The recent farm bills introduced by the government and approved by the president have attracted considerable brouhaha owing to their controversial postulates. However, while there are some genuine concerns pertaining to the compliance of non-farming stakeholders in agriculture, much of the outrage appears to be misplaced. For instance, the people who are furious saying that MSP regime will be axed, which is not true, should be informed that as per 2015 Shanta Kumar Committee’s report based on National Sample Survey Data, only 6 percent of farmers are able to sell their crops at MSP rates. So, if MSP is their primary concern, it is inexplicable why they have not been protesting against it all this time.
There are several other examples of apprehensions that are logically challenged. Before we delve into those, let us have a look at the three bills and try to understand what they are intended to do. The first bill which is Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 enables farmers to break free of the compulsion of selling their crops through Agricultural Produce Market Committee (APMC) mandis, allowing them to sell their produce anywhere without incurring any state tax. The second one is Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 which makes way for contract farming and direct marketing, endowing farmers with a legal framework to engage directly with companies and produce for them. The third and the last one is Essential Commodities (Amendment) Bill, 2020 which aims to bring down the regulations in storage of produce which can give a fillip to the development of storage infrastructure for both perishable and non-perishable items.
Benefitting from Market Behavior
The resistance to the first bill is understandable in case of the state governments and APMC mandi
workers as they currently enjoy a continuous flow of revenue and income respectively under the existing norms.
Punjab government receives 6 percent mandi tax and 2.5 percent fee for handling central procurement as well, which if combined amounts to a yearly revenue of Rs 3500 crore. The first bill will obviously attenuate this revenue much to the dislike of state governments. While on the other hand, the farmers will get a level playing field where they can sell to regions where the produce is in high demand, thus getting better returns.
Although there may be times of low demand when the farmer might not be able to sell his produce at the expected price, it will certainly be ephemeral unlike the perennial low price expectancy at APMC mandis wherein even in times of high demand, the farmers have to settle for MSP. For the majority of farmers who are anyway not selling their crops at MSP with the current APMC route, it is not a bad deal at all to get to benefit from the market behavior.
Removing the millstone of market risk from farmer's neck
The second bill which enables contract farming has the potential to bring about substantial reform in the farming ecosystem. The section which is most likely to gain is of the marginal and small farmers who have less than five hectares of land and who comprise 86 percent of total farmers in India. Contract farming will shift the market risk from the shoulders of small farmers to that of the sponsors and retailers. Thus, the farmers will be able to focus on their agricultural production without worrying about the risks that the future market entails. It will also foster the insurance and financing dimensions of the ecosystem, attracting several players to venture into this domain. However, one of the valid concerns pertaining to its viability is the invocation of force majeure by companies citing quality, slowdown, or any other factor. It needs to be addressed by the government by attaching a robust crop insurance addendum or by ensuring compliance.
Strengthening the Agricultural Storage Infrastructure
After the third bill becoming an act, there is a high potential for prospective investment in the storage infrastructure segment in agriculture. As the government decides to refrain from imposing a stock limit, the players will be able to store items in a better way and prevent the wastage of agricultural produce. It will also encourage government organizations like Food Corporation of India (FCI) to adopt advanced storage facilities. According to FCI, storage is the primary reason behind post-harvest losses of all types of food in India, estimated to be 15 percent. However, it may be misused for hoarding by retailers, causing artificial price rise, which is an area where the government will have to take necessary steps for prevention of such activities.
Hence, notwithstanding all the shortcomings, the farm bills are certainly a step in the right direction if implemented effectively. As for the indignation towards it, it appears to be stemming from the wrong stakeholders and is mala fide. What is being projected as a disenchantment of farmers is actually an act of rabble-rousing by non-farmer stakeholders and beneficiaries.