Everything about the Farm Bills

Agriculture has always been the mainstay of its GDP, India is an agrarian economy. Three bills aiming to alleviate the conditions of the farmers have been passed in the upper house last week in India. This was amid a lot of uproar from the opposition and also from the farmers. These bills seeking to replace an ordinance that was promulgated in June this year has now become a law after they got the nod from president Ram Nath Kovind.

The three tranches of the legislations are:
1. Farmer’s Produce Trade and Commerce (Promotion and Facilitation) bill 2020
2. Farmer (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
3. The Essential Commodities (amendment) Bill, 2020

Farmers, particularly from Punjab and Haryana have been agitating against these bills apprehending that these legislations might culminate in the removal of MSP. Not only farmers, but state politicians from diverse parties have been venting their voice that this is an encroachment on the cooperative federal policy.

“Jai Kisan” was the term coined by a great man, Lal Bahadhur Sastri. He was a man who understood the importance of farming and farmers. Today, the new legislations implemented has not been enacted in a democratic way. It is totally unfair for the government to pass them without debate in the legislatures using the means of ordinances. No such committee has been formed to propose a viable solution for the problems of farmers. No state has been consulted prior to moving these bills. It is the need of the hour to acknowledge that 7.7 percent of total suicides that are happening in India are of farmer’s as per NCRB report. Governments irrespective of the parties must ensure that these legislations are enacted in a democratic way, particularly those legislations which are of national interest.

What is APMC?

APMC abbreviated as AGRICULTURE PRODUCE MARKET COMMITTEE is a board established by the state government. It ensures the elimination of the exploitation of farmers by the intermediaries.

What was the need for APMC?

Farmers mainly used to rely on short term loans with exorbitant interest rates from rich Zamindar’s for cultivation. These indentured farmers could not wait for longer periods for a better price as the interest would be spiking further up. Farmers were indeed compelled to sell their produce to the lender which he then sells them for a better price. Even after the land reforms and the abolition of zamindari system this situation didn’t change. Also, farmers had no access to storage facilities and storage houses (commonly referred as guardians) to store their produce. Only the rich intermediaries had access to such infrastructure, thereby, forcing the farmers to sell the yield for extremely low prices. Thus the farmer was subject to exploitation at every stage of the value chain. To avoid this exploitation, the government came up with APMC.

Under the APMC act, the farmer can’t sell his produce directly to the consumer. The state had been geographically divided into zones. A dedicated auction place or market was set up for every zone. The traders or wholesale sellers have to acquire a license from the APMC to procure the produce. This act has forced the farmers to sell their produce only through APMC. The government guaranteed that the auction price should start at the MSP and cannot go below that price, thereby extenuating the risk of the produce being sold at a loss.

MSP?

Minimum Support price is the minimum price per quintal proposed by the union to ensure that farmers cannot be exploited by corporate cartels. Let us take an example of a paddy farmer, Subramanian. The expenditure incurred by him per quintal is Rs.1,500. Imagine that MSP does not exist and Subramanian wants to sell his yield in an APMC Mandi for an expected price of 1,700. There is a chance that the traders might propose a lower price of Rs.1,400. If Subramanian has no access to storage then, he is worried that the prices may even go down further. He thus thinks of selling the yield at the proposed rates. If this happens, Subramanian will lose 30,000 per tonne of paddy he produces.
So, to avoid such exploitation Government introduced MSP. Let us say the MSP set by the Centre for a quintal paddy is 1,700. Now the auction price will not be lower than the proposed MSP and therefore, it must start at 1,700 per quintal. It could also be more depending on the quality of the grains. This helps Subramanian from running into a loss. It is also important to note, that MSP is applicable only to 22 food crops and not to perishable food items.

Why the protests?

1. Agriculture is under the state list of the seventh schedule of the constitution. i.e., the state governments have the power of making legislations on this subject. The states feel that it is an infringement on the state’s right, and a breach of cooperative federalism.
2. The state governments are entitled to huge revenue amounts via market fee through the APMC’s. The amount is particularly high in the states that have agriculture as the mainstay of their economy.
   Punjab currently earns 3,500 to 3,600 crores annually in the form of market fee. The states have the right to spend this money anywhere they wish, per say farmer welfare policies, loan clearance, irrigation projects etc. Why would any state want to ignore this money? They can showcase this money spent on social welfare schemes in election campaigns to attract votes.
3. Marginal farmers holding a meagre amount of land, presage that it might be tough for them to find a private trader, and also the apprehension is that the corporate entity will have more bargaining power.
4. Small farmers may not be able to derive profits, even if potentially better prices are available at a different geographical location due to non-affordability of transportation and storage.
5. The main thing that farmers fear about these legislations are that private mandis or private markets may eventually lead to the closure of APMC Mandi, which in turn may eliminate MSP.

Fact check?

1. The legislation facilitates the sale of produce outside APMC, this legislation nowhere mentioned the removal of APMC. So MSP stays.
2. As per NITI AYOG’s report, it is evident that only 6% of the Indian farmers are deriving benefits from MSP and around 81% of the farmers are not even aware of the MSP.
3. Not every farmer needs to worry about MSP, because MSP is provided by the Centre, only for 22 food crops.
4. Though the cost of cultivation varies from state to state, MSP proposed by the union, is same for all the states.

What actually is so contentious about these bills and how does the farmer achieve any welfare from these? These were a few questions which provoked me when this whole episode rolled out in the open.

Click here to understand each bill in details.

Way Forward

It is of paramount importance to remember that in this situation of pandemic while all other businesses failed, it is only the agriculture sector that has shown a significant share in the economy. Though in theory the legislations seem favorable to the farmers, the essence of these strictly lies in their implementation.

There are chances of this ordinance turning into success if we also follow it up with the below:

• Create proper agri-infrastructure to sustain an ecosystem of PPP.
• The governments have been making gullible promises on doubling the farmer’s income but the only way it can happen is for the government to increase the MSP of the crops.
• If the government is really committed to farmer’s welfare then they should take path breaking changes in policy making: investment support, assurance of price, storage facilities, and loan waivers ET all.

True welfare is possible if we really think together as a country towards the benefits of its countrymen.