States will be forced to pay attention to farmer needs
Farmers have been protesting on the outskirts of Delhi for nearly a month now, with no clear solution in sight. They are demanding a complete rollback of the three new laws intended to reform the agriculture sector. The Union government has proposed several amendments, including a written assurance to not change the minimum support price (MSP) regime, to address farmers’ concerns. But they have been rejected. The protesting farmers are demanding a legal guarantee for MSP. Taking a maximalist position is unlikely to resolve the standoff, and the government has again invited farmers for talks.
There are ways to address farmers’ concerns if they are willing to come to the table. In any case, the government will not be able to end the MSP regime even if the trade is opened for private mandis. It needs to procure about 55 million tonnes of food grains to meet the requirement under the National Food Security Act. The government provides subsidised food grains to 67 per cent of the population and the bulk of the procurement happens in Punjab and Haryana. The government, to be sure, should not have passed the farm laws in such a hurry. But now that it’s done, a complete rollback is no solution. The Union government should also talk to states that are not in favour of the laws and give them an option of not implementing them for the time being. It’s only a few states that are objecting, and it’s quite possible that they would eventually implement these laws as public procurement could move to other states where transaction costs are lower. Besides, there is no reason why any state should deny farmers the option of entering into contract farming, for instance. Politically, state governments are more sensitive to farm issues and will amend their stance once the costs and benefits of not implementing these laws become clear. The state governments can also buy food grains to support the farmers and sell them to deficient states.
The basic issue is farm incomes and the MSP provides some certainty to farmers. While the government will continue with the MSP policy, it is clear that it cannot do open-ended procurement forever. Also, farmers in Punjab and Haryana cannot go on producing wheat and rice. This cycle is unsustainable, no matter how it is viewed. However, diversification would entail cost and risks. This is where state governments would need to do more in terms of providing support. Since agriculture is a state subject, they will need to find ways to make it more sustainable. The sector cannot entirely depend on the Central government’s procurement. The Haryana government has done well in this context by introducing cash reward for diversifying from paddy. Also, to support farmers, the state government will buy diversified crops such as pulses at MSP. Such schemes must be encouraged in other water-stressed states like Punjab. The Centre can support state governments to implement such schemes on a bigger scale. Even if the Centre does not, the states will be forced to pay attention to farmer needs. A case in point is Uttar Pradesh and the price that it enforces on cane purchases, which are almost always higher than what the Centre recommends. It is obvious that state governments cannot ignore farmers, and that is an indirect safety net.