New Farm Laws: Boon or Bane for the farmers
In September 2020, the Indian government enacted agricultural reforms, which are currently being colloquially referred to as the “three farm laws”. The three farm legislations are, Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC Act), Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 (FAPAFS Act), and Essential Commodities (Amendment) Act, 2020 (ECA Act). The FPTC Act offers alternative trading channels to the farmers for their agricultural produce, outside the premise of Agricultural Produce Market Committees (APMCs), and the notified markets under several state APMC Acts. This Act entails the formation of an ecosystem where the farmers and the traders can have the liberty to sell and purchase the agricultural produce. The FAPAFS Act provides for a nationwide framework on contract farming amongst the farmers and traders for farm services. Further, the ECA Act is an amendment to the Essential Commodities Act, 1955, which involves controlling the production, sourcing, and distribution of the commodities that, if not provided, can affect the everyday lives of the general public. Since these farm laws got the President’s assent, there have been farmers’ protests at the gates of the capital. One question that can broadly be congregated from the agricultural reforms is that, “Are the farm laws a boon or a bane for the farmers”? This paper reflects on these controversial farm laws in their entirety and examines the concerns of the various stakeholders involved. Moreover, it tries to understand these farm legislation through the lens of complexity approach and complexity economics.
The three agricultural reforms provide for modifications in the existing arrangement for marketing the agricultural produce. These reforms have made the farmers apprehensive as the reforms are being seen as endangering the prevailing APMC arrangement and revenues of the state, dampening the government procurement system at Minimum Support Prices (MSP), and corporatizing the farm sector. These farm laws are alarming because, fundamentally, they are non-transparent and have regulatory challenges. The FPTC Act is the most contentious bill out of the three farm legislations, as farmers view it as a step to threaten the present MSP procurement system. Considering the FPTC Act through the lens of complexity approach, it can be argued that control over the outcome of this Act will be difficult because it inherently includes two faulty assumptions. The first assumption is that it disregards the presence of the private players in the market today, and the second assumption is that it takes up the APMCs as monopolies. Currently, private players tend to consider APMCs as their reference points for their transactions. This Act intends to provide the farmers with markets outside the APMCs along with eradicating the taxes involved with the APMC mandis. On a grassroots level, if the APMCs continue to establish reference prices, then the purpose of getting rid of the incompetence of the APMCs will stand defeated. And therefore, the Act will become irrational. Furthermore, it can be collected from the Act that large-scale trading is bound to happen, as the new players, and the APMC traders will choose not to pay the taxes inside the APMC premises. As a consequence, the APMC markets might break down, which will lead to jeopardizing the safety net of the farmers. The Act fails to take into consideration the need for an alternative market that can set the prices. In these conditions, government interventions become significant in the form of subsidies or procurement. These farm laws don’t abrogate government procurement and subsidies, but with the arrival of the big players in the farm market, there is a huge possibility that the big farmers will have an upper hand in trading over the small and marginal farmers who own 86 percent of the landholdings in India. And as a result, it is likely that the arrangement of the APMC markets and government procurement might gradually terminate. Along with this, the clauses in Section 8 of the FPTC Act provide for a grievance redressal system between the traders and the farmers. Many scholars have argued that Section 8 of the FPTC Act undermines the farmers’ interests as it doesn’t keep the farmers, especially the small and marginal farmers, on fair terms with the big traders. Against these backgrounds, what can be gathered is that there is a lack of trust in the government by the farmers, which is eventually leading the farmers to demand a legal assurance of the MSPs.
It can be seen that the guidelines of the farm laws involve the notion of “one size fits all” which cannot be designed in complex contexts of the farming fraternity. The farm laws are tricky, because of which there are fears regarding the public procurement system. In this light, many scholars are demanding an MSP clause in the existing farm laws. There is no denying the fact that the question of MSP needs to be addressed, but, in my standpoint, the MSP question is a serious one that requires a comprehensive consultative process and a separate Act. According to the Shanta Kumar Committee report, 2015, the total percent of farmers that sell their produce at MSP rates is 6 percent. For instance, 29 percent of the total paddy harvest and 44 percent of the total wheat harvest is sold in the APMC mandis, and the rest is sold to private traders or input dealers. Observing the MSP question through the lens of complexity approach, MSP has to be an individual question as India is diverse in its farmers’ population. The farmers of Punjab and Haryana may not be on the same page as the farmers of the states of Madhya Pradesh or Tamil Nadu.
In the context of the farm bills and MSP, it has been consistently argued that a parallel infrastructure can be applied so that the efficacy of the farm policies can be realized across different segments of the farming fraternity. However, with the advent of the farm laws, APMC markets cannot be seen in isolation. It will be illogical to put MSP in APMC markets while allowing them to do according to their requirements outside the APMC premises. For this to make any sense, under the frame of complexity economics, it will only be economically efficient for the government to be competent with its distribution system. Data shows that more than 50 percent of the grains under the Public Distribution System (PDS) fail to reach projected beneficiaries. For the government to achieve this practically, it has to reach multiple equilibriums in the economy, which at present, seems unattainable.
The FAPAFS Act is being contested by many experts as it is being professed to corporatize the farm sector. Though at present also, contract agreements are operational in the farm sector, critics say that this Act can leave the farmers, especially the small and marginal farmers, at the impulses of the big private players. In consideration of the intersection of complexity economics and the FAPAFS Act, the interactions in the market between the individual agents have to be seen specifically, and with the lens of heterogeneity. It cannot be assumed that the agents will interact homogeneously within the market mechanism.
In addition to this, the recent step of the government to ban onion exports is inconsistent with the farm legislations. These farm laws are not being seen as farmer-centric, as there has been an absence of consultations with all the stakeholders, a lack of guarantee by the government to improve the infrastructure, and a lack of willingness to negotiate with the protestors. Citing the Covid-19 pandemic, the agricultural prices are sluggish, and therefore, there is a need to reconsider these reforms. There are many complex questions that need to be addressed, such as – how these farm laws can affect the choices of farmers and traders to sell their agricultural produce? How can the framework be redefined to provide all the stakeholders with positive incentives so that they restrain themselves from engaging in inappropriate social conduct? Amidst the ongoing farmer’s protests, the State Bank of India (SBI), in its Ecowrap report has suggested some feasible solutions to the apprehensions of the farmers. It suggests converting the MSP to the floor price of an auction on the National Agricultural Market (e-NAM), strengthening the existing APMC arrangement, giving a guarantee to the farmers through a quantity clause for their agricultural produce, and setting up contract farming institutions. From my perspective, the solution of converting MSP to the floor price of an auction on e-NAM can be complicated because the prices in the e-NAM mandis are generally lower when compared to the MSP prices. Correspondingly, institutionalizing contract farming can act as a backing for the farmers since the present contract farming framework in the farm laws is tilted in the favor of the large firms. There is no denying the fact that these farm laws need major corrections as the current situation is not just about the farming fraternity anymore. The discussions on farm laws have brought up topics such as national integrity, and balkanization of the country, which is indeed very alarming. The farm laws cannot be disregarded, and steps should be taken in the right direction so that the agricultural reforms can honestly help all the stakeholders across the farming sector.
Poorva Israni is currently in her 1st year of Master’s in Public Policy from Jindal School of Government and Public Policy. She is keen on exploring the domains of Environment and Sustainability, Clean Energy, and Refugee studies.
(The opinions expressed in this publication are those of the author/s. They do not purport to reflect the opinions or views of The Policy Observer or our members.)
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