India's parliament has approved new farm bills that the government says will unshackle farmers from having to sell their produce only at regulated wholesale markets and make contract farming more accessible.
The agriculture sector contributes nearly 15% of the output of the $2.9 trillion economy and employs around half of India's 1.3 billion people. Most of their produce is sold via APMC-regulated mandis.
What is an APMC?
The APMC stands for Agriculture Produce Market Committee, a marketing board established by the state government to ensure fair returns to the farmers. It was introduced to ease distressed farmers under pressure and exploitation by creditors and intermediaries. The sale of produce (fruits and vegetables) at APMCs is carried out by local bodies and prices are determined by auctions with minimum support price (MSP) as bottom-line. Rice and wheat however, is not sold through auction as the government buys at guaranteed prices.
The APMC has mandis and yards under it. There are about 2477 principal regulated markets based on geography and 4843 submarket yards regulated by the respective APMC’s in India.
How do APMCs operate?
The Ministry of Agriculture developed a model APMC Act, 2003 and the Act provide some of the bowling benefits:
Setting up “Special markets” for “Specified agricultural commodities” for direct sale of farm produce (mostly perishables) in any area.
Requires a single levy of market fee on the sale of notified agricultural commodities in any market area.
Creation of marketing infrastructure from the revenue earned by APMC.
What are the 3 new Farm Bills about?
1. The Farmer’s Produce Trade & Commerce (Promotion and Facilitation) Bill, 2020.
This Bill enables farmers to freely sell their produce to large traders or retailers at and other than APMC-regulated mandis. It also allows the electronic trading of farmer’s produce.
Benefits: It will promote barrier-free interstate & intrastate trade of farmer produce. It supports seamless electronic trade. Opens more choices and will result in liberalization for farmers. Reduce the cost of marketing and improve the income of farmers and even consumers can get better and cheaper products.
2.The Farmer’s (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020.
The Bill allows farmers to tie up with agri-business firms, wholesalers, exporters, and large retailers for the sale of future farming produce at a pre-agreed price. It will provide a well-guided framework for farmers to enter into contract farming.
Benefits: Transfer’s risk of market unpredictability from farmers to sponsors as they will have assured prices before sowing. Will allow farmers to get modern technology and better inputs. Attract private sector investment in farming and links farmers to national and global markets. There will be no intermediaries.
3. The Essential Commodities (Amendment) Bill, 2020
Removes commodities like cereals, pulses, onions, edible oils, oilseeds, potatoes from the list of essential commodities. It will allow corporations and traders to legally stock produce freely.
Benefits: Bring investment in cold storages and modernization of the food supply chain. Helps both farmers and consumers to bring price stability. To create a competitive market environment and cut wastage of farm produce which happens due to lack of storage facilities.
What are the oppositions' concern?
Opposition parties and farmers' organisations have criticized the government for rushing through the legislation by issuing the emergency orders. Nationwide protests are being held and oppositions have cited that Modi's administration got parliamentary approval without proper debate and scrutiny.
The opposition argued that sponsors may not deal with small and marginal farmers, which will lead to the Monopoly of exporters and large retailers in the market.
The states will also lose revenue if farmers sell their produce outside registered APMC markets (Punjab and Haryana will be the most affected states), which brings greater disapproval for these Bills.
Know about the Farmers' sentiments
Nearly 200 farmer groups part of the All India Kisan Sangharsh Coordination Committee (AIKSCC) are protesting across the country in dismay of the effects of new rules.
The central government promulgated three Ordinances on June 5, 2020.
Farmer’s organizations had been protesting against 3 Ordinances. Two bills of which were passed by the Parliament on 20th September 2020 and the Essential Commodities bill on 22nd September. Some farmer’s see these bills as exploiting policies as they will not be able to reap better prices (or even a minimum price) outside APMCs.
With the Essential Commodities Act, the government gives up the power to regulate food commodity supply, storage, stock limits, etc except under exceptional conditions.
The Price Assurance Bill, while protecting farmers against price exploitation does not specify the mechanism for price fixation, which could lead to farmer’s exploitation by the big corporates.
For the Produce Trade and Commerce Bill, Farmers think that the government does not want to take responsibility for being the guarantor of MSP.
Many farmer organizations oppose this, saying it will leave small growers with little bargaining power.
Less than 2 hectares of land is owned by 85% of the farmers in India. This indicates that the market majorly accounts for small and marginal producers, who find it difficult to directly negotiate with large buyers of farm goods.
The protests have mostly accounted because the Bills does not provide any alternative framework for selling farmer's produce like terms of the contract, pricing strategies, place of an exhibition such as private markets or direct-purchase centres, so the new rule does not make any sense, claimed the growers. The farmer groups believe that the wholesale markets, that have been crucial in ensuring timely and minimum price payments to small farmers, would lose their importance and even gradually disappear if large buyers were allowed to buy directly from growers, and then all will be forced to sell at lower prices. In addition to farmers' concerns, state governments fear losing out on taxes that are charged at mandis, or wholesale markets.
While passing these bills, Rajya Sabha TV muted its audio during the parliament proceedings and the state MPs were denied a physical vote for the matter, both of these actions are undemocratic and against the sentiments of citizens.
However, the government intends to eliminate middlemen of wholesale markets, who form an extra layer in the supply chain, and that their commission pushes up prices for consumers. The role of commission agents is eliminated if farmers trade outside mandis and that is what exactly this Act offers. This Act allows farmers to sell their produce outside ‘APMC Mandi’ to whoever they want. And through this, farmers might be able to get better rates through competition and cost-cutting on transportation as well as marketing and at the same time consumers will also be benefitted.