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Indian farmers call for free markets

Indian farmers call for free markets

Context:

The Kisan Coordination Committee (KCC) has released a liberal eight-point charter of demands ahead of a meeting to be held in New Delhi of various members of the World Trade Organization.

The farmers have called for the liberalization of agriculture, the end of government intervention in the farm economy, scrapping of the National Food Security Act, direct benefit transfers to the poor, free trade in farm products and the removal of restrictions of rural land markets.

Issues:

 The subservience of the farmer to the licensed trader in the mandi system:

  • These traders collude to determine the purchasing price in a non-transparent fashion, virtually dictating terms to the farmer.
  • This hegemony can be broken by allowing private mandis and delisting farm products from the Agricultural Produce Market Committee (APMC) Act, but there has been little progress on this front.
  • The government has established e-NAM (electronic national agriculture market) to create a national market and price discovery by trading. But the platform has not been successful as there is limited intra-state and negligible interstate trade.

The excessive risk he has to bear in order to do business.

  • Government policy, through the Essential Commodities Act, restricts farmers and traders from transporting and storing their produce, in order to prevent alleged hoarding and profiteering in times of shortages.
  • The stock-holding limits preclude investments in supply-chain as the food processing and retail companies need stocks in order to shield themselves from price shocks.
  • Stock-holding allows a smooth supply of produce, reducing price volatility. Unfortunately, the Narendra Modi government started its term by bringing onions and potatoes under the Essential Commodities Act in 2014, reducing the likelihood and credibility of future reform.

The monsoon-dependent nature of farming:

  • The farmers are at a constant risk of falling into poverty and a number of measures can distribute this risk between peasants and traders.

Way forward:

For decades, despite rising production, the Indian farmer has been at the mercy of government policy, which has transformed over the years from being directed at capital formation to providing subsidies and transfers. There is a need to trust the farmer to make his choices, but that requires institutional changes that can allow price discovery and free avenues for trade.

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