by Subrajoti Paul 11 December 2020
The capital city of India has seen an unprecedented closure of its various links to other states in recent times, the longest-running national highway NH44 was blocked from both ends. Gazipur border on Ghaziabad side and Chilla border on Noida side which are entry points to Delhi were also closed, along with Jaipur-Delhi National Highway being blocked by Akhil Bharatiya Kisan Sangharsh Samiti.
The reason being two Bills which were introduced as Ordinance during the onset of Covid-19, they were hastily passed by the Centre and subsequently garnered mixed responses from citizens and experts, as one party stating it being progressive as “1991 economic reform” while the other labeling it as private pleasing policy.
The first one is the Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, which allows farmers to sell produce outside Agriculture Produce Marketing Committee (APMC).
The second being the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020, which provides a framework allowing farmers to enter into contract farming.
India is a land of a million population housing a trillion mouths coupled with loudspeaker media houses, at times it can become tedious for many to even comprehend the issue. It is important to know that no policy is one-sided or downright positive or negative but various aspects shape it, so before any side leaning a few kinds of stuff should be examined.
Chronology
During the mid-thirteenth century when India was at constant risk of invasion by the Chagatai Mongols from the north, at that time ruled by the Sultans of Delhi, the Khalji Dynasty. Alaud-Dīn Khaljī usurped the throne from his uncle and his personality portrayed ferocity and ambitious nature. To have his control over Delhi politics he tightened his grip over the governance of the kingdom. He introduced the concept of price control by establishing ‘Diwan-i-Riayasat’ and Shahan-i-Mandi whose purpose was to ensure that the goods supplied to the markets by the traders and were sold on the fixed prices. ‘Tareekh-i- Firoz Shahi’ an account by Ziauddin Barni states that such a decision was taken to maintain a large army, mostly of Turkic origin who lived in garrisons outside city walls, to get grains at a cheaper price, so that the threat of Mongols could be tackled. Large royal godowns were made for the storage of grains along with distribution to dealers to avoid black marketing. Alaud-Dīn was also credited for pioneering the concept of Planned Economy which was later followed by Sher Shah and Akbar the Great.
During the colonial era where raw cotton was first produced to attract the attention of the British Administration leading to the establishment of Hyderabad Residency Order and the Berar Cotton and Grain Market Act was passed which allowed Indians to assign a market in the district for sale and purchase of agricultural produce and constitute a committee to supervise the regulated markets. Post-independence the Agricultural Produce Market Committee (APMC) was constituted to frame the rules and enforce them to prevent the exploitation of farmers by the creditors and other intermediaries.
The coming decade still haunts the people of India and all future food policymakers, this period was known for the “Ship-to-Mouth” tragedy where drought-stricken India was completely dependent on imports particularly from the US (PL480) in order to feed its population with India’s former Prime Minister Lal Bahadur Shastri’s urging the population to skip a meal for day.
Then the nation saw a decade of innovation in the primary sector with Dr MS Randhawa (Mohinder Singh Randhawa), being the key figure to bring the Green Revolution in Punjab region. The flat alluvial plain state depended on seasonal and flash flood water streams with rainfall which decreases progressively from 125 cm in Northeast (Dhar Kalan) to about 30 cm in Southwest (Ferozepur). But this State of 1.5 per cent of the geographical area of the country, has been contributing around two-third of wheat and half of the rice to the central pool. Due to major investment irrigation and dam projects post-independence and local practise of ‘warabandi’ also aided their production, Warabandi being a rotational and proportional method for the equitable allocation of the available water in an irrigation system.
The United States then headed by President Lyndon B. Johnson, had put pressure on Indian policymakers to shift from capping food price, inspired by Soviet-era economics, to minimum support price, providing a fixed income guarantee for farmers. This system also acted as a backbone to Green revolution which was mostly concentred to the irrigation fed region of Punjab and Haryana region.
Crisis of FCI
The Food Corporation India public entity has no income source and solely reliant on the Centre. This can be seen in its debt growth from Rs 2.65 lakh crore in March 2019, up from Rs 91,409 crore in March 2014 — an increase of over 190 percent. FCI is responsible to procure (along with godown and transport facility) produce (Wheat and Rice) from the Mandis at MSP(Minimum Support Price) which is then used mainly for National Food Security Act (NFSA) and many Governments run food programme. National Small Savings Fund (NSSF) sanctions loans to Union Government for FCI to meet food subsidy expenses, but ₹46400 crores was used to repay its earlier loans from NSSF.
This situation has arisen as FCI purchase more quantity of stock than the usual norm for buffer stock, with granaries, fast running out of space the new season saw a rise of 13.7 percent of wheat purchased.
India is facing backlash from the US and Canada as they drag India to World Trade Organisation, WTO’s dispute panel stating that India is offering higher MSP for pulses and that its support prices are 26 times higher than WTO permitted levels and India plans to extend it to 50 percent in current crop year (July 2018-June 2019).
The Shanta Kumar high-level committee report on “Reorienting the Role and Restructuring of Food Corporation of India” have recommended FCI to shift all procurement operations to states that have gained sufficient experience and have a reasonable infrastructure for procurement, it also encourages a Negotiable warehouse receipt system (NWRs) where a farmer can deposit their produce to the registered warehouses and get some percent advance from banks against their produce valued at MSP which will allow them to sell when prices are good.
The report also sheds light on the monopolistic nature of government agencies as in some states, the procurement goes to 60-80 percent of the marketed surplus, with just one large buyer (the state agencies) leading to one-sided market sentiments and affecting production pattern. As bonuses adding to the misery as the market gets distorted with wheat and rice of a particular breed overflows the stocks and crowding out the private sector from the state.
The committee also emphasizes that in order to fulfill the “availability pillar” of food security, India should provide farmers their due incentives to raise their productivity and augment incomes with procurement policies to be more ‘farmer-centric’ rather than just ‘tonnage centric’.
Why the fear?
“Policies designed for an India on the edge of starvation don’t fit the India of today, which should be more worried about the quality of its nutrition.” Mihir Sharma
The farmer’s protest is largely an apolitical movement with the least politicians allowed to take lead, which elevates the issue to a national level and especially from a state which has provided the nation with self-sufficiency during dire times. Punjab has a successful agriculture mandi model consisting of 3,000 procurement centres more than any other state in India, this vast network covers a huge geographical area of the state which is why procurement at the minimum support could happen to an extent that 95 percent of products are bought by a government agency through mandis more than any other state.
Agriculture has always been the emotional nerve of the nation as many rituals and traditions find their roots in the farming seasons or methods, which also makes it a political nerve too. The agriculture sector has received the most subsidies from the government and subsidies have been politically important in every election. The subsidy structure completely depends on political consensus and as Mihir Sharma states “The protesters recognize that the passage of these new laws implies that that consensus is eroding”.
Ajay Jakhar, the chairman of Bharat Krishak Samaj state that the bill will “result in a trickle-down model, which will only create large monopolies and not help farmers”. He also writes that the middlemen (Arhatias) and their influential links are reluctant to “amend agriculture marketing laws which are exploitative and don’t allow farmers to receive a fair price. To survive, the APMCs across the nation will have to radically standardize and rationalise their mandi fee structure and limit the commission charged by traders on sale of farmers’ produce”.
According to prof. Ashok Gulati, ICRIER, the state-dependent enterprise of agriculture has 80 percent private players involved in providing technology on the field to provide remunerative prices for their produce with the participation of big companies like Adani Group, ITC, Hindustan Unilever, or the Godrej Group. While on 6 per cent of farmers in the nation benefits from MSP, out of 90.2million agriculture households only 5.21 million household sold paddy and wheat to government procurement centres (2012-13).
The cycle of subsidies, free electricity and loan waivers needs a source to fulfil them and Mandi taxes are one of them. A research study by the State Bank of India (SBI) states that “vested political interest in the ongoing farmers’ agitation, as state governments were concerned of lost revenue from mandi taxes and fees of which Punjab government earns ₹3500crore annually”.
Conclusion
Congress has been against these bills from the start but interestingly the same Congress in its 2019 manifesto had promised to repeal the APMC act and make trade free of all restrictions, their turncoat behaviour is due to the agriculture sector being gullible in every election to curb the wrath of consumers who are major voters too. This can be seen in West Bengal where farmers is ordered to sell their produce below market price. During Bihar election onion export was banned due to hike in price that was done to appease Bihar voters as major producers were from Maharashtra, also between 2014-19 onion export rules were changed 17 times and rice export 14 times. These rules bring unpredictability and concern for both farmers and traders which affect the market sentiment. The country needs a more modern system of procurement which can protect both producers and sellers. The sector has the potential to grow as it was the least affected sector during the lockdown while the informal sector decreased 85 percent. The gap between “farm to fork” for Nordic countries is only 10 percent, for Indonesia is 20 percent while for India ranges from 65-90 percent in various parts. Unlike for GST where Arun Jaitley spearheaded the passing of the bill and gaining support from various states, similar actions were absent from Narendra Singh Tomar, Agriculture Minister.