Farmers' Bills or is it?

Let's make sense of the impact of Farm Bills, in layman's terms...

Oct 19, 2020

Pardon me for taking up this epoch-making topic off-late! Well, some of you might already be aware.. about a month ago, there was a ruckus in the Rajya Sabha over passing of some bills! This, then, took to the streets, where farmers, in large numbers, came out to protest! And what was that exactly? Farm Bills, particularly three of them, which’re intended to liberalize agri-markets and provide the farmers with economic freedom of some sort. But why was it needed? What does it bring for India? Why the protest?

Well, I doubt how many of you did really get down to the nitty-gritty of the issue. Anyways, chill dude. Let me clear the clutter for you…

Freeing up the ‘mandis’ culture

A grain to your stomach doesn’t come directly from farmers. Basically, farmers are confined to a marketplace, called mandi, beyond which it’s illegal for them to sell. These are regulated by the Agricultural Produce Market Committee (APMC). You see, farmers bring their produce to designated mandis, where agents help them organize, and put it up for bidding in exchange of a hefty commission! Ideally, whoever bids the highest price, gets to buy the produce. But these auctions are rigged, meaning the bidders work together instead of competing against one another, and start bidding at really low prices! And the APMCs, you ask? Corruption is rife, buddy. Buying at low prices, these bidders then sell it to consumers at high margins! Ultimately, the ill-fated farmers take only 20-25% of what we pay for these grains!

Ergo, to provide the farmers with choices, to allow competition, cut down intermediaries and boost farm income, now the Government wants to allow farmers to sell their produce directly to private traders and companies. Masterstroke, is it?

But you see, there could be an entirely different problem here. Read the figures and you know, only 6% farmers sell their produce in the APMC mandis. The bulk of 94% already sell it to corporate societies, private traders and processors. Then what are we trying to do really? Look at Bihar, which had already liberalized agri-markets back in 2006, but witnessed no significant improvement! Think of the milk market, which are not regulated by APMCs, but still farmers have little to gain out of it! It’s like we’re doing with agriculture what we did with education and healthcare — “Government institutions, who cares? Bang on the buck for y’all, corporates!”, which of course ain’t good! Anyway, before we phase out the APMCs, we need numerous, easily accessible and lightly regulated markets for farm products.

And the farm laws shouldn’t, as P Chidambaram writes — “reinforce the status quo with all its imperfections.”

No limits on stock-piling

Agriculture is the quintessential seasonal activity. If India harvests wheat in April, does that mean no chapatis for you in October?! Of course not. The harvest has to be stored until the next season kicks in. Because if you don’t, there will be huge imbalance in demand and supply of crops, and prices will fluctuate like hell! But India’s storage facilities are pathetic! Who’s take the initiative then? Government institutions aren’t exactly known for their efficiency, so we need to get the private entities to invest in storage facilities.

Now, suppose you are a private trader stock-piling 100 tons of onion in your warehouse. All of a sudden, prices of onion touch the sky! Now the Government suspects it is due to excessive stock-piling (as it decreases market supply, and when demand>supply, price increases). So to stabilize the prices, it, over-night, announces penalty for anyone storing more than 30 tons of onions. And you’re gone! You incurred heavy investment, rent and other overheads to store them and now you’ve to do away with the 70 tons at whatever it begs! And these uncertainties discourage private entities to invest in storage facilities! There are also evidences that stock-piling limits doesn’t really help in controlling prices! Because there is more than just free market forces, you have export and import bans, which affect the prices anyway!

And now you know why the Government has decided to do away with stock-piling limits. However, it has to be seen whether private entities exploit this liberty for their own advantage by importing more and stock-piling for profits!

Contract Farming

You see, farmers cultivate crops that begged them good income in the previous harvest session. But what if things aren’t the same this time around? What if their harvests are high but prices are very low? That’s problematic! So, why not establish a forward-looking mechanism to decide the prices in advance? Well, that’s what the Government’s third reform in agriculture is. It aims to develop 10,000 Farmer Producer Organizations (FPOs) in the next 4-5 years which will work the way milk co-operatives work with say, Amul; i.e. negotiate a pre-determined price to be paid and the desired quality of produce, all in advance. And this, if mandated by written agreements, could somewhat lighten the stress of the farmers!

Anyway, long story short, what the farmers demand is a guarantee of Minimum Support Price (MSP). MSP is the minimum price at which the Government promises to buy the crops from farmers. This ensures the farmers that they’ll get at least something in return of their sweat and blood. However, the scene in India isn’t very pleasant! Out of 23 designated crops, only two of them, rice and wheat, are procured by the Government at MSP! Ultimately, less than 6% farmers get MSPs on their crops! You see, to cover the entire 23 products, India might need more than Rs. 50 Lakh Crores, which of course doesn’t look affordable! But we can certainly embrace a lot more than mere 2 crops! And the farmers’ fear is with the privatization of markets, the Government might, gradually, scrap MSPs entirely, and the poor farmers will suffer in the clutch of corporates! Ergo, enter a clause ensuring MSPs and they’ll pacify.

The flaw in the law is that there was no consultation with the stakeholders! If the farm laws were meant to benefit farmers, you should have at least negotiated the terms with them. But NO, you make a law, push it down to their throat and tell this medicine is good for you! What a rubbish! Note that more than 70% of Indian population, directly or indirectly, earn a living out of agriculture, and it’s not like if they give up farming, jobs are waiting for them! You can’t let the disturbing figures of farmer suicides get even more pathetic! So, the Government must tread really carefully in this matter.

So, hey guys, hope I could paint a clearer picture of the scenario in front of you. Make of it what you will. And if you know someone who is baffled with these Farm Laws, do share this article with them.

I would also love to hear your views on the topic and this article.

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