Agri Bills: Why are Farmers Protesting even after PM’s Assurance?

The government needs to view the issue through the perspective of a farmer. The small farmers of today need safeguard from exploitation along with greater choices. Although the bill promises them more choices, it doesn’t attempt to strengthen the safeguards. This is what the farmers of today are protesting against!

On September 18, 2020, Prime Minister Modi, in a video address, re-assured the farmers of India about the intent of his government and cautioned them about being ‘misled’ by the opposition parties. While the intent of the government would certainly be the upliftment of farmers, it is the path chosen which is being questioned by the farmers.

It is worth noticing as to why another major political party of India – the INC is opposing the bills even though it had mentioned agriculture marketing reforms in its 2019 General Elections Manifesto. Also, BJP’s oldest NDA-ally – the Shiromani Akali Dal (SAD) – is opposing the bill as well. Even more discernible is the fact that it is the first time since 2014 that a Cabinet Minister of the Modi Government has resigned to show the dissent.

It is the first time since 2014 that a Cabinet Minister of the Modi Government has resigned to show the dissent.

It is quite possible that Harsimrat Kaur Badal, being a Cabinet Minister, would earlier have been in support of (or, at least consulted on) the bills that were promulgated as ordinances in June 2020. However, the fact that she later resigned to show her support to the farmers indicates that it is not the opposition which ‘misled’ the farmers against the agriculture bills. Rather, the farmers initially viewed these reforms in apprehension, and later, parties like the SAD, INC, etc. simply represented them at the political front.

Another strange thing to note is the fact that even the farmer community seems divided on this issue. We have seen the farmer organizations, like the Maharashtra based-Shetkari Sangathan, supporting these reforms. The farmer unions of North India, especially Punjab, Haryana, Western Uttar Pradesh, are the ones which are aggressively fighting against these bills. To understand such differences of opinion, what these bills are and why are they being opposed,  why does the government want to enforce them even after great resistance from the farmers, we need to look at these reforms from a holistic point of view.

Historical background:

During the 1950s, the farmers were heavily debt-laden and largely exploited by traders and moneylenders. To safeguard the interests of farmers and to offer them fair prices, the government started regulating the agricultural market.

But, over a period of time, these regulations started becoming complex and the trader-middleman (arhatiya) nexus put the farmers at a disadvantaged position. It was made mandatory for farmers to sell their first farm produce through the mandi, thus transforming APMCs into a monopsony.

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The Model APMC Act 2003 provided a road map to the states to reform agri-markets and deregulate them to allow for direct purchase of farm produce and contract farming. In 2006, Bihar became the first Indian state to dismantle the APMC monopoly.

The Essential Commodities Act, 1955 is another law that is being amended by one of the three agri-bills. The ECA, 1955 traces its roots to the Defence of India Rules of 1943, a time when India was facing acute food shortages. This law empowers the governments to impose stock limits on commodities listed under ECA. However, unlike the 1950s, the granaries of today are over-flowing. Hence, farmers are forced to sell their produce at ‘throw-away prices’ to avoid wastage.

The small farmers of today need safeguard from exploitation along with greater choices. Although the bill promises them more choices, it doesn’t attempt to strengthen the safeguards.

Having known the historical backgrounds, let’s understand the three controversial bills and assess whether the farmer apprehensions hold water or not!

The Three Bills:

The three bills tabled in the Parliament are:

1. The Essential Commodities (Amendment) Bill, 2020 (ECB)
2. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (FPTCB)
3. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 (FAPAFSB)

Though all three bills are facing the flak from the opposition, it is mainly the second and the third bill which are concerning the farmers the most. In fact, the first bill allows the farmers to stock commodities, like onions, oilseeds and potatoes. This safeguards farmers from the price fluctuations in the market, hence enabling them to sell their produce whenever the price of the commodity increase. The bill also promotes investments in refrigeration and storage facilities.

However, both traders and small farmers apprehend ‘the devil to be in the details of the bill’. It is widely believed among the small farmers, that the permission to stock will only benefit big and rich farmers who can afford storage and refrigeration facilities.

The second and third bills are causes of major concerns to most farmers. These two bills have caused great apprehensions amongst the farmer community, leading them to organize ‘tractor protests’ in Punjab and Haryana. Kisan Mazdoor Sangharsh Committee has decided to hold ‘rail-roko’ agitation between September 24-26 against these bills.

The FPTC Bill 2020:

The FPTC Bill, 2020 proposes to limit the ‘mandi area’ to the premises of the APMC mandi and legalizes the sale/purchase of farm produce outside the mandi area as well. It removes the barriers to inter-state trade of agricultural products and envisions a competitive market for both sellers (farmers) and buyers (exporters, processors, traders, mills) of farm products.

Though openness and de-regulation is a much-needed reform in the agricultural market, the on-ground realities shouldn’t be ignored. The inter-ministerial task force on agricultural marketing reforms (2002) recommended the APMC Act be amended to allow for direct marketing and the establishment of agricultural markets by the private and co-operative sector. However, the Bihar example serves us a caution regarding how the APMC deregulation can fail. The farmers of Bihar suffered greatly since there was no enforcer on ground zero to ensure a fair price to farmers.

Moreover, poor infrastructure and dominance of middlemen in agricultural markets (forcing farmers to sell their produce at nearest private mandi at cheap prices) of Bihar made it difficult for private mandis to run successfully. Imposing the same mechanism countrywide may prove disastrous without filling the loopholes which could be utilized by private players, traders and moneylender to exploit the farmers.

We need to consider that the situation of farmers in India is still not much different from that in the 1950s. The farmers are easy prey to moneylenders and exploiters. Allowing the farm gate market will leave farmers without any safeguards. We have seen how the nexus of arhatiyas and buyers forces farmers to sell their produce at a price lesser than MSP even at the APMC market yards!

APMC proved as a great safeguard to farmers, especially small and marginal farmers, from being exploited by traders.

It is hard to believe that reducing the legal powers of APMC would break down this nexus and improve the condition of small and marginal farmers, that too outside the APMC market yards!

Moreover, the clause of abolishing mandi fees for transactions outside the APMC premises has not gone down well among the farmers. It may be a bit surprising, but observing the ground realities would help us understand why the farmers are against the abolition of fees! The revenue generated through the APMC mandi fees goes to the State Government, which then utilizes it in developing agricultural infrastructure and rural area development. Without proper infrastructure, it would become difficult for farmers to sell their produce.

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At this point, it is also important to note that PM Modi assured farmers that APMCs will continue working along with the private market. However, without mandi fees, it would become difficult to run APMC markets sustainably. Hence, a by-product of the deregulation would be the gradual extinction of APMCs (though unintended, hopefully!)

In practice, the buyers would never want to trade at a regulated place if it is possible for them to exploit the farmers at the farm gate itself!

Moreover, the farmers believe that licensing of arhatiyas confirms their identities. However, the upcoming bill proposes that anyone with a PAN card can trade. This worries the farmers who believe that without proper licensing, financial deception would become easy.

The FAPAFS Bill 2020:

The FAPAFS Bill brings contract farming under a legal framework along with providing safeguards and dispute redressal mechanisms to farmers. Price assurance at the time of sowing, reduction in marketing costs by farmers, minimizing market risks, and helping farmers take cropping decisions based on forward pricing are some of the perceived benefits through this bill.

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However, allowing entry to big MNCs in this market would make farmers vulnerable. There is no comparison between the bargaining power of an MNC and an average Indian farmer. The elaborate redressal mechanism in the FAFAPS Bill surely gives some relief on paper. However, it would an injustice even to think of a farmer spending his resources to sue an MNC. The 2019 case of PepsiCo suing potato farmers in Gujarat  (though withdrawing the lawsuit later) is an apt case to be reminded of here!

A solution to balance the bargaining powers of both farmers and corporates would be to make it compulsory for corporates to strike deals only with FPOs.

According to agriculturist Devender Sharma, the model proposed in the above two bills has already failed in the USA. The entry of big firms like Walmart have put the small farmer at their mercy. According to a report by TIME, the small farmers of USA put the blame of their fragile condition on the government policies which promoted the globalization of agriculture and the abolition of the minimum wage to farmers.

A solution to balance the bargaining powers of both farmers and corporates would be to make it compulsory for corporates to strike deals only with FPOs (Farmer Producer Organisations). It would have two positive results. Firstly, the farmers would gain more bargaining power through collectivization, hence safeguarding marginal farmers. Secondly, it would work as an incentive to increase the number of FPOs across the nations.

Apprehensions on MSP:

Most of these reforms are seen in line with the Shanta Kumar Committee recommendations. Hence, the farmers believe that these steps are the precursor to the abolition of MSP (Minimum Support Price) practically. Most of the government promises regarding the MSP-regime have already failed at the ground. Out of the 23 crops listed under MSP procurement, hardly are the crops other than wheat and rice procured by the states. Also, states don’t have enough financial backing to buy the crops from the farmers at MSP.

The apprehensions can also be explained by the fact that only 6% of the farmers in India benefit from the MSP. Most of this procurement is from Punjab and Haryana that are nuclei of protests. This also explains why the ongoing farmer protests are mostly seen in these states.

Federal Issues:

Since ‘agriculture’ is a state subject, the APMCs were built by individual state acts passed by the Vidhan Sabhas of respective states. Hence, any change regarding the regulatory authority of APMCs should come under the purview of the states instead of being forced by the Central Government ‘from the top’. Hence, both the FPTC Bill and the FAPAFS Bill 2020 seem to be a case of federal overreach and against the spirit of ‘cooperative federalism’.

Dismantling an institution is quite easy, reforming one is not!

Instead of imposing the reforms, the government should incentivize (financially or any other way) the states to reform their agricultural markets. Dismantling an institution is quite easy, reforming one is not! According to Punjab CM Capt. Amarinder Singh, the INC election manifesto had talked about opening agriculture to private players along with bringing new provisions to establish thousands of Kisan markets to provide easy access to farmers within a range of two-three kilometres.

At a time when Centre is unable to fulfill its GST obligations, snatching another revenue source from the state governments has added further to the heat being faced by Centre!

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As proposed by many experts, making MSP a legal right of the farmers would allay their fears. If the government is truly interested in improving the conditions of the farmers, then it should surely consider these suggestions. Moreover, APMC reforms and deregulation should go hand in hand. There is no point in dismantling a 60-year old set-up without building necessary regulations for the new set-up.

Making MSP a legal right of the farmers would allay their fears.

The government needs to view the issue through the perspective of a farmer. The small farmers of today need safeguard from exploitation along with greater choices. Although the bill promises them more choices, it doesn’t attempt to strengthen the safeguards. This is what the farmers of today are protesting against.

Practicing the ethos of cooperative federalism is the need of the hour. Also, a democratic way of solving the issue would be to consult a few farmer bodies and civil societies before enacting a law that affects the farmers the most.

This time, the protestors are our ‘Annadata’. The government should avoid viewing the issue through a political lens. It is in the best interest of the country to reconcile with the community on which our lives depend the most!

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