Economic Viability of Destroying Crops

The farmers’ ongoing protest against the centre’s new farm laws have manifested in various forms, including agitating farmers dying by suicide, voting against the central ruling party candidates in the recent by-election in Haryana and civic elections in Punjab, social boycott of central ruling party ministers, organisation of rallies, Bharat Bandh (countrywide strike), Rail Roko (blocking train tracks), and toll plaza blockades. In order to further strengthen their fierce protest, the farmers in Haryana, Punjab, and western Uttar Pradesh have razed a sizeable part of their wheat crop. Likewise, many farmers have decided not to sell their surplus crops this marketing season for limiting the supply of farm produces in the market. This is an unprecedented way of protest in India. It is, therefore, important to investigate the economic viability of destroying of crops by the farmers as part of the protest.

The farm production-limiting programmes are the most common in many developed and a few emerging economies. These programmes provide financial support to farmers for cutting down their production from the optimal level predicted by a profit maximisation model. By doing so, these production loss-compensating subsidies increase farmers’ welfare and improve the ecological sustainability of farms. According to the Organisation for Economic Co-operation and Development (OECD) Agricultural Policy Monitoring and Evaluation (2020) estimates, the United States (US), Switzerland, and China paid $1,395 million, $713 million, and $2,324 million, respectively, to their farmers for long-term retirement of resources from agricultural production in 2018. The support received by Chinese farmers for not doing farming was 13.11% of the GoI’s total agricultural budget for the same period. The World Trade Organization (WTO) Agreement on Agriculture (AoA) places these production-limiting farm subsidies under the blue box. These subsidies are supposed to have a less trade-distorting effect. As these subsidies tend to limit farm production, the WTO does not obligate member countries for the reduction of such support. Ironically, this type of agricultural support is not available to Indian farmers.