Farm Bills: who gains and who loses

Farm Bills: who gains and who loses

Context:

• Farmers have taken to the streets, protesting against three Bills on agriculture market reforms that were passed by Parliament.

What are the three Bills?

• The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, allows farmers to sell their harvest outside the notified Agricultural Produce Market Committee (APMC) mandis without paying any State taxes or fees.
• The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, facilitates contract farming and direct marketing.
• The Essential Commodities (Amendment) Bill, 2020, deregulates the production, storage, movement and sale of several major foodstuffs, including cereals, pulses, edible oils and onion, except in the case of extraordinary circumstances.

Will farmers get minimum support price?

• Farmers opine that, minimum support prices (MSP), are threatened by the new laws.
• MSPs are the pre-set rates at which the Central government purchases produce from farmers, regardless of market rates.
• They are declared for 23 crops at the beginning of each sowing season.
• Centre only purchases paddy, wheat and select pulses in large quantities, and only 6% of farmers actually sell their crops at MSP rates, according to the 2015 Shanta Kumar Committee’s report using National Sample Survey data.
• None of these recently passed bills directly impinge upon the MSP regime.
• It is feared by the farmers that encouraging tax-free private trade outside the APMC mandis will make these notified markets unviable, which could lead to a reduction in government procurement itself.
• Because most government procurement centres in Punjab, Haryana and a few other States are located within the notified APMC mandis.
• Farmers are also demanding that MSPs be made universal, within mandis and outside, so that all buyers government or private will have to use these rates as a floor price below which sales cannot be made.

Issues

• One of the major concerns raised is that, since agriculture falls in the State list, Centre should not be making legislation on this subject.
• They are concerned about the loss of revenue from mandi taxes and fees.
• Some economists state that both Punjab and Rajasthan are considering to expand the bounds of their APMC mandi yards to ensure that they can continue collecting taxes on all agricultural trade within their State’s borders.
• Paddy farming has received a major boost with procurement at MSPs and farmers fear their newly assured incomes are at stake.

Way forward

• The government opines that the new laws will provide farmers with more choice, with competition leading to better prices, as well as ushering in a surge of private investment in agricultural marketing, processing and infrastructure.
• With only 7,000 APMC markets operating across India, the majority of agricultural marketing already happens outside the mandi network.
• States like Bihar, Kerala and Manipur do not follow the APMC system.
• However, most private buyers are currently small traders at local mandis.
• The removal of stock limits and facilitation of bulk purchase and storage through the amendment to the Essential Commodities Act could bring large corporate players into the agriculture space.
• Although corporates will bring much-needed investment, they could also distort the playing field, as small farmers might not be able to match them in bargaining power.