FARM LAWS: LETS FACE THE REALITY
Part1: FARM LAWS: PROLOGUE- HISTORY OF INDIAN AGRICULTURE
Before we move on to the analysis of these laws, a few questions and concepts are needed to be addressed.
Contract Farming
It is a type of farming wherein two parties form an agreement contract with each other for carrying out the business. One party is obviously the farmer(or Farmer Producer Organizations) and the other is a private company. So before the start of business few aspects would be talked about like what will the amount of procurement, the quality of the produce, the time period for the procurement, what if the quality is compromised, what type of material/grain to use, and many more such. For example, when you move into a rented apartment, there is execution of an agreement between you and the owner, and the contract has details about the rent, deposit, furniture(if any), the tenure of the contract, etc. The same is the scenario in all the business contracts too, just the parameters keep varying.
Farmer, Middlemen, and the APMC triad
In the previous part we read about the middlemen, who they are, and what do they do. We even read that in the states of Haryana and Punjab they range fairly from 30-35 in percentage, and have also contributed to the agricultural development of the two states. But we do have some questions unanswered:
Have the middlemen contributed to the development of agriculture in PN & HR?
The answer is Yes. The reason they were born was due to the failure of the government to provide certain services and infrastructure requirements needed throughout the stage of production and procurement. When there was no formal source of agricultural credit, it was they who had lent money to the poor farmers. Even today when we have so many branches of the banks present in villages, yet a poor farmer prefers a moneylender who in this case is usually the middlemen. There are many reasons for it as well which I would cover in a different blog on banking.Are there any shortcomings of the middlemen system?
The answer is Yes. Knowing the huge population of middlemen in the agricultural system of HR & PN, they are actually one of the (not only) reasons for the protests. The middlemen had an upper hand since they acted as the source of finance for produce as well as the source of sale of the produce. There were occasions when the crops had failed due to multiple reasons like drought, heavy flooding, etc, and remember who was the source of credit? The one who finances also charges a rate of interest for the same too. So in this case the poor farmer is trapped in the vicious cycle of debt and poverty because the crop produce is the only way the farmer can repay the debts.
Why are the farmers of only northern states protesting? There are few parameters on which the answer depends:
The number of people employed in other states in comparison to PN & HR is quite low since many alternate employment options do exist. For example, in the states of Maharashtra, Gujarat, and Karnataka, sectors other than agriculture like Services(IT, Banking), Manufacturing, etc exist. Whereas in states of HR & PN, most of the people are employed in agriculture only.
The agricultural pattern/system of other states is quite different than PN & HR. The number of middlemen in rest of the states in comparison to PN & HR is quite less making the APMC system is not that functional and famous(it doesn't mean it doesn't exist).
So, the following are the laws about which the story is all about:
Farmer's Produce Trade and Commerce( Promotion and Facilitation) bill, 2020: The bill permits the farmers to carry out inter as well as intra state trade for their produce beyond the physical premises of APMC mandis. Earlier, the farmer couldn't trade or sell his/her produce in APMC markets of other states, but now that won't be a constraint. Remember we talked about a tax that was charged on selling the produce at the APMC, well now if a farmer is say trading with some other buyer(not the government) then, the tax amount won't be charged this time. Farmers could now trade throughout the geography of the country and not restricted to the native states.
But some fear that these provisions are a threat to the existing MSP system. Its true that if the farmer will get an opportunity to trade with other buyers and save the tax and the debt trap of middlemen then but obvious, he/she won't prefer the APMC yards to sell the produce. This would hurt the pockets of the middlemen as well as the state governments too.Farmer's (Empowerment and Protection) Agreement on Price Assurance and Farm Services bill, 2020: The bill introduces a framework of contract farming through an agreement between the farmer and the buyer before the beginning of the business. It enlist all the details that would be listed in the contract which both the parties would sign.
The farmers fear that this bill would eventually cost them their lands and huge amount of exploitation by the big private players. But why do they think so? Reason being, there's a provision that under the circumstance of any dispute between both the parties post execution of the agreement, either of the parties can move at max to SDM i.e Sub-Divisional Magistrate( a government official) for resolution of the dispute. There is no provision for moving to the courts.
They also fear that incase the quality/quantity of the produce is not matched as per the provisions agreed during signing of contract, the buyer might not either purchase or pay them less as than what expected. But that's actually not true. The bill clearly specifies that during the execution of the agreement, a clause of minimum amount at which the buyer will have to buy the produce does exist for cases like this only.Essential Commodities( Amendment) Bill, 2020: As per the bill, the government has listed certain essential commodities like cereals, potato, pulses, onion, edible oil seeds, and oil, whose supply and prices would be regulated by itself only during times of war, famines, extra-ordinary price rise, or natural calamities. This amendment has been brought to attract the private investment into the farming sector. As the government would only interfere during extreme times, this gives the private companies a chance to increase the stock of grains or in other terms hoard them.
Now a very strong argument has been put forward by the farmers in this regard, that this might distort the trade if big private firms enter into picture. The big private companies have capital and infrastructure to store the grains for long durations that too in good conditions, so eventually, if they just keep on increasing the stocks and not release/sell them into the markets, it would lead to shortage of products in the market which eventually would lead to inflation of the prices of products. And rest is the pure economics, one who controls the supply, can control the demand, and monopoly in this aspect would harm not just farmers but also the consumers who would eventually have to buy the products at high rates.
Now that we have a fair idea about these farm laws, the question still remains,do we need them? The answer is YES. We do need them but with some modifications. Giving a confidence and assurance to the farmers that MSP won't be done away with and it would be farmers choice to sell the crop either to the private companies incase they get a better price there or else, a system of APMC will always be present with MSP attached. Role of Juidiciary in Dispute Resolution between the parties should be added. It is right of every citizen to move to courts to get resolution of their disputes and this should also be added to the bill related to the contract farming. Government should act as a Regulator and the hoarding levels could be relooked into by the parliamentary committees, so that over hoarding by a particular private entity doesn't take place.
One of the major reason that the laws have created a havoc in country is that they weren't duely scrutinized by the parliamentary committees and they were passed in a haste, when there was no opposition to oppose. The parliamentary committees play a major role in development of a law, they take adivces from the unions and civil societies for whom the law has been made. Its very important to do a ground level analysis and take into confidence the parties(not talking about political party) that are going to get affected. Its not that government hadn't done any research before passing of these bills, but it seems they lacked in taking into confidence the beneficiaries.
Given that few changes are taken care off, the laws should remain to exist because these are once in a decade reforms. Many governments have been trying to pass these changes since decades but couldn't due to political constraints. The government should focus on promoting more and more Farmer Producer Organizations so that their bargaining power increase during contract farming. Just like the financial advisor(brokers) cannot be neglected in functioning of the stock markets, so can't the middlemen/Arhatiyas/Intermediaries/Bicholias be. They have shown they have good service providing skills and government should use them as potential resources. From years, our governments have been procuring wheat and rice exceeding the stock limits and now they are just rotting away in godowns. Government knows that it has been unsuccessful in improving the state of our agriculture( corruption being a major reason) and now private has been given a chance to work for the same. Private companies have huge capital which they can invest for development of the state of our agriculture. For those who think private companies just exploit and think of their profits, then just think where most of us are employed today. There are multiple sectors where the entrance of private sector has worked in favour too. Nevertheless, government should also make sure the farmers being poor aren't exploited and create a fair business environment that favours both the parties and eventually the nation.
