“During the lockdown, someone asked me to help him with just Rs 3,000 so that his family of three doesn’t have to sleep hungry for the next one month. This will not be possible if agricultural goods are thrown out of the essential commodities act”.
Essential commodities mean products which are essential for survival of general population, be it rich or poor, which includes food, edible oil, lifesaving drugs, etc. That means consumption of these products is not optional and any price rise of such products would affect the entire cross-section of population including the poor majority of our country. Essential Commodities Act, 1955 had the power to keep prices under check, by keeping control over production, supply and distribution of such essential commodities. This made overall cost of living cheap and affordable for the common man. It also meant that the unit labor cost of workers in India can remain one of the lowest in the world, helping the industrial sector to earn more profit in return. This is the prime reason why companies around the world wants to shift their labor intensive-jobs to India.
But price control of such products adds-up to certain repercussions which include:
1. The poor farmer ends-up as a looser as they get less out of the agricultural produce from selling in the open market through middle-man who can hoard the produce in big cold-storages. This is apart from the FCI (Food Corporation of India) which purchases some food grains directly from the farmer, to sustain the present food rationing system. So, the same farmer transforms into a migrant labor during farming off-season to work in the industrial (manufacturing or construction) sector to augment their earnings. Thus, this artificial agrarian crisis creates a ‘surplus pool of labor’ for competitive exploitation in the industrial and services sector at bare minimum wages.
2. But this ‘Act’ still worked as a firewall to ‘free trade neo-liberal’ policies to some extent. This restricted the monopolization of such sectors by big-capital in the last 30 years, because effective price control curtailed the ‘rate of profit’ below average, compared to the industrial sector. This in turn, deterred the mechanization of a labour-intensive sector like agriculture which in turn allows the bare-minimum sustenance of over 50% of total population until now.
The recent changes in the Essential Commodities Act, 1955 has passed three ordinances which talks about lifting of all price controls, stock limits, and export restrictions for cereals, pulses, oilseeds, edible oils, onion, and potatoes. That means the middle-man in effect can now buy agricultural products at lowest prices possible from farmers and can then hoard their surplus produce in their big cold storages so that they can artificially raise prices as per market principle of supply and demand. The poor farmers are in no position to take advantage of such situation. This policy change in fact directly benefits the big-capital whose profits from industrial sector investment has been severely impacted since 2011-12 and has collapsed during the current economic slowdown. The is in contrast to the agrarian sector which grew by 4% in the last financial year (2019-20).
A separate ordinance has been passed to facilitate centralization of lands and incentivize capital-intensive production through automation and contract farming. This will legalize land-grabbing and make small-scale farming impossible to sustain. Census 2011 data reported that small and marginal households (owning less than 2 hectares) account for 87% of farming households. The total income from all sources (cultivation, farming of animals, wages, etc.) in such small land-holdings falls less than consumption expenditure. But around 60% households still continue to hold over their wealth as land in 2012, across all economic strata despite such agricultural sector distress. This policy change is the next logical step to intensify such rural distress and force re-migration of workers to urban slums. Meanwhile, diluted labor laws awaits them in the industrial sector with the intention to bring down wages further and prolong labor time to whatever extent humanly possible. That means, the poor farmers are going to give their sweat, blood and now life to bail-out the distressed Ambanis and Adanis once again. Foreign capital is also not far behind as RBI registered ‘Bank of China’ in India last year to facilitate the flow of capital from China to fund such ‘Make in India’ project or ‘Cheap labor in India’ project.
But with no price control, food prices will tend to go-up and so will the overall cost of living. Social subsidies in the form of procurement by government bodies like FCI and public distribution system (e.g. ration shops) will also cease to exist. FCI has a debt of around Rs 2.25 lakh crore and will be privatized in due time. Government is in fact planning to initiate direct cash transfer to reduce such food subsidy expenses, which has gone-down by Rs 17,000 crore from Rs 125,000 crores in 2015 to Rs 1,08,000 crores in 2019. This State apathy will result in complete surrender of the fate of poor at the mercy of market dynamics.