The story behind the farmer agitation

Despite the fact that the new farm laws are aimed at benefiting the farmers, and they have not been able to pinpoint flaws in any of its clauses, they continue to agitate and hold up entry into Delhi. What really is at stake, and who stand to lose from the new laws? An analysis...

The top headlines these days are about the farmers’ agitation. We keep hearing every day as to how the farmers are encircling Delhi. We hear with pain that all approach roads to Delhi have been closed by the protesting farmers. There is a massive deployment of the police force at all the incoming roads to Delhi. This reminds us of wars of olden times when forts used to be surrounded by the invading forces, while there used to be an army defending the inner line. Unfortunately, it is not any fort this time, but it is the capital city of our country, which is under siege.

HELD TO RANSOM

It is almost a month and a half now, and the situation has been getting more aggravating each day, despite many rounds of talks between the government and the unions of protesting farmers. Being winter, it is bitterly cold but the protesting farmers’ enthusiasm has not abated.

The only demand the farmers have is to repeal the three laws passed by the Parliament in September 2020. The government says that the laws are beneficial for the farmers and for which there was a long-time demand. The government has requested the farmers to point out defects in the clauses and has assured that it is prepared to correct them. The farmers are not prepared to have discussions as they have categorically asked the government to either say ‘yes’ or ‘no’ for the repeal of the laws. There are also some disturbing signs of protests in the US, Canada and Britain. Contrary to foreign policy protocol, the Prime Minister of Canada has spoken in favour of the protesting farmers.

WHAT’S IN THE NEW LAWS

Let us now look into the three farm laws which have become the bone of contention in the current agitation. These laws first came through the promulgation of an ordinance and were later passed by the Parliament, and approved by the President. The agitation picked up six months after the laws came into existence. The laws are the outcome of various recommendations from agricultural economists and discussions in parliamentary committees. Even opposition parties of today have been advocating such agricultural reforms in the past, though they are opposed to them now.

UNSHACKLING THE MARKETS

The main focus of the new laws is to free farmers from mandatory selling of their produce at government controlled state mandis (APMC). These mandis have not been abolished, instead the farmers have been given an alternative choice to sell their produce to anyone and anywhere in the country. Farmers may earn more in the free market than in the controlled mandis, and that remains the core belief behind the new legislation.

Farmers have also been allowed to go for pre-harvest contracts with buyers of their produce, with legislation heavily favouring farmers in case of dispute and for quick realisation of the sale proceeds.

Another focus of the new legislation is regarding contract farming, where farmers can pool their small pieces of fragmented land, and then enter into a contractual arrangement with a sponsor who can invest and do the actual farming, and then distribute the profit. The belief here is that there can be more yield per unit of land, if the plot of land is sizable, and there is better investment in good seeds, fertilizers and irrigation supported by modern techniques. This process will give more profit to farmers and there will also be an incentive for more investment in the agricultural sector by the private sector.

FREER MOVEMENT

The third reform is regarding the Essential Commodities Act, the undesirable restriction on the movement of farm produce which has been lifted, together with the condition pertaining to keeping farm produce. It is believed that more cold storage facilities and god owns will come up with the lifting of these restrictions.

The objection of farmers is based on the fear that by these reforms, the mandis will be abolished and the government of India will discontinue the purchase of produce at MSP (Minimum Support Price). Farmers also fear that with the entry of the private sector, the big corporates will snatch away their land while entering into agreements over farm produce.

‘All approach roads to Delhi have been closed by the protesting farmers. This reminds us of wars of olden times when forts used to be surrounded by the invading forces, while there used to be an army defending the inner line. Unfortunately, it is not any fort this time, but it is the capital city of our country, which is under siege’

NO CLAUSE FLAWS

In the course of the negotiations with the government, the farmers have not been able to identify any clause in the three laws that may be the basis of their fear. About 40 farmer union leaders, mainly from Punjab and partly from Haryana and western UP, came for negotiations as these unions are behind the agitation. Farmers from the rest of India are more or less silent, or even supporting the new farm laws partially.

Before analysing the cause of the agitation objectively, let us proceed with the case of paddy and wheat. These farm produce are sold to the mandis, where the major buyer is the central government through the FCI (Food Corporation of India). The MSP is revised upwards every year following the recommendations of the Swaminathan Committee that states that the MSP should cover farming cost plus 50 per cent. Normally, MSP is always higher than the market price of wheat and paddy, and even higher than international prices.

Farmers in Punjab remain assured of their realisation on farm produce, which is more remunerative than what the market can give. Additionally, in Punjab, the major part of the purchase of wheat and paddy is done by the state government.

AGENTS FEAR LOSS

Besides farmers, there is another section of beneficiaries - that of the commission agents (arhtiyas). They get a commission at high rates on the purchases that happen in the mandis, and since the major buyer in these mandis is the FCI, the commission is earned because of government purchase. There are roughly 50,000 registered arhtiyas in Punjab, and it is estimated that they earned about Rs.1600 crores in the preceding financial year. Roughly, each of them employ about five to six people to work in the mandis, and thus in totality, about three lakh persons (arhtiyas plus their employees) may get affected by the abolition of the mandis.

The Punjab State Government also earns a good amount of cess levied on mandi transactions. The fear is that if the mandis go away then the arhtiyas and their employees will lose jobs. The state government will also lose its steady income from cess.

MANDIS MAY NOT BE NEEDED

The Central Government has been giving the assurance that the mandis are not being abolished. On the contrary, announcements for more funds for their modernisation are being made. But the fear of the arhtiyas remains. They believe that if an alternative market comes up then the mandis will decay gradually. They fear that the farmers may stop coming to the mandis if they earn more in the alternative setup, as visualised by the new farm laws. The farmer agitation has come about mainly due to this fear, and the leaders of the agitation are mainly the arhtiyas and their employees. The new laws benefit the farmers but not the arhtiyas. These arhtiyas have also mobilised some farmers on the strength of their historical relationships, and some vested interest groups who want to embarrass the central government have also joined in.

ILLOGICAL FEARS

The agitation is illogical, as it is based on an unknown fear. There is nothing wrong in the farm laws. On the contrary, they are designed to bring immense good to the farmers. Roughly, 55% of our population is engaged in agricultural activity, but the contribution of agriculture to our GDP is only 17% – 18%. Our farmers remain poor, except for a small segment of affluent farmers who corner most of the benefits of subsidies granted by the government. We hear about farmers committing suicide. Farmers have been subjected to atrocious laws in the past, by which they are forced to bring their produce to the mandis where others decide the price of their produce, and they are not allowed to sell their produce elsewhere at a higher price. The new laws are a step in the right direction, aimed at increasing the income of the farmers. Our Prime Minister has announced the mission of the Government to double the farmers’ income by 2022 and these new farm laws are in pursuance of that goal.

The agitating farmers have also demanded that ‘MSP’ should be incorporated into the legislation and that even private players should not be allowed to purchase at a price below the MSP. Our country will go bankrupt if all farm produce is purchased by the Government at MSP. Government purchase is made as per the requirement of PDS distribution, and to create some buffer stock. Right now, our grain stock is 2.7 times our requirement, and more purchase may not be prudent. The purchased stock if kept unutilised, is normally stolen, eaten by rodents or rendered uneatable due to other factors. Taxpayer money used for such purchases cannot be allowed to go down the drain, especially considering that we have a very narrow tax base, and tax collected is not adequate. Further, if private players are asked to purchase at MSP, it will amount to coercing them. Sale and purchase have to be left to market forces. It is hoped that good sense will prevail and the protest called off.

First, our economy went into a tailspin due to Corona and its consequent lockdown for the most part of 2020, and now the blockade due to the agitation will really harm us. If the economy suffers, then even the farmers will be affected, as they constitute the major part of our population.