INDIAN FARM LAWS OF 2020 ARE FLAWED FOR FARMERS

FARM LAWS –FLAWED OR FRUITFUL?? 

The three laws – 

1. Farmers' (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020; 

2. Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 and 

3. The Essential Commodities (Amendment) Act 2020 – took effect from September 27 after President Ram Nath Kovid's assent. 

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The sequence and timing of three Farm laws that have been passed in the Parliament puts shame on this great nation's democratic framework. No consultation with stakeholders (the farmers) who live and work in diverse geographical and environmental conditions, virtually no price discovery mechanism discussed or informed, loss of revenues to states in the absence of Mandi Tax ignored, no effective dispute resolution mechanism (except SDM??). Democratic federalism terminated. The powers of the state in food and agriculture are usurped. No state has ever prevented the farmers from restrictive selling in or outside the state. As late Mrs. Sushma Swaraj stated in the Parliament, Arthiyas or intermediaries have broadly supported the farmers. 

 

The political convenience of introducing the bill during COVID has been a significant factor -- so that farmers may not protest vigorously. It is then muscled through the Parliament with a muted voice in the lower house and imagined majority in the upper house. When the media is fully managed, and all major institutions are compromised, the rushing through these laws raises more objectivity questions. The mirage gives an illusion of water and not the water itself. That is how the essence of these laws can be summed up. ----------------------------------------------------------------  

Q--Do the farm laws give more space to the farmers? 

Ans-These farm laws give more space to the Corporates, Patwaris, and SDM than the farmers. The political and economic dimensions are meant to trim the powers of the state machinery in agriculture. It also vests farmers' control and their income with the central laws in suppression to the States' constitutional ambit. It will be to a naivety to presume that there is no political angle. All political parties have applied the formula of manipulating farmers for grabbing the power directly and indirectly. 

Q-Do, the new farm laws beneficial to farmers? 

Ans-The answer is NO. India is a highly diversified nation-- geographically, environmentally, ethnically, economically, socially, and politically. The whole country cannot be painted with one brush for agricultural laws, mainly when the Farm's agriculture and marketing produce a state subject. Any law that fits Bihar or Tamilnadu may not be appropriate for Panjab, Haryana, or elsewhere. The legal tenability of these farm laws is under scrutiny. Some states are contemplating enforcing their legal framework under the constitution to check the Central Government intervention. The loss of revenue to the states by abolition of APMC is not accounted for. How will they get compensated? Compensation will vary from state to state. Can the Federal Government wipe out the states' source of earnings at its discretion and contrary to the constitutional provisions? 

Q—Is the broader assumption that sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere is workable? 

Ans--These farm bills do not refer to the augmentation of the production or crop diversification directly. Had productivity and diversification been the intended purpose, then the GM crops' induction would have been integrated into these laws. But that has not been the case. Neither there is stress or emphasis on R&D in agriculture production and productivity.

Q--Are these bills offer more choices to the farmers for the saleability of their crops. 

Ans—The farmers always had the choice of selling via APMC or directly or through intermediaries or storing them for future sale. The slogan of offering "more choices" to the farmers is propaganda for marketing these laws and inconsistent with the factual position. 

 The graphic above shows that farmers were already selling 50-70% of their produce to local private traders in 2012. The local private traders also include corporates. The idea of additional avenues of business is speculative. Intermediaries have been erroneously blamed for inflating commodity prices. These aggregators or the Arthiyas undertake the pre-financing of the crop on trust without written contracts, accept quality produced, undertake sorting, logistics (transport+ storage+ government's ad-hoc intervention+ transit losses + quality variation), and bear the market risk. No farmer has ever complained that Arthiyas or the middlemen are nagging them or eating away their margins/profitability. In any case, the arthiya's commission is to the buyer's account—whether Public or private sector. The farmers may not easily conceptualize the devil's consequences in the written contract detailed with the corporates. The loss of the farmer is total when a corporate fails to take delivery of the crop, while the latter remains unscathed.

 Q-Is MSP relevant now?  

ANSWER--Yes, for wheat and paddy-- and no for other crops. The MSP's concept has been supported for the last 50 years or so at the highest level by the previous governments, especially in Panjab and Haryana, and then later in MP, UP, AP, and Rajasthan for wheat and paddy. The irrelevance of MSP for the other 21 crops is logical as they are not exposed to dedicated procurement. Nevertheless, the unwritten intention is to abolish the MSP of wheat and paddy due to higher production and excessive stocks. Moreover, its annual increase makes export non-competitive. MSP is the smoking matter under which the ire and fires of farmers in Panjab and Haryana are simmering. These farm laws fail to deal with matters relating to MSP. The counterview of holding excess stocks is that a single draught in the country in any year can bottom out all these stocks—notwithstanding the buffer norms which are exposed to seasonal adjustments. All governments have been reviewing the adequacy of buffer norms and adjusting them upwards.

 Why the ruling establishment made commitments in their election manifestos of fixing MSP on a C2 basis and doubling the farm income? Was it a jumla for creating farmer's vote banks at the Centre and the states? That political convenience is perhaps no longer valid. Does it not have implications for the breach of trust to the farmers.

 Under the new laws, the Corporates are expected to fund the farmers, subject to the market conditions. Market conditions are variable and exposed to seasonal profits and losses. The farmers' exposure to the market fluctuations will be higher (which means accentuation of profits and losses.) Why continuation of MSP in media and Parliament endorsed by Government verbally? The doctrine of MSP remains unwritten under the law. Sadly, it is now left to Farmers and the Public's imagination whether MSP will exist or not. The Government, however, is silent about FRP and SAP values of sugar cane, which has its parallelism with wheat and paddy. The dichotomy of MSP of grains and FRP/SAP of sugar cane should be terminated simultaneously and lawfully notified. But the lurking danger is that it will inflame sugar farmers in UP, Maharashtra, Karnataka, and Tamil Nadu. That will further fuel the farmer's agitation. That is yet another divide and rule strategy with the farmers that are currently pursued by the policymakers .  

Dr. Ashok Gualti, in his 12th October article in the Indian Express, is "Let me also say that, currently, no system is perfect, be it the one based on MSP or that led by the markets. But the MSP system is much more costly and inefficient, while the market-led system will be more sustainable provided we can "get the markets right".And getting markets right is the biggest riddle. It is also presumptuous to comment that a market-led system will be more sustainable for whom-- the Government, corporate, or farmers? Q—Economic cost of rice is 30/Kg, and wheat Rs 27/kg and selling them at Rs 1-4 pkg under NFSA incurs enormous losses. Will these losses be mitigated? 

Ans—No. NFSA demand will continue.

Such social losses for political stability are mandated, just as trillion rupees of loans are either recycled or written off as NPAs, and then Banks are recapitalized. If FCI's procurement and distribution are discontinued in the long run, the Government will be compelled to procure wheat and rice from corporates at the prices determined by them. Accounting procedures and values of FCI are transparent. Will the same be applicable for Corporates. Many economists decried the introduction of NFSA as a costly burden when the UPA government introduced it in 2009-10. But the same law has worked well during the successive governments for BPL beneficiaries, specifically during COVID times. Abolishing NFSA by any government now will be at the cost of its stability.  

Q--Are Written contracts better than oral commitments for the farmers? 

Answer –NO. A knowledgeable audience knows the intricacies of written contracts between the farmer and the corporates. Even competent individuals cannot decipher the meaning of fine print written in the agreements signed with Mutual Funds!! The principle is that a written contract should be signed when the two parties have balanced strength and resources. Disputes can emerge because of the variation in quality, weather, and perishability of the product. The farmer is in the business of production of the crops and not in the business of litigation. An oral contract of smaller values can be mutually settled, while corporates answerable to the auditor, and banks may not have the same freedom. In a society where corruption is rife—the so-called judicial fabric of sarpanch, tehsildar, patwari, and SDM are not immune to petty inducements or rental income. The quality testing procedures of the surveyors are not above board. Most of the farmers with 1 to 5 acre of landholding cannot manage multiple agencies to their advantage. 

Q--Dispute resolution mechanism via SDM –good or bad? Answer- worse. The supportive argument offered is that this is the fastest mechanism of dispute resolution. But it ignores the farmers and supports the corporates. Some details are already given above. Why is there a ban to approach higher courts against the decision of the SDM? Though litigation in higher courts may be time-consuming for the farmers, the fundamental right to avail justice cannot be curtailed. Maybe this issue is also gets exposed to judicial scrutiny. 

Q—Scrapping of Essential Commodities Act (ECA)—good or bad? Answer –In theory, good. 

Higher price fluctuations in commodities like pulses, maize, tomatoes, onions, and potatoes will compel the Government for ad-hoc intervention locally and in foreign trade. The authorities have harassed traders in the past, through income tax/CBI raids, ED and customs, etc. even without ECA's invocation.