The co-existence of APMC and non-APMC markets giving competition to each other is the best foot forward for ensuring a fair deal to farmers
The enactment of the three farm laws by the Central Government has triggered agitations by farmers’ organisations and a spate of counters, specially from non-NDA ruled States. Their main worry is that growers won’t get the Minimum Support Price (MSP) on sales made outside the Agricultural Produce Market Committee (APMC) mandis (markets). All this, when it is well-known that under the APMC, agriculturists are already getting a raw deal. The constitutional validity of the farm laws has been challenged in the Supreme Court, too, with the Chhattisgarh Government arguing that these have in effect repealed the State law on the mandi system. It will be some time before the matter is adjudicated by the top court. The fact remains that with multiple selling options available under the new Central laws, growers will definitely be much better off. Instead of trying to undo what the Centre has done, the States should focus on how APMC mandis can do better.
The most strident criticism of the laws is based on a belief that big food companies, who now get to buy directly from agriculturists outside the designated APMCs — courtesy, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 — will use their power to deny growers, particularly small and marginal ones, the MSP for their produce. In fact, an amendment passed by Punjab says that the sale of its cash crops, wheat and paddy, will be valid only if the seller pays a price equal to or greater than the MSP announced by the Central Government and that any violation would be punishable.
Before jumping the gun and speculating over what the farmers won’t get, we need to introspect as to what they are getting under the existing dispensation. At present, they are required to bring their produce to the mandi notified by the State Governments under their respective APMC Acts. Growers can’t take their produce to any other place (if any farmer does this, s/he runs the risk of the vehicle being impounded by the State agencies for violating the extant law). If a buyer is willing to pick the produce up from the farmers’ doorstep, even that is not possible.
On reaching the designated mandi, the agriculturist is confronted with two major players, namely arhtiyas or commission agents and licenced traders or buyers. The main function of the arhtiyas is to arrange for the auction and delivery of the harvested crop to the buyers. He gets a commission at the rate of 2.5 per cent of the purchase price and this has to be borne by the buyer. In addition, the latter has to pay other charges levied by the State Government (for instance, Punjab levies market fee at the rate of three per cent and rural development cess or RDC at three per cent).
In cases where the licenced trader is a State agency, such as the Food Corporation of India (FCI), which purchases grain for meeting the requirements of the Public Distribution System (PDS) and giving them to beneficiaries at a subsidised price, the farmer is assured of the MSP. But State agencies don’t buy all of the produce brought by growers to the mandi for sale. Even for wheat and paddy, where the agencies have a well-entrenched network, the purchase is only about 33 per cent of the total produce. For others (the Centre notifies MSPs for 22 agri-items), this is much less.
The agriculturists, who are not fortunate to sell their produce to State agencies (these are predominantly small and marginal growers), are left at the mercy of the arhtiyas and licenced traders and are forced to dump it at a price substantially below the MSP. Arhtiyas exploit farmers in other ways, too. They lend money for buying agricultural inputs, namely seeds, fertilisers, pesticides and so on (in many cases, for weddings, medical emergencies, too). The interest charged is a minimum 1.5 per cent a month. That leads to mounting debt for farmers.
According to a study on Indebtedness Among Farmers and Agricultural Labourers in Rural Punjab, as many as 86 per cent of farmers and 80 per cent of agricultural labour households are mired in debt. Over a fifth of that debt was owed to commission agents and moneylenders. What’s more, the debt burden gets worse down the scale. It’s the heaviest among marginal and small farmers.
The conditions of millions of small and marginal growers could not have been worse than what it is today. And this has to do fundamentally with the absence of alternative options to sell their produce.
The extant arrangements are being used by States to bolster their coffers (for instance, Punjab garners about Rs 1,750 crore annually from levy of RDC at the rate of three per cent) at the cost of the Centre. This is because the levies increase the cost of food procurement for distribution under the National Food Security Act, 2013, which increases the food subsidy. It is a typical case of States gaining access to Central funds outside the award of the Finance Commission (whether one likes or not, the taxpayers’ money is also used up for adding to the riches of arhtiyas as their commission too, is coming out of the food subsidy).
The Central law on trade and commerce opens up a world of opportunities to the farmers even while keeping the APMC intact. They can go to a private market for selling; they can enter into a contract for selling to a company (processor, aggregator, large retailer, exporter and so on) at their doorsteps, form farmer producers’ organisations (FPO) and sell under their umbrella. To worry about whether they will get MSP on all such sales, that too when at present they are literally getting nothing, is flawed thinking. By all means, they must be protected from exploitative corporations. That doesn’t mean they should be denied access to them though.
In August, 2018, among the several amendments approved by the then Devendra Fadnavis Government to the Maharashtra Agricultural Produce Marketing (Development and Regulation) Act, 1963, a provision related to making purchase of farm commodity below the official MSP a punishable offence. With this, if a private trader buys farmers’ produce at a price lower than the MSP, he could be jailed for one year, and will have to pay a fine of Rs 50,000. This led to widespread consternation and had to be dropped.
Even so, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 on contract farming has provisions to protect the interests of farmers. For instance, the grower can walk away from the contract anytime but the company can’t. It protects the minimum guaranteed price in the event of a drastic fall in the open market rate, even as the agriculturist gets a share of the post-contract price surge after a contract farming agreement is signed. To give a fillip to development of parallel markets, the Central law has also disallowed State levies (market fee, RDC and so on) on transactions outside the APMC platform. While, on one hand, this move will reduce the cost of food to consumers, on the other, it will lessen the burden of food subsidy. Instead of re-introducing these levies, the States will do well to abolish these on purchases made at APMC mandis as well.
Complementing the other two legislations, the Centre has also enacted, the Essential Commodities (Amendment) Act, 2020 to exclude pulses, cereals, edible oil, oil seeds, onions and potatoes from the purview of this archaic law. This will free the processors, millers, exporters and so on from stock limits and other shackles and help them do their business in a seamless manner. However, the exceptions (imposition of stock limits in situations of sudden spike in price like in the case of onions right now) should be sparingly used as it gives the wrong signal, particularly in export markets, and will eventually boomerang on farmers.
Giving more options to farmers to sell their produce can’t be stalled just because the potential buyers won’t give them MSP. Instead of opposing reform that promises something distinctly better than what the farmers are getting today, the States need to work to make their mandis efficient and healthy. Both APMC and non-APMC markets giving competition to each other is the best foot forward for ensuring a fair deal to farmers.
(The writer is a policy analyst)
https://www.dailypioneer.com/2020/columnists/food-for-thought-food-for-thought.html