Farms Acts necessary for Green Revolution 2.0; transparency, income support, incentives and communication are key
India's Farm Acts are a much needed step to get us to Green Revolution 2.0, which in turn will ensure food security at an environmentally appropriate cost. But the laws need transparency, appropriate incentives, and good communication to happen right.
‘Perspective’. The origin of the word deals with the science of optics, slowly coming to signify one’s ‘mental outlook over time’. It’s doubtful if one can gain much perspective from a tweet, or a WhatsApp forward — the preferred purveyors of news today.
Which bring me to the farm laws, where the lines are drawn, with one side saying, “the farm laws enslave farmers to corporate interests’, while the other side declares, “farmers have been liberated”. As always, there is some truth in both, which requires us to dig deeper. For background on the laws themselves, check out the excellent overview by IDR here. For the legal angle, please read here and here. This article will examine why these laws are so desperately needed.
The Need to Remain Food Secure
Over the past couple of years, writing a book on India’s water has helped me develop perspective. Above all, if we want to maintain our independence, it is imperative to maintain domestic food security, especially now, as the climate warms. There can be no argument around that. Our famines should be proof enough, of what can happen if we don’t. For those who cannot wrap their minds around the possibility of famine, consider the geopolitical angle. Consider how India’s policy has been held to ransom when the rains failed. A bad drought, coupled with a balance-of-payments crisis, weakened India’s position on the Indus Water Treaty in 1957-58; while the back-to-back droughts of 1965-66 saw the US, whose PL-480 wheat was both alluring and addictive, holding India to a humiliating ship-to-mouth existence, and dictating terms that were not always in India’s long term interests.
As the climate warms, without effective adaptation, crop yields will fall. With food, atmanirbhar is unequivocally, a good aim. I am not against trade; I’m merely saying, especially in food, let us trade from a position of strength. Our current atmanirbharta in food owes much to Punjabi farmers. To understand why, let us rewind to the 1960s, where India needed to import rice and wheat, which the populace’s palates had become accustomed to. The Green Revolution, where Punjabi farmers led the charge, saw India slowly and surely become food independent.
The Green Revolution was incentivised by the procurement policies of Centre and state, including the MSP regime, and the efforts of our farmers and agricultural universities, especially the Punjabi and Haryanvi farmer. We owe them. However, it would be a mistake now to substitute forbearance for gratitude.
Huh? Come again?
The need for Green Revolution 2.0
The Green Revolution 1.0, relying on underground water, got us here. In a warming climate, Green Revolution 1.0 will only worsen our vulnerabilities and stress our water faultlines, failing to carry us into the future securely. Why?
First, water. Mined from deep underground, this water is embedded in the rice and wheat grown in relatively dry Punjab and Haryana, which then flows as a virtual river to the rest of India. How big is this river? Just consider the wheat and rice bought by the Food Corporation of India from Punjab and Haryana. The water embedded in that procurement alone was about 59 billion cubic metres in 2017-18. That’s about a tenth of India’s overall annual agricultural water demand. Importantly, this river uses up substantial amounts of Punjab and Haryana’s groundwater. There is a limit we are approaching here.
A financial analogy may make this clearer: if you were to spend Rs 2 for every rupee you earned, how long will your bank account last, especially if you are not wealthy to begin with? The latest report by the Central Ground Water Board estimates that groundwater up to the levels of 100 metres below ground level will be exhausted in the next 10 years, while groundwater up to 20-25 metres will run out in 20-25 years. India must look to other states to secure her future food security.
Within Punjab and Haryana, improved yields would help, or a price on the electricity used to power the borewells that suck out the water. While Punjab has the highest rice yield in the country, it has stagnated for a while now. With Punjab farmers profiting at the current price, incentives to improve are muted. Any attempt to price electricity has been stillborn. There is currently an initiative, Pani Bachao Paise Kamao, underfoot in Punjab with the support of the World Bank and J-PAL giving farmers cash incentives for conserving electricity units, and by extension, water. While the results from the pilot were encouraging, results from Phase II have been less promising with far fewer farmers signing up for the scheme. The cash, it appears, was perhaps not seen as worth the effort of conserving this free water. In the midst of protests, groundwater water levels in dry Punjab and Haryana fall as the virtual river snakes its way across India.
The second milestone signalling the end of the road, is air. Recently, the Punjab Remote Sensing Centre reported more than 76,000 incidents of stubble burning between 21 September and 24 November, 2020, the highest in years. Both, the incidence of stubble burning and the share of stubble burning in Delhi-NCR’s pollution, peaked in the first week of November. The Hindu quoted an official from the Indian Agricultural Research Institute (IARI), as saying, “It was a bumper harvest this year, so the amount of crop residue was also large. Also, it was a cloud-free season as compared to last year. The biomass was drier and prone to burning… It also appears that the farmers are not willing to cooperate. There could be anger over farm Bills.”
Even those of us far removed from the National Capital Region knew of friends with COVID, and saw frantic messages on WhatsApp groups with pleas for help for a hospital bed for a loved one. Air Pollution plays a role in COVID-19 morbidity, though the mechanics are less well understood. How long can the burning fields persist?
There is a desperate need to change. What’s stopping this? Why are yields stagnating; why is the twin crop culture so enmeshed? Why are the fields still burning? Why isn’t the FCI procuring from other states as aggressively?
The need to break an unholy addiction
Punjab and Haryana are addicted to the Rice-Wheat culture. The state’s finances depend on the Mandi tax, and the Arthiyas (commission agents), depend on the 2.5 percent they get. Farmers are unwilling to risk trying to sell outside APMC yards — after all, if it ain’t broke, why fix it? The Food Corporation of India favours Punjab and Haryana because of their excellent procurement machinery, as buying in bulk from other states is nowhere as easy.
Enter the Farm Acts. The catalyst for these was, interestingly, the COVID lockdown. During the lockdown, to prevent congregation at the market yards, or mandis, the APMC act was suspended. But procurement went on unabated. As Professor Ashok Gulati said in a recent interview, “Farmers did not lose at that time in terms of selling their wheat and rice, tell me if anyone in Punjab sold their produce below MSP …39 million tonnes of wheat were procured, which was never done earlier in the country”. Encouraged, the government passed an ordinance and subsequently an Act.
Now, farmers, if they wished, could choose to sell outside the APMC yards to whomsoever they desired. The law does not suspend APMC yards in any way. Essentially, this Act was aimed at increasing competition amongst buyers, thereby hoping to improve price discovery and widen crop choice, thus hopefully providing higher incomes to farmers. However, by doing so, it may weaken APMC yards that are doing a bad job. Is that a bad thing?
Then came the Contract Farming Act and changes to the Essential Commodities Act, to encourage private investment in agriculture. Why? In states where infrastructure was less developed, private investment in storage and market infrastructure could potentially level the playing field. This second part is key: Punjab, has excellent agricultural marketing infrastructure, with a regulated market every 100 square kilometres or so; the situation is far worse in many other parts of the country: with one regulated market serving over 11,000 square kilometres in Meghalaya, or one serving over 2,300 square kilometres in Orissa. Private investment could make a difference, especially now when a clutch of Agritech start-ups are straining at their leashes to enter this sector. The sector is red-hot, and these laws, if done right, can accomplish what Ola or Uber did for urban transport, or what Swiggy and Zomato did for restaurants.
The need to communicate better
Every change has losers. The clear losers here are the state governments who stand to lose the Mandi tax, and the Arthiyas, who could lose their 2.5 percent commission. They stand to lose what has been, in essence, a guaranteed annuity of thousands of crores. That explains the protests, and why it is centred in Punjab and Haryana. Yes, Punjab and Haryana have developed great agricultural markets, but at what cost (water/air), and for how long can it last?
Other losers include the powerful traders, who have thus far enjoyed a large spread over the farm gate price. Why are farmers seen to be protesting? Well, the answer is that there is a tremendous diversity in India’s farmers — the less-efficient amongst the larger farmers, who would be doing very well in the current regime, are naturally wrathful at this potential influx of competition. In some parts, there may be warranted fear based on past experiences with private parties or local government. Lastly, smaller farmers, who historically have been exploited, are — justifiably — traditionally suspicious. In the absence of effective communication, their presence in protests could come about by effective fear mongering. Which makes communication of the “why”, the “what”, and the “what not”, and the “how” of these acts so critical. When one does a quick scan of Twitter and WhatsApp, one discovers there is quite a bit of fluff out there, on every side. It’s surprising then, that a government which went overboard on communication during the lockdown, missed a trick on communicating a law that affects more Indians than did the lockdown. This is definitely one area of improvement. Communicate to the farmer at his/her doorstep, in his/her language, through one of his/her own.
The need for ‘free-er’ and more efficient markets
Which brings me to the second contentious point — the entry of the private sector into farming. News flash: it’s always been there. An overwhelming majority of farmers in India sell today, not at the MSP to the government, but to the private, petty trader in their immediate vicinity.
In December 2014, the government of India released ‘Key Indicators of Situation of Agricultural Households in India’, which confirmed what many knew: only about 10 percent of agricultural households sell their paddy or wheat at the mandi or to a government agency, most report selling to a local private trader or input dealer. The situation is more pathetic as we move away from Punjab and Haryana to other states, and move to smaller farmers. In West Bengal, over 85 percent of farmers owning less than half a hectare sold their paddy to a private trader.
Moreover, government procurement alone cannot guarantee better prices for the farmer or fairer lower prices for the consumer. Take a recent episode in cotton, where an MP, Su Venkatesan, wrote to the Prime Minister about the spread earned by the middlemen, even when a government agency was involved. Private presence can bring benefits — witness the situation in the dairy or poultry industry. There are the many case studies I have covered in my first book, where private presence in agriculture has been of help — in the textile industry, a Public-Private partnership involving over 76,000 farmers in Rajasthan, helped cotton yields improve by 50 percent, and increase farmer incomes.
The real question is the lowering of the spread, or the gap between what the farmer gets for his produce, and what you and I pay for the same produce. The lower that spread or gap, the more efficient the market. Today, in many states, and in many crops, that spread is high. (Note: the green rectangle signifies the range of farmer profitability; the area above the green price line denotes farmers who make a profit at this price.)
In the ‘Good’ outcome, other Indian states get better agri-market infrastructure, and more farmers get better prices. Punjabi or Haryanvi farmers, spurred by competition, up their game and improve yields/lower taxes or diversify their cropping patterns. The Indian consumer, of course, gets cheaper, more diverse food. India gets food security.
That’s the hope. However, it can also go so easily wrong: after all, there are private interests enmeshed in farmer markets across the country, which are helping sustain status quo. Think Bihar. With bigger buyers, farmers can get squeezed out, and APMC yards left unable to mount an effective response.
What’s to prevent this situation from spiralling into an Orwellian nightmare?
Transparency, Income support and Incentives
Let us begin with transparency. One possible way transparency can be achieved is by mandating the registration of all transactions on a portal. At least, let us begin with the registration of sales to the FCI. This can also help buy the support of states who stand to lose tax-revenue; after all, if all transactions were taxed, albeit at a far lower level, revenue could be protected. If states were to get taxes out of all transactions, they may be more supportive of these Acts. Geopolitically, why alienate states, when their support can be secured? Transparency, i.e., knowing where stocks are stored and what is produced and sold at what price is imperative towards ensuring food security at the national, and income security at the farmer level.
While we are on income security, the PM-KISAN scheme or the Rythu Bandhu schemes that emphasise income rather than price support become the way to go. Especially because, if these acts work well, rising yields and falling losses could result in bumper harvests and falling prices. Which makes the emphasis on income rather than on price crucial. In all the hullaballoo around MSP, let us not lose sight of that. A guaranteed price may be desirable only when one wants to encourage a change in cropping pattern. In every other case, guaranteeing price partially defeats the very purpose of freeing up markets. Ensuring the small and marginal farmer is supported during this process is fair.
Now, let us talk about incentives.
Two of the strongest forces shaping the current sustainability movements across the world are customer and investor preferences. These forces should now be harnessed in giving life to the law. At the end of the day, the big gorilla in agricultural markers is the FCI, and that is who can make or break this Act — in terms of what it buys and who or where it buys from. That is in the hands of the government, whose incentive it is, hopefully, to diversify the sourcing of food.
For the rest of us, to make a difference, we can begin by looking to the brands we buy. When you buy from the grocery store, or online, do check who grew the food you were eating. And if it is unclear, ask. If enough of us do that, it can become a powerful force for improving the life of the farmer. In textiles, right now there is a tremendous move towards traceability across the supply chain, which began when people became concerned about working conditions in factories that made their T-shirts. Such traceability can be replicated in crop markets quite easily as the technology to do that is available. The incentive for a brand to be fair to its farmers would come from you and I asking for it, and willing to base our custom on it.
These two changes, FCI procurement and brand engagement, can help in ensuring that crops are sourced across states, from all sizes of farmers, hopefully with a little bonus for better water and environmental efficiency. The last hope is important: if and when procurement spreads more equitably across India, will Punjab and Haryana’s water and air problems be painted on a broader canvas? What if the burning fields move to Madhya Pradesh, or Telangana? This is where procurement strategies and MSP tweaked for geographically appropriate crops (i.e., grow rice in the Northeast) can, and will have to make a difference.
One aim of this set of acts is to get a whole different type of player with vastly different incentives into the agricultural marketing. Agritech start-ups are typically funded by impact investors, for whom on-the-ground impact is critical. I’m not saying that there is no green washing in some of the annual reports; there is, but there is also plenty of meaningful change. Somewhat good behaviour is structurally built in via the funding they raise: reputation is the biggest asset for impact investors — they are unlikely to risk it by squeezing out a small farmer — especially in this age of social media, where such misbehaviour can quickly go viral. Thus, these companies focus not typically on dividing the pie, i.e., pushing hard on the small farmer for a greater share of the pie, but by bringing in technology and efficiency to make the pie bigger, so there is more to go around. Given the inefficiency in Indian agriculture, that would be a welcome addition.
Green Revolution 1.0 got us this far. Now, it’s time for Green Revolution 2.0 to lead the charge, with new crops, new buyers and new geographies participating. I do believe these new farm laws can get us started on the journey, but as with any law, we determine the lived experience of that law.
Mridula Ramesh is the founder of the Sundaram Climate Institute, cleantech angel investor and author of The Climate Solution — India's Climate Crisis and What We Can Do About It published by Hachette. Follow her work on her website; on Twitter; or write to her at firstname.lastname@example.org.
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