New farm bills: New Delhi perspective Vs Farmers perspective over MSP and APMC

Constructive protest in a democracy is a sign of the empowerment of the people. Protest by Punjab farmers in New Delhi with respect to new farm bills over MSP and APMC is a classic example. Unlike the Shaheen Bagh protest, it was one of the mature protests. The main pillars of the mature protest in a democratic spirit are – (1) There should be a proper and precise set of demands i.e. with respect to MSP and APMC.

It should not be vague or based on political and religious motivates. (2) There should be a leader who could put forth these demands before the government. (3) The mean of the protest MUST be non-violent and in a democratic capacity keeping respect for the sovereignty of India. All these three things are there in farmer’s protests which were absent in the case of Shaheen Bagh case. Everybody has the right to protest but the protest should not be conducted in an anarchical manner.

Concerns of farmers from Punjab are genuine to some extent. One size fit for all approach with slogans like “One India, One Agriculture Market” is may not work in all cases. Every state has its different potential and challenges in agriculture because of different climatic conditions. New Delhi should refrain from any kind of uniformity. For e.g. APMCs have benefitted Punjab a lot because of their activeness. It was failed in States like Bihar due to corruption and muscle power. Instead of revamping the bad performing state, pushing a successful state for a new and uniform plan, is what forcing the farmer especially from Punjab to walk on the road to protest against the three new legislations.

New legislations

During COVID-19 lockdown Central government came up with three ordinances over the new farm legislation. Later on, it was passed by the parliament. These are – The Essential Commodities (Amendment) Act 2020, The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act 2020 [FPTC], and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020 [FAPAFS].

The major area of controversy rotates around the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act 2020. However, the rest two Essential Commodities (Amendment) Act 2020 and FAPAFS are also being criticized especially in the context of contract farming. The major focus of this article will cover the controversies in legislation i.e. FPTC.

Under the Essential Commodities (Amendment) Act 2020, the government tried to liberalize the regulatory system. The government wants to regulate certain food items including cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances like war, famine, extraordinary price rise, and natural calamity of grave nature. It shows that the government is not letting completely on market but put safety valve to regulate in special circumstances from the consumer point of views.

In a normal situation, the government doesn’t want to hoard the commodities which unnecessarily leads to a rise in the price of commodities as it did in the earlier system. Assertion for keeping stock limit was logical in a situation when there is uncertainty in the production of goods from the farm. India is no longer faces food shortage problems, according to the Economic Survey, 2020. India is the largest exporter of rice (25% of the world). Thus, this step could be a logical step in the right direction.

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The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020 [FAPAFS] has been giving legal sanctions to contract to farm. It would help corporates enter the agriculture sector and may increase productivity. But in the Indian context, the liberal ecosystem has created a narrative that looks at ‘Private players as a monster.’ A similar narrative was coined even then also when the former PM of India, Rajiv Gandhi was bringing computers to India. It was being put forth in a poetic style which we even study during the school day that “Machine ne to hamare hath kat diye.”

But today nobody can ignore its significance from job creation in the IT sector to the education and space sector. This legislation says that the price to be paid for the purchase of farming produce will be mentioned in the agreement. There is also a safety valve over disputes where a board is created for dispute resolution. If it is not solved within 30 days then parties may approach the SDM for resolution. Approaching SDM could be a potential bone of contention that needs to be resolved.

A major area of controversy rotates around the third act i.e. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020. It seeks to provide for barrier-free trade of farmers’ produce outside the markets notified under the various state agricultural produce market laws (state APMC Acts). It does not explicitly provide for dismantling the APMCs, abolishing the state Mandis, or ending the minimum support price (MSP) system. It also ensures timely payment to the farmers.

A person transacting with a farmer will be required to make payments to the farmer on the same day, or within three working days in certain conditions. The new law prohibits state governments from levying any market fee, cess or levy on farmers, traders, and electronic trading platforms for any trade under the Ordinance. There is also a provision for dispute resolution with respect to trade in case of conflicts.

Issues over APMC

From the perspective of New Delhi, the Green revolution has addressed the production side of the farmer’s issue but market side issues have been hanging since then. It was also deemed as one of the reasons why farmers are not getting good prices. The production side was revamped through the green revolution which has increased the productivity of the food grains. But due to a lack of a proper supply chain in the market, farmers were forced to sell their grains either to the local traders or destroy their perishable products due to the very low price.

Until and unless their product gets a clear and regular space for movement, farmers won’t get a good price. According to New Delhi, these laws specially ECA act 2020 and FPTC act 2020 collectively could be the potential to transform farmer’s situations and meet the promises made to double their income by 2022.

Prominent agricultural economists, Ashok Gulati, calls it the 1991 moment for Indian agriculture. Economic reform in 1991 doubled the slow economic growth of the 1970s socialist era of Indira Gandhi but bypassed agriculture marketing reforms. Under the leadership of former PM late Atal Bihari Vajpayee, agri-marketing reforms became high on the agenda. The UPA government, from 2004 to 2014, did not pursue any major agri-marketing reforms. It was Modi 2.0 when it grabbed the opportunity amid COVID-19.

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Professor Gulati in his article at the Indian express claims that these new legislative will provide greater choice and freedom to farmers to sell their produce and to buyers to buy and store, thereby creating competition in agricultural marketing. The competition is expected to help build more efficient value chains in agriculture by reducing marketing costs, enabling better price discovery, improving price realization for farmers, and, at the same time, reducing the price paid by consumers.

Critique of the farm bills have been targeting two major points – First, The new law, FPTC, prohibits the state government from levying any market fee, cess, or levy on farmers, traders, and electronic trading platforms for any trade under the Ordinance. Indian express mentions statistics that Punjab earns Rs 3500 to 3,600 crores annually in the form of market fee and rural development fund (RDF) for providing its yards for selling wheat, paddy, Basmati, and cotton crops in the APMC premises. Such taxes are paid by the buyers, not by the farmers.

It was even utilized to maintain 70,000 km-rural link roads and for the construction of village streets. Second, in the dispute resolution mechanism, the parties involved in a trade-related dispute may apply to the Sub-Divisional Magistrate (SDM) for relief through conciliation. Since bureaucrats are infamous for corruption, it makes it logical for the left-liberal ecosystem to criticize it.

Experts and farmers are apprehending closer of APMCs. The new legislation contains the provision regarding having an overriding effect over the state APMC acts (Section 14). APMC has been successful in Punjab. Farmers from Punjab have been enjoying its benefits and are not ready to accept any changes except the status quo. Since new laws are committed to removing the middle man, provisions like electronic trading platforms and selling outside the APMC have been provided.

Down to earth reports that about 36,000 Arhtiyas (commission agent) in Punjab earned Rs 1,600 crore as a commission fee. Around 3 lakh workers are engaged in loading and unloading activities at the Mandis and their income was Rs 1,100 crore last year. Punjab farmers have been dependent on Mandis. For e.g. Of 127.45 lakh tonnes of wheat purchased in Punjab’s Mandis in 2020, private traders bought just 0.58% of the total. (As per down to earth magazine)

MSP apprehensions and liability

There has been NO official declaration or provisions in the laws to end MSP given for different crops. Still, there are apprehensions among farmers and experts. The series of events have raised their eyebrows and confirms their apprehensions regarding weakening the MSP system: First, The way input cost on crops is increasing, correspondingly, MSP has not been increasing at the same pace in the last few years.

Second, Government has not seen interest in implementing Swaminathan’s recommendation to fix MSP at 50% above the input costs. Third, Commission for Agricultural Costs and Prices has been recommending to the government that open-ended procurement of food grains should be ended as the policy has led to excess grain stocks and affected crop diversification. Fourth, National Commission on Agriculture recommended 41000 Mandis in India but India has ONLY 6630 Mandis in 2019.

Fifth, Soon after coming to power in 2014, PM Modi set up the committee under Shanta Kumar to restructure the FCI and give inputs for agriculture reform. It was Mr. Kumar’s recommended which was implemented by Modi Government in 2019 for giving Rs 6000 per year to farmers as cash benefits under the PM-KISAN scheme. Shanta Kumar Committee also pointed out that only 6% of farmers are covered under MSP.

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So, the scrapping of APMCs will not be against the interests of small and marginal farmers. Sixth, if there is apprehension on APMCs then it is natural for the farmers to feel insecurity for MSP because farmers from Punjab sell the majority of grains in Mandis where they get MSP, and role of private players are less than 1%.

Options before Government

The maturity of government reflects from the fact that how government stands on their decision and how are they ready for falsification. The government should listen to farmers are sort out their apprehensions. The government would not commit mistakes to take back legislation because it may work as motivation for the anti-CAA protestors. Thus, the best possible option is to address their apprehensions. First, Government should not hesitate in making MSP a legal right because it was even recommended by Commission on Agriculture Costs and Prices (CACP) in 2018.

It will lead to the end of the debate on APMC. Second, Government should come up with the promise to increase the number of APMCs as recommended by the National Commission on Agriculture (NCA). NCA recommended for 41000 Mandis but there are ONLY 6630 Mandis in 2019. It will automatically lead to an end whole debate.

Third, there is a dispute resolution mechanism under the contract farming legislation. It’s not a big deal for the government to shift the responsibility of dispute resolution from SDM to the judiciary. Fourth, Government needs to effectively communicate to the farmers and experts. Any big reform needs strong communication, otherwise strong will power of a government seems like ‘dogmatic’ and ‘tyranny.’

Effective communication will decide whether it will be Thatcher’s moment or Anna’s moment. or So far agriculture minister has not been able to successfully communicate to the farmers. New Delhi needs to adopt these three ways to address Punjab farmer’s concerns. Because it is an art of opposition in democratic politics to prove the ruling govt dogmatic. However, in electoral politics, no government would afford to make agrarian society unhappy due to electoral interdependence.

Footnotes

  1. PRS Legislative Research | The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020
  2. PRS Legislative Research | The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
  3. PRS Legislative Research | The Essential Commodities (Amendment) Bill, 2020
  4. Down to Earth | 6 reasons why India has failed to solve the riddle of agriculture marketing
  5. Down to Earth | Why Punjab stands to lose from farmers’ produce trade and commerce ordinance
  6. The Indian Express | From Plate to Plough: A 1991 moment for agriculture
  7. India Today | What is PM Kisan Samman Nidhi Yojana
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