Tens of thousands of farmers from the northern states of India have marched to the capital city to protest farming reforms. They’ve covered at least five major highways around the city. The police met them with tear gas and water cannons. But they made it through and have now set up camp in and around Delhi. This is all happening because Prime Minister Modi’s government has passed new farming laws that will change how the agricultural industry has worked for decades. And in a country of 1.4 billion people, where agricultural workers make-up half of the labor force, the repercussions of those laws could be devastating.
History of farmers in India
In the 1960s India, a recently independent country, was struggling to produce enough food for its citizens. A string of droughts made things worse causing devastating famines. So the government stepped in to modernize farming and increase the food supply in what was called the “Green Revolution”. They brought in U.S. advisors to help boost the production of rice and wheat. Together they ended up overusing chemical fertilizers, pesticides and irrigation causing large plots of land to become infertile. Many crops suffered. Some nearly disappeared. But rice and wheat production soared.
And soon, India went from having a food crisis to having a food surplus. It was in this context that India also developed a nationwide food marketing system to ensure fair prices.
Farmers Agriculture Market System
It’s a complex system and it differs from state to state but here’s one way to understand it. It starts with farmers bringing their crops here to wholesale markets locally known as “mandis.” The farmers then sell those crops to traders through open auctions with transparent pricing. Prices can also be informed by the Minimum Support Price or MSP. A government price for crops like rice, cotton, wheat. The government only buys a couple of crops at these prices in certain states but those prices can still serve as a benchmark.
The crops then go to a secondary market or are stored by the buyers before they are sent out for future sales. It’s not a perfect system though. Local traders do end up colluding with each other the auctions actually are not competitive bidding. But for the most part the system works on a large scale because there’s oversight that aims to protect farmers by giving them market standards. They’ve been designed keeping in mind the fact that farmers are the weakest link and they can be exploited in numerous ways.
Impact across the Country
Over the years, state reforms have gradually redefined and regulated markets in different ways across India. In Punjab and Haryana, for example, they have become a vital part of the industry and farmers here have the highest incomes in the country. But in the state of Bihar markets were eliminated in 2006 and the farmers here are still the poorest in India by income. And all of this is happening while there’s a bigger farming crisis. The money in farming is disappearing.
Since the days of the “Green Revolution”, agriculture has gone from accounting for nearly 50 percent of the economy to just 15. Meaning millions of farmers already have trouble making ends meet in this shrinking economy. More than half of India’s farming households are in debt. And this debt has contributed to a suicide crisis. In the last two years, more than 20,000 farmers have died by suicide. Because of this economic hardship farmers have been asking for reforms for decades.
But this year instead of providing more protections for this vulnerable community, the central government went in the opposite direction. And farmers fear that the direction in which the reforms are happening are actually a direction of dismantling of the MSP.
Three Farming Acts
Each of them deregulates a different part of the system.
The first act creates free unregulated trade spaces outside the markets. The laws in these spaces would override wholesale market rules. and although a lot of trade takes place outside already what happens in the markets remains a benchmark across the industry. But this act will create two parallel markets with very different rules. One with oversight and another that creates room for big corporate players to come in unregulated. And in this dual market structure, the players in the regulated markets are bound to move out and operate in the deregulated spaces. And that is where farmers are going to lose out. When these traditional spaces collapse onto themselves.
The second act creates a framework for contract farming deals. Any business agreements would be strictly between farmers and traders with little oversight, giving farmers few options to fight bad deals. As these agreements increase outside of wholesale markets they could further fragment the market and leave small farmers dependent on terms set by big corporations or be cut out of the industry altogether.
The third act affects a different part of the chain. It eliminates the storage limits previously set by the government to control prices. Unlimited storage means that anyone with enough money can stock up. The problem is without oversight they can also start dictating prices.
Altogether the three acts invite big players into a fragmented and deregulated market that could lead to volatile prices for farmers. And by deregulating the markets the government has also put out a message in the same breath essentially saying that they think farmers don’t need any protection anymore from the government.
On June 3rd, 2020, when the government announced the farming reforms, it didn’t take long for the impact to be felt on the ground. Wholesale markets around the country have already seen fewer crops arrive in their market yards. In the state of Madhya Pradesh, more than 40 markets have lost business. Trading has moved out of regulated market spaces. And it is not as though good prices are being fetched by farmers. This is the context in which the farmer’s anger has to be understood They didn’t get what they wanted. And what was thrust down upon them is very different from what they were asking for.