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Indian Express
3 days ago
- Business
- Indian Express
Opening India's agriculture to a free-for-all would have serious repercussions for the sector
It is not enough to say that agriculture contributes only 16 per cent to India's GDP. Nor is it sufficient to state that small farmer households earn about one lakh rupees annually. These statistics do not capture the full extent of the story. For those, particularly outside India, who are unfamiliar with the agricultural and rural heartlands of India, this data conceals a larger narrative. I say this both as a farmer and as a former finance minister: The impacts go far beyond the economy. What is at risk is social stability and what it could bring is a cultural upheaval that we are not prepared for. For instance, 250 million people are directly dependent on farming, and there are 700 million Indians who are directly or indirectly connected to farming and the rural sector. Protecting the farm sector is not just a policy. It is a survival mechanism for millions, crucial to maintaining economic, social, political and cultural stability. The argument around agricultural subsidy and tariffs often centres on the Minimum Support Price (MSP) provided to select crops. In the US and much of the EU, the terminoogy and approach vary, but the issue remains the same. If India has MSP, the US has ERP, PLC, ARC and DMC. Let me elaborate. ERP is the Effective Reference Price, analogous to the MSP. In the US, farmers receive direct payments from the government if market prices fall below this level, and it is called PLC or Price Loss Coverage. Both PLC and ARC (Agriculture Risk Coverage) cover 22 major crops, ranging from wheat and corn to soybean and cotton. These systems are not restricted to farming alone as they also extend to the dairy sector under the Dairy Margin Coverage (DMC) programme. The EU's Common Agricultural Policy (CAP) provides income support via direct payments if prices fall below intervention levels, which are akin to MSPs. The crucial difference is that, while in India, the government procures crops at the MSP, in the US the government does not procure crops but instead pays farmers directly if prices fall below the minimum. Given the literacy levels, or lack thereof, and the paperwork involved with enrolling in these various EU and US policies, asking Indian farmers to transition to these systems would create another level of bureaucracy. Moreover, rolling out the US and EU models in India would take years, if not decades. The pressure on India to dismantle its farm mechanisms, whether MSP or tariffs, and open up to international market forces would be justifiable, if the US and EU were not subsidising their own agricultural sectors. The US spends about $20 billion and the EU about $50 billion on agricultural subsidies. In fact, many of these subsidies remain hidden, while the Indian MSP system is much more transparent. The focus of US subsidies is large farms, whereas Indian farm policy centres on small farmers. US policy priorities include market stabilisation, income protection, and climate adaptation, while India focuses on supporting small farmers and landholderscol, ensuring regular upliftment of the rural economy. EU subsidies are targeted more toward income support, environmental goals, climate and biodiversity targets. In the US and much of Europe, 80 per cent of subsidies go to large farms, while in India, it is the reverse with 80 per cent going to small and medium farmers. The EU, in its latest budget provisions, is trying to move away from the US approach towards the Indian model, by targeting small farmers. In fact, the EU's latest provision in its Common Agricultural Policy (CAP) is 387 billion euros ($451 billion) for 2021-2027, and as recently as last month, they proposed a cap of 1,00,000 euros per year per farmer, in an attempt to shift support from larger farmers to smaller ones. That translates to a cap of one crore of subsidy per farmer. For India, the real issue is that of equitable and development-centred agreements. Just as the Indian MSP is clear, transparent and focused on the Indian context, the alphabet soup of CAP, ERP, PLC, ARC and DMC is tailored to the US and EU contexts. This perspective arises not only from economics, but also from society, politics and culture. Opening the entire agriculture sector to a free-for-all, when US and EU subsidies distort the market in their favour, would create a kind of asymmetric warfare, with tumultuous consequences for Indian society. The upheaval would be massive. This stance has been clearly articulated at the highest levels. As Prime Minister Narendra Modi recently said: 'For us, the interest of our farmers is top priority. India will never compromise on the interests of its farmers, dairy farmers and fishermen. I know I will personally have to pay a heavy price but I am prepared for it.' The writer is the former Finance Minister of Punjab
The Hill
15-06-2025
- Politics
- The Hill
In its war against small farmers, Congress says the quiet part out loud
It's never been clearer where the loyalties of congressional agriculture committees lie. In their seemingly endless quest to shift prosperity from small farmers to large ones — to erode any protections for animals and producers that actually value organic farming — the House-passed budget reconciliation plan plants a flag firmly in the realm of 'profits over people.' The plan cuts nearly $300 billion in Supplemental Nutrition Assistance Program or SNAP benefits to support (in the amount of about $60 billion) industrial agriculture operations. This is on top of the existing $180 billion projected in future subsidies for programs like Agricultural Risk Coverage, Price Loss Coverage and crop insurance. That goes without mentioning the $10 billion recently allocated to big agriculture through the Emergency Commodity Assistance Program, which an American Enterprise Institute report called 'probably not justified.' That's a lot of bacon going disproportionately to America's largest producers. At the same time, congressional agriculture committees are promising to override state and local regulations that protect small farmers, as well as set basic humane agriculture standards. Sen. Joni Ernst (R-Iowa) has introduced the Food Security and Farm Protection Act — formerly known as the EATS Act — to override any state law that 'affects' an out-of-state producer. Directly in her crosshairs are laws like California's Proposition 12, which sets humane welfare standards for farm animals. That ballot measure, which voters approved in 2018, was the single biggest win for the meek and miserable farm animals who feed us. It was the result of legislative decision-making that the U.S. Supreme Court has already deemed perfectly constitutional. It also created more demand for animal products sourced from farms employing more traditional husbandry practices — i.e., smaller ones. The biggest problem for rank-and-file farmers is that the Food Security and Farm Protection Act is vague enough that it could be used to disrupt or derail any state or local agricultural regulation that companies with the means deem inconvenient. That includes, notably, procurement regulations that may favor local producers. According to a study from Harvard, there are more than 100 food and agricultural procurement laws already on the books. In Louisiana, for example, procurement officials are required to purchase agricultural goods from Louisiana unless out-of-state goods are both cheaper and of higher quality. This would likely qualify as a 'standard or condition on the preharvest production of … agricultural products' that would fall under the Food Security and Farm Protection Act's broad scythe. Ernst's effort is no outlier. The House Agriculture Committee said that the new farm bill would prevent states from passing animal welfare regulations that others must follow. They are no doubt talking about the Food Security and Farm Protection Act — and, again, it's going to have the effect of overriding state sovereignty not just on the animal protection front but in all areas under the penumbra of state farming policy. Some commentators have couched the Food Security and Farm Protection Act as an affront to federalism — but, really, all of this activity amounts to an outright fight against small farmers, particularly those interested in something different than the status-quo of factory farmed, chemical- and antibiotics-ridden, steroid-pumped franken-food. Consider that the Trump administration already axed two programs giving food banks and schools $1 billion in funding to purchase from small farmers and ranchers. And they want to put the kibosh on $754 million for the Natural Resources Conservation Service, which assists farmers with resilience efforts and reduced chemical use. Make America Healthy Again (MAHA)? More like 'HAHA.' Congressional agriculture policy has become the epitome of the self-licking ice cream cone. We cut programs that help small and organic farmers, then redirect tax dollars to provide subsidies. Those subsidies largely go to the biggest agricultural interests, inoculating them against having to make any broader systemic reforms. Then, under the next administration, we create new programs to support small and organic farmers. Rinse and repeat. To give congressional agriculture folks their due, the Food Security and Farm Protection Act could go a long way towards ending this loop by making any state-level support for smaller farmers obsolete and allowing the largest interests — like China's Smithfield Foods — to kill any law they don't like. No more demand for humane products — and, hey, higher profit margins while we're at it. Obviously, this is ridiculous, for all sorts of reasons. What we should do is drop the charade and end or dramatically reduce the crony-capitalist corporate welfare system when it comes to Big Agriculture. Let states pass laws reflecting their own health and safety priorities. Let the consumers speak for themselves. And then let the free market do its work.
