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The Three Bills

A quick summary of them given what we learned so far.

1. Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020

2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

3. Essential Commodities (Amendment) Act 2020

I won’t repeat what is said in them here, and so you are encouraged to read them yourselves if you have not already

[1]⁠

. Instead I will briefly comment on each one.

The first bill is just opening up options for farmers, and can hardly be an issue to complain about. In fact, much of this opportunity to trade outside of government mandis already exists. The resistance was instead directed towards the idea of getting rid of these mandis altogether. Whilst this bill makes no mention of abolishing it, it does set the ground for a future removal of that system. The farmers concerns here a definitely valid even if this wasn’t explicitly mentioned, since the rapid introduction of these bills in general, without warning perhaps didn’t inspire any confidence that an approach to phase out the relied upon mandi system would be any different in terms of pace.

The second act aimed to introduce a national framework for agricultural contracts including a three-level dispute mechanism. On the surface, this also sounds reasonable however given the states track record in matters of justice, caution must be taken to any solution including their involvement. Given also the fact the states independence on these issues are compromised via corporate political activity, any unbiased judicial process involving the state seems far-fetched.

The third act removes state imposed restrictions on the stock piling of certain crops and grains. However, if the prices rises over 100% or 50% for non-perishables, then stock limits can be reimposed. There is some disagreement about the level of price increases being too high for this to be relevant at all. However, in terms of economics the worst way to solve an increase in prices is to artificially restrict the supply further or confiscate stocks for manual distribution as this would only disincentivise the further production required to bring prices back down naturally.

If the fear is that by removing stocking limits, companies would just restrict the supply themselves and cause the prices to rise, this fails to consider some crucial factors. Those companies would have to forgo income from selling their stock and bet on prices rising in the future high enough to offset the costs of storage. If there are only a few companies that are allowed to stockpile, then this would indeed be a valid concern. However, if the right for anyone to stock grains or produce is assured (including the farmers themselves), then this risk is drastically reduced since the supply would not be constricted into so few entities. If one hoarder is restricting their supply, people would just go to someone else. They cannot forcibly restrict the supply of others in a cartel-like structure when there is ample opportunity for competition to come in and offer these resources instead. Instead of a few firms to collude with, they would have to convince thousands to comply with their strategy for it to work (including the farmers themselves).

Although largely overlooked in the discourse around this bill in particular, the clause around regulation of the food supply in “extraordinary circumstances (such as war and famine)” is also worthy of scrutiny. As the saying goes, “if you let the state break the law in an emergency, they will create an emergency to break the law”.

Now initially, anyone with even a basic understanding of economics would notice that these are actually quite positive and aim to remove state intervention and promote economic freedom for farmers. And this is true; that is indeed what these laws would do IF India was in the correct position to adopt them. However as discussed above, India is not ready for these sorts of policies to come into effect just yet. Much needs to be done before getting to this condition. For example, if the state is removing barriers for farmers to transact freely in the private sector, this is in principle great. However, if that “private” sector is dominated by state-backed monopolies, then this reform is superficial. It is merely the state changing its clothes. It can’t even be called privatisation since as discussed previously, the private entities lose their private status when they collude with the state to stifle the free-market competition these bills claim to promote.

However, with that said many of these proposed ‘reforms’ already were in effect and should have been guaranteed by the law anyway. Likewise, we shouldn’t be blinded to some of the positive aspects proposed in these either (for instance, the removal of excess state fees outside of designated trade areas). A balanced view must be taken if we are to accurately assess potential solutions.

On one hand, the protesting farmers have legitimate concerns about this, and on the other hand the implementation of free-market reforms may indeed lead to positive change in the long-term, even if the short term is rough. However, the short-term will only be abrasive if the government pushes in reforms at the wrong pace, and without the correct pre-conditions. Implementing some of these things and opening up a state-reliant agriculture industry to the so-called ‘private’ sector overnight in the current state of India would likely by a disaster for many in the short term, and it is preventable if only a more Azadist approach is taken to gradually phase in economic freedom over time.

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Endnotes

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[1]⁠

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Bills:

The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (prsindia.org)⁠

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The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 (prsindia.org)⁠

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The Essential Commodities (Amendment) Bill, 2020 (prsindia.org)⁠

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Link:

The Three Farm Bills | The India Forum⁠

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Raw: https://www.theindiaforum.in/article/three-farm-bills

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Bunga Azaadi — Institute for Azadist Studies

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