While, staying implementation of the three contentious farm laws, the Supreme Court (SC) had set up a Committee to recommend the way forward. The committee submitted its report on March 19, 2021. Even as the SC action on the report was pending, on November 19, 2021 Prime Minister Narendra Modi announced repeal of the laws even while maintaining that these laws are beneficial to small and marginal farmers who are in majority.
Now, in a startling revelation, Anil Ghanwat, a member of the committee has revealed that around 85.7 percent of the 73 farmer organizations, representing more than 33 million farmers supported the laws. This should prompt the government to revisit the laws. Meanwhile, let us look at Committee’s recommendations
First, claiming that the three laws would be beneficial for farmers, the committee has averred their repeal or long suspension “would be unfair to the silent majority” who supported the reforms. The observation could not have been more apt.
Under the extant arrangements, farmers can sell their produce only in the Agricultural Produce Market Committee or APMCs mandi (marketplace notified under the State APMC Act) wherein the commission agents (known as arthiyas in local parley) and the licensed trader/buyer rule the roost. The duo ensure that the farmers get a low price, face rejection, weighed less, delayed payment, etc. Levies such as market fee, arthiyas’ commission and rural development cess (RDC) further reduce their net-back.
The capacity of APMCs being woefully low, the small farmers is forced to sell most of their produce in the so called private local markets at a ‘throwaway’ price. Though legally barred, these sales happen because the buyers are none other than the arthiyas and licensed trader in the mandi who have the blessings of corrupt bureaucrats and politicians (in many cases, they or their kin also masqueder as traders); hence don’t face any legal action.
The three central laws gave farmers umpteen opportunities to sell their produce in outlets other than APMC mandis by legitimizing sales to private traders, processors, aggregators, exporters and so on. When, a farmer gets dozens of options to sell, plain common sense tells she is bound to get a good deal in every respect including a good price. She doesn’t have to pay any levies on selling at non-APMC platforms and can save on transport cost in case the buyer picks up from her doorsteps.
In times, when the demand is buoyant, they can get a fair slice of the gain resulting from higher price. For instance, the steep increase in the international price of wheat following Ukraine crisis is expected to yield a bonanza of about US$ 5 billion on the export of wheat from India. Had the three laws been in force, the farmers would have got a good slice of this windfall which under the extant dispensation will be cornered mostly by traders/exporters.
Second, the committee has suggested that the States may be allowed flexibility in implementing and designing the three farm laws albeit with the Centre’s approval.
Here, it may be pertinent to recall in 2017, the Modi Government had passed a Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Law. It contained provisions to give more options to farmers for selling their crop and greater flexibility to traders such as ‘single pan-State licence’ for buying from anywhere in the State. But, the model law has remained a mere showpiece as majority of the States showed no interest.
In early 2020, in the wake of Covid – pandemic, Modi had asked the States to suspend certain provisions of their APMC laws for three months to make way for purchase of farmers’ produce directly from their doorsteps by large buyers such as processors, millers, exporters, cooperatives, individual traders and so on. Only four states viz. Madhya Pradesh, Uttar Pradesh, Gujarat and Karnataka responded by making amendments in their APMC laws.
Clearly, leaving it to the states won’t help. The way forward is for the Centre to resurrect its law, which allows it to regulate inter-State trade and intra-State trade and enable an entity to buy specified farm commodities – under entry 42 of the Union List and entry 33 of the Concurrent List – ‘directly’ from farmers anywhere in the country, even outside APMCs.
Third, the committee has opined that the farmer unions’ demand to legalize MSP was not based on sound logic and was infeasible to implement. However, its concurrent suggestion to give freedom to States to make MSP legal is anomalous. When, the idea is illogical for the Centre, how can it work for the state?
Put simply, a legal guarantee implies, if an entity say, private trader is found paying a price less than MSP, he can be jailed. No one will ever take that risk. The ball does not stop here. The state will have to buy at MSP every grain of what the farmers offer for sale. This purchase obligation will have to cover all crops and not limited to 23 crops already under MSP regime. This can make the state bankrupt, overstrain the limited handling and storage facilities, increase wastage manifold and embarrass India at the WTO (World Trade Organization) as food subsidy to farmers balloons.
Neither the Centre nor States should take the idea on board.
Fourth, the committee has proposed discontinuation of the extant open-ended procurement policy; instead, it wants a cap on procurement of wheat and rice commensurate to the needs of the Public Distribution System (PDS)/National Food Security Act (NFSA). It has also mooted giving freedom of choice to beneficiaries of PDS/NFSA to choose cash transfers equivalent to MSP + 25 percent for every kilogram of grain entitlement or get it in kind. The proposal makes sense.
When, the system was initially put in place, the intent was to procure only that much quantity needed to meet PDS needs plus a strategic buffer to deal with exceptional situations. Buying ‘unlimited’ quantity at MSP was never contemplated. But, thanks to vote bank politics (guaranteed purchase at ever increasing MSP helps in elections), this has become an end in itself.
This has put the country on a dangerous trajectory viz. swinging cropping pattern towards wheat and rice, adverse environmental consequences, burgeoning stocks, increasing wastage and ballooning subsidy. Things must be set right by taking committee’s recommendation on board.
As for the second part, the government should consider giving subsidy under direct benefit transfer (DBT) to ‘all’ beneficiaries. It may put Rs 125/- a month on wheat (@Rs 25 per kg for 5 kg) in a beneficiary’s account. Including Rs 10/- from her pocket, she can buy 5 kg wheat from the market @ Rs 27 per kg by paying Rs 135/-.
Under DBT, there is no rationale for continuing with PDS though fair price shops (FPSs) can continue – like any other trader – to sell grains at market based price. With guaranteed state purchase of wheat and rice gone, for deciding what to grow, farmers will be guided solely by the demand pattern. This will help in crop diversification and resultant environment benefits. There will also be huge saving in subsidy due to saving in handling, storage and distribution cost.
As for remunerative price to farmers, resurrection of the three central laws (as proposed above) will enable them sell their produce at all non-APMC platforms and get a price of their choice (this could be even be higher than MSP) even as APMCs operating under State jurisdiction remain intact.