Posts Tagged ‘Constitution’

15 Dec

Farm Laws: Good Economics, Bad Politics

Posted by vramani in agriculture, government, Innovation, political economy, public affairs, public policy. Tagged: , , , , .

“The road to hell is paved with good intentions”. This saying sprang to my mind once the three Farm Bills were rammed through Parliament, with the opposition not even being given the parliamentary freedom to have its say in the Rajya Sabha. The absence of collegial decision making seems to be the signature tune of the present central government, as I have had occasion to bring out in an earlier blog (see here). Starting with the enactment of anti-beef laws in different states and moving on through demonetization, triple talaq, Kashmir, CAA, COVID lockdown, labour laws, farm laws and now ‘love jihad’ laws, the governments of the ruling party at the centre and in states ruled by them have relied on legislative majority, Prime Ministerial 8 PM pronouncements and the Ordinance Factory route to push policy down the throats of the citizenry.

The three bills focus on (a) freeing private entities from the oversight and jurisdiction of the Agriculture Produce Marketing Committee (APMC) in respect of transactions outside the APMC market yard area, with no licences being required from and no fees being payable to the APMC; (b) easing up the Essential Commodities Act to allow for far greater price variation in commodities before state restrictions on prices kick in; (c) providing for direct contractual arrangements between farmers and private entities. On the face of it, these measures seem to be exactly what are required to free the agricultural sector from the clutches of exploitative middlemen, ensure a fairer deal for the farmer in terms of better prices for his produce and encourage the growth of entrepreneurship to promote innovation and investment in the farm sector. Why then have these “reforms” attracted so much ire from the farming community, leading to a virtual blockade of the national capital?

It would be easy (and the lazy option) to dismiss the present turmoil as a political gimmick, sponsored by vested interests who stand to lose from the reforms process. Deeper reflection would, however, reveal the inadequate homework done by the authors of these three bills on critical issues, with the lack of clarity sowing major doubts in the minds of farmers. Though it might appear on the face of it that the agitation is largely driven by the interests of the better-off farmers, the issues that remain unresolved need to be squarely faced as they will raise their heads in the years to come and continue to act as flash points for farmers’ discontent.

The future of Minimum Support Price (MSP)

The first issue that has reverberated over the past couple of months has been the future of the MSP. While this has largely been operative only in respect of the two major cereals, paddy and wheat (and, to a far lesser extent, in respect of some other crops), the farmer is apprehensive that the move to a “free trade area” outside the APMC and the entry of contract farming on a large scale in the days to come will sound the death knell of the MSP. While the Government of India has been at pains to stress its commitment to retain the MSP in the future, it has not spelt out its strategy in respect of the MSP in an environment where there is extensive private entity-farmer trade, with prices being determined by direct negotiations between the farmer and the private party. This issue assumes importance especially in a set up where there is an unequal relationship between the farmer and the purchaser of his produce. If there are just two or three big oligopsonistic buyers, there would be grounds for apprehension that, sooner or later, the few buyers could start dictating prices to the farmers. In the absence of a trading licence system and the lack of institutional oversight by the APMC or any other regulatory body, the field would be open for the entry of any oligopsonistic private entity to attempt to dominate the market on its terms. The dilution of the stocking limits in the Essential Commodities Act can also justifiably give rise to fears in the farmers’ minds that end-buyers (read large corporates) will build up stocks to drive down agricultural product prices. At that point, the farmer would expect the government to step in and guarantee purchase of his produce at the APMC at a price that meets the cost of production plus a markup for profit. The legislation, as it stands at present, is silent on this eventuality.

The MSP system needs to be remodelled over time to achieve a much greater diversity in the crops procured, from millets and maize to pulses, oilseeds, horticulture and cash crops. This is essential if the huge surplus stocks of rice and wheat in Food Corporation of India (FCI) godowns are to be reduced. Not only does this increase the financial burden on the Government of India of paying the FCI for these stocks, it also increases wastage percentages. Reducing the incentive to grow water-guzzling, input intensive paddy in states like Punjab and Haryana is also crucial to checking environmental degradation, reflected in the deteriorating soil quality and depleting groundwater levels in these states. It should also not be forgotten that the MSP will have an important role to play as long as government has to guarantee the supply of foodgrains through the public distribution system (PDS), with the FCI as the prime supplier to the PDS.

Marketing issues (including price discovery)

Mandi/APMC related prices play an important role today in fixation of the price at which trade takes place outside mandi/APMC areas between farmers and traders. There is little clarity on how price discovery will take place in future in direct contracts between traders/sponsors and farmers, where there may be few buyers and a vast body of sellers. Realisation of a price that is fair to the farmer presupposes availability of price information and the ability to source the buyer who can offer the most favourable price. This requires the presence of a well-developed electronic marketing network, as envisaged by the announcement of the e-National Agricultural Market (e-NAM) system in the Budget of 2016-17. The e-NAM drew on the Rashtriya e-Market Services Private Limited (ReMS) initiative launched in Karnataka in 2014, which has been analysed in a November 2016 paper by researchers of the Indira Gandhi Institute of Development Research, Mumbai. Their study reveals three major areas where reforms are essential if a thriving national e-market for agricultural products is to flourish: (a) a legal framework which supports a platform for agricultural transactions across the country; (b) incentives to all stakeholders — farmers, traders, commission agents, mandi/APMC officials and others who are part of the agricultural marketing ecosystem — to participate in the new electronic platform at locations across the country; and (c) development of physical and financial payments infrastructure to facilitate seamless real-time trading across multiple locations.

Unless APMCs/mandis act as countervailing centres to forestall efforts to dictate prices of agricultural commodities through the more powerful bargaining position of a few buyers, farmers would be placed in a position where they are compelled to accept not so favourable prices. But this requires vibrant APMC/mandi centres fully linked to e-NAM, so that farmers have a ready alternative site to sell their produce in the event they are not happy with the terms offered by private buyers. Governments, especially at the state level, will need to invest in physical and financial infrastructure in terms of many more APMCs/mandis, facilities to grade produce, accurate weighing, quick delivery and easy online payment to attract farmers to the APMCs/mandis. Winding up APMCs does not promote a flourishing trade in agricultural products, as the experience of Bihar, which abolished APMCs in 2006, amply shows. Opposition from traders and commission agents, who stand to benefit from opaque transaction systems, will need to be effectively countered by assimilating them into the new marketing process.

Regulation and dispute resolution

The provisions for regulation and dispute resolution in the new laws are woefully inadequate. Conciliation and adjudication of disputes between seller-farmers and buyers have been brought solely within the jurisdiction of the executive magistracy. As one who has functioned as an Executive Magistrate during his career in the civil service, I can safely assert that the Executive Magistracy does not have the requisite knowledge skills to adjudicate on commercial disputes. More disturbingly, this responsibility comes on top of multifarious responsibilities already cast on the executive magistracy. Even with the best of intentions, cases are going to pile up in their courts. The absence of alternative avenues to redress grievances through the judicial system will not only adversely impact the rights of farmers but is also, in my view, a violation of the fundamental rights guaranteed to every citizen under part III of the Constitution of India.

The absence of a regulatory framework to oversee the proper conduct of transactions between buyer and seller will also, without doubt, affect the weaker side, clearly, in this case, the farmer. The uncertainty caused by prolonged litigation will have its deleterious impact on agricultural investments and will contribute to significantly weakening the bargaining position of the farmer.

What should the Government of India do to restore farmer confidence?

The quotation with which I began this blog in effect means“…promises and plans must be put into action, otherwise they are useless”. The Government of India (GoI) needs to:

first, repeal the two Farm Acts and the amendments to the Essential Commodities Act;

second, come out with a White Paper listing the issues that are crucial to the success of farm reforms, especially the backward and forward linkages that will enable the farmer to access the marketplace as an equal. These include availability of credit and insurance, easy access to efficient markets and a legal framework that honours contracts promptly;

third, give a guarantee that the APMC/mandi system will continue on the same basis as before the enactment of the Farm Laws;

fourth, involve all stakeholders in discussions on the future directions that the MSP and procurement should take, especially in relation to changing cropping patterns to both meet nutrition needs of the population as well as to tackle the growing ecological degradation caused by rampant overuse of fertilisers, water and power, with its attendant implications for high-cost agriculture;

fifth, while meeting the food requirements of the population, notably its vulnerable sections, through the PDS, work out mechanisms to ensure a fair deal for the farmer as well, without taxing the government budget to breaking point;

sixth, consult with state governments on a subject that falls squarely within the State List in Schedule VII of the Constitution of India. The GoI could possibly incentivise the adoption of these reforms in different states, starting with those states where its party is in power. The demonstration effect of successful reforms can then percolate to other states.

In the final analysis, I have to come back to where I started this blog. The present government at the centre has, in the recent past, pushed through too many measures without adequately consulting stakeholders or taking the advice of those who have the benefit of years of experience of working in those areas. The damaging effects of such unitary approaches not only sow distrust about the intentions of the central government in the states ruled by opposition parties and in the population at large, they also adversely affect the lives of millions of people. It may be good politics in the short run (from the viewpoint of the ruling party) but it leads to disastrous economic, political and social consequences, in the short, medium and long term, for the country. The government at the centre now needs to talk the walk (i.e., discuss before framing policy) since its approach hitherto has been to walk through without talking.

16 May

A sense of déjà vu

Posted by vramani in elections, government, irony, political economy, public affairs. Tagged: , , , , , , .

“Plus ça change, plus c’est la même chose: The more things change, the more they stay the same.” I am rather fond of using this phrase, but only because the same patterns keep recurring like bad dreams in one’s life. The Karnataka state assembly elections have come and gone and we are back again to Ground Zero. The electorate has once more, in its wisdom, chosen not to anoint any one party as the clear victor, leaving the space open for fun and games. The ball is now in the court of the Governor of Karnataka to decide whom to invite to form the government. Sauce for the BJP goose is not going to be sauce for the Congress gander. No party is likely to emerge pristine white from this exercise over the next couple of weeks. The Congress missed the bus in Goa and Manipur in 2017, despite being the party which won the largest number of seats. It was not even invited by the respective Governors to form the government. Instead, the BJP was allowed to cobble together a motley assortment of partners and stake its claim to form the governments in these two states. At that time, the Congress went blue in the face screaming about the shenanigans in government formation and how its claims were ignored. Today, the same Congress is ready to go in for a shotgun marriage with the Janata Dal (Secular) (JD(S)) to hang on at least indirectly to power, even if it means ceding the king’s throne to its junior partner. Not that the BJP is any better. The same party which went hell for leather to seduce its partners last year is now sanctimoniously quoting the constitutional scriptures of the Governor being duty bound to invite the party which has won the largest number of seats.

As if this were not enough, we are left wondering how the numbers game will play out. Given the role that Governors have played in recent years, we need not be overly surprised if the Governor does indeed invite the largest party, the BJP, to have the first go at government formation. With 104 seats in the legislature, the BJP will need seven more legislators to support it when it has to prove its majority in the house in the near future. Partial support can come from three legislators, one of whom is an independent and two from smaller parties. But to win the trust vote, the BJP will still need to ensure that its 107 supporting legislators constitute 50 percent of the number of legislators present and voting. Presuming that the opposition parties issue a whip on the vote, the only way the BJP could win the trust vote would be for five or more opposition legislators to either absent themselves altogether or abstain from the voting process. To prevent such moral (and not so moral) suasion from occurring, the only way out for the Congress-JD(S) would be to sequester their flock at an appropriate location and produce them fresh and ready at the time of the trust vote.

Let us presume for a moment that the BJP loses the trust vote or that, wonder of wonders, the Governor actually invites the Congress-JD(S) to form the government and prove its majority. Even then, the Congress-JD(S) have to ensure that some of their legislators do not jump ship by resigning from legislatorship and introducing uncertainty regarding the future of their government. The memories of “Operation Kamala 2008” must still be touching a raw nerve in these two parties.

So, the resort to resorts will continue. As an old Maharashtra hand, I still remember vividly the coup attempted in 2002 by the BJP-Shiv Sena against the Congress-NCP Vilasrao Deshmukh government in Maharashtra. The Congress legislators (and some independents) had to be spirited away from Maharashtra to a resort on the outskirts of Bengaluru. That Bengaluru continues to be the favourite last resort of the Congress was proved yet again in 2017, when 44 Congress legislators from Gujarat had to be housed here prior to Rajya Sabha elections to prevent them succumbing to the insidious charms of the BJP. History is now set to repeat itself yet again: do you wonder now why I find this exercise repetitive and not a little nauseating?

Actually, the entire Karnataka election process followed the time-honoured pattern. All parties fell over each other nominating candidates with dubious track records, many having criminal cases pending against them. No candidate from the three major political parties campaigned on the specific plank of addressing issues germane to the electorate, whether these related to agriculture, law and order, food security or health care. In any case, the healthy yesteryear habit of house to house campaigning has long been abandoned; in the current elections, probably only the AAP and Swaraj India candidates adopted this approach. Cash, liquor and other freebies are rumoured to have been freely distributed to win votes.

I am not one of those who subscribe to the view that state funding of elections is going to cleanse the Augean stables of electoral corruption. With governance processes still hugely dependent on discretion, and distribution of scarce resources — land, housing, licences, contracts, etc. — centrally controlled by the politico-bureaucratic nexus, elections to political bodies, whether at central, state or local levels, represent the pathway to self-aggrandisement and enriching one’s clan. Making local area funds available to elected representatives has only enabled distribution of patronage to a larger group of cronies. Even moving to a system of proportional representation will not solve this problem: the same worthies will find place in the lists of all political parties.

A change for the better will be possible only when:

  • Elected representatives at the central and state levels confine themselves to enacting legislation and lobbying for public/private projects in their constituencies rather than having any direct role in disbursing patronage in the form of funds or other scarce resources;
  • The 73rd and 74th amendments to the Constitution are implemented in letter and spirit and financial and administrative powers are genuinely devolved to rural and urban local bodies;
  • Patronage at ministerial level, especially in the state secretariats, ceases;
  • Strong anti-corruption ombudsman structures at the centre and in the states, with powers of investigation and prosecution, are created;
  • Corruption cases are fast-tracked and completed within two years of institution so that the fear of early retribution exists, especially in the political class;
  • Inner-party democracy is made mandatory through legislation, so that political parties cease to be the fiefdom of individuals and families.

I am not sanguine about good sense prevailing on our political representatives to implement the above reforms. Till such time as these come about, we will continue to be “entertained” by political drama. To paraphrase Marie Antoinette “If they don’t have jobs, let them have circuses.” O Tempora! O Mores!