Let me start with a disclaimer: I am not wading into the constitutional propriety of the FPTC Act (for convenience, the ‘mandi bypass Act’) and FAPFS Act (‘Contract Farming Act’) or the amendment of Essential Commodities (EC) Act. The current legal position is that these have become laws of the land.
Why are the farmers opposed to these laws that have been proclaimed as game-changers unshackling them from archaic controls? To what extent are their fears justified?
Farmers’ apprehensions seem to be mostly about (i) continuation of MSP via open-ended procurement, (ii) gradual dismantling of the Public Distribution System (PDS), (iii) loss of price discovery mechanism established by the APMC mandis, and (iv) probably a distrust of corporates. Distrust in policy is the result of cumulative actions or inactions of governments. That is another story.
Farmers in states (Punjab, Haryana) that produce large surpluses of wheat and rice have reasons to be apprehensive if they ‘believe’ that procurement may come down. The fear of a reduction in the scope and size of PDS comes from the Shanta Kumar committee report and the much talked about shift to Direct Benefit Transfer (a la PM-KISAN).
These states may lose some revenue, paid mostly out of food subsidy budget. The fact is that none of the above three Acts have a direct bearing on the ‘dismantling or dilution’ of the PDS. If at all, the National Food Security Act is the one, though cash payments are possible even within this framework. Do the advocates of the current system want to ignore the unacceptable levels of wastage, leakage and corruption in the procurement-storage-distribution of PDS and the huge cost (Rs 1.25 lakh crore, going up year after year) to the taxpayer?
It is in the interest of the government to ensure the continuance of APMCs in a farmer-friendly ‘avatar’ (bit.ly/3nDLZbf) to ensure price discovery. The proposed market intelligence arrangement (refer to Section 7 of the FPTC Act) is at best a non-starter, and is no substitute for the imperfect, but useful Agmark net. Farmers’ distrust of corporates is not without reason; though, the new law tries to offer some solutions.
Major misconceptions doing the rounds are: (i) the EC Act amendments are meant to phase out MSP and procurement, (ii) ‘APMC bypass’ Act is to help only multinationals and large traders, (iii) the contract farming act is only to help monopolies who have a history of reneging on contracts, and (iv) contract farming will pave the way for the introduction of GM crops.
The EC Act of 1955 was enacted to control prices. Whether it did more harm than good is a matter of debate, but there is enough evidence to show that the cumulative impact of ‘price control’ and trade restrictions impacted farmers’ incomes adversely. (OECD-ICRIER study pegs this at negative 14% average for nineteen years)
The amendments to EC Act provide predictability and helps processors and exporters to make purchase decisions without fear of ad hoc imposition of stock limits (the recent ban on onion exports destroyed credibility). If governments were to impose stock limits at will on the quantum of wheat for processors, what happens to the consumer who buys processed ‘atta’ or bread in the market? EC Act amendments do not remove MSP, they allow processors and value-add players to buy quantities up to their capacities. It is nobody’s case that MNCs will rush to the market and corner all stocks.
Will ‘APMC bypass Act’ help only MNCs? Take a look at Kerala and Bihar which have no APMCs. In other states, sales outside APMCs do take place without much hindrance. This being so, how are farmers affected? Yes, there will be a loss of revenue for the state. If APMCs close down, the price reference point for farmers will go away. This is a genuine fear!
The Contract Farming Act is an ‘enabling’ Act. Contract farming (e.g., poultry, seeds) takes place even now under the Indian Contract Act. The fear of corporates ‘taking over’ farmers’ land is unfounded since the new Act specifically prohibits alienation of land. The Act does not give any freedom to use prohibited technologies either. So much for fear of ‘GM through the backdoor’!
Now a few facts: The total value of output (2018-19; at current prices) of agriculture is Rs 36.7 lakh crore, of which, cereals contribute 15%, pulses 3%, oilseeds 4%, and fibres 2%, totalling 24%. MSP is available for 23 crops (nine cereals, five pulses, seven oilseeds and two fibres). The other 74% of agricultural output, including milk (23%) and fruits and vegetables (16%) do not have any MSP. Even if it is argued that these new laws are intended to do away with MSP, the impact will be only on the marketed part of this 24%.
Could the government have done better? Perhaps, yes.
Apart from the assurance that MSP will continue and APMCs will not be closed down, the following could have been done:
1 Insertion of a proviso in section 5 of the Contract Farming Act stating that the price in Section 5(1) shall not be lower than MSP for such crops where MSP has been notified.
2 Insertion of a proviso in Section 8 of the ‘mandi bypass Act’ that the order for recovery of the amount to be paid to the farmer shall not be less than the MSP for such crops where MSP has been notified (both the above will need proper drafting and consequential changes elsewhere).
3 The government could have asked FCI and procurement agencies to continue paying APMC cess on procurement as before.
The real fear is: Nothing much will change soon! It will take much more than legislative interventions to give better options to farmers.
Former secretary, food & agriculture, Govt of India. Views are personal