The current standoff between farmers and the government still continued even after a few rounds of discussion. The latest proposal by the government indicates its willingness to amend the three agriculture-related Acts passed in the month of September. On the contentious issues of registration of private traders, levy of taxes on trade outside the Agricultural Produce Market Committee (APMC) mandis, the government has proposed amendments which will empower the States to frame rules on these issues. Similar assurances have been given on access to the judiciary for dispute resolution and continuation of the Minimum Support Price (MSP) mechanism. However, farmer unions have rejected the proposal and continue to demand complete withdrawal of the three Acts along with making MSP a guarantee.
About Farm Laws and its contentious provisions
Farmer’s Produce Trade and Commerce (Promotion and Facilitation Act, 2020
- To create an ecosystem where farmers and traders enjoy the freedom to sell and purchase farm produce outside registered ‘mandis’ under States’ APMCs.
- To promote barrier-free inter-state and intra-state trade of farmer’s produce
- To reduce marketing/transportation costs and help farmers in getting better prices
- To provide a facilitative framework for electronic trading
- Revenue loss to states as they won’t be able to collect ‘mandi fees’ if farmers sell their produce outside registered APMC markets.
- It may eventually end the MSP based procurement system
- Electronic trading line in e-NAM uses physical ‘mandi’ structure
On contract farming: The Farmer (Empowerment and Protection) Agreement of Price Assurance and Farm Service Act, 2020
- Farmers can enter into a contract with agribusiness firms, processors, wholesalers, exporters or large retailers for the sale of future farming produce at a pre-agreed price
- Marginal and small farmers, with land less than five hectares, to gain via aggregation and contract (Marginal and small farmers account for 86% of total farmers in India)
- To transfer the risk of market unpredictability from farmers to sponsors
- To enable farmers to access modern tech and get better inputs
- To reduce cost of marketing and boost farmer’s income
- Farmers can engage in direct marketing by eliminating intermediaries for full price realization
- Effective dispute resolution mechanism with redressal timeliness
- Farmers in contract farming arrangements will be the weaker players in terms of their ability to negotiate what they need
- The sponsors may not like to deal with a multitude of small and marginal farmers
- Being big private companies, exporters, wholesalers and processors, the sponsors will have an edge in disputes
Essential Commodities (Amendment) Act, 2020
- To remove commodities like cereals, pulses, oilseeds, onion and potatoes from the essential commodities. It will do away with the imposition of stock holding limits on such items except under ‘extraordinary circumstances’ like war.
- This provision will attract private sector/FDI into farm sector as it will remove fears of private investors of excessive regulatory interference in business operations
- To bring investment for farm infrastructure like cold storages, and modernizing food supply chain
- To help both farmers and consumers by bringing in price stability
- To create a competitive market environment and cut wastage of farm produce
- Price limits for “extraordinary circumstances” are so high that they are likely to be never triggered
Reasons for Protest
Definition of Trade area
- Section 2(m) of The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 defines “trade area” as any area or location, place of production, collection and aggregation including (a) farm gates; (b) factory premises; (c) warehouses; (d) silos; (e) cold storages; or (f) any other structures or places, from where the trade of farmers’ produce may be undertaken in the territory of India.
- The definition does not, include “the premises, enclosures and structures constituting (i) physical boundaries of principal market yards, sub-market yards and market sub-yards managed and run by the market committees formed under each state APMC (Agricultural Produce Market Committee) Act”.
- It also excludes “private market yards, private market sub-yards, direct marketing collection centres, and private farmer-consumer market yards managed by persons holding licences or any warehouses, silos, cold storages or other structures notified as markets or deemed markets under each State APMC Act in force in India”.
- In effect, existing mandis established under APMC Acts have been excluded from the definition of trade area under the new legislation.
- The government says the creation of an additional trade area outside of mandis will provide farmers with the freedom of choice to conduct trade in their produce.
- The protesters say this provision will confine APMC mandis to their physical boundaries and give a free hand to big corporate buyers.
Traders and protest
- Section 2(n) of the first ordinance defines a “trader” as “a person who buys farmers’ produce by way of inter-State trade or intra-State trade or a combination thereof, either for self or on behalf of one or more persons for the purpose of wholesale trade, retail, end-use, value addition, processing, manufacturing, export, consumption or for such other purpose”. Thus, it includes processor, exporter, wholesaler, miller, and retailer.
- According to the Ministry of the Agriculture and Farmers’ Welfare, “Any trader with a PAN card can buy the farmers’ produce in the trade area.”
- A trader can operate in both an APMC mandi and a trade area. However, for trading in the mandi, the trader would require a licence/registration as provided for in the State APMC Act. In the present mandi system, arhatiyas (commission agents) have to get a licence to trade in a mandi.
- The protesters say arhatiyas have credibility as their financial status is verified during the licence approval process.
- Section 6 states that “no market fee or cess or levy, by whatever name called, under any State APMC Act or any other State law, shall be levied on any farmer or trader or electronic trading and transaction platform for trade and commerce in scheduled farmers’ produces in a trade area”.
- Government officials say this provision will reduce the cost of the transaction and will benefit both the farmers and the traders.
- Under the existing system, such charges in states like Punjab come to around 8.5% — a market fee of 3%, a rural development charge of 3% and the arhatiya’s commission of about 2.5%.
- Farmers fear the proposed system of conciliation can be misused against them. They say the ordinance does not allow farmers to approach a civil court.
Agriculture Crisis Created by Government
- The current crisis is entirely a creation of the government at a time when the country was struggling with novel coronavirus-caused lockdowns, supply disruptions, job losses and falling incomes in an economy which was already slowing down even before the pandemic.
- While the reforms embedded in the three Acts are unlikely to help resolve the structural issues facing Indian agriculture, even their withdrawal is unlikely to change the ground reality which has existed even before the Acts were passed.
- It is precisely because of this that withdrawal of the three Acts by the government will only offer a temporary truce.
- Such a step is unlikely to contain farmers’ anger and unrest which is likely to increase with a slowing economy and falling demand for agricultural commodities.
Reasons of the Crisis in Agriculture
- The real issue is the lack of remunerative prices for a majority of agricultural commodities, a sharp increase in price variability in recent years, and an unpredictable and arbitrary government policy regime, none of which is likely to change in the near future.
- It is these which have led to a recurrence of distress in the agricultural sector with regular farmers’ protests which have only grown in frequency in recent years.
- Part of the problem is the changing nature of agriculture which has seen increased dependence on markets, increasing mechanization along with increasing monetization of the agrarian economy.
- The increased dependence on markets has contributed to increasing variability in output prices.
- With limited intervention by the government in protecting farmers’ income and stabilizing prices through MSP-led procurement operations, the variability has increased in frequency as well as the spread of it.
- Other than rice and wheat and to some sporadic instances, of pulses, most crops suffer from inadequate intervention from MSP operations.
- However, even these procurement operations are unable to stabilize prices with falling demand and a slowing economy.
- Not only has the procurement operation failed to arrest the decline in prices, the uneven nature of procurement has meant that in many States of eastern India, wheat is sold at 2040% lower prices compared to MSP.
- It is the same in the case of paddy where most States have seen market prices significantly lower than the MSP.
- The situation is far more worrying for crops such as maize which sold at 4060% lower than the MSP in most States.
- Unfortunately, none of this is new. In the last five years, three years have witnessed negative inflation for cereals.
- While the withdrawal of the Acts is unlikely to ensure price stability, even the demand of making MSP a guarantee for private trade is meaningless if the government is unable to ensure procurement for a majority of the 23 crops for which it announces MSP.
- Crops such as wheat and paddy for which there is procurement, the regional concentration makes it irrelevant for most of the eastern and southern States.
Long Term Resolution is Required
- Even if the current impasse due to the farmers’ agitation gets resolved, there is no certainty that the structural factors which have contributed to the farmers’ unrest will get resolved.
- The existing policy framework with an excessive focus on inflation management and obsession with the fiscal deficit will likely lead to lower support from the government either in price stabilization or reduction in the cost of cultivation through fiscal spending.
- The agricultural sector needs a comprehensive policy overhaul to recognize the new challenges of agriculture which are diversifying and getting integrated with the nonagricultural sector.
- This not only entails a better understanding of the structural issues but also innovative thinking to protect farmers’ livelihood from the uncertainty of these changes.
Source: The Hindu; Times of India and PRS