Despite tall claims made by the UPA and the NDA dispensations since 2012, a gradual transition to direct cash or benefit transfer of subsidy to the farmers has not been done
The additional provision of Rs 65,000 crore towards fertiliser subsidy (over and above the Rs 71,000 crore allocated in the Budget for 2020-21), that was announced by the Finance Minister under “Stimulus- III” on November 12, will help in clearing all pending dues to the industry. This has led the latter to believe that this is a precursor to a gradual transition to direct cash or benefit transfer (DBT) of subsidy to the farmers. This is illusory, as despite tall claims made by the UPA and the NDA dispensations since 2012, this has not been done. The dominant stumbling blocks are a threat to the viability of high cost units in the public sector, including revival projects viz Sindri, Gorakhpur, Barauni and so on. Plus there is the risk of inviting the farmers’ wrath if subsidy does not reach them in time. Bureaucratic red tape is a third major factor. Till these are addressed, DBT to farmers won’t see the light of the day.
In the Budget for 2012-13, the then UPA Government had announced tracking the movement of fertilisers from retailers to farmers, and linking part of the subsidy payment to manufacturers for sale to farmers by retailers. In the mid-year economic analysis of 2012-13, the Finance Ministry came out with a blueprint on modalities for implementing the Budget announcement. Pilot projects in 10 districts spread over nine States were to be launched, which were to be followed by DBT in these districts from April 1, 2013. Concurrently, the Government planned to track fertilisers movement in the whole country. A pan-India launch was contemplated from April 2014.
Even as the Department of Fertilisers developed the technology platform called e-Fertiliser Monitoring System (e-FMS) to execute the blue-print, the DBT remained on paper. Meanwhile, the NDA Government under Narendra Modi recognised that there was rampant misuse of subsidy. According to the Economic Survey 2015-16, as much as 24 per cent of the subsidy was spent on inefficient producers, 41 per cent was diverted to non-agricultural uses, including smuggling to neighbouring countries, and 24 per cent was consumed by larger, presumably richer farmers. That left a tiny 11 per cent for small and marginal farmers, who alone, according to Modi, should have been the sole beneficiaries of the subsidy. The survey advocated DBT using the Jan Dhan-Aadhaar-Mobile (JAM) platform. In the Budget for 2016-17, the then Finance Minister, Arun Jaitley, made an announcement to this effect followed by the launch of pilot projects for linking subsidy payments to producers with the sale of fertilisers to farmers by retailers in 18 districts spread over 12 States. In March 2018, the scheme was launched across the country.
Under it, the Government has made disbursal of 100 per cent of the subsidy to producers conditional upon actual sales to farmers and these getting registered on point-of-sale (PoS) machines at the dealer’s shop (prior to this, they were getting 95 per cent of subsidy on receipt of material at a district’s railhead point or approved godown and the balance five per cent on confirmation of sales to farmers by States). But this is not DBT as subsidy continues to be routed through manufacturers. Now, just because the Government has cleared all subsidy dues to manufacturers, it gives no clue that this will happen soon. In fact, there are major roadblocks on the way — some explicit and others not so. To understand these, let us look at how the extant system works. The Centre controls the Maximum Retail Price (MRP) of urea at a low level, unrelated to the cost of production and distribution, which is higher. It reimburses the manufacturers for the shortfall as subsidy on a “unit-specific” basis under the New Pricing Scheme (NPS). The current MRP of urea is ridiculously low at Rs 5,360 per tonne even as the cost can vary from about Rs 15,000 per tonne to Rs 25,000 per tonne. Even as all units (31) sell urea at the same price, each one of them gets paid on the basis of its own production cost. Thus, an efficient unit producing at, say Rs 15,000 per tonne, gets a subsidy of Rs 9,640 per tonne whereas another producing at Rs 25,000 per tonne, gets a subsidy of Rs 19,640 per tonne.
In the case of P and K fertilisers, the Government gives “uniform” subsidy on per nutrient basis to all manufacturers under the Nutrient-Based Subsidy (NBS) Scheme. For arriving at the MRP, they are expected to deduct the subsidy amount from the cost. For instance, if a unit produces DAP (dia-ammonium phosphate) at a cost of say Rs 34,000 per tonne and subsidy is Rs 10,000 per tonne, then it will have to fix the MRP at Rs 24,000 per tonne.
Now, if instead of routing through the manufacturers, the subsidy is to be given directly to farmers, the transition in case of P and K fertilisers may not face much of a hurdle. The subsidy of Rs 10,000 per tonne or Rs 500 per bag (50 kg) of DAP can be credited to a farmers’ account even as the manufacturer will sell at the market- based price, say Rs 34,000 per tonne or Rs 1,700 per bag, this being the cost of the most efficient producer (this could also be an average of all units depending on how market dynamics evolve). However, the farmer will have to spend Rs 500 per bag extra at the time of purchase, though he will get back this amount from the Government as subsidy later.
In the urea segment, however, the transition will be tough for manufacturers as well as farmers. For producers, since each one of them will have to sell at the market-based price, all those whose production cost is higher than that of the most efficient producer or the industry average, will either have to perform or wind up. As for the farmer, he will have to spend, at the time of purchase, at least thrice (based on the market price of Rs 15,000 per tonne or Rs 750 per bag) of what he is spending now.
The Government has fears on both counts. On the production front, there are several public sector plants, which fall in the high cost zone and hence risk being chopped under the DBT. Even the revival projects, like Sindri, Gorakhpur and Barauni, on completion (2021) will have a production cost of over Rs 30,000 per tonne. Hence it won’t be viable under the new regime. As for farmers, it risks inviting their wrath if subsidy money does not reach them in time, which is inevitable if the budgetary allocation is inadequate.
There are other roadblocks which are not so explicit. Under the present system of urea being available at a throwaway price of Rs 5,360 per tonne, a mere one-fourth of the cost, dubious operators make a quick buck by diverting it to chemical industries or smuggling it to neighbouring countries. This won’t be possible without the tacit consent of those in the hot seat. Further, urea imports are canalised through State agencies like the Minerals and Metals Trading Corporation (MMTC), State Trading Corporation (STC) and there is a lot to gain for decision-makers. Clearly, there are vested interests in continuing with the status quo.
Unless the above roadblocks are cleared, the transition to DBT will be next to impossible. But this is doable provided Modi sheds his plan of linking development of eastern India with the revival of Sindri, Gorakhpur, Barauni (alternatively, their production cost needs to be cut drastically); pledges to fully fund subsidy requirement (if it can be done for 2020-21, why not every year then); ruthlessly applies his dictum of “naa khaoonga, naa khane doonga (neither will I take bribe nor will I let anyone else take it)”; and does away with bureaucratic red tape by removing all controls, including on urea import. The subsidy may be computed on a per hectare basis and given annually as mooted by the Commission for Agriculture Costs and Prices (CACP). In its Rabi report for the 2021-22 marketing year, it has proposed a subsidy of Rs 5,000 per year to be given in two tranches of Rs 2,500 each in the Kharif and Rabi seasons. This should be given only to the small and marginal farmers, i.e. those with land holdings of less than two hectares. Further, a cultivator must not be denied subsidy merely because s/he does not own the land tilled by her/him.
The Government should garner data on all 140 million farm households and put it on a web portal. This is an absolute must to ensure that no one is left out. At present, there is a void as even under PM Kisan, just about 80 million farmers are receiving the eligible amount of Rs 6,000. Under a business as usual scenario, leaving out 60 million from subsidy payments could be catastrophic.
(The writer is a New Delhi-based policy analyst)
While the private sector favours market orientation for procurement of commodities, the public sector supports inclusivity for farmers in meeting their livelihood needs
The passage of the Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services (Special Provisions and Punjab Amendment) Bill, 2020 by the Punjab Assembly served a body blow to the Central Government’s three farm Acts that were passed in September. The Centre’s Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act allows growers to sell their produce outside the markets notified under the State Agricultural Produce Market Committee (APMC) Act. It attempts to develop “one nation, one market” besides bringing in a framework for both, the agriculturalists and the buyers, for contract farming across States and imposing stock limits on farm commodities only in extreme situations in retail prices. Let us look at how private procurement and State purchase may co-exist in Punjab and the implications if other States pass similar Ordinances.
To understand these Ordinances, we need to grasp the basic purpose of public procurement of foodgrain. The Central Government, through the Food Corporation of India (FCI) and other State agencies, procures foodgrain and other essential commodities from domestic producers at the Minimum Support Price (MSP). The objective is to provide price support to farmers, distribute subsidised foodgrain to the poor through the Targetted Public Distribution System (TPDS) and maintain buffer stocks to ensure price stability and food security. The Government’s procurement system also encourages farmers to increase production due to assured prices. The foodgrain procured through this system gets distributed through fair price shops across the country.
Although there are deficiencies and leakages in the PDS, it served as a basic support of nutrition to around 50 per cent rural and 30 per cent urban households in 2011-12, according to the latest National Sample Survey data. Moreover, the dependence on PDS rose considerably between 2004-05 and 2011-12 in both rural and urban India. Under the TPDS, people Below the Poverty Line (BPL) are provided foodgrain at a highly subsidised rate under the Antyodaya Anna Yojana (AAY). In fact, the PDS system provided great succour to the needy during the COVID-19 pandemic-induced lockdown.
In this sense, the State procurement and PDS system serve the purpose of doing public good. As farmers get better prices and poor consumers get food at lower prices, it serves the dual social objective of food security and a hunger-free nation. The latter benefits one and all, as a country that risks running out of food stock may face civil unrest that emanates out of the desperation of the poor. In contrast, private procurement is part of a system that enables farmers to produce goods which are both excludable and rivals. Food stocks procured through private procurement serve consumers who can afford market prices and exclude others. They are produced in a limited amount, hence rivals in consumption. These two systems have two different objectives and serve different purposes but both are equally important. The new Ordinances passed in the Punjab Assembly pits two systems against each other.
The Ordinance disallows sale/purchase of wheat/paddy unless the price paid is equal to or greater than the MSP. This appears to be serving the social welfare objective of public goods production. However, it is more apparent than real. This is primarily because the procurement criteria of Government and private agents are very different as they serve two different objectives.
The criteria set by the Government are designed to exclude as few as possible. The grains are screened based on the moisture content, proportion of organic and inorganic foreign materials and test weight at a very basic level. The foodgrains that pass these criteria are accepted. However, all accepted foodgrains are offered the same price, the MSP.
On the other hand, private procurement is more fine-graded and priced differently. Hence a product, which marginally passes the Government’s procurement system, may fetch a lower price in the private one or be excluded from a price equivalent or higher than the MSP due to the grading system being applied. While the Government’s criteria of procurement may be standardised across India, private gradation is adjusted according to several factors, such as the cost of extraction of the end substance, the milling properties and the impact on the end product for the consumer. Hence, a penal clause by the Punjab Government’s Ordinance of imprisonment of no less than three years and a fine to the private procurement agent or company could be construed as being unjust.
Fine grading of agricultural produce is very essential from the viewpoint of manufacture of different food products. Due to the diversification of the consumers’ food palate, the focus is not only the cost but also the quality of the produce. This has led to greater attention by private procurement agents on factors like varieties, the agro-climatic zones and seasonal variations of the commodities during procurement. This has meant a finer grading mechanism as well to get both quality and cost optimisation. For example, in the case of wheat, a critical factor of concern is the density of the grain. The denser the grain, the more nutrients it contains and hence more will be the extraction during the milling process on a per weight basis. An important quality factor is the gluten content, a protein that impacts the baking properties of the flour and is used to determine the type of products that can be made. Hence, organisations create specifications in the procurement of commodities dependent upon the consumer segments and their needs.
The emergence of food retail has intensified the choices for the consumer. More choice and consumer awareness have resulted in shorter product life cycles, increased innovation and competition and demand for newer offerings. The repeal of the APMC Act by several States, creation of Farmer Producer Organisations (FPOs) and increased participation by the food retail and processing sector have led to the shortening of agricultural value chains. Procurement determines the profitability as it controls 60 to 75 per cent of the total costs in the system. Thus, procurement of raw agricultural commodities has become a strategic function from a back-office role.
It is imperative to understand that private agents would price their procurement of commodities based on the profitability and price behaviour of end consumers. It, therefore, bears out that they would pay less for a quality where an additional cost would need to be incurred for processing the grain to bring it in line with the consumer’s demand. This reduced price may result in the procurement price becoming lower than the Government’s prescribed MSP.
Thus, while the private sector favours market orientation of procurement of commodities, the public sector supports inclusivity for farmers in meeting their livelihood needs. The two objectives clash with each other. If corporates are punished for procuring at a price lower than the MSP, then they would also apply pressure tactics to go soft on implementation or again change the law, which may, in turn, affect the objective of public goods provision. This would lead to instability in the whole institutional set-up of the agri-business.
In the Punjab Assembly Ordinance, the farmers are given the discretion to approach the civil court or other remedies under existing laws, but all these involve long and expensive litigation and cannot be taken up by individual farmers. This coupling of both the public and private sector objectives through the conduit of one overarching Ordinance will likely be against the interest of farmers, private procurement agents and consumers of both foodgrain and allied products.
(De is Associate Professor and Vishwanath is Assistant Professor, Institute of Rural Management, Anand. Views expressed here are personal)
Free markets with the right infrastructure, better price forecasting tools and dissemination of price information will deliver a permanent solution to our woes over the kitchen staple
In response to the exponential hike in onion prices in the mandis (wholesale fruit and vegetable bazaars) and retail markets, the Union Government reintroduced stock limits on October 23 on traders and wholesalers by invoking a provision of the newly-amended Essential Commodities Act of 1955. Before this, to ease rising prices, the Government had banned export of the bulb and relaxed import norms to increase the stocks available for retail trade.
Wide price fluctuations are a recurring problem in the country, with onion prices varying from Rs 10 to Rs 100 during the same year. In such a situation, the farmers and consumers lose while the traders and retailers gain. India produces around one-quarter of the global onion supply (second only to China) and exports about 10 per cent of its total output regularly. Onion is an indispensable staple in Indian kitchens and as it has no substitute, prices are sensitive to supply.
The yearly consumption of onion in India is about 160 lakh tonnes and between harvests, stored onion is released into retail markets. However, given its perishable nature, it cannot be stored beyond four to six months as it begins to spoil after that. Storage losses are generally 30 to 40 per cent but this season losses are in the range of 50 to 60 per cent because of heavy rain. Thus, onion prices depend upon seasonal factors as they not only affect the standing crop but also damage the stored harvest.
Onion is mainly a Rabi crop (65 per cent of production). Sown in the month of December- January, it is harvested during April-May and sold at about Rs 10 per kg. A Kharif crop is sown in the month of May-June and harvested during the months of October and November. A late Kharif crop is sown in the months of August-September and harvested during January-February. A Rabi harvest is stable with better storage quality and used for about six months until October, when the arrival of the Kharif harvest starts. The main and recurring problem with the Kharif harvest is that it fluctuates widely and production falls below expectations unpredictably once in two years. If the harvest is below expectation, prices will skyrocket during the months of September and October. Hence, the retail prices of onions more than quadrupled between June and September in 2010, 2013, 2015, 2017, 2019 and now again this year. Last year, too, onion prices rose due to simultaneous damage to the standing crop in Karnataka as well as to the onion harvest stored in States like Maharashtra, Madhya Pradesh and Gujarat due to flooding.
Policy decisions, like a ban on exports and promoting sudden imports to bring down onion prices for the benefit of consumers, definitely hurt the farmers, who were hoping for better prices. They are of the opinion that when they bear the losses due to lower prices in a particular season, they have the right to reap the benefits of higher prices, too. Why should they bear the brunt both ways? In fact, farmers’ organisations complain that the Government favours consumers more than it does the farmers. It intervenes in the markets when the prices rise but does not protect the agriculturalists when the prices dip, although Government agencies do procure the produce above market rates during the harvest period.
Even if we keep the problems of the farmers aside, the fact remains that the knee-jerk reaction of an export ban diminishes India’s credibility as a reliable supplier or exporter in the international community. It will also go against investments in the supply chain of onion markets and importers may look for alternatives.
If the recently-passed three farm Acts are implemented in an effective way, these recurring problems could be avoided. Let us look at some alternative policies in the light of the recent farm reforms.
Price forecasting: The new farm Acts clearly emphasise the need to strengthen market intelligence to track price fluctuations. Onion prices are unpredictable, rising from Rs 10 per kg to Rs 100 per kg within a short span of three to four months, sometimes even weeks. A localised flood during the harvest period increases the prices by three to four-fold. Hence, there is a need for strengthening price forecasting systems based on agro-meteorological data to inform farmers in onion-growing areas about taking optimal decisions regarding acreage, storage and marketing. This information system will help traders transport the produce from low price areas to high price ones. It will enable them to take decisions like storing the produce while the price is low and selling it when the price is high. This will help in stabilising prices across space and time.
Open market: Onion production is concentrated in only a few districts of Maharashtra, Madhya Pradesh, Gujarat and Karnataka. In these districts, only a few traders in the Agricultural Produce Market Committee (APMC) mandis handle a huge quantity of the bulb, with possible cartel formation to buy at lower prices from farmers and sell at higher prices to consumers to reap oligopolistic profits. There is a need to break these cartels by encouraging the participation of private traders outside the APMC mandis so that the harvest can be sold to multiple players, including cooperatives, farmer producer organisation (FPOs) and direct farmer-to-consumer channels. This will inject competition in a highly closed system and deter cartel formation among traders.
Eliminate layers of middlemen: Before an onion stock can go from the farm gate to the consumer, it has to pass through as many as four layers of intermediaries. The onions have to be loaded, repacked and sorted between each of these middlemen and all of them take their share of the profit margin, which increases the retail price for the consumers. Besides multiple fees, more intermediaries mean an increase in the manual handling of the onions, which results in them rotting before they reach consumers. This can be avoided through contract farming or by forming FPOs of growers. In the case of onion farmers, it is easy to engage in contract farming as they are geographically concentrated and have the common purpose of getting higher prices.
Storage and processing: The Rabi harvest (arrivals in April-May) is stored in hessian bags and ventilated structures without any temperature and humidity control. These onions are sold in phases, up to September, depending upon the need and prices. Usually prices spike after the sale of all the onions stored after the Rabi harvest in September and October. With better price forecasting and adjustment of acreage and storage decisions, prices can be smoothened during this period. Further, there is a need for encouraging trade in dehydrated onion during price spikes, especially for bulk users like hotels.
Procurement and distribution policy: In 2019, the National Agricultural Cooperative Marketing Federation of India Limited (NAFED) procured 50,000 tonnes of onion during the peak market arrival months of April-May at about Rs 10 per kg and offloaded it at Rs 23.90 per kg during September-October. This was done under the Price Stability Fund (PSF) scheme of the Central Government to keep prices stable and tackle the scarcity of the bulb. Timely procurement and offloading based on price forecasting models may reduce price fluctuations. However, the size of the procurement has to be increased from the current low level of only one per cent of the domestic markets to at least 10 per cent, to have a significant impact on price stability.
Open trade policy: The current policy of highly-regulated trade in onions, especially imports, needs to change in the spirit of the new farm Acts. In such a regulated environment, there are always time lags between sensing shortages, allowing imports and actual imports arriving in the retail markets. This always leads to higher price fluctuations. The best way of securing the interest of both the farmers and the consumers is through an optimal mix of acreage allocation, buffer stocks and free trade regime. This must be backed up by scientific price forecasting models.
Onion is so vital in the Indian household and the domestic market that its price has become a yardstick for Government price policy performance. Free markets with the right infrastructure, better price forecasting tools and dissemination of price information will deliver a permanent solution to our onion woes.
(The writer is an agricultural economist, ICAR-Central Research Institute for Dryland Agriculture, Hyderabad. Views expressed are personal)
Even as Delhiites continue to suffer from a thick smog, Punjab farmers continue to burn their rice crop residue. This despite the Punjab Government banning stubble burning, appointing 8,000 nodal officers to douse the blaze and deploying over 70,000 extra machines for residue management. In fact, stubble burning cases have been the highest this year in Punjab as compared to the previous three years. So, why do the farmers seem indifferent? The fact is they are in a fix. Already overburdened, the present problem of a short gap between harvesting and sowing two different crops was thrust upon them by well-meaning environmentalists crying hoarse over the need for water conservation. So, now they have to remove the paddy straw instead of letting it lie and decompose. If they wish to remove stubble manually, they will need at least Rs 6,000-7,000 per acre. This is economically unviable for small and marginal farmers. Even if an equipment like the happy seeder is given to them to cut the stubble and sow wheat seeds simultaneously at a subsidised rate by the State Government, the additional per acre cost of rent and diesel needed to run these machines means this option is also uneconomical. Then there is the issue of low germination of wheat seeds sown with happy seeders, something our farmers cannot afford.
But a solution has to be found which is viable for everyone. A united and shared approach may yet solve matters as envisaged in the just declared commission on air management provided there is political will. State Governments of Punjab, Haryana and Uttar Pradesh could buy the rice straw from the farmers and then sell it to biomass factories, power plants, paper mills and cardboard factories. Then there is the paddy straw chopper-cum-spreader which can be operated by a tractor with 45-50 HP or more. It will not only chop the straw and spread it in the field, thus maintaining the fertility of the soil, but ease sowing of the next crop too. Plus, the accelerated straw decomposition process or Pusa capsule developed by the Indian Agricultural Research Institute is something that can be looked at as it costs less than Rs 1,000 per acre and is good for increasing nutrients in the soil. Converting stubble into biochar is another option. All stakeholders have to come together in mission mode. Simply coming down on the growers will not help.
The co-existence of APMC and non-APMC markets giving competition to each other is the best foot forward for ensuring a fair deal to farmers
The enactment of the three farm laws by the Central Government has triggered agitations by farmers’ organisations and a spate of counters, specially from non-NDA ruled States. Their main worry is that growers won’t get the Minimum Support Price (MSP) on sales made outside the Agricultural Produce Market Committee (APMC) mandis (markets). All this, when it is well-known that under the APMC, agriculturists are already getting a raw deal. The constitutional validity of the farm laws has been challenged in the Supreme Court, too, with the Chhattisgarh Government arguing that these have in effect repealed the State law on the mandi system. It will be some time before the matter is adjudicated by the top court. The fact remains that with multiple selling options available under the new Central laws, growers will definitely be much better off. Instead of trying to undo what the Centre has done, the States should focus on how APMC mandis can do better.
The most strident criticism of the laws is based on a belief that big food companies, who now get to buy directly from agriculturists outside the designated APMCs — courtesy, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 — will use their power to deny growers, particularly small and marginal ones, the MSP for their produce. In fact, an amendment passed by Punjab says that the sale of its cash crops, wheat and paddy, will be valid only if the seller pays a price equal to or greater than the MSP announced by the Central Government and that any violation would be punishable.
Before jumping the gun and speculating over what the farmers won’t get, we need to introspect as to what they are getting under the existing dispensation. At present, they are required to bring their produce to the mandi notified by the State Governments under their respective APMC Acts. Growers can’t take their produce to any other place (if any farmer does this, s/he runs the risk of the vehicle being impounded by the State agencies for violating the extant law). If a buyer is willing to pick the produce up from the farmers’ doorstep, even that is not possible.
On reaching the designated mandi, the agriculturist is confronted with two major players, namely arhtiyas or commission agents and licenced traders or buyers. The main function of the arhtiyas is to arrange for the auction and delivery of the harvested crop to the buyers. He gets a commission at the rate of 2.5 per cent of the purchase price and this has to be borne by the buyer. In addition, the latter has to pay other charges levied by the State Government (for instance, Punjab levies market fee at the rate of three per cent and rural development cess or RDC at three per cent).
In cases where the licenced trader is a State agency, such as the Food Corporation of India (FCI), which purchases grain for meeting the requirements of the Public Distribution System (PDS) and giving them to beneficiaries at a subsidised price, the farmer is assured of the MSP. But State agencies don’t buy all of the produce brought by growers to the mandi for sale. Even for wheat and paddy, where the agencies have a well-entrenched network, the purchase is only about 33 per cent of the total produce. For others (the Centre notifies MSPs for 22 agri-items), this is much less.
The agriculturists, who are not fortunate to sell their produce to State agencies (these are predominantly small and marginal growers), are left at the mercy of the arhtiyas and licenced traders and are forced to dump it at a price substantially below the MSP. Arhtiyas exploit farmers in other ways, too. They lend money for buying agricultural inputs, namely seeds, fertilisers, pesticides and so on (in many cases, for weddings, medical emergencies, too). The interest charged is a minimum 1.5 per cent a month. That leads to mounting debt for farmers.
According to a study on Indebtedness Among Farmers and Agricultural Labourers in Rural Punjab, as many as 86 per cent of farmers and 80 per cent of agricultural labour households are mired in debt. Over a fifth of that debt was owed to commission agents and moneylenders. What’s more, the debt burden gets worse down the scale. It’s the heaviest among marginal and small farmers.
The conditions of millions of small and marginal growers could not have been worse than what it is today. And this has to do fundamentally with the absence of alternative options to sell their produce.
The extant arrangements are being used by States to bolster their coffers (for instance, Punjab garners about Rs 1,750 crore annually from levy of RDC at the rate of three per cent) at the cost of the Centre. This is because the levies increase the cost of food procurement for distribution under the National Food Security Act, 2013, which increases the food subsidy. It is a typical case of States gaining access to Central funds outside the award of the Finance Commission (whether one likes or not, the taxpayers’ money is also used up for adding to the riches of arhtiyas as their commission too, is coming out of the food subsidy).
The Central law on trade and commerce opens up a world of opportunities to the farmers even while keeping the APMC intact. They can go to a private market for selling; they can enter into a contract for selling to a company (processor, aggregator, large retailer, exporter and so on) at their doorsteps, form farmer producers’ organisations (FPO) and sell under their umbrella. To worry about whether they will get MSP on all such sales, that too when at present they are literally getting nothing, is flawed thinking. By all means, they must be protected from exploitative corporations. That doesn’t mean they should be denied access to them though.
In August, 2018, among the several amendments approved by the then Devendra Fadnavis Government to the Maharashtra Agricultural Produce Marketing (Development and Regulation) Act, 1963, a provision related to making purchase of farm commodity below the official MSP a punishable offence. With this, if a private trader buys farmers’ produce at a price lower than the MSP, he could be jailed for one year, and will have to pay a fine of Rs 50,000. This led to widespread consternation and had to be dropped.
Even so, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 on contract farming has provisions to protect the interests of farmers. For instance, the grower can walk away from the contract anytime but the company can’t. It protects the minimum guaranteed price in the event of a drastic fall in the open market rate, even as the agriculturist gets a share of the post-contract price surge after a contract farming agreement is signed. To give a fillip to development of parallel markets, the Central law has also disallowed State levies (market fee, RDC and so on) on transactions outside the APMC platform. While, on one hand, this move will reduce the cost of food to consumers, on the other, it will lessen the burden of food subsidy. Instead of re-introducing these levies, the States will do well to abolish these on purchases made at APMC mandis as well.
Complementing the other two legislations, the Centre has also enacted, the Essential Commodities (Amendment) Act, 2020 to exclude pulses, cereals, edible oil, oil seeds, onions and potatoes from the purview of this archaic law. This will free the processors, millers, exporters and so on from stock limits and other shackles and help them do their business in a seamless manner. However, the exceptions (imposition of stock limits in situations of sudden spike in price like in the case of onions right now) should be sparingly used as it gives the wrong signal, particularly in export markets, and will eventually boomerang on farmers.
Giving more options to farmers to sell their produce can’t be stalled just because the potential buyers won’t give them MSP. Instead of opposing reform that promises something distinctly better than what the farmers are getting today, the States need to work to make their mandis efficient and healthy. Both APMC and non-APMC markets giving competition to each other is the best foot forward for ensuring a fair deal to farmers.
(The writer is a policy analyst)
Through a fourth Ordinance, India can set a precedent in the world where nature and the agrarian economy grow together
India has taken a small step for farmers but a big leap for free market through the three farm laws. Wooing the US “agri-dollar”, we have liberalised by opening the farm-gate for business, yet shackled farmers and their families under archaic land ceiling laws. Can an agrarian free market be pillared on limited land, plagued by soil degradation and shrinking water resources?
In a socialist mood, India implemented land ceiling laws to deracinate the zamindars and the landed elite. An entire class of people was destroyed overnight and from its ashes grew a new rural elite. As land ceiling laws differed from State to State, we saw a diversity of combinations and also unique systems of parity between irrigated multiple crop land owners versus grove land or un-irrigated land owners. For example, land holdings in Barmer, Rajasthan and Patna are very different in size. Policy-makers relied on production-based value to set these ceiling limits. For most States, the ceiling ratio of dry land to irrigated land is 3:1. Apart from the individual limits, there are family ceiling limits to curtail land ownership collectively. In 2020, we still follow the same system.
Of course, there have been minor tweaks in each State, but overall these laws hamper the growth of agriculture in rural India and confine farm families in a negative ownership trap. As with each generation, the average land holding of individuals reduces. Adding to their woes, the farm incomes have dropped significantly, too, due to higher inputs costs and low sale price, making agriculture less viable each year. The only alternative left for a progressive farmer is either to get out of farming or wait for the next generation, as contract farming has not been successful for most of his kind.
The result is that the Indian farm size is very small (86 per cent own under two hectares), and is decreasing further as the average size of operational holding has declined to 1.08 hectares in 2015-16 as compared to 1.15 hectares in 2010-11 as per the Agricultural Census 2015-16. The Economic Survey of India understood this problem and twice recommended the Government to increase land ceiling limits. But little has happened. Recently, the Karnataka Government tried to increase the land ceiling limits but amid protests rescinded this step.
Nevertheless, even if the land ceiling stays, can there be a consensus between States and farmers for the benefit of the latter, soil and water conservation and the free market? India is already producing enough grains, vegetables and so on but losing more critical resources — water and top soil.
Due to the push for industrialising agriculture, from Punjab to Tamil Nadu, we have witnessed soil degradation leading to desertification, salination and top soil erosion. With 30 per cent of India’s land degraded, the Narendra Modi Government stressed on soil health cards. The deleterious effects paddy has had on water is alarming. Noam Chomsky recently predicted that India and Pakistan may be on the brink of war over water resources. We are already witnessing water wars in southern States and the “Laturisation” (Latur in Maharashtra was the epicentre of a water crisis caused by bad agricultural practices) will only increase unless we stop exploitative practices. Soon, our eco-system and free market will collapse. So, States must study the soil conservation programme of the US, which was implemented to reverse soil degradation in the mid-west or the Dust Bowl. The Government paid farmers subsidies for soil conservation or allowing the land to be fallow.
Under extreme fiscal pressure, one doesn’t expect the Modi Government to give more subsidies but to declare soil degradation and water depletion as the nation’s top nemesis. But the question is how can the Government implement a soil conservation programme and also keep farmers happy?
The answer: Incentivise farmers for agro-ecological plantations and agro-forestry by relaxing land ceiling limits for them. Most of the State Acts already have a separate provision for grove land or orchards. By adding a sub-clause, Governments can ensure that plantations increase rapidly, without the use of chemicals and fertilisers. Each State can choose native varieties and non-water-guzzling trees for plantation or agro-forestry.
This policy change will have many benefits. Both soil and water will be conserved and farmers’ incomes will be boosted while adding new products for the free market. The return of organic matter and biodiversity will guarantee farmland productivity for the future too. Organic fruits get the top dollar. The Agricultural and Processed Food Products Export Development Authority (APEDA) predicts that by 2030, India will be exporting $50 billion worth of organic produce, but the cherry would be additional carbon credits that farmers can earn. If 10 per cent of arable land converts to organic grove land or mixed orchards, we will meet our climate targets sooner and also improve the air and water of our villages and cities. Each hectare of organic land can store 80,000 litres of water. We need a Central policy to bolster this drive.
By making an exception for the agro-ecological plantations, legislators can boost the organic market and also help heal the soil. Additionally, farmers may take over wasteland or degraded lands, beyond the ceiling limits, and restore them into orchards or groves. These zones or farms will be carbon sinks and produce more nutrition per acre, and as the farmers will care for these lands, the Government’s financial burden to restore wastelands will also lessen.
As per the policy in the US, bigger farms are better for business. Farmers of Mexico, Brazil and Argentina, all thought they could resist, but have failed. The fallout of the World Trade Organisation and the recent farm-gate liberalisation will be “bigger farms and lesser farmers” in India, too. But we, as a nation, still have a choice to steer the bigger farms towards agro-ecology or allow industrial farms to take over rural India. If we swerve towards healing the Earth, India may set a precedent in the world where nature and the agrarian economy grow together. The Modi Government needs to bring out a fourth Ordinance to free the land for healing the Earth.
(The writer is Director for policy and outreach, National Seed Association of India)
Disagreement in politics is the right of the Opposition, but playing with the future of farmers is not healthy politics. Those swayed by the cry of the Opposition should question the Congress whose 2019 LS polls manifesto promised to abolish the mandi Act and remove ban on inter-State trade in agricultural produce
Thanks to our Prime Minister Narendra Modi for taking revolutionary steps to improve the agriculture sector and to provide new opportunities to farmers for their prosperity. The farmers got freedom from many legal restrictions and we have moved strongly towards the Prime Minister’s determination to double their income.
These reforms were needed for a long time, but despite hollow promises, the previous Governments could not muster courage to implement them.
Today, those who have questioned the reformative efforts of the Government should be asked why they could not take any major and important decision in the interest of farmers even after ruling the country for six decades. Was their political compulsion behind this or some other reasons?
Efforts are being made to create an atmosphere of confusion in the country regarding the minimum support price (MSP). The canard of discontinuation of procurement by the Government at the MSP is being instilled in the minds of the uninformed people.
Also, it is being said the farmers will have no option but to sell their produce outside the market at less than the MSP. First of all, I would like to correct the misinformation. We have clarified many times that the MSP declaration will continue and the Government procurement on the MSP will continue in the future. The MSP or procurement at MSP has nothing to do with the new legislation. Those who question the Government regarding the MSP should know that only after the formation of the NDA Government under the leadership of Modi, the MSP is being determined by adding at least fifty per cent profit to the cost the produce, as per the recommendations of the Swaminathan Committee. The Government of India declares the MSP of 22 crops.
One of the biggest outcomes of agricultural reforms in the country is that for the first time after Independence, farmers have got freedom from the clutches of middlemen. Till now the farmers were obliged to sell their produce in mandi and only about 30,000 to 40,000 licensed traders doing business in the mandis across the country used to fix the prices of the produce.
Through the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, farmers have not only got freedom to sell produce anywhere, but in today’s technological era, a more convenient mechanism has been created to sell produce through e-trading. Through this agrarian reform, the farmers can also earn more profit on their produce by saving tax and transportation costs.
The question is being raised again and again that the new provisions will abolish the Agricultural Produce Market Committees (APMC). Here again, I want to make it clear that the APMC mandis will continue to work. The only difference is now farmers have freedom to sell their produce outside mandis also. These amendments will also provide an opportunity to the mandis to develop their infrastructure and farmers will get more facilities.
Similarly, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 aims to connect farmers directly with traders, companies, processing units and exporters. The farmers will get remunerative prices in every circumstances as the price of their produce is fixed before the sowing through the agricultural agreement.
Here, I would also like to clarify that the farmers will get additional benefits under the terms of the agreement along with the minimum price. The confusion is being spread that the land of the farmers will be handed over to the industrialists and traders. On the contrary, the truth is that in contract farming, there will be agreement between a farmer and a businessman to assure the price of produce at least at MSP. There is no issue of land in this case. No trader can take loan on a farmer’s land nor can any recovery be made against the farmer’s land. This law protects the interests of farmers in a much better way than the existing contract farming act of the States.
Provision has been made to make payment of produce to the farmers within three days of sale. Simultaneously, it has also been provisioned to settle the dispute at the local level within 30 days to preclude court cases. With this step of the Government, farmers will be protected against the risk of price fluctuations in the market due to fixation of the price of the produce before sowing. Along with this, farmers will be able to access state-of-the-art technology, advanced manure, seeds and equipment.
Under the Essential Commodities (Amendment) Act 2020, a provision has been made to remove grains, pulses, oilseeds, onions, potatoes, etc, from the list of essential commodities. This will increase the capacity of storage and processing and farmers can sell their crops in the market at a reasonable price.
Till now farmers have been worried about the loss of perishable crops like potato and onion. With the new provisions, the farmers will be able to grow these crops with more confidence. The canard is being spread here that hoarding will increase and traders will earn profits by selling products at inflated rate. This apprehension is unfounded; the Government has retained control of the stock limit as before on increasing the price beyond a limit.
Disagreement in politics is the right of the Opposition but for that, one should not play with future of the farmers. Those swayed by the cry of the Opposition against the revolutionary farm laws should verify facts and read the manifesto of the Congress in the 2019 Lok Sabha elections that promised to abolish the mandi Act and remove ban on export and inter-State trade in agricultural produce.
In the same manifesto, they had promised to establish farmers’ markets in big villages and towns to provide freedom to farmers to sell their produce. In the same manifesto, the assurance of amendment in the Essential Commodities Act was made. When the same issues are covered in the new provisions, the moot question is why the atmosphere of confusion is being created by protesting against the same.
Today after a long period, a serious effort has been made in the interest of farmers and for improving their condition. Full provision has been made in these Acts to ensure that farmers get remunerative prices for their produce and all their interests are protected. I will ask political parties to think once again in the interest of the farmers and the nation before whipping up a false opinion.
(The writer is Union Minister, Agriculture and Farmers Welfare, Rural Development, and Food Processing Industries)
Food production is critical to keep the wheels of the economy turning. We must not allow climate change to hijack our food security
The rapidly worsening condition of the environment is increasingly creating harsh terms for agriculture in India. The sudden floods, such as those experienced by Telangana last week, and unexpected droughts in many areas coupled with a sheer drop in yield per acre are creating financial havoc for the farming community. Moreover, the recently-passed farm Acts have added to the woes of the already burdened growers. Farmers have become unsure of the future, especially regarding the produce and how the MSP (Minimum Support Price) will be impacted due to the entry of big players and whether the Government will continue to buy farm produce at the same price and quantity as before.
With the only means of voicing their concern being protests, the growers have of late tried to convey their feelings and insecurities regarding the Acts through demonstrations in Delhi, Punjab and other parts of the country. Sadly, their outcry has fallen on deaf ears till now. This muted response from the Government has now increased the farming community’s distress. This angst is expected to reach a crescendo in November when the agricultural community is planning to scale up the protests.
Already, the country’s farm sector is besieged by chronic problems such as mounting debt, poor quality seeds and overuse of pesticides besides the vagaries of the environment. However, being a hardy community and the spine of the Indian economy, the farmers have always fought their way through hurdles. The challenges thrown up by the environment in the form of rising temperatures and erratic rainfall, too, need to be met and responded to by the growers effectively and innovatively. The Government must enable farmers to deal with this instead of giving the impression of being callous about their welfare.
As politics rages over the Acts, worrisome developments are escaping the attention of policy-makers and the authorities concerned. A decade-wise observation of rainfall patterns shows that from October to December, rainfall has been at a record low of 100.06 mm for the 2010-2019 period as compared to 106.29 mm during the similar period in 2000-2010. The average post-monsoon rainfall has fallen below 110 mm. Coupled with this, droughts are getting more frequent and prolonged each year. Mid-2018 saw heatwaves fanning across India followed by scanty rainfall in the same year and in 2019 as well. These circumstances exacerbated the already daunting challenges for farmers, who had to bend over backwards to take the yield out of the parched land.
The adverse impact of the worsening environment on agriculture cannot be reversed overnight but the lot of the farmers cannot be allowed to deteriorate further as well. Therefore, there is an urgent need to innovate and evolve agricultural methods and initiatives that are capable of rescuing them from the grip of climate change. There is also a need to provide a sustainable solution that can be amplified across the sector on a large scale. An example of how this turnaround can be affected is available in a study published in the journal Earth System Science.
The research focussed on rice crops, which are the mainstay of South India’s agriculture. Rice also happens to be a major part of the diet of the southern population. The study concentrated on how the rise in temperatures, followed by scanty rainfall, was impacting the rice yield in Kerala, which was the chosen field of observation. The participants, who included experts from Japan, recommended altering the varieties of rice to a more heat-resistant strain that could withstand the fluctuating temperatures and yet be resilient enough to deliver an adequate crop yield. The experts also opined that the traditional sowing time needs to be shifted in consonance with the changing weather patterns so that the crop is in tandem with the weather trends. They recommended sowing at the end of July or the beginning of August in order to improve the quality of crop and provide ideal crop maturity time.
The study is an essential tool that provides baseline observations for ensuring future crop planning and maximising yield that accounts for climate variables, maximum and minimum temperatures, rainfall and solar radiation. The fact that the study was able to asses future crop yield projection amid constant carbon dioxide and meteorological values is crucial.
Furthermore, the tool of Growing Degree Days (GDD) incorporated into the study helped provide robust outcomes and observations. For the uninitiated, GDD is a measure to estimate the growth and development of plants in the growing season. The study was conducted using the CERES-Rice Cropping System Model.
The importance of agricultural adaptation to climate change in the current period cannot be stressed enough as food security and nutrition levels have been compromised exponentially due to the COVID-19 pandemic. India accounts for 17.7 per cent of the world’s population and a failure of the agricultural system in the form of yield and quality deterioration at this critical juncture can present a catastrophic scenario. The multiple challenges posed by the environment, policy issues and the long-standing systemic glitches can spell disaster for the agri sector. Unless the writing on the wall is understood and deciphered in time, India may be staring at a food crisis post the COVID-19 outbreak.
Food production is critical to keep the wheels of the economy turning. We mustn’t allow climate change to hijack our food security. This is only possible by being a step ahead of climate change complications.
(The writer is an environmental journalist)
These days farmers across the country are agitating against the three farm Acts passed by the Government recently. If we analyse the status of agriculture today, we find that the sector is in dire need of innovation, both at the policy and ground level. Unless the Government deals with the real issues facing the farming community, nothing substantial will be achieved by simply reforming the existing structure that governs the sale and marketing of farm produce. Government officials and many in the public space think that the Commission for Agricultural Costs and Prices (CACP) is doing a great job in declaring the Minimum Support Price (MSP) for a range of items like millet, pulses, oilseeds and so on, other than wheat and rice. However, the fact is that only six per cent of the farmers and only `2.5 lakh crore out of the `40 lakh crore total output from agriculture are covered by the MSP. From the point of view of food security, the MSP is an important intervention as it provides some financial security to the farmers and price stability to the consumers.
The main cause for concern is how to make farming profitable for the small and marginal growers who constitute 86 per cent of the farming community. They are neither able to invest in technology, better seeds and other inputs, nor in infrastructure. Most of them are at the mercy of the rain god who is now playing truant with them due to climate change, coupled with price instability and indebtedness. The rich farmers are able to manage somehow, but the poor get further indebted and trapped in bad loans.
Yet another problem is the reluctance of the younger generation to carry on subsistence farming. The Government must launch a climate adaptation site-specific programme for tackling the hydrology of the area to retain soil moisture. Increasing productivity is the only way we can double the farmers’ income. Take for example China. In 2010, it produced 500 million metric tonnes (MT) of grain from 143 million ha of net sown area. In India that year, this was only 240 million MT with the same sown area. Now with 140 million ha in 2020, we have inched closer to 300 million MT. Though the contribution of the farm sector in the GDP is around 17 per cent, it supports the livelihood of 58 per cent of the workforce of India. The Gross Value Added (GVA) by agriculture, forestry and fishing was estimated at `19.48 lakh crore in the current financial year (FY). The growth in GVA in agriculture and allied sectors stood at four per cent in the FY 2020-21. If the country wants to become a $5 trillion economy, we must lift the annual growth rate of agriculture by at least eight to 10 per cent in the next few years and then aim for more. This will require a concrete action plan.
As a first step, there should be planned networking to integrate land use with the adjoining forests through the creation of water bodies and implementation of watershed management schemes. This will help tackle climatic vagaries. The next approach is to opt for high value crop diversity for better production so that the return per unit of land used is enhanced. The farmers would require value addition and friendly market support. Though the Agriculture Produce Marketing Committees (APMCs) can no longer control the farmers, they can still be used for better procurement through the MSP and can become competitive with reforms in their functioning, specially by creating more facilities for the farmers in the context of the changed circumstances.
The Government should promote consortiums of investors and farmers while the small and marginal farmers should form cooperatives for negotiating with the sponsors for undertaking contract farming. In this venture, the APMC’s Mandi Samitis could also chip in to provide infrastructure and help. These cooperatives can create infrastructure and inputs for increasing productivity and help small farmers improve soil conditions and mitigate water scarcity through water harvesting. This will sort out the two major constraints in increasing production. Yet another help farmers need is to mitigate weather-related risks and for this, crop insurance policies must be made farmer-friendly. What do we do about the deteriorating soil health due to the overuse of pesticides and fertilisers? We must push for sustainable farming and the Centre and States must provide assistance to organic farming and conservation agriculture. As per the Compound Annual Growth Rate, the organic food segment is likely to grow from `2,700 crore in 2015 to `75,000 crore in 2025.
The Government must take proactive steps to reform Indian agriculture to help production cross 500 million MT in the next two to three years. Only then can the farmers’ income be doubled. The first thing to do is to open the door to agitating farmers. After all, it is they who have been feeding the nation.
(The writer is a former civil servant)
Instead of whipping up the esoteric phobia that the new farm laws will render APMCs redundant, the protesting State Governments should take this opportunity to make these sluggish bodies competitive for farmers by providing better services at lower prices
There are exigent issues in Indian agriculture. India, despite being the largest milk producer and second largest producer of food in the world, has just 2.3 per cent share in global export market, with low value addition. We process less than 10 per cent of agricultural produce and lose `90,000 crore rupees annually due to wastages. 44 per cent of Indian workforce is engaged in agriculture, contributing only 14 per cent to GDP keeping these people tied in very low-income traps.
India’s agricultural productivity is drastically low even as compared to global counterparts like BRICS; at Chinese yield levels, India could nearly double its production or halve the amount of land devoted to cultivation — freeing up that land for other purposes. So far, the Government’s strategy to help the farmers has been to provide subsidies, especially the MSP and input subsidies. However, only 6 per cent of the farmers have benefitted from the fruits of MSP, which mostly happen to be the big farmers; farmers from only few States like — Andhra Pradesh, Punjab and Haryana; and mainly for wheat and paddy. Another undesired offshoot of the MSP policy is the excess procurement of food grains by the Government — it has to procure 90 per cent of wheat from Punjab and Haryana — while 62,000 tonnes of food grains was damaged in FCI warehouses between 2011 and 2017.
At the time of independence, facing food deficit, we needed the targeted approach of MSP to increase the production of food grains. Currently, while having food surplus, we are suffering with the unsustainability of growing water intensive food crops at the lands ill-suited for them, owing also to free water and highly subsidised electricity, resulting in alarming fall of water table in certain States, especially Punjab and Haryana. If agriculture is to be made profitable, a focus on productivity increase, crop diversification, exports and food processing is essential, while creating infrastructure for minimising losses.
The productivity trap
The productivity difference between the rainfed agricultural area and irrigated lands is immense. Swaminathan Commission stated that 60 per cent of cropped area falls under rainfed agriculture contributing to only 45 per cent of total agricultural output. Thus, poverty is concentrated and food deprivation acute in this area. Agriculture is a very high-risk enterprise, much more so for small and marginal farmers which form 86 per cent of Indian farmer community and possess land holdings of less than 2 hectares. It is difficult to make agriculture profitable for them because they are too small for the use of modern implements, suffer from high input cost due to lack of economies of scale, leading to low productivity. Only 40 per cent of them manage access to formal credit, with low penetration of crop insurance. Thus, bearing the brunt of vagaries of nature as well as market volatility of food crops, stuck in the debt trap of money-lenders; these farmers are pushed to suicide. In 2019 alone, around 10,000 farmers and farm labourers died by suicide. The Ashok Dalwai Commission has also called productivity increase as the single most important factor in doubling the income of marginal farmer group.
Contract Farming and FPOs
In the recent policy initiative, the Government has adopted a two-pronged strategy: Contract farming and Farmer Producer Organisations (FPO). Contact farming will help the farmers, especially small and marginal farmers to access formal credit, modern implements, technical assistance, low cost inputs and assured price at the farm gate; thus, increasing crop productivity, avoiding wastage, shielding the farmer from pre and post-production risks. Another benefit of contract farming is selection of crops based on agro-climatic and soil condition of the area, making the agriculture sustainable.
FPOs are registered groups of local farmers — especially small and marginal ones — with a company like management structure. The function of FPOs is to help farmers in pre and post production operations from access to formal credit, inputs, technical assistance to primary processing, marketing, etc. They will also be well placed to negotiate over contract farming or private purchase of food produce with private players. They will be given monetary grant and credit guarantee by the Government to promote local produce. Government has also created Agriculture Infrastructure Fund (AIF) of Rs 1 lakh crore for creating post-harvest infrastructure, which will be mostly functional by providing interest subvention on such projects; and the Government intends to utilise this Fund through the FPOs. It will have to be seen how much of this vision is actually implemented on the ground. The sustainability of the FPOs, post Government grant period, shall also be an area of concern.
State rights and APMCs
Allegations of encroachment of State rights and federalism are also being made as the Central Government used the entry 33 of the Concurrent List to bring out the farm Acts. It would be interesting to note that none other than Prof MS Swaminathan, the biggest well-wisher of farmers’ rights in India, had recommended shifting agriculture to the Concurrent List and creation of a single Indian agriculture market in his report in 2006.
While the APMCs were formed for fair and transparent price discovery for farmers, they have failed and succumbed to cartelisation, while becoming highly politicised. In return to the mandi fee, the services provided to the farmers are abysmal — with no cold storage facility, no facility for grading, sorting, packaging of food produce. Before the onset of e-NAM, the pan India e-trading portal by the Central Government, and push for mandis to connect — most weren’t providing e-trading facilities. Ashok Gulati, an agricultural expert, has placed an important question in the public domain: instead of fearing the redundancy of APMCs, why don’t the State Governments take this opportunity to make them a competitive option for farmers by providing better services at lower price? In fact, we are seeing a trend to that effect –Karnataka has greatly reduced the mandi fee; Punjab and Haryana have reduced the mandi fee for basmati by 50% or more. So, the future of APMCs is to become more efficient and effective and not be wrapped up, and States must work to that regard.
Farmers vs corporates
The reforms in agriculture have also created certain areas of potential hazard to farmer’s interests. As restriction for stocking up food is removed, it can lead to big retailers or corporates manipulate prices in the market, often to the disadvantage of the farmers. In contract farming also, corporates can dictate price to farmers and reject produce on the basis of quality, shape, size, colour, etc. Same fear of less negotiating power of farmers vis-à-vis big buyers, during sale of food produce even outside APMC, exists.
Create Market Regulator
While capitalism has taught the world that competition improves quality of options, we are equally aware of tendencies of monopolies forming without any active oversight of State, rendering the competition neither free nor fair. Hence, an independent market regulator and dispute redressal forum (akin to TRAI and TDSAT) must be created for agricultural sector to check unfair practices by corporates and private players and protect the interests of farmers.
Further, if the farmers are to be truly free and agriculture to be made profitable and sustainable — there’s still no alternative to Government’s own work on the front of setting up cold chain for farmers in villages, implementing more irrigation projects, recharging of aquifers, greater push to extension services and primary processing at farms.
(The author is a public policy analyst and a lawyer, an alumnus of National Law University, Jodhpur)
Had the Government chosen a Standing Committee scrutiny or even had a dialogue with farmers, the opposition to farm laws could have been avoided
The new farm laws might not be as disruptive as their critics want us to believe. They are apparently as logical and timely reforms as interventions like State procurement and notifying of Minimum Support Price (MSP) had been in the mid-1960s. The ruling and Opposition parties are engaged in a wholly avoidable fracas, both refusing to view things in totality. The Opposition is indulging in loathing and fear-mongering, reminiscent of the times when economic liberalisation was introduced in 1991. Paradoxically, it was the Congress’ Government then. The party now is behaving differently when in the Opposition.
The Government’s cavalier attitude to the Opposition parties’ stance is equally uncharitable. Motives have been imputed to their decision. They are accused of having a vested interest in the Agricultural Produce Market Committee (APMC)-run mandis, besides being friendly towards the middlemen who call the shots in those market yards. Ironically, on the National Agriculture Market portal (eNAM), started by the present Government in 2016, there were no less than 83, 958 commission agents registered as on August 31. Why is the Government promoting middlemen here?
The fear that APMC-run mandis would be abolished is largely unfounded. The eNAM platform can today boast of connecting about a 1,000 of them across 18 States and three Union Territories (UT). However, the passage of the Bills was not preceded by any kind of consensus-building. There was no dialogue with the farmers’ unions, State Governments or the Opposition parties. The laws were rushed through the Ordinance route on June 5. This starkly contrasts with the spirit of federalism and the consensus model that marked the implementation of the Goods and Services Tax (GST). The matters concerned with agriculture being under the State list in Schedule VII of the Constitution called for Centre-State consensus.
The legislative competence of Parliament to discuss a Bill on a subject placed in the State list (Schedule VII of the Constitution) was questioned by some members. However, we have precedence of the Seeds Act, 1966, which is a Central legislation. It was one of the key legislations enacted during the Green Revolution era. Still, one is reminded of how the Atal Bihari Vajpayee Government approached the contentious subject of contract farming. This was envisaged in the National Agriculture Policy 2000. Instead of bringing a Central law, the Government in 2003 circulated a Model Agricultural Produce Marketing (Regulation) Act to the States for adoption in 2003. The ensuing UPA-I Government continued the policy. Contract farming was included as an option in the National Farmers Policy (2007). By August 2007, a total of 15 States had brought amendments in the APMC (Regulation) Acts based on the model legislation.
Why did the four Labour Codes, recently enacted, did not become a source of dispute despite the presence of controversial provisions? This was because the Codes, meant to reduce 29 existing labour laws into four legislations, were vetted by the department-related Standing Committee of the Lok Sabha. It was chaired by Bhartruhari Mahtab of Biju Janata Dal. The Government agreed to several suggestions of the committee.
How justified is the claim that previous governments had kept the farmers in chains? Such a view stems from inadequate appreciation of facts. Definite pro-farmer measures were taken by Indian National Congress since 1937 when it formed governments in coalition in seven out of 11 provinces (under Government of India Act 1935). These included debt relief measures, tenancy reforms and licencing and regulation of money lenders and so on. But separation from Burma (now Myanmar) from the Indian Union in 1937 stressed rice availability in India.
India’s agricultural policy since Independence was aimed at attaining food security. With fragmented landholdings, inadequate electricity supply, pitiable irrigation facilities and poor acreage, production was insufficient. To bridge the requirement and availability of food grains, India entered into an agreement with the US under their Public Law 480 on August 29, 1956. It allowed India to obtain wheat, rice, cotton, dairy products and tobacco in Indian rupees. It could not, however, be denied that import of food grains, in excess of the market requirement, de-incentivised the farmer to produce more. The production increased as the imports were brought down to realistic levels around 1966. However, the completion of the Bhakra-Nangal Dam on Beas-Sutlej (1963) was an achievement of the Jawaharlal Nehru Government, which accelerated the advent of the Green Revolution.
The current regime of MSP and Government procurement is a legacy of the short-lived Lal Bahadur Shastri Government (June 11, 1964 to January 10, 1966). It had its origin in the decline in wheat production, consecutively between 1962 to 1964, and decline and marginal recovery of rice production during the corresponding period. This compelled the Government to revisit its open market policy for wheat and modest control on transport and sale of rice. The severity of the food shortage could be understood from the sheer number of speeches that Shastri delivered on the subject as the Prime Minister. His Selected Speeches, published by the Publications Division, Ministry of I&B (1972) categorises a total of 10 under “Food Problems.”
The Shastri Government moved in towards a regime of greater regulation and control on sale, purchase and movement of food grains. On January 1, 1965, two new organisations were created, which became the hallmark of the Government’s intervention in the agricultural sector. These were Food Corporation of India (FCI) and Agricultural Prices Commission (now Commission for Agricultural Costs and Prices). The ambit of Government procurement, which was limited to a few edible items in the beginning, now extends to 23 items (in addition to sugarcane).
The developments since the Green Revolution (1967) have led to the growth in acreage and food surplus situation. Time is ripe for addressing the neglected problem of agricultural marketing. In pursuit of doubling the farmers’ income by 2022 (from the level of 2016), the Narendra Modi Government formed a committee led by Ashok Dalwai, IAS. The committee produced a 14-volume eminently readable report. Though the decision to “liberalise” the farm was not among its direct recommendations, one has to realise that significant decisions are always political rather than bureaucratic in nature. The farmers must have better alternatives for remunerative pricing with legal safeguards. Even today, there is no legal restriction on farmers selling his/her product in the open market. What cripples the farmer, however, is not merely the logistical problem but also the absence of a legal architecture to protect his/her interests.
A single line in these Acts, like “notwithstanding anything contained in the aforesaid sections, no trade transactions should take place below the notified MSP”, would have allayed the misgivings of the farmers. A line in time could have saved the Government from putting eight Cabinet Ministers on ground (not including the Agriculture and Farmer Welfare Minister Narendra Singh Tomar) to convince agitating agriculturists.
(The writer is an author and independent researcher based in New Delhi. The views expressed here are personal)