The Farm Bills 2020: Milestone Legislation for Doubling the Farmers’ Income


There are landmark reforms that have the potential to lift the entire nation economically. The BJP led governments have never been shy of undertaking systemic reforms.

The restructuring and disinvestment of lossmaking and noncore public sector enterprises was a bold step taken by the first NDA government led by the late Shri Atal Bihari Vajpayee (ABV). It ushered in the beginning of disinvestment by the Government of India. To my mind, it was a major shift in the economic policy that the Indian governments had followed till then. I would term it as a major structural reform.

The political successor of ABV, PM Narendra Modi has already surpassed the pace of economic reforms that was achieved by any of his predecessors. The Narendra Modi led government’s biggest economic reform has been the implementation of Goods and Services Tax (GST) in 2017.

GST has been called as the ‘one nation, one-tax’ and it has been hailed as the most significant economic reform in India. There have been many other economic reforms undertaken by the Modi government and the biggest, boldest reform in the series of structural reforms taken by the BJP-led NDA is the introduction of the three new Farm Bills that have the potential to change the agricultural landscape of India.

I will discuss the three bills briefly and explain how they can benefit the agri sector of India.

The farmers’ Produce Trade and Commerce (Production and Facilitation) Bill 2020

The ‘annadata’ or the ‘food-giver’ has suffered at the hands of iniquitous forces that have been inimical to the farmers. Hitherto the farmers were compelled to sell most of their agricultural produce to the ‘mandis’ or the agri-markets owned and controlled by Agricultural Produce Marketing Committees (APMC). A farmer was wedded to the mandis in his area and the mandis were dominated by very parochial middle-men (or arhatiyas or commission agents) who dictated the sale price to the farmers. The minimum support price or the MSP had come to denote ‘maximum sale price’ and farmers often sold at a price lower than the MSP to the intermediaries. The farmers’ Produce Trade and Commerce Bill frees the Indian farmers from the shackles of mandis. They will no longer have to pay 2 to 3% fees to the commission agents. The farmer can sell his produce to anyone he fancies, without any fear or inhibition.

The Farmers (Empowerment & protection) Agreement & Price Assurance & farm Services Bill, 2020

This bill will facilitate contract farming and will provide triple advantage to the farmers.

One, the farmers and buyers can sign simple contracts that will give the farmers assurance of sale by the buyers at a pre-agreed price. This will eliminate the fear factor from the minds of the farmers of not finding buyers in case of excess production.

Two, the agreement acts as some kind of payment guarantee, even before the farmer sows his crops.

Three, the buyer can even advance loans to the farmers and this can help the farmer to meet his input costs.

The bill ensures that farmers are not be exploited by the buyers as market prices would be paid to the farmer in case the market prices are in excess of prices mentioned in the contract.

The Essential Commodities (Amendment) Bill 2020

An amendment to Essential Commodities Act, 1955 will deregulate key food items except in extraordinary circumstances like wars, famine, natural calamities etc. The original Act gave sweeping powers to central government to “control production, supply, and distribution of essential commodities.” This had led to fears in the minds of storage owners due to the inspector raj that has come to be associated with such archaic laws.

The bill will dispel fears of private players of excessive regulatory interference in their operations. The bill also seeks to remove cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.

These amendments are bound to attract corporate and foreign investment in the food supply chain that badly needs modern warehouses and cold storages. The big corporates fear excessive regulatory interference but once the above-mentioned food items are removed from the list of essential commodities, the private sector investment would surely come along.

It is an established fact that better SCM (supply chain management) brings about two positive changes. It brings price stability for the buyers, sellers and end consumers and it reduces wastage substantially. 

Farmers and consumers have welcomed the removal of monopoly of mandis

The farmers have welcomed the participation of the private sector. A recent study reveals that the farmers of Western Uttar Pradesh and Haryana have benefitted by the participation of companies like Grofers, Big Basket, Mother Dairy, More store, Ninjacart & Reliance Fresh. These buyers pay instant cash, better prices and treat farmers with respect. The farmers love dealing with such reputed private enterprises and admit that the monopoly of mandis is bad for the market

The consumers too would benefit by the Farm bills. The farm-to-fork price gap in India is as large as 60% as against the 20% gap that exists in developed economies. The large gap can be attributed to food wastage, inefficient logistics and most importantly to the excessive margin of intermediaries. The three farm bills will go a long way in ushering fair prices for farmers as well as consumers.

The political campaign against farm bills has no basis

The opposition parties have started a misinformation campaign against the farm Bills but it has not met with much success. I reproduce the charges labelled against the bills and the government’s calibrated response to them

Sr. No                 Opposition’s claim     Fact check
1

 

The Bills will lead to withdrawal of Minimum Support price (MSP). The bills should have included a clause on MSP MSP is not covered by any Act. The Commission for Agricultural Costs and Prices (CACP) is responsible for MSP and it will continue to do so in future as well.
2 The agri-markets or mandis will disappear The mandis will stay and will have to become more professional. Only the monopoly of mandis would end.
3 Big industrialists will take over agricultural land Farmlands cannot be sold or contracted out to any corporate. The contracts between farmers and buyers will be limited to farm produce only
4 Big industrialists will exploit farmers Non-APMC items- like milk, certain vegetables, and poultry- have flourished without the interference of mandis.

Competition among private players will benefit farmers.

Farmers can walk out of contract anytime without any penalty

The introduction of Farm bills is a major step in the direction of doubling the farmers’ income. It will usher in the much-needed agriculture reforms in India.

(The writer is professor of management at DME Noida is also a well-known columnist and an author. The views expressed are personal)

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