Growing up in the northern plains of India during the 90s, if you happened to glance through the local newspapers while having daal-chawal for lunch, what would you find?
It would be invariably filled with coverage on major farmers unions demanding yet another increase in MSPs for refined grains, various political parties promising to provide “free bijli” and “free paani”, and farmers claiming to vote for a CM candidate who promises “loan maafi” (foregoing farmer loans).
When our generation went to college, newspapers were again filled with Sunday Op-Eds authored by major policy experts describing the never ending loop of subsidy led politics paying for free electricity, non-stop pumping of groundwater and production of water and fertilizer intensive crops like rice and wheat, which may not have otherwise grown naturally in those regions.
Thereafter, like many students living in Delhi, if you happened to appear for the civil services, it would be fairly easy to recall how you would rote an entire module on “farmer reforms” which would emphasise on the need for removing the monopoly of APMC markets, ending the exploitation of farmers by middlemen (which at least reminds me of the movie “Mother India”!) and making it possible for farmers to cut the red tape and get the best price for their produce.
And today, when you see the “farmers of India” threatening to block all five entry points to Delhi, all those newspapers, Sunday Op-Eds, policy documents, UPSC question papers and the science journals ever written on agricultural transformation in India seem to be raising a troubling question to the surface: Why are the much touted farmer reforms in conflict with the demands of protesting farmers from northern India?
To explore this question objectively, let us understand some basics of what agricultural production in India looks like, who are the real beneficiaries of the current regime and how that may change with the coming of new laws and, most notably, what it means for an average farmer in India.
When we talk about who represents an average farmer in India, it’s important to understand that nearly 70% of agricultural households possess less than 1 hectare of land. Moreover, farmer incomes vary between as high as Rs 18,059 in Punjab to Rs 3,558 in Bihar as per the last assessment made by the National Sample Survey in its 70th round.
It is in this context that we need to address the common myth that Minimum Support Price (MSP) is a magic bullet which protects the interests of all the poor farmers in India. Shanta Kumar Committee set up in 2014 discovered that merely 6% of Indian farmers sell their farm produce through the MSP regime. This is confirmed by the fact that out of the total agricultural output of INR 40 lakh produced in the country as per the last annual estimates, MSP constituted only 2.5 lakhs worth of operations. Also, an often-overlooked fact is that fruits, vegetables, milk and other livestock produce which are so important for the health and nutritional requirements of the population, are not even covered under the MSP regime.
Moreover, MSP procurement across the country is highly skewed. For example, the Food Corporation of India (FCI) which procures cereals on behalf of the government using MSP as the price benchmark, procures majority of its rice stocks from a handful of privileged states. Disparity is startling with MSP procurement as high as 90% in Punjab and Haryana and less than 20% in states like Bihar, Jharkhand, West Bengal and Assam. Hence it isn’t a surprise, that the majority of protesting farmers hail from Punjab & Haryana. In fact, farmers from states like Maharashtra and Tamil Nadu have rather welcomed the long overdue reforms.
That the Modi government is planning on putting an end to MSP incentives, is another related myth doing the rounds. If anything, data from the past 5 years seems to be pointing in quite the opposite direction. MSPs both for rice and wheat have increased by more than 40% in the past 5 years and the purchase of rice and wheat between 2014-19 as compared to 2009-2014 has jumped by more than 250% and 200%, respectively.
Given that 6% of Indian farmers have experienced such an obvious upward trend in MSP procurement, even while the majority 94% remains out of this network, why is there such a resistance to the proposed law on “The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Bill”?
Agricultural Produce Marketisng Committee (APMC) markets or commonly known as “mandis” are government authorised wholesale markets for sale of farm produce. Currently the farmer does not have the freedom to sell his vegetables or cereals directly to a vendor. Instead, the farmer must go to the “arhatiyas” or middlemen, who will charge a commission for selling their produce to traders, exporters and other vendors. Not only that, the states also impose an additional 3% tax on the APMC mandis.
No wonder that this system has become a breeding ground for corruption, eventually leading to a stark difference between the MSP of most crops and the actual price that farmer puts in his pockets. Hence, the new bill mandating for opening up of APMC mandis to competition, might actually hurt the revenues of a wide network of middlemen and those state governments who rely heavily on taxes imposed in the APMC markets.
This is corroborated by astounding figures from Punjab, where in FY 2020 alone, arhatiyas made more than Rs 1,460 crore out of charging commissions for selling of farm produce and the state government collected about Rs 1,750 crore by imposing the mandi tax.
Instead of singling out a couple of states, even if we try to analyse it from the perspective of other geographies like the north-eastern region, distance between two APMC markets could be as far as 50 km. Moreover, 80 % of the APMC mandis across the country do not have godowns and, cold storage facilities are available only in 15% of the markets. Thus, farmers end up being in a situation where they are forced to sell their produce only to a set number of middlemen in a specific APMC mandi, which by itself could be 3-hour walk, and may not even have a storage facility.
Hence, the new farm bill intends to delegitimise precisely this monopolistic nature of APMC mandis, by giving farmers a choice to sell their produce at the best rate available- be it across retailers, exporters or even a different APMC mandi (currently farmers are not even allowed to sell to another APMC mandi without inviting an additional tax). To complement this reform, government has been promoting the e-NAM (electronic – National Agriculture Marketing) platform, which can now facilitate online bidding and mobile based payments without the farmers needing to go to a bank or a mandi.
Coming to “The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill 2020”, this legal framework will now allow the farmers to enter into a written agreement with any other entity, to sell their produce at an agreed rate for a time period. Thus, a farmer will be able to directly sell their produce to a retailer, trader or an exporter, without needing to go via middlemen or APMC mandis.
Again, this bill has been misrepresented to set a narrative that it allows for corporates to snatch away the land from poor farmers. Clause 8 of the bill clearly states,“No farming agreement shall be entered into for the purpose of- (a) any transfer, including sale, lease, and mortgage of land or the premises of the farmer”.
Besides, contract farming has already been in operation in most states, and this bill only provides a uniform national framework which provides the necessary protection for farmers against potential exploitation by the corporate sector. Additionally, anticipating the imbalance of power and information between small farmers and bigger corporates, the government has been incentivising setting up of more than 10,000 FPOs (Farmer Producer Organisations) which can be a game changer in transforming India’s agricultural sector. With small farmers coming together in FPOs much like the principle of cooperatives, promotion of FPOs for contract farming seems to be the best possible solution for improving the productivity, efficiency and profit margins of farmers while providing them the necessary protection.
Finally, the new farm bills, must been understood in the context of much needed farmer reforms in India. The current MSP regime coupled with the bureaucratic and non-competitive APMC markets have invariably led to soil degradation, emptying of ground water tables, loss of agro-food diversity and singular promotion of refined grains leading to a diabesity epidemic, besides the billions of rupees lost to misdirected subsidies and environmental degradation.
Hence, as a democracy we need to move beyond the rhetoric and see the larger picture of India’s next generation agricultural reforms, which are directed at benefitting the farmer in the last rung. Passing of the laws is only the first step. A common minimum agenda needs to be built across all state governments irrespective of their political affiliation. And the central government needs to begin investing in confidence building measures by holding open and fair consultations with farmer groups that are representative of all geographies and socio-economic quintiles.
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