As a nation, we cannot be accused of lacking the capacity to create conflict content. The government of India brought three farm related Bills, and it says these are for the good of farmers; the agriculturalists say we do not need this goodness. Why then add to conflict by enforcing the measures that the targeted beneficiaries do not want?
It is not that there are no positives in the new proposals; the issue, however, is the acceptability of these. Illustratively, a non-controversial measure is amendment of the EC Act to remove upper limits on stock-holdings of agricultural produce. It would ease the agro-supply chain, facilitate businesses and remove trade barriers.
The stated objective of the other two Bills is to allow contract farming and enable the farmers to sell wherever and to whosoever they like, treating the country as a single market. Farmers, thus, will turn entrepreneurs to realise optimum price for farm produce, while at the same time retaining the option to revert to the existing regulated Mandis, which are not being abolished. This certainly sounds alluring.
The fact, however, is that these measures disrupt the existing market mechanism that has served well over the years and the new reform measures, where ever implemented, have not really delivered. Illustratively, Bihar had abolished the APMC regime in 2006 and its experience, by any yardstick, is not encouraging.
The Agricultural Produce Markets Act, 1961 that is now being debunked and bypassed by the new laws, was all along championed as a saviour of farmers. It had established a competitive market infrastructure and all sale / purchase transactions are conducted through open auction – farmers sell to the highest bidder. What could be more fair? The distributional efficiency of the marketing chain was ensured by regulating costs of each transaction in Mandis.
Thus, Arhtiya or commission agents get two and half percent (in Punjab) on the transaction value for rendering basic services like cleaning the produce, packaging, weighing etc. However, this two and half percent is now being debunked by the reformists, projecting Arhtiyas as ‘middle-men’, while actually they are ‘facilitators’. Arhtiyas do not buy the produce; they only render certain Mandi services. These services are integral to any marketing chain and in the new regime will have to be created afresh, by whatever name or form they may be called.
Secondly, the reformists disparage levy of market fee and Rural Development Cess @ 3% each on commodities sold / bought in Mandis. These levies are projected as anti-consumer as these add to the end cost of the commodities. However, they ignore the fact that the revenue so generated is utilized to build rural infrastructure including village link roads that in Punjab have a total length of 64,878 Kms, apart from building storage godowns, marketing yards, and even for funding specific research projects by the Agricultural University.
The new law prohibits the state governments from levying any market Fee, Cess or levy on agricultural transactions under the new regime and thus deprives the states of a vital source of income, which in the case of Punjab is about Rs. 1800 crores annually from RD Cess and an equal amount from Market Fee.
The power of the state governments to impose sales tax was earlier absorbed by GST, which had also reduced the Mandi transaction costs from about 14% to the present eight and half percent. In the absence of alternative sources of revenue, which neither the present trinity of the new laws offer nor the GST assures, more than the farmers, it is the state governments that would be under tremendous resource crunch and my fear is that rural infrastructure would crumble, for want of funds.
The irony is that what is being attempted by the new Bills could be achieved even under the existing Mandi laws, without disrupting the revenue streams. The present law permits setting up of private markets owned and operated by any person or Company or Cooperative where entire infrastructure is developed by such private entities. The law also allows contract farming and Punjab has experimented with it. In any case, there is no bar under the existing law on farmers to sell their produce outside a notified marketing yard. And even mill premises of Cotton ginning factories and Basmati processing units are used as purchase yards, to facilitate marketing.
The real bug bear of the farmers, however, is the apprehension that the Central government will substantially reduce, if not all together withdraw from the Minimum Support Price mechanism. Though 33 commodities have been notified, de facto, however, the MSP operations cover wheat and Paddy crops, and marginally few other crops like cotton and oilseeds. Procurement mechanism for the other notified 33 commodities is symbolic, and virtually non-existent.
The farmers apprehend that the projected reforms are an outcome of the agricultural surpluses and plenty. Given the current stock of wheat and paddy, which is reportedly three times more than 21 million tons of the buffer norm for food security, the Central government, they fear, may slowly move out of procurement business, leaving it to market forces to determine both the price and transaction costs. The government agencies find the burden of the buffer stock prohibitive due to huge amount of funds blocked and interest and the establishment costs. Besides, spoilage, waste and pilferage of the stocks add to the costs.
The state governments have reasons to suspect that even if the MSP operations are retained, the Central agencies may just shift these operations outside the existing regulated Mandis to other locations, say to the storage godown premises, under the new laws. That will deprive the states of their income from Fee and Cess.
The farmers, however, may be satisfied if a justiciable clause is incorporated in the new law declaring that all sale / purchase transactions shall be valid only if conducted above the notified MSP. The other issues like the complex legal mechanism for dispute resolution under the proposed contract farming, or building farmer’s capacity to make use of e-trading and to access the far flung markets, would require determined efforts over a long period of time. The farmers are mostly uneducated or semi-literate. With dwindling land holdings that reduce their capacity to bargain and lacking the economy of scale, the terms of trade are certainly tilted in favour of big businesses, under the proposed new dispensation.
By :
Co Chairman S RI SINGH Ex Chief Secy. Pb. Govt.