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Indian Farmers are Producers not Traders or Vendors

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India: Prime Minister Narendra Modi in his special talk show ‘Mann Ki Baat’ brusquely said: “Farmers can break free of APMC shackles.” The announcement faced severe criticism as farmers called themselves “Farmers not Traders” after PM’s remarks.

PM Modi said that with the introduction of new Farm laws, every farmer of the country can sell their produce cross-wide and have multiple options markets. But the fact is that more than 95% farmers across Punjab, Haryana, Rajasthan and other regions of India are owners of less than 5 acres land and only earns hand to mouth earnings. Is it possible for a farmer who has never visited the metropolitan city closest to his village to travel all over the country to sell his produce? The correct answer is no. What will happen next?

As most protesting farmers own less land and produce a limited amount of crops, they would be forced to sell the produce to the private stakeholder of the national or local level. This is not only theories, yet Bihar is the previous victim of abolishing the APMC system for farmers.

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Among all three laws, Farmer‘s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 is perhaps the most contentious (Which seeks to provide a trading area outside of APMC – mandis of agriculture).

The Flawed Bihar Model

In 2006, the Government of Bihar decided to abolish the APMC system and provide an open market to the farmers for better results. Critics of the APMC system promised that its elimination would ensure better prices for the state’s farmers and attract large-scale private investment in its market infrastructure, promising some current reforms.

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Prior to their abolition, Bihar had 95 market yards, 54 of which had infrastructures such as covered yards, warehouses and administrative buildings, weighbridges and processing, and grading units. In 2004-05, the State Agricultural Board earned 50-60 crores through taxes and spent over 52 crores, 31% was on infrastructure development. There is no revenue to maintain it; this infrastructure is now in dilapidated condition. Also, no significant private investment has come.  

In a study of agriculture in Bihar last year, the National Council for Applied Economic Research reported that after 2006, grain price volatility increased, negatively affecting farmers’ choice of crops and decisions and improved farming practices. It has been concluded that the repeal of the APMC system in Bihar and increase in price fluctuations may be one of the reasons for the low growth of agriculture in the state.

It was concluded, “Farmers are left to the mercy of traders who inadvertently set lower prices for agricultural produces that they buy from them. Inadequate market facilities and institutional arrangements lower prices in prices And are responsible for volatility.” The majority of farmers surveyed reported high storage costs in private warehouses. Further, the need for immediate cash meant that they were forced to sell to private traders. Recent field studies have also informed traders and farmers that both are charging market fees in unregulated private markets, even though the infrastructure for weighing, sorting, grading and storage is missing.

The emergence of Contract Farming

The new laws introduce Contract Farming, and PM Modi is also seen several times emphasizing on it. It lays down a framework for contract farming agreement between farmers and buyer before sowing a crop. It sets a three-tier mechanism for dispute settlement – Conciliation Board, Sub-Divisional Magistrate and Appellate Authority. 

Under this law, no company needs to enter into a written contract with the farmer for any contracted farming. Therefore, even if the company violates the agreement’s terms, the farmer cannot prove it.

There is no provision for penalizing companies which do not register their contracts. For example: Last year, potato farmers in Gujarat saw a major issue, where PepsiCo attempted to punish potato farmers for growing similar seed varieties. Farmers’ organizations eventually had to knock the doors of the court and agitate for justice.

The bill does not stipulate or specify that the crop’s contract value should be equal to or less than the MSP. This means that contractors/companies can pay whatever price they can pay to the farmer. India’s contract farming experience has been of very low rate farmers through contract farming compared to selling it in government mandis at MSP (MSP).

Prime major drawback of this law is that farmers who get in a dispute with private stakeholders cannot knock the door of the court, the supreme authority to resolve farmers’ dispute would be Sub-Divisional Magistrate (SDM) and according to farmers, “Mostly SDMs are unreachable for people like them.” That is another thumbs up for private companies.

Freedom of Crop Storage for Private Players

The Essential Commodities Act gives the Central Government the power to regulate the price hike in food items. It halts big private players from storing the produce to provide a further boost to inflation.

Till now only farmers, farmer cooperatives and farmer producing organizations have no limits or restrictions to stock, produce or sell their crops. As a result, they make a conscious decision to sell their crop only when the market or buyer is paying a reasonable price for the harvest.

Hence, farmers are not getting any new freedom under this bill. In contrast, the government is now removing all food items in this category, allowing companies and traders to store more and more food, as they want to promote hoarding. The result will be seen as a price hike in essential food items, including wheat and rice.

By law, the government can only intervene when non-perishable goods have a 50% increase in the price of the previous year and a 100% increase over the perishable goods of the last year. This means that if 1 kg of wheat is being sold at Rs 30 government will not interfere to private storage holders till its price reaches Rs 60 per kg. Not only that, if the price is stable at somewhere between Rs 50 to 60, then next year the government interference line would go up to Rs 120.

Anyone who has the PAN (Permanent Account Number) card is allowed to do trader outside the APMC mandis is another primary concern of the Farmers. There are thousands of cases in the civil court concerning this. Farmers having land less than five acres cannot bear the burden of getting duped by fake buyers.

Please find three new farm bills below:

  1. THE FARMERS’ PRODUCE TRADE AND COMMERCE (PROMOTION
    AND FACILITATION) ACT, 2020 
  2. THE FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT
    ON PRICE ASSURANCE AND FARM SERVICES ACT, 2020
  3. THE ESSENTIAL COMMODITIES (AMENDMENT) ACT, 2020
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