Why the ‘farm laws’ are bad- A ‘primer’ for the PM and Agri Minister 

At the fourth round of talks between government representatives led by the Agriculture Minister and farmers’ unions, union representatives claim to have spent the entire duration of the meeting pointing out the flaws in the laws and their apprehensions.

In the next round of talks, unions claim, they went to Vigyan Bhavan with their langar, told the government they had come prepared to spend the whole day to listen to the government explain the ‘positive points’ in the laws. But the government representatives did not have any satisfactory explanation to offer to their questions.

To begin with, both PM and the Agriculture Minister must remember that agriculture marketing has been overwhelmingly ‘private’ for the last 70 years. Agriculture traders, millers, wholesalers and retailers have mostly been private entities, medium and small enterprises.

It is impossible to imagine that the two dignitaries are not aware of the flaws in the farm laws. But since they have claimed on the floor of Parliament that they are not, here is a reminder.

1. As many as 27 of the 28 states already had state agriculture marketing laws with provisions for licensing, contract farming etc. Farmers were always FREE to sell wherever they wanted. There has always been a national market for agriculture produce. Pepsico or ITC could always buy what they wanted from anywhere in the country.

Farmers were always free to sell to whoever they wanted and wherever they wanted. Many states like Punjab and Tamil Nadu have had contract farming laws for a very long time. It is wrong therefore to say these laws liberate the farmers. In effect, these laws liberate the buyers of agriculture produce.

2. Since many states had already made changes in their own laws for agriculture marketing, allowed for licensing and contract farming, was a central law needed? The conditions in each state, the cropping pattern, infrastructure for irrigation and access to market etc are so diverse that states, not the Centre are best placed to regulate agriculture marketing.

3. These are central laws on a state subject. Agriculture is in the state list. It is a misnomer therefore to call them farm laws. In any case, the Centre did not consult the states on these laws seeking to regulate agriculture marketing.

Even now, these central laws expect the states to implement and regulate these laws, and bear the consequences, but they were not taken on board. While agriculture trade and commerce is on the central list, what the laws seek to control is marketing, which is different.

4. These laws are bad laws because they have created regulatory confusion. Most states will have a multiplicity of regulations in different areas. Mandis or APMCs will continue to operate under state laws and be known as marketing areas but areas outside will be called trade areas which will be ‘free’, where the states will not be allowed to impose tax, cess etc. and anybody with a PAN card will be able to buy the produce. Bihar, which abolished APMCs, will be entirely a trade area.

5. Mandis were designed for on-the-spot dispute resolution. But under these central laws, disputes would be decided by the Sub-Divisional Magistrates (SDMs). Appeals would go to the Collector/DM, who then within 30 days will set up a Conciliation Board.

District level administrators are busy and this mechanism is unlikely to work on the ground. In any case, this is worse than the existing system. On top of that, the laws prevent the parties to approach the judiciary in case of disputes. Can this be legal?

6. There are better contract farming laws that exist in several states. And these central laws, say experts who have studied contract laws, are problematic because they have added to the confusion by inadequately defining conditions for attachment of land, third parties, service providers etc. This, they hold, will not work on the ground.

7. When the PM and the Agriculture Minister say the laws do not mention MSP and that MSP is here to stay, they gloss over the fact that Minimum Support Price (MSP) for agriculture produce has never been part of any law. It was always the government’s policy.

Farmers are referring to discussions within the government and reports and recommendations submitted to the government in the past to do away with MSP and public procurement. It is in view of this context that farmers are demanding that MSP be made a legal right and there be a law that no trade will take place below the MSP.

8. The reason Agriculture Marketing was always deemed to be a state subject is because on the ground, agriculture marketing is linked to consumption, productivity, land ownership and so on. In states like Bihar and Odisha, millions of farmers have little surplus produce to trade. Most of them would consume most of the produce.

9. Farmers also need credit for inputs, cultivation and consumption. Local systems have evolved to cater to these requirements. The aim of doing away with ‘corrupt intermediaries’ and Arthiyas does not address this issue. Intermediaries have always performed an important role and unless a better system replaces it, it is wishful thinking to do away with intermediaries.

10. Bihar repealed the APMC Act in 2006 and the expectation was that it would lead to private, corporate investment crowding in. Instead, what has happened is the deterioration of public infrastructure with the state abdicating. Private sector continued to buy the produce, as they did before 2006, from large traders but no infrastructure was built at the farmgate level. Reasons were obvious.

It would be prohibitively expensive for the corporate bodies to build infrastructure for millions of marginal and subsistence farmers. Lesson: Allowing the private sector does not necessarily bring in corporate investment.

Central laws are needed. They are needed to regulate inter-state trade issues. For better inter-state coordination and consensus on inter-state trade issues like taxation, storage and stocking etc where decisions by one state affect other states. But these laws fail to address them. The Centre could have set up an Inter-State Council instead.

In Madhya Pradesh, laws were changed as far back as in 2004-05 and private corporates like ITC were allowed to set up ‘Mandis’ to buy specific crops they needed. But unlike traditional Mandis in Punjab and Haryana, which function all the year round and trade in multiple crops, the private mandis in MP were seasonal and trades in select produce that the commercial entities needed.

Committee after committee has pointed out that there are far too few Mandis. While there are only 2,500 or so regulated, primary Mandis, the number including sub-mandis will not exceed 7,000.

The advantage of these local markets was standardized weights and measures, price discovery through a system of auctions, better bargaining power of farmers and on-the-spot dispute resolution.

Different states handled the APMCs differently and in the 1960s, Kerala decided to have commodity boards and not APMCs. In Karnataka Mandis have been brought online but very little inter-district or inter-state trade take place.

The idea behind Agricultural marketing yards was to protect the small farmers from monopsony, the tyranny of one or two traders. But these central laws are designed to undo that protection.