Farm Acts need of the hour

Naveen P Singh *

Every crisis provides opportunities to move needle on pending reforms. Perhaps for us Covid 19 comes as an opportunity to sequence distorted policy levers in agriculture in a more pragmatic and meaningful way.

It is evident that there is no single year after independence without the new farm intervention or the change existing ones. Even then the improving farmer’s economic condition and social status for small and marginal is largely driven by non farm and off farm income.

The legacy of farm interventions starts with preparation of a Model Bill based on the recommendation of the Royal Commission on Agriculture, 1928. With the enactment of Agricultural Produce Markets Regulation (APMR) Act in 1960s the regulation of agricultural marketing practices commenced and it acted as a conduit since then for a gradual transformation from a monopoly (executed by local traders) to Oligopolies (farmer-traders built in relationship).

This transformation is quite complex and is symbiotic seems invincible till news laws were approved. The laws envisions to crack/ end this ugly relation/ transmission by allowing more avenues for farmers to sell his/ her produce beyond the APMC borders, above the clutches of traders and money lenders.

It is quite visible in villages/ rural areas that the commission agents, middle-man and traders are wealthier than the farmers. The reason is simple and is well established i.e. earning huge profits and exploiting farmers (especially small and marginal) wherever possible. There are several committees and commissions since 1980s which have actively promoted/suggested ways to correct this imbalance but did not get due sincerity from regimes.

As a part of cajoling strategy they brought pieces of cake by capitulating dessert. It is still a mystery for anyone who thinks that farmers who grows staple is more affluent than the farmer who grows high valued fruits and vegetables and other horticultural crops.

In fact the farmer’s income has risen in those states with larger chunks of food grains procured via MSP route and their level of prosperity is non comparable as some states have geographical curse. . It is therefore necessary to bring uniformity across the regions, states and farmers. In the medium term, enacted laws are expected to reduce inequities amongst farmers.

Need of reforms

The needs of reforms have been felt since very long time and many states have tried earlier to crackdown APMCs, few succeeded as well. It is evident that before reaching the consumer, the agri products in the process of exchange has a potential to increase farmer’s’ income by 11-12%. The fact of liberalizing agri markets not instant and this has been curated over the last two decades taking cues from the Shankarlal Guru Committee 2001 recommendations and other research studies.

The main idea behind the three consolidated Acts viz., Farmers Produce Trade and Commerce (Promotion and Facilitation) Act 2020, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Service Act, 2020, and Essential Commodities (Amendment) Act, 2020 lies in reducing the dreadful loss to the producer besides making it farm commodities dearer to the consumer.

In addition to set of benefits viz., choices and options in marketing, better price discovery and realization with traders competing with APMCs, attracting investment in market infrastructure (where more than 80% of private investment in agriculture is done by farmers alone),efficiency gains, access to improved inputs, good agricultural practices and technology, etc. would ease farming across the country.

Moreover, allowing direct procurement by building farm gate infrastructure would reduce the time taken for a produce to reach the consumer, conveyer loss and almost ensure no deterioration in quality of the produce.

As per the provisions of the Act, the farmer is free to market his produce at field, factory, warehouse or cold storage without any hindrance and without any market fee or any other charges that were earlier applicable under APMC Act. The existing of the APMCs is not at all under any kind of threat, but will face competition as the farmers will have a parallel mechanism, to get fairer prices for their produce.

There are demands and suggestions for amendments to render assurances towards continuance of the MSP and that the intended private procurement will not be less than the MSP should be a part of the law. Given the fact that MSP as of now benefits hardly 6 per cent of the farmers cultivating mainly wheat and rice with an annual outgo of 2-3 lakh crore rupees and it includes all the paid out cost and the imputed value of family labor.

There are studies which indicate that a 10 per cent increase in MSP reduces the GDP by 0.33 per cent, investment by 1.9 per cent and increases aggregate price index by 1.5 per cent. Moreover, thus legalizing MSP may have serious economic repercussions as they tend to move away farm commodities from global competition.

In the provision for contract farming it’s simply impossible for corporates to take over farmer's land as contract is for the produce and not for the land. Fear mongering and undue speculation of this fact is the reason for large scale agitation. Besides, the law does not allow the contract to build any kind of structures on farmer's land or by the traders/corporates.

Further instances of successful contract farming are clearly visible as seed production and sugarcane cultivation are the best examples of contract farming that are successfully operating for the last several years. More than 60 per cent of the broiler production in the country is also through contract farming and even the dairy model is based on contract.

Contract farming offers a wide range of opportunities and price assurance while also sharing windfall gains in any case with producers. Once contract farming is fully operational, the FPOs can be leveraged for focusing commodity wise/ region wise to achieve efficient use of resource endowments.

This may end few state government’s earning thousands of crores via levies and taxes (amounting to 8.5 per cent which was 14 per cent before GST) on Mandis. This cannot be counted as a loss as the mandi taxes bred crony capitals in the APMCs. And by the measures set in now this amount reaches the producer and a part to the consumer as well.

There is also apprehension that the amendments to the Essential Commodities Act intended to boost investment in agri-marketing infrastructure and reduce volatility in prices of agri-produce, will enable big agri-business houses to hoard commodities that will lead to artificial shortages and food inflation.

The law mandates that its present provisions on stocking limits will be triggered in ‘exceptional circumstances’ in the event of the retail prices of non-perishable food commodities shooting up beyond 50 % and that of horticultural produce beyond 100 % over the base price. The bench mark and base will be the retail prices in the preceding 12 months or the average retail price of the last five years, whichever is lower.

Overall, these amendments are overdue and needed to free the agricultural marketing system that has prevented farmer’s’ income from rising commensurately with economic growth of the country/.

The government should steadfastly articulate, convincing and in spreading the information on the merits of the laws supplemented by actions on the ground in creating vast agri infrastructure, expediting the tech enabled interoperable platforms under eNAM, a vast network of FPOs, tech startups, mobile and digital marketing extension and logistics.

Thus, these laws are the need of the hour for ushering in game changing reforms in agricultural marketing and sound development of the agriculture sector. There is a need to shift from entitlement to empowerment of small and marginal farmers and enable them to produce and compete for international markets.


Views expressed are purely of the author