The Hindu Business Line : Making farmers security-savvy

Why should farmers, whose land is to be acquired for the proposed SEZs, suffer from the old-world doctrine of eminence juris and lose their capital? And why should they accept the equity in companies that just happen to come up there? Empoweri ng the farmer to tackle these and other issues is vital, not only for their survival, but for the future of the economy, says SHARAD JOSHI.

IT WILL soon be as important to train farmers in cultivation techniques as in investment moves.

The farmer is faced with a dilemma and is required to make decisions that neither he nor his forefathers were called upon to make. Traditionally, one was born a farmer; lived a farmer and died as one, all in grave indebtedness. The same was the case with the artisans living in the villages — the ironsmith, the cobbler, the barber and the weaver. All these artisans required few instruments and had a large degree of freedom across vocations.

This was not the case with the farmer. The farmer inherited land from his ancestors and bequeathed it to his descendants. Land represented substantial capital. Further, the pursuit of agriculture required capital and livestock, which needed a sizeable investment and represented social prestige. Farmers had a far greater reason to carry on their vocation by family tradition. It was a noble vocation, highly respected, and therefore its members had little inclination to switch to other professions.

The farming community, grounded in the land, was disinclined to move, except in times of such natural calamities as droughts and floods. Under Colonial rule, the non-farming artisans faced competition from higher-quality, cheaper goods from industry and often had to abandon their professions and shift to cities as, in most cases, simple manual labour.

Historically Vulnerable

Under the British, the doctrine of the eminence juris — the land belongs to the monarch — was established. The lands of the farmers were acquired for public works, such as railways, roads, dams and canals. The displaced farmers usually accepted whatever was paid by way of compensation and moved to the cities. After a few teething troubles, they found themselves more comfortably settled than they were as farmers.

After Independence, the doctrine of eminence juris continued to prevail. The new Nehruvian socialism proceeded with enthusiasm to impose ceilings on agricultural land holdings and to pass a series of anti-zamindari and anti-moneylender legislation. The landlords and the moneylenders found the whole rural environment too hostile to permit comfortable stay and shifted to the cities.

As massive projects of national importance came up, millions of farmers came under submergence or were displaced. By this time, resettlement in the cities had already become a tough proposition. There was a powerful "push" provided by uneconomic agriculture, but also a "push-back" by the unemployment and the filthiness of the urban slums. The balance tipped in favour of inertia, and farmers started resisting the government's efforts to displace them on payment of a meagre compensation.

Seeking "land for land and more" has become the popular plank of the activist NGOs, in spite of the fact that agriculture has been reduced to a state where farmers are committing suicide by the thousands.

Knowledgeable people are asking if it would not be better to give the farmers an alternative to suicide? If the farmer had the possibility of selling his land at the prevailing prices in a buoyant real-estate market, could not at least some of them be prevented from killing themselves?

By way of compensation, the bereaved families come into sums of money that they are not used to handling, and it is often spent in a manner that could not be termed prudent in the long run.

Unfair Deal

The ushering in of the era of special economic zones (SEZ) has widened the dimensions of the problem. Every State has entered the race, sanctioning as many special economic zones as possible. The industries that will set up shop in the zones are to get special concessions in taxes, tariffs, labour laws and even credit. This will certainly give the upcoming industrialist a breath of fresh air and prepare him for facing competition in a globalised world.

It is difficult to understand why the farmers, whose land is to be acquired for the benefit of the industrialists alone, should suffer from the old-world doctrine of eminence juris and lose their lands. Some wise thinkers and some politicians too have proposed that the farmers be given equity in the industry by way of compensation for the lands that they will lose.

The farmers, however, are not in favour of the idea, for two reasons. One, the quantum of the compensation has to be as free as the working environment for the industrialist. The farmer should not get anything less than the current market price as compensation for his land. If the compensation is inadequate, it does not matter whether it is in the form of hard cash or equity.

Two, there is no reason why the farmer should be forced to accept the equity in companies that just happen to come up there. They must have the full right to choose the equity that they consider safe and profitable. They demand that they be paid hard cash and given the freedom to choose the form of investment, according to their own rights.

Apart from the question of exit from agriculture, there is a question very similar that would arise even in case of practising farmers. The Government is determined to move to create a network of warehousing companies to solve the problem. The companies will advance to the farmer, on delivery of the produce, 70 per cent of the value at the prevailing market price and will issue warehousing receipts that will be negotiable instruments in law.

What will the farmer do with these receipts? Is he required to keep them indefinitely? Can he transfer them when the market is favourable? Will he benefit from the information available on the futures markets? The introduction of the new scheme will presuppose the development of a market for these negotiable instruments.

Regulatory Role

In the near future, the farmer is likely to face the problem of being flush with the kind of funds that he is not used to handling. If he makes wrong investment decisions we might have destitute farmers committing suicide instead of landholding farmers taking their lives, as is now the case.

The markets for securities, bonds, debt, etc., are highly complex. Even the educated urban middle-class is far from being finance-savvy about these areas. The farmer, caught as he is in the morass of indebtedness, and on losing his lands, will easily be tempted to shift into a sector that seems buoyant and profitable.

Various sectors of industry, and particularly information technology and services, can use the funds in the hands of farmers to their mutual advantage. The question is: Can the farmer navigate between the two?

These are areas that lie within the legal mandate of the Securities and Exchange Bureau of India (SEBI). The latter has the reputation of being perhaps the country's most effective regulatory body.

The manner in which the regulator handles this problem might well determine the economic future, not only of the farming community but of the economy as a whole.

(The author is Founder, Shetkari Sanghatana, and Member of Parliament, Rajya Sabha. He can be reached at sharad.mah@nic.in)

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