Saturday, February 4, 2023
HomeOpinionFarm reform bills are a beginning, not the agricultural equivalent of 1991

Farm reform bills are a beginning, not the agricultural equivalent of 1991

Govt says farmer should be free to sell to who he chooses, where he chooses, when he chooses. But fact is outcomes vary across crops & geographies, over time.

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There are two ways to increase a farmer’s income. One is through higher productivity. The other is higher prices. The only way to get higher prices without hitting the consumer is by increasing the farmer’s share of the retail price. There are three ways of doing that: The government offers a minimum price guarantee (as with foodgrain) along with a price subsidy, or it mandates a minimum price (e.g. for sugarcane) that bulk customers (sugar mills) have to pay. The third option is for farmers to organise themselves as cooperatives, cut out middlemen, and/or capture greater value by processing the raw output. The best example is milk cooperatives. The global success stories in cooperative action are California’s Blue Diamond almonds and Norwegian salmon.

In foodgrain, the subsidy allows the farmer to get a price that roughly equals the retail market price. In sugarcane and milk, the farmer’s take is up to 75 per cent. In comparison, the growers of TOPs (tomatoes, onions, and potatoes) and horticulture in general, which have a combined tonnage greater than for foodgrain, get barely 30 per cent of the retail price, on average. The rest goes to a succession of middlemen. Direct marketing efforts can take this up to 40 per cent. There are also crops where growers get as little as 10 per cent of the retail price, as experienced with coffee and bananas (both in Latin America, where O. Henry coined the term “banana republic” to describe what he saw).

These varying percentages create a price bias towards the crops where the farmer’s share of the take is greater. Sugarcane and paddy have become profitable, so farmers grow them in even water-scarce areas. India has a surplus of both, as also milk. For sensible crop choices, it is important that the grower’s share is improved in other crops. Can that be done, without a government subsidy or price intervention? Yes. For even if the share does not match cane or milk, direct marketing initiatives offer big potential benefits. So the debate has to go beyond the binaries being spun out by politicians who either condemn the new farm Bills, or think the new system will be the agricultural equivalent of the 1991 de-licencing of industry. It’s not so one-sided, or so simple.

Also read: When Modi govt came to power, farmer protests increased 700% — the 3 bills are its result

The history of regulated markets, potentially a victim of the new enactments, is instructive. The first such market, for cotton, was created in 1897, so that textile mills in Manchester could get pure cotton from India. From then till nearly a century later, regulated markets multiplied to over 8,000 because they offered standard weights, the grading of produce, transparent pricing, and so on. They fell into bad odour because poor management practices set in: Control by vested interests, price manipulation, excessive fees and taxes, and exploitation of small farmers.

Small coffee growers in south India improved their price realisation when they rebelled against the exploitative trading rules of the Coffee Board in the 1980s. But permission to by-pass auction centres for tea had the opposite result. The lesson is what the Nobel laureate Elinor Ostrom (who favoured collective action by people, and not governments taking charge of common resources) argued: A resource arrangement that works in practice can work in theory!

The government has gone for theory, which is that the farmer should be free to sell to whoever he chooses, wherever he chooses, whenever he chooses. But what freedom does a small farmer really have when up against large food processors or retail chains that buy in bulk? Freedom is enjoyed by those who have market power, or so says another theory. But have potato farmers complained about Pepsi? And the orange growers’ association has sought help from the Safal chain to sell oranges in the pandemic. The fact is that outcomes vary across crops, over time, and in different geographies. So farmers producing some crops in some states are protesting, not others.

The real hope lies in the farmer producer organisations being pushed by the government — if these get off the ground in the right way and acquire scale. For that, the hard work lies ahead. And then there’s the question no one discusses: Productivity.

By Special Arrangement with Business Standard.

Also read: Modi’s farm bills gamble is risky, but it was about time and is still worth it


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  1. Very good article. But govt will look the other way. It is crystal clear the huge gap between waht farmers get and what is sold in retail.

    Bjp ruled now for about 7 years but not even baby steps taken to narrow the gap between the rates farmers get and the rates sold by retailers. Even generally even if farmers get rs5/- to rs 10/- more per kg on all items they will be more than happy which the middlemen and govt combine will not allow.

  2. Some Basic Facts

    Banias = Vermin
    Brahmins = Vermin
    Arhatiya = Vermin

    The Arhatiya have to be EXTERMINATED – alongwith the Bania scum.Indian Agriculture,is a Ponzi Story !

    Farmer A sells potatos at Rs 5/per Kg to Bania Arhatiya (B),who sorts,grades and sells to Bania wholesalers (C),at Rs 10/kg, who then sells to bania retailers (D),at Rs 20/kg,and then,who sell to users (F) at Rs 30/kg. dindooohindoo


    Bania Arhatiya (B),who sorts,grades and sells to Manufacturers (E)


    Bania Arhatiya (B),who sorts,grades and sells to Indian Walmart (G)

    Y not kill B,C and D ?

    Dharti Pe Bhoja

    Bascially B,C and D number 10-15 crore bania-brahmin vermin.They are worthless trash who cannot employed.So the Ponzi rule is that the Indian farmer (A) and the users (F),have to partake in a Ponzi Sceheme,to employ the bania vermin (B,C and D). So B.C and D are doing a Ponzi on A and F,with the blessings of the GOI – as the GOI is a nikamma namard state.

    Y are Dharti Pe Bhoja,in the Agri Business ? Simple,it is tax free,and so,is ideal for money laundering. 2ndly,the Dharti Pe Bhoja operate in those businesses,where the supplier is impotent (the farmer),the Buyer is an oaf (the user) and the GOI is absent,helpless and COMPLETELY RELIANT,on the Bania vermin.

    The Foolish Farmer

    The twit small farmer who gets loans from B,is getting the loan from the profits and cheating done by B earned FROM the conning A.The Indian State has abdicated the role of banking to farners and OUTSOURCED it to B.In 73 yearsthe nikamma GOI could not structure a MUDRA scheme for the small farmers – as B lends to A,at high ROI,and in some cases,on land/gold security.

    The farmer love for B is like state sposnored use of ganja.The farners have become addicted as B lends to A to snort ganja.

    The Financing of the Supply Chain of Bania vermin

    When B sells to C to D they sell on credit and recover only the marginal cost.With 7-15 rotations,when the Marginal Cost is recovered and there is a Profit of 100%,then they sell on clean credit ONLY to the Bania vermin.That way,the web is spread wide and far,and the compounding,is exponential

    Killing the Bania vermin

    By killing the Bania vermin,E and G will purchase from the farmers DIRECTLY.Therefore,the NSR to the farmer will OBVIOUSLY INCREASE.Farmer always has the option to sell to B,C and D.More importantly,it will force to organise and form,a co-operative and cartelise.

    The Maths

    The Potato Farmer will get Rs 10/kg as the stages of B,C and D are obviated by E and G.E and G have staff and godowns and so,they do not need B and the State Infrastructure.In any case,state infrastructure is trash.E and G will buy in clusters,all grades of Potatos, and so,the losses incurred by B.C and D of sorting,grading and storing are saved,and the farmer is also NOT Cheated.

    Since E and G have better infrastructure,the farmer purchase is free of tax (as E and G are NOT RELYING on the State) – and so,there is a saving of 8-10% therein,AND the margins of B,AND THE WORKING CAPITAL INTEREST OF B,and the Mandi losses (storage,sorting,handling etc.) – In Phase 1. The savings of E and G,will ensure that the farmer gets a price,HIGHER THAN THE MSP,paid by B to A.

    For the premium grades of Potato, E and G will pay a MUCH HIGHER PRICE to farmer – as that is where B makes the maximum margin – and so,on a basket price of all grades of Potatos,also,A will get a much higher price from E and G.In addition,the bonus and incentives paid by E and G to B for consistent quality,will ALSO go to Farmer A – and that will lead to strategic sourcing,agri hedging,partnership and technology transfer.

    Since the Mandis will NOT be used,or used to a lesser extent – the GOI subsidy and expense on the same,can be OBVIATED.and,in due Course,the Godowns and Infra in the Mandis,can be OUTSOURCED to E and G,or SOLD to E and G,THUS RAISING A ONE TIME OR RECURRING REVENUE,TO THE GOI

    More and more people will start retail cooperatives,as they can purchase from farmers,free of tax,and, at a lower landed cost – and so,the Bania chain of C and D,will face competition,and the Price to User E,will be lowered

    The Logistics supply chain will be improved,as the logistics operations of E amd G,will be at the door step,of the farmer – from the Farm Gate,to the Warehouses of E and G.


    In India,perhaps 80% of farmers realisations are of NON-MSP Crops.So the MSP debate is irrelevant.In any case,the farmer has the option to go to the Mandi to sell the MSP crop.

    The Final Solution – Dharti Pe Bhoja

    These Bania Scum – B,C and D – who are bania and brahmin vermin, and for the last 5000 years,have been looting the agri,financial and industrial supply chain.They are off the banking grid – as they lend among each otherand sell on credit – and so,Indian Banks and the State,EARNS NO REVENUE from them.The black money anc capital created by these scum from the agri chain is deployed in money laundering and all the other illegal trades in this pathetic nation.

    The SAME capital of these vermin is COMPOUNDED at several stages in the SUPPLY CHAIN to Yield a return of 1000-1500% per annum – AT THE MINIMUM.

    There is NO CONTROL on their SPECUALTION as the Nikamma Indian State has NO DATA OR CONTROL OVER THEIR STOCKS.Hence,these vermin can CREATE supply shocks, at ANY TIME that they want.

    The Time has come to EXTERMINATE THEM – they are pure SCUM.

  3. When modi came to power India, All middle class family in martury, farmers in burial ground, small merchant become a beggar, youths get no chance for a job, workers lost his job, only corporate adhani Ambani,marvadis getting 700%growth, engineering people and students selling Modi pakkoda,,😂😂😂

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