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Reduced bargaining power, MSP worry behind farmers’ stir in Punjab, Haryana, UP


NEW DELHI: Farmers’ protests against the agriculture legislations are set to intensify over the next week with the Congress and Shiromani Akali Dal determined to scale up this controversy. Though the Opposition parties have opposed the new Bills, the protests have largely been centred around Punjab, Haryana and western Uttar Pradesh. Uncertainty over the minimum support price (MSP) mechanism, loss of livelihood for the powerful arhtiyas or middlemen, deep-seated political linkages of the farm sector and a reduced bargaining power for small farmers in the highly-corporatised new regime are the main factors fuelling the protests.

ET takes a look at the reasons why the three states have spawned the protests and other states have remained largely passive.


The biggest factor for farmers is the assured income that comes from the MSP mechanism. Farm expert and former UP Planning Commission member Sudhir Panwar says, “The Green Revolution states –– Punjab, Haryana and western UP belt –– have a vibrant and organised mandi system, which would be rendered defunct with the new laws. This is the main reason the farmers are protesting.” Farmers selling their produce outside the mandi system will mean loss of revenue for Punjab and Haryana governments as the two states see maximum public procurement of rice and wheat.

Punjab earns nearly Rs 3,000 crore annually through a 6% market fee and rural development cess with government agencies procuring nearly 250 lakh metric tonne of crops worth Rs 50,000 crore. Punjab earned over Rs 1,620 crore by procuring 128 lakh metric tonnes of wheat earlier this year and could earn Rs 1,320 crore from the public procurement of nearly 110 lakh metric tonnes of paddy worth Rs 22,000 crore that started this week. Punjab also reduced the market fee by half for Basmati this time to compete with Haryana.

“99.6% of the wheat and rice in Punjab is procured by government agencies and just 0.4% by private agencies after Punjab brought in a State APMC Act in 2017 to allow private mandis in a regulated manner,” a senior Punjab government official told ET. He said Punjab’s farmers “feel safe” in growing wheat and rice crops as it gets procured on MSP with early payments.

The public procurement is organised differently in other states. For instance, Chhattisgarh and Madhya Pradesh have smaller land holdings as compared to Punjab, Haryana and western UP. About 86% of Chhattisgarh farmers have land holdings of less than 5 acres.

“In the villages, 30% of small farmers grow crops for consumption and depend on MNREGA for their cash needs. Small farmers usually never reach the mandis. They are tapped by arhtiyas who reach their villages and buy the crop,” says Panwar. Since small farmers are not in the mandi system, they remain unaffected immediately and hence passive to the protests.

Chhattisgarh rural development minister TS Singhdeo differs, “The new laws will also disrupt Chhattisgarh’s procurement system, which is largely dependent on cooperatives. Our farmers have organised themselves and have better bargaining power for their produce.”

In Haryana, the BJP-led government backs the new laws, but has slashed the existing 4% market fee and a state rural development fees to just 1% last week to ensure farmers come to the mandis. “The private mandi system is for a limited number of some progressive farmers in the state. Most farmers will opt for state mandis and will get MSP there,” Haryana BJP president OP Dhankar argued. In TRS-ruled Telangana, 86% of land holdings are less than 5 acres with average land holding size being 2.8 acres, which is lower than the national average. Though Telangana saw the second highest procurement of paddy in 2019-20 (after Punjab), there have been no protests in the state.


Punjab chief minister Amarinder Singh says that the new laws would bring in private mandis in an unregulated manner where anyone would buy produce without registering with the state government. With this, Punjab stands to lose yet another revenue stream that could be used to build rural link roads and develop state mandis. Experts, however, worry about the fate of small farmers. Panwar says, “Farmers have zero bargaining power. They can bargain with the arhtiya but not with a big corporate. This is why he is resisting the change. There has been no discussion on this aspect.”

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