Farmers who have been protesting at the borders of Delhi for the last two weeks – and in their states for almost three months now – rejected proposals by the Central government to amend the controversial new farm laws. They argued that the proposal was inadequate and accused the government of being “insincere”. They have now promised to intensify their protests further.
Farmer unions argue that the government’s proposal did not do nearly enough to address their demands and that they are not willing to compromise on these demands. While the protests have been triggered by the passing of the three new farm laws in a controversial session of the Rajya Sabha in September, the farmers’ demands are not restricted to the three laws.
So, what are the main issues involved?
The three new farm laws
What was the context in which the laws were announced?
Perhaps it is important to remember that the timing of the new laws – which the government says are reformative and will help farmers reap long term benefits – might not have been the most appropriate. Finance minister Nirmala Sitharaman announced the government’s intention to move ahead with the new laws in a press conference on May 15 – when the COVID-19 lockdown was still in force – as part of the government’s Rs 20 lakh crore financial stimulus package to provide relief to the economy, which was reeling from the impact of the pandemic.
What the agriculture sector – and all other sectors for that matter – needed was steps to provide immediate relief that would aid it in riding through the period of restrictions – either imposed by the government or self-imposed due the nature of the virus – which it was clear by then would last for the next several months.
The announcement of the new laws would not provide any immediate relief. For one, the laws needed to be passed by the two houses of parliament which, even while allegedly not following the due process, the government took four months to accomplish.
Then even after the laws are passed, it will take months or even years for them to be implemented in letter and spirit – for the new markets to be set up, for the contract farming agreements to come into force, and so on.
How much of that can legitimately be expected to happen – and how quickly – when all sectors, state governments and most businesses are struggling to keep their heads above the water due to the unprecedented economic crisis is a question that the government may have a degree of difficulty answering.
So, the benefits of the new laws – insofar as they exist – would not be enjoyed by farmers any time in the near term. This is crucial because the laws were brought in as part of a ‘COVID-19 relief package’ which strived to provide immediate relief to the economy.
The laws themselves
First, it’s important to relieve the laws of their obfuscating names and instead to understand them using names that better describe them, as agriculture economist Sudha Narayanan, has done.
This law permits, for the first time, trade in agricultural produce outside the APMC regulated mandis. Private mandis can be set up across the country where anyone can buy produce from farmers. Licenses that buyers are required to possess in the APMC are no longer necessary. These mandis are also exempt from paying any taxes or fee.
The government argues that this is designed to provide farmers with more choices on who to sell their produce to. Economics 101 will tell you that more buyers means a better price for the seller. But, the real world is a little bit more complex than the typical economics classroom.
Farmers don’t like the change. They argue that instead of providing them more choice, and hence better price, it will leave them at the mercy of a few private players who will organise as cartels thus setting the price.
This, they argue, will happen because the APMC mandi will continue to attract taxes and regulation thus disincentivising traders from buying in the mandi and paving the way for the APMC structure to be dismantled.
The fear is that farmers with little bargaining power will have to sell outside the mandi in an unregulated trade area, where the relatively more powerful buyers are able to dictate price which will turn farmers from ‘price makers’, in theory, to ‘price takers’ in reality.
Centre’s December 9 proposal
The government has said that it is open to amending the Act to the effect that state governments can devise mechanisms for registration of mandis. The Centre has also said that it can leave up to the state governments the decision of imposing a tax or cess on the private mandis up to the rate applicable in APMC mandis.
This proposal, as The Wire has pointed out before, has been rejected by the farmers, who have said that they will settle for nothing less than the repeal of the law.
This establishes a national legislative framework to enable contract farming, where an agreement can be made between the farmer and the buyer before sowing under which the farmer is contracted to sell her produce to the buyer at a predetermined price. The government has argued that this will help remove some income uncertainty by providing the assurance of a buyer at a predetermined price prior to sowing.
The opposition to this stems from the past experiences of contract farming in India, which has not always been beneficial for farmers. According to a paper, contract farming in parts of Maharashtra rendered “participating households vulnerable to indebtedness and loss of autonomy over land and livelihood decisions.” It only led to the reinforcement of existing patterns of inequality as the contracting firm had relatively more power than the farmer.
Agriculture economist Sukhpal Singh has said that contract farming in India involves many malpractices against farmers including “one-sided (pro-contracting agency) contract agreements, delayed payments, quality-based undue rejections and outright cheating, besides poor enforcement of contract farming provisions by the state government.”
So, it’s the history of odds being stacked against farmers in contract farming that makes them fearful. They also fear that contract farming can enable large corporations to take over their lands as the law lacks adequate redressal mechanisms for farmers.
This is another law which is seen as benefiting big business. It seeks to remove arbitrary and periodical stocking limits on agricultural commodities that the government imposed on traders.
Instead of arbitrary triggers, the new law introduces price triggers to be employed only in “exceptional circumstances”. The stocking limits can now be imposed only when the prices of perishables increase by more than 100% and non-perishables by more than 50% in the last year.
As per Roshan Kishore of Hindustan Times, these limits were breached a total of 69 times in the last 10 years, defeating the idea of the reform. Most recently, stock limits were imposed barely a month after passing of the law when the price of onions started to increase like every season. As per the new law, the price ought to have increased by more than 100%, which was true for only one of the four major metros but stock limits were imposed across the country with an idea to keep onion prices low for consumers.
Recently Amitabh Kundu and Harbir Singh Sidhu articulated the pro-consumer bias of policymaking thus: “The critical concern about keeping prices low for the middle classes in India has, thus, impaired the healthy growth of the agriculture sector.”
The MSP issue
At the heart of these protests is an issue which is not directly mentioned in the three new laws. That is the question of minimum support price (MSP) which is announced for 23 crops. In reality, however, sizable and sustained procurement only really happens for wheat and paddy in Punjab and Haryana.
Farmers fear that with the three new laws, the government is signalling that it is moving away from the current patterns of procurement at MSP. The fear is a product of multiple factors.
There have been suggestions that the food subsidy bill should be reduced. Economists have argued that the MSP regime as it exists today is unsustainable. And also equally, or perhaps more importantly, farmers simply do not trust the government after a range of broken promises in the last six years, as The Wire has detailed here.
So farmers fear that the government is paving the way for its withdrawal from procurement at MSP by allowing for the dismantling of the APMC via the ‘APMC bypass law’.
They want the government to pass a new legislation which deems MSP as a legal right. The Punjab assembly has already passed such a law, but it is still to get the assent of the president. Even if the assent does come, it remains unclear how the law will be implemented.
In August 2018, for the first time, a law to this effect was brought into parliament as a private member Bill by Raju Shetty, who was then a member of parliament representing the Swabhimani Paksha. The Bill was not discussed in parliament.
It was drafted by the All India Kisan Sangharsh Coordination Committee (AIKSCC), an umbrella organisation of several hundred farmer organisations from across the country which was formed after the Mandsaur agitation of 2017, and which continues to be at the helm in the current agitation.
After 2018, farmer protests died down and have resurfaced now. The demand to make MSP a legal right is once again on the table and farmer leaders have said that the protests will not end until this demand is met.
Another demand which is back on the table is the demand for MSP to be set at cost plus 50%, as recommended by the Swaminathan commission for farmers in 2007. Prior to 2014, the BJP had promised to implement this once it comes to power.
Since 2018, the BJP has claimed that it has fulfilled the promise. However, as The Wire has pointed out several times, that is not true.
The Centre has said that it will provide a “written assurance” that the existing procurement mechanism will continue.
It has not specified what form the written assurance will take. It has also not addressed the questions of setting the MSP as per the recommendations of the Swaminathan commission.
Electricity Amendment Bill, 2020
Farmers in several states currently benefit from subsidised rates of electricity where they pay a fraction of the total tariff that they consume. The respective state governments pay the DISCOMs the balance amount. The payment is often delayed. This, and other factors, has led to a situation where the balance sheets of the DISCOMs are in a state of disrepair.
The key feature of the new Bill that farmers are irked by is that it changes how the subsidy is paid. As per the new Bill, farmers will have to pay the full charges for electricity to the DISCOM. The state government will transfer a subsidy amount to the bank accounts of farmers, thus shifting to a direct benefit transfer mechanism.
Again, farmers do not trust that the mechanism will work as envisaged and fear that while their electricity charges will go up, the transfer might not be enough to cover the increase.
The government has said that the Bill – which is still under consideration – could be modified to ensure that there is no change in how farmers pay their bills.