Farm Reforms Bill 2020: Will it get rid of middlemen or is it just an anti-farmer puffery?
Government has introduced three agricultural bills with the intent to transform the agricultural infrastructure. Despite discontent and confusion among most of the farmers, there are plenty of positive reactions coming up from experts of the field. Discussing the diverse facets, various association heads and economic experts express their opinion on the farm bill.
Anushruti Singh October 10, 2020
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Sanwarmal, a farmer from Rajasthan and the head of Bhartiya Kisaan Sangh, has been protesting the contentious farm bills along with numerous others. The new farm bills introduced by Modi government to restructure agricultural infrastructure are under scrutiny of farmers. Farmers from north-west and south have opposed it calling it as anti-farmer reforms.
According to the association, the ministry has totally ignored suggestions regarding the resolutions handed prior to passing of laws. “There is no mention of MSP clause, thus farmers are worried,” says Sanwarmal. The protestors across India are apprehensive on the farm reforms as there is no clarity on minimum support price (MSP).
Discontented with the government’s move, farmers are of opinion that this will pave the way for dismantling of MSP system as the corporates take over. On this, Badrinath, National General Secretary of Bhartiya Kisaan Sangh questions, “There are number of cases of frauds by private players. In such situation, what is the guarantee that farmers will get a fair price?”
Farmers are hence demanding to revoke the bills. On the contrary, there are agricultural apex bodies and experts who are supporting the reforms. But, let us first understand briefly what agricultural reforms bills are about.
Bill on market of agricultural produce
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 will create an ecosystem for farmers or traders and will provide them freedom related to sale and purchase of farmers’ produce outside the physical premises of APMC markets. Furthermore, state governments are prohibited from levying any market fee, cess etc outside APMC areas.
Contract farming bill
Through the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020, a national framework on farming agreements would be developed. Adding to this, the risk of market unpredictability will be transferred from the farmer to a sponsor through this.
This legislation will also attract private sector investment to supply the Indian farm produce to national and global markets, and in agricultural infrastructure. In addition to this, farmers have been provided adequate protection against sales, lease, or mortgage of farmers’ land as it is totally prohibited in it. The farmers’ land is also protected against any recovery in this bill.
Essential Commodities bill
The Essential Commodities (Amendment) Act, 2020 will remove certain commodities from the list of essential commodities such as pulses, onion, oilseeds, potatoes etc. Farmers suffer huge losses whenever there are bumper harvests, especially of perishable commodities. The legislation will boost investment in cold storages and modernization of food supply chain. It will also create competitive market for these produce by preventing their wastage.
Point of Conflict in Bills
Speaking about these bills, union agriculture minister Narendra Singh Tomar claims that the Government has taken several landmark decisions for agricultural reforms in last six years. These decisions are to ensure that farmers get the best price for their produce, and to increase farmers’ incomes, and thereby improve their livelihood status. The bill will also grant farmers the freedom and choice to sell his crop.
The most contentious issue for farmers is less clarification on MSP. According to them, it may end MSP-based procurement system. Another doubt is that if produce of farms is sold outside APMC mandis, an alternate effective system will be required. Then, electronic trading such as in e-NAM will replace physical mandis. This raises questions on the existence of the trading portal e-NAM.
Farmers are also opposing the contract farming bill. They will be dependent on associations if this bill becomes an act as they will not be able to determine prices. Sponsors will shy away, because investors do not want to deal with smaller and marginal parties. Farmers also argue that in case of disputes, big companies will always be at an advantage.
Farmers are also of opinion that big companies will dictate their terms if essential commodity act comes into play. They will have freedom to stock the commodities. This can further lead to less prices for famers. Lastly, the ban on onion export creates further confusion among farmers about the implementation of this act.
Overhaul of Agricultural Supply-Chain
Despite discontent and confusion among most of the farmers, there are plenty of positive reactions coming up from experts of the field. Discussing the diverse facets, various association heads and economic expert express their perspective on the farm bill which will replace ordinances promulgated on 5th June 2020.
BV Jaware Gowda, President of the Federation of All India Farmer Association (FAIFA) says that these visionary bills will ensure a sustainable and profitable future for the farming community. FAIFA represents farmers and farm workers across various states.
According to him, the new regulation will create an ecosystem for farmers to prosper. He asserts, “The farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce. I believe this will encourage inter and intra state trade and commerce outside physical premises of markets notified under State Agricultural Produce Marketing legislations.”
On the similar note, India Pulses and Grains Association (IPGA), the nodal body for India’s pulses trade and industry welcomed the passing of three bills. Bimal Kothari, Vice Chairman of the apex body said, “This is a welcome move and IPGA has given thumbs up on behalf of traders. The farm sector has been completely opened up by the government.”
Kothari also feels that this will prove as a major step towards doubling the farmers’ income and improving living standards of farmers. In 2018-19, an analysis by HT of National Sample Survey Office revealed that an average Indian farmer monthly income would be Rs 10,329. There is a significant divide to be filled to level up the incomes.
Appreciating the historic move, Dr D K Aggarwal, President, PHD Chamber of Commerce and Industry echoes the same views as Kothari. He says that three farm bills will enable barrier-free agricultural trade and significantly enhance farmers’ income. The core of reforms is ensuring a highest level of farmers’ welfare, said Dr Aggarwal.
Agarwal claims that these agricultural-reform bills are likely to enhance India’s agricultural and food processing exports from the current level of US$ 40 billion to US$ 100 billion in next five years. It will also enhance sector’s competitiveness globally.
India has emerged as a key supplier of food products in past few years and has the potential to serve as a factory to world. Even during the difficult phase of COVID-19 lockdown, India has ensured production for the continuity of world food supply chains and has remained open to export of agricultural commodities.
Is free market a new normal?
Even if the contentious farm bills have created a political uprising, numerous ex-bureaucrats, including former finance, banking, and defence secretaries, have supported bills. Along with them, agricultural corporate firms also feel that it is a necessary move to reap maximum benefits from the Indian agricultural wealth.
This new farmer bill appears to be a watershed moment in the history of Indian agriculture as farmers can now sell their crops anywhere from open markets to processing companies, exporters, hotels, restaurants, and retailers. Simultaneously, the farmers can also sell their produce in APMC market, eNAM, futures market, haat etc without any licensing requirements.
Earlier, APMC Act only allowed farmers to sell their produce at APMC through license holders’ traders who were controlled by middlemen. There were no other alternatives for farmers to sell their crops. Responding to PM Modi’s Mann ki Baat on the farm bill, RS Sodhi, Director at Gujarat Cooperative Milk Federation Ltd (GCMMF) or Amul hailed the act on Twitter.
He also explained how free markets helped dairy players to grow and how milk became India’s largest crop worth Rs 8 lakh crore. This is more than the combined value of wheat, paddy and sugarcane. Praising the freedom to sell, he added that the dairy farmers are free to sell their produce anywhere. As a result, the dairy industry enjoys healthy competition.
Agritech companies see these bills as welcome steps. Sudhanva Sundararaman, COO, Barton Breeze, an agritech firm which helps in setting up hydroponic set-ups expresses his views. He claims, “Now the farmers have got their real independence. To clear the misconceptions, even small farmers can produce specific products according to demand of buyers. They can also make their own club such as an FPO, or cooperatives etc.”
Role of corporates and end of middlemen-era
The primary intent of these bills is to boost agricultural production, promote healthy competition, and fetch better prices for farmers’ produce. These reforms also aim to abolish the middlemen trap and other related bottlenecks for farmers. Does it then infer that corporate firms will get a stronghold on this sector?
According to the farmers, corporates will gain more control under the contract farming bill, and farmers will perish. Explaining the predicament, Sanwarmal of BKS tells that developed countries such as America have smaller population. Hence, practicing contract farming suits them. But, in a country like India, there are bigger families where 10 to 12 members of each family are engaged in farming in every village.
He adds, “Imagine if a company comes to a field of small farmers, it will hire its own men to till the farm. Where will the family members go who were farming on those fields. Also, if a family disengages in farming for few years, it is difficult for them to get back into agriculture. Then their fields may be taken up by corporates leaving nothing for them,” he adds.
On the contrary, agricultural experts do not think alike. Sundararaman who started his company in form of indoor farm says currently conditions are like 1990 when India implemented a liberalisation program. It was said then too that big corporations like GM, Fords, Toyota, Honda, McDonald’s, KFC etc will destroy the Indian market.
But the truth is that after 30 years GM has closed their operations in India, while Maruti controls 51 per cent market share. Honda just holds 3 per cent of market share. India’s Cafe Coffee Day has bigger turnover than McDonald’s or KFC and Chai Point runs more successfully than Starbucks. Hence, Indian companies have emerged stronger in these years.
“In the similar way, market forces and proper regulations will never let anyone control the whole farming sector. It is too big and diversified for any company to control. Most importantly, government is working to transform market intelligence through digital technology and AI. It will provide every farmer an access to good markets,” he adds.
This huge furore has largely erupted in Maharashtra and Punjab where middlemen have a monopoly. The previous political dispensation was a corrupt private club which was engaged in exploring opportunities for looting poor farmers. The farmers should hence understand that vandalism is futile and refraining from fringe groups with vested interests is the best move.
He then claims, “When vegetables are thrown forcibly on the road, they belong to poor farmers and not any rich middlemen. The tractor that was burned in Punjab also belonged to a poor farmer. Many agents or dalals (with political connections) who control APMCs are all millionaires. The families of many farmers are struggling to make their ends meet.”
Lack of clarification in MSP
Central government sets the minimum support price (MSP) for crops based on the recommendations from Commission for Agricultural Costs and Prices (CACP). Government had announced revised MSP last year and there was uproar because of the formula used to calculate the MSP.
This year also government has announced increase of MSPs for six crops ranging between Rs 50 to Rs 300. This was done a month ago when bills were passed. But these actions don’t seem to pacify worried cultivators. Instead, they are protesting and demanding to bring a fourth law to guarantee the minimum support price.
Government has however clarified that the MSP system will remain intact. According to renowned agricultural economist Ashok Gulati, if MSP is guaranteed, it will spell disaster in markets and private player will shun buying. Expressing his views in an article, he argues that MSP cannot be assured even with the wheat and paddy crops.
According to NSSO survey, only six per cent farmers gain from MSPs. The rest of agrarian society suffers because of imperfect markets. Therefore, this is time to get agricultural markets right, and the bills are right steps towards that direction.
Growth of investments will reinforce supply-chains
The Essential Commodities (amendment) bill has a provision to remove several commodities such as cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. Government claims this will encourage private investments in cold storage and will remove the supply side hurdles at better prices.
On this, Kothari points out that this amendment is hugely beneficial to trades also. “The Essential Commodity act was a draconian law which was used by the state against agricultural traders and farmers. This progressive change will allow traders to do their business without any hindrance. Now that the farm sector has been liberalised, we can expect lot of investment.”
According to him, this investment in infrastructure will boost monetary value for farmers, enhance production, minimise post-harvest losses, better storage facilities with larger capacities, modernization, and technology.
“This will also improve accessibility and availability of goods throughout the year as goods can be stored for longer periods despite natural calamities and irregularity in weather conditions. Earlier due to difficult laws, traders were not willing to make large investments because of uncertainty. Now trade will invest more, and they can do business without any fear and apprehensions,” he says.
As government is coming up with FPOs, traders and manufacturers can work in partnership with farmers through these FPOs. They grow their produce for mass supply and meet the increasing demand through these. Many options such as contract farming are also possible now. With this amendment in the essential commodity act, the traders will be able to buy the produce directly from the farmers.
They will also be able hold the association for a longer period. Thereby, the farmers will be assured of the maximum price. It will also ensure availability of produce in case of natural calamities or extreme weather conditions. This will not only benefit the farmers but also the trade and manufacturing sector as there will be value addition, huge employment generation, and increase in the GDP of agriculture.
Green thumb for all!
Experts feel at large that government is on the right path and farmers are now in safe hands. With inception of these acts, they can now take their produce beyond the premises of what are known as APMC markets or mandis. Also, companies are enthusiastic with enormous opportunities unfolding the future of entire agri-ecosystem.
According to Agriculture Secretary Sanjay Agarwal, private companies have already started investing in farm sector and this will help in increasing farmers’ income. “Lot of things are happening. I was told that a rice company has already entered into contract farming with basmati rice growers in 1,000 acres, while another company has opened a private mandi,” he tells without disclosing the investment amount.
Overall, agricultural fraternity is confident that this policy will boost the farm production and create many avenues for traders to invest in agri-infrastructure. Experts are calling these reforms as definite game-changer in lives of Indian farmers. Hence, it will be interesting to witness whether the policy change favours the agrarian society or it will doom the farming economy