By: Kardama Muni @ Muni Blogs

Indian government recently passed three well-meaning Farm laws that have caused protests and agitation primarily amongst the farmers of Punjab and Haryana. Intent of these laws was to help farmers make more profit on their efforts and help alleviate suicides due to financial reasons.  Also, to eliminate the farmer’s dependence on subsidies.

Due to political immaturity as well as myopia of opposition parties in India, everything becomes protests and agitations.  Such issues do not require an agitation when the government is open to talks and willing to make changes necessary as long as the intent of the laws are met.

The protest and agitation in a democratic society should be used only after the law that was passed in accordance with the constitution, have been tried for a year or two, have not yielded desired results, and all attempts to draw government’s attention have failed.  It is very unfortunate to see India plummet into agitations after agitations just on rumors or fear of unknowns.

This article puts forth the facts in front of an open minded reader.

  • Since 26 November, farmers from Punjab and Haryana are protesting against recently passed farm laws
  • Government thinks these three laws lay the framework for protecting farmers, the MSP, APMC and at the same time allowing farmers to sell produce directly to corporates (and anyone else they wish to sell). These laws are named appropriately as
    • PROMOTION AND FACILITATION
    • EMPOWERMENT AND PROTECTION
    • THE ESSENTIAL COMMODITIES (AMENDMENT)
  • Farmers fear that this may be an excuse to pull off the MSP safety net from under their feet
  • Government claims it is not removing the MSP.  However, expects farmers to make much more than MSP in an open market (*2).
  • If farmer can get 2-3 times the price of MSP in an open market then their income goes up, government subsidy spending goes down and would largely eliminate finances as a cause of farmer suicide.
  • Farmers getting much higher prices in the open market and in contract farming is a highly likely scenario as there is 4 to 7 times price difference between the MSP versus the market price of the produce.
  • This difference is currently usurped by the middlemen – typically a cartel (*3).  The laws set the stage to eliminate the middlemen and expects a part of the difference to go to the farmer.

The Bills (now Laws)

  1. THE FARMERS’ PRODUCE TRADE AND COMMERCE (PROMOTION AND FACILITATION) BILL, 2020 

This bill allows farmers to sell their produce anywhere of their choosing.  It has measures that will prevent state governments from discouraging farmers from making use of this law.

  • THE FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES BILL, 2020

This Bill makes provisions for the setting up of a framework for contract farming just like USA.

  • THE ESSENTIAL COMMODITIES (AMENDMENT) BILL 2020: 

It allows sale of farmer’s produce beyond the physical premises of APMC markets.  State governments are prohibited from levying any market fee, Cess or levy outside APMC areas.

Before Situation

Before this law, a farmer could sell the produce only in a designated price-controlled market called Agricultural Produce Market Committee (APMC) (*1). The farmer typically received the minimum support price (MSP) for the produce although the produce was worth much more in the open market. 

After Situation

The farmer can continue sell the produce in APMC markets, to the existing known agents at MSP.  Government has guaranteed that the APMC and MSP regime will continue as is.

In addition, these laws allow farmers to sell their produce outside the APMC regulated markets to anyone and anywhere in India.

State governments are not allowed to charge any market fee, Cess, or Levy outside APMC areas. This ensures that state governments do not interfere with the farmer’s rights, discourage or make selling elsewhere artificially prohibitive.

Farmers can sell the crops before even planting at or above the MSP – thus, transferring the risk of crop failure to a private corporation instead of carrying it by self. 

The corporations would typically mitigate risk by taking crop insurance and the difference of buying prices versus the market price.

How will the new laws benefit farmers?

The three farm laws offer three basic freedoms to the farmer. 

  1. Over the years many monopoly cartels have developed in the APMC markets that are preventing farmers from getting anything more than MSP.  At times the produce is purchased below MSP.
    1. Before these laws a farmer can’t sell directly to the local shop owner.  Now the farmer can.  Imagine all profit of the middlemen shared between the farmer and the retailer.
    1. Before these laws, the farmer can’t sell produce to the end user. Now they can.  Thus, all the profit of all the middlemen in such a transaction go to the farmer.
    1. Thus, the three laws together will help defeat these cartels at the APMC mandi as the laws allow farmers to sell the produce anywhere to anyone and make more money.  The farmer will no longer be dependent on the cartel or MSP.
  2. Farmer so far were not allowed to store inventory.  So if they produce grains, the grains were subjected to weather and theft; they must sell it within a certain time at the mandi.  Thus, creating an artificial urgency for the farmer to dump the product in the market at whatever price offered.  The middlemen were allowed to store the products.  They would buy cheap from the farmer, store and not release the inventory until an artificial shortage is created and then sell at a much higher prices.  The new laws allow farmers to store inventory.  When to sell power is now in the hands of the farmer.
  3. Farmers were not allowed to contract directly with anyone to sell the crops.  Thus, farmer had to take all the risk of weather, water shortage, pests, insects, locust, fungus, poor quality fertilizers, and other reasons for crop failure.  In spite of taking all the risk, the minuscule price was paid to the farmer and a substantially large chunk of profit was retained by the middlemen.  So if the crops fail, farmers lose.  If crops are successful, middlemen win.  That was the current situation requiring government to provide regular subsidies, interest free loans and loan forgiveness to farmers on an ongoing basis.  And still we saw so many farmer suicides.  Now, the farmer is free to make contracts and transfer risk to businessmen in deals made over a crop even before yield is made or met.

Who are the losers then?

The middlemen, mandi cartels, few rich farmers who sold their crop to their family middlemen and made huge profit while also obtained subsidies meant for smaller farmers, are all going to lose out if they operate without a global vision. 

On the other hand, the intelligent middlemen now have ability to convert themselves into a corporation, join the white market, make value added products, and help in nation building while making the same amount of profit or even more.  If they think a bit, they too can come out as a winner from this law albeit the way they would make same amount of money would change. Instead of being a mere treader moving trucks from point A to B, they would have to buy farm produce and made products out of it so make same amount of profit. But they too don’t have to be losers unless they chose to be one.

Why are the farmers upset?

  1. Fear of unknown:

Some farmers are afraid that these laws may be a way for the government (at the Centre) to replace or scrap the existing support system prevalent in their states for the purchase of their crops.

  1. Government has denied this and there is not provision for it in the laws passed.
  2. Fear of losing what they already have in terms of price guarantee and false rumors that the price subsidy (MSP) is going to be withdrawn:

They fear that the safety net of Minimum Support Price (MSP) guarantee in place since 1960s is being taken away under the pretext of giving the farmers more freedom and better options.

  • Government has repeatedly mentioned that MSP and APMC mandis will stay intact.

In reality, of the 23 agricultural crops with MSPs, the governments primarily buy rice and wheat only. Farmers fear the laws will eliminate the government procurement process and  the MSP.  Being wheat producers, Punjab and Haryana farmers are the biggest beneficiaries of this safety net where FCI declares the MSP before the growing season and buys at that price.

  • Because MSP, APMC mandis, FCI and government purchases for Punjab (and all other) farmers is remaining intact, there is no apparent reason to agitate and protest.
  • Fear of corporations:

These farm laws are encouraging farmers to strike deals with large corporates, and farmers likely do not trust corporates. 

  • Government can provide a standard proforma of the contract to alleviate this trust issue or help create local co-operatives to deal with the large corporations (as was done in 60s for milk producers in Gujarat – Amul is such a success story)
  • Short-sightedness of farmer leaders:

Farmer leaders are failing their followers by not seeing the long term benefits of these laws.  Also, the continuation of existing system ensures necessary protection and successful transition of all farmers over the years (making current system irrelevant then).  This myopia of farmer leaders is blocking all the efforts of communications from the government.

  • Former middlemen possibly spearheading misinformation campaign:

The economic expert Gurcharan Das points out that a small, organized, and well-funded group in a democracy can hijack the nation’s interest when the majority is silent and unorganized. Das claims that behind these protests are the arthiyas, buying agents in PMC mandis who stand to lose Rs 100 crore a year in commissions, as well as the few rich farmers of Punjab who have benefitted from the MSP regime.

  • National Politics:

The marginalized opposition political parties need such stir ups to justify their presence and gain some grass root support.  For this reason only, they are now opposing the laws that they themselves insisted be created a few years ago (and had promised they would create these laws if they were elected to power).  Some have dipped so low to gain some traction in election that they are willing to side with anti-national forces as well.

  • International Politics:

Countries like Pakistan, who can offer up their own Punjab province to our Sikh brothers to create an independent nation of Khalistan, is not doing so.  Instead, it is trying to foment trouble in India using such protests and intermingling/overtly supporting a few misguided Sikh youths as a revenge for (Pakistan’s own incessant killing of Bangladeshi Muslims in 1970 and eventual) separation of Bangladesh. 

  • These youth, if taught the origin of Sikhism, the meaning of what is stated in Guru Bani, Japaji Sahib, fate of their last five Gurus, their Guru’s prominent followers and Guru’s children, would definitely revise their allegiance and approach towards their Hindus brothers.

Reference

  1. Agricultural Produce Market Committee (APMC):

These are regulated markets. The APMCs are government-controlled marketing yards or called mandis in vernacular.

  1. The economic expert Gurcharan Das (Harvard alumni, former CEO of Procter & Gamble, India) writes in TOI that the Agricultural Produce Marketing Committee (APMC) is an obsolete institution from an age of scarcity, meant to protect the farmer but has now become his oppressor, a monopoly cartel fixing low prices for the farmers’ produce, forcing distress sales.
  • According to PRS India, a “Standing Committee on Agriculture (2018-19)” observed the APMC laws needed reforms as cartelization had begun to crystallise due to a limited no. of traders in APMC mandis. Therefore the following law was passed in September 2020. 
  • Bill No. 112-C of 2020 – THE FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES BILL, 2020
  • Bill No. 113 of 2020 – THE FARMERS’ PRODUCE TRADE AND COMMERCE (PROMOTION AND FACILITATION) BILL, 2020

DISCLAIMER: The author is solely responsible for the views expressed in this article. The author carries the responsibility for citing and/or licensing of images utilized within the text.