On the farm bills: Farmers forming cooperatives will be able to negotiate better prices on their produce
It is a well-known fact that the young among farming communities are not interested to take up farming as their livelihood. Census 2011 indicated that 2,000 farmers give up farming everyday, even though agriculture continues to be the mainstay of the majority of the Indian population.
It is interesting to see the polarisation in the country with respect to the recent farm laws. It is necessary to ask why farmers and their unions from most of the states such as in south India, northeast and east India, and other parts of the country except Punjab, Haryana and western Uttar Pradesh, are silent on matters such as the dissolution of the mandis, possible withdrawal of minimum support price, and entry of corporates in farms.
At the all-India level, marginal and small farmers who operate less than or equal to two hectares of land together comprise 87% of all farmers. Needless to mention here that the farmers are enumerated based on the land they operate, which is different from the land they own. Interestingly, there exists a wide inter-state variation in the distribution of farmers under marginal and small farm categories.
Of those in the marginal and small farmers category, 62% are in southern, eastern and northeast Indian states, the highest being in UP (15%, mostly in eastern UP) followed by Bihar (11%). The lowest number of farmers under this category has been reported in Punjab and Haryana, only 1%. Almost all farmers under this category in most of the states are debt ridden.
They borrow in various forms to meet their immediate cash flow in an uncertain situation (eg crop failures, medical needs, marriage, death in the family etc). The farmer-debtor is generally required to repay the debt right after the harvest is in. This means that the farmer is trapped in a regressive market mechanism in two ways.
First, with no other means to repay the debt, the farmer is forced to sell the product immediately after the harvest quite often to the creditor or the creditor’s agent, probably at a pre-arranged price or in pre-decided quantities. Second, the sale of crops immediately after the harvest means that the farmer-debtor probably receives less than what they could have obtained at a later point in time when the market prices stabilise.
Farmers, and mostly marginal and small farmers, borrow much larger amounts on average from commission agents or traders than workers do from employers or tenants from landlords, or those who have no other dealings with their creditors. Moreover, links between credit and output are the strongest in the small farmer dominated areas.
At the local level the structure of the market is oligopolistic, ending up in less bargaining power for the small farmer. Besides, the MSP hardly matters for small farmers due to their inability to participate in a distorted market. Farmers from Punjab, Haryana and western UP, however, are the real beneficiaries of government support.
It is a matter of debate if interlinkages ought to have been created prior to introducing the farm laws, as it is important to create an efficient supply chain by developing a closely knit network of farmers through cooperatives. This will have the benefit of farmers being able to negotiate a mutually favourable price point for their produce with the traders. Without such measures, the implementation of the laws may be inadequate and lead to weak execution on the ground. The implications could be harsher not only for distribution but also for production in the long run in southern, northeast and eastern Indian states.