Farm Laws 2020

 It is not just about minimum support prices but also about the survival of the entire system of public  procurement and distribution of food grains which, despite its drawbacks, continues to provide a modicum of food security to vast numbers of our population.

Threat from Northern industrial countries: 

• Northern industrial countries, namely the US, Canada, EU cannot produce the tropical and subtropical crops in high demand because of climatic reason while they have mountains of surplus grain and dairy products, and they require export markets for these.  For over two decades, they have put relentless pressure on developing countries to give up their own public procurement systems, insisting that they should buy their food grains from advanced countries, while diverting their food crop producing land to contract farming of export crops that these industrial countries want but cannot produce.
• Dozens of developing countries including Philippines(mid 1990s) and Botswana (Africa mid 2000s)  give up their PDS and 37 newly import dependent countries saw food riots, with urban population being pushed into greater poverty as food grains in US diverted for Ethanol Production.

there is an increasingly powerful opinion advocating ‘green energy’ in advanced countries, pushing for even greater conversion of grain to ethanol; hence initial low priced grain imports, if permitted today, will not only destroy our farmers but will soon give way to a scenario of price spikes and to urban distress as experienced earlier by developing countries forced into import dependence.

Food Security Concern :

• Procurement prices were raised substantially after virtually stagnating during the six years preceding the 2008 price spike, and grain output in Punjab grew again from near stagnant levels as economic viability improved.  But absorption of foodgrains did not improve as much owing to continued exclusion (error) of many of the actually poor from ‘Below Poverty Line’ ration cards, while unemployment caused by the 2016 demonetisation followed by the 2020 pandemic has reduced aggregate demand by now to a historic low.

• the Agreement of developed countries on Agriculture is‘not subject to reduction commitments’. India along with other developing countries signed the Agreement with very little idea of the implications of the small print. For the U.S.,  provides the direct cash transfers ( converted from price support measures during mid 1990s ) to its 2.02 million farmers, amounting to a huge half or more of its annual farm output value, uses up only 1% of its budget. For India, over 50% of the entire central government annual Budget would be required to give even a quarter of annual farm output value to our 120 million farmers, which is an economic impossibility and an administrative nightmare.

• While depletion of groundwater in Punjab is a real problem, the solution lies in introducing improved agronomic practices such as the System of Rice Intensification which economizes water and not reduction in rice production.

Litigation 

The U.S. complained against India to the World Trade Organization in May 2018 that since the ‘reference price’ for calculating support was the 1986 - 88 average world price of a crop which they converted to rupees at the then prevailing ₹12.5/$ ER, India’s support price per quintal for rice and wheat in 2013-14 should have been at the most ₹235 and ₹354, respectively! The actual support

prices were ₹1,348 and ₹1,386 and the difference of over Rs 1000 per quintal, was then multiplied by

the entire 2013-14 output of rice and wheat, and came to 77% and 67% of their output values (https://bit.ly/3mROANe). This, the U.S. claimed, was support provided in gross violation of the permitted 10%!

Our farmers are among the lowest cost producers in the world, and the support prices in 2013-14

at the prevailing exchange rate of ₹60.5 per dollar were well below global prices, which means that actual support was negative.