The Real Problem Of Farmer’s Bill And Reason To Protest
My first question raise to farmers is that, why farmers are poor? They are the price takers because inputs like seeds, fertilizers, and pesticides buy at retail price and they sell their output at wholesale price. In both cases, they become price takers, not price makers.
Nearly 70% of farmers in India are very small like who hold less than 2.5 acres. Here small land means small output (Crop) and small output means small bargaining power. After 1947, the zamindari system was abolished in India, and farmlands split into small pieces, tiller became the owners of the land. Which exploited the farmers by traders. In India, traders used to give loans to small farmers and buy the crops (Output) from them at the lowest price after harvest season. The farmer would stay poor because he never got the right price for his crops. So who decides the right price of the crop? In 1960, the country was going through a green revolution that time APMC ( Agriculture Produce Marketing Committees) started which is also called Mandis. Where they starting regulating farms like nobody was allowed to buy crops directly from farmers except APMC. And APMC would give licenses and space to traders to buy crops (Output). The system sounds cooler than the before the system, wherein APMC has different traders who negotiate with farmers and finalize the rate mutually. But in the true scenario, still today farmers are price takers, not price makers. This is exposed in the video by Trupti Jani ( Sector expert in a leading agro-business). Traders collected and formed a cartel to decide one price example today’s price for a product is 20Rs. And all traders will quote the same price. This proves mandi system is not perfect. There are around 7000 mandis all over India. Meghalaya state has only one mandi for an 11,215 Km area. National Committee for farmers said one mandi should be every 5km if the mandi system wants to be successful. This leads to selling 60% of crops to be sold outside the mandi.
where small farmers even can not afford transportation of mandi. Such kind of farmers sells their produce in their village only those who don’t have trader license whatever the price the trader quote, the farmer has to be accepted. As a result, 3 farmers out of 4 want to quit farming. Because the market needs a good buyer to pay a fair price.
Now let’s come to the reform of farmers, which means farm bills. There are three different bills,
1. The farmer’s (Empowerment & protection) agreement of price assurance and farm service bill.
2. The essential commodities act(Amendment).
3. Farmer’s produce trade and commerce (Promotion and facilitation) bill.
To understand the above bill, we will take three different examples
1. Potatoes for fries
Mcdonald can contract directly with farmers for their standardized potatoes for French fries. To grow the potatoes with their requirement and they will buy 1000 tonnes of it every year. This is called contract farming which is not possible for small farmers, but the only benefit of contract farming is that price of the product is decided before only. Like, while signing the contract, the price of the potato decided to be 30 rs per kg. but after harvest season, the market price of potato falls to 15 rs per kg then also company have to buy the potatoes at 30rs per kg and that’s the fixed cost. Such kinds of contracts happened before the bill also but they were supposed to register in mandi and mandi gets the small cut that had to be paid.
The positive thing about the bill was that middlemen directly cut from the process and both sides people get benefits from it. Sometimes farmers can take some money in advance and avoid taking loans.
This sounds good but still, there are some loopholes.
Such kind of contract is not possible with small farmers where they don’t have lands to produce tonnes of potatoes. This kind of opportunity is out of reach to small farmers.
Why is there a protest?
The company is powerful and big where they have a legal team who draft one-sided contract, the analyst who decided the price which works for them. What if the company does not honor its contract? So in such kinds of cases, farmers can be exploited.
Solution- there is a need for an intermediary body like a mediator, conciliator, or arbitrator who can protect the farmers in disputes. Also, who can explain the agreement to the farmers in detail. But farmers also need to learn how to read the contracts. The dispute redressal in the bill is not practical. A sub-divisional magistrate has other responsibilities as well. So sometimes is not possible to take out time for them.
2. Crying onions
Onion is like a commodity, sometimes onion crosses the 100 Rs per kg or sometimes farmers sell the onion 8 Rs per kg. This situation occurs because onion can not be stored, it’s an essential thing all over India.
There was a time where India had a chronic food shortage, so wheat was imported from the US (Inder Malhotra, 12 Jul 2010, Archive, Journalism of Courage) and directly went to ration shops. In that situation, anyone holds the supplies then it would cause artificial scarcity. But now India has reached a stage in which surplus foodgrain management has become a major challenge (RBI). It’s called the food surplus crisis. Food Corporation of India (FCI) has more than double the buffer stock in godowns(MY BIZ, Mail Online India), and much of it going to waste in godowns due to disuse.
30,00,000 tonnes of sugar, 221,00,000 tonnes of rice, 478,00,000 tonnes of wheat. Today’s situation is different as compared to 1960 but still, people of India are hungry because food is mismanaged.
Why will a company or trader invest in traditional warehouse or storage when storing many products are illegal. As a result, there is a lack of development of infrastructure for storage and this needs to be changed. Where government or company can give incentives to create a storage capacity. Through essential commodities act stocking limit is remove in cereals, oilseeds, pulses, edible oils, onion, and potatoes. But if prices of horticulture items go up by 100%. And foodgrains go up by 50% then stock limits will come back to traders.
Why is there a protest?
Because holding is still a legitimate concern for example if any trader buy more onions during supply harvest season which means low price and stored it, and start selling them in the market when prices are high
3. Sell your oranges anywhere
Before, a farmer from Maharashtra who grows oranges cant sell his oranges in Gujarat or any other state. But because of this bill, he can sell oranges anywhere in India. But does not allowed to trade in mandis from other states because mandis come under state government controls. The state government has to take the final decision whether farmers from other states can sell in local mandis or not.
Why is there a protest?
Farmers have to pay tax at the mandi where they don’t have to pay outside the mandi. So company and farmers have benefited from trading outside the mandis. As a result, the importance of manids and the tax that the state government earns from mandis may reduce. The new law permits any pan holder the permission to be a trader.
Whereas mandis have the condition for people to become traders and traders have a license. In mandi by law, payment has to be done in one day to the farmer. But according to the new law, if trading happens outside the mandis then payments get three working days credit period. And this leads to misused of this condition
All these concerns are like loopholes that need to be addressed.
Apart from this, there is a major concern, that is MSP( Minimum Support Price). the central government declared MSP on selective 23 items. But still, there is no guarantee that government will buy all 23 items from everyone.
The government mostly ends up buying rice, wheat, and few items. Where Punjab & Haryana benefit the most from MSP procurement.
The farmer’s concern is that if most of the trades happen outside the mandis, in the future government will remove the MSP. Most of the protests center around this fear that farmers have. MSP concept is clear as it does not give a guarantee to farmers. Only 6% of farmers get benefits of MSP procurement and price because traders do not buy at MSP. Also, the government does not procure all the items every year. There is no uniform method for price discovery over non-MSP crops. And this is the true problem of farmers that most farmers face.
Solution
Solution for the pricing
Single farmers don’t know the right price for their crop, price varies with place and location. So how the farmer will discover the right price of the crop. In the stock market, we check the stock price on the stock exchange. Anyone can check the price and sell at that price. There is total transparency of supply and demand. Today, in India trading can be done on commodity and derivative.
There are two exchanges NCDEX and MCX where agriculture commodities are sold at future prices and they can be easily checked. These prices can be base on farmers to decide their prices. Farmers are not united which kills their bargaining price. If the government truly wants to change the situation of farmers, then they need to work to unit farmers of the state. NECC is cooperative which gives the indicative prices of eggs. This gives sufficient profit to farmers to sustain the business and that’s is not expensive for consumers to afford. But to become like NECC, farmers need to unite and come together. They can come together and start farmer producers and organizations. Amul earn the respect in India because they work on the unity of farmers to getting them on a single platform. FPO (Farmer Produce Organization) already exists in India, which helps farmers to get the right prices of crops. Such kinds of FPO need funding and education from the state and center.
Conclusion
This bill can be a reformer for farmers’ situation but we need to work on these loopholes which exploit the farmers. Who is working in this process, only know the benefits and loopholes. Otherwise, some people are discussing it from a political point of view. So we need to discuss at the grassroots level to understand from others’ perspectives too.
