Even though the six rounds of talks between the representatives of agitating farmers and the government have failed to arrive at a settlement, it is clear that irrespective of the result of this agitation, the agriculture scene will not be the same as before.
Even if the farmers’ demand for the continuation of procurement at a minimum support price (MSP) for wheat and paddy is accepted by the government, the farmers would have realised that the days of open-ended procurement will not last forever.
The three farm laws hurriedly enacted by Parliament in September would have already made it clear to farmers of Punjab and Haryana that they have no option but accept the reality of the beginning of the end of unlimited procurement.
In Punjab, the gross cropped area (GCA) under wheat is 45 percent, while the same under rice is about 40 percent. Sugarcane is grown on just about 1.2 percent of GCA in Punjab. On the other hand, the farmers of western Uttar Pradesh do not feel that much affected by the possibility of reduced procurement of wheat and paddy, as they grow sugarcane in about 14 percent of the GCA, while paddy is grown on only 17 percent and wheat on about 37 percent of the GCA. Clearly, Punjab farmers are more dependent on wheat rice cycle than the farmers of western UP.
The laws enacted in September do not touch the sugarcane growers as their produce is guaranteed to be purchased by the sugar mills at Fair and Remunerative Price (FRP) or State Advised Price (SAP). The state governments declare SAP and it is higher than the FRP. Like rice, sugarcane is also a water-guzzling crop, but for the time being it is not impacted by the three laws.
So, irrespective of the result of this agitation, from a 10-year perspective, the farmers of Punjab and Haryana will explore other crops.
Before the advent of the Green Revolution, agriculture in these areas was much more diversified and was in consonance with the ecological balance of the region. They are therefore not unjustified in believing that they switched to rice from coarse grains (e.g. bajra) and mustard etc., on the persuasion of the central government so as to provide food security to the growing population and a country facing a shortage of foreign exchange.
Now that their water table has gone down and the quality of soil has deteriorated, the Centre is seen as unwilling to extend fiscal support to the state so that the farmers can be compensated for some years for the loss of assured income due to diversification from wheat rice cycle.
However, the farmers of the two states are hardworking and know what is good for them in the long run. The area under fruits in Punjab is just 1 percent of the GCA, while the same under vegetables is about 2.6 percent of the GCA. We can expect voluntary diversification to fruits and vegetables in both Punjab and Haryana.
If the premise of an increase in private investment in supply chain actually materialises, the farmers of Punjab and Haryana are not likely to lag behind in producing high-value fruits and vegetables. With an increase in investment by the Centre and the two states in creating a required post-harvest infrastructure for perishables, as was done for food grains through the setting up of the APMCs and warehouses, the process of diversification can be accelerated.
Punjab has a slight locational disadvantage as the transportation cost of perishables to large markets is higher as compared to areas in Haryana which are nearer Delhi and other big cities of adjoining states. A natural market for high value agricultural and horticultural produce of Punjab would have been the countries of Central Asia, but the road route for export from Punjab is not open and transportation by air is too expensive.
One side effect of this diversification, over the next 10 years, will be on rice exports from India. In 2019-20, India earned $4.3 billion from the export of basmati rice and $2 billion from the export of non-basmati rice. This year the exports are likely to be higher as several countries are importing more rice due to COVID-19. Both Haryana and Punjab have attracted private investment in ultra-modern rice mills and export-oriented supply chains. Over the next 10 years, further investment in this sector is likely to go down. It will also adversely impact employment.
Another option for the two states will be to switch from rice to pulses and oilseeds. At present, the productivity of pulses and, therefore, income from their cultivation does not match the same from rice. There is an urgent need to invest in research so that higher productivity can be achieved for both pulses and oilseeds. This is necessary to protect the income of farmers.
It is quite possible that the corporates will purchase pulses and oilseeds from farmers at MSP (or even higher prices) as they will not be constrained by the draconian provisions of the Essential Commodities Act. Inflation management will, however, remain a challenge for the government as it cannot intervene unless there is a 50 percent rise in prices of non-perishables over the previous one/five years. For this to succeed the government will have to ensure that imports are not cheaper than the MSP.
All in all, the enactment of three laws by Parliament, without a 10-year roadmap into the future, has exposed the farmers, especially those who are used to selling their crops at MSP, to market forces. The experience of farmers by diversifying to maize has not been successful due to low market prices as compared to the MSP of maize.
A support system in the form of direct income support to these two original Green Revolution states is needed for the next 5-10 years. This can make the transition and diversification smooth.
Finally, one hopes that the government will follow a consultative approach, for future reforms in the sugar and fertiliser sectors.