Free market but at what price, ask farmers

Farmers from the south, including Karnataka, feel the new farm laws are a hasty move towards privatising agriculture and are protesting their imposition

Even at 70 years, Vishakhante Gowda knows no rest. Since he was 12 years old, he has been working day and night on his 25 guntas of land in Panakanahalli, Mandya to support his family of five.

Gowda’s annual income is Rs 16,000. A debt of Rs 3 lakh looms over his ageing shoulders.

Over the years, he has lost trust in government schemes and policies as he has not seen any of them helping farmers. More so, when something is thrust upon them, like the recent farm laws.

For three months now, farmers in Delhi have been protesting against the three farm laws — Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, Essential Commodities (Amendment) Act — that were passed in the Parliament in September 2020. The Prime Minister called this the “1991 moment” for agriculture. However, farmers continue to distrust the government’s motives.

In Karnataka, farmers have been agitating since September 2020.

“It is not just farmers in Delhi who are protesting against the farm laws. In Karnataka, we have been agitating since September. Saying that we are being misled or ill-informed is insulting,” said A L Kempu Gowda, district president, Karnataka Rajya Raitha Sangha (KRRS), Mandya.

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Close to 10,000 farmers gathered in Bengaluru on January 26 to demand the government to repeal the laws. On February 6, thousands of farmers across Karnataka joined in the nation-wide chakka jam. Yet, the protests of South Indian farmers have not received the scale of response that protesters in Delhi have received.

“The difference is that in Delhi, it has become a people’s movement. People from various sectors are sympathetic to the cause. That kind of response is absent here,” says farmer leader Chukki Nanjundaswamy.

Farmers in the other south Indian states too have voiced their concerns about the laws.

Agrarian distress is mounting, and the farmers feel that the government has put an already broken system in the hands of private traders and corporates.

Their anxiety is not without a reason: In June 2020, the Karnataka government passed an ordinance that allowed non-agriculturalists to buy agricultural land. It also did away with the income ceiling and increased the limit of the area of agricultural land that could be owned by a single individual or family. The Legislative Assembly also passed an amendment to the APMC Act last year.

With the absence of the checks and balances provided by the Agricultural Produce Market Committee (APMCs or mandis) and the Essential Commodities Act to guard prices and prevent stockpiling, they fear that traders would hoard produce and jack up the prices.

Under the amendment to the Essential Commodities Act, the government had the power to regulate commodities such as pulses, cereals, oilseeds, edible oils, onions and potatoes. Now, this can be done only in case of war, famine or an extraordinary price rise.

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Professor T N Prakash Kammardi, former chairman of, Karnataka Agricultural Prices Commission, explains that any policy must examine what kind of effect it will have on the most vulnerable sections of society. “In this case, in case this move towards de-regulation fails, farmers will be devastated,” he said.

In all his years of farming, Vishakhante Gowda has never sold his produce at a mandi. “The dalalis (private tradesmen) turn up at our fields and quote a price that is prevalent in the market. Not once is this price fair, but farmers still sell because they are in a lot of pressure to repay their debt,” says Doreswamy, a member of the Rajya Raitha Sangha.

The lack of geographical proximity makes mandis less accessible to farmers. According to the Report On Doubling Farmers’ Income by Niti Aayog, the average area served by a mandi is 434.48 sq km as opposed to the recommendation of one mandi per 80 sq km made by the National Commission for Farmers in 2004.

Another issue is the lack of timely procurement. Doreswamy says sometimes the mandis start procuring weeks or sometimes even a month after the first harvest. “We don’t have any storage facilities or godowns in the villages. So, we are forced to sell to private traders at lower prices than what is available at the mandis,” he says.

Many farmers, however, feel that flawed as the mandi system is, it is a source of comfort. Farmers like Prakash in Kolar district fear that the new laws will take away power from the APMCs and instead empower dalalis and corporates.

In fact, while the government alleges that the farmers’ protest is being fueled and funded by the middlemen, dalalis or Arhatiyas, the three farm laws would actually benefit the middlemen. Once the APMC system becomes completely irrelevant, the minimum support price (MSP) system will die on its own.

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The mandi systems provide farmers with an accessible daily price discovery mechanism. This is generally used as a reference for transactions that happen outside the APMCs, explains Gopal Naik, a professor at the Indian Institute of Management Bangalore.

Need to strengthen APMC

If the new laws take hold, in time, with low volume and quality of arrivals at the mandis, the price discovery system will definitely take a hit, and traders will not feel compelled to even match the prices in the mandis. “The existing system can be strengthened. Instead, we are running away from our problems,” Naik says.

The APMCs also have a host of other benefits, like godowns where farmers can store their produce and avail pledge loans. They also have standardised measurement equipment that farmers can trust.

As Kammardi explains, “Based on the APMC revenue, the Karnataka government has floated a Price Stabilisation Fund. They would collect cess from the traders, and put it in the fund. This is going to collapse now,” he explains.

The director of APMCs in Karnataka confirmed that revenue had dipped. In December last year, the state government was reduced the cess from 1% to 0.6% after widespread protests from traders. They argued that they would be at a disadvantage since traders approaching farmers directly did not have to pay any market fee.

The three farm laws were passed under the presumption that a free market in agriculture would boost farmer incomes by getting them better prices because of increased competition between private traders and corporates.

Fourteen years ago, the Nitish Kumar government in Bihar had the same idea, and scrapped the government-regulated mandi system. This has hardly led to a rise in farmers’ income.

In fact, a study by the National Council of Applied Economic Research suggests that the volatility in the prices of grain had increased and that, “Farmers are left to the mercy of traders who unscrupulously fix a lower price for agricultural produce that they buy from [them]. Inadequate market facilities and institutional arrangements are responsible for low price realisation and instability in price.”

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Brijesh Kumar Dikshit, Commissioner of Agriculture, Karnataka, says, “In an economy, not all experiments are successful in all instances. The lessons we have learned until now are in favour of free-market but we will have to see how it pans out on a larger scale.”

Small farmers will suffer

“If corporates enter the scene, they would not be interested in small farmers as their output is usually also very low. Left with no other route, they will have to accept whatever price is dictated to them. Small and marginal farmers have next to no bargaining power in front of private traders,” says Chamarasa Malipatil, the honorary president of the KRRS. This may even force them to quit farming.

The MSP, a lifeline for such farmers, has been a flashpoint in the ongoing stir. While the Central government has said that the MSP would remain, the question farmers ask is — How?

Even the present system of MSP does not cover all production costs, explains Prakash.

For example, labour costs are frequently not factored into the final amount, nor are transportation costs.

The M S Swaminathan Committee’s report constituted in November 2004 recommended that the benchmark price for agricultural produce be set at cost of production+ 50%, the current price is the only cost of production + 20%.

Farmers have been demanding that the MSP be made a legal right.

Without a guaranteed MSP, the onus of paying a fair price falls on the trader and Prakash asks, “Will they have the best interests of the farmers in mind or will they want more profits?”

The dispute resolution mechanism has also come under heavy scrutiny. Section 15 of the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act reads, “No civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter, the cognisance of which can be taken and disposed of by any authority empowered by or under this Act or the rules made thereunder.”

In essence, it replaces the jurisdiction of civil courts with a bureaucratic mechanism.

Prakash sees a metaphor in how the government deals with farmers. Near Bangarpete, in the 60s and 70s, the government encouraged the planting of eucalyptus trees to bolster farmers’ incomes even with low labour involvement. Fifty years later, the soil is leached of water and minerals.

“Nothing grows in a 10m radius of the tree,” says Prakash. “The government is always in a hurry to bring in reforms, but in the long-term we suffer.”