03 Oct 2020 22:09 IST

Heat and dust over the Farm Bills

The Centre’s heavy-handed approach towards farm reform is raising the States’ hackles

The three Farm Bills passed in Parliament recently have predictably created a storm not only in the political circles but also in the streets of North India. Before even the Bills were presented in Parliament, Food Processing Minister Harsimrat Kaur Badal quit the government in protest. Her party, Shiromani Akali Dal, even walked out of the National Democratic Alliance, after having been part of it for more than two decades.

The Opposition parties led by the Congress have also not surprisingly turned up the heat on the government. What are these three Bills and why are they generating so much of controversy?

The three Bills

The Farmers’ Trade and Commerce (Promotion and Facilitation) Act, the Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, and the Essential Commodities (Amendment) Act for stock holding limits are the three Bills.

The first Bill aims to allow farmers to sell their produce outside the APMC (Agriculture Price Marketing Committee) yards. This will purportedly give the farmers the freedom to sell their produce to whomever they want and more importantly release them from the clutches of middlemen (or Arhityas as they are known in some parts of North India). It will also save the farmers from paying market fees and commission to middlemen and allow free trade in farm produce across States.

The second Bill allows for contract farming, where farmers can directly sign contracts with corporates, and direct-selling of farm produce to the consumers, bypassing the APMC yards and middlemen.

And the third Bill deregulates the production or storage of a range of farm produce — cereals, pulses, edible oils, and onion. This is expected to bring in private investment in the farm value chain, such as cold storages and logistics.

There is a growing fear, fuelled in good measure by the Opposition parties, that the government will dismantle the Minimum Support Prices regime, although, the government has categorically denied it. The MSPs are floor prices announced by the government at which it will buy produce from the farmers even if the market prices rule below them. This support price regime aims to help farmers when prices of farm commodities crash.

Conflicting narratives

Now let’s look at the conflicting narratives spun by the government and the Opposition parties. The Bills, according to the government, will free the farmers from the clutches of the ‘evil’ middlemen, take trade out of the dreaded APMC yards, usher in contract farming, and bring in hitherto unseen prosperity to farmers.

The Opposition narrative is that these Bills are the knell of death for the farming community, leaving them at the mercy of cold and cruel market forces and rapacious corporates, waiting to cheat the farmers of their due share.

The reality, as always, lies somewhere in between. The irony is that some elements of these three Bills are already in existence. For instance, contract farming is already taking place in the country. Companies such as Pepsi, ITC, and others, are in contracts with farmers directly for sourcing their produce. Punjab is the only state that has a model contract farming Act and several other States are working on one.

Also, selling farm produce outside the APMC yards is taking place in most States. States such as Bihar, Kerala, and Manipur do not have an APMC Act and all the farm produce there is traded with private parties directly.

The Centre even came out with a pan-India electronic market for trade in agriculture produce — eNAM in 2017. This trading portal networks with the APMCs to create a unified, nation-wide market for farm produce. But for the eNam to succeed, States have to bring about reform and they have been slow in this.

The importance of MSPs, too, is being inflated in this debate. Though the government announces MSPs are for 23 agricultural commodities, it procures only rice, wheat, and some pulses in large quantities. Also, only six per cent of farmers sell their produce through the MSP regime.

This brings us to why the protests against these Bills have been most vehement in some parts of the country — namely Punjab and Haryana. These are two States where the current APMC system is working reasonably well and the bulk of paddy and wheat grown here are bought by the government at MSP rates. In Punjab, about 95 per cent of the paddy farmers are covered under the government’s procurement system and the corresponding figure for Haryana is 70 per cent. The farmers here naturally fear that the dilution of the APMC system would affect them. . States also earn revenues from the fee they charge on the APMCs — mandi charges.

The Modi government’s objective is to usher in private investments in the farm value chain — especially in cold storage facilities and logistics, which will help private entities to procure produce from farmers directly.

The Centre is also pinning its hopes on farmer producers’ organisations (FPOs), which is nothing but a fancy term for cooperative farming, gaining traction. This will allow farmers to not only scale up production by consolidating resources but also give them bargaining power while negotiating with big retail chains. So the Bills are ushering in the entry of private players in the agriculture sector in a big way.

Federal questions

But the biggest criticism the Modi government is facing is the way it has literally rammed through these Bills in Parliament with no debate, which is a big blot on our Federal polity. Some economists such as Ashok Gulati have called these reforms as the ‘1991’ moment for Indian agriculture. Other observers such as veteran journalist TN Ninan have been more circumspect. The Congress Party is talking about bringing in legislation in the Congress-ruled States which will nullify the Central laws.

Bringing reform and change in a system as complex as Indian agriculture was never going to be easy. Is a ‘top-down’, ‘one-size-fits-all’ approach by the Centre, in what is essentially a State subject, really the right way to bring about change and reform in Indian agriculture?