Demystifying the farmers’ protests in India

Indian farmers have been striving for changes to the farm laws for the past seven decades. Unlike in the US, Canada, and other developed countries, Indian farmers cannot sell their produce within India (to buyers in different states in India) due to poorly drafted legislation, lack of any selling platforms, and the required supply chain. As a result, for many years, they have been relying heavily on the local middlemen. Their produce is purchased by the middlemen at or a little bit above the minimum support price (MSP) announced by the government and then the middleman sells this produce at a much higher price in the open markets with zero downsides. The government of India through Food Corporations of India (FCI) purchases most of their produce at the MSP, but the middlemen can sell their farmers' produce in India or outside India at much higher prices. The new farm bills aim to change all this.

India has 28 states and 8 Union Territories, but the majority of farmers protesting come only from one state – Punjab. Given that Punjab is not even in the top 5 farming states in terms of quality of annual production and the demand of produce, yet constitutes of India’s richest farmers (per capita), it does beg the question: why are the farmers specifically from Punjab protesting?

The protests in Punjab are driven mainly by middlemen and other non-farmer entities of the supply chain because the new laws ensure that the farmers do not have to rely on the middlemen.

The MSP does provide a lot of support to the Indian farmers but simultaneously, it can be a counter-intuitive mechanism that encourages farmers to grow something and sell to the government without worrying about the quality of produce, the extent of chemicals used to grow the crop, and also whether there is even sufficient demand for their crop in the market or not.

Consequently, the farmers particularly in Punjab have been growing excessive surplus quantity of wheat and rice with free electricity, free water, and free fertiliser available to all the farmers. The electricity subsidies bill just for the state of Punjab has cost the Indian taxpayer a massive US$ 2.25 billion for the fiscal year 2020-21. Furthermore, wheat and rice produced by farmers have excessive volumes of pesticides, one of the important reasons for Punjab now having the highest number of cases of cancer in India. 

...what the government has proposed is a change that was long due and a correct step to provide full access to farmers in India

The old or existing rules are governed by the Agriculture Produce Market Committee (APMC) which operates under local state governments, responsible for ensuring farmers are not exploited by large retailers and high farm to market prices. However, it requires farmers to sell their produce only in the markets of their home state (the first sale of their farming produce should happen only in their home state). It means that if a farmer, say in Punjab, wants to sell their produce, then they must go through the middlemen who select their produce and can then sell their produce in a different state; however, the farmer is prohibited from directly selling their produce to anyone else, regardless of state. Whilst there was a time many decades ago when this rule was necessary, today it robs farmers of the freedom of choice to sell produce as they wish and subjects them to the mercy of the middlemen.

On the other hand, the new Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act allows any farmer in any state to sell their produce anywhere domestically as per the market prices. This impacts the revenue of the middlemen in the local markets; therefore, it follows that most of these protests in Punjab are led by the middlemen, however, there are also many anti-social elements supported by opposition parties trying to join the protests with their own end goals in mind.

It is also important to note that under both the existing as well as the new laws, the minimum support prices are still guaranteed by the government. This means that if a farmer sells his/her produce in a local market at IN₹ 15 per kilogram, but the minimum support price is at IN₹ 20 per kilogram, then the government will make up the difference to the farmer so that the farmer does not suffer any losses. Therefore, there can be no concerns regarding the misconception that the MSP is being removed.

Simple economics dictates that the new laws are therefore in favour of the farmers and would improve their overall economic situation. The International Monetary Fund (IMF)’s chief, Gita Gopinath, has also supported the bills stating that they would “widen the market” for farmers and that the "farm bills and labour bills are very important steps in the right direction". 

therefore, this suggests that major economies around the world simply do not believe that the new Indian farm laws are against the farmers, but the exact opposite

Multiple politicians and world leaders have also criticised the new farm bills in support of the protesting farmers, most notably being the Prime Minister of Canada, Justin Trudeau. Contrary to the buzz happening over on social media platforms as well, you would be amazed and surprised when you would try and understand the actual situation at the World Trade Organization (WTO) to see what these and some other countries are really contesting for.

At the WTO, many countries such as the USA, Canada, Japan, and the EU have filed cases against India in the WTO ironically blaming India for having laws that give too many subsidies to the Indian farmers in the form of a minimum support price. India’s minimum price support programme is under scrutiny at WTO because the EU and USA have challenged India’s subsidy policies. Similarly, many countries like Brazil have challenged India’s subsidies to farmers growing sugar cane, cotton, and wheat, in which India is one of the largest producers. India sells wheat at approximately IN₹ 19.5 per kilogram which is the most expensive in the world.

Therefore, this suggests that major economies around the world simply do not believe that the new Indian farm laws are against the farmers, but the exact opposite. 

Now you would realise that what the government has proposed is a change that was long due and a correct step to provide full access to farmers in India. This was a bill that was promised by the opposition government too back in 2013 but unfortunately was not implemented. It is a change that not only farmers and the people of India, but the entire world should appreciate for improving the lives of farmers throughout India, which represents 25% of the world’s food production.