A Treat for the Corporate Sharks or Autonomy in Indian Agriculture?

“Farmer’s bills will create a vacuum that may result in utter chaos.” - P Sainath, Founder of People’s Archive of Rural India.

The largest source of livelihood in India is agriculture. A whopping 70% of the rural households consider agriculture to be the primary source of their subsistence. Among them, 82% of farmers are engaged as small or marginal agriculturists. An economy which is majorly dependent on farmlands has witnessed unprecedented upheaval in the wake of the passing of the Farmers Bill 2020. Perhaps even more surprising is the polarised public opinion pertaining to it. While it has been welcomed by certain sections of the public, others have expressed stiff opposition to it. The displeasure wasn’t just restricted to the contents of the bill but also to the manner in which it was passed. Many regard it as a move towards a unitarian bias of the Indian State and a blow to federalism. The Minister of Food Processing Industries in the Narendra Modi Government, Harsimrat Kaur Badal, resigned from the Union Cabinet as a mark of protest.

What is the Farmers Bill 2020?

It refers to a collection of three bills dealing with agriculture market reforms that have been passed in mid-September 2020. These draft laws aim to change the existing procedures laid down for the sale, marketing and storage of agricultural produce across the nation. They were passed by voice vote in both the houses of the Indian Parliament - Lok Sabha (the lower house) and the Rajya Sabha (the upper house), during the monsoon session, much to the chagrin of the opposition. The first bill termed as ‘The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020’ allows the farmer to sell his or her produce outside the allotted Agricultural Produce Market Committee (APMC) mandis (marketplace) without having to pay any State taxes. The second bill ‘Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020’ assists in the method of contract farming and empowers the farmer to pursue direct marketing. The final bill ‘The Essential Commodities (Amendment) Ordinance 2020’ ensures the deregulation of the production, storage, movement and the sale of essential food crops such as cereals, pulses, edible oils and onion.

The Ayes v/s the Nays

The ones supporting this measure argue that it ensures a greater autonomy of the farmers in terms of the sellers dismantling the APMC mandi system (agricultural market system). The government believes that this will invite private sector investments and help in the building of infrastructure and supply chains for agricultural harvest in both national and global markets. Further, it might assist small farmers who may not be in a position to negotiate a bargain or invest in superior technology to improve the quality of their harvest. Moreover, farmers are expected to sell their produce at a better price than the fixed price they have to sell at an APMC mandi. Market competition and cost-cutting on transportation may facilitate greater profits. The private investments are likely to help in fetching better technological support that a marginal farmer may not have been able to afford prior to the process of privatisation.

The ones opposing the bill including regional/national opposition parties such as Indian National Congress and All India Trinamool Congress (TMC) have highlighted the cons and believe it has the power to reverse the benefits bestowed by the Indian Green Revolution of the 1960’s. They have been interestingly opposing the bill on the same ground that the government seeks to promote it - “the interests of small and marginal farmers”. They believe that the farmer may not be able to choose his seller due to the lack of knowledge of negotiation if mandis were rendered redundant, the lack of bargaining power of the farmer when compared with corporate giants might force him to sell his harvest at a far lesser price.

Their biggest concern stems from the farmers being deprived of the minimum support price (MSP). MSP is a pre-set rate at which the Central Government purchases certain crops such as paddy, wheat and select pulses from the farmers, irrespective of the market rate. These predetermined rates are usually declared at the beginning of each sowing season for the 23 crops which fall under this list. The fact that the Anti-Farmers Bill Protests have been most fervent in Punjab and Haryana may be due to the fact that most government procurement centres are located within the notified APMC mandis. Farmers are wary of the fact that encouraging tax-free private trade will lead to a slow and natural demise of the APMC mandis thereby leading to a reduction of government procurement. Instead, the farmers demand a universalisation of the minimum support price which will compel the government as well as private players to incorporate these rates as a floor price. There has also been a general concern about the fate of the middlemen as their role in the chain has been rendered obsolete under the new laws.

The APMC structure consists of two parts - a strong market network where farmers have been selling their produce for decades and have established a familiarity among themselves, a connection between commission agents (known as arthiyas) who further the cause of procurements. These two antagonistic structures are connected by roads which run from the villages to the notified APMC markets. Most of the private buyers are small traders at local mandis - they face an uncertain financial future as farmers will be directly selling their produce to corporates and industrialists, and the small traders might financially not be in a position to compete with the bigwigs. This is furthered by the provisions of the Essential Commodities Act which removes the ceiling on stock limits thereby allowing bulk purchase and storage - a treat for the corporate players. Thus, the idea of the corporatisation of the agricultural sector has been a major point of hue and cry across the nation. Monopolisation of agriculture where the business houses may attempt to minimise costs would vitiate the farmers’ interests. There has been a concern about growing input costs which the farmers had to bear - trampled between rising expenditure that cultivation demands and the sluggish prices on the other hand. Moreover, the hoarding of the harvest can prompt the industrialists to create artificial shortages and sell the produce later at an exorbitant price.

The Political Angle

There has been a greater political angle to this debate centering around the question of a gradual smothering of federalism. Out of the three lists in the Seventh Schedule of the Indian Constitution - Union, State and Concurrent lists, agriculture falls under the State list. The State Governments’ believe that it doesn’t lie within the ambit of the Central Government’s authority to legislate upon a subject beyond its jurisdiction. As per this case of Union of India v HS Dhillon (1972), the constitutionality of parliamentary laws may be challenged on two grounds - first, the subject is in the State list and second, it violates fundamental rights. The state’s loss of revenue from mandi taxes which used to enter the state treasury ranged from being as high as 8.5% in Punjab to being as low as 1% in some.

Moreover, the bill was passed by the Chair in Rajya Sabha, where states are represented, on the basis of a voice vote, refusing to consider repeated demands by the members for a division vote on the statutory resolution. Motions moved by certain left-wing parties to refer the bills to the select standing committees were also rejected. Thus, a violation of the federal principle upon which the very idea of Indian polity is established seemed to have received a jolt. The State Governments of Kerala and Punjab have declared that they shall challenge the bill in the Indian Supreme Court.

The Commission Agent’s market fee and rural development fee are 3% and 2% in Punjab and Haryana respectively. For these states, which are the epicentre of these protests, the biggest sources of state revenue are these additional fees. Thus, financial subordination of the state governments seems like a bitter compromise on their part. These two states estimate a loss of ₹35 billion and ₹16 billion annually, respectively. However, similar to the concept of separation of powers and constitutionalism, the word federalism is not explicitly mentioned in the Indian Constitution. But it is a convention enmeshed in the essence of our constitutional scheme.

The Way Ahead

It is probably wise to look into the prevalent frameworks in some other nations all across the globe. The French dairy producers and the dairy farmers co-operatives in the United States have gained power over the years. A number of buyer cartels fix the price and this has forced the European Union and the US to introspect at the existing mechanisms of their own supply chains and to reduce their consolidative powers. Many believe that corporations may target the grain market as there are more than 90 million tons of food grain in Indian stocks and this might be a lucrative option for big money players. Under the Second Bill which permits contract farming, farmers will produce crops as per contracts with corporate investors for a mutually agreed remuneration. Farmers remain extremely sceptical, with very justifiable reasons, about the Farmers Bill 2020 which has received the assent of Indian President Ram Nath Kovind in late September. This has been largely dubbed as a ‘death warrant’ for poor farmers against the Prime Minister’s declaration of the bills as a ‘watershed moment’ for the Indian Agricultural Community. It remains to be seen whether the trio of bills is a boon or a bane, only time will tell.


Oyeshi Ganguly

An undergraduate student of International Relations at Jadavpur University. Interests range from the Beatles to Manto and everything in between. Travel enthusiast. A philatelist. Harbours an unquenchable curiosity towards everything under the sun.

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