Farm laws leave much to be desired

The recently passed Central farm Bills have two purported aims: reducing intermediation costs and providing a better deal to farmers and consumers; and creating private markets to complement the presence of Agriculture Produce Market Committees (APMCs), which are too few in number to absorb the rising output, although their numbers vary sharply across regions.

The APMCs are state-controlled market yards set up after Independence to ensure that all farm produce is sold at designated places. The aim was to help farmers, large and particularly small, benefit from auction-determined prices. In practice, APMCs have not lived up to this objective, with vested interests seizing control, but farmers would have been worse off in their absence. This explains the demand by States and farmers to have more of them, rather than to do away with them.

In a recent article in the India Forum, researcher Sudha Narayanan points out: “As per the State of Indian Agriculture, 2015-16, while the all-India average area served by a regulated market is 449 sq. km, the density varies widely across the country — from one per 119 sq. km in Punjab to one per 11,215 sq. .km in Meghalaya. The National Farmers Commission (2004) had recommended that a regulated market should be available to farmers within a radius of 5 km (corresponding to a market area of about 80 sq. km).”

The APMCs over the years apparently have not allowed private markets to come up in their vicinity, despite changes in the States’ APMC laws since 2003 to allow alternative platforms. Interestingly, organised private markets have not come up where APMCs are scarce. This is probably because aggregation of produce is streamlined in places where the APMC network exists. This prompts the question of whether private market yards will come up in the absence of APMCs. The Bihar experience points to the opposite.

The Centre has, however, decided to leave the task of creating more market platforms to private players. The question before it is to incentivise them and ensure that they work for the welfare of farmers. This is bound to be a tricky affair, as farmers and traders have conflicting goals.

MSP question

The Farmer Produce Trade and Commerce (Promotion and Facilitation) Act seeks to promote private markets by curbing the domain area of the APMCs and not legally enforcing the MSP provision. With its ‘farm-to-fork’ plan, the Centre has tried to force down wholesale prices by cutting out mandi fees. The Centre’s verbal assurances on MSP may ensure its implementation on the ground for a few years. But if its inclination towards income support schemes such as PM-KISAN (PM Kisan Samman Nidhi Yojana) and PM-ASHA (Annadaata Aay Sanrakshan Abhiyan) are anything to go by, MSP does not seem like a favoured policy option, at least in its present form.

Meanwhile, in September 2018, private trade in Maharashtra had opposed the implementation of MSP clause with penal provisions. Perhaps to keep both farmers and traders happy, the Centre has done the fence-sitting act on MSP.

What we may see is the end of open-ended procurement at MSP rates in major procurement States. The plan here is to ensure smooth supplies to private trade, which in turn will spur them to set up warehousing facilities — with the FCI procuring at MSP rates to meet its buffer stock requirements. It remains to be seen whether below MSP-purchases by private trade (in the event of a glut after FCI picks up its requirement) runs into farmers’ resistance. Given the suspicion over private market yards, farmers’ pressure on APMCs to do the heavylifting may increase.

Whether the new law, with its ambivalent price signalling, impacts the composition of output over time remains to be seen. A shift away from wheat and rice to maize and other crops will take place if there is a credible marketing system to absorb the produce. Else, there could be social chaos and distress sales, with farmers travelling long distances to sell at APMC yards.

The State will have to implement price support for the crops it wishes to encourage — be it maize, coarse grains or pulses. It must set up a price stabilisation fund for horticulture crops, so that farmers do not go through boom and bust cycles, as in the case with onions. Money saved due to lower levels of MSP-driven procurement can be used to encourage crop diversification.

While trying to pare its procurement and storage costs, the Centre must bear in mind the worth of this grain stockpile in times of crisis — such as these Covid times. The buffer stock norm can be revised for such situations.

Documentation of sales at private yards is important in order to be aware of the total availability of commodities. Implementation of the new Essential Commodities Act, with refined price triggers, would require adequate information on inventories. As experts have observed, a regulatory network for transactions at private yards is also necessary to protect small farmers in particular.

If private yards are to be encouraged (assuming that governments have other welfare priorities), they must complement APMCs and not replace them. Farmers need transparent market platforms (private, public, or ‘PPP’), apart from being organised into bodies such as FPOs so that they distribute their own stuff.

Many go hungry

Studies have shown that the compression of intermediaries in the developed world has not helped farmers get a higher share of the final price. Monopoly buyers have squeezed farmers’ margins over time. There is a growing movement in the West to grow and procure locally, and organically, rather than source food of uncertain quality over huge distances.

As Narayanan asks, is India going for the wrong model (farm-to-fork), when it should be encouraging local producer-driven markets, such as Uzhavar Santhai in Tamil Nadu?

Our embarrassing rank in the Global Hunger Index, despite rising food output, tells a story of gross mismanagement of food distribution. It should be possible to create horticulture/farm spaces close to the urban landscape, and promote indigenous varieties of cereals and coarse grains.

Wholesome food is not reaching the needy, despite rising output. This is despite food wastage being less than 10 per cent for cereals, oilseeds and spices (ICAR’s 2015 study, cited in third volume of Dalwai panel report). While the existing system requires a relook, the proposed new regime does not address these concerns.

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