Revolutionising the Agricultural Sector?

The farmers’ protests are not new news to us. You, me, the citizens of this country and people around the world, saw what is possibly the largest protest modern history has seen. But while the urgency and “hype” around it left social media as fast as it came, the farmers continue to fight for their livelihoods. As the country battles the second wave of the pandemic, the health care system is coming dangerously close to a shattering collapse. Keeping that in mind, it has to be noted with utmost importance, that if the farmers continue to gather in massive crowds to protest these laws, knowing the severity of the pandemic, then the laws and the government that passed them, are deadlier to the farmers than the virus itself.

Let’s take a closer look as to why.

Essentially, the 3 laws are a large step towards the privatisation of agriculture. While the Produce Trade and Commerce bill allows for the famers to directly sell their crops to big corporates, the Agreement on Price Assurance and Farm Services bill states that farmers can get into contractual agreements with buyers. What this does is assures that the farmers will be fully aware of all details before the harvest and cultivation even begins. Lastly, the Essential Commodities bill removes certain crops from the list of essential commodities with the aim to assure private investors that no excessive regulatory behaviour would occur and interfere with their business operations. These laws are meant to be revolutionary for the agricultural industry and more importantly for the Indian economy.

But since when has innovation and revolution in economic ideas equated to the worn out process of privatisation?

Now, a short recap on grade level economics. Agricultural goods are considered necessities are relatively inelastic in nature. For-profit firms almost always favour inelastic goods for the very reason that as they hike the prices, demand will only slightly waver, and their revenue and therefore profits, will continue to grow. The conflict is in the idea that since agricultural crops are necessities, not only will a rise in prices be regressive for the consumer, but it would not benefit the producer directly either. The most preferred way of increasing profits apart from raising prices is obviously reducing costs. For large companies to make the most profits, they would have to cut their streams of expenditures which in the situation created by the laws, will be the dues that the farmers must receive.

Whether this is in contracts or in the direct sale, the large corporates such as Reliance, which are known to be building their Agri-Tech businesses, very clearly have the upper hand. The minimum support prices offered previously and the way the agriculture sector is currently running, both have not been the best. Thus, it can be inferred that financial literacy would be lacking among these farmers, especially in comparison with the large firms that carry years of exploitation on their backs. It would be safe to assume that with the objective of cutting down their own costs and making the most profits, conglomerates would not shy away from taking advantage of this discrepancy. Extracting the highest yield of crops from farmers which would amount to excruciating hours of labour, for the least amount of pay to be given to them is not something we haven’t seen before. This is exactly the kind of exploitation the farmers know will detriment them and are thus opposing of the laws.

While a statement on the bill’s intention was given on how it will help create a positive environment for farmers, it only sounds superficial at best.

The essential commodities bill is also centred around the comfort of private firms and their ability to go about operations without much government intervention. While a statement on the bill’s intention was given on how it will help create a positive environment for farmers, it only sounds superficial at best. While the bills are meant to demonopolise the APMC and remove it as the middle man between the transactions, what they will actually do is replace that body with retailers and the large firms. These will then essentially become the monopoly that was replaced. Even with the promise of opening the industry to many private firms and retailers for “healthy competition,” this monopoly will restrict exactly that. It need not even be done on purpose because the sheer largeness of firms like the Adani group or Reliance would deter away any new entrants into the market. The barriers that come along with monopolies and oligopolies are often aggressive through branding, taking over, and even in illegal practices. But, these barriers can also be the economies of scale that such firms can and already have achieved. Since smaller firms would have yet to do so, many of them would either stray away from the market, exit the market soon enough, or shut down entirely. In these cases, even if a farmer wishes to to sell to the small retailers that would expectedly treat them fairly, they still wouldn’t be able to do so. Apart from small retailers, farmers can also sell individually. However, this also doesn’t work in their favour, because now their direct competition is the monopoly itself- which has them beat in every logistic aspect. At the same time, as price competition would have it, since consumers wouldn’t like to pay more either, large firms have enough margin to price the final good low enough such that the farmers’ individual prices seem unfair. This leaves them with two options, to sell to their competition- which has its own disadvantage, or stop earning enough to support themselves and their family. This also applies to those that continue to sell to APMCs with the minimum support prices, which, though have not been eliminated, have not been explicitly stated in any of the bills either. With the new allowances, and no mention of the MSPs which get re-decided every year, there is a very small margin for farmers to actually utilise the MSPs or continue selling to the APMCs.

It is important to remember that there are faded lines in the question of what is dominance and what isn’t, in a market.

Though the Competition Commission of India has established the competition act of 2002, it also has a history of being swayed by the very large corporations in the picture right now. When it moves in their favour, it makes way for the anticompetitive behaviour these firms are looking to conduct. There’s a reason it is believed that Reliance owns almost 90% of the Indian agri-tech industry. On that note, it is also important to remember that there are faded lines in the question of what is dominance and what isn’t, in a market. Though it may be strikingly clear through observation, at a closer look, minor technicalities are where companies, and the regulatory bodies that are influenced, can find loopholes for denial. Overlapping responsibilities of the CCI and other regulatory bodies also causes confusion and grey area, and therefore many times anticompetitive behaviour is left as it is.

An example of a similar situation was seen in Reagan’s America. The Sherman Antitrust Act introduced in 1890 was meant to prevent monopolies in the poultry industry. However, the Reagan administration amended it to accommodate for relaxations under the ruse of “promising to lead to greater marketplace ‘efficiency.’” As a result, by 1995, the department of justice filed 126 cases against 73 corporations with a total of $59 million in fines. After being alerted, these corporations changed their tactics to move around the antitrust laws. This was detrimental only slightly for the corporations, in comparison to the farm and cattle owners that suffered from poor treatment.

While the central government of India has kept the bills on hold, the farmers are not satisfied, and rightfully so. For laws meant to be for the farmers, they sure weren’t inclusive of them. We know the agriculture sector in India needs amending, but this definitely was not the way to do it. The prime minister and the government of this country have the shivering health care system, the 2nd and 3rd waves of the virus, vaccination drives, and most importantly, the central vista project to focus on. It would be wise to repeal the laws the in their entirety, and make future plans to redraft them WITH the farmers, while simultaneously working on the CCI and regulation reforms.

Until then, doing their part in protecting the citizens of this country, in health and in work, is the very least this government can and should do.