The new legislations come amid a slight sequential uptick in the agri sector. While all other segments of the economy are still majorly stuck in Covid-induced disruptions, agri has shown some nascent signs of a recovery.
However, according to the noted economy commentator, it would irrational to expect overnight miracles from the Indian agriculture sector, reform or no reform.
Some sections of industry have lately come to pin recovery hopes on a rural/farm revival, based mainly on factors such as rising tractor sales over the past couple of months. But agriculture is just 14% — or roughly one-seventh — of GDP and hence can’t make up for the suffering of the rest of the economy, Aiyar said.
There is another significant reason why agriculture is making some sort of a comeback, he pointed out. A govt can close down industry and services in a crisis, but no govt can do the same with farming — you can’t just suddenly stop crops from growing or make the cow hold back on giving milk — which is why agriculture is doing relatively well, he explained.
He also listed a few other positive developments behind the farm sector’s resurgence — a) rabi procurements were not hurt by lockdowns; b) the monsoons have been good and despite some rain damage to vegetables, prospects of a good crop for the second year on run are high.
But these developments do not take away from the fact that the tail can’t wag the dog — at the end of the day, agri is still only one-seventh of the economy, Aiyar cautioned.
The more things change…
What will be the most likely outcomes of the new laws? Will procurement come to an end?
According to Aiyar, that will hardly be the case. For all practical purposes, farmers will still continue to take some of their produce to the mandis, he said.
While there is some theoretical likelihood of procurement-related problems at some point, any serious supply threat is ruled out because the government is free to invoke the essential commodities act whenever such a thing happens, Aiyar added.
The new system, however, can be very inconvenient for some states like Punjab, he said. This is because Punjab, in effect, was taxing the rest of India by levying a big mandi tax, so Punjab and some of the other states may lose it now.
In the interview, Aiyar also looked back on how the mandi-MSP regime — which began in the 1960s when farmers were forced to only sell in mandis so that the ration system can be kept well-supplied — eventually became a support system for the country’s farmers.
The farmer should definitely be free to sell his produce anywhere he likes, and in this respect the new farm laws are a good thing, Aiyar said, adding that being able to sell the grain anywhere is an absolute and fundamental freedom.
…the more they remain the same
While the govt is of the view that its new farm bills will have a tangible and meaningful role in changing the farmers’ lot, the ITC e-Choupal experience seems to suggest otherwise, Aiyar said.
Under the e-choupal scheme, ITC was permitted to set up separate direct procurement setups for wheat, soya, etc. Up to a point, it worked — farmers did flock to these centres, and got better prices and immediate payment. But it hardly revolutionised farming as it was supposed to. The system just took care of a small number of farmers; the rest still went to the mandis.
In Indian agriculture, there usually are not many large farmers who are open to catering to vast areas. That is why they can get by using these small middlemen and other such people, because the need to reach large geographies is not there, Aiyar explained.
It is possible for farmers to scale up by setting up their own marketing groups and doing their own marketing, but such an attempt will definitely take time despite the huge business advantages involved, he said.
Amul’s handbook could be a great example for the Indian farmer who wants to scale up this way, but replicating the milk business’ success with other crops will take time; those who expect overnight miracles should draw their lessons from the e-choupal episode, Aiyar said.