With certain tweaks in the farm bills like adding legislation of Minimum Reserve Price (MRP), the farm bills can be a win-win situation for government, farmer and private players rather than zero-sum game.

Introduction

Agriculture employs 42.40% of Indian population, but has witnessed little growth since independence. With the intention of doubling farmers’ income by 2022, the Central government has introduced three major farm bills with repercussions across the agriculture sector and Indian economy thereof. The bills have been criticised from both within and outside the party. This has heightened to a point where the Union Minister of Food Processing Industries, Harsimrat Kaur Badal of the NDA government, resigned citing the reason that she stands against farmers’ oppression in any form. Besides the Indian National Congress, many regional parties including TRS, DMK, TMC and Maha-Vikas Aghadi have stood their grounds against the bill. Let’s look into the details of the reforms that are being proposed by the government and the take of parties opposing the same. We briefly outline each bill and look at the pros and cons of the probable impact that they can have.

The government has introduced the following bills :The Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020; The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020; and The Essential Commodities (Amendment) Bill, 2020.

Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020(FPTC)

The bill allows for a barrier free trade of inter-state and intra-state of the agricultural commodities. So far, the farmers could only sell in wholesale markets run by Agriculture Produce Marketing Committees (APMC). The APMC restricted farmers access to other open markets which could have garnered higher profit margins. This unshackles 5-decade long struggle of farmers to find better markets and better price. The bill provides a legal framework for setting up of entities in dealing with online buying and selling of farmers produce which can highly improve the efficiency of the market mechanisms. States can no longer levy market fee, cess or any other charge on the trade of scheduled farmers produce outside APMC notified markets. The bill also has legislation for Dispute settlement mechanism through the Sub-divisional magistrate (SDM) in case of dispute between farmer and trader. Prior to the bill, states such as Punjab, Haryana imposed 5–6% of market fee on transactions of APMC which has been a huge source of revenue which is estimated to be about at Rs. 3000–5000 crores. There has been an uproar among the states as their revenues are likely to take a hit following the introduction of bills.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020(FAPRS)

To be precise, this ordinance aims at laying down a framework for contract farming in India with respect to the pricing terms and dispute settlement. Besides making it mandatory for the price of farming produce to be mentioned in the agreement, it is equally important to define the process of determining that guaranteed price. The agreement should also clearly elucidate provision for a conciliation board as well as a conciliation process for settlement of disputes with all parties having a fair representation. In case the board fails to resolve the dispute, parties have the right to approach the Appellate Authority and further the Sub-divisional Magistrate for resolution. The most important part that needs to highlighted here is that no action can be taken against the agricultural land of farmer for recovery of any dues.

The Essential Commodities (Amendment) Bill, 2020(ECA)

The prime objective is to attract private investment in the value chains of the commodities mentioned under this act by allowing the central government to regulate the supply of certain agricultural items which can only be done under some extraordinary circumstances (such as war, famine, natural calamities of grave nature or an extraordinary increase in price).

Under this ordinance, the proposed way for the government to impose a limit on the stock size is when there is a 100% increase in retail price of horticultural produce; and a 50% increase in the retail price of non-perishable agricultural food items where the increase will be calculated over the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.

Evaluation and Suggestions

The major argument coming from the opposition’s end is that the government is trying to do away with the Minimum Support Prices and government procurement in agriculture. In an attempt to disqualify these arguments, the government has been reiterating that it has no plans of dismantling the MSP and procurement procedures through the APMC and in order to show its commitment to continue with the same, the Union Minister for agriculture, Narendra Singh Tomar, had preponed the announcement regarding hike in MSP on Rabi crop and also increased off-take limit.

Monopoly, whether undertaken by a private player or any government is not beneficial for any stakeholder. Though the bill increases the options of the farmer to sell their produce, the private players and large buyers still can form cartels to drive down the price of agricultural commodities. Hence, as the farmers move towards selling the crop to the private players, they need a reserve price which will form the threshold level, below which no buyer can purchase the commodity. The minimum reserve price (MRP) should be turned into a legislation and added as a part of FPAFC bill to safeguard farmers’ interests. This will ensure that farmers get a fair price so that he can cover his costs and increase his profit margin. Such a minimum reserve price can be decided by Commission for Agricultural Costs and Prices (CACP) with all the cost calculations similar to MSP. In case the private player buys the below the Minimum Reserve Price, then farmer can take it up to the sub-divisional magistrate for resolution.

Conclusion

Some of the worlds developed nations like Taiwan, Australia and even the developing giant China have built their growth stories on Agriculture. This moment, therefore, is India’s beginning for a new growth story. A lot of power had been vested on the APMC through central APMC act and various individual state APMC acts which had led to cartelization and reduction in farm profit margins. The farmers had to undergo a lot of deductions in the form of market fees and commission charges in the APMCs. The bills, therefore strip away the powers APMC acts and provides farmers a wider array of options like contract farming, online trading and providing them freedom to sell their produce in any market, thereby paving the way for government’s vision of “One Nation One Market”. These ordinances are also likely to push the farmers for registering on e-NAM.

India being an agrarian economy, has a lot of potential for food processing industries, and these bills encourage the entry of private players in this area, which will help facilitate the growth story of Indian agriculture. With certain tweaks in the farm bills like adding legislation of Minimum Reserve Price (MRP), the farm bills can be a win-win situation for government, farmer and private players rather than zero-sum game.