Indian farmers' protests against three new farm laws approved by parliament in September 2020 have generated considerable interest in domestic and international media. And of particular interest is the outcome of these protests in Pakistan where sector specialists and administrations, including the incumbent, have repeatedly cited the higher yield per hectare in India compared to ours as proof positive that India has tackled its farm sector better than Pakistan.
The laws in question are as follows: (i) the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, which envisages expanding the scope of trade areas of farmers produce from select areas to "any place of production, collection, and aggregation", and allowing electronic trading and e-commerce of scheduled farmers' produce and prohibiting state governments from levying any market fee, cess or levy on farmers, traders, and electronic trading platforms for trade of farmers' produce conducted in an 'outside trade area'; (ii) the Farmers' (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, which provides a legal framework for farmers to enter into pre-arranged contracts with buyers including pricing with the identification of a dispute resolution mechanism; and (iii) the Essential Commodities (Amendment) Act, which removes foodstuff such as cereals, pulses, potato, onion, edible oilseeds and oils, from the list of essential commodities, removes stockholding limits on such items except under "extraordinary circumstances" and requires that imposition of any stock limit on agricultural produce be based on price rise.
Indian farmers opposing these laws argue that they are anti-farmer and corporate friendly. India's National Sample Survey Office (NSSO) data reveals that the cost of farming for 70 percent of farm households' is more than they earn from the sale of their commodities, and more than half are in debt. And while the launch of India's Green Revolution in the 1960s raised the yield and output due to widespread use of technology yet, in the long term, it shifted farm output away from diversified crops and towards cash crops particularly cotton and sugarcane, as well as grains such as wheat and rice.
The Modi government justifies the laws by arguing that they would facilitate farmers to sell their produce in the market directly to bulk buyers but given the small existing Indian farm size bulk buyers may have greater influence over the price relative to the large number of small buyers and the dispute mechanism put in place has yet to prove effective. In addition this implies that the Agriculture Produce Marketing Committee (APMC) markets, located within easily traversible distance of working farms, and where all famers were required to sell their produce at government regulated rates, would end.
Another concern of the Indian farmers is the lack of statutory support for the minimum support price (MSP) in the three bills. Farmers in Punjab and Haryana particularly are heavily reliant on MSP with these two states accounting for wheat purchases of up to 65 percent by the Food Corporation of India and state agencies. In this context it is relevant to note that the decision by the Indian government in 1998 to deregulate the sugar industry, which paved the way for private establishments, did not result in a significant improvement in either farmers' productivity or incomes.
An Indian recent news flash noted that "Shetkari Sanghatana, the apex body of farmers in Maharashtra, wants the market to play its role to decide the prices of agri commodities; it contends that the MSP has actually weakened farmers, instead of empowering them. The Sanghatana is planning an agitation demanding that the government give freedom to farmers and stop intervening in the agri commodity market so that farmers will not have to depend on MSP." While economic theory supports Shetkari Sanghatana's rationale yet the reality is that political considerations cannot be ignored especially if the outcome of any legislation would undermine incomes of poor farmers.
Khalid Khokhar, President Pakistan Kissan Ittehad (PKI), has told Business Recorder that the differences between Indian and Pakistani farm sector are three-fold. Firstly, Indian farms are much smaller in size on average, while in Pakistan there are larger landholdings (though the total percentage of small/subsistence farmers in Pakistan is more than 70 percent of the total). There is a wide disparity in yield between the rich and the poor farmers due to use of technology by the former and while Jehangir Tareen, a rich successful landlord, was tasked to formulate the government's over 300 billion rupee farm policy last year, yet he failed to satisfy the large number of small/subsistence farmers who remain extremely critical of the policy.
Secondly, all Indian farmers had access to APMC markets while in Pakistan the bulk of the small/subsistence farmers are unable to reach the market and are forced to rely on middlemen who are accused of raking in windfall profits. Prime Minister Imran Khan while addressing the World Economic Forum recently requested suggestions to do away with the middlemen and clearly one way would be through setting up APMCs which may require time and subsidies that the government can ill afford.
Third, in India all crops, before the passage of the laws, were given a Minimum Support Price (MSP) while in Pakistan wheat is the only commodity where MSP is applied. Sugar has an indicative price that is used by the government to pressurize mill owners to purchase at that rate however the politically powerful mill owners determine the price based on sugar content which as per reports declines with time which is why there are massive queues for sale of cane to millers. It may be recalled that Pakistan Kissan Ittehad (PKI) staged a protest early November 2020 seeking fair prices for their wheat and sugarcane produce, at rates of PKR 300 and PKR 2,000 per 40 kilograms, respectively, while the Punjab government announced a rate of PKR 1,600 (USD 10.05) per 40 kilograms of sugarcane and the Economic Coordination Committee at 1650 rupees per 40 kg.
The Food and Agriculture Organization's website notes that "On 26 October 2020, the Economic Coordination Committee (ECC) fixed the minimum support price (MSP) for the 2020/21 wheat crop at PKR 1600 (USD 10) per 40 kg, 15 percent above the corresponding MSP announced in March 2020 for the 2019/20 crop. These measures, which come during the planting period of the wheat crops, aim to increase production of wheat in 2021 by incentivizing farmers to expand the planted area, while supporting them to meet the costs of production..... The high market values have been driven by increased transportation costs and a lingering tight domestic supply situation following reduced harvests in 2018 and 2019, as well as strong exports and low procurement in 2019." The foregoing clearly indicates that the government has contributed to farmers worsening plight given that the high cost of transportation is not only due to the rising international price of fuel but also due to heavy taxation on fuel as well as allowing exports when a shortage is imminent.
Domestic opposition to Indian laws has been strengthening in India and protesters are converging on New Delhi while Canadian Prime Minister Trudeau has sided with the Indian farm protests. Fawad Chaudhary, Pakistan's Science and Technology Minister, termed Modi's farm policies shameful and Modi's policies as threats to regional peace.
To conclude, the Indian farm sector's opposition to the laws is understandable however one would hope that the Pakistani government too reflects on the farm sector whose contribution the Gross Domestic Product is considerable, not only directly but through providing major inputs to the industrial sector. There is therefore a need to focus on reforms in this sector which must include careful consideration of any decision to export any commodity which subsequently raises domestic prices (and may come to the notice of National Accountability Bureau with or without a change in administration); or allow imports (with scarce foreign exchange reserves) when the ongoing sowing season would in any case have reduced domestic prices.
Copyright Business Recorder, 2020
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