28 highlights
-
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, allows the farmers to sell their produce outside the Agricultural Produce Market Committee (APMC) regulated markets. The APMCs are government controlled marketing yards or mandis.
-
As mentioned earlier, the farmers of Punjab, Haryana and Western Uttar Pradesh, are the ones, primarily protesting. Hence, farmers across the country are not protesting against these Bills.
-
The farmers of these states are primarily protesting because the government procurement infrastructure in these areas is very good.
-
In order to encourage farmers to adopt a new variety of wheat, the government offered procurement through the Food Corporation of India and a minimum support price (MSP) to farmers, which was declared before every agriculture season. Since then the system has evolved and the government sets an MSP on 23 agricultural crops, though it primarily buys only rice and wheat.
-
The fear among farmers is that the next step in the agriculture reform process will be the doing away of government procurement process as well as the MSP. This is going to primarily hurt the farmers from Punjab and Haryana, who benefit tremendously from this.
-
The farmers who benefit from the government procurement process and MSP are medium and large farmers.
-
Also, if the government purchases and the MSP are done away with, there will be further danger of free power, fertiliser subsidy etc., being done away with as well.
-
Now, you cannot fault farmers for doing this. If they are incentivised to grow something, with a regular buyer available in the form of the government, they are bound to do that. Why take a risk, when a safer option where the government increases the price of rice and wheat every year, and buys what is produced, is available.
-
In fact, it is safe to say that if the government procurement is lowered (even without the MSP being done away with), the price of rice and wheat will fall. If private markets are established, it will fall even faster. This is something that the big farmers of Punjab and Haryana, don’t want, hence, the protests.
-
Punjabis themselves eat very little rice. But the solid procurement system in place ensures that the Punjabi farmers grow a lot of rice.
-
As can be seen from the above table Punjab and Haryana are again the major beneficiaries when it comes to procurement of wheat. Uttar Pradesh is the biggest producer of wheat but only around 11-12% of its production gets procured by the government.
-
The other big fear among farmers, those representing them and many economists, is that large corporates will take over contract farming.
-
So, while the big farmers of Punjab and Haryana might feel that the government will do away with procurement and MSP, it is not possible at one go. What is possible is that the government can cut down on procurement, in order to ensure that FCI does not have to maintain excess stocks like it has over the last few years.
-
Secondly, if contract farming and trade markets other than APMC have to pick up, the state governments need to be on board as well. No corporate or businessman is going to attempt contract farming or setting up trade markets where agricultural produce can be sold by farmers, unless the state government is on board as well.
-
The government resorted to reform by stealth and aggressively pushed the Bills through the Parliament, without either talking to the Opposition parties or farmer organisations.
-
There are multiple problems with the way the APMC markets across the country have been functioning.
-
“Market Committees are reportedly democratic institution but in fact… [the] Committee is dominated by politicians and traders not by farmers as required.”
-
“The provisions of the APMC Acts are not implemented in their true sense. For example, market fee and commission charges are legally to be levied on traders, however, same is collected from farmers by deducting the amount from farmers’ net proceed.”
-
“Market fee is collected in some States even without actual trade-transaction has taken place and simply on landing the commodity at processing units. While in other States trade transaction outside the market yard is illegal.”
-
Having said that, the absence of any regulation in non-APMC trade markets is not a good sign.
-
It needs to be pointed out here that as per the Agricultural Census of 2015-16, 12.56 crore or 86.2% of India’s operational holdings are small and marginal that is less than two acres in size.
-
Hence, most of the farmers really don’t produce enough to be able to deal with any marketing system, the old one or the new one, in a direct profitable way.
-
For such small farmers to be able to benefit and get a better price for their produce without selling to a middleman, all kinds of other infrastructure is needed. These include everything from more cold storages to improved roads connecting villages to the newer markets that come up, power supply which can be relied upon (so that a cold storage can function like one) and traders who compete to get their produce.
-
In fact, the state of Bihar did away with the APMC Act in 2006 and didn’t get anywhere near higher incomes for farmers, given that the basic infrastructure to get market transactions going was not available.
-
Also, as usual, the central government hasn’t gone into the details. It has talked about how the farmers will benefit and is driving home that narrative aggressively, without really talking about the all the practical issues that will keep cropping up. (Remember demonetisation? Remember GST? Why does this feel like déjà vu?)
-
It is worth remembering that arthiyas (commission agents) who buy produce from farmers at APMCs, are locally influential people. Hence, assuming that parallel systems of buying and selling in the form of new trade markets, will come up automatically, is rather stupid
-
But prima facie given the abysmal ease of doing business in most states, I see no reason why the buyers won’t continue buying from the agents, instead of having to deal with many farmers.
-
Not surprisingly, farmers of Punjab and Haryana are worried. They would rather deal with the known devil, the government, who, they can always vote out in the next election. But how do you vote out a corporate?