— KANCHAN BASU.
The passing of the ‘Farm Bills’ in both the Houses of Parliament has sparked a major controversy in the country. The Central Government claims that it is a historic step taken in the interest of farmers, giving them the freedom to sell their produce anywhere in the country and to any one they want. But the opposition parties described the passing of the Bills as a “Black Day” because these pieces of legislation could destroy the existing system of ‘Minimum Support Price (MSP)’ and the Agricultural Produce Market Committee (APMC) markets, leaving farmers at the mercy of big corporations.
Where does the truth lie? Let us dig a little deeper into the economics and politics of it.
The ‘Bills’ – The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (FPTC): The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 (FAPAFS); and The Essential Commodities (Amendment) Bill, 2020 (ECA) – have to be seen in totality. Essentially, the FPTC breaks the monopolistic powers of the APMC markets, while FAPAFS allows contract farming and ECA removes stocking limits on traders for a large number of commodities, with some caveats still in place.
The economic rationale of these pieces of legislation is to provide greater choice and freedom to farmers to sell their produce and to buyers to buy and store, thereby creating competition in agricultural marketing. This 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. It will also encourage private investment in storage, thus reducing wastage and help contain seasonal price volatility. It is because of these potential benefits that I had compared these pieces of legislation to the delicensing of industry in 1991 (‘A 1991 moment for agriculture’, IE, May 18). I had also suggested that for these legal changes to deliver results, we need to create Farmer Producer Organisations (FPO) and invest in marketing infrastructure.
I must caution that sometimes good ideas/laws fail because of bad implementation. Just to cite an example, late Arun Jaitley had announced a scheme called TOP (Tomatoes, Onions and Potatoes) to stabilize the prices of these farm products through processing and storage. He also allocated Rs. 500 crore for it. The scheme was entrusted to the Ministry of Food Processing for implementation. But even after three years of the scheme, not even 5% of the money promised has been spent. No wonder, the Government is back to export bans of Onions, fearing a spike in Onion prices. This is contrary to signal that the Government wants to give through the farm bills that farmers have freedom to sell.
Let us take an example a big business community comes to by agricultural product. They offered 5% or 6% more than the existing market price and buy the hole of the product. Being happy to get more prices the farmers became very glad and disposed of the hole of the product. After this the big business community hoarded all the commodities in ware houses then they began to relies the commodity step by step in the market. Then there was scarcity of commodities and demand increase. As a result there was hike in prices of commodity by at least to a great extend. Middle class was squeezed and the poor down trended remain half fed. Maximum present of our country are holders of small land. They have to buy food from market. They got excess price at the time of selling crops, now that many was all spent to buy food leave aside the other consumers.
There is another possibility. If getting higher price farmers sell of all the crops where from the Government will procure food grain. There will be crisis in public distribution system. People of this country then could not get food grain from Government at free or Rs. 2 a kilo. Government should interfere in ‘Famine Condition’. But what to do for that legal interference? In fact people are getting afraid because of previous instances of faming condition.
It seems the Government has one foot on the accelerator to liberalise agro markets, and the other foot is on the break. All this dents its credibility. This is to emphasise that NABARD (National Bank for Agriculture and Rural Development) has a lot of heavy lifting to do, else they will fail the country by not realizing the full potential of these legal changes NABARD must get its act together, take professional advice and work with implementing agencies in the private sector, including various foundations already working with farmers. The pay off will be very high. It will make Indian agriculture globally competitive, and benefit farmers and consumers alike.
But then why is there so much opposition? The Congress is leading the charge. But its manifesto for the 2019 General Election said, “Congress will repeal the Agricultural Produce Market Committee Act and make trade in agricultural produce – including exports and inter-state trade – free from all restrictions”. And further: “We will establish farmers’ markets with adequate infrastructure and support in large villages and small towns to enable the farmer to bring his/her produce and freely market the same” (points 11 and 12 of the manifesto under the section on ‘Agriculture’). I fail to understand and how this is different from what the three bills are about? It is true the farmers in India have been implicitly taxed through restrictive trade and marketing policies. So, the freedom to sell is the beginning towards correcting this massive distortion.
But the Opposition has now changed the goal post. It is asking MSP (Minimum Support Price) to be made legal, implying that all private players buying below this price could be jailed. That will spell disaster in the markets, and private players will shun buying. The Government does not have the wherewithal to buy all the 23 commodities for which MSP is announced. Even for wheat and paddy, it cannot assure MSP throughout India. The reality, as the 70th round of NSSO (National Sample Survey Office) on Key Indicators of Situational Assessment Survey of Agricultural Households in India shows, is that only 6% of farmers gain from MSPs. Roughly the same percentage of value of agro-produce is sold at MSPs. The rest of the farming community (94%) faces imperfect markets. It is time to “get agro-markets right”. These ‘Farm Act.’ are steps in that direction.
Some States fear losing revenue from ‘Mandi Fee’ and ‘Cess’. The Centre can promise them some compensation, for say three-five years, subject to reforms in APMC markets.
The economic inequality will surely increase if as a result of ‘Farm Act.’, the surplus in the hands of farmer transfer to the hands of local hoarders, profiteers and business tycoon. Moreover, if the corporate capital native or global becomes powerful in this way it will be harmful to even the political stability of the country.
As such it will be Himalayan blunder it we look upon the ‘Agriculture Act.’ as a weapon to increase the income of the peasantry. It has a far reaching consequence and its impact is as much economic as it is political.
