Farm acts: Are the reforms necessary?

Balbir Singh, president, Bhartiya Kisan Union, after the seven-hour long meeting on December 3, updated Forbes India about the conference on a call, saying that farmers are fighting for “the benefit of everyone in the country”. In the meeting, proposals from the government to amend the Acts were rejected by representatives of as many as 35 farmer organisations.

“From saying that the laws won’t change to offering to amend them, the government is slowly succumbing to our demands. We would settle for nothing less than the abolition of these laws,” says Sandhu.

Broadly, the three Acts allow farmers and traders the freedom of choice relating to the sale and purchase of their produce. With the barriers to inter-state and intra-state trade removed, a farmer can also do etrading of agricultural produce.

It also allows farmers to sell their harvest outside Agricultural Produce Market Committee (APMC) mandis, without paying any state taxes or fees. Farmers can make contractual arrangements with retailers, exporters, and processors. And cereals, edible oil, oilseeds, pulses, onions, and potatoes have been removed from the list of essential commodities. Therefore these commodities are free of restrictions and stand deregulated.

While on paper, the proposed structural changes will empower the sector and offer more opportunities for both farmers and the private players, the agitating farmers have many concerns.

Kulwant Singh Sandhu, a farmer from Jalandhar, Punjab, who was one of the 40 representatives who met with agriculture minister Tomar on December 5, explains, “The existing APMC laws already have a provision that authorises private players to buy produce at the established MSP (Minimum Support Price), so the need for a special Act is unnecessary. Government’s purpose behind enforcing these laws hurriedly is to strengthen the presence of private players in the agriculture sector enough to eventually render APMC bodies irreverent, and in time, abolish the MSP and the mandi system.”

Historically, Punjab and Haryana have had a strong APMC mandi system in place. "The mandi system and MSP are most important for the farmers in these states, because these are the areas which supply a majority of the paddy and wheat. So it is obvious that when there is a threat to these ideas, the protests will be more pronounced in these states," explains R Ramakumar, professor, School of Development Studies, Tata Institute of Social Sciences.

In 2019-20, government agencies in Punjab and Haryana purchased about 227 lakh tonnes (lt) of paddy and 201 lt of wheat, whose value—at their respective MSPs of Rs1,835 and Rs1,925 per quintal respectively—would have been Rs80,293 crore. Ramakumar adds, "Additionally, the loss of mandi tax and mandi fees will also adversely impact these states, since the state government uses a lot of this revenue to invest in infrastructure." Currently, the mandi taxes and fees range from 8.5 percent in Punjab to less than 1 percent in some States.

There have been arguments that the removal of mandi taxes are likely to fetch farmers a higher price for their produce. Ramakumar disagrees, "This is a bit problematic because mandi tax will simply be replaced by transaction costs of companies [meaning companies are likely to state a buying cost of their own, which is not likely benefit farmers too much]. Secondly, when it comes to middlemen, they are not likely to disappear either, because private companies will have their own agents to do the purchases from farmers." Ramakumar believes these protests are justified since farmers see these reforms as a way of changing the agricultural system in to one that works well for them in the long run.

On the other hand, agritech players like Farmpal—a farm-to-market company—believe it is only farmers with large land holdings or harvesting a certain type of crop that are not in favour of this change.

Co-founder Puneet Sethi says, "For most Indian farmers—small and marginal farmers that constitute over 75 percent of India’s farmers—even if this legislation does not help, it certainly will do no harm as the legislation has not changed or stopped any specific way of doing things that was being done previously. APMCs will still function as earlier, MSP will be still applied as earlier. And the current situation for the farmers with small and marginal land holding can only get better."

The other issue is with Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 which permits contract farming. According to a report on Gaon Connection, contract farming enables a private corporation to get a farmer to cultivate their own land. The company tells the farmer what to grow and at what price it will buy the crop after it is harvested. But if the yield doesn’t pass the quality check the company can refuse to buy it, causing a loss to the farmer.

“Contract farming is common in Punjab and Haryana, but The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act enables big businesses to formulate a contract in their favour, which they can very easily misuse with their expertise and legal prowess and exploit simple-minded farmers,” Sandhu says. “The redressal mechanism proposed in these acts also favours the corporations. These acts will take away whatever little power farmers have.”

PepsiCo is one such company that did business with farmers in Punjab for almost three decades but with considerable restrictions and supervision by government authorities. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020, however, provides higher autonomy to corporations to conduct business. The fear is that these for-profit companies may not be considerate of farmers’ welfare and might end up exploiting them further.

Are protests happening elsewhere?

Although most number of people gathered at the Delhi borders are from Punjab and Haryana, farmers and supporters of the protest from states like Bihar, Rajasthan, Chattisgarh, and Madhya Pradesh have also joined. “If the government thought that this will just be a Punjab and Haryana issue, they are being proved wrong. Farmers from Madhya Pradesh, Rajasthan, Bihar, and Maharashtra have joined us. The country’s farmers stand united,” says Sandhu.

Apart from Punjab and Haryana, protests have spread to Kerala and Karnataka as well as Assam, wherein farmers have taken to the streets in solidarity. Farmers in Madhya Pradesh have staged demonstrations in Mandsaur and Malwa; in Uttarakhand farmers in Uddham Singh Nagar are protesting, and in Rajasthan farmers have taken to the streets in Hanumangarh and Sri Ganganagar districts. Beyond India, Sikh-Americans are holding rallies in the US cities, while thousands of people protested in central London on Sunday.

Forbes India spoke with four farmers stationed at different Delhi borders. All of them claim to have enough ration to continue the protests for 8 to 12 months if need be. “We brought enough supplies with us to sustain for months. But we’re encouraged by the people from nearby villages who have been generous enough to provide us with food and water every day,” says Sandhu. His claim was backed by Sharanjit, who said that people from a village near the Tikri border cancelled their scheduled sports tournament and used the resources to provide farmers with food and water. “They chose to spend Rs 2 lakhs on buying ration for us,” he says.

Are these reforms necessary?

While lakhs of farmers are protesting against these newly formed legislations, agritech players and farmers who are currently open to working directly with private players believe these changes are necessary to revolutionise agriculture in India. "Farmer are too dependent on AMPC, and in a time of globalisation we need make our farmer produce reach international market. All the three farm laws will push Indian agriculture towards globalisation," says Parth Tripathi, CEO and director of BeeHively Group & Krishna Agro. The agri-businessman believes that consumers are paying a high price in retail markets, yet farmers continue to get low prices.

"It is the middlemen (arhtiyas) who take all the benefits by selling sell farm produce in the market at higher prices, which increases agro commodities inflation overall." In his opinion, farmers are misinformed by the middlemen, causing these protests. Tripathi adds, "The middlemen always buy at MSPs even if the market is good and prices are up. Those price hikes are enjoyed only by arhtiyas."

An agri-business expert, who did not want to be identified, believes, that there is need to connect smaller farmers with markets, them choice and flexibility to store, process and sell at the price and place that provides best possible returns. He adds, "There is also need for value addition near farms for improving farmers' share in end consumer price. This cannot happen without reforms and creating enabling infrastructure."

Sethi of Farmpal believes that while there might be certain logistical challenges in the short run, the impact in the long run will be positive for the farmers. Varun Khanna, co-founder of Otipy, a social commerce venture (B2B2C) by Crofarm—a farm-to-fork agritech startup agrees. He says, "On the ground, even before these bills were passed, farmers did sell to private players. We see these bills expediting this trend even further. Hence, we see them insisting on making the MSPs a law so that the price of their crops is secured."

Ramakumar of TISS believes the agri-sector needs reform, but "the changes have to be brought about at the state-level by governments, because they are the people who are running agricultural policy. No one knows why there was a rush to implement these reforms in the middle of a pandemic. There could have been more discussions with states as well as farmers about the same."