India is witnessing the farmer protests which is being described as the largest protest in history. Delhi has become the epicenter of the protests with protests by farmers from Punjab, Haryana, and Western Uttar Pradesh. About 1.2 million farmers are said to have thronged to the capital or in Singhur border along with about 96 thousand tractors. About 500 farm unions, both large and small are said to have extended support to the farm protests.
Farm Bills and Farmer concerns
At the center of the controversy are the three farm bills. These include: a) Farmers Produce Trade and Commerce (Promotion and Facilitation) Act; b) Farmers (Empowerment and Protection) Agreement on Price assurance and Farm Services Act; c) Essential Commodities (Amendment) Act. The first bill seeks to allow intra-state and inter-state trading of farmers produce beyond the APMC premises. State Governments are not allowed to levy market fee, cess outside APMC areas. The second bill seeks to create a framework for contract farming between a farmer and a buyer prior to producing or rearing of farm produce and provides for dispute settlement mechanism. The third bill allows for removing limits on stocking of essential commodities such as food items except than under extra ordinary circumstances such as war and famine.
The concerns expressed by the farmers suggest that the laws would dismantle the minimum support price (MSP) regime once it is implemented. That corporates would enter the market and would exploit them. And that they would be left with little negotiating ability to take a legal recourse once they start dealing with the corporates. Farmers point that the three laws are beneficial for the corporates and not the farmers.
The demand put up by the farmers include: repealing the three new farm laws by calling for a parliamentary session, making minimum support price and state procurement a legal right, assurance of continuation of conventional procurement system, implement MS Swaminathan formula of price of produce at 50% additional to the cost of production, reduction of diesel price for agriculture purpose by 50% and abolition of electricity ordinance 2020.
Debate on Farm Bills
There have been argument on both the sides.
Liberating or enslaving
Those in favor of the bill argue that the farm bills are liberating for the farmers. Now the farmers are free to sell their produce anywhere across the country. Those criticizing the bills argue, that even otherwise farmers had the freedom to sell their produce. There were restrictions on traders and not the farmers. Financial constraints however never allowed farmers an opportunity to go far away and sell and had to sell locally. This will continue even now.
Role of Middlemen
Those in favor of the bill argue that the farm bills will shift the farmers away from the middlemen and would thus prove beneficial as they get direct access to bigger players. Those critical of the bills argue that while there are issues with middlemen, they are also beneficial due to the relationship established between them and the farmers. On the contrary they believe that the smaller middlemen would be replaced by larger corporate middlemen, which would be more exploitative.
Market choices
The pro-farm bill groups argue that the bills have only expanded the market options for the farmers. Now apart from APMC, they have an additional market channel where the farmers could sell. The anti-farm bill groups argue that this will ultimately result in closure of APMCs.
Access to APMCs
The pro-farm law lobby argue that APMC was never a good option for the farmers. Only about 6% of farmers accessed and sold at APMCs. Moreover, they never invested in infrastructure development and provided all-round services. The anti-farm bill group argue that while this is true, it is also a fact that APMCs & the policy of MSP did set a standard of minimal price. While those who did not sell at APMC even while they did get a lower price than MSP, any closure of APMCs would only mean that the benchmark price that was forming the base for offering price even otherwise would see a decline.
Minimal Support prices
The pro-farm bill group argue that the laws would not have any effect on Minimum Support Price (MSP) scheme. It would still continue. The anti-farm bill groups argue that the suggested changes in the long run would give way to ultimate removal of MSP.
Contract farming – choice of crops and legal recourse
Supporters of farm bill argue that through contract farming the farmers can enter into negotiation and would be able to get a better price. The critics argue that such contract farming will take away choices from the farmers on what they produce. The farmers would be forced to produce based on the market choices and this may mean lesser priority to attain immediate household food security as they may go for cash crops rather than food crops. The critics also fear that given the power imbalance between farmers and the corporates, the farmers would not be in a position to take a legal recourse in case of conflicts with the corporate houses.
What the data reveals?
Private players outside APMC are already predominant buyers
At present there are twenty crops for which minimal prices are decided by Commission for Agricultural Costs and Prices (CACP). The 22 crops include Paddy, Wheat, Jowar, Bajra, Maize, Ragi, Arhar, Moong, Urad, Groundnut-in-shell, Soyabean, Sunflower, Seasamum, Nigerseed, Cotton, Barley, Gram, Masur (lentil), Rapeseed / Mustardseed, Sunflower, Jute and Copra. For Sugarcane fair & remunerative price is set. From Government procurement is to be organized through Food Corporation of India (FCI), Cotton Corporation of India (CCI), Jute Corporation of India (JCI), Central Warehousing Corporation (CWC), National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED), National Consumer Cooperation Federation of India LTD. (NCCF) and Small Farmers Agro Consortium (SFAC). Besides, State Governments also appoint state agencies to undertake procurement operations.
Despite the provision, it is only in two crops i.e., paddy and wheat of the 22 crops are brought by the Government. It is only in the crops covered under the public distribution system (PDS) that government procures. The remaining 20 are brought by local private players. Even for paddy and rice only 29% and 44% of the harvest are sold in mandi, while the remaining is sold outside.
Reach of farmers to regulated markets is already low
According to National Commission for Agriculture, average area served by mandi should be reduced to 80 sq.km, so that farmer is able to reach mandi within an hour by cart. This would mean that there should be 41,000 regulated markets. However, with 6,630 mandis the average area served by mandis is currently 463 sq.km. Moreover, in 18 states private markets have already been established outside APMC and 19 states have allowed direct purchase of agricultural produce from farmers. It is only in Punjab, Haryana and West Uttar Pradesh the average area served by APMC mandis is low and the primary beneficiaries of APMC also are from these areas.
Procurement by Government will not be same after APMC abolition
Despite the fact that APMC had its shortages, there is no evidence to indicate that abolition or weakening of APMC benefits the farmers. Weakening of APMC seems to be associated with procurement by Government. Contrary to claim that government procurement will continue, the empirical evidence of Bihar suggests that government procurement actually reduced. APMC was abolished in 2006 in Bihar. Currently less than 20% of paddy and often 0% of wheat is procured by Government in Bihar. The number of government procurement centers too has come down in Bihar from 9,000 in 2015-16 to 1,619 in 2019-20.
Weakening MSP system does not necessarily assure higher price
A study by Reserve Bank of India shows that MSP was the most beneficial scheme for 50% of the farmers. Deregulation of regulated markets may force one to sell at lower price. In Bihar, despite an MSP of Rs. 1,815 per quintal for in 2019-20 for rice, yet the farmers were forced to sell to traders at only Rs. 1,350 to Rs. 1,400 per quintal. For wheat though the price was Rs. 1,925 but farmers had to sell at Rs. 1,800 or less. For maize, in place of Rs. 1,850 MSP, the farmers were able to get only Rs. 1,000-1,300 per quintal. In a Niti Ayog study even in states with low procurement under MSP, the farmers wanted the scheme to continue as the farmers felt that it helped the farmers to escape exploitation when they sold to private traders. While procurement under MSP is only 6%, yet it helps in stabilizing prices when sold to private traders.
New farm laws need not necessarily attract private investors to invest on wholesale markets and cold storage
Bihar experience does not provide any evidence in this direction. The study by National Council for Applied Economic Research (NCAER) showed that as expected private sector investment into infrastructural development necessary for procurement of produce did not take place. Investments in cold storages and warehousing facilities were not seen as expected. Contract farming was also not seen. Over the time public infrastructure deteriorated. Density of mandis reduced and the farmers were left to the mercy of the private traders. A study by National Institute of Agricultural Marketing (NIAM) came to the conclusion that APMC abolition has created an institutional vacuum for administering the functioning of markets. The small scale farmers have no alternate channels of marketing except to use the current trader dominated system.
Freeing agricultural markets does not necessarily result in growth
The study by NCAER showed that agriculture in Bihar during 2000-01 to 2007-08 grew by 2%. Immediately after reforms it accelerated to 3.1% during 2008-09 to 2011-12, but thereafter decelerated to 1.3% during the period 2012-13 to 2016-17.
Increased corporate role does not necessarily ensure better returns to farmers
Increased corporatization of agricultural inputs such as fertilizers, pesticides has resulted in increased costs of production, but not necessarily resulted in rice in prices for farm produce. This has resulted in unfavorable conditions for the farmer. Lower income is attributed to continuous rise in material costs of inputs, higher wages and high cost of finance contributing to a rise in cost of production. This is despite the productivity of land witnessing an increase.
Policy Suggestions
Making MSP legally binding
While it is not necessary that the whole procurement needs to be completely undertaken by the state due to financial resources required for procurement, yet MSP can be made legally binding. Currently MSP is being set for 22 crops. Irrespective of the players involved government or private, the MSP can be made legally binding. This can empower the farmers to demand a minimal price and exploitative aspects involved in buying can be reduced.
Strengthening of Mandis
As suggested by National Commission for Agriculture, India needs more mandis. To serve a large population, though it needs to be set at a distance of 80 sq. km, currently each mandi serves only 463 sq.km area. This denies a large number of farmers, particularly the small and marginal farmers to access mandis and sell their produce. It is not surprising that farmers in the process by selling to middlemen lose out in the process. Mandis need to be closer to where the farmers stay. There could be smaller market yards even at the block level, so that the farmers are able to directly reach the consumers. A more direct connect with the consumers only ensures a better price.
Adopting Innovations in marketing of agriculture produce
There have been innovations made in marketing of agricultural produce. ‘Uzhavar Sandhai’ in Tamil Nadu whereby there is direct selling of fruits and vegetables by farmers to consumers by avoiding intermediaries ensures fair price for the farmers. ‘Rythu Bazaars’ in Telangana and Andhra Pradesh benefits both the producers and the consumers. These markets allows for sale of fresh fruits, vegetables and food items. Middlemen are eliminated in marketing activities in Rythu Bazaars and farmers are able to get a bigger share on the price sold to the consumer. ‘Apni Mandi’ in Punjab allows for direct selling for farmer producers to the buyers or consumers. ‘Krushak Bazaars’ in Odisha allows farmers to trade paddy, maize, cotton, fruits and vegetables. Such innovations in marketing can be scaled up.
Strengthening APMCs
While it is true that APMC system has its inherent flaws, yet at places where it has functioned well it has benefitted the farmers. Punjab, Haryana and West Uttar Pradesh are examples where APMCs are well maintained. The storage facilities in APMCs need to be improved particularly for the perishable commodities. However, in only 15% of the APMCs which allow for trade in crops and vegetables have cold storage facilities. While alternate market channels outside APMCs can still be created, it cannot be at the cost of weakening APMCs, which has potential to ensure fair price to produce for the farmers.
Strengthening Farmer producer organizations
Weakening of farmers may only reduce their bargaining power vis-à-vis prices for produce. Including the farmer unions, Farmer producer organizations (FPO) display the power of collective. FPOs which are farmer owned, led and controlled need to be strengthened. An FPO may be started under cooperative acts at national or state level or under producer companies under the Indian companies act. They can ensure a better return to the farmer through the power of collective. Through aggregation farmers can avail the benefits of economies of scale. Through collective, they can also have better bargaining power vis-à-vis corporates during bulk selling of produce and bulk buying of inputs. There are an estimated 7,374 farmer producer companies in India. Government of India too recently announced of creating about 10,000 FPOs across the country. However, startup support of FPOs has to be further extended for strengthening them.
Protecting farmers from legal hassles
Contract farming establishes a relationship between farmers and corporates, where terms of relationship is heavily turned against the farmers. A case in point is that of Gujarat farmers where they were sued for more than Rs. 1 crore in the name of illegally growing and selling a potato variety registered by PepsiCo. The cases were withdrew with state intervention. There are also international examples when corporations such as Monsanto sued farmers in United States in the name of patent rights on genetically engineered seeds. But they do point of the inadequacies of protection in case of farmers when they are pitted against powerful corporations. There needs to be provisions for protecting farmers from powerful corporations.
Innovations in Contract farming
Contract farming in India is said to be comparatively better in poultry sectors. A study of contract farming in broilers showed that farmers were promptly paid. The working capital requirement for farmers was low and extension services were provided by the aggregator. However, the net return from bird was Rs. 11.06 for farmers in comparison to others for whom it was Rs. 17.05 indicating a loss of Rs. 5.99 for those under contract farming. However, this was said to be the cost for avoiding risk of disease, fluctuation of market prices and expert guidance from veterinarians. Such innovations can be applied however, without compromising on the net returns.
There is need for evaluation of implications of the current bills on the farmers. Where-ever necessary these need to be amended in a manner that benefits the farmers including a decent price. Benefits to farmers cannot be enhanced unless their relative strengths vis-à-vis the corporations are not increased. Hence a regulation against a possible misuse of laws by corporations need to be ensured. The strengths of the farmers needs to be built through the power of collectives.
Author: T Navin is a Researcher at Institute for Livelihood Research and Training (ILRT)
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