Existing agri support systems like the Mandis and MSP falling out of favour now, it leaves to be seen how much the Farm Bill 2020 will drive a good harvest for the marginalised Indian farmers. SURAJIT SINHA, Economist and Professor at IIT Kanpur ploughs through the new legislation and analyses.
An Indian peasant tilling the farm (Picture Courtesy: Shutterstock)
Farm output in India is bought and sold in Mandis set up and regulated by the Agricultural Produce Market Committees (APMCs) of the states. The twin goals of APMC are (a) safeguard farmers against exploitation by intermediaries and private money lenders and (b) ensure that all foodstuff are auctioned to wholesalers and retailers. The other important support system that farmers have been enjoying is the Minimum Support Price (MSP) for certain products and some percentage of the total produce of farmers.
Both Mandis and MSP have been subjected to various criticisms like vested role of politicians in Mandis, price volatility and benefits of MSP primarily accruing to large farmers. In addition, the vast majority of small and marginal farmers have been left to fetch for themselves by catering to local markets and toiling land for large farmers as agricultural labour. With rising agricultural distress and suicides among farmers, government has opted to waive loans from time to time for temporary relief which often benefitted across farmers, large or small. At the government level, MSP and various agricultural subsidies have posed a huge financial burden in addition to accumulating large stock pile of grain in the Food Corporation of India (FCI) godowns.
The present government has attempted to solve these issues by passing two acts of Parliament, namely Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, which complement each other. The Essential Commodities (Amendment) Bill, 2020 amended an earlier bill passed in 1955 to remove stock limits of produce held by farmers and others. The basic idea of these two new bills is to allow farmers to sell beyond APMC Mandis through pre-production contracts between farmers, sponsors (corporates, individuals and societies) and a third party although it is not clear who that may be. This is expected to open up intra-state and inter-state trade in farm produce. There are various clauses in the Bills to safeguard farmers’ interests like land protection, timely payment schedule, guaranteed pricing, time bound grievance redress system and so on.
The obvious goal of the government is to benefit financially by gradually limiting MSP to a select few who still continues to trade through Mandis. It will also reduce storage costs in FCI godowns as procurement from farmers is expected to decline. The other advantage is to the corporates who would like to set up commercial trade in vast untapped farm produce through retail outlets and exporters. It may also help to develop agro-based industries.
But farmers are up in arms in certain parts of India protesting these two new Farm Bills. Large farmers of Punjab and Haryana are protesting the most. Some political groups have also shown reservations. Is it the fear of losing MSP behind these protests or the idea of deal-making with corporates unnerves them? It could be both. Large farmers are not business people particularly having enjoyed MSP, free electricity, subsidised inputs and government procurement for decades. On the other hand, corporates are experienced deal-makers with required shrewdness and expertise to write the contracts in their favour. On the other hand, why are political parties wary of this new policy? One obvious reason could be that farming community votes have always won them elections and with this uncertainty and apprehensions in farming community, they may stand to lose their support without re-establishing their solidarity with farmers.
But the age old small and marginalised farmers are yet to organise themselves to voice their opinion. May be they are too weak economically and feeble to organise themselves having been underfed for years. Neither of these two Bills contain any explicit benefits for them. They are not expected to produce enough individually to write contracts with sponsors. This new system of buying and selling of farm produce can benefit only farmers with substantial produce if written under proper supervision. Extra provisions are required to help small and marginal farmers. The vested interest groups like local politicians and individuals may still corrupt deal-making between farmers and their sponsors; that can be minimised if state governments act effectively as regulating bodies. The Bills only ask state governments to maintain electronic registers of agreements.
SURAJIT SINHA‘s areas of teaching and research interests range from Monetary Economics, Macroeconomics, Indian Economic Problems, Microeconomics to Money and Banking. In 2019 he was awarded Distinguished Teacher Award by IIT Kanpur. He can be reached at suraji@iitk.ac.in
Opinions expressed in this article are of the author’s and do not represent the policy of The Edition. The writers are solely responsible for any claim arising out of the contents of their articles.
Tags: #FarmBill2020 #Mandi #MinimumSupportPrice #APMC
The Edition 
I have no disagreement with you. Farmers should be given more freedom to sell outside Mandis at profitable prices. In the note I have expressed some apprehensions that farmers may have and what we academicians feel. Since, there are no Regulatory Clauses in the Farm Bills, mutially profitable contracts have to be written without supervision which may not always work in favour of farmers who are after all not business people. Secondly, in many states farmers have been selling their produce outside Mandis but reports suggest that even then they are not being rewarded adequately. Thirdly, since the bulk of the farming community fall under “small and marginal” category, they may require special attention which I could not find in the Bills. To make transactions profitable for both the buyer and the seller, small farm output may have to be accumulated through co-operatives or some other means so that sponsors can enjoy bulk buying and farmers receive good return. It may be difficult for corporates or any other sponsor to write contractrs with small farmers individually, at the same time it may be expensive for individual small farmers to pay the legal fees. A few more legislations may be required along with an efective regulatory body to make farmers happy.
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Dear Professor,
First of all my sincere thanks for your insights on FARM bills 2020.
I have a few queries for you. First, why do not you think de-licensing can help the farmers. Because present APMC act states that sell only one market( specifically, MANDI) rather approaching multiple markets.
Second, Farmers selling outside mandi also, but they are selling with fear because if concern authority would notice, the authority will seize the farmer stuff so on. thus, farmers always in fear of selling outside limits of mandi.
Third, you cited some political vested interested in your editorial text. Yes, I totally agree with that. like Punjab and Haryana getting huge cess getting from mandis, in India. these two states afraid to lose that cess, if FARM bill implemented 2020. That is the only vested interested of those two state governments and encourages the farmers’ protests. In fact, in Indian history, no government has been supported to farmers, for your better understanding. I am not saying this FARM bill 2020 can solve all the tussles of agro-industry. We required more and more legislations and this just beginning.
Fourth, the FARM bills 2020, don’t abolish present APMC act and holding the MSP system also.
And, my last submission to you, FARM bill 2020 giving freedom to farmers to sell his/her products where ever they wanted to sell.
Note: The above all my insights I have gotten after reading news articles and watching interviews concern experts respective fields, ex. retired IAS officers and Professional law experts. If my questions offend you, kindly forgive me, Professor.
Thanks in advance.
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