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| Farmer's Protest in Delhi |
The Farm Bills 2020 is a combination of three agricultural bills passed by Indian Parliament in September 2020. These three bills are:
- Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill
- Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill
- Essential Commodities (Amendment) Bill
Lets take a deep breath and analyze the situation by studying the content of the bills as well as articulating the concerns of the farmers in a logical way. But what qualifies me to make this assessment? Brought up in the agro-industry base of the sugar belt in Western UP, I have a unique perspective of how farmers do their business in age-old tradition of Mandi. In last 25 years I have also seen how modern agriculture business is conducted in California.
Mandi - Traditional Agriculture Procurement System
Most Indian farmers in Northern India, currently sell the majority of their produce at government-regulated wholesale markets or Mandi at assured floor prices. These Mandis are government-run APMCs (Agricultural Produce Market Committees) run by committees made up of farmers, often large farmers, and traders or "commission agents". These commission agents are called Arhtiya who act as middle men for brokering sales, organising storage and transport, or even financing deals.
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| Mandi in Punjab |
As per older laws and provisions, farmers could only sell their produce at Mandi. It's a complex system underpinned by regulations, and a host of personal and business relationships between farmers and Arhitiyas or brokers. In a Mandi, licensed middlemen known as Arhtiya broker the deal between farmers and the government or industry. Over the years, these middlemen monopolised Mandi and cartelisation occurred. Farmers were often at the mercy of these middlemen who exploited them by squeezing the price and loaning advance monies at extortionist interest rate.
Reforms in Mandi system over last decades have regulated the procurement of certsin agricultural produce in Punjab and Haryana. The Mandis are no longer controlled by the "Baniya" or the Arhtiyas. Instead a Mandi Board is elected every year to manage the Mandi and its control is shared between Arhtiyas and the farmers. The farmers unions have a big say in the formation of Mandi Boards.
Minimum Support Price (MSP)
Procurement of foodgrains to feed the public distribution system and maintain a buffer stock is the country’s largest agricultural market intervention programme, implemented through the Food Corporation of India (FCI). The Government of India shielded farmers with price of crop not going lower than an assured price or MSP (Minimum Spport Price) while at the same time, ensuring that retail prices did not get sky high.
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| Minimum Support Prices in Punjab |
Over the last decade, several states have organised their procurement machinery to buy cereals at MSP directly from farmers. Madhya Pradesh has done this on a large scale in wheat, while Chhattisgarh and Odisha have undertaken similarly successful procurement for paddy. They all use state-level agencies and FCI to handle grain purchases and storage, with payments made directly to farmers, mostly through electronic transfer.
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| Farmer in Punjab Mandi with his harvest |
However, in Punjab and Haryana, the FCI and state agencies undertake procurement through commission agents or arhatiyas. Farmers bring their produce to Arhatiya, who purchase the wheat or paddy on behalf of the FCI/state agencies and deliver these to the latter. The payment for the grains is, then, released by the FCI/state agencies to the arhatiyas, who, in turn, are expected to pay the farmers. No payment trail is, however, maintained beyond the arhatiya.
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| Government Procurement Facility - FCI Godown |
The sums involved here are not paltry. This year alone, during April-June, 106.45 lakh tonnes of wheat was procured in Punjab and 67.22 lonnes from Haryana. An amount of Rs 16,233.62 crore against these was paid out to the Arhatiyas in Punjab and Rs 10,251.05 crore in Haryana. Some $ four billion equivalent in public funds were, thus, handed over to a few thousand arhatiyas of these two states, with nothing more than good faith to back the assumption that they would pass on the full MSP amount to farmers.
India is wasting anywhere between 30 to 40 percent of its agricultural produce!! The wastage occurs due to : bad farming practices, bad storing practices/storage facility, bad transportation modes, bad selling mode. Since Mandi boards are dominated by traders and large farmers, its the small farmer that suffers the most in this syetem.
Need to Modernize Agro-Industry
Today, India is among the world’s top producers in many crop categories. Yet farm incomes remain low. Over the past 25 years, Indian economic reforms have mainly focused on liberalizing the nonfarm sectors of the economy, particularly industry. Agricultural reform has stayed on the back burner, despite high-flown rhetoric on the subject from practically every political party.
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| Foograin Packaging in a Punjab Mandi |
Political parties like Akalis have exploited the situations by offering loan waivers to farmers. Loan waivers have been popular because they help shift the focus from the deep-seated problems on the ground. Thes loan waivers promote bad economic practice by farmers making them dependent on the political masters.
Provisions of these farm bills may result in the elimination of monopoly of government-run Mandis and Arhtiyas. As per the new bills, farmers will now be free to sell their produce even to private buyers, including big companies. Farm bills passed in the Indian parliament give farmers the freedom to sell their crop anywhere in India.
The government has said these reforms will accelerate growth in the sector through private sector investment in building infrastructure and supply chains for farm produce in national and global markets.
Then Why are Farmers Protesting?
For the past two months, farmers of Punjab, Haryana, and Western UP have been protesting against the Centre’s new farm laws. Farmers claim that the Centre has not addressed their concerns over the three laws.
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| All Roads to Delhi choked by farmers from Punjab & Haryana |
The following are the perceptions and concerns of Punjab and Haryans’s farmers regarding these legislations:
- The packaging industry will buy the agricultural produce at their dictated rates and not at the MSP. There is no provision to prevent these large companies purchasing the produce below MSP.
- The government says that farmers will not have to pay broker fees when selling their produce outside the APMC Mandi. Today, the he farmers only paying unloading and cleaning charges to the Mandi. Market charges in Punjab are fixed at 8.5% — 3% market fee, 3% rural development fund and 2.5% commission for the licensed arhtiya. All charges are being paid by the procurement agency or brokers and not farmers.
- This will trigger the collapse of Mandi system and farmers will lose the decades old protection of MSP.
- In case of a dispute, the farmer do not have a legal option against the trading company for breach of trust.
- In case of contract farming, the companies can refuse to purchase the whole produce based on the quality inspection and the farmer will be left with unsold harvest. About 33 per cent of the farmers in Punjab have landholdings less than 2 hectares. They neither have storage capacity nor much marketable surplus with them.
How to resolve the dispute?
- There can be a written clause that no one can purchase the farmer’s produce at a price below the MSP. Any purchase below the MSP should be punishable.
- The government can provide infrastructure like cold storage and warehouse facility to the farmers at a nominal rate if they want to store their produce. The government should provide credit facility to the farmers against the stored produce to avoid distress sale.
- In case of a dispute with the trading company, the farmers should have the option of availing of free judiciary services from the government’s lawyers and approaching the court if not satisfied.
- The farmers should be given a written assurance by the companies that the whole produce will be purchased and it can be made mandatory for the party to provide assistance to the farmer throughout the crop season for ensuring quality produce.
- The farmer and the contracting party should have an equal share in the profit/loss from the marketing of the produce. If the contracting party is providing inputs and technical assistance to the farmer, the latter is offering his services and his land for crop production.
Conclusion
References
- https://www.wionews.com/india-news/indias-new-farm-bills-whats-good-what-may-not-be-330262
- https://economictimes.indiatimes.com/news/economy/agriculture/everything-you-need-to-know-about-the-new-agriculture-bills-passed-in-lok-sabha/articleshow/78183539.cms
- https://www.reuters.com/article/us-india-farms-law/indias-controversial-farm-bills-become-law-despite-protests-idUSKBN26I0MN
- https://www.bbc.com/news/world-asia-india-54233080
- https://indianexpress.com/article/explained/an-expert-explains-farm-acts-and-federalism-6622769/
- https://indianexpress.com/article/india/india-news-india/farm-marketing-reforms-india-farmers-3079644/
- https://www.tribuneindia.com/news/features/make-laws-farmer-friendly-174528
- https://scroll.in/article/979852/in-cartoons-indian-farmers-face-police-brutality-as-they-protest-new-laws
Pretty good insight
ReplyDeleteThank you.
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