The APMC Act of the 1950s freed the Indian farmer from the monopoly of the local trader (a la Kanhaiyalal of Mother India), undoubtedly with substantial benefits. Equally truly, what got created were oligopolies. In practice, each trader in the mandi has built relationships with a set of farmers: The traders provide credit, the farmer then sells his produce only through that trader, to have the credit/advance against such sales adjusted. More often than not, the mandi trader is also a conduit for the sale of foodgrain at MSP (direct sale by farmers to MSP centres is virtually impossible), reducing the net received by the farmer to below MSP (the traders’ “commission” for such transactions is obviously off the books). The symbiotic relationship between particular traders and farmers, which have been created within these oligopolies, is possibly less exploitative only in comparison to the Kanhaiyalals of yore.
That taking the next step, of allowing/introducing more buyers for farm produce, would further reduce exploitation of farmers has been the wisdom-by-consensus of almost all experts, expert committees and conferences at least since the late 1980s. The logic is simple: If the farmer has a single buyer for her produce, she is most vulnerable; if there are a few buyers, she is less open to exploitation; and if there are an unlimited number of buyers, she is the best off, because she can sell to whoever offers the best price. Few can argue against this simple logic.
In fact, the much-advocated reform of the APMC laws has not happened so far due to the opposition from mandi traders, by now an influential lobby. In Rajasthan, for example, in 2004, a similar Cabinet-approved amendment to the APMC Act had to be withdrawn because traders went on strike. Opposition to changes from traders to the way, and to whom, farm produce is sold is perfectly understandable. But from the farmers? Why should farmers oppose more avenues for the sale of their produce, other than mandis, especially if no element of coercion is involved?
What changes have the three farm laws wrought? The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 gives farmers the freedom to sell outside the mandi; and to the buyer to buy at “farm gate”, without the necessity of a mandi licence. The farmer’s choice to sell within the mandi, if she so wishes, is not taken away. Reportedly, farmers believe that this reform is a precursor to the abolition of mandis and MSP. It is hard to imagine what might have made them jump to this conclusion: Any political party would have to have an extreme and unprecedented case of myopia to do away with either mandis or MSP, as it would be politically suicidal. Besides, it seems the government is prepared to give whatever assurance the farmers want on their continuation, and also to make changes in the law such as mandi fee applying to private “mandis” as well.
The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020, basically provides for yet another much-recommended agriculture marketing reform — contract farming. This helps the farmer to transit to commercial crops, such as vegetables and fruits, which give higher returns than foodgrain sold at MSP, by assuring her the “contracted” price even if there is excess production, and prices in the market fall. Of course, the farmer is also committed to selling at the “contracted” price, even if market prices are higher, though the law does provide a means of sharing this windfall. The point, however, is that there is no element of compulsion. The farmer is free to continue sowing crops that sell at MSP, or to take her chances in the market, if she sows non-MSP crops, without entering into any contract. How can there be a protest about an additional option? If the farmers do not like the safety features of the law, such as appeals, they can seek those changes. Why they should seek a repeal of the law altogether is truly baffling.
The Essential Commodities (Amendment) Act, 2020 provides that storage, etc of cereals, pulses, oilseeds, edible oils, onions and potatoes can be regulated only in extraordinary circumstances such as war, famine, natural calamity, or extraordinary price rise. The EC Act, as it stood, served the interests of the consumer, especially the rather spoilt urban middle classes, by trying to get farm produce to them at low prices. It is not difficult to see that if retail prices are low, farm gate prices will be depressed too. The EC Act has also been against the interests of the farmer by discouraging investments in cold chains, warehouses, etc. Better supply/marketing chains have the potential of getting higher prices/returns for the farmer. If anything, the farmers should have agitated, from decades ago, for the amendments that they are now reportedly opposing!
In the 2004 strike in Rajasthan, the traders’ demands were uncannily similar. This is what is astonishing: The concerns of the traders — additional sale options for farm produce other than the mandis, and contract farming — are being mouthed by the farmers. What is equally astonishing is the silence of all those “intellectuals” and “experts”, barring a few exceptions, who had passionately argued for years for these reforms. Let us not let our reform imperative be informed by which party is in power.
There is obviously more to this agitation than meets the eye. To think that the farmers have been “misled” as part of a “political conspiracy” is perhaps naïve. Perhaps, the key lies in the way the MSP scheme works in certain states, and the way “big” farmer-trader relationships have worked out in such states.
This article first appeared in the print edition on December 23, 2020 under the title “His Trader’s Voice”. The writer has been the CAG of India, and is a former civil servant.
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