Farm Laws: Reality, Concerns and The Way Ahead

When I woke up on the morning of 7^th January, I was in a complete shock to see what was happening at the Capitol Hill in the USA. America, one of the world’s oldest and strongest democracy was on its feet against a bunch of wild extremists. But what I saw on the evening 26^th January at the Red Fort in India was even worst than that. A day which is celebrated as a festival across India by people of all race, religion, caste, culture turned into a complete mayhem. On the streets of national capital, there was a dance of democracy which no one ever wished to witness.

The reason behind all this mess are the farm laws brought by the central government few months ago.  Amidst the pandemic, these laws were arbitrarily passed by the cabinet without any discussions and consultations. This made the farmers angry, especially from the states of Punjab and Haryana which happens to be the party affected most by these laws. Widespread protests began in Punjab and Haryana in the month of September and soon reached the borders of the national capital by the end of the devastating 2020. Almost every initiative taken by the Modi government ignites controversy, something similar happened with the new farm reform laws where the people were found standing with divided opinions.

In today’s time if there is someone suffering the most than it is surely the farmer of this country where the ongoing pandemic has already added more to his adversaries. Bringing much awaited and long due agricultural reforms were the only way through which farmers could get any relief. The highly enthusiastic government passed the three farms reforms laws but unfortunately they were not received well by the farmers from the north of India. Before we head to find the loopholes and possible amendments in the bill passed, it is important to understand what these new farm laws are all about and why they deserve a run in the Indian agricultural sector.

Law I: Amendment to Essential Commodity Act (ECA), 1955.

ECA (1955) is a draconian pre independence act which was implemented by the colonial masters during the period of World War II. Through this act, the state and the central government receive powers to enforce stock and price limits. This not only bounds farmers in terms of production but also restricts them from making any further growth.

Amendment to ECA is highly necessary and with these new laws into practice, the powers of the Central and State government will be reduced to enforce price and stock limits. It will also limit the commodities where it is done. Though these restrictions can be switched on but only at the time of war, famine or emergency. In the same amendment the price high limits are also fixed where a limit to stock can be put if the price of the vegetables surges by 100% and 50% in the case of lentils and cereals. This can be perceived as the least opposed law as the farmers now have freedom to store as much amount of their farm produce as they want.

 Law II: The Farmers Produce Trade and Commerce (Promotion and Facilitation Ordinance, 2020).

This particular bill addresses the marketing issue. Till now the farmers were forced to sell their produce in a particular mandi/mandi of their area. They were having no freedom to sell their crop at any other place due to which the traders or so called ‘Bichaulias’ (middleman) of mandi were having full powers to manipulate the prices of the crops and indulge in massive corruption. This is the prime stage of the exploitation of the farmer. Through these laws, The APMC (Agricultural Produce market Committees) will loose its monopoly of business and geography though it will not shut down completely. The farmers will now have the freedom to sell their crop at any place of their choice within the country.

This will also allow the corporates to trade directly with the farmers, eliminating the role of middleman completely from the trading cycle. The farmers fear that the corporates might exploit them by not paying as per the MSP (Minimum Support Price). The government has agreed to give farmers a written assurance that MSP will nowhere be dumped.

 Law III: The Farmer’s (Empowerment and Protection) agreement on price assurance and farm service ordinance.

Till now farmers were not sure about who will buy their crops or how hard they will have to struggle before they will get the full price for their produce. This particular law will ensure the concept of ‘Contract Framing’ where the farmer will know in advance about who is going to buy his crop and what amount, type or quality of crop he will need to produce. This will empower farmers to plan strategically and will also inspire them to use better resources.

               

What is making the farmers of Punjab and Haryana angry?

Punjab and Haryana are the biggest producers of wheat and rice in India. They produce surplus crops which is then purchased and stored by the FCI (Food Corporation of India) for National Buffer Stock. In return the FCI gives  MSP and 8% tax on the purchased crops. This is a big source of revenue for the State Governments of Punjab and Haryana. Given the already existing ECA restrictions, nobody wants to set up cold storages due to which selling to FCI is the only wise option left. The farmers of these states fears that with the amendments in the ECA, FCI may decrease/stop purchasing crops from them. This will also reduce the profit margin of farmers and the state governments as the corporates and other big private traders will now be able to store agricultural produce without any limits and restrictions. It need to be kept in mind that wheat and rice are grown in surplus in India. FCI which is ruthlessly purchasing and storing all these crops in buffer stock is now in debt of over Rs. 2 Lakh Crores.

      Concern of Farmers

I. There are tangible fears that the laws which liberate agricultural marketing by severely limiting the role that mandi plays would affect  government procurement and prices of produce.

II. The option to sell crops at a tax free rate outside mandis dictate that farmers with better storage infrastructure will gain significant advantage over others.

III. There are fears that contract farming undertaken by big corporate buyers would skew bargaining power against farmers.

IV. With ECA being dissolved, artificial crisis can be contrived for the sole benefit of large stock holders of agricultural commodities.

V. Biggest fear of all being, the corporates might exploit the farmers by purchasing their crops below the MSP. Since MSP is not a law, farmers will be left with no legal option in hand.

The way ahead: Necessary amendments the Government should make – 

I. Legalise MSP: Any corporate house/Private Trader trying to exploit farmers should be made to stand in the court.

II. Since the farmers now have no restrictions to sell their crops in a particular mandi, the government should work on bringing in new selling points. Many small farmers don’t have resources through which they can carry their crops at distant places. The government should also plan of installing transportation facilities for the farmers.

III. The government should assure farmers that new cold storages and granaries will be built where farmers would be able to store their produce at minimal or no price.

IV. With proper budget allocation, government should start new welfare policies so that farmers dealing with all kind of crops can benefit.

(Picture Credits - The Indian Express and Getty Images)