Three Farm Acts 2020 – the reforms that farmers do not want !!

(This article was first published in the Agriculture World, October 2020 issue)

Three Farm Acts 2020 – the reforms that farmers do not want !!

Government claims this is Historic & Revolutionary. Farmers believe this will harm them, instead demands MSP as a statutory right to ensure incomes.

Finally the farm sector has also been dealt with what is now Narendra Modi governments signature “Surgical Strike”, as one can call this. Three Bills that are intended to reform the agri marketing sector is finally law. The nation saw an unjustifiable unprecedented urgency with which the Bills were first introduced as Ordinances on June 5^th 2020, packaged as response to the crisis created by Covid19 and to usher in Atma Nirbhar Bharat. The way the Ordinances, which did not seem to behold any matter of urgent nature, itself were introduced, sowed the seeds of mistrust and skepticism, eventually forcing farmers to the streets. In September, when the Bills were placed in the Parliament, the Government literally bulldozed it through, shocking the nation. Discussions were not entertained, amendments were rejected and even a vote, in fear of losing it, was not allowed inside the Rajya Sabha. The appeal of the Governments’ own constituents to review the decision were rejected. The Minister for Food and Civil Supplies, Harsimrat Kaur Badal of the Shiromani Akali Dal, a constituent of the NDA, even resigned in protest, and the party later walked out of the coalition. At the end, the farmers unions asked for just one amendment - Make Minimum Support Price (MSP), a statutory price for all farm produce trade, so that even when markets are freed, price realisation can be achieved. The PM simply gave a rhetoric sounding commitment that MSP will continue, which anyone would know has no binding value.

The farmers, especially of the major agriculture states - Punjab, Haryana and UP are on a protest against the Acts, driving down on tractors, blocking roads and even railways. The All India Kisan Sangarsh Coordination Committee (AIKSCC) an umbrella collective of more than 250 farmers and farm worker organisations across the country went on a Bharath Bandh on 25th September. The whole of the opposition parties have joined the protests. The Government has also ignored concerns raised by their own think-tank - the Swadeshi Jagran Manch and the Bharathiya Kisan Sangh, the farmer outfit of the RSS. Every farmer organisation in this nation has opposed the Bills, some rejecting it in total, some demanding that it be sent to the Parliamentary Committees, and many asking for MSP as a legal right.

The Three Acts

The three acts go by descriptive names that do not as much give us the actual intent of the Act.

1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020

2. The Essential Commodities (Amendment) Act, 2020

3. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

Economist and Associate Professor at the IGIDR, Dr Sudha Narayanan gives us a literal version for the names of the three bills. She calls the first Act - “APMC Bypass Act”, the second one - “Freedom of Food Stocking by Agribusiness Act” and the last one - “Contract farming Act”. We shall use them to explain the Act further, as it make things easier to understand.

What are the Acts intended to do? What could it actually do?

The “APMC Bypass Act” is supposed to liberalise agriculture marketing, which as stated is to “create an ecosystem where farmers and traders enjoy freedom of choice”, facilitate “remunerative prices through competitive alternative trading channels”, promote “efficient, transparent and barrier-free inter-State and intra-State trade and commerce...outside the phyiscal premises of markets or deemed markets notified under various State agricultural produce market legislations” and facilitate a “framework for electronic trading”. This primarily means removing existing market regulations imposed by State legislations, usher in free and open trade in agriculture, and bypass the conventional regulated markets, Mandi’s and the Agriculture Produce Marketing Committees (APMC) and directly sell produce anywhere in the country. Farmers, on the other hand, feel this will remove all regulations for traders and cartels that presently guarantee a remunerative price for the farmer’s produce. They also fear that the traders and commisison agents will move out of the present system to trade directly with farmers and eventually take away whatever regulated option they had and force them to sell produce at lower prices.

Fatal blow on regulated markets and APMCs

The Mandi system and the APMC were mechanisms that ensured the produce sought after by traders always got a better auctioned price for the farmers. This is an age old system that was established way back in 1939, reformed and amended many times, and has thrived in the major agriculture states like Punjab, Haryana, UP etc, and in various forms in the rest of the country, more so after the adoption of the APMC Model Act of 2003. It is also true that this system has serious problems ranging from high licensing fees, poor infrastructure, administrative issues and corruption as well. There is no doubt that the APMC system in most states need serious reforms and upgradation, but a fatal blow, as has been delivered now, is unacceptable to both the farmers and the arthiyas, who are the traders and commisison agents. The Prime Minister argues that the Mandi will remain and the MSP will also remain. But farmers well aware of ground relationships and realities are not buying the argument.

As per the Santhakumar Committee report on reforming Food Corporation of India(FCI), MSP assured through Government procurements benefit only 6% of Indian farmers. The rest of the 94% is left to the mercy of the traders and private markets, and the only mechanism that ensures that this huge population gets a remunerative price is the regulated market systems. Moreover, in India 86% of the 14 crore farmer households are small and marginal ones and own less than 2 ha, and there are tenant and landless farmers as well. Clearly none of them would have the wherewithal to go and sell “anywhere in the country” and will need government or private established markets, as near to their farms as possible. The only way to ensure they are not exploited is to have these with regulation systems such as APMCs, reform and expand them and make them effective in ensuring maximum uptake and price realisation. According to available data, the number of regulated markets in India are less than 6700, with 2284 APMCs which operate 2339 principal markets and 4276 sub-market yards. The demand from the farmers is also for at least 42,000 such regulated markets to cater to the 14 crore farming households.

The argument that this Act will not ruin the Mandi/APMC does not stand. The big traders, the market cartels, the giant players in the agriculture markets and the new age online marketing networks would only love to set up their own procurements outside the APMC controlled Mandi and dictate the prices. The impression that they will even provide MSP rates is as good as a castle in the air! The Mandi system where farmers had a better say will now be replaced by fully trader controlled “trade area” markets, and neither the State nor the Government of India will have even basic data on markets, leave alone control. The APMC will be gone, taking with it the only place where farmers got some semblance of remunerative prices. The “Doubling farmers income” will continue to remain what it always was, a figmant of distractive imagination.

Count down for MSPs

The next in the surgical strike list would be the MSP itself. MSP is declared for most food crops, twice every year, and is supposed to ensure a bottom price for the procurement of the produce from the farmers. The only agency that procures at MSP is the Government through the FCI for the Public Distribution System (PDS). The procurements also don’t cover more than 50% of the total production of Rice and Wheat, and others produce, much less. Dr Ramanjaneyulu, Scientist and Executive Director of the Centre for Sustainable Agriculture (CSA) points out that “the government procures 40-50% of the marketable surplus in rice and wheat, and unfortunately, this procurement does not benefit all the farmers, as much of them are procured from very few states.” He quotes Socio Economic Survey 2019-20 to show that of the 340.6 lakh metric tonnes of wheat procurred, Haryana supplied 80% of its produce and Punjab 72.6%, clearly reasons why Punjab and Haryana farmers are angry at the possible implications of the Acts on the prevalent system. Government also plans to move out of such a system, claiming that this procurement is creating price distortions and also benefitting only farmers in a few states. They have already decentralised procurement, thus ending with surplus procurements from the major rice/wheat states. The argument of the Government is also that the majority of the farmers left out of the MSP guaranteed procurements needs a competitive market, outside the Mandi’s and the Government procurement systems. If one were to agree to this argument, then such a system should be a level playing field, with the same set of regulations, such as registrations, handling fees, and license fees as in the present system. Instead they have introduced two types of markets, with the Mandi’s /APMCs in a disdvantaged competiton with the new market players. Farm policy expert, Devinder Sharma observes that “The Governments slogan ‘one country one market’ therefore in reality turns out to be ‘one country two markets’ – one inside the regulated mandi, and another outside its premises, where anyone having a PAN card can buy from farmers directly without paying any tax”. For the farmers, this is not an unfounded fear. They know better that this is not a competition at all, as the Niti Ayog CEO, Amitab Kant, claims it to be. They know that this will make APMCs reduntant and even the traders and commisson agents will discard the old system, and with that the need to ensure MSPs, contrary to the claims of the PM.

The big agri marketing corporations also want the produce at cheap prices to profit and also to compete in the global market. The WTO itself has raised issues with India’s MSP system, claiming this as trade distortive, which India has challenged, but nations like US continue to taunt us on this matter. Members of the present Cabinet have also expressed their reservation against MSP and many economists also want MSP and procurements ended, even while they have no issues with the massive industry subsidy bills and write-offs. In Indian farming conditions, MSP is seen as the best way of ensuring farmers realise prices and be protected from the market plays, which is traditionally not known to offer better prices, as is claimed. Price fluctuations in open market systems are in it’s DNA, and without a regulatory mechanism, would be disastrous for the farmers.

Kisan Ki Loot (plunder of farmers)

Alternate suggestions from Devinder Sharma and farm think-tanks like Alliance for Sustainable and Holistic Agriculture (ASHA-Kisan Swaraj) to bring a WTO-acceptable Direct Income Support system for farmers also don’t seem to catch the imagination of the policy makers. Nevetheless the PM-KISAN scheme that pays Rs 6000/year to the 10 crore farm households is a step in the right direction, but much short of even the deficit in price realisation. Earlier in 2018, the AIKSCC calculated that for the top 7 crops in the kharif season that year, farmers got prices that were less than the Government’s promise by a whopping Rs.2 lakh crore. This study covered only paddy, maize, soybean, cotton, bajra, groundnut and urad. If all crops, such as wheat and pulses were covered this could be much higher. The AIKSCC called this “Kisan Ki Loot” (plunder of farmers). The AIKSCC orgainsed a Kisan Mukti Sansad (a farmers’ freedom parliament) at Parliament Street, where they demanded “Full remunerative prices as a legal entitlement with correct cost estimations and at least a 50% profit margin over the cost of production, for all farmers and commodities”.

Interestingly in 2019, an ICRIER-OECD study calculated that farmers lose 2.65 lakh crore rupees per annum in terms of prices being kept low for the sake of consumers. The study calls this “taxing” the farmers. Their study covering data of 17 years found this to be “nothing short of plundering of the farmers’ incomes by 45 lakh crore” according to one of the authors of the study, Dr Ashok Gulati. Nevertheless, their recommendations were to “reform India’s agri-marketing laws, and free agri-markets”, but did call for a “structured and stable income policy for farmers”. Devinder Sharma, on the other hand calls for a “Assured Farmer’s Income” through establishing a Farmers Income Commission which would work out a system of not just compensating this deficit, but also ensuring that every farmer in India would be assured an income which is atleast on par with the salaries of the last grade employee of the Central Government, a demand that finds great ressonance with the farming community.

Making MSP a legal right

The PM categorically states that “MSP will continue”. “Then why not put it into the law?”, asks farmers unions. In 2018, the AIKSCC in their “Kisan Mukti Sansad” (Farmer’s Liberation Parliament) had presented a Bill demanding “Farmers’ Right to Guaranteed Remunerative Minimum Support Prices for Agricultural Commodities”. This Bill also found its way into the Parliament as a Private Bill. When the three ordinances were promulgated, Devinder Sharma called for the “4th Ordinance” to make MSP a legal right. Many farmers unions and political leaders have supported this demand. Making MSP a legal right is only a natural, logical step forward towards ensuring price realisation, irrespective of the supply chain, and is still not trade distorting, as this is not expected to increase the subsidy burden of the Government.

Hoarding legalised!

The second Act which as stated earlier is an amendment to the original Essential Commodities Act 1955, and removes all restrictions imposed by the 1955 Act for maintaining stocks for procurement and processing companies. The restrictions in the original act were intended to curtail hoarding of essential commodities. But with this amendment the Government has allowed the stocking of “ all food stuffs, including cereals, pulses, potato, onions, edible oil seeds and oils”. The stocking of the commodities would now be regulated only if the retail prices double in the case of horticultural produce and go up by 50% in the case of non-perishables in this list. This regulation has also been done away for major processing companies and exporters, whose limit to stock is the capacity of their processing unit or the demand for exports! Simply translated, the big procurement and processing companies have been fully allowed to hoard as much as they can! Hoarding of agriculture produce and unregulated exports have always been the major reason for food inflation in the country. Everytime there is food inflation in India, the Central Finance Minister through the State Governments go on an overdrive to crack down on hoarders and stockists and to release stocks into the market. That regime ends. This is also clearly a decimation of the federal nature of regulatory systems of sectors that have concurrent status.

“The preamble says that the purpose of this amendment is to enhancing income of farmers but the original Act was never about farmers or their incomes. It was always about hoarding by Agri-business companies and traders. Now, those restrictions are being removed for all food commodities, so it gives them to purchase and store any quantities, hence indulge in hoarding.” says Kavitha Kuruganti, Convenor of ASHA-Kisan Swaraj. “Companies like Adani-Wilmar, Reliance etc. will now have freedom to stock any amount of food commodities. They will build huge storage and processing facilities, and build complete market domination. This means that they will dictate terms to farmers – which is likely to lead to less prices to farmers, not more income, as is claimed”.

Contract Farming

The last of the Acts,which we shall call the “Contract Farming Act” has the objective of facilitating contract farming and encourage farmers to directly engage with prospective firms on a contract basis. This is one Act that hasn’t seen much opposition, but has some inherent problems as well. Informal contracting systems already exist in India, which are mostly unwritten and mostly for seeds, floriculture, commodities like sugarcane and high-value products like potatoes for chips making. In such contracts, farmers are the weaker player, and can be easily forced to accept the terms of the contracting firm, in matters such as kind of crops, farming practices, chemical use,price, standards of produce etc. Moreover, contracting firms prefer medium and large farmers and not the majority small and marginal, who actually are the most challenged ones. Neither the agri-corporates nor the farmers seem to be excited about this Act. While the Act does encourage farmers to get into contracts, fixing prices is left to the contracting parties and the dispute mechanisms involve routine government officers. These provisions are seen with skepticism by the farmers. Even the contracting firms are not convinced that this Act would ease written contracts. Kiran Vissa of the Rythu Swaraja Vedike, a farmer organisation, says “In fact, what the government should have done is to have ensured that the pricing of farming produce be referenced to MSP as the guaranteed price and the price fixed in the contract should be over and above the MSP. Even here, the Government does not ensure MSP and leaves it to the contracting parties”.

The big question is how does all this become transformational so as to usher in Atma Nirbhar Bharath and to help farmers “double incomes”? How does this strengthen the federal system, when through three Acts they have taken away the State’s powers to regulate markets, control hoarding and stop inflation, all critical powers needed to ensure food security, availability and access.

“1991 moment” in agriculture!

The evangelists for these Acts even call it the “1991 moment” in agriculture, reminding us of the year Indian economy started the liberalisation process. Lest we forget, the “1991 moment” also led to the worst ever agrarian crisis, increasing farm debts, taking the lives of 3.64 lakh farmers by suicide till date, and forcing atleast 70 million agricultural refugees to leave their villages and end up in urban slums and squalor. The “1991 moment” is nothing to celebrate in the agrarian sector.

Just last month, we were told the GDP has gone down an unprecedented 23.9% and all sectors except the agriculture sector has hit it’s rock bottom. Even during the worst economic situation, blamed on to Covid and God, of the three sectors, the Agriculture sector that stands on the toiling hands of India’s 60% population withstood the crash, produced bumper crops and kept the economy ticking. It is against this last straw that the Modi Government has unleashed their big ticket reform, after Demonetisation and GST. The strength of this Agriculture sector is in its size, diversity, inherent resilience, deep belonging to the land and even the subsistence nature of the population doing farming. The corporate India, the tranformational specialists in the ‘Niti Ayog’ and the economists who haunt the corridors of Delhi are never able to fathom the strength and depth of the agrarian system nor the nature of crisis they need to address. For them, bringing in the big agri-market middle men is the only solution, nay, the agenda. And today, they have the right leadership to do this. The Surgical strike has been done, and this time, sadly it’s the annadata, the Kisan, at the receiving end.