The farm fumble that has left the Modi govt struggling

Things have reached an impasse between the government and the protesting farmers

The three black laws should go. It is time the raja listened to his praja,” says 65-year-old Balwant Singh from Punjab’s Gurdaspur district. Singh is one among thousands of farmers camping on the Singhu border between Delhi-Haryana for the past fortnight, protesting against the farm sector reforms enacted by the Modi government.

The numbers at Delhi’s borders with Haryana and Uttar Pradesh have been swelling and the protesting farmers are prepared for the long haul to ensure that the three farm laws – the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act and the Essential Commodities (Amendment) Act – are repealed. However, Prime Minister Narendra Modi appears unwilling to budge on the farmers’ core demand to roll back the laws, although the Central government has shown willingness to concede on some of their concerns.

“The agriculture reforms will give direct benefit to farmers. They will be directly connected to the market and the middleman will be out of the system,” has been the refrain of the PM. Things have reached an impasse, as the agitation enters its 25th day. It’s a rare occasion when the Bharatiya Janata Party, flying high after its electoral successes, appears to be pinned down by the farmers. Opposition parties have been relishing Modi’s discomfiture from the sidelines.

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So steadfast have the farmers been in their demand that the Modi government, through friendly farmers’ unions, has knocked on the doors of the Supreme Court, seeking a solution to the stand-off.

The agitating farmers have refused to be made a party to the case in the Apex court, insisting that their grouse was with the Executive. All eyes are now on the view the Supreme Court takes. The Court is now on winter vacation, but Chief Justice
S A Bobde, who heard the matter on Thursday, has asked all parties to approach the vacation bench for a speedier hearing.

Understanding the protests

But, why are Punjab and Haryana farmers, considered as a prosperous lot with relatively large landholdings, protesting? The devil appears to lie in the details of the three new farm sector laws, that give farmers the option to sell outside the traditional markets, grant statutory cover to contract farming and remove the stock-holding limits on Essential Commodities on agricultural food stuff.

For example, Balwant Singh from Gurdaspur cultivates a mix of wheat, rice and vegetables on his 15 acre farm and earns about Rs 10-12 lakh annually, but is rattled by the changes initiated by the Centre as it could unsettle the system of ‘arthiyas’ and market committees.

“These are well-off farmers who feel threatened that the new laws would bring down the age-old system of Agricultural Produce Market Committee (APMC), and the minimum support price assurance that has been in place for decades,” Sandip Das, agricultural analyst, said.

Under the APMC system, a farmer brings his wheat or paddy crop to the regulated markets to a commission agent – arthiya – for sale to Food Corporation of India and other state-level procurement agencies who purchase the produce at minimum support price (MSP) announced by the Centre.

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Almost 85% of the wheat and rice grown in Punjab and Haryana gets procured at MSP rates, earning the arthiyas or middlemen a commission of 2.5% of the total value of the crop, and a similar percentage in taxes and cess to the state government.

The aggregate taxes in Punjab adds up to 8.5% of the MSP value and 6% in Haryana , explaining why the Punjab government is backing the existing laws. Punjab earned Rs 1,750 crore and Haryana Rs 850 crore in mandi fees alone in 2019-20. The arthiyas earned Rs 1,600 crore as commission during the same period in Punjab alone.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act allows farmers to sell their produce directly to the buyers – an alternative to the APMC system – without the commission agents or arthiyas.

However, farmers do not appear keen to cut-off the arthiyas, whom they turn to for quick funds for seeds, fertilisers or even family emergencies. “Do you think the big corporates who would buy from us under the new laws care for us in times of need,” asked Gurmeet Singh, a wheat grower from Bazpur in Uttarakhand.

Gurmeet, who migrated from Punjab to Uttarakhand during the 1965 war, said he manages to earn Rs six lakh annually from his farm in Bazpur, but the income is inadequate to meet the needs of his family of eight.

Gurmeet’s other complaint is that he has to sell his wheat and paddy crop below the MSP rates and wants the government to make such transactions illegal and a punishable crime. His plaint is echoed by Kulwinder Singh from Pilibhit in western Uttar Pradesh, who joined the protests at the Delhi-Uttar Pradesh border at Ghazipur a week ago. He is unhappy as his crops of paddy and rice never fetches the MSP announced by the Centre.

But making MSP legal would harm agricultural trade as private traders would always look for cheaper costs and even turn to imports, Das argues. The fear is that a statutory cover for MSP could lead to high inflation and distort the agriculture market.

Legacy from period of shortages

The APMC laws, MSP scheme and stock-holding limits through the Essential Commodities Act were a necessity when India battled food shortages in the pre-Green Revolution years.

However, over the years India has overcome the era of shortages and is not battling the problem of surpluses.

According to SBI Research, the stocks of wheat and rice in the central pool of food grains was 822 lakh tonnes on July 1, 2020 as against the mandated buffer stock norms of 411 lakh tonnes.

“India has overcome the food security challenge and needs to focus now on nutrition security,” Ashok Gulati, Infosys Chair Professor at the Indian Council for Research in International Economic Relations (ICRIER) said.

Gulati favoured encouraging farmers to produce more fruits and vegetables, milk and meat which are in greater demand than cereals.

“The contribution of cereals in the value added of crops grew rapidly after the green revolution. However, their value has come down over the years and from a high of 49% in 1968-69 the share now remains at 28% in 2018-19, in current prices. Meanwhile, that of fruits and vegetables have grown rapidly and now they command 30% of the share in crop output, vis-a-vis 14% in 1968-69,” a paper by SBI Research said.

Farmers in Haryana have also diversified into allied areas of prawn and fish cultivation, besides poultry, an example worth emulating on a larger scale, Das said. But until farmers actually take to crop diversification in a big way, it is unlikely that the issue will be easily sorted out.