The farm laws will lead to the corporatisation of agriculture and its control by foreign agribusiness corporations. Our very food sovereignty and thus the sovereignty of the country itself is at stake.
As we write this, lakhs of peasants – men, women, youth and children – are camping at entry points to the country’s capital, demanding the scrapping of the three farm legislations recently imposed on the country by the present Central Government. It has been some time since the country has witnessed such powerful challenge to the malignant policies of the rulers. It is inspiring because it is organised around demands which are not just of the peasantry, but of all the working people.
The Central Government, which began by fortifying the city as if against an invading army, firing water cannon and tear gas on the peaceful protesters, has been compelled to change its stance. It has been forced to call them for unconditional talks. From the nature of the present regime and its leaders, it is obvious that this is a mere tactic, an attempt to buy time and wear out the protestors, the rulers have no intention of changing the thrust of their basic policies.
Nevertheless, climbdown by the Centre, with Home Minister Amit Shah himself leading the negotiations, is in itself a significant victory for the peasant agitation.
The movement has gained widespread support nationwide. People have been organising protests across the country in support of the peasants.
Below is a summary of the main issues related to the three bills, and their effect on the farmers, the working people, and on the country as a whole.
The Three Farm Bills
The three bills, which the BJP pushed through the Parliament in a most undemocratic and hasty manner, despite nationwide protests by farmers and the Opposition parties, have long names. They are:
- Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill – commonly referred to as the APMC Bypass Bill;
- Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill – better known as contract farming bill; and
- Essential Commodities (Amendment) Bill – in short, bill to promote hoarding and blackmarketeering.
The APMC Bypass Bill: Promoting Free Markets?
This bill scraps the whole existing system of selling and buying agri-produce in India. The Agricultural Produce Market Committees (APMCs) are designated areas created by state governments where various agri-produce can be sold by farmers to licensed persons or commission agents. These markets are also nodes for government procurement of food grains, for distribution to the poor at subsidised rates through the public distribution system. This bill allows farmers to engage in trade of their agricultural produce outside the APMC market yards.
The government claims that the APMC bypass bill promotes free markets and will enable the farmer to sell anywhere in the country and get the best possible price for his produce.
This claim is stupid. In a country where 86% farmers have a landholding of less than 5 acres (2 hectares), expecting a small farmer from – say – Satara (in Maharashtra) to load his crop on a bullock cart and go all the way to Indore in Madhya Pradesh or Ludhiana in Punjab to sell his crop is absurd. Small farmers are so keen to sell their produce at the earliest that they are generally not willing to go to faraway markets even in their own state, even if they get a better price. Which is why, the National Commission on Farmers had recommended that mandis should be available to farmers within a radius of 5 km.
Bihar: APMC Act Repealed in 2006
What the Centre is attempting to do at the national level now has already been implemented in Bihar. In 2006, the state of Bihar repealed the APMC Act and abolished APMCs. It was claimed that this would eliminate middlemen, promote efficiency in the marketing system, enable farmers to get better price for their produce, and incentivise private investment in agriculture. Fourteen years have gone by, Bihar farmers are still waiting for the miracle to happen:
- There has been no increased flow of private investments into the agriculture sector.
- Private mandis have come up all over the state, functioning on the roadside, without any infrastructure. There is hardly any facility other than the roadside space made available for the transaction of produce. There are generally only a few makeshift sheds from which the mandi operator works and monitors the functioning of the market.
- Farmers in Bihar sell at the mandis nearest to their farms, as they cannot afford to go to faraway markets.
- At these mandis, there is no auction; farmers are left to the mercy of traders who unscrupulously fix a lower price for agricultural produce.
- Also, if there is any malpractice, there is no agency that the farmers can approach.
Bihar is one of the leading producers of maize in India. For maize, this year (2020) most farmers reported getting a price of ₹1,000-1,300 per quintal, as against the official minimum support price (MSP) of ₹1,850. For wheat too, farmers in Bihar reported receiving prices 10-15% lower than the MSP.
Clearly, the free market reforms have completely failed in Bihar. This is also borne out by data provided by Agriculture Minister Narendra Singh Tomar in the Rajya Sabha last year. He stated that farmers in Bihar had the lowest income in the country. The average income per agricultural household in Bihar was just Rs 3,558 per month. Haryana recorded the highest farmer’s monthly average income of Rs 14,434. Haryana is among the states with the best APMC mandi network in the country. This only proves that the narrative of free markets benefiting farmers is all bunkum.
That agriculture is in deep crisis in Bihar is also borne out by migration figures from Bihar. During the corona pandemic, Bihar recorded the largest number of migrants returning home. With agriculture in Bihar in great distress and not being able to provide employment, people are migrating to other states in search of work.
Free Markets have Not Worked in USA-Europe too
Free markets in agriculture have not worked anywhere in the world, even in the developed countries. In the USA and Europe, there are no MSPs, no APMCs, and there are no controls on stock holdings – the markets are absolutely free there, the kind of markets that the Modi government is seeking to usher in India through its three agricultural reform bills. And yet, agriculture in those countries is crisis ridden. In 2018, the then Chief Economist of US Department of Agriculture, Robert Johannson, had stated, “Real farm prices, when indexed for inflation, have fallen sharply since 1960.” With farm bankruptcy growing to $425 billion, US farmers are struggling to survive; the suicide rate among male farmers in the USA is 1.5 times higher than the general population.
Consequently, agriculture in the developed countries is only surviving due to massive agricultural subsidies provided by the government. In 2018, the OECD countries, a bloc of the world’s richest 37 countries, provided agricultural subsidies to the tune of $246 billion to their farmers.
Despite this global experience, and Indian experience too, the Modi government is pushing for free markets in agriculture.
But the Majority of Farmers are Already in Free Markets!
However, the strange truth is, the majority of farmers in India are already in free markets! The total number of APMC mandis in the country is just around 18% of the number required! As per norms of National Commission on Farmers, an APMC should be available to farmers within a radius of 5 km. This would require the country to have 42,000 APMCs, but only 7,700 exist. Assuming that farmers are distributed evenly across the country, this means that only around 20% of the Indian farmers sell their produce in APMC mandis.
In the APMC mandis, two kinds of transactions take place. One is government procurement, at prices declared by the government, called the Minimum Support Price or MSP. The other is sales through auction to private traders, who are issued licences to operate within the market and other traders are not allowed to buy the produce directly from farmers.
While the government declares MSP for 23 crops, government procurement takes place mainly for two crops – wheat and rice. Even for these two crops, government procurement is only around one-third of the total produce of these crops nationwide; the remaining is purchased by private traders. According to the Shanta Kumar committee report, submitted in 2015 to the government, only 6% of the farmers in the country benefit from government procurement and sell at MSP.
Various reports suggest that the actual number of farmers who sell their produce within the mandis is probably more than 20%, and could be as many as 35%.
This implies that about 60 to 70% of Indian farmers sell their produce to private traders outside the mandis. In the words of our Prime Minister, they are already in free markets, free to sell their produce to anyone they wish, on their terms!
Estimating Loot of Farmers by Free Markets
While defending the agricultural bills, the PM has gone on record to say that the APMCs have become dens of vested interests and are exploiting farmers. But it is obvious from the above statistics that the majority of farmers do not feel that way. This is also proven by the fact that the agitation by the farmers against the bills is the strongest in the states of Punjab and Haryana, precisely the two states which have the best APMC network in the country.
It is true that there is corruption in the APMCs, and that traders cartelise and prevent farmers from getting a decent price. But farmers also know from their real life experience that the situation is the same outside the APMCs too; there too, the traders take advantage of the economic weakness and helplessness of the small farmers and fleece them. The reason why farmers prefer to sell within the APMC mandis rather than outside is because the mandis also provide them several benefits, like infrastructural facilities (storage, weighing, etc.), guaranteed payments by traders, etc.
The extent to which traders fleece farmers in the name of free markets is brought out in a joint study undertaken by the OECD and Indian Council for Research on International Economic Relations (ICRIER). It estimated that during the 17-year period 2000-01 and 2016-17, Indian farmers suffered an income loss of Rs 45 lakh crore (at 2017-18 prices), on account of being denied a fair price for their produce.
It is therefore not the absence of free markets, but it is because the overwhelming number of small farmers in the country are subjected to the vicissitudes of free markets – just 6% of farmers get the Minimum Support Price announced by the government, the remaining farmers are forced to sell to private traders in free markets inside or outside the APMCs – where traders fleece them and force them to sell at a loss, that agriculture is in deep crisis in the country. And this is accelerating under the Modi regime – because of which agricultural growth rate during the Modi years (2014-20) has fallen to an average of 3.2%, from 3.7% during the previous UPA years (2004-14).
Another Consequence of APMC Bypass Bill: Eliminating the PDS
As the farmers’ agitation becomes more intense across the country, the government is now arguing that the bill does not scrap APMCs, it only gives farmers the freedom to sell wherever they want.
Again the govt is resorting to trickery. While it is true that the bill only bypasses the APMCs, it will effectively sound a death knell for them. The reason is simple. As per the provisions of the bill, traders buying outside the APMC market yards will not have to pay any taxes, whereas those trading inside the premises will have to pay the APMC levies. APMCs levy taxes / cesses of around 4 to 6%. Without a level playing field, this will obviously mean that private traders will not buy produce from farmers inside the mandis, as a result mandi incomes will fall, and the APMCs will not be able to maintain themselves, ultimately leading to their collapse.
For instance, in Punjab, the tax collected by the APMCs is around Rs 3,600 crore or so, and this is used to maintain the sprawling network of regulated mandis built across the state over 60 years, which comprises of roughly 1,840 mandis, sub yards and purchase centres spread across the state. The tax is also used to maintain the excellent 70,000 km network of village roads in Punjab, which connect every village to the nearest mandi.
The APMC mandis also serve as the nodal points for government procurement of food grains; with their collapse, government procurement will also drastically reduce.
This brings us to another important, but hidden, agenda behind the APMC bypass bill – the government actually wants to scale down and eventually scrap procurement of food grains and wind up the Food Corporation of India. The Shanta Kumar Committee report, submitted in 2015, calls in effect for eliminating both public procurement and distribution, and for substituting them deceptively with cash transfers. Cash transfers, in fact, will compensate neither the peasant, nor the consumer, for reasons we explain elsewhere. As a first step, the Economic Survey 2019-20 of the Government of India calls for reduction in the number of beneficiaries covered under the National Food Security Act from the present 67% to just 20%.
As procurement falls, it would automatically also mean that farmers would no longer get MSP for wheat and rice too.
What is the Real Intention Behind the Agricultural Bills
To understand the real intentions of the Modi government, we need to see the APMC bypass bill in conjunction with the other two agriculture bills, and then relate it to the overall orientation of the economic policies under the Modi regime.
- Contract Farming Law: This law essentially means that the government is allowing big traders and corporations to directly enter into agreements with farmers and buy produce from them. What most people do not realise is that the big agribusiness corporations are giant-sized. Thus, for example, the total value of arrivals of agricultural products in all marketing committees of Maharashtra in 2017-18 was Rs 51,093 crore, while the total sales of just a single giant agribusiness corporation, the Bayer-Monsanto group (now known as Bayer group), that year was 36,742 million Euros, which works out to Rs 2.97 lakh crore. In other words, Bayer is so big that it can buy up all the agricultural produce coming to all the marketing committees in Maharashtra!
- Amendment to the Essential Commodities Act: This scraps limits on the amount of food grain stocks traders or companies can keep; it also ends government intervention to control price increases (with the provision that government will step in if prices rise significantly).
Consequence of the Three Agricultural Bills
Taken together, the three bills will enable big traders and corporations to monopolise agricultural trade.
The contract farming bill and APMC bypass laws essentially allow big companies to enter into direct contract with farmers, buy as much as they want, and hoard it to drive up prices. At the same time, the government is also taking steps to gradually end government procurement and dismantle the public distribution system (PDS) by gradually eliminating the nationwide APMC network. An important role of the PDS was to keep a check on speculation in food grain prices by traders; if prices went up, the government could quickly step in to bring them down by releasing food grains from its stocks. Now, this will end, enabling private corporations to indulge in speculation in even food grain prices.
Supporters of this reform will argue that since there are many corporations, competition amongst them will enable farmers to get better prices! This is where mainstream economics is completely wrong: giant corporations do not compete with each other; since they are so big, and have enormous amount of funds, engaging with each other in price competition will be self-destructive for all of them. Therefore, they collaborate in the matter of prices; they actually form cartels and divide up the market among themselves.
These giant corporations will enter into contract with small farmers over entire regions, and initially offer better prices to farmers, as they have enormous funds at their disposal. Since stock limits have been removed, they will be able to buy and store huge quantities of crops from farmers. Therefore, in just a few years, the MNCs will gradually acquire monopoly over the buying of agricultural produce from farmers. Once they monopolise purchases from farmers, driving out all the small traders, they will then start lowering procurement prices from farmers (and government procurement systems would have completely ended by then). The farmers will have no option but to sell to them.
India in the Mirror of Mexico
This is not speculation or scare-mongering. This has been happening in all the developing countries, as a result of liberalisation, privatisation and globalisation of agriculture. For example, this is precisely the model imposed on Mexican agriculture since the 1990s, and more particularly since 1994 (the North American Free Trade Agreement).
- Mexico’s state trading agency (an equivalent of FCI) was dismantled.
- All state measures to support agricultural production were slowly wound down.
- Subsidies on its staple food (corn) were slowly wound down, and these were replaced by selective cash transfers to peasants and consumers.
- Imports of US corn (to Mexico, which is the very home of maize and the world‟s great treasury of maize varieties) tripled.
- Family farms in Mexico collapsed by well over half.
- Total agricultural employment fell sharply.
- The prices of the staple food (tortillas made from corn) rose steeply.
- More than half the population cannot meet basic needs and one-fifth cannot meet food needs.
Consequences for the Working People of India
In the long run, this will mean that small farmers will be squeezed and forced to abandon agriculture, and agribusiness corporations will acquire control over their lands and set up huge farms, like is happening in other developing countries and has already happened in the developed countries.
Secondly, this will also mean that lakhs of our small traders who presently buy produce from farmers in the mandis, called arhtiyas, will be driven out of business. Many would argue that the arhtiyas also form cartels, and thus cheat farmers; so there is no harm with the new farm laws. But replacing arhtiyas with big corporations is a far more worse solution; shutting down APMCs to end corruption in the mandis is like throwing out the baby with the bathwater. Instead, steps need to be taken to democratise mandis, which can be done in consultation with farmer organisations.
Thirdly, this is going to result in a huge increase in the country’s alarming ‘hunger and malnutrition crisis’. The mandis are the place where most government procurement takes place. So, by dismantling the mandis and allowing private traders to procure directly from farmers, the Modi government has taken another step towards implementing another of its pet schemes that it announced during its first term itself – ending governmeng procurement of food grains, gradually eliminating the Public Distribution System and replacing it by cash transfer to farmers. This will not only put an end to all hopes of farmers getting a fair price for their crops through government intervention, the destruction of the PDS will enable traders to indulge in speculation in food grain prices – this was one of the important reasons why the PDS had been introduced in the country. That would then require the government to increase its cash transfers to the poor, which it is obviously not going to do as its main aim of eliminating the PDS is to reduce its food subsidy bill. This is therefore going to spell absolute disaster for the crores of impoverished people in the country.
Finally and most importantly, this is also going to affect our food security and therefore our sovereignty, as argued below.
Handing Over Control of Agriculture to Foreign Cos.
Foreign agribusiness corporations want to seize control of India’s agriculture as India has some of the best agricultural lands in the world. Being a tropical country, a wide variety of crops are grown in India, including so many types of vegetables and fruits, as well as a huge variety of cereals, pulses and oil-crops. On the other hand, the cold temperate regions of the world, where most of the developed countries are located, can neither grow such a range of crops, nor can they grow them throughout the year. So, the agribusiness corporations of the USA and the European Union have been seeking to acquire control of Indian agriculture, so that they can use our lands to produce the crops needed by the developed countries, and at the same time they have been pressing upon India to import food grains. On the face of it, this model appears to be beneficial for India, as we will be exporting high value crops like flowers and vegetables, and importing low value crops like food grains. But in reality, this is a myth, another of the neoliberal myths promoted by international capital. That is because these foreign agribusiness corporations will be in control of this entire agricultural trade. When we export flowers, fruits and vegetables to Europe and America, since they will be controlling the exports and prices, we will get low prices for our exports. And when we import food grains from them, since again this trade will be controlled by them, we will have to pay high prices for food grain imports. But that is not all. The most important problem with this deal is: since food grains are among the most fundamental of all necessities, while flowers and fruits are not, once we become dependent on the developed countries for our food supply, our very sovereignty will be at stake, they can impose any conditions that they desire on us.
This is not an exaggeration. It has already happened in Africa – the reason for the periodic famines in sub-Saharan Africa is that these countries allowed Western corporations to reorient their agriculture towards growing non-food export crops instead of food grains.
Thus, by the passage of these three bills, the ‘nationalistic BJP government’ is not only creating conditions for foreign agribusiness corporations to seize control of Indian agriculture, it has also put the country on the path to increased hunger and even famines. And it has surreptitiously done this taking advantage of the pandemic lockdown.
Support the Farmers Struggle, It Is Our Struggle Too!
Therefore the struggle of the farmers is not just there struggle, it is our struggle too, the struggle of all the people of the country, to defend our food sovereignty and thus the sovereignty of the country itself.
We must fight relentlessly to force the government to withdraw the three farm bills. But the struggle must not end there. We need to advance our struggle and mount pressure on the government to change its orientation from favouring entry of agribusiness corporations in agriculture towards supporting India’s small farming community. For this, it needs to: increase its investment in the agricultural sector; implement the Swaminathan Commission’s recommendations for agriculture; increase government investment in agricultural research and improve extension services to end the increasing control of agribusiness corporations over areas such as seeds, fertilisers and insecticides and pesticides; and strengthen the public distribution system and universalise it.
[Neeraj Jain is a Btech in Electrical Engineering. He is a social activist in Pune and is the Associate Editor of Janata Weekly, a weekly print magazine and blog published from Mumbai. This article was earlier published in Janata.]