Cultivate Trust, Show Flexibility–economic times

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Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.

It is welcome that the protesting farmers and the government have both shown readiness to continue negotiations to reach a settlement. The government has, on its part, shown willingness to be flexible. It has offered to amend the law to remove the bar on disputes under the new farm laws being taken to court.

It has also offered to allow state governments to levy taxes on parallel markets that come up alongside the regulated markets that operate under the Agricultural Produce Marketing Committee Acts of different state governments. It has also promised that the government would continue to offer Minimum Support Prices for assorted commodities.

The farmers have been sticking to just one demand: repeal the laws. This would need to change. The farmers have to appreciate that the status quo is untenable, with the government using up scarce resources to buy up three-and-a-half times the grain required to ensure the nation’s food security at prices that have made Indian grain too pricey to be sold in the export market. The excess grain ends up rotting in government godowns.

Vast amounts of resources are additionally wasted in subsidising power and irrigation water, besides fertilisers. Punjab is in perpetual fiscal crisis because of its open-ended power subsidy for farmers. Excessive use of lift irrigation has depleted groundwater, corrupted soil chemistry and together produced a situation that calls for ever greater quantities of inputs to sustain production, raising costs and the exchequer’s subsidy burden. At the same time, India imports edible oil, lentils and fruit in large quantities.

The government has promised to invest big time in farmgate infrastructure and help set up Farmer Producer Organisations. Clearly, the government must go ahead with these steps and reassure farmers of its intent. The debate must be on how to diversify away from grain and into commodities, of which India faces a shortage, and how to mitigate the risks of the transition. Political sense says the government wants to help, not harm, farmers.

This piece appeared as an editorial opinion in the print edition of The Economic Times.


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