Friday, December 9th, 2022 11:42:23

A Pan-India Market is good for Farmers

By Sanjeev Chopra
Updated: October 5, 2020 11:53 am

The three farm bills, which received the Presidential consent last week, had been long in the making. The text of the three Acts had been debated and discussed in the erstwhile Planning Commission of the UPA regime, and under the NITI Ayog of the NDA, and this write clearly recalls the several rounds of consultations at the level of the National Advisory Council (NAC) in his capacity as a Joint Secretary in the Ministry of Agriculture from 2010-15. If there was ever a near -bipartisan consensus on agriculture reforms, this was the one, which the then Agriculture Minister Sharad Pawar wanted to push through, but there was opposition from others in the UPA Cabinet.

What has changed now is the context – there is a firm commitment to usher in liberalisation in the farm sector which will break the stranglehold of the intermediaries in the farm markets, give greater impetus to FPOs and co-operatives and ensure a direct connect between farmers organisations and FCI and NAFED, the two largest agencies, which are mandated to procure cereals, pulses and oilseeds. Incidentally, the reforms of the APMC were also part of the manifesto of the UPA. It is, therefore, odd that the protest is now being orchestrated by the very same leaders who had committed themselves to these reforms. Perhaps the only valid argument is that it should have been left to the state governments to implement these model legislations from the Niti Ayog, which were part of the Doubling Farmers Income Agenda: however the counter factual must also be placed on record. How do you create a pan-Indian market for agriculture commodities if some of the leading agriculture production states like Punjab are reluctant to bring about the much needed reform?


These Acts affect

Intermediaries, not Farmers

Before discussing the salient points in each of the three Bills, it is pertinent to point out that more than the farmers, it is the intermediaries who are up in arms, for these are the ones who lose their core livelihoods. Their numbers are in thousands, not in lakhs, and both the FCI and NAFED have been struggling to streamline the procurement operations but they have been the biggest hurdle. Readers may not be aware that even when the FCI and NAFED want to procure directly from the farmers, the extant laws did not allow this transaction. Let it also be placed on record that the intermediaries (arthiyas) played an important role in the agrarian eco-system – but with the advent of technology and new institutions, this role had to decline. Rather than reinventing their role as aggregators, processors, assayers and value chain integrators, they have chosen to go against the tide and current of history. Blocking the roads in times of Covid is hardly the best way to put across a point of view, especially when in states like Haryana, Rajasthan and MP, the state governments ensured seamless procurement even when the APMCs faced restrictions on account of physical distancing norms. In fact, the government of Haryana went in for door step procurement, thereby ensuring that the farmers have a direct connect with the state procurement agency.

Salient Features of Acts

At this juncture, let me highlight the salient features of the three Acts. The first of these, The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 allows intra-state and inter-state trade of farmers’ produce beyond Agricultural Produce Market Committee (APMC) markets. State governments will not levy any market fee. Moreover, farmers can trade produce at any place outside ‘Mandi’, including farms, factory premises, warehouses, silos and cold storages, and the produce can be traded electronically in specified trade area. This allows setting up of e-trading facility for direct/online buying. These platforms can be established as companies, partnership firms or registered societies. In fact, as the founding Mentor  Director of the National Centre for Cold Chain development, I had been making the point  that cold stores should be treated as market yards   to avoid  double jeopardy to the farmers.

The Second, the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 creates a framework for contract farming through an agreement between a farmer and a buyer prior to the production or rearing (in case of livestock) of any farm produce. The minimum period of an agreement will be one crop season, or one production cycle of livestock and the maximum is five years, unless production cycle is more than five years as in the case of timber plantations.

The price of farm produce should be mentioned in the agreement between the two parties, and it also has provision for a three-level dispute settlement mechanism – the conciliation board under the sub-divisional magistrate as well as an appellate authority. The best part is that arbitration and conciliation has been kept on the executive side, as the idea is for a quick settlement. This is indeed a commendable feature of the Act.

The third, The Essential Commodities (Amendment) Act, 2020 allows Centre to regulate supply of certain food items under extraordinary circumstances (such as war and famine). Stock limits may be imposed on agricultural produce only if there is a steep price rise. It empowers the Centre to designate certain commodities (such as food items, fertilizers and petroleum products) as essential commodities, which the Central Government may regulate or prohibit, or order imposition of stock limit on agricultural produce to be based on price rise. The increase will be calculated over price prevailing in immediately preceding twelve months, or the average retail price of the last five years, whichever is lower. Again, what this does is to give authority to the Central government, but the exercise of the authority is based on empirical record of price movements.


No Bearing on MSP or APMCs   

Contrary to what is being made out in a section of the media, it is   clarified that these acts do not have a direct bearing on MSP, or even on the existing structure of the APMCs, which in any case had not been crowned with glory. Over the years, the original purpose had been lost, and APMCs had become cartels where only traders who had a shop in the premises were allowed to operate in those particular commodities. As Mr. Nand Kumar, former Secretary in both the Food and Agriculture Ministries pointed out that even NAFED was denied the trade license for onions and apples by the Azadpur APMC on the ground that Nafed did not have physical premises in the Mandi. This is akin to saying that if you do not have a chamber within the High Court, you cannot appear taking up a case.

Let me, at this juncture share the origins of the APMC.  These date back to 1939, when the legendary farmer leader, as Development Minister from the Unionist Party, got the Punjab Agricultural Produce Markets Act passed in the Punjab Assembly.  It provided for the constitution of “market committees’’ having two-thirds farmer representation to oversee the functioning of Mandis and curb malpractices by traders. This was complemented by another law that made the use of false or non-standard weights and scales in Mandis a cognizable offence.

The Monopoly of APMCs

In the course of time, almost all states enacted their own APMC Acts to regulate Mandis and outlaw any wholesale transactions in farm produce outside these market yards or ‘notified areas’. This was done with very noble intentions, but as the author’s own experience in West Bengal and Uttarakhand shows, the APMCs soon became an extra- budgetary resource head for the state governments.  Take the case of Punjab Mandi Board for example, which generates hundreds of crores of rupees on procurement undertaken by the central procurement agencies. In West Bengal, the APMCs have at different points of time stopped the interstate movement of potatoes and paddy, much to the detriment of farmers.  The record of elections to the APMCs is dismal, and the administrators appointed by the ruling dispensation is geared more to meet the short term political objectives. Incidentally the manifesto of all political parties makes a statutory mention of APMC reforms, and thereof it is clear that the opposition is more political than ideological.

Meanwhile, it is also important to point out that of the thirty six states and union territories, eighteen states have already enacted reforms allowing for establishment of private market yards/private markets, nineteen states, including major horticulture producers like Maharashtra have enacted reforms allowing for direct purchase of agricultural produce form agriculturists by processor/bulk buyer/bulk retailer/exporter and twenty states have enacted contract farming acts. Kerala and Bihar do not have APMC Mandis and Tamil Nadu has a different system. Most states have exempted levy of taxes and fees on sale of fruits and vegetables. Most of these reforms were enacted by the state governments and rules were framed with farmers welcoming these changes, even though the changes were suggested by the Centre.  What these legislations have done is to fast track the process in states which were hesitant to join the One India, one Agriculture market proposition.

CACP, FCI and Nafed

Just as the column acknowledged the role of Sir Chhotu Ram in the establishment of Mandis, it is imperative to discuss the political economy of MSP. With the  adoption of Green Revolution technology – particularly the planting of the new semi-dwarf high-yielding varieties responsive to fertilizer and water application – the then Agriculture Minister, C Subramanian made a pitch for  declaring MSP in advance, but also ensuring farmers were paid these through effective government procurement. There was heated debate over the paper he had prepared for the Cabinet. The opposition came from Finance Minister T Krishnamachari, who was predictably concerned

over the attendant fiscal and inflationary consequences. Ultimately, Subramanian’s view prevailed, thanks to the support received from Prime Minister Lal Bahadur Shastri.  To implement the MSP, Subramanian also founded two major institutions, both in January 1965. The first was the Agricultural Prices Commission, which was renamed as the Commission for Agricultural Costs and Prices or CACP in 1985, and the second was the Food Corporation of India (FCI). Its role was to organize countrywide MSP-based procurement operations. Later Nafed was mandated with the procurement of oilseeds and pulses. The CACP, in its price policy report for the 2018-19 Kharif marketing season, had suggested enactment of a legislation conferring on farmers ‘The Right to Sell at MSP’. This, it felt, was necessary “to instill confidence among farmers for procurement of their produce”. However, there is no consensus on this so far, though most state governments are trying to ensure that their farmers get the MSP.

Let us examine the contentions of those opposing these legislations. Their first is that the dismantling of the monopoly of APMC Mandis in wholesale trading of farm produce is the first step at ending even the present MSP-based procurement programme. If APMCs were to turn unviable due to the trades moving outside, how will government agencies undertake procurement that now takes place in Mandis? This argument  is specious – for the farmers have to be concerned about  farm gate prices, rather than the viability of the Mandis , which in any case can also reinvent themselves as centres of aggregation, assaying, packaging, value addition. APMCs are not being dismantled: their monopoly is being broken.  Again, long term contracts will ensure that even in a Covid type situation, the farmer will get the contacted price. In the case of the livestock sector, especially milch cattle, this enables the farmer to plan her expansion with support from financial institutions .Then there are issues regarding ‘imposition of Centre’s will upon the states’. Well, if the entire procurement system is funded out of central funds, then should the center not have a stake? Can a pan India market for agriculture be held at ransom because a few states find that this will end their rent seeking opportunities from procurement operations?

Last but not the least:  are these steps moving towards the larger goal of Doubling Farmers or not? The answer is a categorical yes, and with this the columnist rests his case.


(views expressed are personal)

By Sanjeev Chopra

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