Farm Laws 2020/Farmers’ Protest: Myth Vs Reality

Farmers have been misinformed to believe that Food Corporation of India (FCI), will shut down annual wheat and rice purchases from the States. It is to be noted here that the Centre distributes annual wheat and rice procured from farmers in Punjab and elsewhere, through the Public Distribution System (PDS).The truth is,the procurement process will continue like before.In fact,there was a solid increase of 59.2% in the procurement of paddy in 2019,when compared to 2013-14.

How has public procurement fared under the Modi government?

Well,the procurement of wheat from farmers by the Modi government,for Rabi 2020,touched an all-time high record figure of 382 lakh metric tonnes (LMT). During the same period, 119 lakh MT paddy was also procured by the government agencies through 13,606 purchase centres.All over India, 42 lakh farmers were paid Rs 73,500 crore towards minimum support price (MSP) for wheat alone,in the current Rabi season. This year Madhya Pradesh became the largest contributor to the Central pool with 129 LMT wheat, surpassing Punjab which procured 127 LMT. Haryana, Uttar Pradesh and Rajasthan also made significant contributions to the national procurement of wheat.The heartening thing to note is,there was an increase in the procurement from the eastern and northeastern regions too, this year, as opposed to earlier trends. In the Kharif season this year, procurement from these regions has been to the tune of 89.5 LMT benefitting more than 18 lakh farmers.

Given the hue and cry over MSP,it is only apt to ask–What has been the track record of the Modi government,on MSP?

Without an iota of doubt,the track record has been exemplary. Minimum Support Price (MSP) is a form of market intervention by the Central government,to insure agricultural producers against any sharp fall in farm prices. The minimum support prices are usually announced at the beginning of the sowing season for certain crops, on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP). MSP is the price fixed by government of India to protect the farmers against excessive fall in prices,during bumper production years.

Coming to the Modi government’s track record,the numbers speak for themselves. MSP payment to farmers for paddy, rose by 2.4 times to Rs 4.95 lakh crore between 2014 and 2019 under the Modi government, as against only Rs 2.06 lakh crore, under the previous, Congress-led regime,between 2009-2014. MSP to farmers for wheat increased by 1.77 times during 2014-2019,to Rs 2.97 lakh crore,compared to Rs 1.68 lakh crore,in the 2009-2014 period.MSP payment for pulses surged by a whopping 75 times under the Modi government,to Rs 49,000 crore from 2014-2019,compared to a measly Rs 645 crore,under an inept Congress led UPA-2.Payment to farmers for Oilseeds and Copra also surged 10 times under the Modi government, to Rs 25,000 crore, during the last five years, in comparison to MSP payment of just Rs 2460 crore,in the period from 2009 to 2014, under the Congress-led, United Progressive Alliance (UPA) establishment.

Again,in July 2018,in a landmark decision,the Modi government announced MSP at 1.5 times the cost of production,for 14 kharif crops.The cost considered by CACP is as per the A2+FL formula, which includes expenses on farm inputs,including seeds, fertilisers, fuel and irrigation and ofcourse,the imputed value of family labour (FL).

What do experts have to say on MSP?

The Modi government in 2018 had increased the MSP at 1.5 times the production cost, which is the chief determinant of MSP,today. This is based on the recommendations of the Swaminathan Commission and National Commission of Farmers,2006,which the Congress clearly failed to implement for eight long years between 2006 and 2014,before it was ousted. Shanta Kumar, recently said,when asked about MSP—“On MSP, the Modi government has clarified that it will stay, but the question we (the committee) have raised is that MSP only relates to 6% of big, elite farmers who sell their crop in Mandis. About 86% are small farmers who don’t go to the Mandi to sell their produce, and the new Bills will give them strength to sell outside the Mandi at better prices,” Shanta Kumar,further added—“Those who are protesting are big farmers, Mandi operators or Arhatiyas (middlemen) who get commission. But think about small farmers who are outside the Mandi system, who will be strengthened through these new Bills. It has been pending for a long time,”thereby,clearly debunking the fake narrative around Farm Bills.

The total value of all agriculture output was around Rs 40 lakh crore in FY20 while the total value of MSP operations was around Rs 2.5 lakh crore, corroborating the argument by Shanta Kumar,that if only 6.25% of the agri produce is MSP driven,then why this hue and cry about MSP?Clearly,the entire MSP related controversy is a needless one,that is in large measure,a manufactured controversy by an electorally debilitated opposition,that is running out of issues to fret and fume about.Prime Minister Narendra Modi has categorically assured farmers that his government will continue with MSP.Hence any apprehensions on this front are not required.

Well,the straight answer to that is,a loud and clear, “Yes”. Punjab agriculture department’s records show that 22.91 lakh hectares were under paddy cultivation in 2019-20, 25.94 lakh hectares in 2018-19 and 25.19 lakh hectares in 2017-18.

The average yield of paddy in Punjab was recorded at 6,635 kg (6.6 tonnes) per hectare in 2019-20, 6,532 kg (6.5 tonnes) in 2018-19 and 6,516 kg (6.5 tonnes) in 2017-18.

As per yield and “cultivation area” the total production should be 152 Lakh tonnes (15.2 million tonnes) in 2019-20, 169.44 LTs (16.9 Million tonnes) 2018-19 and 164.14 LTs (16.4 million tonnes) in 2017-18. Thus, in all the three years, government agencies purchased more paddy than Punjab’s total production, as per the average yield.In 2019-20, 11.82 lakh tonnes (1.2 million tonnes) more paddy was sold in Punjab’s mandis than produced in the state. In 2018-19, the figure around 1.02 lakh tonnes, and in 2017-18, it was nearly 15.42 lakh tonnes (1.5 million tonnes).

Recent media reports have gone thus far as to suggest that,traders in Punjab get paddy from States like Bihar at the rate of Rs 900 to Rs 1,200 per quintal, depending upon quality. Adding milling and transportation charges, it costs them around Rs 1,200 to Rs 1,500 per quintal. In Punjab, they sell at a far higher rate of the MSP, Rs 1,888 per quintal, illegally in the name of State’s farmers.In effect,more paddy is procured by the Central government from farmers in Punjab,than what Punjab produces.Hence the State has no reasons to complain,whatsoever.Interestingly,while the Congress under Amrinder Singh keeps reiterating that Agriculture is a State subject, when it comes to resolving the problems of farmers in Punjab,Amrinder has shrugged off his responsibilities,completely shifting the onus to the Central government.

No, they do not. The rights or livelihood of those associated with Agriculture Produce Marketing Committee (APMC) Mandis, will not be encroached upon. However, it is a known fact that APMC structure has been inefficient, with farmers relying on APMC agents, to help them sell their produce. In this system, while APMC agents walk away with hefty commissions, the hapless farmers make precious little. It is precisely to unshackle the farmers from predatory agents and middlemen, that the Modi government passed the Farm Bills.Going forward, farmers will have the choice and freedom to sell their produce either at APMC designated wholesale Mandis or in “Trade Areas” that will be created, as per provisions of these Bills, outside the jurisdiction of APMCs. Farmers will have the right to sell their produce to anyone at a price they deem fit, in these “Trade Areas”.

How is “Trade Area” beneficial?

Let it be clear,that the Modi government takes immense pride in it’s farming class,who toil selflessly to feed millions.While a large majority of farmers are happy with the new Farm Bills,vested pressure groups who owe allegiance to middlemen and APMC Mandi owners,are unhappy for obvious reasons. The middlemen are upset because their monopoly has been broken. There will be no taxes or levies of either State or Central government, on trade conducted in these “Trade Areas”, thereby reducing the cost of transaction in the entire food chain, from farm to fork. Hence,the whole narrative that “Trade Areas”,are anti-farmer,is false.

The farmer can now be a producer of crops and a trader too if he or she wishes to,by simply getting a license to engage in “Trade Area”,by furnishing basic details,with hardly any paperwork involved.Earlier,the farmer was restricted and could only sell in licensed Mandis in a given area.But with new Farm Bills,farmers can undertake both intra and inter-State trading and marketing activities, too.Effectively speaking,under new farm legislation,a farmer has the freedom to become a grower or producer of crops,a trader who buys and sells agri products and perishables and also a marketeer,who has the leeway to market his produce or that of third parties,to counter-parties,who offer the best price.

Why are “Farmers” protesting, if the Bills are indeed pro-farmer?

Well, let the truth be told–while some pockets of farmers in a few States are indeed protesting,it is certainly not a pan-India movement.Morever,it is not primarily farmers, but wily APMC commission agents and rich landowners with deep political connect, who have flourished under the flawed APMC regime, who are hurt. The original idea behind setting up APMCs was to protect farmers from greedy middlemen, ensuring competitive practices and optimising farm incomes. Empirical evidence suggests that APMCs have, however, fallen prey to the very vices they were supposed to mend and this made for a strong case for agrarian reforms. In fact, Prime Minister Narendra Modi needs to be applauded for bringing in the Farm Bills and in one fell sweep, dealing a body blow to institutionalised corruption, in the agriculture sector.No leader other than Modi could have taken such a bold step to weed out lethargy from a fattened system, that for decades was anti-farmer and yet had no accountability.

Have APMCs delivered?

Well,State APMC Acts empower State governments to demarcate their geographical region into various ‘notified market areas’, headed by a Market Committee (MC), for each Market Area. Over time these committees became authoritarian, leading to a monopolistic structure, antithetical to the cause of farm welfare. State APMC Acts typically declare the purchase, sale, storage, and processing of agricultural produce outside the yard set up by the “Market Committee”, unlawful. These Farm Bills, however, have made it lawful and legal henceforth, to deal outside the “Yard Areas”. Basically, APMCs will now face competition from traders who trade in “Trade Areas”, that will be outside the jurisdiction of “Yard Areas”.APMCs enjoyed immense clout and functioned without any competition. The new Bills change that status quo and hence some APMCs are protesting.Clearly, the Farm Bills will dilute the overarching monopoly of big APMC Mandis like say,the Vashi Mandi in Navi Mumbai and the Azadpur Sabji Mandi in New Delhi. With the power of Mandis getting diluted, small and marginal farmers as also retail customers–both groups of people in the entire food chain, stand to benefit,as overall costs will come down significantly.

In the medium term, the Farm Bills will force various stakeholders in the food chain, to readjust and recalibrate themselves. For example, the APMC Mandi Boards or Marketing Committees (MCs), as they are widely known, will be forced to become efficient,corruption-free and competitive and will no longer have the luxury of making lazy money, purely by virtue of age-old laws that have been heavily lopsided in their favour, for decades together.Till now, these MCs had a free run and would often indulge in malpractices, to pocket hefty fees and commissions, while the hapless farmer would be left with just 15-20%, of the final consumer price that you or I pay, for farm products. So if say, one pays a retail price of Rs 100 per kg for a vegetable, the farmer in the existing system gets nothing more than Rs 15 or Rs 20, at best. But with new Farm Bills, farmers will make a higher mark-up, as the new Bills would eradicate intermediaries from the equation, putting more money in the hands of the farming community.

Will new Farm laws,make FCI’s operations more efficient?

Certainly,yes! Grains procured by the Food Corporation of India (FCI’s) are often more costly than those bought by private traders and the open-ended system of procurement by FCI ensures that it has Rs 1.5 lakh crore or so worth of extra foodgrain in its godowns, which often get wasted if there is a bumper crop but not enough, matching demand. This wastage will get curtailed significantly, under the new agrarian structure.

What has the Modi government done for uplifting the well being of India’s farm community?

Despite with the Food Security Act’s generous 90-95% subsidy to two-thirds of the population, the Modi government has also simultaneously been engaging in direct cash transfers to farmers, as is evident from the Rs 6000 per year that is paid to over 14 crore farmers, under the PM Kisan scheme. Over Rs 94,000 crore,has been paid via PM-KISAN, since it’s inception,two years back,with over Rs 22,000 crore,paid during the last six months of the pandemic, alone. Needless to add,the Farm Bills, will weed out wastages, without impinging on the financial security of farmers which is already being addressed via schemes like PM Kisan, PM Fasal Bima Yojana, NFSA and the like.

What has the Modi government done for agrarian infrastructure?

Talking of infrastructure, the Modi government, in August this year, launched a new Agriculture Infrastructure Fund worth Rs 1 lakh crore, meant for setting up storage and processing facilities, which will help farmers get higher prices for their crops.In September this year, the government launched the “Pradhan Mantri Matsya Sampada Yojana” – a flagship scheme for focussed development of fisheries sector in the country with an estimated investment of Rs 20,050 crore during a period of five years as part of the Atmanirbhar Bharat package. In June this year, the Modi government announced a Rs 15,000 crore Animal Husbandry Infrastructure Development Fund with an interest subsidy scheme to promote investment by private players and MSMEs in dairy, meat processing and animal feed plants, a move which is expected to create 35 lakh jobs.So the government has been working at strengthening farm infrastructure. This, along with the new Farm Bills, will boost the productivity of the agrarian sector to areas beyond just growing traditional crops like paddy or wheat.

Prime minister Narendra Modi, in 2018, promised to double farmers income while speaking at the inauguration of a Rs 300 crore chocolate plant of Amul in Anand, the milk capital of India. He said the co-operative movement has shown that an alternative to economic prosperity other than socialism and capitalism, exists. This is precisely where the Farm Bills, come in.The new Farm legislation seeks to protect farmers,with the Central government stepping in when needed,via MSP,crop subvention schemes and related measures. When market price of a crop falls MSP,the Modi government intervenes via the market intervention scheme and price support scheme (MIS-PSS).Equally,the new Farm laws encourage modernisation and freedom from exploitative practices,by giving the farmers the freedom to profit from their produce,as they deem fit,without being told where to sell, or whom to sell to.

Why are only few States protesting?

It is precisely because of this reason–Few States will lose the unbridled control they have had on Agriculture, via State APMC Acts. Note,intra-State trade is a State subject, but inter-State trade comes under the aegis of the Union government. Since, as per Farm Bills, farmers will now be able to engage in barrier-free, intra and inter-State trade, the iron grip that some States have on farmers in their respective geographical areas, will loosen. Obviously, some States like Punjab are uncomfortable with a scenario where farmers have the upper hand and the State government, is the lesser mortal, in the equation.Under the APMC-Mandi system, market levies,fees and charges in States like Punjab come to around 8.5% — a market fee of 3%, a rural development charge (RDC) of 3% and the Arhatiya’s commission of about 2.5%. These levies fatten the middlemen and State coffers,at the expense of the hardworking farmer,who is left with precious little.The “Trade Areas” under the new Farm Bills will not have any of these charges and will empower farmers. If you calculate the Mandi transaction cost on 1 quintal of wheat, at 8.5% all inclusive, it comes about Rs 164. So, on the sale of every quintal of wheat inside the Mandi,the middlemen are being incentivised. The new Farm Bills remove this anomaly. Instead of questioning the Central government,the question that needs to be asked of Amrinder Singh,is this—Why has Punjab not made transactions in Mandis cost-efficient? Why are farmers in Punjab not provided a free facility for selling their produce?Of over 40,000 Arhatiyas in Punjab,24000 are registered and made roughly Rs 1600 crore as commissions last year. Punjab government too raked in close to Rs 4000 crore as Mandi fees and RDC.Why is the Punjab government shielding middlemen,under the false pretext of working for farmers?

How will Contract Farming help?

The Farm Bills also allow for contract farming, whereby farmers can enter into contracts, at a pre-determined price, even before the crop has been harvested, with private companies, aggregators, food processors and exporters. This is an unprecedented reform, as it allows farmers to lock in a good price for their harvest and insulates them from any post-harvest, product-related or price volatility.

Who will pay for the insurance, cold storage, machinery and farm equipment, when farmers enter into contracts, with private players?

The Farm Bills clearly state that these will be paid for by the counterparty and not the farmer. This will be a big relief for especially small and marginal farmers who can access superior farm technology and become agripreneurs, without having to go out of pocket.Also,there will be an able bodied resolution mechanism,whereby any dispute between the farmers and counterparties will be resolved in a time bound manner,by a Conciliatory Board (CB),formed under the aegis of the Sub Divisional Magistrate (SDM).The CB will have representatives from both sides.Sale, lease or mortgage of farmers’ land is prohibited. There will be just a farming contract for specified products at a specified time,as per farmers’ choice.So the baseless allegation that farmers will be forced to sell their lands to private players,is absolutely false and malicious.Also,even after signing the contract, the farmer can withdraw anytime, without penalties, if no advance is taken. If the advance is taken, money can be returned (with no interest or penalties charged) and then farmer can withdraw.

Well, in Budget 2020, the Modi government announced the formation of 10,000 Farmer Producer Organisations (FPOs). These FPOs are largely clusters or groups of farmers who are brought together so that credit and other assistance can be extended to them. As a group, FPOs have demonstrated superior and better bargaining skills, rather than standalone farmers,operating as individuals. There are already about 5000 FPOs in India,of which only a handful are private. More than 3900 FPOs are affiliated to NABARD or small farmers’ agri-business consortium (SFAC).Hence allegations of corporatisation and blanket privatisation of Indian agriculture,are baseless.Also, the Farm Bills clearly state that insurance, cold storage, machinery and farm equipment, will be paid for by the counterparty, when farmers enter into contracts, with private players, thereby mitigating any risk whatsoever,for farmers. In fact, with the limited entry of the private sector, small and marginal farmers who do not have seed capital, will be able to access superior farm technology and become agripreneurs, without having to go out of pocket.The Modi government also plans to extend marketing support to States that implement the ‘one district one product’ scheme,with the help of FPOs.For instance, food products rich in nutritious ragi can be developed in Karnataka, sunflower in Tamil Nadu,mustard in Rajasthan,kesar in Jammu and Kashmir,GI crops like chilli in Guntur and ofcourse,alphonso mangoes in Ratnagiri. These districts can be developed as niche markets for particular crops and that is exactly what FPOs are doing,thereby enhancing the bargaining power and income of farmers.

A lot of farmers are complaining about having no infrastructure to grow ‘other’ crops or ‘more’ crops. Would the Bills help them with the same? If yes, how? Do note that over 46% of India’s farm output is not crops—it comprises milk, fishing, forestry, fruit and vegetables (F&V),etc. The production of these items is greater than that of cereals &grains but F&V get no MSP support from the government, nor does milk production. India’s dairy industry, however, has been tremendously successful due to the cooperative movement led by Amul.This shows, it is not price support but a facilitative and participative environment that breeds efficiency, which is eventually what matters the most. The Farm Bills by the Modi government aim at creating many more empowered cooperatives on the lines of the hugely successful Amul, by providing farmers with a business-friendly ecosystem that encourages competition and entrepreneurship and disincentivizes the culture of freebies.

If MSP will stay, why has the Modi government not mentioned it in the bill? Because MSP has always been an administrative mechanism and never a legislative one.It is indeed because the MSP is an administrative mechanism, that the government has the flexibility to increase it as and when needed.Imagine,if it was made into a law or legally binding,not only would the litigious processes kill the very spirit of MSP,even otherwise,it would make practical implementation and changes to MSP at regular intervals,very very cumbersome.

How will MSP be ensured in private transactions?

Well,private trade will be above the rate of MSP. That is the whole point. The farmer will go to private people when they get rates more than MSP.If the farmer gets less than MSP in private trade,the farmer can always opt for selling his produce in the APMC Mandi and pocket the difference between market price and MSP,if the market price is lower than the MSP.The very purpose of bringing in “Trade Area” alongside APMC Mandi,is to ensure the farmer gets a price that is higher than the MSP, or the price at which he is forced to sell in the regulated Mandis.

Has the Modi government strengthened MSP?

Ofcourse yes.The numbers speak for themselves. Congress led UPA between 2009-14 purchased only a measly 1.52 lakh metric tonnes (LMT) of pulses at MSP. BJP led NDA between 2014-19 purchased 76.85 LMT of pulses,at MSP. For oilseeds, numbers are 3.65 LMT under UPA and 30.17 LMT,by the BJP led,Modi government.It needs to be mentioned here that while MSP is applicable to 23 crops( 7 cereals,6 pulses,7 oilseeds and 4 commercial crops),in most States in India,over 50% of MSP is cornered by just two crops, namely, paddy and wheat.

Many farmers in many water deficit States produce paddy and wheat,only to benefit from MSP,despite the fact that productivity and yield per hectare would be higher, if they grew other crops.Paddy is a highly water consuming crop but even farmers in relatively dry regions grow paddy,only so that they can benefit from MSP.To that extent,MSP has skewed India’s farm economy towards a handful of crops.MSP was started in the 1960s when India was a food deficit nation.But India,today,is a food surplus economy,with agriculture production hitting a record high of 277.49 million tonnes,284.83 million tonnes and 291.95 million tonnes in FY 18,FY 19 and FY20,respectively.Despite this,the Modi government has been handholding farmers as Prime Minister Modi has always cared for India’s “Annadata”.The success of the MSP depends on wider procurement of crops, details of which are still being worked out.The price support scheme (PSS),market assurance scheme (MAS) and price deficiency payment scheme (PDPS), to ensure efficient procurement,are key steps undertaken by the Modi government,for ensuring farmers are taken care of and what is promised,is delivered.

To cut a long story short, the pathbreaking Farm Bills of 2020 are a culmination of a slew of Agri Reforms by Prime Minister Modi.TheRs 1-lakh crore Agriculture Infrastructure Fund (AIF), to give credit at subsidised interest rates for building post-harvest infrastructure, extension of 2% Interest Subvention (IS) benefit and 3% Prompt Repayment Incentive (PRI) to farmers, for all crop loans up to Rs 3 lakh and the game-changing decision to give Rs 6000 per year, to over 14 crore farmers under “PMKisan”, have truly empowered India’s unsung heroes–the Indian farmer or “Annadata”. Samuel Johnson famously said, “Agriculture not only gives riches to a nation, but the only riches she can call her own.”

Prime Minister Narendra Modi has done the unthinkable–he has mainstreamed farming and ensured that the Farm Bills pave the way for a stronger hinterland, with the farmer choosing to do what he will. Investment, technology, economies of scale, modern equipment, better seeds, more crops, in-between-season crops, improved yields, better logistics and free access to markets,will completely transform India’s agrarian landscape,thanks to Prime Minister Narendra Modi’s Historic Farm Bills.Over 50% of India’s workforce directly and indirectly,depends on agriculture and allied activities.The new Bills will raise farm incomes and the resultant multiplier effect will substantially boost economic activity and GDP growth,going forward.

It needs to be mentioned here that Prime Minister Narendra Modi’s agrarian reforms have been sweeping,far reaching and inclusive. Over 6 crore farmers are taking benefit of the Pradhan Mantri Fasal Bima Yojana,(PMFBY) paying a meagre premium of just between only 1.5-5%.In the Budget 2019-20,for instance,the government set aside Rs 18,000 crore spending towards interest subvention on short term crop loan, while Rs 14,987 crore was allocated in the revised budget for the 2018-19 financial year.

Similarly, the allocation for the Pradhan Mantri Annadata Aay Sanrakshan Yojana (PM-AASHA) was raised by Rs 100 crore to Rs 1,500 crore.For the Pradhan Mantri Krishi Sinchai Yojana (PMKSY), the government raised the budget allocation to Rs 3,500 crore for FY20,from Rs 2,954.69 crore in FY19. To implement 18-odd central schemes under the ”Green Revolution” umbrella, budget allocation was increased to Rs 12,560 crore for 2019-20, as against the revised estimate of Rs 11,802 crore for the 2018-19.

Again,beyond traditional crops,the Modi government has also been strengthening allied rural activities.For example,to aid the ongoing milk revolution,the Modi government decided to establish 28000 bulk milk coolers with 140 Lakh litres per day as additional milk chilling capacity. The impact of this scheme is that it will benefit 95 lakh milk producers in 50,000 villages. Besides,the government is also working towards the creation of additional 210 metric tonne per day,milk drying capacity. Modernization, expansion and creation of milk processing capacity of 126 lakh litres per day,creation of Infrastructure of 59.78 lakh litres per day capacity, for value-added dairy products to ensure remunerative prices to milk producers and providing 28000 Milk testing equipment to check adulteration in milk,are some of the other steps.

To cut to the chase, Prime Minister Narendra Modi, famously said, “Mind is never a problem; Mindset is”. Well, it is time for India’s hapless opposition and pressure groups to wake up, smell the coffee and change their mindset, because the agri-reforms by the Modi government are pro farmers and the Farm Bills are indeed India’s “Glasnost” moment,as these reforms will usher in greater transparency,in India’s farm economy. For the Modi government, “Jai Jawan,Jai Kisan”, is not a mere slogan.The journey of the “Bharatiya Kisan” from being the “Annadata”,to also becoming the “Urjadata”,is at the core of Modinomics,in more ways than one.