How to ease farmers’ fears of the new laws

CL Dadhich | Updated on October 06, 2020

Sinking feeling: Farmers are yet to come to grips with the new laws   -  The Hindu

Being a reliable partner for farmers, the survival of APMCs should be ensured, and MSP must continue for some more time

The three farm Bills passed by Parliament last week have become a bone of contention. At one level, they are a step in the right direction but have failed to get the support of farmers in agriculturally developed States like Punjab, Haryana and western part of Uttar Pradesh. Farmers will now have the freedom to sell the produce to anyone, but there clearly are many concerns that remain unaddressed.

For decades, the Agricultural Produce Market Committee (APMC) has been the sole agency for marketing of agricultural commodities in the country.

There is a wide network of APMCs, particularly in Punjab and Haryana where there is one within a radius of 5 km from a village, with a large number of market players like arhtiyas and commission agents. There has been a strong tie between producers and traders for generations together.

Despite the limitations of APMCs to ensure competitive prices to producers, the APMC is considered a reliable and dependable agency. The new players — licensed traders — have not been perceived as being as dependable as APMCs. The co-operatives did not enjoy the confidence of the producers due to inefficient management and political and bureaucratic interference. New agencies like producers’ organisations (which work under the Companies Act) are still in the nascent stage.

Furthermore, there is the question of a deliberate tilting of the playing filed against the APMC under the new arrangement. While the new players have been not allowed to levy any market fee or charge, APMCs will continue to charge market fee in the new regime. This will place them at a disadvantage, given that the so-called market fee is eventually passed on to the farmer-sellers. Abolishing this fee will be difficult since APMCs have to provide services that involve costs — the day-to-day management of mandis, storing, monitoring, accounting, et al. APMCs are in a fix.If they do not charge a fee, they will not survive for long.

If they charge, the producers will not prefer them. As a result, sooner or later, APMCs will vanish from the scene.

This loss will not be without its consequences. The farmers’ community will lose a reliable agency, thereby limiting the freedom of choice to any one agency, namely, the new class of private traders who are yet unknown, untried, untested and will be prone to exploit.

This is so also because the growth of producer companies, the new species that is just about taking off, suffers from step-motherly treatment from the various State governments, who continue to prefer cooperatives.

Conspicuous by its absence

The minimum support price system was introduced in the early 1970s in the wake of the Green Revolution with the twin objectives to encourage producers to use high-yielding varieties of seeds and fertilisers and use irrigation facilities to produce more by protecting the cost of production, and providing subsidised foodgrains to people below poverty line under PDS.

This has led to higher fiscal burden on the exchequer but turned India from deficit to surplus producer of foodgrains. In all, there are as many as 22 commodities under the MSP but mainly two commodities, wheat and rice, are procured through APMCs in Punjab, Haryana, Andhra Pradesh and Tamil Nadu.

To ensure farmers recover at least their cost of production, if not remunerative prices, it is imperative to have MSP in place. Ultimately, MSP should be replaced with price insurance. There is no mention of MSP or any other mechanism to ensure cost of production to farmers in any of the Bills. This has caused understandable anxiety among farmers.

One of this farm Bills is envisaged to deregulate essential agricultural commodities like cereals, pulses, edible oils, potatoes and onions under normal circumstances.

Their stock limits have been liberalised, provided the prices do not increase more than 100 per cent in the case of horticultural commodities and more than 50 per cent for non-perishable agricultural foodstuff.

This has been done to give a push to warehousing/cold-storage facilities in the country. However, in some quarters, there is a feeling that this stock deregulation may encourage hoarding to exploit consumers in the period of shortage.

Past experience, particularly in the case of onions, shows these apprehensions are not baseless.

The way out

To address these fears, the government must take the following measures without further delay.

First, either a market fee or levy should be introduced in case of licensed traders, or the Centre may advise States to remove the market fee charged by APMCs. If required, this fee could be reimbursed by the Centre. This will help buy peace in rural areas. APMCs have played a salutary role in marketing of agricultural commodities and their survival will infuse further competition in the sphere of agricultural marketing.

Second, in a predominantly agricultural country like India, farming cannot and should not be pursued on a loss basis. MSP should continue with a legal sanction written into the law, and should be further strengthened to protect the farmers. In the event of prices falling below MSP, State agencies should either procure at MSP through APMCs to have the buffer stock, or introduce the scheme of bhavantar (difference between MSP and sale price) to protect the farmers. Alternatively, as mentioned earlier, price insurance should be introduced in a big way.

Third, producers’ organisations, particularly in the dairy sector, have done a commendable job in protecting the interests of both farmers and consumers alike. The share of producers is as high as 85 per cent in the case of producer companies compared to 50-70 per cent in case of co-operatives. Incidentally, producer companies with professional management and a democratic and co-operative culture have been the most efficient organisations.

However, in the absence of a level-playing field, their growth has been hampered. While co-operatives get a lot of state support, such as price incentives and animal feed subsidy, producers’ organisations do not. Also, the Centre and the States, are not size-neutral in the case of tax concessions or tax holidays.

Fourth, since regulation of essential commodities was mainly intended to protect the interest of consumers rather than producers, stock limits should be liberalised in a phased manner to keep pace with expansion of warehousing and cold storage facilities. The current stipulated conditions for regulation to prevent hoarding are too liberal.

Prices are seasonal, and price rise during a particular production season should be taken into account rather than the time series rise in the pricing. Stock limits should be determined on the basis of supply-demand and price movement during a season to keep interrupted supply at reasonable prices.

The writer is a former Director of Rural Economics at RBI, and Hon. Secretary, Indian Society of Agriculture Economics. Views are personal. Through The Billion Press

Published on October 06, 2020

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