Farmers Movement Archive

Consult states and farmers before enacting farm bills

At present, farmers, their organisations, political parties and a few state governments are intensely up in arms against the three agriculture bills passed in Parliament. These bills were promulgated as ordinances by the President on June 5, 2020. The move was widely criticised as a ploy to push the bills clandestinely during the pandemic when Parliament was not in session, and that too without taking into confidence the farmers — the major stakeholders — and also political parties and state governments. The period spanning over three months since the promulgation has seen intense debates in media as well as widespread dharnas, agitations and protests in many parts of the country. The stakes are so high that a Union cabinet minister resigned (supposedly) to make a point that any sacrifice could be made to uphold the farmers’ interests. Of the three bills, the most controversial is the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020, while the other two, easing regulations under the Essential Commodities Act and facilitating contract farming, are in a way of complementing and enabling farmers. Punjab being predominantly an agricultural state, it is not surprising to see farmers at the forefront of the agitations. The state, with its reputation of being the country’s food bowl, has a deep interest in public procurement. During 2014-15 to 2018-19, on an average, the state contributed almost 68.7% of the production of its wheat and 84.6% of paddy to the central procurement. It also underlines the role that an arhtiya (commission agent) plays in the APMC (Agriculture Produce Market Committee) markets by earning 2.5% commission on the sales that he mediates in the market. Since private purchase in mandis is relatively insignificant, therefore, an arhtiya earns commission primarily by mediating sale to public procurement. However, under the proposed bill, there is no such provision for commission, and hence, the purchaser in the trade area will undoubtedly save on this account. Two basic objections raised by the state governments, for example Punjab, are: the bill is an attack on cooperative federalism as agriculture is the state subject, and that it will cause immense loss to the state exchequer as the bill prohibits imposition of any tax or levy or fee under any state law on the scheduled farmers’ produce transacted in the trade area. Punjab collected a market fee of Rs 1,830 crore (at the rate of 3%) in 2019-20 and an equal amount — by way of the rural development fund. The state will lose the fee collections that it has been productively using to maintain rural roads and fund other agricultural activities. On the contrary, the bill will benefit private players (the corporates) at the cost of the state as they will be saving taxes/fees which they were supposed to pay if they had purchased it from the APMC market. Whereas transgressing the state subject is in legal domain, the loss to state exchequer should be evaluated in terms of the volume of purchase by the private players in the APMC markets and the corresponding benefits, direct and indirect, that may accrue to the state due to inter- and intra-state sale. The APMC has failed to promote a competitive environment in the mandis leading to market inefficiencies and asymmetrical information. Except for the paddy and wheat where open procurement system at MSP is prevalent, the price discovery in other crop has not been satisfactory. On the other hand, strong fears have been expressed that the bill will lead to exploitation of the marginal and small farmers (87% of the farming community) at the hands of the corporates. There is substance in this argument as these farmers tend to have poor bargaining power. The primary issue, therefore, is what safeguards are being provided in the bills to protect the interests of the farmers so that they get remunerative price for their crops. A provision of minimum fair price for the crops in the Bill will allay the real fears in the minds of the farmers. On the other hand, organising farmers in collectives as farmer producers organisations (FPOs) will greatly improve the bargaining power of the farmers — marginal and small included. Punjab has recently notified its policy on FPOs which is a welcome step. In addition, the central government should continue the present procurement policy that enables the MSP system. In addition, the central government should consult the agriculturally dominant states and the farmer organisations before taking a final call on enacting the bills directed at agricultural reforms. The writer is RBI Chair Professor at the Centre for Research in Rural and Industrial Development

The Times of India

2020-09-28

Chandigarh