Agriculture

Some Key Questions That Need to Be Answered About the Three Agriculture Ordinances

The text of the ordinances raises some questions about their stated objective to ‘free up’ curbs on trade and help farmers get a remunerative price for their crop.

Recently, the Bharatiya Janata Party-led Central government introduced three ordinances to bring in far-reaching agricultural ‘reforms’ in the country. Taken together, these ordinances intend to liberalise the regulatory system in the agriculture sector, provide freedom to farmers and traders to trade in farm produce at a site of their choice such as farm gates, warehouses, etc., and to usher in legal contract farming in a uniform manner throughout the country.

While the stated objectives of these ordinances provide the appearance that these will ‘free up’ curbs on trade that had shackled farmers and their ability to get a remunerative price for their crop, the text of the three ordinances raises some questions.

The Essential Commodities (Amendment) Ordinance, 2020 allows for regulating the supply and stock limit of certain specified agricultural produce under extraordinary circumstances such as an extraordinary price rise and natural calamity of grave nature, etc. The price range fluctuation allowed in this ordinance is so narrow (100% increase in the retail price of horticultural produce and 50% increase in the retail price of non-perishable agricultural foodstuffs) that the government will be in a position to impose the stock limit multiple times in a year and thereby taking away the ordinance’s liberalising character.

Also Read: The Fine Print of the Essential Commodities Act Ordinance Must be Carefully Parsed

For instance, according to the Economic Survey 2020, the CPI-based inflation rate of onion increased steadily to more than 300% from August 2019 to December 2019 within a span of just four months.

Moreover, this stock limit regulation will not be applicable for value chain participants of any agricultural produce if their stock limit remains within their installed capacity. It will also not apply to exporters if they can show demand for export.

The question therefore is, how will the states ensure that exporters and value chain participants are stocking only the permitted amount according to the rules?

My fieldwork experience from Haryana (conducted in the months of May-July in 2019) for an anthropological study suggests that the agriculture and horticulture departments at the district levels and below are not equipped to ensure enforcement of the new rules.

For instance, in Haryana, at the level of agricultural bureaucracy – whose officials are primarily tasked with enforcement of rules and regulations within the department of agriculture – there is a severe lack of class II officers of the agriculture department, called agriculture development officers (ADOs). Almost 60% of the sanctioned posts for ADOs in Haryana are vacant. Senior-most ADOs have been given the charge of block agriculture officers at several places.

Farmers carry vegetables after harvesting them from a field, during the ongoing nationwide COVID-19 lockdown, in Jabalpur, Thursday, May 21, 2020. Photo: PTI

Reforming APMC markets

The second reform, ‘The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Ordinance, 2020’ has been introduced to effectively bypass the Agricultural Produce Market Committee (APMC) markets by providing for the freedom to trade in any area outside of private and APMC designated market yards.

There is no doubt that APMC markets have been marred by several problems in different states such as lack of enough market yards, lack of facilities/amenities in the existing markets, the bureaucratic monopoly in existing APMC markets and aperiodic elections to the market committees, malpractices by traders such as non-issue of receipts, unwarranted deductions in the payments given to the farmers, etc.

In my conversations with an arhatiya (commission agent) in Haryana, I was told that fake invoices are generated by rice millers and the equivalent amount of produce are sourced from other states such as Bihar (which repealed its APMC Act a few years back) at a price lower than the minimum support price (MSP) announced by the Haryana government.

Also Read: What Will the End of the Road for APMCs Look Like?

This leads to a situation where local farmers do not find adequate demand for their produce at MSP in the local market. Since most farmers are small or marginal landowners, they do not have wherewithal to transport their produce to large distances, and hence, are forced to sell them at a lower price than the MSP in the local market itself.

The presence of all these inefficiencies and issues, however, does not mean that APMC markets are inherently problematic. APMC markets have been an important medium for price discovery at the local level for the farmers. Moreover, as Sukhpal Singh has recently written, APMC markets are the “last resort for millions of marginal and small farmers who would never be attractive to corporate buyers, individually or perhaps even collectively, through FPOs.”

For instance, the repeal of the APMC Act in Bihar back in 2006 ostensibly for enabling free private trade in agriculture has neither helped the farmers in the state who have been forced to distress sell their produce year after year well below the MSP nor has been able to ensure private investment in the development of market yards. Therefore, the need has been to reform the existing APMC markets and sub-markets in the rural areas, and also create newer ones in order to reduce the burden on the existing ones.

File photo of an APMC fruit market. Photo: PTI

The third reform

Third, ‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020’ that is designed to create a legal framework for contract farming in India seems to be the least contentious of the three ordinances. The ordinance purports to protect the rights of farmers as well as sharecroppers.

The provision for timely payment by the sponsors to the farmers, variation in pricing which can only be more than the guaranteed price are welcome additions. A conciliation process for dispute settlement has also been provided where the concerned sub-divisional magistrates (SDMs) have been given the power to resolve the disputes in case a conciliation board with a fair representation of parties has not been already formed.

Also Read: Will India’s Contract Farming Ordinance Be a Corporate Lifeline for Agriculture?

However, there are two broader concerns here. First, one principle concern with contract farming has been regarding the negotiating power of the two parties involved. It seems likely that individual farmers might not find themselves equipped or powerful enough to negotiate with corporates or big-pocket sponsors to ensure a fair price for their produce. Approaching the office of SDMs might be a hurdle for millions of small and marginal farmers who might get into a farming agreement with a powerful entity. Second, the ordinance says that the quality parameters can be mutually decided by the two parties in the agreement. But the quality aspect will become crucial when a few corporates will try to usher in uniformity which might end up adversely impacting the already skewed agro-ecological diversity in the country.

Summing up, it is palpable that the three ordinances will have far-reaching and varying impacts depending on the social, political, economic and cultural contexts of the respective states. The set of agricultural ‘reforms’ promulgated while bypassing the parliamentary debates and discussions, and also without consulting the states, are also bold in their tenor.

But such bold and unilateral moves by the Centre fail to incorporate and give due consideration to the immense diversity in the country, not just between the states in terms of land ownership, cropping patterns, historical functioning of agricultural markets etc. but also within them. Therefore, it is feared that the three ordinances rather than helping farmers, might end up being a source of distress for millions of small and marginal farmers in the country as have been observed in the past in cases of demonetization and COVID-19 related lock-downs.

Nikhit Kumar Agrawal is an anthropology PhD candidate at UCLA.