Source: Ideas and Institutions Issue #6
Analysis
The Farm Laws Repeal Has Not Reversed the Reformist Trajectory in Agricultural Marketing
The repeal of the contentious farm laws did not spell the end of reforms in agricultural marketing in India. Even though the Union government was forced to repeal the laws in the wake of protests by farmer organizations, mostly from Punjab, state governments in India have reformed their state agricultural marketing laws by adopting many components of the repealed central laws. Many states have, over the past decade, been gradually moving towards liberalizing agricultural marketing laws, opening alternative avenues for agricultural trade, and opening up agriculture marketing to competition.
In fact, as I argue in this essay, the dominant tendency in the agricultural sector is towards reforming agricultural marketing along the lines proposed in the repealed laws, by removing monopolies in agricultural marketing and promoting greater competition.
In a previous edition of this newsletter, I highlighted how the existing Agriculture Produce Marketing Committee or APMC laws hindered the development of agricultural markets in the states. State APMC laws penalize trade between a farmer and a trader outside APMC markets or mandis. They fragment agricultural markets by introducing multiple points of levy and licensing; they enable mandis to charge high commissions and fees for using their facilities—sometimes requiring traders to pay mandi fees even when they trade outside the mandis. They also create monopsonies of traders and are distant from farm gates in many states. This fragments the agricultural market, creates a long chain of intermediation, and reduces the bargaining and earning capacity of farmers. As agriculture is primarily a state subject, many states have taken steps to liberalize APMC laws both before and since the farm laws were introduced.
The central government first introduced the controversial farm laws by exercising emergency law-making powers or through the ordinance route on June 5, 2020. By then, seven states—Gujarat, Himachal Pradesh, Karnataka, Tamil Nadu, Uttarakhand, Uttar Pradesh, and Madhya Pradesh had already promulgated ordinances on similar lines.
All seven state ordinances removed the APMC’s monopoly and allowed multiple marketing channels, including direct marketing between traders and farmers, without having to transact within the physical confines of a mandi. All the ordinances provide avenues for online trading of agricultural produce. Most of the ordinances have provisions for enabling a single, state-wide licensing system for traders, compared to the system of requiring separate licenses for each mandi. Most of the ordinances also allow the state government to notify the entire state as a single, unified market for specific agricultural commodities.
However, gradual reformist measures targeted at curbing APMC powers in agriculture marketing have been going on prior to the center’s farm laws. Much before 2020, many states moved fruits and vegetables out of the ambit of APMC laws. As a result, subsequent trade in fruits and vegetables has been subject to neither APMC market fees nor costs arising from intermediation and cartelization. Many states also adopted provisions related to creating a unified market area within the state and created direct marketing channels within their state. Many states, including Punjab, had already enacted contract farming laws—the subject of one of the controversial central farm laws. They also made provisions for enabling online trading platforms. Bihar repealed its APMC law in 2006.
These reforms had been enacted both through encouragement and nudges from the central government, but also because many states understood the necessity of creating greater competition and better infrastructure in agricultural marketing. It is the latter that is more significant, for it highlights the “pull” side of agricultural marketing reforms—an understanding by states themselves that these reforms are an essential component of agricultural modernization.
Madhya Pradesh (MP) is one of the biggest success stories in agriculture over the past decade. The state has been able to increase agricultural production and productivity through a series of measures over the past two decades. Agriculture contributed 34 percent of the Gross Value Added in the state’s economy in 2011-12. In 2019-20, this increased to 44 percent. As per one paper, the state’s agricultural GDP grew at 11.5% compared to the national average of 4.7% between 2017-18 and 2020-21. This has contributed to making MP one of the faster growing Indian states over the past decade. Between 2009 and 2019, MP more than doubled its production of food grains, one of only two states to do so. What is perhaps even more stunning, is that its production of vegetables during this period has increased by five times, and production of fruits trebled. This transformation in agriculture has come about due to a series of measures, including reforms in agriculture marketing.
Economists Ashok Gulati and others have put this achievement down to a significant improvement in irrigation, better power supply for irrigation, mechanization, and pro-active and decentralized government procurement. Simultaneously, the state government has improved storage infrastructure. It developed a new warehousing policy in 2012. Warehousing capacity increased from 7.8 MMT in 2010-11 to 16.5 MMT in 2017-18. Cold storage capacity increased from 64,603 MT in 2015-16 to 3,27,819 MT by 2017-18, an increase of close to five times in three years.
A multi-state study by scholar Devesh Kapur and others highlights how farmers increasingly participate in the market as their marketable surplus increases. In the 2000s, MP increased its wheat production significantly, putting pressure on agriculture marketing infrastructure in the state. To respond to increased production, the state moved aggressively to liberalize APMC mandis. Moves in this direction had started in the early 2000s with the introduction of private trading platforms run by ITC called “choupals”. This, and other liberalizing measures, increasingly introduced competition in the state agricultural marketing system. In addition, MP competed in wheat procurement with Punjab and Haryana by keeping its APMC mandi fees much lower than these two states. The 2020 ordinance passed by Madhya Pradesh was in continuation of this longer trend of improving marketing linkages to support agricultural modernization.
Karnataka similarly adopted a reformist attitude towards agricultural marketing in the past decade. It reformed its state APMC law in 2007 and focused on APMC modernization during that period. From 2011 onwards, there were moves to liberalize the APMC markets by creating a single market, allowing warehouses to function as mandis, and by cutting down transportation costs and expenses related to mandi fees. The state adopted a new agricultural marketing policy in 2013, where the core objective was to reduce and/or eliminate “barriers to participation in markets to foster competition and efficient determination of price.” It focused on creating a single state-wide agriculture market supported by digitization, unified licensing for traders, private and competing markets, increasing warehousing capacity, and improving information dissemination.
To improve efficiency and transparency in the state agriculture markets, the state government launched a special purpose vehicle, the Rashtriya eMarket Services, in partnership with NCDEX, one of India’s leading commodity exchanges. The Unified Marketing Platform created by REMS has more than 48 lakh farmers on the system. In 2017, it was reported that farmers saw a price increase of 38 percent in nominal terms and 13 percent in real terms on the UMP, as opposed to the national average. ReMS claims claims that in comparison to the period prior to these reforms, farmers now receive an additional share of the final price the consumer pays—between 59-74% now, compared to 45-55% earlier. Karnataka therefore, also had a long history of progressive reforms in agricultural marketing before the central government’s farm laws were passed.
Maharashtra and Gujarat have similarly taken many steps over the past decade to reform their APMC laws. A 2016 paper that ranked states on their adoption of APMC related reforms ranked Maharashtra and Gujarat the highest. Bihar stands as a useful counterpoint because of the difference of its approach towards deregulation of APMCs. In contrast to other states that introduced competing marketing infrastructure while retaining APMCs, Bihar completely repealed its APMC law in 2006. As per studies, the repeal has benefitted traders but not farmers. The quality of marketing infrastructure remains poor. At the same time, Bihar has seen an agrarian transformation in corn cultivation and a trebling of price realizations from corn cultivation. As per one news report, this is, at least in part, because of the complete lack of mandi fees.
As these multiple examples highlight, different states have taken reformist approaches towards agricultural marketing based on their local political economy considerations. What is common to these approaches is the idea that APMC reforms are an important part of modernizing agriculture. This realization importantly, pre-dates the central government’s farm laws, in some cases, by over a decade. In 2013, state agriculture ministers of a dozen states agreed on the necessity of APMC laws. This means that states that are serious about modernizing agriculture will prefer to liberalize APMC laws and institutions.
The central government’s repeal of the farm laws was a missed opportunity. The implementation of the center’s laws would have done away with mandi fees for non-APMC transactions in one go and created uniformity in the channels for private agricultural transactions and marketing at a national scale.
However, even if the creation of a national market in agriculture is a missed opportunity, states increasingly seem to be competing on the basis of marketing regulation and infrastructure. Madhya Pradesh’s approach of investing in infrastructure and cutting mandi fees to outdo Punjab in wheat procurement exemplifies both. The reformist trend in agricultural marketing remains strong.
—By Anirudh Burman
Review
A Contrarian View on Publicity in Government
“Sunlight is the best disinfectant,” wrote Justice DY Chandrachud in his concurring judgment supporting livestreaming of court proceedings. A recent book, ‘Secret Government: The Pathologies of Publicity by Brian Kogelmann’, presents a philosophical critique of this popular cliché of democratic life. While conceding that there are good arguments for publicity in government, Kogelmann argues that there are also good reasons for secrecy. Since publicity is usually a means to some ends, trade-offs must be considered.
The book begins with a review of what certain philosophers have written about publicity. Kogelmann shows how Plato’s position changed from the Republic’s gennaion pseudos or noble lie (acceptable only if told by a virtuous leader) to the emphasis on truthfulness in his later work, the Laws. This reflects, as Kogelmann argues, following Bernard Williams, Plato’s shift towards “an exalted understanding of the capacities of citizens but a more pessimistic view of rulers.”
Kogelmann argues, citing Jeremy Waldron, that Hobbes’s support for publicising justifications for laws and explaining the foundations of the government prefigured later liberal positions. Since Hobbes cited the difficulties of hiding the truth from the public, his position seems merely pragmatic, but it captures the political force of the Enlightenment, which according to Waldron, “consists in the fact that it is too much of a risk to try telling lies to people who can reason about something they have reason to regard as important.” In contrast, Kogelmann shows that Immanuel Kant, a key predecessor of modern liberalism, had “unclear and underwhelming” views on transparency.
Kogelmann then turns to three utilitarian philosophers: Jeremy Bentham, John Stuart Mill, and Henry Sidgwick. Bentham argued for both publicity and secrecy. When people vote in their own interests, as he sees as the case of citizens voting in elections, secrecy should shield them from external influence. And when people serve the public interest—as the representatives in a legislature supposedly do—their actions should be made public. In John Stuart Mill’s view, publicity can help representative government function well, but only if an attentive citizenry bears the costs of monitoring. Mill argued for ‘publicizing' voting by citizens in elections, because he believed citizens should cast their vote just like legislators, keeping the public good in mind.
Henry Sidgwick disrupts this “Whig history” of increasing advocacy for transparency, turning it towards a form of noble falsehood. He saw how simple common-sense moral rules, such as prohibitions on lying, stealing, killing, contribute to overall happiness. He also thought that exceptions to these rules that should be made by all under specific circumstances for greater overall happiness can be stated publicly as more complex rules. However, if the exceptions for greater good are to be made only by some, so that if they were to be made by all, overall happiness would decrease, he argued that such morality should be secret. In Sidgwick’s famous words endorsing deception for the larger good, “on utilitarian principles, it may be right to do and privately recommend, under certain circumstances, what it would not be right to advocate openly.” Further, to maintain common sense morality in the public, utilitarians must hide the philosophical theories that encourage this secret morality “a utilitarian may reasonably desire, on utilitarian principles, that some of his conclusions should be rejected by mankind generally.”
The book then gets into institutional design choices. Kogelmann argues that in voting by legislators, political equality is better served by secrecy. Publicity enables unequal political influence by allowing the rich and powerful to buy off the politicians and by allowing special interest groups to engage in monitoring that ordinary citizens are not capable of performing. In a chapter on deliberations in legislatures, Kogelmann lists the benefits of secrecy. He believes it allows deliberators to change their minds, encourages bipartisanship, and permits exploratory debate. He also considers the benefits of public deliberations—their results appear legitimate, they discourage self-interested bargaining, and allow citizens to learn by observing. He suggests finding a balance by having institutions select a deliberative body that ensures diverse representation and allowing members to publish statements explaining or criticizing the body’s decision.
The rest of the book considers arguments on the political philosophy of publicity in a just society, as envisaged by John Rawls and the liberal-democratic tradition he inspired. Kogelmann argues that their concept of publicity is often vague and one-sided in considering only benefits and not the costs of publicity. He tries clearing these confusions by identifying four distinct conceptions of publicity in the liberal-democratic tradition.
First, officials should not hide the intentions and reasons underpinning their policy choices. Bernard Williams, who also offered a spirited critique of Sidwick’s secret morality, was a proponent of this conception of publicity.
Second, justice should not only be done, but should manifestly and undoubtedly be seen to be done. This conception is often applied to social justice issues.
Third, not only must everyone in society accept the same theory of justice, but everyone must know that everyone else accepts this theory. So, citizens’ beliefs about morality and justice should be transparent to one another.
Fourth, persons in the society the philosopher theorizes about must have access to everything the philosopher theorizes about. So, “everyone living in Rawls’s perfectly just society must have access to A Theory of Justice and related works.”
Kogelmann examines the arguments in the defence of each of these conceptions. While he agrees with some of them, he finds most of the arguments wanting.
Despite the seeming “repugnance” of some its conclusions the book is worth reading to form a nuanced, all-things-considered view on this issue. I do have a few quibbles though.
First, the chapters on institutional design are mostly focused on the legislative branch. But, in democracies, the most interesting debates about transparency and secret morality are in the executive branch. As Pierre Rosanvallon has shown, decisions in democracies are now mostly taken by an empowered executive and “independent” authorities, which are, perhaps unavoidably, either opaque or publicize in a manner that few can understand. Unsurprisingly, the counter-revolution against this opacifying trend often takes the form of leaders claiming to be completely transparent.
Second, in the review of philosophers’ ideas, perhaps the book would have benefited by including thinkers on state decisions such as Max Weber and Carl Schmitt. Decisionism presents a persistent challenge to liberal arguments for publicity.
Third, the book could have considered how consequences of publicity are intermediated by other institutional choices. For instance, isn’t the concern over the powerful buying off individual politicians mitigated if defying the party whip leads to severe punishment like disqualification?
—By Suyash Rai