Are the agriculture reforms pro-farmer or anti-farmer?

By Philip Mudartha
Bellevision Media Network

Mumbai, 22 Sep 2020: The Department of Agriculture, Cooperation & Farmers’ Welfare, on its website, states that three bills aimed at transformation of agriculture and raising farmers’ income were introduced in the Lok Sabha to replace ordinances promulgated on 5th June, 2020.

 

Legislations will enable barrier-free trade in agricultural produce and empower farmers to engage with investors of their choice, said Union Minister of Narendra Singh Tomar. These bills are:

1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020.

2. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020.

3. The Essential Commodities (Amendment) Bill, 2020.

 

The Modi-led NDA government said that the bills will empower farmers to engage with investors of their choice. It said that these steps are only the latest in a series of measures taken by the Government, which shows its continuous commitment to championing the cause of welfare of the farmers of India.

 

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020:

It seeks to provide for the “creation of an ecosystem” where the farmers and traders enjoy the freedom of choice relating to sale and purchase of farmers’ produce which facilitates remunerative prices through competitive alternative trading channels to promote efficient, transparent and barrier-free inter-State and intra-State trade and commerce of farmers’ produce outside physical premises of markets or deemed markets notified under various State agricultural produce market (APMC) legislations. It aims to provide a facilitative framework for electronic trading and for matters connected therewith or incidental thereto.

 

What is the “ecosystem” now?

Farmers face various restrictions in marketing their produce. There are restrictions for farmers in selling agricultural produce outside the notified APMC market yards. The farmers are also restricted to sell the produce only to registered licensees of the State Governments. Further, barriers existed in the free flow of agricultural produce between various States owing to the prevalence of various APMC legislations enacted by the State Governments.

 

This legislation is a historic step in unlocking the vastly regulated agricultural produce markets in the country. It will open more choices for the farmer, reduce marketing costs for the farmers and help them in getting better prices. It will also help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.

 

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020:

It seeks to provide for a “national framework on farming agreements” that protects and empowers farmers to engage with agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce at a mutually agreed remunerative price framework in a fair and transparent manner and for matters connected therewith or incidental thereto.

 

What is the “framework” now?

Indian agriculture is characterized by fragmentation due to small holding sizes and has certain weaknesses such as weather dependence, production uncertainties and market unpredictability. This makes agriculture risky and inefficient in respect of both input & output management.

 

This legislation will transfer the risk of market unpredictability from the farmer to the “sponsor” and also enable the farmer to access modern technology and better inputs. It will reduce cost of marketing and improve income of farmers. Farmers will engage in direct marketing thereby eliminating intermediaries resulting in full realization of price. Farmers have been provided adequate protection. Effective dispute resolution mechanism has been provided for with clear time lines for redressal.

 

The Essential Commodities (Amendment) Bill, 2020:

It seeks to remove commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. This will remove fears of private investors of excessive regulatory interference in their business operations. The freedom to produce, hold, move, distribute and supply will lead to harnessing of “economies of scale” and attract private sector/foreign direct investment into agriculture sector.

 

What is the “framework” now?

While India has become surplus in most agri-commodities, farmers have been unable to get better prices due to lack of investment in cold storage, warehouses, processing and export as the entrepreneurial spirit gets dampened due to existing Essential Commodities Act-1955. Farmers suffer huge losses when there are bumper harvests, especially of perishable commodities. The legislation will help drive up investment in cold storages and modernization of food supply chain. It will help both farmers and consumers while bringing in price stability. It will create competitive market environment and also prevent wastage of agri-produce that happens due to lack of storage facilities.

 

Explained: Why farmers are unhappy:

The passage of these three agriculture related Bills in the Lok Sabha does not seem to have gone down well with farmers and the opposition parties, with protests by the farmers erupting in several states.

 

What does the government say about the Bills?

The government claims the legislations will transform the sector and raise farmers’ income. The Centre had promised to double farmers’ income by 2022. It says the Bills will make farmers independent of government controlled markets and fetch them a better price for their produce.

 

The Bills propose to create a system where farmers and traders can sell and purchase products outside ‘mandis’. They also encourage intra-state trade and propose to reduce transportation cost. The Bills formulate 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. The bills provide benefits for small and marginal farmers with less than five hectares of land.

 

What are the farmers’ concerns?

Farmers fear that the state guaranteed Minimum Support Price (MSP) will not be available and the state may not procure their produce at the MSP. They also believe that agri-businesses and big retailers being corporate houses will enjoy the upper hand in negotiations, thus putting the “lesser educated” farmers at a disadvantage. The farmers also fear that the companies may dictate prices of the commodities.

 

"The new change in the farming sector is the need of the 21st century and our government has brought this reform for the farmers," PM Modi said while assuring the farmers that the MSP system won’t be touched and government purchase of their produce would continue. "I assure every farmer of the country that the MSP system will continue to operate. The way work was done there before, will continue". But there is trust deficit in PM Modi now, as he has failed to deliver on his past promises.

 

The increase in MSP on Monday 22nd September 2020:

To assuage the raging farmer protests over the contentious farm bills passed in the Parliament, the Union government on Monday decided to raise the MSP by 6% only to further increase the furor of the Opposition parties who now plan to hit the streets with the protests.

 

MSPs are also of concern to rice and wheat farmers, who sell directly to the government at these guaranteed prices. They fear that government purchase will give way to private buyers, who arm could twist them to sell at lower rates. These guaranteed prices, which the government today raised, are often a source of credit in hard times like droughts and crop failure.

 

In addition to farmers’ concerns, state governments, particularly of Punjab and Haryana, fear that if private buyers start purchasing directly from farmers, they will lose out on taxes that are charged at mandis. The potential scrapping of mandis, they also argue, endangers the jobs of millions who work there.

 

The “Rosy” view of the Farm Reforms: 

1991 is remembered as a watershed moment in India’s history. The license raj was dismantled. India opened its markets to international trade, investment and competition. As a result, in the 30 years since then, we quadrupled our per capita incomes. In the 40 odd years between Independence and the 1991 reforms, per capita incomes only doubled. However, an important group was left out of the reform process. India’s agriculture sector remained regulated by the archaic Agriculture Produce Marketing Committee (APMC) Acts. 2020 will be remembered as a watershed moment in India’s economic history, much in the same way 1991 was, as this year marks the year where our agriculture sector was finally unshackled and set on the path towards modernization.

 

The “contract farming” to service providers:

Farmers can enter into agreements with farm service providers. This will give the ‘Farming as a Service’ (FaaS) a huge fillip. Farmers will be able to enter into agreements with food processors to grow process able varieties and sell them at assured prices. Nor will they be restricted in to whom and where they sell their produce. Several agri-tech startups operate in this space, utilizing technologies such as Artificial Intelligence (AI) to provide crop intelligence as well as grade and assay produce. Enabling technological interventions in Indian agriculture has the potential to transform this sector, based on the strong foundations these reforms enable.

 

Why are allies of NDA protesting?

The Shiromani Akali Dal (SAD), junior partner in the NDA has withdrawn its minister in protest. Another ally, the Biju Janata Dal (BJD) has opposed the bills in their current forms and wants them to be sent to the standing committee in the Lok Sabha and select committee in the Rajya Sabha for legislative scrutiny. "This is required to ensure poor and marginal farmers are adequately protected," the party spokesperson said.

 

There is no “legal promise of MSP in the bills: 

 The bills nowhere states that the current system of MSP based procurement of food grains, mainly staples wheat and paddy by the government agencies would continue or end. The APMCs wouldn’t stop functioning. Nothing prevents farmers from selling their produce in the mandis or traders and processors from buying in these mandis. They will not be forced to sell or buy on the physical premises of APMC mandis, thus liberating the farmers and their service providers from the stranglehold of APMC mandis.

 

But the farmers, at least from the said states, seem least interested in the promised freedom. For them, the threat to the existing system, which has worked reasonably well with all its limitations, is what matters.

 

For farmers, and laborers in the mandis, the gains from “freedom” are theoretical. The APMCs may be rendered unviable, when trade moves outside and the government stops buying. These threats are practical and real. What if the neighboring mandi does not earn enough market fee and turns into a BSNL vis-a-vis a Jio or Airtel?

 

“For corporate institutions, the first year is loss making, the second year is breakeven and the third year is profit making. If allowed to buy directly, they will first ensure that the mandis close down without the government doing it. Will the dismantling of APMC monopoly actually lead to their becoming redundant? Secondly, would they result in corporate agri-businesses establishing direct connection with farmers and eliminating market intermediaries? These are questions that haunt farmers and their co-operatives.

 

Who is a “farmer” under the bill?

The bill defines the farmer as an individual engaged in the production of farm produce either by self or hired labor. It includes a “Farmer Production Association” (FPO). A FPO means an association or group of farmers, registered under any law or promoted under any central or state government scheme.

 

Who is a “sponsor” under the bill?

An individual, a FPO, a trader, a registered agri-business firm or a farm produce marketing corporation can be a “sponsor” to a “farmer” or FPO. The farmer can contract to farm land not belonging to him (hired farms) and he can find a sponsor who will execute a contract to supply necessary inputs, technology and then off-take the produce at an agreed price for given quality of produce. The quality can be assessed by the sponsor or a third party expert as stipulated in the contract. All this is fine, except that the small and marginal farmer is sure not to posses the legal mind required to enter into such complex contracts. Any grievances will have to be redressed through the Sub-Divisional Magistrates (SDM) only and not through any civil courts will put so much power in the hands of the SMD, the farmer will only be at the receiving end of the corrupt practices in connivance with the moiré powerful sponsor.

 

What do expert critics say? 

P. Sainath, the founder editor of the People’s Archive of Rural India and a Magsaysay Award Winner for journalism has said that the bills are an attempt to wipe out the fortunes of farmers. While there were many criticisms of the concept of both the APMC and the MSP, the options being provided under the bill would ensure that large corporate houses would arm twist farmers into being paid the least remunerative prices.

 

He pointed out that Bihar which scrapped its APMC Act in 2006 and there has been no resultant “liberation” of the farm sector. Farmers were already subject to murderous price fluctuations and the three farm Bills would create major discontent amongst farmers and throw the community into utter chaos. “If the UPA couldn’t shoot straight, the NDA can’t stop shooting,” he said.

 

Another journalist who has done fieldwork in Haryana for an anthropological study suggests that the agriculture and horticulture departments at the district levels and below are not equipped to ensure enforcement of the new rules.

 

For instance, in Haryana, at the level of agricultural bureaucracy, whose officials are primarily tasked with enforcement of rules and regulations within the department of agriculture, there is a severe lack of class II officers called Agriculture Development Officers (ADOs). Almost 60% of the sanctioned posts for ADOs in Haryana are vacant. Senior most ADOs have been given the charge of Block Agriculture Officers (BAO) at several places. The crux of these laws is implementation. The field level experts point out that the government lacks the human talent at the Grama and or Block levels to enforce the provisions of the three new laws.

 

 

The “contrarian” views: 

There are arhatiya (commission agent) in Haryana under the present APMC system. The journalist was told that fake invoices are generated by rice millers and the equivalent amount of produce are sourced from other states such as Bihar (which repealed its APMC Act in 2006) at a price lower than the MSP announced by the Haryana government.

 

The presence of all these inefficiencies and issues, however, does not mean that APMC markets are inherently problematic. APMC markets have been an important medium for price discovery at the local level for the farmers. Moreover, APMC markets are the “last resort for millions of marginal and small farmers who would never be attractive to corporate buyers, individually or perhaps even collectively, through FPOs.”

 

For instance, the repeal of the APMC Act in Bihar in 2006 ostensibly for enabling free private trade in agriculture has neither helped the farmers in the state who have been forced to distress sell their produce year after year well below the MSP nor has been able to ensure private investment in the development of market yards. Therefore, the need has been to reform the existing APMC markets and sub-markets in the rural areas, and also create newer ones in order to reduce the burden on the existing ones.

 

 

Summary of critical views: 

There are two broader concerns: 1) the principle concern with contract farming is regarding the negotiating power of the two parties involved. It seems unlikely that individual farmers might find themselves equipped or powerful enough to negotiate with corporate houses or big-pocket sponsors to ensure a fair price for their produce. Approaching the office of SDMs might be a hurdle for millions of small and marginal farmers who might get into a farming agreement with a powerful entity. 2) the bills say that the quality parameters can be mutually decided by the two parties in the agreement. But the quality aspect will become crucial when a few corporate houses will try to usher in uniformity which might end up adversely impacting the already skewed agro-ecological diversity in the country.

 

Summing up, it is palpable that the three bills will have far-reaching and varying impacts depending on the social, political, economic and cultural contexts of the respective states. The set of agricultural ‘reforms’ promulgated while bypassing the parliamentary debates and discussions, and also without consulting the states, are also bold in their tenor.

 

What scenarios may unfold in our coastal districts?

In the three coastal districts of Karnataka State, namely Uttara Kannada, Udupi and Dakshina Kannada, fertile farmlands have been deserted for want of farm inputs at affordable price levels. The farm hands are scarce; the owners have aged; their progeny have found profitable and sustainable vocations in either urban centers or abroad.

 

These bills provide such farmland owners an avenue to find a farmer (as defined in the bill), and turn into a sponsor. He/she, as sponsor, provide the inputs such as seeds, fertilizers, implements and so forth to the farmer who brings his traditional agriculture knowhow and the manual labor. The sponsors can off-take the farm produce in its entirety or partially as stipulated in the agreements. Both the farmer and sponsor have adequate skills to assess the “quality” of the farm produce, be it paddy, vegetables, fruits, coconuts, areca nuts, spices and herbs, sugarcane, etc. There is vast scope for educated urban dwellers to monetize their now fallow lands and earn reasonable returns.

 

(The details are taken from the official texts of the bills passed by parliament on 22nd September 2020 and will be Acts when published in the official gazette after the President signs them into laws.  Other views expressed are personal)

 

But such bold and unilateral moves by the Centre fail to incorporate and give due consideration to the immense diversity in the country, not just between the states in terms of land ownership, cropping patterns, historical functioning of agricultural markets etc. but also within them. Therefore, it is feared that the three ordinances rather than helping farmers, might end up being a source of distress for millions of small and marginal farmers in the country as have been observed in the past in cases of demonetization and COVID-19 related lock-downs.