Fuss about the Farm Bills

The President on October 9 gave his assent to the Agriculture bills that were earlier passed by the Parliament. The opposition and long-time BJP ally Shiromani Akali Dal (SAD) have termed these reforms as “anti-farmer”. Harsimrat Kaur Badal, the SAD representative and Minister of Food Processing Industries, resigned from the Union Cabinet protesting against the bill. Below are some keywords before discussing the fuss about the farm bills:

Minimum Support Price (MSP)

MSP is an agricultural product price set by the Central Government to purchase directly from the farmer. This rate is to safeguard farmers to minimum profit for the harvest if the open market has a lesser price than the cost incurred. The Central Government usually declares MSP on 23 items. But they only end up buying rice, wheat and a few items. Only 6% farmers get MSP procurement and prices benefit.     

Agriculture Produce Marketing Committees (APMC) or Mandis

These are marketing boards established by state governments to ensure farmers are safeguarded from various exploitations. There are just over 7000 mandis all over India. The National Committee of Farmers said that for Mandi system to be successful, there should be a Mandi at every 5kms distance.   

The Farmer’s Produce Trade and Commerce (Promotion and Facilitation)

This bill gives farmers freedom to sell their produce anywhere in India. In APMC, traders formed a cartel to decide one price. So the farmers had no option but to accept the price that the trader quotes. Farmers were price takers not the price makers.  Farmers have to pay certain tax at Mandi which they don’t have to pay if they sell their produce outside. So corporates and farmers will benefit from trading outside Mandis. NSSO data reflects that only around 40% of total produce goes to mandis, remaining produce is sold to unlicensed traders in their village. This “One Nation One Market” idea which is opposed by the Congress now, was present in their own manifesto of 2019 general election.

The Farmer’s (Empowerment & Protection) Agreement of Price Assurance and Farm Services Bill

This bill promotes contract farming where there is an agreement between farmers and large retailers or companies for supply of agricultural products frequently at predetermined prices. This will give the farmers much needed clarity of what to produce. The fixed amount of money to be received by the farmers will remain unaffected by the market fluctuations. These contracts happened before this bill but they were registered in the Mandi and thus, the Mandi received a small fee for it. Now, the companies can directly deal with the farmers without any middlemen and can possibly reduce the importance of mandis. 

Small and marginal farmers may be left out as the big companies are unlikely to approach them. Moreover, these big companies have legal teams which can sue the poor, uneducated farmers by false accusations. Therefore, an intermediate government body is required to avoid farmer’s exploitation. In France, farmer suicides have drastically increased after the industrialization of the farm sector.

The Essential Commodities (Amendment) Act (ECA)

This bill seeks to remove commodities like cereals, pulses, oilseeds, edible oils, onions and potatoes from the list of essential commodities. So it will end the imposition of stock holding limits except under extraordinary circumstances. The ECA has its roots in World War 2, when the laws were used to control the Indian economy. The law was so restrictive that it fell afoul of India’s new Constitution, and two constitutional amendments had to be passed to ensure that the government could continue with the bill. This will end both license permit raj and inspector raj in the agriculture sector. The idea behind the amendments is to reduce unpredictable and frequent interference in foodstuff markets. While it is undoubtedly a good step, the power is still with the state government. They can impose price controls, ban transportation, force sales of the food items at below market price.

Protests in Punjab and Haryana

Farmers in Punjab and Haryana along with their state governments are protesting against the agricultural bills. Farmers in Punjab and Haryana produce wheat and rice in surplus. So they benefit the most from procurement through MSPs. They claim that the new agricultural reforms could pave the way for the central government to stop buying grains at MSPs, leaving them vulnerable to exploitation. But PM Modi clarified that the new reforms do not jeopardize MSPs for rice and wheat.

Punjab and Haryana have the most efficient Mandi system and the respective state governments earn Mandi tax of Rs.2600 crore and Rs.1750 crore respectively. The Free Market system may reduce their Mandi tax earnings significantly. 

Despite having some loopholes, these three agricultural reforms aim for the much needed liberalization of the agriculture sector and the unwinding of 700 years of systematic policy bias against the farmers. 

Onion Export Ban

The day after introducing the agricultural bills in Lok Sabha, the central government banned the export of onions which goes against the spirit of the agricultural reforms. The reason is the steady increase in wholesale prices of onions which has seen the kitchen staple becoming costlier in urban markets. With Bihar and West Bengal elections coming, no party can afford their urban consumers (which forms a large chunk of votes) outraged. So in this game of politics, it is the poor, wretched farmer who gets squeezed. Onions has been a soft power of India for a long time. Onions are exported to the countries in the Gulf, Sri Lanka and Bangladesh. This move tarnishes the image of India as a reliable onion exporter.

Written By: Aman Verma