The Essential Commodities (Amendment) Act (ECA) allows the accumulation of large quantities of agricultural produce. Farmers sell their produce at harvest time and prices fall. Those with funds purchase, store and release stocks as per demand, and prices rise over the next few weeks and months. Pulse and oilseed prices regularly increase 50-75%. Semi-perishables such as onions and potatoes sometimes see a price rise of more than 500%. It is the trader who benefits, not the farmer. ECA allows large corporates also to buy up huge stocks.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act allows private mandis, or market yards, with no tax. This formalises an existing arrangement where large corporates are already buying directly from farmers. Modern retail chains are also trying to purchase directly from farmers. This Act will make all this easier
So, one would assume that businesses , farmers and consumers all benefit. There is, however, a catch. The world over, when buyers are much bigger than sellers, prices are depressed. Coffee prices for Karnataka farmers have been steadily going down over the years due to the presence of very large international buyers.
Market forces also need a level playing field. The average landholding of a farmer in India is 1.22 hectares. How can he negotiate and bargain with large corporates? Replacing exploitative local middlemen with big corporates hardly benefits the farmer in any way.
The third law, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act on contract management, forbids farmers from going to the court. Complex contracts can be drafted and understood by corporate lawyers, not so easily by individual farmers. A local bureaucrat will be the only arbiter of disputes.
The Actor Behind the Acts
Whose hand is behind these three Acts — farmers or the agri-business lobby? Farmers fear that the minimum support price (MSP) will be gradually rolled back. This would mean a loss of about Rs 7,500 per acre to a rice farmer. Meanwhile, GoI has reportedly agreed to give a written assurance on MSP and procurement, an offer that representatives of farmer unions have apparently rejected. Of the 310.6 lakh tonnes of paddy procured during 2019-20, 202.5 lakh tonnes were from Punjab, and of the 389.5 lakh tonnes of wheat, 127 lakh tonnes was from the state. Many other state governments procure very little of the total produce.
Yes, a lot of food purchased by GoI is wasted in warehouses. But that can be fixed. An earlier proposal of directly passing on subsidy to farmers instead of physical procurement is worth reconsidering. With the use of IT, glitches in implementation can be anticipated and sorted out. MSP implementation puts small millers and processors under the control of local government red tape and some harassment. This needs to be sorted out.
Gone are the days when farmers ‘could not understand’ market economics. Perhaps it is the intellectual class — exceptions apart — who are a bit removed from ground reality. The world over, including in the US and EU, governments intervene in agriculture. Comparing subsidies across nations is tough, as the definition of subsidy differs. However, on a per-farmer basis, the Indian farmer receives less than 1/30th of what an EU farmer receives. His net income is, of course, far less.
National food security concerns force the US and EU to massively subsidise agriculture and incentivise farmers to stay in farming. India, for long self-sufficient, is now again importing pulses and edible oils. The three farm laws further disincentivise farming. We need atmanirbharta in food.
What is the way out then? Again, we must ask: way out for whom — farmers, the government or corporate interests? If it is for farmers, then clearly farmers need to increase their bargaining power in the market
India is planning 10,000 farmer producer organisations (FPOs). . Privately, people in the know say most will not succeed. The reason is simple — politics treats FPOs as a means for votes, and the bureaucracy as one more scheme to control and preside over. Most NGOs do not have the necessary business capabilities to set up genuine market-oriented FPOs.
The Milk of Biz Kindness
The way out was shown by Amul, the world’s largest dairy cooperative in terms of number of members. It is ‘for the farmers, by the farmers, of the farmers’ — no subsidies, and a turnover of over Rs 50,000 crore. Can this work in the non-dairy sector?
India can learn from international success stories, and keep politics and government control away. The total turnover of the top 10 agricultural food cooperatives worldwide is over $200 billion. In the whole of India, it is less than $10 billion, most of it in dairy. India also has the world’s largest number of farmers. FPOs need to get the right incentives, market access and business knowhow. While we say ‘Jai Jawan’, we need to say ‘Jai Kisan’ — and mean it — as well.
(The writer is professor, India Institute of Management (IIM) Bangalore, and founder, Farmveda, Bengaluru)