Since May 14, 2014, the focus of the present central government has remained on ‘Minimum Government but Maximum Governance’. According to Prime Minister Narendra Modi, “For decades, we have had extraordinarily large governments while ironically the quality of governance has been quite poor” and Modi has demonstrated that “a good justice delivery mechanism and an entrepreneur-friendly environment is possible, even with a small and less intrusive government.”
There has been a paradigm shift by the prime minister towards the approaches of governance as strict adherence to Mahatma Gandhi’s principle of Swaraj (Gandhi believed in the importance of self-government and that every village must be empowered to deal with local issues) particularly in the wave of growing crony capitalism across the world, that has been strongly echoed by the mission statement of ‘Atma Nirbhar Bharat’.
Farmers are the backbone of our society and make up around 60 per cent of the Indian population. This essentially contributes to around 17 percent of the country’s Gross Domestic Product. However, marginal farmers comprise 85 per cent of the total population of the farmers in India. Agriculture has achieved self-sufficiency in producing grains but it is resource intensive, cereal centric and regionally biased. The resource intensive ways of Indian agriculture has raised serious sustainability issues. Increasing stress on water resources of the country would essentially need rearrangement and reframing of policies. Desertification and land degradation have become a corollary fuelling major threats to agriculture in the country (FAO).
The monthly income of agricultural households from cultivation has recorded a marginal increase since the national census in 2011 with an estimated average monthly income of agricultural families was about Rs 3,140 in 2016. Almost 52 percent of total rural agricultural households were estimated to be under heavy debts. The average annual debt amount per agricultural household is estimated to be around Rs 104,602 that might trigger with increasing farmer distress, urban migration and growing incidence of suicides in rural India, especially in the farming community.
Earlier this year, the Union government passed three heavily contested farm bills in the Parliament. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, which aims to dismantle existing, trade and distribution monopoly enjoyed by the Food Corporation of India (FCI) and the Agricultural Produce Market Committees (APMC). This Act will now allow farmers to sell outside of their designated districts APMC, thereby advancing their interaction with the market directly.
The second is the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, which focuses on creating avenues for farmers to engage in contract farming through verbal or written contracts. This bill paves the way for farmers to access national and corporate markets.
The last is an amendment to the Essential Commodities Act, 1955, according to which, cereals, pulses, oilseeds, edible oils, onions and potatoes have been deregulated.
Together, the three bills aspire to liberalise and deregulate the market for the agrarian sector. The bills bring long-awaited reforms to a key segment of the Indian economy. As the thrust for development took this turn, it also left the farm sector dealing with outdated laws and systems. The Farmers Agreement of Price Assurance and Farm Services bill creates opportunities for farmers to engage in contract farming, selling their produce outside the APMC and expanding their access to market.
The Farmers Produce Trade and Commerce bill breaks the monopolistic situation afforded to the APMC-FCI structure. The amendment to the Essential Commodities Act, 1955 changes the limitations on stockpiling and allows for staple crops to become commercial.
The three bills seek to transform agriculture in India. It would be beneficial to analyse the strengths and weaknesses of these bills through the lens of the market economy and potential impacts on the socio-economic situation of the farming community.
Strengths and Opportunities
• With the passing of the bills, the Union government has intended to liberalise farming with the short-term goal of doubling their current average monthly income. The government aspires to deregulate the sector and offer farmers the freedom of choice to sell their produce without restraint.
• The bills will empower farmers through greater market access and expanded opportunities for commercial outcomes. By eliminating the APMC monopoly, the bills do away with the long-standing challenge of middlemen. The bills could also lead to an open market, enabling improved price discovery, supply chain efficiencies and dynamic market linkages.
• The liberalisation of the market will introduce corporate and private investments in the industry. These investments can strengthen infrastructure, improve tools and modernise the sector. The open-market structure also allows the farmers to sell their produce online, an important change in an increasingly digital universe.
• The increase in competition can potentially work to increase prices for farmers who are currently at the mercy of middlemen. In addition to these benefits, the availability of contract farming provides farmers with a price assurance instead of subjecting them to market uncertainty. There is also the possibility of firms providing farmers with input material as a part of contracts, thereby reducing input costs.
• By amending the Essential Commodities Act, 1995, the government does away with stockpiling restrictions on several commodities. In doing so, the government intends to stabilise prices by driving supply chain efficiencies through access to stock.
• These bills have the potential to create a similar impact as the New Economic Policy of 1991. This, however, is dependent on several independent actors and their motives.
• By loosening the grip of APMCs, the government risks the possibility of farmers receiving prices below the minimum support price (MSP).
[A similar law was passed in Bihar in 2006 when the state abolished APMCs. A recent study conducted by the National Council for Applied Economic Research reported an increased volatility in grain prices. Bihar witnessed fractured growth in agriculture after the repeal of the mandi-system in 2006. These experiences have influenced a few agricultural economists, who believe that rebuilding the existing system might be a better course of action than tearing it down to introduce a new system altogether.]
• Another weakness in the plan is the lack of policy-level support for transporting farmer produce. At least 85 per cent of the Indian farming community comprises marginal farmers who do not have access to markets or transportation facilities.
• The bills also create a sudden power vacuum in the market, thereby creating uncertainty in the production market. In case of gradual collapse in APMC systems, the government has not currently envisioned an alternate price setting mechanism.
• Agriculture falls in the state list under the Constitution of India. However, the existence of Entry 33 in the concurrent list gives both the Centre and states the power to control production, supply and distribution of products in trade and commerce related to agriculture. With several state governments expressing dissent over the bills, it is likely that they would undermine the bills by exercising their power.
• Rajasthan did this by designating all potential market areas as state-controlled areas. This blocks the Centre’s intention to create an open market in the absence of state regulations. Rajasthan is an example of how states might circumvent the bills by utilising their existing power.
• It is also difficult to ensure that the big corporates do not enslave the already marginalised farmers. By allowing both verbal and written contracts, the Centre places the farmers at the vulnerable end of the bargain with no redress.
• It is highly likely that big corporates bury the farmers in an avalanche of legal resources. There is no denying that there is a widely disproportionate access to legal resources between farmers and corporates and there seems to be no real law in place to safeguard the interests of the farmers.
• Both farmers and consumers run the risk of exploitation by placing the market in the hands of big businesses.
Few Indicative Case Studies that Empowered Farmers
• A maze farmer Maharashtra, Jitendra Bhoi had filed a case under the newly introduced Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 against two traders for not paying him an outstanding amount of Rs 285,000. The bill mandates the buyers to make payment to the farmer within three days of transaction but Bhoi’s payment was delayed by four months. Bhoi approached the authorities in the first week of October. The concerned magistrate ordered the traders to immediately pay the outstanding amount to Bhoi or face criminal charges under the bill. The traders complied with the order and the case was closed on November 4.
• The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 has proved to be of great help to cardamom farmers of Kerala in times of pandemic. Until now, the Spices Park was the only option available to the farmers to auction their produce and that has not been going well for the farmers due to pandemic. Due to restrictions on inter-state travel in the lockdown, sellers and buyers could not reach the Spices Park. But then Vandanmedu Green gold Cardamom Producer’s Company, which is a producer firm as well as a licensed auctioneer, started e-auction of cardamom under the provisions of the bill.
• Now, a company called Idukki Progressive Spice Producer Company Ltd (IPSCL) has been registered by the Cardamom Growers’ Association which is expected to start an e-auction by the first week of December. The Spices Board at Puttady in Idukki and the Bodinayakanur in Theni district of Tamil Nadu were the only places where farmers could auction their produce. With the introduction of e-auction facility under the bill, more and more farmers are now auctioning their produce there.
• Chairman of VGCPC, KS Mathew said that around 50,000 kg cardamom was sold during two e-auctions held recently. PC Mathew, Secretary of Cardamom Growers’ Association and the Chairman of the IPSCL said that they were in the process of creating a website and app for buyers. He said that e-auction would stop the system of deferred payment in which middlemen were engaged. “As per the news norms of the Spices Board, the payment should be done within 10 working days. Instead of payment, the auctioneers will lend money to the producers on a 33% interest rate. It is a highly lucrative business. We will only deal with buyers who can provide money on time”, he said.
• Farmers from Dibrugarh in Assam are relieved with the introduction of farm bills. The farmers said that they will now be able to get direct benefits from the sale of their sales unlike before when the middlemen used to keep the lion’s share from the sale and would give a meagre amount to the farmers.
• Farmers from Gaya also hold similar views regarding the farm laws. The farmers thanked the Modi government for introducing the farm bills. They said that now they would be able to directly reap the benefits of their produce that would until now was only benefitting the middleman. The farmers are hopeful that under the new laws they would receive a fair price for their hard work.
• Farmers in Agra have also come in the support of the new farm laws. Farmers thanked the Modi government for bringing the new farm laws, saying that these will ease their lives. A farmer from Agra said, ‘PM Modi has done great. Farmers are very happy with the decision.’ Another farmer said, ‘Now because of Modi ji, we will be able to sell our produce directly,’
• To build trust among farmers and the states would be to include a mandate for MSP, as recommended by the Swaminathan Committee, within the ambit of the bills. Another would be to plug the holes in the current system instead of trying to dismantle and introduce a new structure.
• The Farm Bills may be augmented by special provisions of introducing Limiting access to MSP to those farmers who either fail to sell their produce independently or having small land holding (less than 2 hectres) for a limited period of five years. They could be provided adequate HRD intervention so that they could bargain their crops in the competitive market.
• The Government may introduce special package under ‘Universal Basic Income’ scheme to protect the landless farmers or the farming families suffering from extreme poverty or hunger. They may be extended financial grants through Direct Benefit Transfer (DBT) or providing free rations and basic financial grants to support their families (Chakrabarty, 2019). This would enable India to achieve first two agenda of UN – Sustainable Development Goals.
• There may be possible interventions of 4IR ecosystem promoted and supported by the state in order to motivate the farmers to become more enterprising and entrepreneurial in nature. There may be investments on improvising supply chain excellence so as to attract the farmers to select the prospective buyers through mobile app as the integral part of digital ecosystem.
• The government also needs to make it mandatory for firms to draw up written contracts in vernacular languages and do away with verbal contracts. It may also be necessary to declutter the complexities surrounding export and import of agricultural produce, in alignment with the new bills.
• The agricultural sector could also benefit greatly if the bills achieve harmony with the provisions related to self-help groups and farmer producer organisations to incentivise collectives, aimed especially at marginal and small holding farmers.
The wisdom of these bills is visionary in its intent. As part of its implementation strategies, it may be improvised with certain other augmentations so that the purpose of these legislations would not be defeated both in letter and spirit.
The author is a Professor of Agricultural Economics, Banaras Hindu University and Vice-Chancellor of Rajiv Gandhi University (Central University), Rono Hills: Doimukh, Arunachal Pradesh. Views expressed are personal.
1. Chakrabarty, A. (2019). Universal Basic Income at the Bottom of the Pyramid: Achieving SDGs through Financial Inclusion in India. Administrative Development. Volume – 6 No. 1 January – June, 2019 Issue, pp. 119-141. [ISSN No. 2319-2976] http://qtanalytics.in/journals/index.php/HIPA/article/view/439
4. https://www.opindia.com/2020/11/farmers-tell-how-they-are-benefitting-from-the-new-farm-bills/ Retrieved December 14, 2020