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Contentious farm laws: Agri-reforms led to farm income decline, land concentration in Bihar

It is imperative to know that without the existence of regulated markets, agriculture markets are deprived of efficient marketing infrastructure and fair prices to farmers and all other stakeholders

A farmer harvesting wheat. Photo: Wikipedia

This is the second of a two-part series. Read the first part here

In the first part of this series, we analysed how agricultural reforms in Bihar weakened infrastructure, decreased growth and led to the adoption of a decentralised procurement system in the state. Now let us analyse other impacts. Consider for instnace, the income of farmers.

It was believed that agri-market reforms would improve the economic conditions of farmers in Bihar by enhancing competitiveness. But this proved to be untrue. The real income level of farm households declined during the post-reform period in Bihar.

Changes in average agricultural household income

Source (Rs/month) Years Bihar Punjab India
Wages 2002-03 487 1462 819
2012-13 1,323 (627) 4,779 (2265) 2,071 (982)
Cultivation 2002-03 846 2,822 969
2012-13 1,715 (813) 10,862 (5,148) 3,081 (1,460)
Farming of animals 2002-03 265 236 91
2012-13 279 (132) 1,658 (786) 763 (362)
Non-farm business 2002-03 202 440 236
2012-13 240 (114) 760 (360) 512 (243)
Total 2002-03 1,810 4,960 2,115
2012-13 3,558 (1,686) 18,059 (8,559) 6,223 (2,949)
% change in real income -6.85 72.56 39.43

Source: Ministry of Statistics and Programme Implementation

Note: Figures in parentheses indicate the income at constant prices in 2002-03.

The monthly real income of agricultural households in Bihar was Rs 1,810 during 2002-03. This declined by 6.85 per cent (Rs 1,686) during 2012-13. In Punjab, where such agri-reforms had not occurred, the monthly real income of farm households improved by 72.56 per cent to Rs 8,559 from Rs 4,960 during this period.

The real income of farmers at an all-India level also increased by 39.43 per cent during this period. This shows that Bihar remains one of the poorest states of India, while Punjab has the highest average income among all states in India. The reasons for this may have been regulated agri-markets and effective public procurement of wheat and paddy at minimum support price in Punjab.

Structure of landholdings

The size of landholdings also influences the level of technology adoption, price realisation and effective bargaining in both farm input and farm output markets.

The increase in the number of landholdings with a size of more than 10.0 hectares (large farmers) is an important concern for agriculture in Bihar. The number of marginal landholdings increased to 91.21 per cent in 2015-16, from 89.60 per cent in 2005-06. This may have happened because of division of land.

It is imperative to note that the trend of land concentration occurred as the number of large farmers increased in the state. This may put a negative impact on the livelihood of smaller farmers.

Changes in the number of operational holdings in Bihar

Types of holdings Before repeal of APMC (2005-06) After repeal of APMC (2015-16)
% operational holdings % operational holdings
Marginal (< 1.0 ha) 89.60 91.21
Small (1.0-2.0 ha) 6.70 5.75
Semi-medium (2.0-4.0 ha) 3.00 2.49
Medium (4.0-10.0 ha) 0.70 0.53
Large (>10.0 ha) 0.00 0.02
 Total holdings (in thousands) 100 (14,657) 100 (16,413)

Source: Economic Survey 2019

Figures in parentheses are the total number of operational holdings in Bihar.

Concerns for Indian agriculture

The Government of India has claimed that the three new farm laws would greatly improve the farm sector. But the Bihar model of agri-reforms clearly outlined the bleak future of the farm economy.

The participation of government agencies in procurement, number of procurement centres and scale of procurement of farm produce declined after the repeal of the Agricultural Produce Market Committees (APMC) Act in Bihar.

Due to the poor functioning of agricultural markets, the farmers got lower and unstable prices for their produce. Consequently, the growth performance of the agricultural sector diminished. The real income level of farm households declined and the trend of land concentration was witnessed in post-reform Bihar.

These reforms were unable to bring in new investment to set up and run the agri-markets. These experiences of agri-reforms in Bihar raise serious concerns that the new farm laws would be harmful for the agri economy of the country in general and the surplus-producing states like Punjab and Haryana in particular.

It is imperative to know that without the existence of regulated markets, agriculture markets are deprived of efficient marketing infrastructure and fair prices to farmers and all other stakeholders in the economy.

In a nutshell, the repealing of the APMC Act through the recent three laws may have serious concerns and worries for Indian agriculture. These agri-market reforms would be detrimental for the farmers, farming, state exchequer and agrarian economy of our country.

Views expressed are the authors’ own and do not necessarily reflect that of Down To Earth

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