Noise Over Farm Bills Explained
Introduction
The following historic Bills that are likely to completely alter the farming sector have been passed in both houses of the Parliament:
- The Farmers’ Produce Trade and Commerce (Protection and Facilitation) Bill, 2020.
- The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020.
- The Essential Commodities (Amendment) Bill, 2020.
The Bills were passed in Rajya Sabha amidst a huge uproar as the opposition was vehemently against the passage of these Bills calling them, ‘anti-farmers’.
Present Procurement Process of Farm Produce
The farmers carry their produce to the Agriculture Produce Marketing Committees (APMC) or Mandis. The APMC is a marketing board established by the state government in India to ensure farmers are safeguarded from exploitation by large retailers, as also to ensure that the farm retail price does not reach excessively high level for the benefit of the consumers. Hence, the first sale of the farmers produce, till now, could happen only at the market yards (Mandis) of APMC.
The Centre Government fixes a Minimum Support Price (MSP) every year separately for each crop (wheat, paddy, coarse grains, etc).
Then, the Government through its agencies, like Food Corporation of India (FCI) or State Government Agencies (SGA) procures the food grains from the APMCs at MSP to stock for a central Pool. Government is required to maintain a certain ‘buffer stock’ of food grains for food security schemes through Public Distribution System (PDS).
The food grains procured by SGAs are handed over to FCI, (cost of which is reimbursed and includes a Mandi Tax to the tune of 8% that the State Government collects from FCI) for storage and subsequent issue against GoI allocations in the same state or movement of surplus stocks to other states. It may be note that, in case the farmer does not take his produce to the APMC, the state government loses out this revenue.
Reasons for Opposition and Farmers Protest against the Bills
The Farmers’ Produce Trade and Commerce (Protection and Facilitation) Bill, allows the farmers to sell their produce anywhere and at any price. In other words, there is no restriction on them to sell their agriculture produce to the APMCs or Mandis.
Conversely, it means that the MSP regime will no longer apply and there is no guaranteed minimum support price for that crop.
The opposition is calling these bills a ‘death sentence’ for farmers because it will allow private entities/big corporate to enter the farming sector, who will be able to manipulate the prices of procurement form the farmers.
Similarly, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill will provide a framework to farmers, especially small and marginalized farmers, to enter into contract farming. In other words, the Bill formulates a framework on agreements that enables farmers to engage with agri-business companies, exporters and retailers for services and sale of produce while giving the farmer access to modern technology.
Presently, 86% of farmers in India have less than 2 Acres of land. It is felt that these farmers may end up leasing out their land to big corporate at a throw away price. With 70% of the Indian population directly/indirectly involved in the farming sector, it will be rendered jobless, as they lack any other skill set to make themselves productive outside of farming.
The Essential Commodities (Amendment) Bill will allow economic agents to stock food articles freely without the fear of being prosecuted for hoarding. Such stocks can well be used to manipulate the prices and push down the price of a particular agriculture produce while procuring the same from the farmers by the corporate. This is the least controversial Bill, as it only amends the existing Act and reduces the limit of regulation by government on stocking to only extreme exigencies, like in case of a war or famine.
The farmers are apprehensive that while they could influence the most powerful governments through the electoral process to fix a viable MSP, but while dealing with big companies, they will be exposed as minor players, incapable of bargaining effectively to get the right value for their produce.
The farmers have further got suspicious of the government’s intent to safeguard their interests, when two weeks back; the government announced a ban on export of onions. In doing so, the government prioritised the interests of the consumers over the interest of the farmers, as the retail price of onions was shooting up in the market.
Government’s Argument: Bill is in the Best Interest of Farmers
Government has maintained that they are not dismantling the MSP regime or the APMC. They are only giving a wider option to the farmers to choose whether to sell their produce in the State Mandis or in the open market anywhere else in the country and at whatever price that they can sell it for.
Government feels that farmers will get out of the clutches of the monopoly APMC-Mandis and rent-seeking behaviour of the traditional intermediaries (called the Adhtiyas).
It is further argued by the government that if corporate farming does manage to weaken the APMC-Mandi system then it would only be because hordes of farmers chose corporate farming or selling outside existing Mandis.
Centre Government feels that perhaps these farmers’ agitations are being spearheaded by Adhtiyas and existing elites, who are using the farmers as pawns, because they are the ones who are most threatened by these reforms. Besides, it is likely to lead to loss of revenue to states like Punjab and Haryana, who collect crores worth of Mandi Tax, while procurement is done by FCI from these states.
Conclusion
There are certain structural issues of the farming sector that may act as roadblocks for the farmers when these reforms are implemented, e.g. how will an illiterate, small time farmer be able to make a considered decision, without having an access to real-time present day information system, regarding where can he get the best price? How will he transport his small quantity of produce to that location? How will he bear the incidental charges while transporting, etc?
Even those farmers with moderate land holding may not have the requisite storage and stocking infrastructure to hold the produce, so as to enable them to bargain for the right price. Panic selling to avoid their perishable goods to go bad or destroyed by vagaries of weather will be an advantage for the private entities while buying their produce.
Finally, what will eventually determine the outcome of these farming reforms is the implementation. I sincerely hope that we are fair to the farmers and do not bite the hand that feeds us.
