In a bid to accommodate the concerns of agitating farmers over the three farm bills enacted by Modi – government in September, 2020, the Union Minister for Agriculture & Farmers Welfare, Narendra S Tomar has given positive signal on following points:-
(i) require every trader transacting with the farmers to register (under the extant law, the former only needs to have PAN number);
(ii) in the event of dispute, allow farmer to go to higher courts (the present law provides for dispute resolution at magistrate’s level);
(iii) strengthen the APMC (Agricultural Produce Market Committee) by imposing levies at ‘uniform’ rate on purchase at APMC and non-APMC platforms – transactions at the latter are permitted following enactment of the Central law viz. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020;
(iv) give legal status to the minimum support price (MSP) and make it applicable to sales made at the non-APMC platforms as well.
Acting upon (i) and (ii) should not pose much of a problem for the Centre. However, (iii) and (iv) if implemented will have strike at the very foundation of agri-reforms brought about through these revolutionary legislations.
On (iii), under the present APMC system, on the produce brought by the farmer to the mandi notified by the State Government under its APMC Act (the law prohibits taking it to any other place), he has to pay three levies. For instance, in Punjab, apart from commission at the rate of 2.5% of the purchase price given to the arhtiya (local name for ‘commission agent’), the State Government levies market fee and rural development cess (RDC) at the rate of 3% each.
These levies adding to 8.5% increase the cost of food to the purchaser or trader licensed to buy at the APMC which in turn, leads to hike in price to the consumer. On wheat or paddy purchased by central agencies such as Food Corporation of India (FCI) etc for meeting the requirements of the public distribution system (PDS) and giving to the beneficiaries at subsidized price @ Rs 3 per kg rice, Rs 2 per kg wheat under the National Food Security Act (NFSA), this leads to corresponding increase in food subsidy.
Under the Central law, the farmer can take his produce to any place in any nook and corner of the country or a buyer can come to his doorsteps (call it non-APMC market). No levies are allowed to be charged on all such sales. This is the way to go as on one hand, the farmer gets many options to sell and on the other, consumer has to pay less. This will also reduce food subsidy to the extent FCI et al source their requirement for PDS from non-APMC platform.
How will levies at ‘uniform’ rate on purchase at the APMC and non-APMC platforms help strengthen the former? Before this, we need to ask as to how APMC gets weakened by a law whose sole aim is to give more options to farmers sell their produce without disturbing the former? Let us understand using an example.
Suppose in a market, person A has been the sole (albeit monopoly) seller of a product for several decades. One fine morning, another person B starts selling the same product offering better terms. This prompts A to complain that he has been weakened. That the presence of B will eventually lead to his annihilation. The complaint of those who are controlling the APMC viz. ‘commission agents’ and ‘licensed traders’ is broadly similar.
The opening up of more avenues (courtesy, Central law) where farmers’ can sell their produce has challenged their monopoly. As more and more farmers sell at non-APMC platforms, arhtiyas will lose their commission and ‘licensed’ traders their hefty profit (they currently enjoy by paying less to farmers). These stakeholders are up in arms against the Central laws masquerading as farmers and are getting the tacit support of the State Government who will lose revenue as on sales made outside APMC, they can’t collect levies.
The idea of uniform levies is to let the State Government collect levies on sales at non-APMC market also at the same rate as applicable to APMC sales. If, the Centre goes ahead with it, it will be deter development of parallel/non-APMC markets and could become a breeding ground for inspector raj and corruption (think of a small farmer selling fruits or vegetables on roadside being harassed by the tax inspector to collect bribe money). It would have killed the baby even before it is born.
As regards (iv), the demand for requiring purchasers at non-APMC platform to pay MSP and give it legal status is pregnant with dangerous possibilities. What is the current position?
At present, purchases by FCI et al are made at the MSP. But, this is done vide an executive order only; it does not have legal sanction. These agencies buy only about 33% of the total wheat and paddy offered for sale. For other 21 agri-items for which the Centre notifies MSPs, the agencies procure much less. Moreover, of the 150 million farmer households, only 8% get to sell their produce to them (albeit at MSP) even as the rest 92% (includes almost all of 130 million small and marginal farmers) are left at the mercy of licensed traders and arhtiyas at the APMC. They get much less than MSP.
The Central law has opened up a plethora of opportunities for these 92%. They can go to a private market for selling; enter into a contract for selling to a company (processor, aggregator, large retailer, exporter etc) at their doorsteps, form farmer producers organization (FPO) and sell under its umbrella and so on. Their net realization from sale (price minus expenses incurred on taking it to the market place) will be much more than what they are getting today.
While, no one will ever disagree that farmers should set their eyes at MSP as the ultimate goal post, but to insist that they should get it right now is totally unrealistic. It is like telling a student who hitherto, was securing only 4 out of 10 and now gets 8 (courtesy, extra efforts made by parents and teachers) to secure 10 immediately. If, 10 is not possible now then, he is being told to remain at 4. Going a step further, giving MSP legal status is bizarre.
In a contract between two private entities (read: farmer and trader), how can the government legislate that buyer must pay a certain price, say MSP? Given the risk of going to jail in case, he/she pays less than MSP (that is not under his control being primarily a function of the market dynamics), which trader will dare buying from the farmers? What if a large number of them decide not to buy (a real possibility with MSP getting legal sanction)? The farmers will be left with unsold stocks rotting in their fields and get nothing.
In that scenario, will the government pick up at MSP every grain of what the farmers are offering? Does it have the machinery to buy, stock and dispose off the produce of all the 150 million farmers? Most crucially, does it have the resources?
Already, its food subsidy bill is Rs 253,000 crore being the budget provision for 2020-21 (this does not include Rs 1,50,000 crore it spent on supplying free food during April-November to address the impact of Covid – 19 led crisis). This is for procurement, handling and distribution of food at subsidized price through PDS under NFSA plus the price support for pulses and oilseeds. On top of this, if, it decides to guarantee MSP on every grain farmer offers for sale, one shudders to fathom where the subsidy payout will reach.
To conclude, the government must not agree to making MSP mandatory and also refrain from imposing levies on non-APMC sales as these decisions will be an assault on the very soul of reforms brought about through the three Central laws. If, the states want level playing field for APMCs then they should abolish levies on sales made on this platform as well besides taking other measures to make them efficient and effective. Coexistence of the APMC and non-APMC markets giving competition to each other is the best foot forward for ensuring a fair deal to farmers.