Indian Farm Laws, 2020
I am neither supportive nor critical of the said farm laws1, because of my resentment towards the inorganic farming system that we practice, which the laws, as one side says, are improving, and as the other side says, are regressing. Having said that, given the enormity of the protests against the law, and considering that we still have to depend on inorganic farming for food till a foreseeable future, I believe it is not improper to assess the law.
The laws prior to the farm laws in question allow farmers to sell their produces only in a mandi, which is a market run by the state and unofficially controlled by the trader cartels. This system is so restrictive and exploitative of the farmers that they could sell their producers in only one place where farmers have no negotiation power at all. As an example, consider this farmer who was offered 1 rupee a kilo in the mandi for his cauliflower harvest.
The farm laws in question fundamentally allows farmers to sell their products to any buyer anywhere, including private enterprises, thus enabling them to negotiate the best price for their deal. These are good reasons to support the law.
Many have opinioned that government should be fixing the mandi system instead of making new laws. There are two problems with that thought. The first is that, the thought assumes that the mandi system and the laws are not mutually exclusive when in fact they are. It means that strengthening the mandi system and passing agricultural laws does not replace each other. Both can take place. There is no place for the word 'instead' in that argument.
The second problem is that the thought implies that the mandi system is run by the government, or how else can the government strengthened the system if it is not run by the it? Is so, how is a mandi a farmers' market?
The best way to monetize farm products is to sell it in a farmers' market to any buyer. A farmers' market must be run by the farmers themselves with the producers and consumers (market) fixing the price of the produces. This is best way out for farmers from their financial distress. However, there are great incentives to the farmers when they engage solely in production and someone else manage the distribution and sales of their produces, especially in remote and large farms. The logistics and customer acquisition is too much of a work.
Here, farmers must engage with various buyers directly and negotiate the best price for their produces; which these laws in question enables. There is a concern that these laws is that private bodies will exploit the farmers. So long as farmers are not forced into contractual farming and have the liberty to get into or turn down the contract as per their judgement, there is no exploitation at all. If a farmer finds a contract exploitive, let him not sign it.
There is another concern that when private players enter, because they are better than the mandi system, will dominate the buyer market and kill the mandi system. Now that there is no alterna tive system, private players can form a cartel and dictate the prices; thus exploiting farmers. This assumes that every business mind in the country has gone rogue to form cartel and exploit farmers — a very improbable occurrence.
Also, unlike the traders in the mandi system who are not accountable to anyone except themselves, corporations are accountable to investors. Therefore, they cannot form cartels like traders do, make a truce and exploit farmers. If they do, their investors will push them out of such agreements, for it is their nature to make maximum profits, and truces stagnate profits. Thus, private bodies will be in competition with each other whereas the traders are in competition with farmers in the mandi system. With private bodies, farmers will not even have to go around looking for buyers because the fierce competition between private bodies will ensure that a farmer will almost always have a buyer at doorstep.
Worst case scenario, even if private players form cartels, farmers can now form their own market and the difficulties of forming and running it will not matter because of contrast principle.
The other concern is the monopoly of any corporation. This too is almost impossible because the laws do not state that only a particular player can get into contracts. It is a public law and therefore any private body can buy products from farmers, even without contracts. So, there would be many players competing, thus inhibiting monopoly. Even if a monopoly builds up, the laws in question now permit the farmers to form their own market thus bypassing the monopolist corporations.
An argument raised by the politically motivated, is that the farmers themselves do not agree the benefit of the law, and therefore the laws are counter beneficial. This is wrong in two ways. First, most farmers do realise the benefits of the law, which is why not all farmers protested. Those who protested were of two types: those from a specific geographical region demanding MSP, and those farmer and farmers' union who were aligned with the political opposition. And given the amount of misinformation about the law and fear mongering spread by the opposition, influencers and media, it should not be surprising if some farmers misunderstand the law or have got their fears aggravated.
Second, whether laws are beneficial or not must not be decided based on whether the benefactors understand and realise the benefit. It must instead be decided on the tenable consequences of the law.
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Now that the farms laws have been repealed, I still say that farmers must come together and form a farmers' market under any legislation that allows it, and sell their produces directly to end users. Or, get into contractual farming with any private bodies.