Farmers from Pujanb, Haryana and Uttar Pradesh have been protesting for over two weeks. Some farmers from these three states have congregated on the periphery of the National Capital and blocking roads to Delhi as they remain firm on their demand to repeal recently passed farm laws. Thousands of farmers, along with trade unions and opposition parties have joined the protest. The government has assured the agitators that the new laws are for their benefit, however, farmers still fear that their livelihood will be severely affected. At the centre of it all, the farmers are protesting three laws that the Government of India passed during the Monsoon Session of the Parliament in September this year. These are – the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020; Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; and The Essential Commodities (Amendment) Act 2020. They want a complete rollback of the farm laws. In this edition of the big picture we will analyse if the demands of the farmers are justified.
Edited Excerpts from the debate
What are the demands of the Farmers?
Repeal of new laws: The first and foremost demand of the protesting farmers’ organisations is the repeal of three new agricultural laws.
The three new agricultural laws include the Farmers Produce Trade and Commerce (Promotion and Simplification) Act 2020, the Farmers (Empowerment and Protection) Price Assurance and Agreement on Agricultural Services Act 2020, and Essential Commodities (Amendment) Act 2020.
Legal status to MSP: The farmers are not just demanding a repeal of the three new farm laws. They also want minimum support price (MSP) to be made their legal right.
Guaranteed remunerative MSP: The farmers are asking the government to bring in a legislation that will make the purchase of crops below a “guaranteed remunerative MSP” (GRMSP) a cognisable, punishable offence.
GRMSP is the main demand in a proposed draft legislation that farmer leaders have handed over to the government in the course of their five rounds of talks.
Protection of APMC structure: Farmers fear that the provisions of the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act will weaken the Agriculture Produce Market Committee (APMC) mandis. They want to protect the APMC mandis.
Are the demands of the farmers justified?
Despite various suggestions and offers made by the Government, farmers are not ready to compromise. However, the rigid demands made by the farmers are not completely justified:
1. MSP: The first and major demand that the government should give legal status to MSP
MSP is incentive and NOT right.
Farmers do overproduction of crops (such as wheat and rice), whose MSP is high.
It hurts the population which is not producing food grains and majority of population even in villages are not producers of food grains. They are land-less labourers, small & marginalised farmers.
MSP is burdening the economy with huge buffer stock.
Moreover, it is leading to destruction of biodiversity. Punjab used to grow variety of crops before green revolution but now the focus in only on wheat and rice.
The state is not in an agro-climatic zone suited for cultivation of rice, which is a water-intensive crop. Large-scale rice cultivation has resulted in farmers sinking private tube wells, which has led to a drastic depletion of ground water levels.
MSP is breeding the same inequality that is manifested in every aspect of our system. Rich farmer gets richer and lobbies to maintain status quo.
Only bigger farmers are benefitting from MSP. Bigger farmers are:
Capitalist farmers who emerged after green revolution
Middlemen in APMC markets
The Government has assured that APMC is not going to shut down, it will continue its operation.
Rather, farmers will get freedom to sell their crops wherever they like.
3. Contract farming
It is not that contract farming is new to India or it did not have any legal backing.
Under the Model APMC Act, 2003 also, contract farming was permitted and the Agricultural Produce Marketing Committees (APMCs) were given the responsibility to record the contracts.
They were also mandated to resolve the disputes in such contracts. However, market fee and other levies/charges were payable to APMCs.
The new Bill just provides a legal basis to the existing practice of contract farming in India’s agriculture and allied sectors.
What’s wrong in the Bill?
The only thing which is wrong in the bill is that they are 30 years late.
When China started liberalization of its economy, they started with agriculture. However, in India, the government did the opposite.
In China, the grass-root prosperity created by the agriculture reform gives widespread legitimacy to the entire reform process in China. Whereas, it is lacking in India.
In India, economic reforms are seen as suspect because it had not been able to benefit agricultural sector at the grass root level and the reason is that the country has not reformed the agricultural sector.
What is the ignored ‘core problem’?
In India, the Mandi system was created in the 1960s to address exactly the same problems of market access of middlemen that are being trolled today by its critics. Just attacking the APMC and Mandi system does not solve farmers’ woes.
Focus only on abolishment, NOT alternative solution: In Bihar, despite abolishing the APMC in 2006, saw no alternatives merge.
Poor infrastructure: The core problem in India’s agriculture has been poor infrastructure, not just for marketing and storage, but also in the fundamentals of irrigation.
No money to maintain infrastructure: Not only have new projects not come, there is little money to maintain existing infrastructure.
Middlemen, the only solution: With 86% of farmers in the small and marginal category, they have no alternative but to use middlemen.
A primary problem that the current debate ignores is the rich diversity of India’s agriculture. India’s cultural tradition may be just 3,000-4,000 years old. Our agricultural practices have been honed and perfected over 10,000 years.
Supporting and protecting that diversity, that self-perpetuating storehouse of our immense biological wealth, is an absolute policy imperative.
What reforms are needed in Agricultural Marketing?
There has been limited success in establishing efficient agricultural marketing practices in India.
The monopoly of government-regulated wholesale markets has prevented development of a competitive marketing system in the country.
The APMC Act has not achieved the basic objective of setting up a network of physical markets.
There are some successful initiatives in direct marketing, such as Apni Mandi in Punjab, Uzhavar Sandhai in Tamil Nadu, Shetkari Bazaar in Maharashtra, Hadaspur Vegetable Market in Pune, Rythu Bazar in Andhra Pradesh, Krushak Bazaar in Odisha, and Kisan Mandi in Rajasthan.
Some measures that would facilitate the creation of a barrier-free national market are:
Permit sale and purchase of all perishable commodities such as fruits and vegetables, milk and fish in any market. This could later be extended to all agricultural produce.
Exempt market fee on fruits and vegetables and reduce the high incidence of commission charges on agricultural/ horticultural produce.
Taking a cue from the success of direct marketing efforts of states, the APMC/other market infrastructure may be used to organise farmers markets. FPOs/self-help groups (SHGs) can be encouraged to organise farmers markets near urban centres, malls, etc. that have large open spaces. These could be organised every day or on weekends, depending on the concentration of footfalls.
Include ‘facilitating organisation of farmers markets’ under the permitted list of corporate social responsibility (CSR) activities under Companies Act 2013, to encourage companies engaged in agri-allied activities, food processing etc to take up this activity under CSR and also help in setting up supply chain infrastructure. This would be similar to the e-Choupal initiative of ITC Ltd., but under CSR.
All the above facilitators can also tie-up a link to the commodity exchanges’ platform to disseminate spot and futures prices of agricultural commodities.
Only solution to the present impasse is that both sides listen to each other and understand their viewpoint and then negotiate sincerely. A give and take on both sides would be helpful.
Who are India’s farmers?
Small and marginal farmers make up 80 percent of the Indian agricultural sector, which employs 47 percent of the population and supports the livelihoods of 60 percent of the country.
68% of them own less than one hectare of land.
Only 6% of them actually receive guaranteed price support for their crops, and more than 90% of the farmers sell their produce in the market.
More than half of the farmers, in the words of an economist, "don't even have enough to sell".
What is Minimum Support Price?
MSP is the minimum price paid by the government when it procures any crop from the farmers.
It is announced by the state-run Commission for Agricultural Costs and Prices (CACP) for more than 22 commodities on an annual basis, after calculating the cost of cultivation.
Food Corporation of India (FCI) which is the main state-run grain procurement agency largely buys only paddy and wheat at these prices.
The FCI then sells these foodgrains at highly subsidised prices to the poor and is thereafter compensated by the government for its losses.
However, the FCI procurement is not uniform across India.
Is MSP mechanism beneficial to all farmers?
The MSP mechanism for wheat is robust only in Punjab, Haryana and Madhya Pradesh.
For rice, only farmers from states such as Andhra Pradesh, Chhattisgarh, Punjab and Haryana benefit.
Farmers in other states hardly benefit from support prices because the government’s procurement infrastructure is missing in these states.
The 70th round of National Sample Survey for 2012–13 revealed that only 32.2% of paddy farmers and 39.2% of wheat growers in the country were aware of MSPs.
The survey also showed that only 13.5% of paddy farmers actually benefited from MSP, while only 16.2% growers sold their produce to government procurement agencies at MSP prices.
For commercial crops, such as cotton and jute, the state intervenes through the Cotton Corporation of India and Jute Corporation of India only when market prices fall steeply.
What is APMC? Which states have it?
Agricultural Produce Market Committee (APMC) is a marketing board established by state governments in India to ensure farmers are safeguarded from exploitation by large retailers, as well as ensuring the farm to retail price spread does not reach excessively high levels.
APMCs are regulated by states through their adoption of Agriculture Produce Marketing Regulation (APMR) Act.
Kerala, Manipur, Mizoram and Sikkim along with the UTs like Andaman & Nicobar Islands, Lakshadweep, Daman & Diu, and Dadra and Nagar Haveli never had an APMC, law whereas Bihar repealed it in 2006.
In 2013 vegetables and fruits were shifted out of APMCs.
Since 2002, close to 69 to 73 percent of the production left with the farmers was sold outside APMCs below the minimum support price (MSP).
As per a NSSO report of 2016, only 36 percent of the trading could be identified to take place in the regulated market.