Farm sector needs reforms, not controls and quotas

The government’s direction to traders, big retailers, and food processors to declare wheat stocks every Friday from this month onwards is at odds with its stated goals of augmenting farmers’ income and opening up the farm sector. It has justified that this move would prevent hoarding and price spikes. It is true that wheat production was hit following heat waves for two straight years, forcing the government to offload huge volumes to shore up domestic supplies. The intention may have been good, but the manner in which the situation has been dealt with smacks of a statist mindset and not a reformist instinct. The government maintains that the measure is to “manage overall food security and prevent hoarding and unscrupulous speculation,” which are terms used by champions of dirigisme who claim to be the saviours of the poor and farmers. The fact is that they did immense harm to the economy; most of them are no longer around, but their influence still calls the shots. A Reuters report quoted a trader saying that the government is keen to replenish stocks by increasing wheat procurement this year, and to do this effectively, it wants to monitor private buying. This is micro-management of the farm sector, if not outright ‘inspector raj.’

Another report said that the government has stepped up vigilance on agricultural commodity companies and traders in the run-up to the general elections to keep food prices in check. The government has penalized about 80 sugar firms for selling beyond their quota; directed wheat companies to disclose their stock during the harvest season and told rice exporters to pay export duty even on freight charges to discourage exports. All this is malodorous. This doesn’t seem to come from the same regime that brought three excellent laws in 2020 to revolutionize agriculture—the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, the Farmers (Empowerment and Protection) Agreement Act, and the Essential Commodities (Amendment) Act. They had the enabling provisions to empower agriculturists, freeing them from the existing rules and regulations. They were emancipatory in nature but an activist-intellectual-politician nexus torpedoed them, thus perpetuating the discredited rules and regulations of the socialist era.

The Modi government was forced to repeal the three laws. The repeal was not just a blow to agriculture but to the entire economy as a sector employing the largest number of people was deprived of a strong dose of reforms that it urgently needed. Emboldened, the same kind of people who agitated in 2020-21 recently started another stir, this time with even more outrageous demands, the main one was in making MSP a legal guarantee for 23 crops. If accepted, these demands would further hurt the farm sector, distort markets, fuel inflation and burden the public exchequer. While the government has not accepted these demands, it seems to have turned its back on reforms in agriculture.

The need of the hour is to open up the farm sector by at least piecemeal measures, if not the big-bang reforms that were attempted in 2020. Farmers would benefit if trade, domestic as well as international, is eased and supply chains are improved. Antiquated steps like controls and quotas would not help them.