The President of India in September promulgated three agricultural bills that were earlier passed by both houses of Parliament. The new laws were welcomed with resistance from opposition political parties and farmer organizations. The protesting farmers chiefly came from the states of Punjab and Haryana, the largest food grain-producing states of India. The farmers have taken their protests, which have been remarkably peaceful, right up to the Centre and to the streets of Delhi.
The three laws are The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, and The Essential Commodities (Amendment) Act. But before I delve into why these laws are contentious and why the farmers are protesting let me provide some background.
MSP, or Minimum Support Price, is the price guarantee that acts a safety net or insurance for farmers when they sell particular crops. These crops are procured by government agencies at the MSP and cannot be altered in any given situation. Wheat and rice are amongst the top crops that are procured by the government at MSP from farmers. The MSP has its origins in the rationing system introduced by the British during World War II. The department of food from 1942 was upgraded to the ministry of food. Post-Independence India faced acute food shortages and India was looking at shoring up its food reserves. The Green Revolution was started in the 1960s with the intent of boosting food production in India. The MSP was finally started in 1966-67 and was further expanded to include other essential crops. Currently, there are twenty-three crops covered by MSP.
The MSP is set by the Central Government for select crops and is based on the recommendations it receives from The Commission for Agriculture Costs and Prices (CACP). The current CACP pricing is based on a formula derived from the Swaminathan Committee. The Swaminathan Committee submitted five reports between December 2004 and October 2006 when tasked with finding solutions to the problems faced by farmers.
According to the report the three main components of the cost for food production were labeled as A2, the actual paid out expenses incurred by the farmers – in cash and kind, to cover the cost of seeds, fertilizers, pesticides, hired labor, fuel, irrigation, and other farm inputs. FL is the actual family labor. Accordingly, the Commission recommended that the final cost of production was C2 = A2 + FL + cost on rent and interest on owned land and recommended that MSP be fixed at 1.5 times to C2. In reality MSP is calculated at 1.5 X (A2 + FL).
It should be noted that whilst the government does declare the MSP twice a year, there is no law making MSP mandatory. This means that though the government buys at MSP from farmers there is no law mandating this.
‘Mandis’ are where the wholesale trading in primary produce has been taking place forever. The ‘mandis’ were and continue to be dominated by middlemen and agents depressing prices and keeping the farmers under their thumb. The Agricultural Produce Market Committee or APMC was established by the State Governments of India and have two primary principles
- Ensure that farmers are not exploited by intermediaries who compel farmers to sell their produce at the farm gate for an extremely low price
- All food produce should first be brought to a market yard and then sold through an auction
The erstwhile ‘mandis’ became APMC mandis and there are about 7300 of them across India.
According to government propaganda, the new bills are intended to help small farmers who don’t have the means to either bargain for their produce to getter a better price or invest in technology to improve the productivity of their farm. The bill on the Agricultural Market seeks to allow farmers to sell their produce outside APMC mandis to whoever they want. The legislation on contract farming will allow farmers to enter into a contract with agri-business firms or large retailers on the pre-agreed price of their produce. And third, the law on Essential Commodities seeks to remove commodities like cereals, pulses oilseeds, edible oils, onion, and potatoes from the list of essential commodities thereby removing any stock-holding limits except under extraordinary circumstances.
According to the Indian, Constitution Agriculture is a State subject and it lies in the State’s purview to make new laws or modify existing ones. As things stand the Centre has become all too powerful and continues to undermine and undercut the State’s authority. Take this against the milieu of our Indian fabric, with its hundreds of communities, languages, tribes, cultures and peoples. One wonders how a government, sitting in Delhi miles away from most people, where about 500 odd people are elected, actually represents the interests of more than one billion people.
Even before the introduction of the bill on the Agricultural Market, farmers all over India were always free to sell their produce to anyone they chose. According to the findings of the Swaminathan Commission more than 70% of farming households own from no land to less than 2.5 acres. Also, according to the Commission, there is a need for 41,000 APMCs against the number of 7300. Given this data, it can be easily concluded that the produce by most of the above 70% farming families, is never sold at the APMCs because they just don’t have the means to get it there or have already sold it in advance to money lenders or other in-betweens. Also, the government collection centers, when they do open, either open too late in the season or close too early and most farmers are forced to sell outside the APMC infrastructure only so that they themselves can survive.
So, who does this law actually benefit? ITC has about 6,100 ‘echoupals’ across 10 states. The other retail giants like Reliance and Future have vast networks to collect farm produce, in most cases directly from the farmers, to see in their stores and online shops. With this new law, these giants will only succeed further in cornering most of the farm produce in India.
What will the legislation on contract farming in reality do? Even today MSP is not guaranteed by law. Most of the sales outside the APMC happens at prices lower than MSP. So, when there is no law to control the minimum prices, small farmers with no legal knowledge or help will have to deal with lengthy legal contracts drawn out by corporate lawyers. embroiling them and their produce for years. Produce bought cheaply is then sold in fancy grocery stores or used in packaged products for markets
Finally, the law on the Essential Commodities. There was a cap on how much a trader could accumulate to prevent the shortage and sharp price hikes. But today when India exports food grains, some of which are used as cattle feed in other countries, the intent behind this law has long faded. But with the cap removed it only enables large retailers to buy cheap produce in years of plenty and have them in storage in the years of shortage.
Yes, farming needs a rethink and systemic reform. Farmers are dying under the burden of loans. There is still a large percentage of farmers who are classified as landless farmers. Farmers are being forced into buying genetically modified seeds year on year when earlier they were using seeds from their last year's produce. And yes, for the urban taxpayer, the issue of no taxes on farming has always been a sore spot. But the current laws do not do anything to assuage any of the problems faced by the farmers of India but would in the due course of time only increase them. The new laws only benefit large retailers and their ever-increasing demand for cheap produce at guaranteed costs.
I would like to end this by relating an incident not too many days ago. I had gone vegetable shopping and came home with two large bunches of Fenugreek, two bunches of coriander, and two of mint. I paid all of thirty rupees. Rs 5 per bundle. What does the actual farmer make on this transaction?
References
- https://www.indiatoday.in/india/story/explained-what-is-msp-and-why-farmers-are-protesting-over-it-1726658-2020-09-29#:~:text=In%20short%2C%20the%20MSP%2Dbased,India%20faced%20acute%20food%20shortages
- https://economictimes.indiatimes.com/news/economy/agriculture/everything-you-need-to-know-about-the-new-agriculture-bills-passed-in-lok-sabha/articleshow/78183539.cms?from=mdr
- https://www.prsindia.org/report-summaries/swaminathan-report-national-commission-farmers
- https://www.indiatoday.in/india/story/what-is-swaminathan-report-that-has-kept-farmers-vs-govt-battle-alive-for-12-years-1247810-2018-06-01
- https://www.downtoearth.org.in/news/agriculture/new-msp-govt-fails-to-meet-swaminathan-standards-yet-again-61031
- https://indianexpress.com/article/opinion/columns/the-men-behind-apmc-msp-and-procurement-6617277/
- https://en.wikipedia.org/wiki/E-Choupal#:~:text=There%20are%206%2C100%20e%2DChoupals,affecting%20around%204%20million%20farmers
