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End of MSP:FARMERS IN WTO TRAP?, 5 October 2020 Print E-mail

Economic Highlight

New Delhi, 5 October 2020

End of MSP


         By Shivaji Sarkar


The new farm laws apparently entrap the Indian farmers in a World Trade Organisation (WTO)- tailored quagmire to gradually make them dependent on the large corporate and may substantially change the way farming is done in India.


Since 1995 the WTO has been demanding that developing countries make severe cuts in tariffs and tariff quotas. Now, internationally agricultural products are protected only by tariffs. Many non-tariff barriers have been eliminated or converted to tariffs through different regimes. The WTO at its various rounds has been pressurising India to deregulate. India has been fighting back but with little success.


All three laws -- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 and The Essential Commodities (Amendment) Bill, 2020 -- now aim to deregulate the agricultural market mechanism, which is highly controlled by traders and producers.


The WTO provision for non-tariff barrier, through Agreement on Agriculture (AoA), means that there should not be subsidy in any form. The WTO views any State subsidy, including Minimum Support Price (MSP), preventing integration of agriculture to the free market. It also needs to be understood that despite it being a supposed multilateral body, the WTO policy-making is dominated by the US and the European Union as they want to keep food grain trading under their domination and eliminate all competition from developing countries, which have an advantage of cheaper labour and lower production cost.


The West fears that a strong farmer in the developing nations could virtually end its domination in the world market. Note that the WTO is not an economic bargain between governmental trade elites without normative value. It is a legally binding treaty squarely within the wider ambit of international law.


It is not only the farmers and the Opposition that are protesting but even organisations such as the Swadeshi Jagaran Manch or Bharatiya Kisan Sangathan, part of the Sangh Parivar, which are opposing the move. It is being perceived as changing the pattern of agriculture in the country. These bodies fear that relaxations being given would make it much easier for the corporate to control the pricing of farmers’ products and in the long run may control the entire farm market.


An interesting phenomenon is that just a month after the three bills came as Ordinances, Prime Minister Narendra Modi told the US-India Business Council meeting that since agricultural reforms have been initiated, the US companies should invest in India, implying that they no more need to fear about the non-tariff barriers, which have been dismantled by the government.


Remember, the government is under tremendous pressure for showing results as the economy is sinking. The rural economy sees severe constraint on cash flow, low incomes, rising loss of jobs and higher prices. This is possibly the reason why it pushed through the bills keeping all niceties at bay.


The move has led to raising many an eyebrow. It is not just a matter of MSP, contract farming and hoarding as the new laws seek to indicate. Its purport is deeper-- aiming at integrating farmers to an open world market where they would have to fend for themselves without government support at home. The second bill, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 provides a framework for farmers to engage in contract farming or farming as per an agreement with the buyer before sowing, under which the farmer sells his produce to the buyer at a pre-determined price.


While it may assure them a price, post production, it does away with the farmers’ right to remain independent and not succumb to becoming effectively farm labourers or at best a tenant as the decision is taken by the buyer. The farmer may virtually become redundant and through machinations the buyer himself could become the owner of his land and deprive the farmer of his livelihood.


That the apprehensions are real is demonstrated by the plight of the cotton farmers in Africa. The WTO could not force the US to cut its cotton subsidies and at the end it impacted the African farmers hard.


Importantly, the United Nations itself is a critic of the WTO. “Globalisation creates big winners and big losers, but where food systems are concerned, losing out means sinking into poverty and hunger,” said Olivier De Schutter, UN Special Rapporteur on the right to food. “A vision of food security that deepens the divide between food-surplus and food-deficit regions, between exporters and importers, and between winners and losers, simply cannot be accepted”.


What the UN has emphasised is not only true for farmers but also for consumers in poor countries, where food bill has increased manifold since the WTO process began. It says, “More they are told to rely on trade, the less they invest in domestic agriculture”, almost a stark reference to dwindling public investment in agriculture in India.


The US spends $ 61286 per farmer and the EU $ 8588. Whereas India spends a mere $ 282 and this too is falling. If the subsidy or in real terms the MSP is done away with, it would be difficult for the entire farm sector. The bills do not speak of continuance of the MSP, though separately the government has said that it would continue, fearing perhaps that it might be interpreted by WTO as subsidy. It does have ramifications on all other aspects of economy.


If India wants to have a viable farm sector, public investment is a must. Depriving farmers of direct investment and also preventing them of price supports (MSP), considered subsidy by the developed countries and tariff regulations on exports and imports as protectionist policies, are sure prescriptions for having an ailing farm sector that could ruin not only farming but also the foundation of the Indian economy. The western and WTO views are tailor-made for western MNCs, who virtually monopolise the international farm trade.


There is another catch. Can the Centre enact such laws? This is primarily a State subject. In a case between ITC Ltd and APMC 2002, the Supreme Court upheld the validity of several State laws relating to agricultural produce marketing, and struck down the Central Tobacco Act 1975.


The Centre now is sending a model bill to the States for enacting similar farm laws to avoid court intervention. Predictably, there is now a long battle ahead for the farmers. The Centre is no more reviewing the bills and farmers being in the WTO and corporate trap. The nation has to wait and see how a remedy works out. --- INFA


(Copyright, India News & Feature Alliance)

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