Bharat Bandh: Why farmers are crying foul over farm Bills

The largest private enterprise in the country is farming. And so it is difficult to be monopolised. Yet, the Central government in its wisdom thought to bring farming under such parameters that it becomes subservient to a few cash rich and privately held industrial houses through three bills rammed through Parliament recently.

These bills primarily aim to recast the process of marketing or sale of agricultural produce, pave the way for contract farming and allow unfettered storage of essential food-grains by those who have means to do so for their benefit in future, or through the times of scarcity when prices go up to bring better returns.

The consequences of all the three steps being pushed through by the government have led to grave fears among most farmers about their prospects once these bills come into force. This is why farmers have called a countrywide shutdown which is underway today, upsetting life in large parts of Punjab, Haryana and Uttar Pradesh, besides other regions.

The first of the three laws called the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill goes by the supposition that allowing farmers to sell their produce to buyers, other than those under the watch of the governments, will fetch greater freedom and better prices from myriad kinds of buyers to farmers for their crop. This is thought to be so since currently the bulk of Rabi and Kharif crops are sold in yards called mandis which are run by Agricultural Produce Market Committees (APMCs). These have been in place for quite some time under the laws of the state governments.

Another important factor under the APMC system is the government-backed process of procurement of farmers’ main produce like wheat, paddy, lentils and oilseeds on Minimum Support Price (MSP) fixed by the Central government. From the farmers’ point of view, MSP is as important as is the case with MRP, or minimum retail price, printed on packed products for the benefit and protection of an ordinary consumer of daily-use products sold at retail outlets.

Notably, some of the farm products or their derivatives are also sold by retailers as packaged items with duly printed MRPs. Wheat-flour is one such product. It is marketed by many companies, including some of the better known among them like ITC, in sealed and trademarked plastic bags of 5 and 10 kilograms. Similarly, many companies are already trading in farm produce after acquiring them from farmers either via mandis or directly and processing and packaging them.

There is a significant cost difference between the MSP for wheat fixed by the government and MRPs charged by the companies for flour from the consumer after adding up the charge for processing and packaging to include substantial profit for the company. So any facilitation and promotion of farmers produce can possibly be done by ensuring that the farmers get a more reasonable price for their product. If MSP and MRP are correlated at current rates in case of farm products and by-products, not only the farmers but also the consumers will benefit.

This is so since for example the gap between the price of a kilogram of wheat as per MSP at less than Rs 20 a kg and its flour at Rs 35 a kg in the retail market comes to more than Rs 15. Yet, the Farmers’ Produce Trade and Commerce Bill passed last Sunday in the Rajya Sabha did not look at the existing gap between the price at the farm-gate or mandis and its high cost paid by the consumer that leaves farmers poorer and makes companies marketing farm products richer.

What the bills seek is making the acquisition of grains from farmers easier for the companies. This is so since after the three bills get nod of the President, the companies dealing in agricultural products can bypass both APMC mandis and MSPs for various kinds of cereals laid down by the government that too procures them. The procurement by the government is to maintain stocks for food stability and meet shortages in case of a contingency.

Going through mandis costs private buyers a mandi fee and commission for agents if they are in between. So the bill subsidizes the purchase by trading companies rather than enhancing the price of the farm product. Most companies trading in grain-based products already prefer to buy at rates cheaper than the MSP fixed by the government.

The second bill is the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill. It will allow contract farming through an agreement where price of the product can be assured at the time of sowing of the crop. Contract farming too is already in practice at certain places in the country. The bill seeks to formalise this through a written agreement for a significantly extended period like up to 10 years. A few companies like KBRL Limited that deal in Basmati rice are already into contract farming and rice sold under the brand name like Dawat is already cultivated in dedicated farms as per those who are in the know of the trade.

According to them, the difference that the bill is going to make is that it will open the farmlands for the companies at a larger scale than what is the case now. The terms of the contract set through agreement may not be easy to be adhered to because of the natural factors that determine the yield and quality of the crop. And in case of dispute the contracting company may be in a better position to have its say than the farmer. The dispute redressal mechanism as laid down in the bill is mainly confined to a magistrate’s level where there are already too many matters that await the magistrate’s attention. Thus, an early solution can hardly be visualised in case of a dispute among contracting parties.

The third and the last bill relates to the provision of storage, stocking and, thus, accumulation of essential food-grains. It is called the Essential Commodities (Amendment) Bill, which lifts restrictions on traders to stock grains that are supposed to be an essential commodity.

The government’s point of view behind this bill is that farmers will be able to stock the farm produce up to the period when they could get suitable prices. But most farmers being small peasants with marginal land holdings can hardly be expected to wait for the prices to go up to sell their crop. Thus, the bill is thought to favour moneyed traders instead of farmers. Only traders can stock up grains at the time of harvest and sell the essential food grains when prices are high.

Thus, a farmers’ rights activist Yashpal Malik says overall the three bills are bound to lead to a virtual “company raj” in the farm sector. “If the later Mughals had once handed over the task of revenue collection to the East India Company and ruined the country, the present government is initiating a process where the farm produce and its trading is going to shift to a few companies in a big way. Not only petty farmers but even those with significant acreage of land cannot hope to survive such an onslaught in the longer run. Thus, such steps can trigger off distress sale of farmlands in the times to come.”