The controversial farm sector bills that the Modi government has hastily and undemocratically pushed through during the recently held Monsoon session of Parliament are all set to override all state laws relating to agriculture and destroy India’s vast agrarian sector.
The government’s claim that the bills are aimed at ushering much required reforms in the farm sector and are also for the welfare of the farmers falls flat as bills are facing strong opposition from farmers as well as artiyaas who are up in the arm against the newly enacted laws. The states ruled by the principle opposition Congress party are seeking legal opinion to pass counter legislations in their respective assemblies to negate centre’s farm laws.
The opposition-ruled state government are opposing farm bills because they consider them as direct encroachment on the powers and functioning of state as agriculture and markets are state subject under the provisions enshrined in the Constitution of India. They are also being construed as an attempt contrary to the spirit of cooperative federalism. These states contend that the laws would curtail the efficacy of state legislations on matters mentioned under state list.
The centre is duty bound to respect the autonomy of states in a federal structure because the farm bills have a direct impact on state laws and for that reason such an attempt by the centre is being construed as violation of federal structure. Another serious concern that all the stake holders including farmers, state governments and commission agents have raised is not entering into consultations with them before the introduction of the bills in Parliament and not allowing proper discussion to take place in the Parliament because the government was in a hurry to get the bills passed despite of a curtailed session that was called even as the country has been facing COVID-19 pandemic.
On the first bill called the Farmers’ Produce Trade and commerce (Promotion and Facilitation ) Bill, 2020, the stake holders have raised three interconnected issues that include end of minimum support price, end of existing agriculture price mechanism system and loss of revenue and livelihood. The biggest apprehension of farmers is dismantling of MSP because in such a situation they fear exploitation by big private companies by means of hoarding and other wrong doings. They are also apprehensive of government’s move to do away with existing food grains markets popularly called mandis replacing them with the private grain markets, which will end the assured procurement of food grains at MSP.
The right-wing Hindu nationalist BJP led government’s call for one nation; one market has also met with widespread opposition as the farmers unions have replaced it with one nation, one MSP. The purpose of the government to enact such a law is to end the APMC food grain market system and force the farmers to sell their produce to private players at the price of their choice because of non-existence of MSP. In case one crop is failed due to bad monsoon or other natural calamities, the private companies would hoard food grains and sell them at higher prices.
Even under the current system farmers are already free to sell to anyone, as most APMC acts contain exclusion clauses. Therefore, freedom to sell outside the APMC controlled mandis were never curtailed by these acts and APMC laws only regulate the first transaction between farmers and the buyer- not the trade that followed.
Many states, including Punjab, have amended their APMC Act in accordance with 2017 Model APMC Act and provide for setting up of special and private market yards for purchase directly from farmers. Furthermore, according to NSSO data and data from regulated markets in India, mandis account as marketing channels for around 36% of the farmers, depending on the commodity.
This is clearly indicative of the fact that much of agricultural trade was happening outside the regulated areas anyway, it was, however, restricted in scope. While trade outside mandis was required to be decriminalized it cannot be understood to mean deregulation.
Although the APMCs are not explicitly dismantled or the mandis explicitly abolished by the Bill, farmers and experts reasonably apprehend that the entire mandis network and MSP system will become redundant as the Bill has an overriding effect over state APMC acts.
The APMC system in Punjab has contributed a great deal towards the Green Revolution and the state already has a well-developed infrastructure for the purposes of storage, transportation from farm to mandis and open marketing.
Implementation of the Bill will eventually pave the way for disbanding of the MSP regime as well as the food procurement regime. At present, procurement by the government pressurizes the implementation of Public Distribution System, which will be jeopardized as a result of reduced government intervention.
The basis for market intervention by the government for procurement is price intelligence from mandis which initiates government intervention when prices start crashing. The new Bill will result in lack of information on market transactions, quantities and prices with the government, in a way facilitating the government to abdicate its responsibility of assuring MSP and PDS.
Mandi system will also be rendered irrelevant, therefore, resulting in a collapse of the price intelligence mechanism. Expansion of public procurement at remunerative MSP is what the farmers are demanding whereas the government is doing the opposite. Although the government has verbally ensured that these systems will remain intact, these will do so only on paper and be rendered redundant in the application by the legislations.
Another provision of the Bill provides for the waiver of market cess, fee or levy for all transactions made outside the APMC premises. This provision aims at incentivizing traders to purchase farm produce outside mandi premises. However, such incentives will not alter the power relation as it only harmfully affects the collective bargaining power of the farmers.
APMCs certainly have shortcomings of their own; however, their role in ensuring the availability of an MSP for farmers cannot be overlooked. APMCs provide a platform for farmers for collective bargaining not only on price matters but also on non-price issues like grading, moisture measurement, weighing etc.
Creation of two parallel and extremely distinct markets, with a different set of rules, is one of the key problems with this Bill, which will eventually lead to the collapse of the APMC. This is because the APMCs have stringent requirements of a license, constant monitoring as well as the market fee, whereas the new private marketplace will be unregulated, and lack government oversight and market fees.
Furthermore, this will be detrimental for states as a large part of the revenue is generated from fees or cess on transactions in farm produce in APMC markets. This revenue is utilized by states for developing rural roads and linkages with mandis.
Revenue collected by Punjab in 2019-20 from trade fees was estimated at Rs 3,600 crore. A 2.5% commission is paid by Food Corporation of India to artiyaas under the Punjab APMC act. The livelihoods of these artiyaas as well as the workers engaged in loading, packing and unloading activities are also at stake with the disintegration of the mandi system.
One objective of the Farmer Bills was to eliminate the middlemen who are responsible for the exploitation of the farmers. However, attributing only a negative role to these commission agents is not correct as farmers often resort to them for loans instead of banks for the fear of losing their land to banks and also because banks are hesitant to lend to small farmers.
Furthermore, it is likely that the reforms do not do away with middlemen at all as the same and newer entities will now have the freedom to operate outside the mandis without any regulations. Additionally, giving due regard to the small scale of landholdings of farmers in Punjab and Haryana, it does not seem as if the large private corporations would deal directly with the small and marginal farmers, consequently resulting in the emergence of middlemen and contractors.
It would be pertinent to refer to the Bihar model after the repeal of the APMC Act in 2006. Aimed at enabling free private trade in agriculture in Bihar, the new system failed to help either help the farm or boost private investment in the development of agriculture.
Year after year the farmers have been forced to distress sell their produce much below the MSP. Full control of agricultural produce has been assumed by private traders, who have set up small markets and charge commission from farmers. Farm produce is purchased at a rate well below the MSP and sold by such traders in other states at higher prices.
Another aspect that the Bill seems to ignore is that these farmers lack sufficient capital, understanding of free-market forces, price and market fluctuation as well as electronic and internet connectivity. Lack of storage facilities with farmers will also coerce the farmers to sell their products to corporations at lower prices, soon after the harvest.
Private traders might also insist on purchasing produce immediately after harvest when prices are low. There is also a possibility that corporations will buy food grains from states with surplus grains, like Punjab, at lower prices and sell these at a later time to grain deficient states at higher prices, resulting in market distortion and reduced income for farmers.
In a state like Punjab, the average size of landholding is 3.62 acres, average farming debt for a small farmer is Rs 5,57,000, and for a marginal farmer is Rs 2, 76, 000. Burdening the small and marginal farmers with complexities of electronic trade and commercial technicalities, while weaning away the MSP, would not be a wise move.
Despite the raging COVID-19 pandemic in April-May, exemplary management skills were displayed by Punjab in procuring 100% of the produce. Out of the 127.45 lakh tonnes of wheat purchased in mandis in Punjab, only 0.58% was bought by private traders.
Three primary concerns arise with respect to The Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Service Bill, 2020 on contract farming relate to the negotiating power of the parties involved, determination of quality parameters by the parties involved and dispute Resolution beyond ambit of judicial review.
Although the Farming Agreement Bill aims at protecting farmers against price exploitation and increasing choice in the sale, it does not take into account that individual farmers, especially small or marginal farmers (who constitute 85% of rural farmers), might not be equipped to negotiate with private corporations to ensure themselves a fair price.
As a consequence of the adoption of contract farming policy, the power balance shifts from the farmer to private companies, and the farmers might end up being the weaker players in the negotiation process. A farmer might be pushed to become a land-owning tenant under the interest of corporate.
The Bill does not provide any mechanism for price fixation, leading to apprehension regarding the intent behind giving a free hand to these private corporations. Further, there is also a concern regarding the multitude of agreements as landholdings are small in states such as Punjab and Haryana.
Although protection against exploitation is a stated objective of the Bill, how can a small and marginal farmer not be fearful of exploitation while engaging with large retailers and powerful industrialists?
Furthermore, according to the provisions of the Bill, the quality and grade measures and standards of farming produce can be mutually agreed upon by both the parties to the agreement.
However, if and when the private sponsors attempt to bring in uniformity, the quality aspect might be affected, consequently impacting the already distorted agro-ecological diversity in India. Another concern that arises relates to the three-tiered dispute settlement prescribed by the Bill, first, a conciliation board, second, the Sub-divisional Magistrate, and third, the Collector or Additional Collector as the appellate authority.
Farmer-buyer contracts will effectively be removed from the ambit of civil courts, as well as judicial review, by the creation of bureaucrat led dispute resolution mechanism. The usage of “shall” in the Bill points to the mandatory nature of these provisions. Additionally, the majority of farmers lack the resources required for fighting legal battles against large private corporations.
One of the foremost concerns that have arisen in relation to this Bill is regarding hoarding and black marketing. Since the Bill eases the restrictions imposed on stock limits relating to the prescribed food items, there is increasing fear of hoarding of food items by exporters, processors and traders during harvest season when prices are lower until a later time when prices tend to increase.
Since states would no longer have information and intelligence about the availability of stocks within the state, this could also result in undermining food security, in addition to adversely affecting the interest of both the farmers and consumers.
The Bill has no substantial benefits for either the consumers or the farmers; it legally permits private companies to stock food items without restrictions on the stock limit except in circumstances of war, grave natural calamity, extraordinary price rise etc. The Bill is likely to affect the prices of food commodities resulting in rising in prices, adversely affecting the consumers as well as the subsidies for PDS.
Serious food problems are likely to arise during extraordinary circumstances as the government will not have the requisite information relating to who, where, when, and how much stock exists in the state. There will be no machinery to verify the stock limits in the circumstances specified for regulation. Furthermore, the Bill also provides for the exclusion of value chain participants if their stock limit remains within their installed capacity and exporters if they can show demand for export.
However, the rationale behind such exclusion is unclear as to when extraordinary situations may arise, an essential commodity like food must not be adversely affected and a smooth supply must be maintained. Additionally, there is no machinery for ensuring and verifying that these value chain participants and exporters are limiting their stocks in accordance with the rules prescribed.
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