The ongoing stand-off between the Union government and protesting farmers does not show any signs of a resolution at the moment. Farmers, especially in Punjab and Haryana, have been protesting against the three agriculture laws enacted by the central government.
The situation is extremely volatile since the farmers are determined not to leave Delhi and camp therein for months for further protests.
The Three Contentious Laws: A quick recap
(1) Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:
- It expands the scope of trade areas of farmers produce from select areas to “any place of production, collection, and aggregation”. It allows electronic trading and e-commerce of scheduled farmers’ produce.
- It prohibits state governments from levying any market fee, cess or levy on farmers, traders, and electronic trading platforms for trade of farmers’ produce conducted in an ‘outside trade area’.
(2) Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020:
- It creates a national framework for contract farming through an agreement between a farmer and a buyer before the production or rearing of any farm produce.
- It provides farmers engaging with Agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce by a mutually agreed price framework.
(3) Essential Commodities (Amendment) Act 2020:
- It allows for the center to regulate food items through essential commodities.
- It also requires that imposition of any stock limit on agricultural produce be based on price rise
Agitators at the forefront
Farmers in Punjab and Haryana are known for their adamant attitudes. They are heavily dependent on public procurement and assured price through MSP. Nearly 88% of the paddy production and 70% of the wheat production in Punjab and Haryana (in 2017-18 and 2018-19) has been absorbed through public procurement.
Why are farmers fuming over these laws?
These bills sought to bring much-needed reforms in the agricultural marketing system. However, farmers are apprehensive that the free market philosophy supported by these bills could undermine the Minimum Support Price (MSP) system and make farmers vulnerable to market forces.
Let us look at all their concerns one by one:
(1) Fear against the end of Mandi System
- The APMC regulates the mandi (marketplace) where farmers bring their produce, and therefore, guarantees that they receive the MSP.
- Since the state governments will not be able to regulate the trade outside the APMC markets, farmers believe the laws will gradually end the mandi system and leave farmers at the mercy of corporates.
(2) Fear over MSPs and procurement guarantee
- Farmers believe that dismantling the mandi system will bring an end to the assured procurement of their crops at MSP.
- Similarly, farmers believe the price assurance legislation may offer protection to farmers against price exploitation, but will not prescribe the mechanism for price fixation.
- They are demanding the government guarantee MSP in writing, or else the free hand given to private corporate houses will lead to their exploitation.
(3) Fear of Arhatiyas
- The arhatiyas (commission agents) and farmers enjoy a friendship and bonding that goes back decades.
- On an average, at least 50-100 farmers are attached with each arhatiyas, who takes care of farmers’ financial loans and ensures timely procurement and adequate prices for their crop.
- Farmers believe the new laws will end their relationship with these agents and corporates will not be as sympathetic towards them in times of need.
(4) Fear over the end of subsidised electricity
- Farmers concerns are also fuelled by the proposed Electricity (Amendment) Bill 2020 which might end their access to subsidised electricity.
- The bill seeks to create an Electricity Contract Enforcement Authority (ECEA), a move aimed to further centralization.
- Another concern is the transfer of subsidies through DBT. Farmers will have to pay first from their own pocket, after which they will get subsidies.
(5) Fear over Contract Farming
- The FAPA Act formalizes contract cultivation through a “national framework” and explicitly prohibits any sponsor firm from acquiring the land of farmers through purchase, lease or mortgage.
- But farmers fear over the big corporate players’ monopoly over food processing industry and its supply chain dynamics.
- They fear that their ownership rights would be at risk as the Act provides for debt instruments for the companies which have their own recovery mechanisms.
(6) Fear over dispute resolution
- The FAPA Act provided for a three-level dispute settlement mechanism by the conciliation board, Sub-Divisional Magistrate and Appellate Authority.
- Since the highest level of appeal for the farmer against any private entity was the Appellate Authority, the farmer is effectively prevented from moving the Court.
- Thus, they claim that the Act was highly skewed in favor of private entity as the individual farmers did not have the resources that private companies had.
(7) Fear over EC Amendment Act
- The original EC Act de-regulated food items including cereals, pulses, potato, onion, edible oilseeds, and oils, and could only be regulated in the extraordinary circumstances.
- The new law states that government regulation of stocks will be based on rising prices.
- This stock-limiting puts farmers at the peril of the government and thus prevent them from making from any profit during any extra-ordinary circumstances as most of the time they only have to bear losses. (Ex. Onion farmers in Maharashtra).
What are the broader concerns?
Agriculture per se deals with everything that a farmer does — right from field preparation and cultivation to also the sale of his/her own produce.
(1) The centre has overreached
- Article 246 of the Constitution places “agriculture” in entry 14 and “markets and fairs” in entry 28 of the State List.
- But entry 42 of the Union List empowers the Centre to regulate “inter-State trade and commerce”.
- While trade and commerce “within the State” are under entry 26 of the State List, it is subject to the provisions of entry 33 of the Concurrent List – under which the Centre can override.
- The Centre, in other words, has passed a law that removes all impediments to both inter-and intra-state trade in farm produce, while also overriding the existing state APMC Acts. The FPTC Act does precisely that.
(2) States authority grossly surpassed
- The act of primary sale at a mandi by the farmer is as much “agriculture” as production in the field.
- “Trade” begins only after the product has been “marketed” by the farmer.
- Going by this interpretation, the Centre is within its rights to frame laws that promote barrier-free trade of farm produce (inter-as well as intra-state) and do not allow stockholding or export restrictions.
- But these can be only after the farmer has sold. Regulation of the first sale of agricultural produce is a “marketing” responsibility of the states, not the Centre.
(3) A totalitarian move
- There is a debate around the constitutional provisions with regard to the respective domains of the State and the Union with regard to agricultural marketing,
- However, issues affecting the farming community have a far greater bearing on the States relative to the Centre.
- While enacting the Bills, the Centre extended little consideration to the sensitivity or consultations of the States who are busy fighting the pandemic this hour.
(4) Media insensitivity
- Punjab and Haryana farmers have been at the forefront of this struggle and the other regions were slow to catch up.
- The media terming it as a movement of ‘middlemen’ carried out by opposition parties and covertly supported by the ‘Khalistanis’ is the most distressing aspect.
- This claim, for which no evidence has been offered, has been amplified by many news channels.
Wait! Before you make up your mind ….. Ever wonder, why did the govt intervene through these legislations?
(1) Flawed argument over MSP
- These bills do not mention to do away with MSPs. Moreover APMCs have never assured that farmers get MSPs (which itself has no legal backings).
- Over 80% of all land holdings were small and marginal with less than 2 hectares of farm land and hence, most of them, far from selling, end up buying food for even their own consumption.
- In such cases, the rise in MSP actually hurts these farmers instead of helping them. The government assured price only helps a few large farmers.
(2) Food security is no more an issue
- The roots of state intervention in agriculture, from government procurement to rationing and restrictions on private traders are to found in recurring food shortages in the period after Independence.
- Many experts believe that these incentives are not needed today because India is a food-surplus country now.
- This is what the current reforms seek to abolish. The sharp rise in India’s agriculture exports is often cited as evidence of this fact.
(3) An equalizing move for all
- The average nutritional intakes in India are much lower than just developed countries and, the purported food surplus seems to be the result of inadequate food consumption due to affordability issues.
- There still exists malnutrition as most of the public cannot afford good diets.
- According to research by the International Food Policy Research Institute, 63.3% of people in rural India could not afford the Cost of a Recommended Diet (CoRD).
(4) Protesting farmers are better off than the rest
Data from a 2013 survey carried out by the National Statistical Office (NSO) shows that farmers from Punjab and Haryana had the highest incomes in the country.
- The farmers who are protesting outside Delhi’s borders are among the richest among their peers in India.
- A disproportional share in government procurement at MSP plays an important role in this.
- States where there are no large-scale MSP operations tend to have lower prices in private markets as well. That incentivizes the richer farmers to lobby for the continuation of the status quo.
(5) Contract farming was a long pending issue
- Contract farming in India has shown that marginal and small farmers are generally excluded.
- The problems they face include the following- highly one-sided i.e. pro-contracting agency contracts, delayed payments, undue rejections and outright cheating among others.
- Hence it was necessary for the govt. to bring legislation.
Much of government procurement at MSPs — of paddy, wheat and increasingly pulses, cotton, groundnut and mustard — happens in APMC mandis. In a scenario where more and more trading moves out of the APMCs, these regulated market yards will lose revenues. “They may not formally shut, but it would become like BSNL versus Jio. And if the government stops buying, we will be left with only the big corporates to sell to….
Govt and farmers at crossroads: A timeline
In its first term, the government was forced to retract its proposal to ease the 2014-15 land acquisition norms fearing a political backlash, following massive protests across the country. But the peace it bought with the farmers was short-lived.
Farmers’ angst in nooks and corners of rural India had been simmering, bursting out in spurts of violence like the one witnessed in Madhya Pradesh’s Mandsaur in 2017 where farmers were protesting, demanding loan waiver and higher crop prices.
This was followed by the 2018 farmers’ agitation in Maharashtra. Moved by the poor implementation of the loan waivers, thousands of farmers undertook a march from Nashik to Mumbai demanding redressal. Though then the government decided to fulfil the demands, it, however, retreated.
Why do farmers get on the streets?
- It’s not that farmers’ agitation has picked pace only since 2014. But agriculture sector experts say farmers’ grievances have mostly remained unaddressed.
- Rural distress has been on the rise, stoking farmers’ anger. Politics has added fuel, making a lethal cocktail.
- Even though Punjab and Haryana are not as critical to the country’s food security as they were a few decades ago, they are extremely important in India’s farm economy.
- Decades of high farm earnings also mean that the peasantry in these two states has much more in terms of material wherewithal to fight for its interests.
- Therefore, the fact that the government’s attempts to undermine their interests by enacting the recent farm laws have triggered a sharp political backlash is hardly surprising.
What do they want?
- Farmers would want no restrictions on the movement, stocking and export of their produce.
- For example, Maharashtra’s onion growers have vehemently opposed the Centre’s resort to banning on exports and imposition of stock limits whenever retail prices have tended to go up.
- But these restrictions relate to “trade”.
- When it comes to “marketing” — especially dismantling of the monopoly of APMCs — farmers, especially in Punjab and Haryana, aren’t very convinced about the “freedom of choice to sell to anyone and anywhere” argument.
From the government’s standpoint, the elephant in the room would be if the farmers insist on an additional demand: Making MSP a legal right. That would be impossible to meet, even if the three farm laws get repealed.
What options does the government have?
While the farmers want the three farm laws to be repealed and a new law with a provision that ensures the MSP is not tinkered with, the government has maintained that MSP is not being done away with.
These may be just fears, but they aren’t small.
(1) Repealing the laws
- Punjab farmer leaders, including two major political parties, demand repeal of these laws.
- Overall, almost 90 per cent of the agri-produce is sold to the private sector. However, repealing would mean bringing back controls, licence raj and the resultant rent-seeking.
- Milk, poultry, fishery, etc. don’t go through the mandi system and their growth rates are 3 to 5 times higher than that of wheat and rice.
(2) Legally enforcing the MSPs
- Another demand is making the MSP statutory and legally binding even on the private sector.
- This is impractical as there are 23 commodities for which MSPs are announced, but in actual practice only wheat and rice enjoy MSPs in any meaningful manner and that too only in 6-7 states.
- The FCI is overloaded with grain stocks that are more than 2.5 times the buffer stock norms.
- If the government cannot cope up with excess production of just wheat and rice in any meaningful way, think of how it will handle 23 commodities under MSP.
(3) Implementing Price Stabilization Scheme
- The third policy option is to use the Price Stabilization Scheme to give a lift to market prices by pro-actively buying a part of the surplus whenever market prices crash.
- Farmers can use Commodity Derivatives Exchanges where farmers can buy “put options” at MSP before they even sow their crops.
- If the market prices at the time of harvest turn out to be below MSP, government can compensate them partly for lower market prices (which again aren’t feasible for the govt.)
(4) Decentralizing MSPs and other subsidies
- Another option is to totally decentralize the MSP, procurement, stocking, and public distribution system (PDS).
- The Centre can get off from MSP, PDS, fertilizer subsidy, and MGNREGA and let the states decide it.
- So, the whole money on food subsidy can be allocated to states on the basis of their share in all-India poverty/proportion of vulnerable population.
A bigger challenge at the moment
- Several farmers said that they had come prepared to dig in for a prolonged struggle.
- Farmers are carrying ration that can last months and are in no mood to turn back. Any use of force by the state may lead to a major law and order disruption.
- In the current situation, the police have already used water cannons and tear gas to disperse the agitated farmers — but both methods have failed.
- This could lead to a severe law and order crisis.
- Moreover, international voices are also rising on the credibility of the government to address the farmers concerns, which is not a healthy sign.
Way forward: Give reforms a chance
Reforms in agriculture have been overdue. There has been rhetoric in last 10 years in favour of agricultural but very few concrete steps have been taken.
One rhetoric is very clear now. The APMC mandis were never filled with good samaritans and neither is the MSP religiously enforced everywhere.
- Just passing these laws won’t be enough. The success of liberalizing the farm market will hinge on effective implementation, constant monitoring and timely action.
- Accelerating research and academic excellence could bring in the ‘best in class’ technologies and can multiply farmers’ incomes.
- As far as the APMCs and commission agents are concerned, the governments should work on a clear roadmap to modernize them by facilitating them in providing value-added services.
- They could be leveraged to set-up grading and sorting, warehousing, cold chains and food processing infrastructure. This way, it is a win-win-win for the state government, farmers and the commission agents.
- While taking the control away from these agents, the government must also ensure that the gap is filled with foolproof mechanisms to ensure timely payments to farmers to avoid any cash crunch.
Don’t fear the competition
- When we create competition for their produce, the price improves. There are more buyers, more choices. Farmers can reap the benefits of that.
- The COVID-19 crisis opened a window of opportunity to reform the agri-marketing system. Patience and professionalism will bring rich rewards in due course, not noisy politics.
- The governments must try to allay the fears of farmers over the Farm Bills and it is never too late to rethink. Unconditional talks with farmers would be an appropriate starting point.
- There is genuine uncertainty over what private procurement will mean. Will it mean greater corporate power over farmers, possibly unhealthy monopolies or duopolies?
- Leveraging the reforms and moving forward rather is the most feasible solution than to protest amid the pandemic.
- What farmers need and are asking for is legally guaranteed remunerative prices. If the Bills are perceived of good intent, then the government should not shy away from proper parliamentary scrutiny of all its details.
- Political parties that are opposing these Bills should coordinate better keeping farmers’ interests in the forefront, and not their party politics.