View: Modi govt needs to clearly spell out the intent behind the new farm laws

Economic history, market competition and Food and Agriculture Organisation indicators are the basis for new farm laws.

Agencies
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Last month, the Rashtriya Kisan Mahasangh (RKM), an umbrella body of more than 180 farmer groups, wrote to chief ministers of all states demanding they oppose the three farm market reform laws — Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, and the Essential Commodities (Amendment) Act — that were ratified by the president on September 27. RKM sought state governments to take up the matter with the Supreme Court, charging the Centre of having usurped the states’ rights to make laws on agricultural issues.

It also demanded that all states come out with their own legislations providing a legal guarantee to minimum support price (MSP) for farm produce. The ongoing farmers’ protests come on the back of these developments.

So, what are the farmers protesting? Against apprehensions that Agricultural Produce Market Committees may be dismantled, MSP may not be offered, foodgrain may not be procured — and that the new laws are an infringement of a state subject. Economic history, market competition and Food and Agriculture Organisation indicators are the basis for new farm laws. These have been discussed over the past 18 years in Parliament as well as in state legislatures. So, why have farm incomes not doubled, despite new farm technologies, all this while? The answer lies in our inefficient and imperfect markets. Till farmers are freed from clutches of middleman, most of them will be ‘born in debt, live in debt and die in debt’.


Performance of agri marketing is indicated by the farmer's share of the retail price, gross marketing margin (farm retail price spread) and proportion of consumers’ income spent on food. An October 2019 RBI study (bit.ly/39moGy9) concludes that even after 60 years of the APMC Act, the producer share in consumer rupee terms has been abysmally low in major crops, and the percentage of monthly per capita consumer expenditure on food is falling, benefiting consumers while producers are under clutches of middleman. Marketing margins of middleman vary widely from 2% to 60%. However, due to the volume of produce handled, their income is always substantial. About 67% of farmers, in the RBI study, were aware of market prices before selling, and 50% of farmers said that their source is from other farmers and traders. In this context, farmers should be facilitated to realise competitive prices in oligopsonic markets.

GoI needs to clearly state that the intention of the new laws is to address this historic exploitation of farmers and that this is in national interest. Article 249 of the Constitution is used to legislate on matters in the state list that is of ‘national interest’. There is also a parliamentary provision for this in Article 252.

While land, markets and agriculture are indeed state subjects, the new farm laws deal only with the removal of restrictions on farmers and buyers to sell or buy in APMCs, allowing a wider definition of the market, and do not deal with state subject per se. Entry 33 of the Concurrent list enables Parliament to pass laws relating to trade, commerce, production, supply and distribution of any product. The farm laws only expand the choice of marketing that were limited by states to mandis (market yards). Thus the new laws only address how farmers can sell their produce, enabling them freedom and liberty to benefit from competition. The new laws offer the freedom for farmers to sell to any buyer. Also, farmers cannot be charged commissions, as they should be now collected from the buyers. The existing provisions of MSP and associated procurement continue to exist while now attracting competition.
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Much of the ongoing protests are from Punjab. The state’s farmers have overexploited groundwater while not realising the incomes that, say, Karnataka farmers have. By diversifying into horticulture crops, using only a third of the groundwater that farmers in Punjab do, farmers in Karnataka realise higher gross returns of Rs 15 lakh per farm, higher net returns of Rs 5 lakh per farm, higher net returns per acre of Rs 1l akh with lower holding-sized farmland.

To ameliorate the current situation, GoI must create a congenial ambience for discussions — instead of automatically branding agitating farmers as ‘Khalistanis’ and ‘antinationals’ — including exposure visits for farmers and state leaders, so as to convincing them of the benefits of the new farm laws. It should also highlight the blight of middlemen more effectively.

The writer is former director, Institute for Social and Economic Change, Bengaluru.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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