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Saturday, July 31, 2021

Farm laws: Claims and reality

Farm laws will create more layers of middlemen, increase vulnerabilities of farmers and prove detrimental to food security

Updated: October 9, 2020 8:07:35 pm
Punjab farmers protests, Punjab farm laws, farmers protest Punjab, Punjab protests, India news, Indian ExpressProtesting against the new farm laws, farmers sit at the Railway station in Jalandhar, Punjab for an indefinite period as part of their rail roko agitation (File/Express Photo by Gurmeet Singh )

By Ashish Mital

In the recently-concluded Monsoon Session of the Parliament, three pieces of legislation pertaining to agriculture were enacted: The “Income Assurance”, Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, in short the “Mandi Bypass” Act; The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, in short the Contract Farming Act; and the Essential Commodities (Amendment) Act, 2020. There has been opposition against these laws in several parts of the country. The Prime Minister and ministers maintain that these laws will benefit farmers. So why so much opposition to them? Let’s scrutinise each of the government’s claims.

Claim 1: The farmer is now free to sell his crop anywhere. That the government is providing options to farmers.

The reality: 86.2 per cent of Indian farmers own less than 2 hectares land. They are under heavy compulsion to sell their crops immediately after harvest in order to pay their debts, buy inputs for the next crop, and their other needs and because they have no capacity to store the crop, to transport it (which government procurement did) and bargain for the best price, these farmers go to the nearest mandi.

The claimants of “sell anywhere” are obviously unconcerned with the peasant’s plight. Where is the alternative? Companies are alternative to what? The Acts do not say, what they should, that Corporate will be alternative to MSPs and government procurement. There is no “freedom of choice”.

Claim 2: MSP and government procurement will continue.

Reality: Section 5 of the Contract Act states that “to ensure best value to the farmer” such price “may be linked to the prevailing prices in specified APMC yard or electronic trading and transaction platform or any other suitable benchmark prices” — but not to the MSP or the government procurement rate. In fact, there will be no declaration of MSP for all crops, determined by Swaminathan formula of C2 costs plus 50 per cent.

Claim 3: Farmers will be free from exploitation by intermediaries.

Reality: The APMCs, established in 1960s were a marketing solution to provide incentives of a fair price and government procurement to farmers and save them from selling crops at throwaway prices to pay their debts accumulated from private lenders for the purchase of inputs. Half a century later peasants are making the same complaints against the arhatiyas of government mandis and the government for its failure to declare profitable MSP, for covering only 23 crops under MSP and for scarce procurement.

These Acts create at least five layers of middlemen, roles which will be filled by rural moneyed sections, who are currently the middlemen as well. Section 2(g) stipulates a Farm Agreement in which “written agreement entered into between a farmer and a Sponsor or a farmer, a sponsor and any third party”. This “third party” has been left undefined

The sponsor has to provide farm services — “seed, feed, fodder, agro-chemicals, machinery and technology, advice, non-chemical agro-inputs and such other inputs for farming, etc” (section 2d). The farmer pays for these. But section 3(1)(b) states that the “responsibility for compliance of any legal requirement for providing such farm services shall be with the Sponsor or the farm service provider”. This “farm service provider” is a middleman.

Section 4(1) and Section 4(3) say determining “quality, grade and standards for pesticide residue, food safety standards, good farming practices and labour and social development standards may also be adopted in the farming agreement”. Section 4(4) says monitoring and certification of quality and “the process of cultivation or rearing, or at the time of delivery, by third party qualified assayer…”. This means another middleman.

Section 10 provides for “an aggregator or farm service provider”, the “aggregator” being any person, “including a Farmer Producer Organisation”, who acts as an intermediary between a farmer or a group of farmers and a sponsor and “provides aggregation related services to both farmers and sponsors”. This middleman will have three roles — aggregating land of small owners for contracts, securing services from companies for farming and mobilising farm produce for sale to companies.

Section 2(e) of Contract Act and Section 2(b) of the Mandi Bypass Act state that a “farmer” also includes “farmer producer organisation”. It is the rich farmer who is likely to organise the FPOs and act as an agency of the sponsor company. The original plan for FPOs was to be voluntary collectives of farmers to empower them to bargain with traders. These acts envisage a middleman role for them akin to the present-day moneylenders, brokers for banks, arhatiyas and commercial agents. There is no security clause in the Acts for the underprivileged.

Section 5 (1) of the Mandi Bypass Act also provides for the FPO the role of establishing and operating “electronic trading and transaction platform… commerce of scheduled farmers’ produce in a trade area” – this implies ownership and management of private mandis.

There is an obvious provision for a nexus between the sponsor company and the middlemen and in the absence of government control these outfits will control all operations. Where is freedom from the middleman?

Claim 4″ Food security of the poor will not be harmed.

Reality: The EC Amendment says, “the supply of such foodstuffs, including cereals, pulses, potato, onions, edible oilseeds and oils”, etc, “may be regulated only under extraordinary circumstances” and “imposing stock limit shall be based on price rise” “may be issued under this Act only if there is — (i) hundred per cent increase in the retail price of horticultural produce; or (ii) fifty per cent increase in the retail price of non-perishable agricultural foodstuffs, over the price prevailing immediately preceding twelve months, ..”

There will be no regulation of food prices, no check on hoarding and black marketing in a food market chain controlled by corporate and MNCs. Cheap food grain under the PDS will get converted to a cash transfer scheme and more than 75 crore beneficiaries will be forced to buy from open market.

This law further states that these changes shall not apply to orders under PDS and targeted PDS “for the time being in force”. The use of the phrase “time being”, for PDS, is very sinister.

Claim 5: Farmers shall not be deprived of their land.

Reality: Section 8 of Contract Act mentions that, “No farming agreement shall be entered into for the purpose of (a) any transfer, including sale, lease and mortgage of the land or premises of the farmer”. That is indeed welcome.

But Section 9 links “farming agreements” “with insurance or credit instrument under any scheme of the central government or the state government or any financial service provider to ensure risk mitigation and flow of credit to farmer or sponsor or both.” This will entail credit linkage with mortgaging of farmer’s land, unless it had been specified that the sponsor company will provide the assets for mortgage.

In case the contract suffers a financial loss, there will be recovery, under Section 14(7) “amount payable … may be recovered as arrears of land revenue”. And though Section 15 prohibits recovery “against the agricultural land of the farmer”, clearly the credit schemes will follow their debt instruments, not Section 15 of this Act, to which they are only “linked”.

Claim 6: There will be no loss to the farmer in calamities (force majeure).

Reality: Section 14(2)(b) of Contract Act provides that where the “order is against the farmer for recovery of the amount due to the Sponsor” on account of any advance payment or inputs, “such amount shall not exceed the actual cost incurred by the sponsor”. In other words, apart from cost of inputs, the actual costs “incurred by the sponsor” will be recovered.

Further in cases of “default by the farmer is due to force majeure”, “no order for recovery of amount shall be passed against the farmer”. There is no commitment here to pay for the services of the farmer, though the loss is due to ‘force majeure’.

In these recoveries the government will play an active role.

Claim 7: There will be no govt taxes and benefit will be shared by the company and the farmer.

Reality: Section 6 of the Mandi Bypass Act does bar “market fee or cess or levy”, but only under “any state APMC Act or any other state law”. And, Section 5(2) provides that the “the person establishing and operating an electronic trading and transaction platform shall prepare and implement the guidelines for fair trade practices such as mode of trading, fees, …”. There will be no government taxes, but there will be mandi fees, and with no government control.

Three major threats stand out.

First, farmers will be subjected to corporate control: The scheme of these Acts is to impose an “Indigo farming” type pattern in the entire agriculture sector, with powerful rural elites acting as middlemen of the MNCs and the corporate sector and both input and crop markets being corporate monopolised.

Second, subjecting food security to world markets: With complete government withdrawal from the food chain and food security, MNC food giants will freely import at the cheapest rate. The major grain trade giants, who control more than 70 per cent of the world grain trade, along with other MNCs and their Indian collaborators will integrate Indian agricultural production with world markets and demolish the freedom of farmers and work to the detriment of the country’s food security.

Third, the threat to India’s food and political sovereignty: With legal freedom, these companies will readily promote banned and dangerous GM seeds, terminator seed technology, which has been restrained due to protests. They will erode our seed sovereignty and threaten our food and political sovereignty.

No country has developed by handing over its agricultural sovereignty and development of farmers to foreign powers.

The writer is General Secretary, All India Kisan Mazdoor Sabha, AIKMS and Working Group Member, AIKSCC

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