When PM says the farmer is happy, he shows his ignorance of farming and farm policies

With the President of India meekly giving his assent and signing on the dotted lines, three farm and farm-product related bills have become law.

These legislations permit the sale of agricultural produce outside the mandis regulated by the Agricultural Produce Marketing Committees (APMC) constituted by different state legislations; provides for contract farming and deregulates production, supply and distribution of food items like cereals, pulses, potatoes, onion and edible oilseeds.

Since agriculture and markets are State subjects under the Constitution, the legislations are seen as a direct violation of the federal structure of India. Centre’s explanation that trade and commerce in food items is part of the concurrent list, is unconvincing.

Dismantling APMCs and opening up agricultural sale and marketing outside these mandis as well as providing a framework for electronic trading exposes farmers to the volatility and vicissitudes of the market which is invariably imperfect. APMCs were set up with the objective of ensuring fair trade between buyers and sellers for effective price discovery of farmers’ produce.

APMCs regulate the trade of farmers’ produce by providing licences to buyers, commission agents, and private markets; levy market fees or any other charges on such trade; and provide necessary infrastructure within their markets to facilitate the trade. Dismantling of the APMCs would mean the ending of assured procurement of food grains at minimum support prices (MSP).

Contract farming, provides a framework on trade agreements for the sale and purchase of farm produce. The mutually agreed remunerative price framework envisaged in the legislation is touted as one that would protect and empower farmers. The written farming agreement, entered into prior to the production or rearing of any farm produce, lists the terms and conditions for supply, quality, grade, standards and price of farm produce and services. The price to be paid for the purchase is to be mentioned in the agreement.

However, The Price Assurance Bill, while offering protection to farmers against price exploitation, does not prescribe the mechanism for price fixation. There is apprehension that the free hand given to private corporate houses could lead to farmer exploitation.

Cereals, pulses, oilseeds, edible oils, onion and potatoes have been removed from the list of essential commodities. This will deregulate the production, storage, movement and distribution of these food commodities. This would lead to exporters, processors and traders hoarding farm produce during the harvest season, when prices are generally lower, and releasing it later when prices increase, thereby undermining food security since the States would have no information about the availability of stocks within the State.

Gravamen of this hurried ‘reform’ in the farming sector is that there would be no regulated pricing mechanism and minimum guaranteed price. This would throw the farmers--particularly small and medium--to the wolves to be torn apart at their will. Yet the honourable Prime Minister states that these are laws framed to benefit farmers and that the small and marginal farmers were the “happiest today” because it was for the first time, they have got an alternative to bargain for the price of their produce. This exposes his lack of knowledge on the ground realities of India’s farms, farmers and farming.

In actual fact this triumvirate of legislations is part of the ‘Digital’ juggernaut set in motion after Prime Minister launched an electronic National Agriculture Market (eNAM) platform in April 2016 and later set an ambitious target of doubling farm incomes by 2022.

This was the statement of purpose given out by the additional secretary in the Ministry of Agriculture who headed the drafting committee: “Our goal is to create a one-nation, one-market model for farmers, similar to what GST is to taxation... a model of creative disruption for an efficient marketing system.” So, promoting ‘Digital India’ appears to be the motive behind these legislations, not farmer’s welfare!

In the event, the most important part of such a legislation--a pricing mechanism that protects the producers of food grains (farmers) and consumers (all of us) has been left out.

This is despite the fact that government had a model to draw from the “Report of the High-Powered Committee on Agricultural Policies and Programmes-1990” headed by former Union Agriculture Minister Bhanu Pratap Singh and had top farmer-leaders, parliamentarians, eminent economists/administrators as Members.

At the outset the Committee realised that farmers faced triple-whammy: very high risk due to constant exposure to elements of nature, adverse terms of trade and non-remunerative prices. These needed to be ameliorated. Committee looked at farming and farmers from one large perspective--remunerative/stable income across the board while ensuring food security with the active involvement of key stakeholders.

The core issues identified were: need to rely more on the commitment of farmers, who are the producers, and the market mechanism that influences consumption; protecting the farmer and the consumer against the vagaries of production and the market forces in order to enhance agricultural productivity and ensure fair prices; reduction in the cost of food grain procurement, storage, transportation and distribution; an efficient delivery system under which those in genuine need of subsidies and support are properly targeted and given sufficient access to food grains and effective intervention powers in the hands of the government in times of need to protect the interests of producers or consumers.

Committee suggested a series of policy initiatives. The emphasis was on withdrawal of all controls, except that of quality. “Triple pricing” was advocated in order to regulate the market and protect the producer, consumer and the trader. There will be a ‘parity price’ to fully compensate the farmers for a rise in the cost of inputs and their other necessities of life, a ‘support price’ below which prices will not be allowed to fall, and ‘intervention price’ beyond which prices would not be allowed to rise.

As soon as the price of food grains in the open market rises above the intervention price (already fixed), all stocks or part of it would be acquired by the government agencies on payment of “parity” price. If the price would fall below the support price, the farmers would have the right to sell their stocks to the government at the support price already fixed. This mechanism could be made to work effectively by establishing appropriate Food Security Regulatory Authorities invested with adequate powers to implement and monitor.

Under this policy mechanism, farmers will be assured of MSP and consumers reasonable and relatively stable cost. Traders will also know the limits within which they can operate. Small farmers will be saved from going in for distress sales, and the government will have the facility to quickly locate and acquire food grain stocks in times of need.

In short, Committee’s recommendations were meant to prevent food inflation while making the farmer stand on his feet and be his own boss instead of depending on government charity or market volatility.

A fresh law on the above lines is the only way out of the mess created by this government. But pray, will it heed to reason?

(The author is a former Army and IAS officer and was a member of the High-Powered Committee on Agricultural Policies and Programmes-1990)