The three bills — The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020; The Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020; and the Essential Commodities (Amendment) Bill, 2020 — seek to remove the shackles on farmers and traders that prevent them from transactions of their choice, permit contract farming and interstate commerce, give electronic markets a firm legal basis for trading in farm produce.
The law that says farmers can sell their produce outside the regulated market controlled by an Agricultural Produce Marketing Committee (APMC) is the most controversial one. The law that regularises contract farming creates a bureaucrat-led dispute settlement mechanism and removes farmer-buyer contracts out of the ambit of civil courts. The amendment to the Essential Commodities Act removes the scare that traders who buy from farmers would be punished for holding stocks that are deemed excess.
Why are farmers worried? They fear that these reforms sound the death knell of the cosy arrangement of ever-rising Minimum Support Prices (MSP) and open-ended procurement (although confined to a few states). The cash transfers for farmers had been welcomed but carried the ominous portent of an end to subsidies for power, water and fertiliser. The new laws complete the framework for moving agriculture out of direct state support to a more market-oriented system, fortified with a huge financing scheme for market infrastructure for agricultural produce.
Farmers thus face uncertainty. They realise, or at least their leaders realise, that the current system of high MSP and open-ended procurement cannot continue. The government made a big deal of its free food scheme during the pandemic-induced lockdown. Rather than spending money on it, the government actually saved expenditure. When the buffer stocking norm stood at 21 million tonnes, government stocks held upward of 60 million tonnes of grain. This entails a cost — interest on financing the stock, the cost of storage, the cost of pilferage and spoilage. That cost comes down when the grain is given away. The short point is that the country faces an excess of cereals, rather than any shortage.
And mounting MSP and open-ended procurement prevent farmers from moving out of grain and into other crops. But any change entails disturbing its entrenched beneficiaries. Farmers benefit from the status quo, of course, but could benefit even more, if they diversify from grain to fruit, vegetables, fodder, flowers or animal husbandry. Those who definitely stand to lose are the arhtiyas, middlemen, to whom farmers sell their produce in the current system and who often act as moneylenders as well.
Arhtiyas are also politically influential. In all probability, they call the shots in the ongoing protests. But there are two features of the bills that invite valid opposition: one, infraction of the states’ right to decide on intra-state commerce in agriculture, and two, officer-led dispute settlement outside the ambit of judicial review.
Inter-state trade, even in farm produce, is the Centre’s concern, as per the Constitution’s Seventh Schedule and its lists of subjects that states and the Centre can deal with exclusively and a third list on whose items the two poles of the federal polity can legislate concurrently. Intra-state trade is a state subject. The farm laws of the Centre curtail the efficacy of state laws on a state subject. That is not a good thing.
The other unwelcome part is placing farmers and traders at the mercy of civil servants, rather than of the courts. Will a Jat sub-divisional magistrate in Panipat or Meerut be guided solely by the merits of the case when a Jat and a Yadav approach him with a dispute? Ideally, he should be. And, of course, we live in an ideal world.
If these two shortcomings are removed, will the reforms proposed in the three bills herald an era of prosperity for the Indian farmer? Bihar scrapped its APMC Act in 2006. The state’s farmers have not quite been wallowing in milk and honey ever since. Giving farmers choice to sell without the help of middlemen is of use only if there are roads that connect villages to markets, climate-controlled storage facilities await their produce, electricity supply is reliable and available to power those facilities and food processing companies compete to buy their produce. These are as plentiful as cures for Covid-19.
Nor are the lacunae purely physical. A few days ago, the government banned the export of onions. If international trade in farm produce is hostage to sarkari nervousness about inflation, farmers cannot prosper. That apart, most farmers in India are too small to take a meaningful part in market-driven agriculture. They need to be organised into cooperatives and farmer-producer companies or weaned off the land and employed in a dynamic urban sector. Farm prosperity is not just a function of deregulation, but of sound macroeconomic policy and governance and realistic investment in infrastructure.
A bold step across a chasm is a plunge into the abyss, if a bridge has not been built for the crossing.