The Indian Parliament recently passed the Farmer’s Produce Trade and Commerce Bill 2020. There has been considerable outrage over the future implications of the bill, and the oppositions seem to be portraying a disastrous calamity on farmer’s lives facilitated by the bill. Their claims are far from the truth and indeed based on some political agenda of the state-controlled ‘mandis’.
The Farmer’s Produce Trade and Commerce Bill 2020, is a significant moment in commercialising agriculture and ensures more transparent participation of market by providing more freedom to the farmers. Agriculture is provided in the state list of subjects in the constitution. Thus, states have been controlling most of the agricultural output of India.
Agricultural Produce Marketing Committees
Just after gaining independence, India faced food shortages, and it had to import food from other countries. It became clear the farmers in India needed more credit. Thus, the states implemented the APMC (Agricultural Produce Marketing Committees) Regulation Act.
There was market intervention required by the farmers. Intermediaries were providing credit to the farmers, and they exploited the farmers regularly. They even faced exploitation in the markets.
If the farmers were to produce more food, they needed more technological input and hence more credit. Thus the government removed the middlemen and started institutional credit, so that farmer’s distress lessened.
Once an area was designated under the aegis of the APMC, no person or agency could not freely carry on wholesale marketing in the area. The market intervention proved to be a massive success during the Green Revolution, and slowly farmer’s assumed more political voice and power.
Then APMCs themselves started to become more political agents than pro-farmers. Inefficiencies crept in the dealings of state APMCs. There was a new middleman in the garb of commissioning agents exploiting the market. Model APMC act, 2003, included provisions which stopped market fragmentation by a single levy of market free and also promoted contract farming.
The economic survey of India in 2014 – 15 mentioned many inefficiencies in the workings of APMC:
- It reported that APMC is licensing fees for a whole range of intermediaries like warehousing agents, loading agents etc.
- A market fee collected by the APMC which worked like a tax but didn’t go the state exchequer hence remained outside state approval for fund utilisation.
- The Commissioning agents charged an excessive amount of commission rates on the whole produce.
- Statutory taxes, mandi taxes, VAT which varied from states to states created more market distortions.
- A high amount of taxes in the first part of the trade results slipped into cascading effects in the supply chain, ultimately raising the commodity prices at the end.
- Politically influenced positions in the market committees maintain a cosy relationship with the commissioning agents who wield power by a monopoly in the area, at times, forming cartels.
Contract Farming
After this, to promote contract farming – where agencies could buy the produce at pre-determined prices, the union government passed the Model Contract Farming Act 2018. It proposed to keep contract farming outside the ambit of APMC act.
It wanted to increases agricultural income for the farmer by integrating them with the bulk buyers and agro-industries. There are several success stories like PepsiCo India Holding Ltd’s Atlantic variety of potatoes in Jharkhand. Now in many other states like Gujarat, Maharashtra and West Bengal contract farming is allowed.
Minimum Support Price is the predetermined price at which the government buys farmer’s produce, which is declared during the sowing season.
It is a market intervention done by the government in order to protect the farmers face any price changes in the market so that the farmers do not have to sell their produce at a low price and get troubled. Many experts have lauded the new bill’s introduction.
What If The Farmers Become Scapegoats Of Capitalists?
India is still transforming from a closed market to an open market, and for significant reforms to happen, the people themselves should change. There is a fear being generated among the people that if the agricultural market moves more into an open market, the farmers could become scapegoats in the hands of the private enterprises.
It is very much untrue to suggest such outcomes because the crony capitalists tend to grow more when the market themselves are closed, moreover, when politicians themselves give way to their greed, sacrificing national interests. UPA – II regime, Bofors scandal, INX media are some well-known instances.
In order to get the most out of private enterprises, the government must ensure fair competition in the market. This new bill has precisely done so. This bill will provide more private investments in agriculture. As more private investments
grow, there will be more space for innovation, and the all-around supply chain will decrease substantially.
As costs decrease the government’s expenditure on schemes would also decrease, and the government will have more capital to spend, in more areas. Most of the excess spending of the government is due to inefficiencies, and private enterprises would give just the right balance and save people from unnecessary hassles.
The unnecessary spending of farmers would also be reduced as the current APMCs are riddled in politically motivated corruption and private competition in the agri-market. The best example is Jio’s market disruption. Farmers would have more capital with them, and they would be able to invest more in technologically advanced developments.
It is necessary that for this transition to happen, the first step must be through a government-private partnership. The government should continue procuring through MSP until there is enough cost reduction through private sector investments and innovation. This is the age of multilateralism – India has to open up its market or else it will miss out on further opportunities.