No matter how much public attention the issue gets, the appetite for detailed engagement with the challenges and possibilities of regulating India’s agricultural markets only seems to diminish by the day. Instead, the arguments on both sides keep returning to two states—Punjab and Haryana; two crops—paddy and wheat; two interventions—APMC mandis and MSP; and one ultimate binary—State control versus free markets. While all the attention is focused on the demand for MSP and remunerative prices, many of the other critical issues that farmers’ organisations have now brought to the table should be of serious concern to all those who view better regulated and more competitive primary agricultural markets as essential for agricultural growth and development in India.
Over the last ten days, we have witnessed extraordinary scenes, as a set of central laws with the stated objective of facilitating the free and unfettered inter-state trade of agricultural produce, gave rise to a situation where the State itself erected massive, physical barriers to prevent farmers— the producers — from reaching New Delhi to protest the laws and place their demands. Farmers responded to the Narendra Modi government’s legislative bulldozers with the unrelenting thunder of their own tractors, laden with rations and supplies for the long haul. They were greeted with water cannons, tear gas, ditches, barbed wire and lathis, and accused of being ignorant, confused, herded, pampered, politicised, violent and secessionist. They responded with langars, press conferences, prayers, pop songs, silent protest and clause-by-clause written responses to the three farm laws.
By the end of the third round of ongoing talks between farmers’ unions and Union ministers this past week, Agriculture Minister Narendra Singh Tomar publicly acknowledged the exceptional conduct of the farmers’ movement.
That the Modi government has finally expressed a willingness to review and amend certain key clauses in response to the concerns raised by the farmers’ organisations is a testament to the reason and power of the farmers’ mobilisation. But the bypass and bulldoze approach to reform thus far seems to have broken trust in the process and raised too many fundamental questions about the intentions behind the three laws. The farmers’ organisations have insisted that nothing short of a full repeal will be acceptable.
Whatever the outcome, these negotiations are an important opportunity for us to re-look at the critical elements of regulatory design and capacity that are all too often ignored until too late. And here, we have decades of regulatory reform experience that could help us return to the principles, processes, institutions and investments that are all needed to support and sustain well-regulated agricultural markets that work for India’s farmers. Consider the vexed issue of licensing and registration.
Deregulation vs better registration and licensing
Under the new law, the only documentary requirement to engage in trade with farmers outside state-regulated market yards or existing private sites licensed under state marketing acts, is the possession of a PAN card. As has been pointed out before, this is not linked to any other system of verification or oversight, so it is somewhat unclear why it is required at all. The law does leave open the possibility that the central government may prescribe a system for electronic registration of traders and other trading modalities if it deems this necessary and in the public interest at a future date.
Given our experience with convoluted regulations, one can sympathise with Narendra Singh Tomar when he stated after a round of negotiation, “We wanted to make law simple.” One also understands the frustration against and phobia of any kind of registration and licensing regime, especially given the well-known strategies that powerful local traders and market functionaries deploy to keep competition out of the local market. But even so, the decision to opt for this degree of deregulation is deeply problematic.
Far from providing well-regulated markets for farmers, it legalises the vast existing unregulated trade in agricultural produce and ensures that any currently licensed trading firms who decide to move their business to the new free trading areas will also enjoy greater invisibility. A similar mention, without any requirement or specified mechanism,is made in the case of a price information and market intelligence system. Again, as with registration, it is left to the central government to cover all traders, trading areas and transactions across the length and breadth of India if it considers this required.
This is of course not the first time that private procurement and trade is being enabled outside mandis. According to a report of the Standing Committee on Agriculture (2018-19),as of June 2018, 22 states had already amended their state acts to enable the establishment of private markets, direct marketing and the granting of a unified single trading license. But, up to this point, while it was clear that licensing and registration reform is critical and that the regulatory powers should be separated from the Agricultural Produce Marketing Committee (APMC) mandi and Mandi Board to avoid conflicts of interests, there was no case being made to do away with such basic systems completely. In fact, registration and a state unified license are central elements of the Centre’s flagship eNAM scheme as well. But since both price discovery (via electronic auctions by interlinking mandis) and payment and settlement processes are core processes for eNAM, it was fully understood that sound registration and licensing systems, are an essential, not optional, part of the market architecture.
Invisibilising agricultural trade
Instead of learning from the various state reforms and the eNAM experience thus far to improve regulatory design and systems going forward, this law makes the confounding decision to drastically deregulate, fragment and invisibilise agricultural trade. It means that under the new law, farmers will not have the safeguard of knowing that the PAN-wielding buyer has been even minimally registered and verified or have access to timely and updated price information in the trading area. The Essential Commodity Act amendment, which lifts all stock limits on agricultural produce, also does not take simultaneous action to require even minimal reporting on inventories. In the process, traders, especially larger private buyers operating in these markets, now get cover.
For millions of farmers, this is in fact, the status quo. But, given that the stated goal is to have well-regulated and competitive markets, it is a regressive direction to have chosen. Either, one must conclude (as farmers have) that the laws are indeed in the interest of large corporates and it is a familiar story, wherein persistently unequal markets such as in agriculture, de-regulation is really re-regulation in favour of capital. But, perhaps this is a case where the singular preoccupation of getting around the troublesome federal territory of state marketing acts, has inevitably led to the bypassing of the first principles of market regulation in the first place. Perhaps it also reveals something about the status of messy, physical agricultural exchange involving poor, small farmers in the imagination of our law and policymakers. It is impossible to imagine a futuristic vision for drastic deregulation of the stock exchange and financial markets being met with delight and optimism.
The farmers’ protests are a powerful reminder of the grave risks of bypassing legislative consultation and consensus building in a complex state subject and vital livelihood system involving many, diverse stakeholders. They also point to the dangers of declaring that new laws will have sweeping and transformative impact without explicitly articulating a larger vision for Indian agriculture and detailing how plans for different, yet deeply interrelated State interventions will work with market reforms.
As a result of their negotiations, the issue of registration and other critical and related concerns have now surfaced as possible amendments. It would be easy to view them as concessions to soothe the anxieties of some agriculturalists. But each of these aspects—and agricultural marketing laws as a whole—need to be re-examined keeping in mind the basic principles, processes, investments, and institutions essential to create the robust and supportive regulatory architecture that agricultural markets in India actually need.
Mekhala Krishnamurthy is Senior Fellow and Director of the State Capacity Initiative at the Centre for Policy Research and Associate Professor at Ashoka University. Views are personal.