Why the new agri laws are not anti-farmer

Farmer outfits are continuing to protest the new legislations in agriculture. On Sunday, amidst uproar from the opposition parties two of the three Bills were passed in Rajya Sabha. Last week when these Bills were passed in the lower house, Shiromani Akali Dal’s Harsimrat Kaur Badal, who was the Minister of Food Processing, quit the cabinet. Why this drama?

It was the Congress which in its 2019 election manifesto promised to repeal the APMC Act. All that the Bill on farm produce trade has done is to give farmers the freedom to decide to whom they sell; it removes the compulsion to sell to the licensed agents of APMC (Agriculture Produce Market Committee). So, the reason for the protests is not clear.

As for the issue of the Centre’s intrusion into the States’ jurisdiction, it is only under the powers given by the Constitution that the Centre has enacted these pieces of legislation. The fear that the legislation will lead to the end of MSP procurement is unwarranted. Even at present, there are a large number of procurement centres outside the APMC that engage in MSP operations. The new legislation does not say it will shut APMCs. It only says that it is restricting the powers of APMCs to their physical boundaries, and opening up the space to private players.

It appears that the fear of protesters is that the new legislation will check money flow in the hands of APMCs; in Haryana and Punjab, the market fee is 4-6 per cent, respectively (1-2 per cent in other States). Yet, the infrastructure is not great at the mandis. It is only right that the new legislation has cut out a source of income for APMCs by saying they cannot charge a cess on trade that takes place outside its yard. However, there are some concerns in the new laws that the Centre should address.

Why the fear?

The fear of farmers that the MSP procurement will stop is misplaced. The Agriculture Minister has said that MSP procurement will not stop. A few weeks back, the target procurement for kharif paddy was increased to 49.5 million tonnes, almost 20 per cent jump over last year. So, farmers need not worry. The MSP for kharif 2020 paddy has also been increased. Even if it so happens that APMCs shut down on not being able to withstand competition, MSP operations will continue through government procurement centres. Farmers’ outfits need to realise that outside the APMC mandi, there will be more buyers for farmers’ produce (as they will not be charged any levy), helping effective price discovery. Farmers’ bargaining power will improve.

The new legislation may throw some middlemen out of business. That is no calamity, given their minimal role in the agri-marketing ecosystem and exploitative relationship with farmers. In APMCs in Punjab and Haryana, agent commission is about 2.5 per cent. Hence, it is not surprising that the arhitya community is against the new laws. If arhityas are indeed playing a relevant role in the market, they should not worry about losing their work. The APMCs in Punjab and Haryana are also dreading the new legislation. There are reasons for this: In all these years, from the mandi fee collected they have not created enough infrastructure, and now there is fear of losing business to private markets. In Punjab and Haryana, the mandi fee collected by APMCs fills up the coffers of the State government — a reason why the States do not want the new legislation.

Some suggestions

There are certain aspects of the law which have not been well thought out. First, given that free trade is allowed, there should be a provision to register private players, check the systems they have in place for weighment of farmers’ produce, their price auctioning and payment mechanism and other facilities. Also, it should have drawn out a regulatory framework for supervision of all trade (irrespective of its being done on the electronic market or physical market). Further, the legislation should have thrown light on how it is going to capture trade data and build a market intelligence system, which is crucial for decision-making by the government on export/import, prices, inflation control, etc.

It would have been ideal had the legislation announced the creation of an umbrella entity that can take all smaller primary markets across the country under its fold and bring uniformity in trade and regulations. Another issue with regard to the Farmers’ Trade Promotion Bill is that the grievance redress system is weak. One is not sure at least in the initial phase how a high number of grievances would be handled by a Sub-Divisional Magistrate.

The other concern is that the Bill has clubbed FPOs with traders and made it mandatory for them to pay the farmers on the same day or within three days, which is unreasonable given the long working capital cycle of FPOs.

Instituting these safeguards will make the reforms foolproof.