Saving Farmers from the Unions

THERE WERE TELLTALE signs of the political orien­tation of farm unions demanding a Central law guar­anteeing a minimum support price (MSP) for several crops besides wheat and rice. The large number of hammer-and-sickle flags and occasional demonstrations in sup­port of Maoist activists indicated there was more than what met the eye. The Left-oriented unions may well have believed in their MSP demand but their opposition to the Modi government was ideological and political. They succeeded in stoking the fears of a section of Punjab and Haryana farmers who are highly dependent on MSPs offered by Central agencies that procure their crops and tapped into the Shiromani Gurdwara Parbandhak Committee (SGPC) network once the Shiromani Akali Dal (SAD) broke its alliance with the Bharatiya Janata Party (BJP).

The farmer agitation found support of the Rakesh Tikait group in western Uttar Pradesh (UP) and with the encouragement of first the Congress government in Punjab—later the Aam Aadmi Party (AAP) played benefactor—blocked key highways in and out of Delhi. The previous Congress government in Rajasthan looked the other way as the agitators took over one carriageway on the Delhi-Jaipur highway. The AAP government in Delhi supported the agitators despite the immense hardships caused to Delhi’s residents in the hope that the protests would weaken the Modi government’s popular appeal. The endless rounds of negotiations between the unions and the Centre saw the farm leaders hold up placards saying “Take back the farm laws”. Some of the union leaders did not utter a word.

The farm reforms in question were a sweeping agenda to open options other than MSP, such as contract farming and scrapping of stockage limits that were seen to limit the prospects of Indian agriculture. But at their heart the protests —that turned violent on occasions—had only so much to do with farming issues. The idea was to foist socialist-era policies on the Centre and take the shine off the Modi government. Prime Minister Narendra Modi’s decision in November 2021 to withdraw the three farm laws saw the stir being wound up, only to return in 2024 ahead of the Lok Sabha polls. But the Union government was more prepared this time and while the unions blocked roads in Punjab, BJP-ruled Haryana prevented them from marching on Delhi. The second time round a fast by farm leader Jagjit Singh Dallewal failed to move either the Union government or public opinion which had become thoroughly fed-up with the hindrances caused by the protesters. It was an unlamented end to an agitation that had seen the foreign media gush—Time magazine said the stir was a turning point for India—fizzle out without a whimper. The Budget Session of Parliament that ended this week hardly saw the removal and detention of protesting farmers being raised by the Opposition. Clearly, even non-BJP parties felt there was little traction in doing so.

Having taken three steps backwards in withdrawing the laws intended to deregulate Indian agriculture, the Centre in November last year released the draft National Policy Frame­work on Agricultural Marketing (NPFAM), a forward-looking set of proposals and assessments of various issues in agricultural marketing. It was a move to revive the need to modernise agri­culture and help farmers in many parts of India who did not share the MSP-centric vision of the farm unions that had pitched tents on highways. The bid to push-start reforms was immedi­ately opposed by the unions which were, however, weakened by diminished support in Haryana and western UP.

The draft NPFAM has some interesting—and important— observations and recommendations. Its overarching goal is to bring efficiency into agricultural markets in India. These markets remain fragmented even after ef­forts to create a unified national market through devices such as the National Agriculture Market (eNAM) was launched in 2016.

The draft policy document notes: “This is the era for an ecosys­tem wherein there should be ac­cessible markets with the choice to farmers to sell their produce through any channel of marketing (APMC mandi, private mar­ket, direct marketing, online through e-trading platforms, tertiary markets through electronic trading exchanges etc.) and also any buyer offering the best bid for their purchase.” (Section 7.1.1)

The document also says: “As a fulcrum, private markets would enhance the farmers’ income. Though the majority of states have made enabling provisions for setting up of private wholesale markets, yet private markets have come up in few states only like Maharashtra, Gujarat, Rajasthan, Karnataka, Uttar Pradesh” (Section 7.1.3.1). It notes that states have either not framed the rules under the APMC Act or have not provided an attractive business model for private entrepreneurs.

THE STATES LISTED in Section 7.1.3.1 make for an inter­esting contrast with the two mainstays of Indian agricul­ture: Punjab and Haryana. Both states have adopted the reform provision that allows the establishment of private markets in their APMC Acts and Punjab has even notified the rules, yet private markets do not exist in Punjab. It is equally interesting to note that while 25 states have rationalised market fee and another 24 have rationalised commission charges, Punjab and Haryana are the only major holdouts.

There is a certain correlation between the absence of politics and agrarian progress. States like Maharashtra, Gujarat, Rajasthan, Karnataka, and, to an extent, UP are moving ahead in creating a private market infrastructure that is more efficient, one where price discovery has fewer frictions, while Punjab and Haryana are in the grip of farmers’ agitations. Farmers from Punjab have openly al­leged that the draft NPFAM represents the “backdoor” entry of the three farm reform laws that they had managed to roll back after forcing the Modi government’s hands by a prolonged agitation.

The interesting thing about agricultural marketing is that while it is a state subject (Entry 28, List II, in the Seventh Sched­ule of the Constitution), states want the Centre to foot the bill for all subsidies, purchases and any outlandish scheme they can conjure for “farmers benefit”. Ideally, the Centre should prescribe MSPs for various crops and let states intervene in markets for all crops, including purchasing what farmers sell, storage and other processes involved in such interventions. Matters have gone well beyond that stage: now farmers in certain troublesome states want a law that guarantees MSPs for all crops. This, in effect, means the Union government will foot the bill for all purchases of crops, whether by states or by the Centre. This is a proposition that will bankrupt India. To ‘over­come’ this criticism, activists and farmers’ unions give a ridiculous­ly low figure of what it will cost the Centre to become a buyer of first resort.

It is instructive to note that in one set of markets where the Centre does play that role (although in a limited geographic area)—wheat and rice in Punjab, Haryana and some other parts of the country—the costs are exorbitant. In the rabi and kharif marketing seasons for 2024-25, in Punjab alone, the Centre spent ₹40,145 crore in buying foodgrains. These payments dwarf the two next biggest states—Haryana and Madhya Pradesh in case of wheat procurement, and Haryana and Tamil Nadu in case of rice—by a very large margin. (These figures are taken from the Central Food Grains Procurement Portal.)

There are two issues here: one, the opportunity cost of the Cen­tre spending such large sums in a single state. Can there be a better solution to provide sustainable incomes to farmers there? Two, there is an equity issue involved in such purchases. All states of India are equal. In the present circumstances, there is no reason why a Chhattisgarh or a Bihar—a state with near-zero official procure­ment—should not get the same level of support.

The draft NPFAM moves beyond this cul de sac in which India has locked itself due to political reasons. Its proposals are technocratic in nature and are geared towards ironing out mar­ket frictions in a country that produces gargantuan quantities of agricultural commodities and yet remains unable to efficiently process them. This is necessary to ensure that both farmers and consumers get the best. The ideas in the draft NPFAM are a step in that direction.

The key reason for the AAP government in Punjab turning against the farm unions was a realisation that significant sections of the population were distressed by the blockades imposed by the farmers. The fall of AAP’s fortress in Delhi and the shock defeat of party leader Arvind Kejriwal brought about a reassessment of the situation. Once Punjab Police were given the go-ahead, it did not take long to get the farmers off the roads. The end of the agitation provides the political space for a more meaningful dis­cussion on Indian agriculture. The Congress government headed by Captain Amarinder Singh had proposed a contract farming policy. Indeed, dairy and potato farmers in Punjab have engaged in contract farming with encouraging results. A 2005 study showed that profitability was double for dairy farmers in contract with Nestle as compared to non-contract farmers. When the SAD-led the NDA government in Punjab, it had brought out a proposal on crop diversification by promoting horticulture, vegetables and oil seeds besides crops other than wheat and rice that do not guzzle so much water.

The Modi government has the time and mind space to restart farm reforms since the next round of state elections is due only at the end of the year and polls in Punjab are due only in February 2027. It has also become more apparent that the MSP regime is not being done away with and various states, including BJP-ruled ones, are offering support prices for large numbers of non-cereal crops. This encourages crop diversification even as initiatives to promote better market linkages hold out the hope for better returns. It is evident that while the role of the Centre and state governments cannot be understated, the participation of the private sector and the infusion of capital and technology are the need of the hour. The trade discussions between India and the US that focus on tariffs are an urgent reminder of the limits of protec­tionist policies and the need to modernise farming and make it much more globally competitive. The farm unions sought to take farming back in time. The window to do so is now firmly shut.

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