How the new farm bills are exploitative
Three farm bills — the Essential Commodities (Amendment) Bill, the Agricultural Produce Marketing Committee (APMC) Bypass Bill, and Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill — have disappointed farmers across the country. Before I come to the harsh provisions of the bills, I wish to note that their journey — without any meaningful consultation, debate, or majority in the Rajya Sabha — marks a new low in democratic lawmaking. The bills represent an unprecedented encroachment into the rights of the states: Agriculture is a state subject under the Constitution.
The government introduced e-National Agriculture Market (eNAM) in 2016 to address issues arising from the inefficiencies in existing mechanisms and different APMC Acts in different states. Till May, the government was confident of adding more mandis to eNAM. However, the market was not well-designed and the states were not incentivised to push for its adoption. So, only 1,000 out of 6,900 APMCs had joined eNAM. As a result, the government’s hyperbole of doubling farmer incomes and offering them higher support prices has been exposed. A properly-implemented digital platform could have resulted in better terms for farmers. With the APMC Bypass Bill, even that halfhearted attempt to leverage digital technology as a step towards a unified agricultural market has been abandoned.
APMCs have performed regulatory, match-making, and price discovery functions since inception. They have also assimilated the regional and local socio-economic landscape. Mandi fees and other associated costs of selling through APMCs constituted a key drawback as this reduced effective prices available to the farmers. This has needed reform for some time now. This could have been addressed by passing the burden of these costs to large corporate buyers, the use of technology, and by a financial line to the states to underwrite these expenses. This would have enabled APMCs to preserve its local character, allowed small and medium farmers to bargain collectively and to exchange crucial information. The Bypass Bill will help a few large farmers who can obtain favourable terms from buyers. Large buyers, in turn, driven by the need to minimise the cost of procurement, would prefer to deal with large farmers. This will create a separate ecosystem in which buyers divide up regions and large farmers among themselves, drive hard bargains and transact on terms that are publicly invisible. In the absence of a regulator, cartelisation of buyers and inferior terms for farmers cannot be prevented. The anti-competitive and exploitative impact of the bills has not been examined. Far from converging prices towards the minimum support price (MSP), the bills will create asymmetric markets in which farmers are the losers. In countless examples of privatisation from across the world, the “invisible hand” of regulation has been necessary to ensure favourable terms to those with the least bargaining power. The bills also lack any semblance of a genuine grievance redressal mechanism.
Agriculture suffers from poor and uneven infrastructure and access to markets. In fact, there are too few mandis. As per the National Commission on Farmers, there should be a mandi every 80 sq km; there is only one every 435 sq km. Farmers hold a low share of warehousing facilities and have no access to good agri-logistic facilities like cold chain infrastructure and reliable grading and assaying facilities. Privatisation of trading will selectively benefit peri-urban farmers with access to better infrastructure and literate farmers, though the caveats listed here would continue to apply to them. The only important example of a large-scale experiment with the abolition of APMCs is available from Bihar, which repealed the APMC Act in 2006. Studies in the state have concluded that there has been little change in the way farmers sold their produce before and after the repeal. Small farmers continue to sell to traders on unfavourable terms, even when transport facilities are available. In any case, widely varying efficiency and modalities with which the Act has been implemented in the states make interstate comparisons meaningless.
The bills divert attention from the anti-farmer stance of the government. Small and marginal farmers form 86% of the farming community and contribute over 50% of crop output. This majority faces substantial bottlenecks in connecting to markets and the bills bring no relief to them. There has been no systematic attempt by this government to infuse capital, technology and knowledge to make farming on small land-holdings profitable.
In the absence of infrastructure, small and most medium farmers will continue to turn to local traders. With the marginalisation of APMCs, this relationship will turn even more adverse for the farmer. Input cost-price mismatch will worsen and rural indebtedness; as per the National Sample Survey Office, a farming household is likely to have 630% higher debt-to-asset ratio in 2013 than in 1992, and this has worsened in the last six years.
Starting with demonetisation, withdrawal of support to agricultural research, the steep fall in international commodity prices, disruption of logistics on account of the Covid-19 pandemic, and forcing of APMCs into irrelevance are likely to push millions of farmers deeper into poverty and encourage profiteering, widen income and wealth inequalities and fuel social unrest.
These reasons should convince us that while agricultural marketing and procurement need examination, this needs extensive consultation, most importantly with farmers, the organisations that represent them, and state governments, whose experience with the farm sector is much more vast, diverse, and nuanced than that of the central government.