The agricultural sector was subjected to a major change as the central government initiated three new agriculture-related legislations, which have triggered mass protests across India. Several sections of farmers have voiced concerns about the government favouring the corporates.
In India, the farming community is not a monolithic body. The agricultural sector provides the highest employment in India and many types of farmers exist in India. However, these agricultural legislations, will impact all categories of farmers – from small-scale farmers to large-scale farmers.
During the 1970s, the Green Revolution helped states like Punjab and Haryana to be the highest crop producers in India. The government also created the Agriculture Produce Marketing Committees (APMCs) under the agricultural marketing department to facilitate procurement of crops. This has actually aided the above-mentioned states in selling and getting adequate prices for their crops. With the APMCs under threat, farmers of these states are showing maximum outrage. Several farmers of Tamil Nadu, Andhra Pradesh, Karnataka, West Bengal, Odisha, and Maharashtra are also protesting.
The government mandi infrastructure that was built by APMCs through public money had registered and licensed middlemen procuring crops from farmers while abiding by specific government regulations. Now the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act aims to open up the agricultural market to more competition. The APMCs expected that farmers will only sell at government mandis whereas the new Act allows them to sell outside the mandis - even without any tax.
P. Sainath, a renowned agricultural journalist, while talking to journalist Barkha Dutt in her channel Mojo, compared this situation with the telecommunications sector in India. The allegation is - eventually the same is going to happen to the agricultural sector and it will be largely monopolised. One can assume, after monopolising, private participants - in the absence of stringent regulations - will undercut market prices. The farmers, left with only a few marketing options, may be forced to accept the corporate-fixed prices. Their scope to go to court against this has also been reformed. It is feared that the enactment of this law might actually abolish the Minimum Support Price (MSP) regime in the long term.
Sainath, in the interview, added, “This whole thing is based on lies and on fake assumptions that through the APMCs, some sort of gigantic monopoly is enslaving the farmers. The bulk of transactions in marketable agricultural surplus have always and continue to take place outside the APMCs. Most farmers part with their crops at farm gates because they are pledged to some money leaders, creditors, traders or commission agents. In reality, the APMC is to agriculture what government schools are to education. Even if the infrastructure is degraded or flawed, the idea is to strengthen the system; not to eliminate them.”
Talking about the restructuring of APMCs, Sainath commented, “The model they are trying to put forward already exists - in the APMC market in Vashi, Maharashtra. There the APMC's power and control is limited. It has no jurisdiction outside. The idea of this is once you clip the wings of APMC, large private players will come to set up the market. But since 2016, nothing like that has happened. On the other hand, in Kerala, there has never been an APMC legislation. In Bihar, the state government gutted the APMC Act in 2006. Now Bihar farmers sell crops in Haryana and there is a huge price inflation.” But if we look at the present context, we can find that a large section of farmers has migrated from the state in search of jobs with better income and have actually left the agriculture sector. So, the model did not benefit Bihar to the expected extent and taking the state as an example, the government could have reassessed these acts. Additionally, experts think that to attract more private investment in a particular sector so as to help farmers, public investment in the same field should be adequate.
Devendra Sharma, an eminent agriculture economist, recently informed NDTV, “The reforms India is trying to put forth now has already been implemented in the US and in other European countries. There is open market, contract farming and big commodity trading exchanges in the US in absence of MSP or APMC." But the Chief Economist of the US Department of Agriculture has revealed that the country's farmers have experienced a stiff decline in income since the 1960s. A report by the American Farm Bureau Federation said that 91% of the country's farmers are bankrupt and most farmers want to leave the sector. They are surviving only because of massive agricultural subsidies.
Responses to e-nam - the first step for local APMC bypassing
Presently, the government is saying that they do not seek to completely withdraw the AMPC structure. Interestingly, last year, Nirmala Sitharaman, the Indian finance minister in NABARD's sixth congress, commented that the APMC structure can be abolished. Additionally, the government also aims to reduce any interstate or intrastate barrier for agricultural marketing (Source - NDTV).
In tandem with its push for digitalisation, the central government created the e-num platform where with internet connection in smart devices, farmers can observe market prices and demand trends across the country’s mandis. To avail this facility, the farmers are required to have crop quality certificates. It was the first step towards bypassing the local APMCs and this was initiated in 2015. E-num was a failure because of the poor status of a large number of farmers in India. The data regarding e-num registration too was controversial and flawed -according to some media reports.
Sandip Naskar, a farmer from South 24 Parganas, West Bengal, told BE, “In our village, we do not get adequate internet connection. Most of the farmers do not even have smart phones. So, using the e-nam application is quite impossible for us.” Speaking about marketing his crops, Naskar added, “Small scale farmers like us do not go to APMCs to sell the crops. We sell at our local market to minimise the transport costs. Keeping that in mind, going outside the state is not a visible option for us. We would rather demand for MSP because we do not get it. Also, the MSP system must be checked regularly by the government to avoid its underuse.”
MSP is the central demand
The need for MSP can be traced back to the 1960s when India faced a food shortage followed by multiple years of drought. Policies were formulated in order to maintain reserve stocks of food by providing price support to farmers by declaring and procuring stocks at MSP for various commodities. Later, the grains were supposed to be sold at subsidised rates for the economically marginalised.
Two major agricultural committees were formed and certain recommendations were made related to the MSP. The Swaminathan Committee that was formed in 2004 recommended that MSP should be at least one and a half times of the total cost of production (C2+50%) and at least 50% more than the weighted average cost of production. However, the committee failed to define what constituted the weighted average cost of production. A report by The Indian Express states, “The government fixes the MSP of 22 mandated agricultural crops based on the recommendation of the Commission for Agricultural Costs and Prices (CACP). The list of crops shielded by price fluctuations include 14 kharif crops, six rabi crops and two commercial crops. The CCAP is also responsible for fixing the fair and remunerative price (FRP) of sugarcane.” It further stated that factors like domestic and international prices, the demand-supply situation and the likely effect of the MSP on inflation are also taken into consideration by the CACP.
The farmers through their movements are now demanding MSP as their legal right.
Significantly, the recommendations of the Shanta Kumar committee in 2014 also suggested to defunct the MSP structure. The committee itself revealed that only 5.8% farmers are facilitated with the MSP programme and that farmers of Punjab and Haryana have mostly benefited. The major reason behind the failure was then identified by the committee as lack of storage capacity of the states.
Vijoo Krishnan, Joint Secretary, All India Kisan Sabha (AIKS), informed BE, “The problem of farmers was not marketing but they were not getting the right price for their produce. The government announced the MSP for about 24 crops but procurements happen only in case of wheat, rice and in some places for pulses and in Karnataka for some crops like ragi and others.” He further stated that over 200 organisations of farmers had united to form the All India Kisan Sangharsh Coordination Committee (AIKSCC) that developed the Farmers’ Rights to Guaranteed Minimum Support Prices for the Agricultural Commodities Bill. This was a demand that arose from the grassroots and was placed as a Private Member’s Bill in the parliament. However, the government did not respond to this."
Impact on different sections of farmers
As per census 2011, farming was the main occupation for almost 96 million cultivators in India. According to the provisional estimates of the 10th agricultural census of 2015-16, operational land holdings for small and marginal farmers has reduced from 1.15 hectares in 2010-11 to 1.08 hectares in 2015-16. The report further stated that small and marginal holdings constitute almost 90% of our total agricultural land holdings. A report by the online news portal thewire.in suggests that according to various estimates from governmental sources, in 2016-17, the average income of a farming household was Rs. 8,931 per month. Moreover, almost 35% of the income came from wages. The report concludes that till now, almost 85% of farmers fall in the category of marginal and small farmers with less than two hectares of land holdings. Thus, the impact of the farm bills on these sections of the farmers needs to be analysed.
Ashoke Gulati, Infosys Chair Professor for Agriculture at ICRIER in an article for The Indian Express, suggests that three legislations have to be seen in totality. He writes, “Essentially, the FPTC breaks the monopolistic powers of the APMC markets while FAPAFS allows contract farming and the ECA removes stocking limits on traders for a large number of commodities with some caveats still in place.”
Gulati also pointed out that these laws will create a competition in the agricultural marketing space by providing greater choice and freedom to farmers to sell their produce and to buyers to buy and store. This is expected to help in building more efficient value chains in the agriculture sector by reducing marketing costs, enabling better price discovery, improving price realisation 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 to contain seasonal price volatility.
In this context, Krishnan said, “Though the government has not said that they are ending the MSP and procurement mechanism, however, gradually that is the direction towards which it is going. As a result, the smaller farmers are going to be in a more disadvantageous position as they will be left with no bargaining power.”
He believes that the new laws will promote contract farming. Even in case of a dispute, the farmers cannot go to courts and it will be addressed at a bureaucratic level. He added, “Given the power of some of the big companies, it is not difficult to anticipate the manner in which bureaucracy is going to address the issues.”
Can extensive contract farming be threatening?
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act aims to formalise contract farming in India. Through contract farming, farmers produce crops for corporates at pre-agreed prices. This kind of farming largely consists of big land holding farmers. Poor farmers are mostly deprived. This will open another door for monopoly of the big corporations. According to corporates, they will buy from farmers at very cheap rates while selling at much higher prices to the end consumers. With lesser options, the farmers will also be forced to sell to few corporates and will be exploited in many forms. The PepsiCo versus farmers case in India is a significant example.
The last legislation regarding essential commodities omits all cereals, pulses, oilseeds, potato and onion from trade restrictions along with price control. This, in reality, will benefit traders who have good storage facilities. The government will not put stringent restrictions on storage limits of these items apart from extraordinary situations (like pandemic or emergency). The traders will buy crops from farmers during the harvest season and store them for long. This can increase the price for consumers in case of higher demand and also due to intentionally restricted supply in the market. In that case, the small or marginal farmers will be left with no other option rather than selling their crops at much lower prices - as the traders will say that they have adequate crops in storage. Thus, the relaxation in the ECA itself can call for an extraordinary situation - impacting the poor citizens by taking their food security away.
Most government procurement centres in Punjab, Haryana and in a few other states are located within the notified APMC mandis. Farmers fear that encouraging tax-free private trade outside the APMC mandis could lead to a reduction in government procurement itself. Farmers are also demanding that MSPs be made universal, within the mandis and outside, so that all buyers - government or private - will have to use these rates as a floor price below which sales will not be made.
Trade unions, different mass organisations as well as civil society groups extended active support to the call by the AIKSCC. Even the farmer organisations connected with the ruling parties are unhappy with the new acts. Krishnan points out the hollowness of the claim of granting freedom to the farmers to sell their produce wherever they want by stating that though price assurance is mentioned in The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, it does not mention anywhere that the prices given by a trader or an agribusiness company to the farmers cannot go below the MSP. There is also no mention of fixing the prices at 50% above the comprehensive cost of production as recommended by the Swaminathan committee and as promised by Narendra Modi in 2014. Agricultural experts feel that unless there is a specific regulatory body to fix and assess it, farmers will not get their desired prices.
Reacting to the farmer protests throughout the country, Krishnan informed, “Over 20 lakh people all over the country participated in our protest against the acts. We are also going to have massive protest movements in Delhi towards the end of November. We are going to have coordinated action with the labour unions.”
Various agricultural experts feel that the apparent objective of the acts seem to be for the benefit of the farmers as the removal of the middlemen will help farmers get better prices. However, the previous disastrous instances of the implementations of the demonetisation drive and GST have raised doubts. Moreover, the way in which the bills were passed in the Rajya Sabha despite the objections raised by the Opposition was widely criticised as undemocratic. As a result, agricultural workers all over the country are fearful of the fact that these legislations are a step towards the corporatisation of the agricultural sector. Reforming the existing structure with focused governmental support might have been more beneficial for the farmers.