By: Mustafa Mubarak Pathan
Agriculture remains an important sector in the Indian economy and trade with significant contribution to rural livelihoods, food security and economic growth. It is the only means of survival for almost two-thirds of the employed class in India. It is also considered as the backbone of the Indian economy, covering almost 70% of available land, providing employment to about 60% of the working population and by contributing about 22% of the national Gross Domestic Product. However, Indian agriculture is confronted with varied issues like high price volatility, climate risks and indebtedness. Since the majority of the farmers are small and marginal with declining and fragmenting landholdings, such uncertainties render them even more vulnerable and risk-prone. The agrarian distress in India is not something new. It is deep-rooted and is an outcome of accumulation over the last decade or so. Attempts have been made to address the issue and seek solutions. However, though problems of farmers have been seen from the agriculturist perspective and various legal paternalistic prescriptions and policies have been put forward to safeguard the interest of the farmers and to address agrarian distress, it is noted that these safeguards are found to be doing next to nothing in overcoming the persistent agrarian distress in our country. On the contrary, some of these legal prescriptions have been observed to be contributing to the woes of the already distressed farmers and need fresh retrospection on the utility of such legal safeguards. Farmer organisations too have voiced for laws like the Essential Commodities Act 1955, Land Ceiling Act, Land Acquisition Acts, Wild Animals Protection Act etc. to be scrapped as they retrain farmers from exporting their produce and realising its rightful price and are against the interest of farmers. According to them, such laws actually ensure that farmers do not get their rightful pay and are contributing to their miseries. As most of these laws have been driven by urban consumers’ motives and keeping in mind the populist electoral vote-bank during impending elections with short-term objectives, they are proving to be detrimental to farmers’ larger, long-term interests.
In this respect, this paper focuses on the need to rethink the utility of some of the agri-related legislations and policies and elaborates on how these statutes are contributing to the woes of farmers more than doing any good for them. The role of Essential Commodities Act (ECA) 1955 in discouraging investment in the agriculture sector and the role of Prevention of Cruelty to Animals in Animal Markets Rules, 2018 in devastating livestock economy are deliberated with a view to ascertain their contribution in existing agrarian distress in India. Before delving into these statues and their role in agrarian distress, the nature of Indian agrarian distress is briefed in the section below.
THE NATURE OF AGRARIAN DISTRESS IN INDIA
The crisis in Indian agriculture is deep-rooted and not a new one as farmers in India are at the mercy of nature and our agriculture still gambles on the monsoon. As mentioned in the earlier section, this crisis in our agriculture sector is the consequence of an accumulation of distress for many years. Our agricultural productivity is below its potential. Restricted use of modern farming methods, the volatility of weather, weak agricultural support services and lack of market-oriented production have been the contributing factors for this situation. The frequent occurrence of natural disasters like flood, drought, storms, hails, cyclones have also played their role in the farm distress. Though such factors and a collapse in international prices might have worsened the Indian agrarian distress, the current precarious situation is largely a result of the neglect of the agrarian economy by successive governments in different ways- be it through the failure of having a comprehensive farmer-focused policy or by not making required, adequate budgetary provisions for the agriculture and related sectors. Facing increased protests by the farmers and resulting politicisation of the farmers’ crisis through it, the government has responded with measures such as- loan waivers, MSP increases and some form of direct income transfers in the recent years. Though loan waivers are necessary in case of extreme indebtedness, it should also not be forgotten that they are giving rise to a tendency to default on loans impacting our already volatile, stressed banks.
Most of our agrarian policies are short-sighted keeping in mind our political agendas and the lack of interest in addressing the agrarian distress in the true sense by forming systematic long term farmer-centred policy. Larger investments, access to better technology, market infrastructure, storage and warehousing infrastructure are need of the hour and such policy issues hardly get implemented. Some of our own statutes and short-sighted populist faith-oriented policies are proving to be the contributing factors in the already worsening agrarian distress of the Indian farmers. There the required solution must address all its dimensions. We should acknowledge that band-aids of overprotective legal prescriptions & policies can hardly go a long way in solving this problem. Time and again we need to review our existing laws and policies to evaluate their impact and thereby determining the future course of action to address the issue for which such policies were framed. In line with this, I believe that we should rethink the utility, need and contribution (positive and negative) of some of our laws to address the distress in the agricultural sector. The following sections focus on two of the statutes which are affecting our agriculture growth and contributing negatively to the present distress.
PATERNALISTIC LEGAL PRESCRIPTIONS & POLICIES & THEIR ROLE IN AGRARIAN DISTRESS
Essential Commodities Act (ECA) 1955
Enacted on 1 April 1955, the Essential Commodities Act (hereinafter ‘the Act’) aimed at ensuring the easy availability of essential commodities to consumers and to protect them from exploitation by unscrupulous traders. The Act gave the consumers protection against irrational spikes in prices of essential commodities. The Government has invoked the Act umpteen times to ensure adequate supplies. It cracks down on hoarders and black-marketeers of such commodities. However, this has also been quite problematic from an agricultural perspective as almost all the crops are seasonal and ensuring the round-the-clock supply requires an adequate build-up of stocks during the season. So, it may not always be possible to differentiate between genuine stock build-up and speculative hoarding. Also, weather-related disruptions may also trigger genuine shortages which may result in prices moving up. Now, as the provisions of the statute provide, if prices are always monitored, farmers find no incentive to farm and even traders are hardly encouraged to invest in better storage infrastructure. Thus, this statute has been doing great harm to the agriculture sector in different forms. The law also ignores the effect of storage on future consumption. It is not only discouraging investment in modern methods of storage and in market intelligence but also making it harder for market participants accurately forecast due to the lack of information on trades.
The lack of formal warehouses and silos in India is often attributed to the fear of the Act and its draconian provisions. We need to understand that agriculture, unlike manufacturing, is seasonal. At the time of harvest, supply is maximum and consequently, prices are at their lowest. If farmers (or traders) store produce, then the supply is smoother and price volatility reduces. However, the Act effectively criminalises this supply smoothening through storage of agricultural goods. Such warehouses naturally become the prime target of raids by the officers specified by the Act. It should be noted here that the violators of certain provisions of the Act may be imprisoned for up to seven years. This speaks volume in itself about the nature of the Act and the kind of impact it can have on the agriculture sector through its draconian provisions.
Disinvestment Factor in the Farming Sector
National Commission on Farmers, better known as the Swaminathan Commission, argued that higher productivity in agriculture could only be achieved by a substantial increase in public investment. However, as illustrated in the section above, the provisions of the Act arouse fear of not investing in warehousing and storage infrastructure, at least those that are visible (like large, efficient warehouses and silos) and can be easily raided. Usually, intermediaries who do not mind taking the risk of being raided in the event of a Control Order enter the business of warehousing. This encourages a group of grey market intermediaries between the farmer and the end consumer to emerge. Since the storage of large quantities of goods under the Act carries the risk of raids and expropriation, intermediaries normally demand a risk premium that has to be ultimately paid by the producer and the consumer ultimately not serving even its own objective for which it was enacted.
It might be argued that the government has attempted to address this problem by providing interest and capital subsidies to any person setting up warehouses and other storage facilities for agricultural goods through public sector banks. However, this subsidy creates another set of problems. The risk of the Orders, in such situations, shifts from the owner of the warehouse to the banks. Since the owner has put in less capital, he can recoup his costs quicker. Consequently, if the government places Control Orders on agricultural goods, the warehouse owner can default on the loan. As a result, the Order becomes the problem of the public sector bank and the government entity providing interest subvention-in effect. This completes a circle of government first subsidising a business and then destroying the same business with its own Control Orders.
There have been many recommendations to reduce the arbitrariness of the Act as it discourages people from creating assets in agriculture. Sadly, as long as the Act remains, in any form, its deterrent effect will continue. The only solution, according to ILA Patnaik and Shubho Roy is a complete doing away of this draconian law. Even the premier think-tank, NITI Aayog (hereinafter ‘the Aayog’), has pitched for completely removing agriculture commodities from the Act and making a shift towards organised trading wherein lower number of traders with enough capital will dominate the market. This will also reduce handling costs, bring economies of scale, reduce prices and increase the returns for the farmers. The Aayog is of the view that removing stock restrictions from agriculture commodities will lead to organised trading, improve scale and logistics benefit and bring about more capital into trade with a handful of big traders competing with each other. The other argument in favour of the Aayog’s proposal is that with frequent changes in rules and stock limits, traders have no reason to invest in better storage infrastructure. Also, stock limits curtail the functioning of food processing industries which need to maintain large stocks of underlying commodity to run their operations smoothly. In such a situation, large scale private investments are unlikely to flow into food processing and cold storage facilities which are essential for ensuring framers get better remuneration for their crops.
The Aayog has also argued that the law permits governments to enforce strict controls in agriculture which is preventing much needed private investments in agriculture in areas like storage capacity and logistics for improved supply chains as pointed above. Going by a newspaper report, the share of private corporate investment to total investment in agriculture is a paltry 2.4 per cent. Agriculture receives only 0.4 per cent of the total private investment though this sector contributes to about 15 per cent of the GDP. The reasons pointed out by private investors for the same are that unless there is a more enabling environment in the sector for them, investments will not increase. Even the CM’s panel on the committee for agriculture reforms, which includes the Chief Ministers of Karnataka, Haryana, Arunachal Pradesh, Gujarat, Uttar Pradesh and Madhya Pradesh, has also suggested amendments to the Essential Commodities Act. Maharashtra Chief Minister, after their meeting, pointed out that though they were exporting their agri-products, it was still very little. On the other hand, various countries, who have their embassies (consulates) in Mumbai, had appointed agri-experts to gather market intelligence from here. Therefore, he stressed on the need for creating such a dynamic system for gathering market intelligence and getting the right prices for exports which are restricted by the provisions of the Act. Amitabh Kant, Niti Aayog Chief Executive Officer has also suggested that changes are required in the APMC Act and the Essential Commodities Act to help farmers get better prices of their produce.
The worst thing about the Act is the grant of immense power in the hands of the implementing authorities, which could even be at the level of a constable in the local police station. The Act empowers authorities to search the premises and arrest as well as seize/confiscate and sell the stock under dispute on mere suspicion and even before the guilt is established. It is against the common principles of jurisprudence to impose three penalties simultaneously, namely- arrest, seizure or confiscation, and sale of the entire stock. The result is obvious: corrupt practices and misuse of granted powers. The magnitude of this can be gauged by the fact that in 1995, against 80,927 raids, only 2,719 persons were convicted (3.36%) and during 1996, 45,500 raids resulted in 2,177 convictions (4.78%). The rest had to undergo unnecessary humiliation and harassment. Therefore, as Seetha points out, the Essential Commodities Act is not in tune with present times. It made sense at the time when the transport infrastructure across the country was poor and markets were not integrated. This is certainly not the case anymore. as shortages in one part of the country can be countered if there is ample supply somewhere else.
According to Mayank Wadhwa, 60% of our workforce is still employed in agriculture, but its contribution to our GDP is 26.8%. It provides for 20% of the country’s exports. 80% of farmers are small and marginal, and 75% of the poor reside in rural areas. Probing into the plight of the poor farmers, he examines the restrictions imposed on the marketing and movement of agricultural goods in India and their associated fiscal and efficiency costs on the economy. It is evident from the discussion above as well as from the recommendations of National Commission on Farmers that we need more warehouses and storage and a great deal of investment for the same. But, the Act deters such investment on these fronts which are essential for supporting agricultural incomes. Therefore, the government needs to rethink, relook at the utility of the Act in the age of free market and repeal the Act.
THE PREVENTION OF CRUELTY TO ANIMALS IN ANIMAL MARKET RULES, 2018
The Prevention of Cruelty to Animals (Regulation of Livestock Market) Rules, 2017 were notified on 16th January 2017 by Ministry of Environment, Forest and Climate Change, Government of India. However, the same was stayed by the Supreme Court of India on 11.08.2017. Thereafter, the Ministry of Environment, Forest and Climate Change further notified the draft Prevention of Cruelty to Animals in Animal Markets Rules, 2018 which has now been transferred to Department of Animal Husbandry and Dairying. The step has impacted the lives of many, including farmers due to the stringent provisions. We should know that our crop economy has been under severe distress in the recent years owing to varied factors including the recent demonetisation. This has been further worsened by the problems in the livestock economy due to such populist vote-bank, faith-oriented policies having an adverse impact on the agricultural sector.
The cattle economy forms a very essential part of Indian agrarian economy for small and marginal farmers. It is an important source of income for the farmers and poor people in rural areas. Going by the data of the Central Statistical Organization, the livestock sector contributes approximately 4.07% to our GDP and over 27% to the agricultural GDP. However, recent political mobilisation against cattle trade has been contributing to the already awful distress in our agrarian economy. As per the 2019 Livestock Census data, government’s policies for the protection of cattle and restrictions on its trade have adversely affected the population growth of indigenous breeds of bovines in the belt stretching from Maharashtra to Uttar Pradesh. It has also been reported that the disruptions in conventional methods of disposing of end of productive-life cattle have increased distress among dairy farmers. We should acknowledge that a very extraordinary situation is prevailing in rural India today where many parts are experiencing agrarian distress and farmers are under financial stress from their main vocation. This has made it very difficult for them to afford the upkeep of their livestock. Expert reports estimate that the maintenance of an uneconomic cattle costs around Rs 40,000 a year. For small farmers, this is a huge cost to pay for maintenance of the animal. Already bruised by such anti-cow slaughter laws and widespread vigilantism further adding to this, farmers are simply abandoning cows. To add to this worsening distress of the farmers are laws to penalise such abandonment too. This has eventually resulted in the complete collapse of the market for cattle, and in turn, their commercial value. Under this situation, farmers are left with no option but to maintain such animals or find ways of surreptitiously abandon them under the cover of darkness.
But unfortunately for farmers, the problem doesn’t end here. The stray cattle, abandoned by farmers, are becoming new menace for their crops which is forcing them to engage labourers to protect the fields. This again results in a sharp reduction in income with an increase in the cost of cultivation. And as we read and watch on TV channels that raids on cattle trade and their movement become the new normal, today, our villages are turning into economic bad zones, thanks to such laws and provisions. We should acknowledge that constant restrictions and a regime of conservation, based purely on ‘faith’ or ‘sentiment’, are turning cows into a pariah breed too. Farmers are already quitting rearing cattle, particularly cow or abandoning under financial stress and new laws punishing such abandonment would certainly be the proverbial last nail in the coffin.
Today, the livestock economy is at crossroads. We should genuinely acknowledge that such policies do not help our small and marginal farmers who use earnings from selling off their old cattle to invest in a new, productive stock. These farmers as well as the dairies need an alternative to disposing of cattle that have reached the end of their productive life. Therefore, it is time we really rethink our short-term, populist, faith-based policies and devise them in the interest of farmers going beyond our ideological lines if we are really serious and sincere about addressing the distress in the agriculture sector. We should not forget that agriculture and farming are very essential not only for our economic growth but also for our food security and livelihood. By devastating this sector in such a way as to please a particular section, can we really afford the continuous distress in that sector which is considered as the backbone of our economy?
To sum up, the rising pressure of population on our farming and land assets and various unflavoured factors have turned our agriculture sector into a distress mode. As most of our farmers have small and marginal land holdings (less than 2 hectares) accounting for 72% of land holdings and lack structurally organised strong political lobby, they are left with low bargaining power and have almost no say in our agricultural-related policies. Whatever laws, reforms and new policies have been framed and devised, are actually devoid of their real interest and focus. Short-term electoral populist interests predominate our policies and laws over the real structural reforms which can genuinely benefit Indian farmers. Such short-sighted policies also pose the risk of potentially pulling down and derailing the economic growth and social development prospects of India.
To address the issue, we must make entry of other sectors into the agriculture sector in an easier and a more attractive way. To attract youth towards agriculture, we should focus on secondary and speciality agriculture assisted with value chain for efficient post-harvest handling, rural-based primary processing and marketing. Considering enormous potential for agricultural exports, we should also re-examine our export-import policy and make it long-term foresight oriented to harness the benefits of globalisation. We must shift our policy focus from basic farming to more efficient, sustainable, and productive farming. But, all this requires a political will to question the existing policies, the laws and the support mechanisms to check their equity, efficiency, and macroeconomic impact. And the fundamental question is- are we ready and willing to do that going beyond our ideological and political lines to make our policies and laws farmer-focused? To sum up, successive governments in India have tried to help farmers through large subsidy programmes and loan waivers while legislations like the Essential Commodities Act dis-incentivise investment in crop warehouses and storage. According to Montek S. Ahluwalia, Indian farm profitability deserves the highest priority. Therefore, it is high time that such legislations are re-thought, revised or repealed. We should note that crop loan waivers, crop investment support, income support and Direct Benefit Transfer for subsidies will not solve the mismatches between seasonal demand and supply in agriculture. In fact, these mismatches are bound to increase as both demand and production increase each season. We need long-term, farmer-focused structural reforms that really yield the results.
Looking around, for example, a Policy Note document by the World Bank on the nature of impact of State support and market intervention on agricultural productivity and competitiveness in Belarus can be a learning step for us. The policy note reports that through a re-orientation of the agricultural policy framework towards less distortive measures, Belarus could achieve higher efficiency, competitiveness and growth without compromising on its food security and rural incomes objectives. It could even reduce budgetary expenditures. India too, being a member of the World Trade Organisation (WTO), can learn a lot from this. Like India, in Belarus too, Agriculture continues to be an important sector in its economy and trade, with crucial contributions to rural livelihoods, food security, and rural and economic growth. The elements of the re-oriented policy framework in Belarus included:
- Increasing the efficiency of resource use through less state control. This implied price liberalization for agricultural inputs and outputs, guiding productive resources to their most efficient uses, with positive implications for employment generation and agricultural growth and ultimately for the provision of attractive income opportunities as a sustainable basis of rural livelihoods in the long term. We need to rethink and test our laws and existing policies on these criteria and do the required to address our distress issues.
- A reduction of state control over farm management. This was considered as critical to enable agricultural producers to respond to market signals by adjusting the nature, scope, intensity, and technology of their production and the nature of their business relations for purchases and sales, which will ultimately result in increased efficiency and competitiveness. Our laws, such as Essential Commodities Act are contrary to this. Our frequent intervention and control on-farm management is really disincentivising our agriculture sector. Our patriarchal and overprotective approach to the agriculture sector will not always help us nor the farmers. We should trust our farmers in the age of liberalisation and help them transform farming sector on business line model. We should also revisit and repeal different statutes which are proving hurdles in the progress of agriculture sector and chaining it into distress.
Agricultural education, training, and advisory services and measures especially in the field of market-oriented farm management are essential to provide farm managers with the knowledge that would allow them to make the best use of new opportunities, i.e. adjusting production technologies and farm management practices to market signals including quality and other requirements. Farmers would further benefit from market-oriented information systems. We should revisit our policies and check if we are any nearer to such propositions and what needs to be done to achieve this. Therefore, it is submitted that instead of devising our laws and policies in the frenzy of populist sentiments and with short-sighted electoral gains in mind, we should rethink, relook our existing laws and policies and even repeal some, if the need be, to have long-term, a farmer-focused policy that will serve nation’s interest over any ideology or group or class of people and address the distress in the agriculture sector at its root.
(Mustafa is currently a law undergraduate at Dayanand College of Law, Latur, Maharashtra. He may be contacted at email@example.com.)
Cite as: Mustafa Mubarak Pathan, ‘Rethinking Populist Paternalistic Legal Prescriptions & Policies to address Agrarian Distress in India’ (The RMLNLU Law Review Blog, 29 May 2020) <https://rmlnlulawreview.wordpress.com/2020/05/29/rethinking-populist-paternalistic-legal-prescriptions-policies-to-address-agrarian-distress-in-india > date of access.