Farm Bills revolutionise agriculture, opens farmers up to sell produce outside of APMCs

Controversy dogs the farm bills just passed by Parliament. The bills aim to revolutionise the farm sector. The new legislations are farmer-friendly and free agriculturists from selling produce through the state-run Agriculture Produce Marketing Committee (APMC) platforms. Earlier, the purchase/sale of coffee through the Coffee Board, Ministry of Commerce, was deregulated in the mid-1990s and selling coffee in the open market has been a success story. Similarly, after these legislations, farmers will no longer be subjected to the stranglehold of merchants who dominate the APMCs. Like a citizen can choose to avail of services of a private or a government hospital, the farmer should also be free to sell outside the APMC.

The APMC as an institution was born in the 1950s to create price awareness at nodal points across the country. The prevalent illiteracy among the farmer community, coupled with the lack of communication infrastructure to figure out price levels, necessitated the need for government intervention and infrastructure in terms of market spaces. It was established in response to the institution of the merchant-money lender in villages across the country who lent money to farmers for seeds, cattle, education or marriage in their hour of need. Thereafter, he would exploit the borrowers through arbitrary purchase of their crops. Therefore, the APMC was a marketing board by state governments across the country to ensure that farmers are safeguarded from exploitation by large retailers. The objective was to check the farm to retail price spread from reaching excessive levels.

However, over the years, the APMC merchants, who were registered as traders, also played a dual role as money lenders for farmers. Many farmers therefore view the APMC as an informal money-lending channel and fear that it would become defunct, which is worrisome for them. Their sources of informal borrowing would dry up and disrupt farmers’ finance. Today, the fears implanted in the agitated farmers’ minds by their association leaders are mainly based on speculation about the probable onslaught of market forces outside the APMC forum against them. This refers to the rumours that the minimum support prices (MSP) would cease to exist, which is not true. Similarly, the APMCs will continue to exist and those farmers who are keen to sell their produce through these platforms can continue to do so. This legislation frees the farmer to choose between the APMC and the private trader.

Most farmers are ignorant about the nuances of the legislation, and their leaders mislead them about the need to protest. Their large numbers are attractive for the opposition parties to drum up support against the government. Clearly, the brains behind the farmers’ protests are the ones who have lost their ability to make easy money illegally through the farmers’ efforts.

Earlier, large-scale sales of farmers’ produce were done while evading payment of APMC cess. For instance, an RTI enquiry revealed that the APMC cess on black pepper was only 30% of the production in Karnataka. Traders and APMC officials shared the rest of the evaded cess amount among themselves. Such evasion of cess was possible only with the connivance of APMC directors which, in turn, allowed them to illegally amass money.

Another aspect of the APMC Act is linked to contract farming, which is not legally permitted as the farmer cannot sell his crop to anybody without going through the APMC. Technically, the farmer violates the law by directly selling his product to either the commodity end user/fresh vegetable exporter, food processor or animal feed sector. Over the years, the domestic and multinational corporations have undertaken contract farming in pockets around the country that has benefitted the farmer but remained outside the law.

The fact that the new legislation legalises contract farming is advantageous to the farmer because his output is procured at guaranteed prices. Moreover, crop procurement is done at the farmgate, which saves the farmers’ energies and expenditure on logistics to reach the market. This benefits even small growers. The fear that corporations could fix lower prices for contracted crops is unfounded as the farmer has the option to grow other crops of his choice which would fetch higher prices.

Other advantages are that the farmer obtains financial assistance, hybrid seeds, fertilizers, fungicides, pesticides, drip irrigation systems and plastic mulch, besides specialised scientific technology and agri-extension services. Such support results in higher crop yields which is beneficial to the agricultural economy.

For the agriculturist, the challenge is two-fold – one, to be able to fight the vagaries of nature like untimely rainfall, landslides, floods or drought to grow their crop with high productivity; two, to be able to sell their produce profitably without middlemen eating into it. The new legislations address these concerns. The legislation also attempts to create a national grid for agri-marketing wherein the northern and southern markets are integrated to source from each other, which will benefit farmers across the country.

The government needs to provide farmers with an alternative source of finance now that their earlier informal sources are likely to dry up. Also, while the practice of warehousing receipt financing exists in the country, it should be scaled up to generate adequate and easily available funds on stock hypothecation to substitute earlier informal financing. The government needs to increase the number of warehouses at taluk/hobli levels across the country to reduce logistics costs for the farmer and provide him superior support to profitably sell his produce.

The reality of the political economy is that market forces tend to work around the regulatory framework to earn profits. The government therefore needs to re-work its regulatory framework from time to time and the recent legislation is a step in that direction in the farm sector.

(Gowda is a former Additional Director of Horticulture and Managing Director, HOPCOMS, GoK; Poovayya works with contract farmers and is an agriculture activist based in Bengaluru)