucratic heavy hand and attendant corruption?

Published: 25th December 2018 04:00 AM  |   Last Updated: 25th December 2018 05:44 AM   |  A+A-

Farm loan waiver illustration

Farm loan waiver illustration (Amit Bandre)

Just as lakhs of farmers marched to the nation’s capital demanding relief for their distress, another smaller set assembled in Shirdi, Maharashtra. This was for the annual national conference of the Shetkari Sanghatana, founded by the late MP Sharad Joshi. The three-day conference coincided with the third birth anniversary of Joshi, whose name unfortunately is fast fading from public memory. It was Joshi who first pointed out, three decades ago, that the terms of trade were heavily tilted against the farmer. 

Busting the popular misconception that the farm sector in India is heavily subsidised, it was he who showed that indeed the farm sector was net taxed, not subsidised. Even the World Trade Organisation had to accept this revelation, and it has become a maxim. 

Undoubtedly over the years, the terms of trade have shifted in favour of the farmer, but we are far from what would be socially optimal. The depressed food prices are but a manifestation of this problem. Despite a minimum support price that is 50 per cent above cost of cultivation, for 22 crops, the fact is that most prices are below cost. Additionally, there is a huge gap between what the farmer receives and what the city dweller pays for farm produce.

That reflects the inefficiency of the supply chain, and perhaps monopolistic grabbing of the intermediate value by middlemen. The solution lies partly in tilting this balance toward the farmer, and partly in direct income support as well as structural reform. 

The two different national assemblies of farmers in December represented two, almost radically different, approaches to their problems. One set was predominantly asking for more sops, debt relief, higher subsidies and greater government intervention. The Shirdi conference, on the other hand, passed a resolution for less government, greater freedom and unshackling the farmer. 

When the farmer is in acute distress, and all other reforms are stymied or not functional, the only palliative is the waiver of loans. It has negative consequences. It punishes those who worked hard to repay. It depletes the treasury. It sets precedents and the expectation of future bailouts. Most importantly, it does not benefit half the farmers, who may resort to moneylenders or are landless workers tilling the land as tenant farmers. Clearly, the lasting solution is not loan waivers, but structural reforms giving more economic freedom to the farmer and large investment in infrastructure, including the finishing of incomplete last mile projects.

Consider the macro context. Agriculture provides only 14 per cent of the national income, but still engages roughly half of the workforce. On average, a worker outside agriculture is earning three times more than the farmer. It is clear then that the solution to farmer distress lies outside agriculture. 

If industry provides jobs and livelihoods, then farm workers can be weaned away. That calls for reforms like ease of doing business, starting and shutting enterprises, reducing the inspector raj and so on. 
It also calls for large investments in urban infrastructure to accommodate the consequent influx of job-seekers and their families. 

But while we wait for all of this to happen, we also need urgent reforms to unshackle the farmer. There are just far too many controls on prices, quantities, whom he can sell to, land transfers, land ceiling, futures trading and money lending. These have to go. Agriculture is a state subject, so there is a lot that state and local governments can do to bring in reforms. Besides, as a large and diverse country, India does not need one-size-fits-all kind of solutions.

Can we be bold enough to let the farmer sell his land to whomever he pleases? Can we allow the conversion to non-agricultural land use without a bureaucratic heavy hand and attendant corruption? How about completely removing restrictions on export of farm produce? Over the years, there has been strong growth in animal husbandry, which includes poultry, dairy and cattle. But beef politics has put a dent in this growth.  India used to be the largest exporter of beef (which is buffalo meat), but vigilantism means even legitimate meat trade would rather shrink than take on vigilantism. 

Farmer-producer companies are a very promising innovation, which organise farm collectives into common stock companies. But they are still thwarted by burdensome taxes and the license permit raj. The government needs to actively support the formation of these companies, and exempt them from taxes. 

There are many developed countries where farmers do not live a life of penury and distress, and whose produce fetches decent prices. Even in India, the Amul revolution is a demonstration of how to tilt the balance in favour of the farmer. We need to learn from and emulate such successes.

(Through The Billion Press)

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