Were the laws a missed opportunity to address the deep-seated issues faced by millions of India’s struggling farmers and consumers?
Recently, a BJP Member of Parliament talked of resurrecting the three national Farm Laws. Faced with criticism from the opposition parties, a spokesperson of the BJP clarified that ‘her statement does not represent the party view’. Modi – The government doesn’t intend to bring back these laws.
What were those laws?
Enacted in September 2020, the most far-reaching of these laws was the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020. It allowed the Centre to regulate inter-State trade and intra-State trade, providing for freedom of choice to the farmer or trader to conduct trade and commerce while allowing traders to purchase specified farm commodities directly from farmers anywhere in the country, even outside the designated State APMCs (Agricultural Produce Market Committee).
The second law was the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020. It provided a legal framework for farmers to engage with processors, aggregators, large retailers etc in a ‘fair’ and ‘transparent’ manner.
The third law was the Essential Commodities (Amendment) Act, 2020. It took off pulses, cereals, edible oil, oil seeds, onions and potatoes from the purview of this archaic law. The enactment of these laws triggered prolonged protests - mostly confined to Punjab, Haryana and Delhi. In January 2021, the Supreme Court stayed their implementation and set up a committee to undertake a thorough review. The report of the committee submitted within the set deadline of three months was never made public. Meanwhile, the farmers continued with their stir. On November 19, 2021, Prime Minister Narendra Modi announced their repeal.
Was there anything wrong with them?
But, first, we need to ask as to how the subsisting laws on the marketing of farm produce are treating farmers. The widely reported plight of a farmer from Maharashtra’s Solapur says it all. Last year, he got a measly Rs 2.49 from the sale of 512 kg of onions to a trader at Rs 1 per kg on sale at the Solapur market yard, the total sale value was Rs 512; after deducting labour, weighing, transportation and other charges adding to Rs 509.5, the net back was Rs 2.5. Let’s be clear, it isn’t a profit. To arrive at it, we need to deduct from this the cost of producing 512 kg onions which includes the expenses on seeds, fertilizers, pesticides, irrigation, etc.
This would result in a colossal loss. This leads to a mounting debt burden as the farmer is forced to take a loan (often at a high interest rate) to finance the loss. The condition of tens of millions of poor farmers with small land holding sizes of fewer than 2 hectares (they are about 86 per cent of the total number of land-owning farmers) is no different.
Why does the farmer get a low price?
This is because she can sell her produce only in the ‘designated’ mandi under the State APMC Act. In the mandi, arthritis - the local term for commission agents (they arrange for auction and delivery of the produce) - and the licensed trader/buyer rule the roost. The duo exploit her to the hilt by giving a low price, rejections, weighing less, delaying payment, etc. Levies such as market fees, anthias commission, rural development cess (RDC) etc further erode her netback.
The APMC mandis can handle only a fraction of the quantity farmers bring to sell. So, most of them are forced to come to private local markets, where sales are legally barred.
At these markets, they end up selling their produce to traders at throwaway prices. The latter have the blessings of corrupt bureaucrats and politicians (in many cases, they or their kin also masquerade as traders) and hence, won’t face any action for violating the law.
True, the state agencies such as The Food Corporation of India (FCI), National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) etc purchase in the mandis specified crops needed for running welfare Schemes such as the distribution of free food under the National Food Security Act (NFSA). They make purchases at the minimum support price (MSP) notified by the Centre. But, their purchases are limited. Except for paddy and wheat where the agencies buy only 30 per cent of farmers’ produce, for all other crops their purchase is minuscule. Even so only 6 per cent of farmers - mostly rich with larger land holdings - get the benefit of government procurement. In short, under the existing State APMC laws, most poor farmers have no hope of getting a better price. They are forced to live in abject poverty and run high debt leading to even suicides that have become a national phenomenon.
The millions of consumers too are at the receiving end. They pay high prices for the foodstuff they buy from the market. People getting free food under NFSA 820 million, but that leaves out a mammoth number who buy their needs from the market; even NFSA beneficiaries depend on the market for buying their needs other than wheat/rice. The extra money they pay fills the coffers of the commission agents, traders and middlemen. Retail inflation very often gets out of control primarily because food inflation (it has a share of 40 per cent in the retail basket) remains sticky most of the time. It remains so even when there is a normal monsoon enabling surplus production. This, in turn, has a lot to do with the cartelization of the supply chain by a few middlemen working in collaboration with the political brass in states – abetted by the State APMC laws.
High inflation doesn’t let the RBI reduce interest rates and that imposes an additional burden on millions of borrowers whose EMIs remain high; small businesses getting crippled due to the high cost of servicing their loans. Even the government’s budget comes under stress due to higher interest payments on its debt. The solution lies in liberating all such stakeholders from the stranglehold of the big sharks. The way forward is to give more options to the farmers to sell and more options to consumers to buy. This is precisely what the three laws sought to do. The laws legitimized sales on all non-APMC platforms such as private traders, processors, aggregators, exporters etc without disturbing APMC mandis. These opened up unlimited opportunities for farmers to sell their produce, thereby helping them get higher prices, which could even exceed MSP depending on the demand-supply. They don’t have to pay any levies for selling at non-APMC platforms.
These enabled the farmers to enter into contracts with enterprises (private companies, cooperatives etc) that would not only give them an assured market at pre-set good prices but also the timely supply of quality inputs viz. fertilizers, seeds, pesticides etc and good agronomic practices for securing higher yield and quality foodstuff. In short, the laws gave a fair deal to millions of poor farmers on one hand and millions of consumers on the other. This would have reined in the unjust enrichment of a few and left more money to the farmers and consumers. Resulting lower inflation would prompt RBI to reduce interest rates helping millions of borrowers at one level and improving the Centre’s fiscal health. ALAS! Their withdrawal has restored the status quo. Thanks to the political compulsion of the BJP, it is unable to even talk about those laws; forget resurrection.
(The writer is a policy analyst; views expressed are personal)
