It was some 12 years back, I read a shocking report in New York Times detailing how a small dairy farmer, distressed over falling milk prices, first shot each of his 51 cows and then shot himself. Severe agrarian distress in American agriculture, a citadel for open markets in agriculture, was something unheard of. Reports now say that farm suicide rate in rural America is 45 per cent higher than the urban areas. US farmers now are saddled with a bankruptcy of $ 425 billion.
In India, as per the Shanta Kumar committee report, only six per cent farmers in the country are able to sell at the guaranteed MSP and the remaining 94 per cent farmers are dependent on the markets.. Studies have shown that only an average of 36 per cent of farmers produce was sold in the mandis and the remaining was sold outside to private trade. The question that crops up is that if the markets were so efficient, Indian agriculture shouldn’t have been in the grip of a severe agrarian crisis. In other words, like in America, markets failed to prop up farm incomes in India.
Aimed at transforming agriculture, and increasing farmer’s income in the process, the contentious farm legislations that have been passed by parliament are expected to bring in private investments in agriculture. But the continuing farm protests in Punjab and Haryana, and now across the country, reflects the apprehension and skepticism farmers carry arguing that liberalising Indian agriculture will actually create private monopolies, and drive out the small farmers. With capital investments flowing in without any regulations and in the absence of any rights-based safety net enshrined for farmers, they fear that in reality the new laws are aimed at providing a complete freedom for the companies.
At the heart of the debate is the raging battle for retaining the Minimum Support Price (MSP). Although the government has time and again assured farmers that MSP and the regulated Agriculture Produce Market Committee (APMC) mandis will stay, it has allowed purchase by private traders outside the premises without paying any market fee. To explain, it means that in Punjab, which has a vast network of APMC mandis linked with village link roads, trading inside the mandis will invite six per cent tax for traders (including rural development fee) but outside the mandis anyone having a PAN card can buy from farmers directly without paying any tax. Farmers fear such a system will make APMC mandis redundant over the years, which in turn also means that MSP too will go away. The fear is not completely unfounded. Over the years, several committees have talked of MSP being a barrier in price discovery and the need to dismantle APMC markets.
The slogan of ‘one country one market’ therefore in reality turns out to be ‘one country two markets’ – one inside the regulated mandis, and another outside its premises. The claim that such a system will allow farmers to get a higher price outside the mandis and if they don’t, they can always come back and sell it at MSP within the mandis is something that farmers have been contesting. Since the government announces MSP for 23 crops, it procures only wheat and paddy and some quantities of cotton, soyabean, pulses, mustard etc. Experience so far has been that the market prices of the 23 commodities for which MSP are announced are often much lower and in the absence of an assured procurement there is no choice for the farmer. Take the case of maize; the ruling market price is between Rs 800 to Rs 1,000 per quintal whereas the MSP is Rs 1,850 per quintal. Farmers have been selling maize at a distress price.
An earlier experiment in bringing in open markets in agriculture in Bihar too has failed to attract private investments, and in the process failed to provide farmers with higher prices. In 2006, there was excitement all around when Bihar repealed the APMC Act. Economists were upbeat saying Bihar will turn out to be the harbinger of a new market-driven revolution in agriculture, but it has been 14 years and nothing like that happened. We are still waiting for the miracle to happen. A 2019 study of the National Council of Applied Economic Research (NCAER) on ‘the experience of Bihar after the abolition of APMC Act in 2006’, had warned: “It is easier to dismantle institutions than build them. The consequences could be very serious for the farm sector and the farming community.”
Over the years, a number of discrepancies have emerged in the functioning of the APMC mandis. There is cartelisation and at some places even mafias have sprung up. There is definitely a need to therefore reform these regulated markets, remove the political influence and bringing in professionalism in its operations. Considering there are close to 7,000 APMC mandisin the country, the challenge is to set up a total of 42,000 mandis, ensuring that a mandi is made available within five km radius. In any case, even if private mandisare to be set up, there is a need for regulations.
After all, let us not forget that the legendary Sir Chhotu Ram, known to be the man behind Punjab’s mandi system, enacted the Punjab Agricultural Produce Markets Act, 1939, making it mandatory for traders to be registered in the regulated mandis. As Revenue Minister of the erstwhile Punjab province during the days of the British Raj, his basic concern was to free farmers from exploitation in the hands of unscrupulous traders and middlemen. Eighty years later, the policy effort seems to de-regulate trade leaving it open to free markets. While it is alright to blame small traders and middlemen operating in the mandis for the flaws that have crept in, how one can be sure that the big players with larger financial clout will not be in for a bigger ill-treatment, abuse and misuse of the market freedom?
The real freedom for farmers will therefore happen when farmers know, for sure, that wherever they sell, within the mandi or outside the mandi, in Amritsar or in Bangaluru, they will at least get MSP. The need therefore is to bring in a 4thOrdinance which makes MSP (for all 23 crops for which prices are announced) a legal right for farmers, ensuring that no trading happens below it. At the same time, make MSP the price below which no contract farming can take place. Since agribusiness companies and the policy makers are claiming that farmers are being misled and they in reality will get higher prices, making MSP a legal right will help build confidence and trust among the farming community. #
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