April 27, 2024   Academy | Blog | Community | Our Philosophy
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Apr 27, 2024  Academy | Blog | Community | Our Philosophy

Agriculture Pricing News

Agriculture Pricing is a crucial aspect of Indian Economy, as the majority of the population in India devotes 2/3 of its expenditure on food alone and about half of the population is engaged in the agriculture for livelihood.

  • The increasing prices of edible oil needs government intervention
    Synopsis:

    In the past year, the prices of edible oil increased significantly. There are many internal and external reasons behind the price rise. So, the government has to pay attention to the edible oil prices.

    Introduction:

    In India, Edible oil prices have risen sharply in recent months. According to the data from the Department of Consumer Affairs, the prices of six edible oils — groundnut oil, mustard oil, vanaspati, soya oil, sunflower oil and palm oil — have risen between 20% and 56% at all-India levels in the last one year.

    India’s Demand of Edible Oil:
    • India’s production of oilseeds is too little to fulfil the domestic demand. Therefore, India is dependent on imports.
    • India is one of the largest importers of oilseed and edible oils in the world. About 56% of the domestic edible oil demand is met from imports.
    • The major sources of these imports are
      • Argentina and Brazil for soybean oil;
      • Indonesia and Malaysia palm oil; and
      • Ukraine and Argentina for sunflower oil.
    • Therefore, any increase in global prices of oilseeds and edible oil is bound to be transmitted into domestic prices.
    Why are International Prices of Edible Oil rising?
    • Firstly, Demand on making biofuel from Soybean oil: There has been a demand on making renewable fuel from soybean oil in the US, Brazil and other countries. This increased the demand for edible oil in these countries and increased prices globally.
    • Secondly, Aggressive Buying by China: China uses soybean for extracting oil as also to prepare the animal feed. Hence, aggressive Chinese buying of soybean depleted inventories in the market. This in turn put upward pressure on prices.
    • Thirdly, Labour issues in Malaysia: Malaysia’s palm oil sector is dependent on migrant foreign workers. However, pandemic induced border closure meant the palm oil sector faced a severe labour shortage causing the output to fall.
    • Fourthly, Impact of La Niña on palm and soya producing areas
    • Fifthly, Imposition of Export duties on crude palm oil in Indonesia and Malaysia.
    Suggestions to reduce prices of edible oil 
    •  Firstly, Short Term Measures:
      • Lower Import Duties: India can lower the import duties on the edible oil prices. This can lower the prices immediately.
      • Subsidise Edible Oil: Government can subsidise edible oils and make them available to the poor under the Public Distribution System.
    • Secondly, Long Term Measure: India needs to reduce its dependence on imports of edible oils. This can be feasible by incentivising farmers to diversify wheat and paddy crops to oilseeds.

    Source: The Indian Express

  • Importance of FPOs | Farmer Producer’s Organisations

    Synopsis: FPOs Farmer Producer’s Organisations could be a solution to the agrarian distress if they are helped to access credit and markets

    What are the main reasons for farmer’s distress?

    How FPOs can help small and marginal farmers?

    Institutionalizing FPOs Farmer Producer’s Organisations can help marginal and small farmers to overcome their challenges. FPOs will allow members to gain greater bargaining power in the purchase of inputs, obtaining credit, and selling the produce. For example,

    1. One, FPOs in Gujarat, Maharashtra, and Madhya Pradesh, Rajasthan have shown positive outcomes. Farmers through FPOs  Farmer Producer’s Organisations were able to realize higher returns for their produce.
        • For example, tribal women in the Pali district of Rajasthan formed a producer company, and they are getting higher prices for custard apples.
    2. Two, The International Food Policy Research Institutes comparative study of FPOs in Maharashtra and Bihar has revealed the following benefits of FPO’s.
        • FPO’s are doing better than non-FPO farmers. Also, within FPOs, organically evolved FPOs (OFPOs) are more beneficial than pushed or promoted Farmer Producer’s Organisations (PFPOs). For example,
          • According to the survey, OFPOs resulted in an increase in gross income. While only 2 percent indicate a decline in the same.
          • For PFPOs, 64 percent report an increase in gross income while 27 percent report no change in income.
          • Whereas, only 32 percent of the non-members indicate an increase in gross income.
    Steps taken by the government in this regard?
    • Since 2011, the center has intensively promoted FPOs under the Small Farmers’ Agri-Business Consortium (SFAC), NABARD, state governments, and NGOs.
    • The FPO is supported through,
      • Capital infusion: up to Rs 10 lakh to registered FPOs
      • Credit guarantee cover to lending institutions: maximum guarantee covers 85 per cent of loans not exceeding Rs 100 lakh.
      • Budgetary support: Budget 2018-19 gave a five-year tax exemption for FPO’s. Budget 2019-20 targetted to set up 10,000 more FPOs in the next five years.
      • State support: In Tamil Nadu, under collective farming, six lakh small and marginal farmers have been integrated into 6,000 farmer producer groups.
    What are the Challenges for building sustainable FPO’s?

    Studies of NABARD shown the following challenges for building sustainable FPOs:

    1. Lack of technical skills,
    2. Inadequate professional management,
    3. Weak financials, inadequate access to credit,
    4. Lack of risk mitigation mechanism and
    5. inadequate access to market and infrastructure
    How to address the challenges faced by FPO’s?
    1. First, for a large country like India, more than one lakh FPOs are required. (currently 10,000 FPO’s).
    2. Second, to address issues such as working capital, marketing, infrastructure. For that
      • Banks must be facilitated to come with structured products for lending to FPO’s.
      • Also, banks need to focus on capacity building to improve their professional management.
    3. Third, FPO’s have to be linked with input companies, technical service providers, marketing/processing companies, retailers etc. This will enable them to access data on markets and prices and other information and competency in information technology.
    4. Fourth, FPOs need to look for land consolidation of their members where contiguous tracts of land are available. To some extent, Aggregation can overcome the constraint of small farm size. Women farmers also can be encouraged to group cultivate for getting better returns.

    Source: Indian Express

  • Lessons from Operation Flood for Operation Green

    Synopsis: A closer inspection of the Operation Green scheme shows that the scheme is nowhere near achieving its objectives.

    Introduction 

    The Finance Minister during budget presentations announced the expansion of Operation Green (OG). It will be expanded beyond tomatoes, onions, and potatoes to 22 perishable commodities. 

    • Operation Green was launched in 2018 with three basic objectives:
      1. Firstly, it should control the wide price instability in the three largest vegetables of India (Tomatoes, Onions, and Potatoes).
      2. Secondly, it should build efficient value chains so that a larger share of the consumers’ money is received by the farmers. 
      3. Thirdly, it should reduce the post-harvest losses by building modern warehouses and cold storage.

    How is the operation green performing currently?

    The Ministry of Food Processing Industries (MoFPI) has invited some program management agencies to see the implementation of OG.

    • Rs 500 crore budget was outlined initially. However, only Rs. 8.45 crore has been actually released. 
    • A closer examination of the scheme reveals that OG is progressing in slow motion and is nowhere near achieving its objectives. 
      • Research at ICRIER tells that price instability remains high. Farmers’ share in consumers’ money is very low with 26.6 percent for potatoes, 29.1 percent for onions, and 32.4 percent for tomatoes. 
      • In cooperatives like AMUL, farmers get almost 75-80 percent of consumers’ money. 

    What can operation green learn from the operation flood?

    Operation Flood (OF) changed India’s milk sector and made India the world’s largest milk producer. There are some important lessons OG can learn from OF: 

    1. Firstly, OG will not get any immediate results and one has to be patient. There should be a separate board to strategize and implement the OG scheme, like the National Dairy Development Board (NDDB) for milk. 
    2. Secondly, a respectable leader with commitment and competence is required to head this new board of OG. The person should be given at least a five-year term, sufficient resources, and should be made accountable for delivering results. 
      • The MoFPI can have its evaluation every six months. 
    3. Thirdly, at present, the criterion for the selection of TOP commodity clusters is not transparent. This process should be transparent to keep the politics away.  
    4. Fourthly, the subsidy scheme will have to be made innovative with new generation entrepreneurs, startups, and FPOs. 
      • For instance, the announcement to create an additional 10,000 FPOs along with the Agriculture Infrastructure Fund and the new farm laws are all promising but need to be implemented fast.

    Green tax on vehicles older than 15 years

  • “First Trade Minimum Price” (FTMP): A model to increase farmer’s income

    Synopsis: Industrial revolution 4.0, will reduce employment opportunity. The “First Trade Minimum Price” model can be used for increasing farmer’s income.

    How Industrial Revolutions are changing employment dynamics?

    • The subsequent three Industrial revolutions reduced the dominance of the agriculture sector. They made the service and manufacturing sector dominant.
    • This helped the agrarian workforce to shift to secondary and tertiary sectors of the economy.
    • The advent of the Industrial Revolution (IR) 4.0 will make this situation more complex.
    • The use of new technologies in IR 4.0 will lead to job losses in the service and manufacturing sectors. New techs include Artificial Intelligence, robotics, cognitive analytics, 3D printing, genomics.
    • Thus, the industries employing a huge population from the agriculture sectors will have a reduced capacity for employment.

    Present status of Agriculture sector 

    • However, according to the FAO, about 60 percent of the global population, directly or indirectly, is still dependent on agriculture.
    • Yet, its contribution to the world GDP is just about 4 percent. Whereas, the contribution of secondary and tertiary sectors to the economy is 90%.
    • In India, the contribution of the agriculture sector to GDP is 12-15 percent. Though it is higher than the world average, it is still much less, compared to the contribution from other sectors of the economy.
    • Centre and state governments are continuously trying to improve the economic status of farmers. Yet, their efforts are unable to deliver a sustainable increase in their per capita income.

    Thus, there is an urgent need to think about the way to avoid the possible employment crisis of the future. It involves increasing the productivity of the agriculture sector and farmer’s income.

    What is the solution to improve the farmer’s income?

    The author suggests a new economic model for fixing farm prices. If this model is employed it will address the issue of the agrarian economy, and will also retain the population in the agriculture sector. Also, it will make agriculture more prosperous by bringing rural average household income closer to those engaged in manufacturing and services sectors.

    • The author proposes for “First Trade Minimum Price” (FTMP). According to this model, the local farming community will fix the prices of all the agricultural primary goods on a day-to-day basis or periodically.
    • Also, this will make it mandatory for the first trader to procure the commodity at a price, not below the price fixed by the above criterion.
    • He also suggests the use of robust digital technologies for the exercise of fixing prices.
    • This proposal is based on the present market-based pricing of services and products.  Here, the prices of products or services are determined and decided by the manufacturers or providers.
    • Similarly, the farming community also can decide the prices of their products. It will increase their per capita income. This will also help to retain the agriculture workforce in the farm sector thereby decreasing the unemployment rate.
  • Arka Vyapar App to connect farmers with market

    What is the News?
    Indian Institute of Horticultural Research(IIHR) has launched an app called Arka Vyapar App.

    About Arka Vyapar App:

    • The app aims to connect farmers with traders. It will help farmers get the best available prices for their products.
    • How the app would work? The app would have details of farmers and traders who have enrolled with the IIHR. At the same time, the app would also provide prices for different products in different markets of India.
      • Example: If a farmer has grown papaya in Karnataka, he can know the trends related to prices for papaya in different markets through the app. He can accordingly decide upon the market which is offering the best price. He can then contact the traders there for further transactions.

    Source: The Hindu

  • Gandhian imprint in the farmer’s protest

    Source: The Hindu

    Syllabus:

    GS 4 – Contributions of moral thinkers and philosophers from India and the world.

    GS 3 – Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System-objectives, functioning, limitations, revamping.

    Synopsis: The protesting farmers are going through physical and mental suffering in Delhi’s severe winter. But the Government and the urban middle classes do not seem to felt a sense of discomfort.

    Background

    • Gandhi always backed non-violent methods of protest. Gandhi also believed rural economy based mass movement follow non-violent methods. This is evident in the incident when he cancelled the Non-Cooperation Movement after Chauri Chura.
    • Today also, India is facing a rural economy based mass movement, following the principle of non-violence (Farmers protest). But the government and supporters of the farm laws are not respecting the non-violence.
    • Scholars, columnists and advisers supporting the laws are of the view that farmers who are protesting are being misled and do not represent the farming community as a whole.

    What steps should the government take to end the farmers protest amicably?

    • Firstly, Persuasion approach- Persuading farmers about the benefits and other important efforts towards farmer’s welfare can end the protest.
    • Secondly, Dialogue between equals- The Government should reach the farmers for negotiation as an equal partner.
    • Thirdly, Removal of stereotypical perception- The urban educated class has certain stereotypes about farmers. These stereotypes have to be removed during negotiations. According to urban educated class:
        • Farmers do not know their own benefits due to the general ignorance and lack of education.
        • The farming community is simple-minded and therefore can be easily misled.

    How the farmer’s protest and the Gandhian principles are relatable?

    • Firstly, the idea of a peaceful protest is a legacy of Gandhi.
    • Secondly, the faith in non-violence by the protesting farmers must be respected by the other side (the government).

    Thus, according to Gandhi’s view the protester’s willingness to undergo physical or mental sufferings is a means of awakening opposite party’s human instincts.

    Way Forward

    • The government and the urban middle classes need to change their stereotypical perception regarding farmers.
    • The government should also consider the suffering [physical as well as mental] of the farmers equal party to the negotiations
  • New Farm Laws and Labour Codes is the way forward

    Source: The Indian Express

    Syllabus: GS-3  Issues related to direct and indirect farm subsidies and Issues related to direct and indirect farm subsidies 

    Synopsis: The agriculture and labour reforms passed recently creates a condition for productivity and enhance growth. This benefits millions of small farmers and unorganised workers.

    Farm Laws and the changes it brings: 

    In India, Farmers earn less than people engaged in the services sector. This difference is not common in all countries.

    • An RBI study shows that a potato farmer only gets 28 per cent of the amount paid by the consumer. Across all crops, the farmgate price (the net price of the product when it leaves the farm) is 40-60 per cent less than the consumer price.

    How the earlier existing laws were problematic to farmers? How the new farm laws are of help?

    The Green Revolution and subsidies have expanded India’s agricultural production. But the farmers have not gained. This is because the mediators have taken 40-60 per cent of the profit. The problems with the earlier laws are, 

      • First, the stock limits mentioned in the Essential Commodities Act. The Act mention a certain amount of stocks to be maintained to satisfy the food security needs of India. This restricted large-scale processing units from running at full capacity. This led to the problem of food wastage. 
        • 30-40 per cent of vegetables and fruits are lost due to inadequate storage, processing and transportation facilities.
        • New Farm Law (The Essential Commodities (Amendment) Act, 2020): The Act removed the stock limits and introduction of the contract farming act. This will bring in new investments to tap the wasted resource.
      • Second, earlier under the APMC Act, only traders registered in APMCs can buy farmers’ produce. This restricted the outsiders and favoured registered intermediaries. Intermediaries used this to make a profit instead of farmers. 
        • New Farm Law (The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Act, 2020): The new laws amend this provision that favoured the intermediaries. Farmers now will have an option. Either sell to the traders registered or to the outsiders.   
        • Now private market/non-APMCs registered trader can also set up an agricultural market and compete with APMCs registered intermediaries.
        • For example, Karnataka implemented the Uniform Market portal in 2014, enabling trade across taluka APMC limits without APMC fees. This increased farmer’s profit.

    Labour reforms and the changes it brings:

    • Parliament has passed 3 labour code bills aimed at labour welfare reforms. These codes cover more than 50 crores unorganized and organized workers in India. This also includes platform or gig workers also. These three codes were
      1. Industrial Relations Code, 2020
      2. Code on Occupational Safety, Health & Working Conditions Code, 2020
      3. Social Security Code, 2020.

    First, multiple labour laws have not encouraged employment creation. These laws have created hindrances for job creation due to the high costs of compliance. For example, India’s employment elasticity with respect to GDP growth is 0.2. China and Bangladesh have an elasticity of 0.44. And 0.38 respectively.

        • New Labour Codes: India’s labour reforms will promote growth with higher employment elasticity. This is because these codes are the simplified comprising of many prior labour laws.

    What is employment elasticity?

    Employment elasticity is a measure of how employment varies with economic output. For example, An employment elasticity of 1 implies that with every 1 percentage point growth in GDP, employment increases by 1%.

    • Second, the old labour laws protected existing jobs at the cost of preventing new job creation.
      • New codes: The new codes would incentivise the firms to create new jobs. It is also in line with the reforms being undertaken by our neighbouring countries.
      • For example, Bangladesh increased formal jobs by legalising fixed-term employment and banning union activity in FDI industries. It raised the threshold for seeking prior permission for laying off workers. 

    Suggestions to improve further:

    • India should bring in economic reforms. Aadhaar-enabled social safety nets and direct income transfer to the poor will pay off by enabling growth with a massive expansion in employment.
    • The social safety nets have been created to ensure the right to food and direct income transfers to farmers. This will protect incomes of the vulnerable even as competition increases productivity and growth.
    • The government should continuously communicate with those unhappy with the reforms. The government should explain how the current status quo is hurting farmers and informal workers.

     

  • Why Farm laws must be redrafted?

    Synopsis: The process adopted by the government to enact the three farm laws was not appropriate. The government should reconsider its stand to not withdraw the laws.

    Introduction 

    Much has been debated about the impacts and benefits of farm laws on farmers. But the ordinance route adopted to enact these laws was a clear violation of the rules and procedures of Parliament. 

    What were the discussions between the first Lok Sabha speaker and the first Prime Minister?

    After independence, the ordinance route was criticized for being inherently undemocratic by G V Mavalankar in a letter to Nehru. In a reply, Nehru also agreed with his view.

    They both agreed on one thing that the ordinance route is not appropriate and should be avoided except on special and urgent occasions.

    What was wrong in the process of passing these laws?

    Passing these farm laws through the ordinance route was bad in law and in clear violation of established parliamentary practices. There was nothing urgent which could not have waited for Parliament to reassemble.

    In normal circumstances, bills are referred to the concerned standing committee for examination and report. Only in rare cases, the bills are passed directly by the two Houses without referring them to the committee.

    For example, the Companies Amendment Bill was examined by the committee twice in spite of the opposition of the then corporate affairs minister Veerappa Moily. 

    The procedures established by the parliament ensures that the two Houses do not go wrong in the passing of bills for the public purpose. In case of a mistake, courts have the power of reviewing these bills. 

    Way forward

    The Supreme Court has stayed the implementation of the laws. But these laws can be declared void for not following the established procedure, stepping over the power of states.

    Although The government agreed and delayed their implementation for 18 months, it should consider the government withdrawing the laws completely. It should redraft the bills if required and send them to the standing committee on agriculture. 

    Source: click here

  • Issues in SC Mediation step on farm laws

    Synopsis: The Supreme Court’s decision to take a route of mediation, instead of judgment on the legality of the law, is being criticized by some experts. Let’s have look at the criticisms? 

    What are the issues in SC mediation process? 

    Supreme Court-appointed a committee and put a stay on implementation of the laws. Although it is officially not called a mediation committee, but the Court does mention its role in helping the negotiations between the farmers and the government. 

    The committee route that SC has adopted should have been a legislative and executive exercise. Moreover, if it is an attempt to mediate, there are issues in it; 

    • Firstly, Mediation should be Voluntary. i.e. all parties must provide their consent to it. Major farmer’s union have denied participating in it; thus, it is not a successful attempt.  
    • Secondly, the mediators must be fair and neutral. Majority of its members have a positive attitude towards bill. Thus, it is not fair and neutral.  

    What are the steps to be taken? 

    The Chief Justice of India said that the dialogues seem to be going nowhere, and something urgent needs to be done. If the Court wants to mediate due to the government’s reluctance in doing so, then it must observe some prerequisites. 

    • First, the committee should be made of such people who give out an image of impartiality, ability and seriousness. The committee should have knowledge and respect so that it can influence sceptics to give the process a try.  
    • Second, assurance should be taken from the government that its ministers at high posts will meet the committee and participate in the proceedings as this will assure the consent of all parties. 

    Way forward 

    • Once discussions start and are properly guided, solutions are possible. It may well be that once the important elements get focused upon and the key concerns expressed, approaches will open up which will secure legitimate interests to the maximum extent possible. All this is possible only when mediation is on the lines of principles.

     

  • Supreme Court stays implementation of 3 farm laws

    News: The Supreme Court has stayed the implementation of Three Farm Laws until further Orders.

    Facts:

    Summary of the Supreme Court Order:

    • Stay on Farm Laws: Implementation of three farm laws namely The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, The Essential Commodities (Amendment) Act and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act have stayed.
        • The stay on their implementation means the Centre cannot, for the time being, proceed with any executive actions to enforce the laws.
    • No Retrospective Action: No farmer must be dispossessed or deprived of his title as a result of any action taken under the laws.
    • Committee Formed: The court formed a four-member committee of experts to listen to the grievances of the farmers on the farm laws and the views of the government and make recommendations. The Committee shall be provided with a place at Delhi and Government to bear its expenses and give it secretarial assistance
    • Functions of Committee: The representatives of all the farmers’ bodies whether they are holding a protest or not and whether they support or oppose the laws shall p Supreme Court stays  farm laws articipate in the deliberations of the Committee and put forth their viewpoints. The Committee should file the report within 2 months before the Supreme Court.

    Article Source

    Further Reading on Farm Laws: https://forumias.com/blog/issue-of-farm-bills/

     

  • Contradictions between farm laws and the MSP system

    This article has been created based on the Indian Express article “Misunderstanding the MSP”  

    Synopsis- Mere amendments to farm laws will not solve the MSP issue, as the MSP system may not be able to face the private system of farm laws.

    Syllabus– GS Paper III (Issues related to direct and indirect farm subsidies and minimum support prices)

    Introduction- Recent negotiations between the farmers’ organisations and the Centre are stuck on the issue of MSP and repeal of farm laws. Although the government offered an amendment to address flaws in the three farming laws.  But the farmers demanding, laws themselves need to be repealed.

    Understanding the aspects related to the MSP system  

    • MSP Package: MSP alone is not remunerative for farmers. Remuneration is facilitated by a combination of 1.MSP, 2. Public Procurement System (PPS) and 3. Strict time-bound purchase of output brought to the PPS (By APMC, mandi yards). 
        • If any one of the above factors is missing from the combination, farmers will not be able to get the intended benefits.  
        • For example; Gaurang Sahay of the TISS, Mumbai reported that in MP, the absence of timely purchase of vegetables led to farmers feeding cauliflower and aubergine to their animals. i.e., one missing aspect from the combination.
    • Availability of package: The government system of announcing and implementing MSPs is inadequate.
        • MSP is announced for 23 crops but PPS and timely public procurement, are provided mainly for two crops, wheat and rice. 
        • For other 21 crops, the full package is not available and the market price falls way below MSP. 
        • It is the reason behind the demand for MSP continuation by Wheat and Rice farmers.
    • Definition of MSP is another contested issue– Farmers’ organisations are insisting on the Swaminathan Committee formula of C2+50 percent, also announced by BJP government in its 2014 election manifesto, but not yet implemented.   
        • The MSP announced by the government is based on the A2+Fl+50 percent formula, which, unlike the C2+50 percent formula, does not cover all the costs of farming.
        • This led to Farmers’ lack of trust in the government regarding its “assurance” on MSP.
    Components of MSP Calculation:

    1. A2: the actual expenses paid by farmers in cash and kind for seeds, fertilisers, pesticides, paid labour, irrigation, etc.
    2. A2+FL: the A2 cost along with an adjustment for the costs of unpaid family labour (given traditional Indian farming practices involve families).
    3. C2: A2+FL along with all other production costs, including loans, rentals, cost of land and other fixed capital assets, i.e. a comprehensive cost of production.

    How has the significance of MSP/PPS system changed over time?

    At the launch of the Green Revolution, MSP and PPS were designed to

        • incentivize farmers to produce cereals — mainly wheat and rice —and  
        • achieve food self-sufficiency, which was met by the early Seventies.

    At present, the purpose of MSP, PPS/APMC are:

        • To maintain food self-sufficiency because crop diseases and extreme weather conditions can lead to food shortages. 
        • To ensure a reasonable, assured income to the farmers.

    The 2nd purpose of ensuring reasonable income to farmers becomes crucial as 86 per cent of India’s farming households are either marginal (cultivating less than one hectare of land) or small (cultivating between one hectare and two hectares of land).

    The above fact has been totally ignored by many pro-farm bill experts and even the Shanta Kumar Committee in its 2015 report by suggesting the dismantlement of FCI public procurement.

    Can MSP system co-exist with the Private market system?

    Government argument of Coexistence of MSP/APMC with big agribusiness-controlled private markets doesn’t look promising, due to the following factors.

    1. Firstly, Contract with the private trader, once entered into by a farmer, he will not be legally allowed to use the APMC mandi system for a better price than that contracted with the trader.
    2. Secondly, Dispute Resolution Mechanism doesn’t favor farmers. In case a farmer tries to use the other avenues providing better remuneration, private entities will take the non-compliant farmer to court.
    3. Third, Farmers will not be able to win a legal battle due to the structural inequities of legal resources and social-cultural capital under the dispute resolution mechanism.
    4. Fourth, Lack of choice for farmers– The proposed dispute resolution mechanism increases the choice of the trader to trade i.e. can trade with n number of farmers but not of the farmers i.e. can enter into agreement with a single trader.
    5. Fifth, genesis of Centre-State conflict- As central law will prevail in the private markets, while state laws in the APMC mandis., it will create conditions for perpetual Centre-state conflicts.

    How to improve MSP system in India?  

    NITI aayog in its report provided with the following recommendations to improve the MSP system in India:

    • Awareness among the farmers needs to be increased and the information disseminated at the lowest level so that the knowledge would increase the bargaining power of the farmers.
    • Prompt payment: The delay in payment needs to be corrected and immediate payment should be ensured. For sustainability of farming prompt payment at remunerative rates should be made.
    • Timing of MSP announcement: MSP should be announced well in advance of the sowing season so as to enable the farmers to plan their cropping.
    • Transport and storage: More god owns should be set up and maintained properly for better storage and reduction of wastage. Transport facility (say, in the form of providing two wheelers) for Purchase Officers may be considered to help them effectively discharge their work.
    • Updated criterion for fixing MSP: The criteria for fixing MSP should be current data and based on more meaningful criteria rather than C3.
    • The small and marginal farmers can be provided with Procurement Centres in the village itself to avoid transportation costs.

    MSP has been very helpful in keeping agriculture in our country alive and we have been able to become self-sufficient in food grains due to it. It becomes crucial for government to provide some solid assurance to farmers that it won’t be allowed to die down.

     

  • Issue of single law for different regions of agriculture

    Synopsis: Present agriculture reforms have not considered the ground level issues faced on the regional level and vertical level. 

    Introduction  New farmers laws

    Recently, the current government has opened up the output market with the purpose to let market forces improve effectiveness and create more value for farmers and the economy.  

    • New farm laws state that farmers are now free to sell all their products anywhere and to anyone beyond the APMC markets.  
    • The laws also promote contract farming by creating partnerships between farmers and food-processing companies and license unlimited notice of food except in special conditions. 

    However, reforms cannot be forceful and should be implemented as per the requirement of farmers. 

    What do the farmers want? 

    The farmers gave 3 main suggestions in the enquiries held with them: 

    • Firstly, the selling price of their produce should include the cost of production and reasonable profit margin. 
    • Secondly, rise and fall in prices should be nominal. 
    • Thirdly, Farmers are not comfortable in dealing with legal or administrative officials, so there should be little or no interface between them.  

    What are the issues with new laws? 

    There will be no control over the new markets by anyone which creates a lot of uncertainty.

    • First, concerns related to Mandi-market system: 
        • Farmers could go to local leaders in case of malpractices in Mandis but there is no authority to report to in the new system. 
        • There is no certainty over the continuation of the mandi-MSP system as if the alternative traders offer better prices, farmers will go there and not to the mandis.
    • Second, Issues related to contract farming:
        • There is an advantage to the corporate-buyers as they can choose to not buy the full quantity and delay payments. The corporates have access to several lawyers, so the poor farmers can’t complain or compete against them.
        • This is a contract between unequal and will result in unequal outcomes. Farmers do not have the resources or are not educated enough to deal with traders or corporates. 
    • Third, Issues related to similar solution for different problem  
        • The conditions of different regions are not similar as country is diverse with some 15 agroclimatic zones and has over 50 crops grown.  
        • It is also the reason behind farmers from outside the wheat-rice belts in northern India are not protesting.  
        • Thus, a comprehensive law for all the regions with different cropping patterns and climatic conditions might create troubles for farmers later. 

    What are the steps should be taken? 

    • The problem of lack of progress and high input prices in agriculture can be resolved through an efficient approach suggested in the M.S. Swaminathan Commission and/or the Ashok Dalwai Committee.
        • For example, a solution should be worked out for farmers to switch from water-soaking paddy crops to other crops in Punjab and Haryana in the next five years. 
        • They would reduce the area under paddy by 25-30%, and the loss they suffer in the short run, will be compensated for by the government. This could also be done for sugarcane in western Maharashtra.
  • Farmer welfare in Kerala, in the absence of Mandi system

    Synopsis: Absence of Madi system in Kerala has not impacted the farmer’s welfare in the state. 

    Background:  

    Thousands of farmers have assembled to protest against the 3 farm bills and have established a new way of life at Singhu, Tikri, Ghazipur, Noida and Shahjahanpur borders.  

    • Farmers have made all necessary arrangements for food, shelter, clothing, and sanitation. They have been gathering a countrywide support.
    • A tussle among various political parties is also ongoing on the issue of support or opposition to farmer’s demand. 
    • Meanwhile, in all this debate, example of Kerala was used by some big politicians that the states with no Mandi system is also siding with the farmers. 
    • However, ground realities and facilities for farmers in Kerala suggest that the same model can be applied at other places too for the welfare of farmers.  

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    How Farmer’s Welfare in Kerala assured? 

    Agricultural Produce Market Committees (APMCs) and mandis although do not exist in Kerala, the needs and interests of farmers are taken care of in the state.  

    • The central government’s rate for obtaining rice is ₹ 18 a kg whereas the government in Kerala has fixed the price of rice from cultivators at ₹27.48 a kg. This increased basic price is also applicable on fruits and vegetables.
      • Basic prices (per Kg) of 16 items are assured by the government. Few examples are tapioca ₹12, banana ₹30, garlic ₹139, pineapple ₹15, tomato ₹8, string beans ₹34, ladies’ fingers ₹20, cabbage ₹11 and potato ₹20. 
    • Dried coconut also has a much higher procurement rate in Kerala as compared to the rate announced by the central government. 
    • Apart from crop insurance, paddy cultivators also get the royalty in Kerala at the rate of ₹2,000 per hectare. They get a pension as well, which is a very unique step in the country.  
      • A debt relief commission was introduced in 2006 by the left government when farmers’ suicides were increasing, this initiative tried to help and save them.   

    Above facts prove that farmers in Kerala are in a better condition compared to the state of farmers in other states after enacting Farm Laws. Forex; 40% of mandis in Madhya Pradesh have registered only zero transactions after the passing of 3 bills.

  • Reforming Agriculture sector through FPOs

    Synopsis – the present market structure is not favorable for marginal farmers, the government should use the model of Farmers Producers Organisations (FPOs) for assisting farmers.

    Background

    • A set of three laws passed in September aims to deregulate India’s enormous agriculture sector aimed at “liberating” farmers from the tyranny of middlemen.
    • But many farmers fear that they stand to lose more than they could gain from the new regulations and these are the following concerns of farmers-
        • End of MSP- Their main worry is about a possible withdrawal of the MSP and a dismantling of the public procurement of grains.
        • Promote corporate control– The farmers contend the federal government is making ready to withdraw from the procurement of food grain and hand it over to the company gamers.

    Although all of the concerns of farmers are not misplaced, but these concerns have definitely been blown out of proportion for political reasons.

    What are the issues in present Agri. Market structure?

    Present Agri. Market structure which suffers from the lacunas of MSP system, restrictive Mandi system and APMC market structures, is doing more harm than benefits to the marginalized farmers.

    • First, CRIER-OECD study on agricultural policies showed that over the period 2000-01 to 2016-17, Indian agriculture was implicitly taxed to the tune of almost 14 per cent of its value.
      • What this implies is that Indian farmers have been implicitly taxed heavily through restrictive marketing and trade policies [export controls, stocking limits and restrictive mandi system]
    • Second, the procurement system and MSP mechanism are beneficial particularly for the rich farmers of Punjab and Haryana
        • The NSSO’s Situation Assessment Survey [2012-13] revealed that Only 6 per cent of the farmers in India are fully covered and benefitted by the MSP, and 84 per cent are located in the states of Punjab and Haryana.
        • The MSP and APMC system primarily helps those who have large surpluses, mainly the large farmers.

    How FPOs can be helpful for small and marginal farmers?

    In India, 86 per cent of farmers are small and marginal (less than 2 ha), who do not get the benefit of MSP system.

    • Farmer’s Producer’s organizations (FPOs) at village level, consisting of small farmers, supplemented by the mechanism of new farm laws will benefit them.
    • The creation of an additional 10,000 FPOs and the promised Agri-infra Fund of Rs.1,00,000 Crore will aid this process.

    How government can eliminate the fears of agitating farmers?

    • First, MSP to be continued– The government need to assure farmers in writing that the new laws discontinue APMC and MSP system.
    • Second, Government needs to clarify about the contract farming that that the contract will be for the produce, not the farmers land.
    • Third, farmers can take disputes to district courts.
    • Forth, Government can also approve 25,000 Crore alternate fund under the Price Stabilization Scheme to support market prices in case when prices fall below 10 percent the MSP

    However, The Food Corporation of India is already overloaded with grain stocks that are more than 2.5 times the buffer stock norms.

    • To deal with such situation, Government can either limit the quantity of procurement or go for Price deficiency Payment system for those who buy “put options” at MSP to address the gaps in MSP based procurement of crops.
    • An expert committee will have to be set up to look into its operational guidelines and further announcement of a diversification package for the Punjab-Haryana region can be done.

    Conclusion

    • On the one hand, repealing of new farmer’s law would be unfair for small and marginal farmers as they never got any benefit from the MSP system. On another hand, High price to farmers also mean high food prices for consumer.
    • Thus, there is a requirement to strike a balance between the interest of various stakeholders of Indian farming system and its consumers.
  • Farm laws and Importance of parliamentary process in India

    Synopsis: Recent controversy on recent farm laws highlights the importance of following parliamentary procedure not just in letter but in spirit as well. 

    Introduction  

    There are many benefits attached to the new farm laws for farmers and economy as well, still farm bills are facing heavy opposition. This situation could have been avoided by using parliamentary processes properly.   

    Even though request for an actual vote was made, 3 bills were passed by Voice vote, without any discussion with the opposition.  

    What are the benefits attached to farm laws?  

    There are strong indications that the new law is desirable and will bring in much-needed market reforms in the overregulated farm sector. 

    • Role of market forces: The benefits of relaxing the non-agricultural sector of the economy in 1991 established that, in the end, market forces cannot be ignored.  
    • No contrary evidence:  There is no contrary evidence that the new proposals will adversely affect farmers in the long run. 
    • No justification for MSP:  There is no justification for a minimum support price regardless of demand and supply. 
    • For instance, A pharmaceutical company doesn’t need to be assured of a minimum price for essential medicines that it produces, irrespective of whether the quantity produced far exceeds the demand. 
    • Experience with over-regulation: Under the Essential Commodities Act, 1955, several control orders were passed on products such as cement and steel, and these were planned to ensure their availability at fair prices. 
    • The result was just the opposite: Severe shortages, a huge black market and massive corruption. 

    How the parliamentary process is being neglected?  

    • Even though a request for an actual vote was made, 3 bills were passed by Voice vote, without any discussion with the opposition. 
    • Participation of opposition: though government has a clear majority in Parliament, the Opposition is also a part of parliament. Its involvement is necessary for parliamentary procedures. 
    • laws are supposed to represent the “wisdom of the legislature” that involves a careful examination of their provision by select committee and members. But In fact, fewer and fewer bills are being referred to as Select Committees.  
    • While 71 percent of the bills were referred to a Select Committee in the 15th Lok Sabha (2009-14), only 25 percent were so referred in the 16th Lok Sabha (2014-19). 

    Significance of Parliamentary Process  

    Parliament is at the heart of a constitutional democracy based on the Westminster model and following parliamentary procedures builds trust among the different stakeholders, other than the following benefits.  

    • Expertise of Select Committee: Referring the bills to a Select Committee provides assurance of scrutiny to citizens and serves the following purposes:  
    • A detailed deliberation on the Bill, It remains aloof from the sometimes, surcharged atmosphere prevailing in both Houses of Parliament. 
    • The Select Committee can, and often does, get the views of experts on the impact, particularly economic, of a proposed law. 
    • Preserves Constitutional morality: As per Dr. B.R.Ambedkar, the essence of constitutional morality is respect and adherence to constitutional conventions. 
    • Tackle the vested interests: Following constitutional conventions always pays dividends. It benefits the nation and preserves the dignity of Parliament.  
    • The delay that arises by following parliamentary procedures acts as a proof that the new law is apt and those opposing it have placed their short-term vested interests ahead of the national interest. 

    What are the steps should be taken? 

    • The best way to demonstrate the beneficial effects of the laws is to implement them in select states or districts for a year, before countrywide implementation.  
    • It is worthwhile considering the implementation of a controversial law on a trial basis. The feedback can finally prove whether the new law can achieve its objects and is beneficial to the nation. 
    • It can also reveal flaws in the new law. For instance, if GST had been implemented on a trial basis for select products, it would have revealed the serious technological deficiencies and the nation would have benefitted by delaying its implementation. 
  • How farm laws are Protecting Farmer’s interest?

    Context: Farm laws enacted by government will protect farmers’ interest only by providing them more option to sell their produce and enter into agreements with corporate buyers. Apprehensions are misplaced.

    Why there is need for reforms?

    • The mandi trader role in APMC mandis reduces the net received by the farmer to below MSP due to the off-book trader’s commissions. Thank
    • Still farmers are compelled to sell their produce to traders as each trader in the mandi has built relationships with a set of farmers and provide them with credit, thus the farmer sells his produce only through that trader, to have the credit/advance against such sales adjusted that reduces his profit realisation.
    • It is the reason behind Strong opposition by the mandi traders on bringing reforms to the APMC laws for long time. For example, In Rajasthan 2004, a Cabinet-approved amendment to the APMC Act had to be withdrawn because traders went on strike.
    • But farmer’s opposition to these bills is not rationale as according to many experts allowing/introducing more buyers for farm produce, would further reduce exploitation of farmers because if there are an unlimited number of buyers a farmer can sell to whoever offers the best price.

    How the changes brought in three farm laws will benefit farmers?

    • First, The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 benefits the farmers by providing farmers the freedom to sell either outside or to the mandi and enables buyers to buy at “farm gate”, without the necessity of a mandi licence.
      • However, farmers are in the misconception that this reform is a precursor to the abolition of mandis and MSP. But it is not true as it would be politically suicidal for any government.
      • Even, the government is ready to provide assurance to the farmers on their continuation, and to make mandi fee applying to private “mandis” as well.
    • Second, The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020, provides for contract farming that will help the farmer to transit to commercial crops, such as vegetables and fruits, which give higher returns than food grain sold at MSP.
      • Contract farming will provide assured return for farmers even if there is excess production and market fall.
      • In case of contracted prices lower than market prices there are provisions to share the excess windfall to the farmers.
    • Third, the Essential Commodities (Amendment) Act, 2020 will help the farmers to build better supply/marketing chains and have the potential of getting higher prices/returns for the farmer.
      • Whereas the earlier EC Act served the interest of urban middle classes, by trying to get farm produce to them at low prices. It has also led to discourage investments in cold chains, warehouses, etc.

    So, why the Farm laws that has tremendous opportunity and potential to change the lives of farmers are being opposed. The answer partly lies in the way the MSP scheme works in certain states, and the way “big” farmer-trader relationships have worked out in such states.

  • MSP for other crops

    Context: Need to extend MSP for other crops to promote crop diversification.

    How India achieved self-sufficiency in food grain production mainly in wheat and rice?

    • Ship-to-mouth situation in India: In the early 1960s, near-famine conditions prevailed in India and some 10 million tonnes of wheat had to be imported from the US under the PL480 programme.
    • Green Revolution: With the efforts of M S Swaminathan seeds of high-yielding dwarf wheat varieties were procured from Norman Borlaug wheat-improvement programme and were distributed to the Indian Agricultural Research Institutes. These high yielding seeds ushered the era of Green revolution in India.
    • Self-sufficiency: With favourable government policies, efforts of agricultural scientists and due to the immense contributions of farmers of Punjab, Haryana and western UP, India achieved self-sufficiency in food grain production mainly in wheat and rice.

    Why the farmers from “food bowl “region are against the new farm bills?

    • First, the Farmers of the “food-bowl” states have been selling food grains (mainly wheat and rice) at Minimum Support Price (MSP) since the mid-1960s.
    • This has helped the central government create a central pool of food grains and the Public Distribution System (PDS) to help the poor.
    • However, MSP has not been guaranteed in the newly enacted farm laws, which is the major bone of contention.
    • Second, the Agriculture Produce Marketing Committees (APMCs) are under threat from the new farm laws. Many experts feel that MSP and APMC go hand-in-hand. This has created uncertainty in the minds of farmers about the continuation of MSP.
    • Third, though the new farm laws are meant to eliminate the “middlemen” (arhtiyas), farmers feel that a new class of middlemen, that is, lawyers belonging to big companies, will emerge leaving small farmers at a distinct disadvantage. (more than 80 per cent of farmers own less than five acres of land).
    • Fourth, according to the central government, the new laws will ensure contract farming. However, the farmers feel that the big companies might become monopolies, and exploit both farmers and consumers. Farmers fear being made into labourers.
    • Apart from these issues, the manner in which the bills are passed without consultation of stakeholders and lack of discussion in the parliament has provoked a reactionary response from farmers.

    What is the way forward?

    • Guarantee MSP: A clause should be added in the law to the effect that no matter who buys the producing government or a private entity, the farmer must be given MSP.
    • Implementation of MS Swaminathan committee recommendation: The National Farmers’ Commission recommended providing an MSP of 50 percent over and above a farmer’s input expenses must be implemented.
    • Need for Special MSP: MSP should be determined on the basis of grain quality. For example, wheat varieties grown in the “food bowl” states contain 11 percent protein compared to 7 percent protein grown elsewhere.
    • Promote crop diversification: Government needs to purchase crops produced other than wheat and rice at MSP. This could help conserve underground water and soil fertility.
    • Encourage farmers to grow high-value crops: For this to happen the government should set up an adequate cold-chain infrastructure so that perishable products can be kept longer and sold at an appropriate time.
    • Discussions, Deliberation, Debate: Including intellectuals like M S Swaminathan, Gurdev S Khush, Surinder K Vasal, and Rattan Lal in the “Agricultural Think Tank” and  they should be consulted by Niti Aayog
  • Farmer’s protest in India

    Context- The economic calculus needs to shifts from ‘economies of scale with standardization’ to ‘economies of scope for sustainability’.

    How farm productivity can be increased and what are the consequences of this?

    The agriculture sector contributes 17 per cent of India’s GDP. As per estimate, about 57 per cent of the working population is engaged in agriculture.

    According to economists the farm productivity can be increased by –

    • India needs to shift from basic farming to more efficient, sustainable, productive farming.
    • More technology and automation will be required to improve productivity.
    • Reduce the number of employed– The agriculture sector should employ only 17 per cent of the workforce as to become more productive like other sectors.

    Concern with such approach-

    1. Landholdings are too small for mechanization
    2. Mono-cropping– Mechanized farming will initiate mono-cropping, as mechanization requires standardization of work, which results in-
    • Fluctuate the ecological balance.
    • Reduced diversity of flora enables pests to spread more easily.
    • Soil quality gets reduced and waters resources deleted.

    Therefore, India must figure out a way to provide meaningful employment to hundreds of millions of people outside agriculture.

    What is government’s contention with new farm laws?

    1. Farmers will get higher prices – These Acts are intended to empower the farmers and ensure doubling of their incomes.
    2. Provide wider markets for farm produce – The Acts will only increase options for farmers in the output markets.
    • Connections into global supply chains can increase volumes of sales.

    What are the major issues with new farm reforms?

    1. Promote corporate control– The farmers contend the federal government is making ready to withdraw from the procurement of food grain and hand it over to the company gamers.
    2. Will not have adequate pricing power-Small and marginal, would be left at the mercy of the corporates, with reduced collective bargaining capacity.
    • Trade will always favour the larger players in the supply chains who have easier access to capital.
    1. Against the Spirit of Cooperative federalism– Since agriculture and markets are State subjects, the ordinances are being seen as a direct encroachment upon the functions of the States

    What is the way forward?

    1. Experts from many disciplines must collaborate to find systemic solutions for low income in farm sectors.
    2. The intended beneficiaries of the new policies must be included in the designing of the new policies right at the beginning.
    • Policymakers must listen to the institutions that represent small people — associations and unions of farmers, informal workers and small enterprises.
    1. Cooperative ownership and collective bargaining must be strengthened to give power to small farmers before opening markets to large corporations.
  • Farmers have constitutional right to continue with protest: SC

    News: The Supreme Court has said that farmers have a constitutional right to continue with their “absolutely perfect” protest as long as their dissent against the three controversial agricultural laws did not slip into violence.

    Facts:

    • Background: This ruling came by the Supreme Court during the hearing of a batch of petitions seeking removal of protesting farmers from the Delhi borders.
    • Verdict: The Supreme Court has stated that it is the fundamental right of the farmers to protest as long as the protest is constitutional and does not destroy property or endanger life.

    Additional Facts:

    • Right to Protest: The right to protest peacefully is enshrined in the Indian Constitution—Article 19(1)(a) guarantees the freedom of speech and expression; Article 19(1)(b) assures citizens the right to assemble peaceably and without arms.
      • However, these rights are also subject to reasonable restrictions mentioned under Article 19(2).
    • Supreme Court Judgements on Right to Protest:
      • Ramlila Maidan Incident vs Home Secretary, Union Of India & Ors. case(2012): The Supreme Court had stated that citizens have a fundamental right to assembly and peaceful protest which cannot be taken away by an arbitrary executive or legislative action.
      • Shaheen Bagh Judgement: The Supreme Court has upheld the right to peaceful protest against the law but made it unequivocally clear that public ways and public spaces cannot be occupied and that too indefinitely.
  • What are the negative impacts of farm laws on landless labourers and small tenant farmers?

    Syllabus: GS-2- Development issues

    Source: – Click Here

    Context: Although the issue of MSP system has been brought into the limelight by protest of farmers, but very little attention has been paid to the impacts of farm bills on the landless and agricultural laborers.

    Present data of landless laborers and tenant farmers

    About 60 per cent of India’s population is engaged in agriculture and allied activities, of which Nearly 263 million are directly and rest are indirectly dependent on agriculture.

    According to Census 2011;

    • There are 494.9 million (49.49 crore) landless individuals in villages, who are directly or indirectly dependent on cultivation for their livelihoods.
    • Around 1.2 crore or nearly 14 per cent of the farming community are tenant farmers or sharecroppers, who work in fields owned by others.

    What are the provisions of farm laws in question?

    Farmers’ (Empowerment and Protection) Agreement of Price Assurance and Farm Services, 2020 will enable

    • Agri-business firms, retail supermarket chains to enter into prior agreements with small farmers for production, pricing, and purchase of agricultural products.
    • Leasing of land from small farmers (possessing below 1.0 ha of land) and pooling of plots to turn them into large farms and cultivate them with modern machinery and technology.

    The rationale for the above provision was provided by NITI Aayog that since small farms are non-profitable it is necessary to opt for corporate farming.

    How Farm laws will affect landless labourers and tenant farmers?

    However, these provisions may lead to large-scale landlessness, unemployment, and further impoverishment of rural India.

    • Landless labor ideally should find 170 days of employment per year in two crop cultivated areas. But with the entry of corporate and their modern technology and the use of heavy machinery, they are certain to lose employment with no option for rehabilitation.
    • As the corporate buyers will dominate the APMC mandis, Small tenant farmers will be able to get the price 30 per cent lower than the MSP outside mandis. With no bargaining power and transportation facilities for their produce, they will be forced to sell their produce at a lower price.
    • The situation of most of the landless laborers and small farmers is so bad that for their own consumption, the majority of them are dependent upon subsidized grain provided through the PDS. Lesser procurement by the government through FCI will soon result in denial of ration to many of them under the Food Security act.

    Thus, not only farmers but all sections of society — farmers, agricultural labourers, small shopkeepers must raise their concerns against the farm bills.

  • Green revolution 2.0 and new farm laws

    Context: The next Green Revolution 2.0 will come through in-depth research, better investment opportunities and access to the market.

    What led to the green revolution?

    • Scarcity of grain: After the China war, when India was standing at the cusp of economic destruction, Pakistan attacked India. There was an acute scarcity of food grains in the country.
    • Change in farm sector: Scientist Norman Borlaug brought a revolutionary change in the farm sector in Mexico with his semi-dwarf varieties of rice and wheat. Borlaug analysed the farm sector in Punjab and concluded that production can be doubled.
    • Beginning of green revolution: Subramaniam promised the farmers that if they implement the new farming techniques, the central government will compensate them. This scheme was initially implemented in around 150 farm holdings with the assistance of Punjab Agriculture University, Ludhiana.
      • The Green Revolution worked on three fronts: better seeds, irrigation and optimum use of fertilisers.

    The new laws have set the tone for second green revolution. Discuss.

    • For the rich farmers of Punjab, Haryana and western Uttar Pradesh: Things are different; but for crores of small landholders in Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, West Bengal, Odisha, etc., it is now possible to feed their families.
    • Landholdings in many states have shrunk: In eastern UP, the cultivators are largely marginal farmers now.
      • Farmers with less than an acre of arable land are identified as marginal farmers.
      • Small farmers are those with landholdings between 1 acre and 2.5 acres.
      • It is difficult for a farming family to sustain themselves with just an acre of arable land. The farmer will have to explore other avenues to improve his financial position.
    • Agrarian transition development: The latest farm policy reforms of the government are also called agrarian transition development and were implemented in Europe and the US early on. Today, around 45 per cent of the country’s workforce is involved in agriculture.
    • Agriculture after independence: When India attained Independence, the contribution of agriculture to the country’s GDP was huge, which today has come down to around 15 per cent. The old model has been a drag on the economy as well as the villages.
    • Develop models of contract farming: It is an avenue to develop an organised corporate model of agriculture in the country. This will speed up urbanisation in the villages and the development of industries and the service sector there.
      • These sectors will be able to absorb the excess workforce in the farm sector.
    • Structure and potential of contract farming: For instance, if a village has a thousand farmers who have an acre of arable land, then, through contract farming, someone can sow crops on the entire 1,000 acres of land.
      • The land continues to belong to the farmer, while on the other hand, he/she will earn the profit from the sale of produce generated from his/her part of the landholding. This also frees him/her to pursue other employment opportunities.

    Way forward

    • The next revolution: Green Revolution 2.0 will come through in-depth research, better investment opportunities and access to the market. The three farm laws are a revolutionary step in that direction.

    Agriculture Reforms

  • Farm and Banking Reform

    Context: There is some risk necessary to reform Banking and Agriculture sectors.

    What are the recently announced reforms in Farming and Banking sector?
    • The three farm bills legislated by the government recently, which are in the early stages of implementation.
    • The second is a proposal by RBI to let corporates/industry own banks.
    Can MSP ensure farm income and Agri-growth?
    • No guarantee of income: Farmers don’t get a remunerative price for their products, with the exception of a minority whose produce, mostly wheat and rice, is covered by the Minimum Support Price policy.
    • Prevalence of middlemen: Most farmers toil on tiny, suboptimal acreage and have no bargaining power vis-vis the APMC middlemen. Choice in buyers gives them some leeway to bargain for a better price.
    • MSP is not a guarantee: even those who get MSP are suffering from a fast depletion of the water table.
    • Excessive use of pesticides/fertilisers due to faulty policy: the high prevalence of cancer in rural parts of Punjab and a higher cost of other foods like vegetables and fruits which are in short supply since everyone who can is planting MSP crops.
    • Post-harvest loss: every year a lot of wheat and rice rots in the Food Corporation of India’s limited warehouses.
    What do the laws propose to do?
    • End the monopoly of APMC mandis where farmers had to compulsorily sell their produce.
    • End limits on stock-keeping and allow contract farming by the private sector.
    What is immediate response of common people?
    • The new farm laws have brought the farmers of Punjab and other parts of north India to the streets of Delhi.
    • The volume of protest tells us that some of us are afraid of change and unable to see what may be good for all of us a decade from now.
    • Farmers will no longer get a remunerative price for their produce
    How future will be different for Agriculture?
    • Growth in demand for non-cereal foods, like vegetables, fruits and proteins will outstrip demand for cereals.
    • Remunerative price for farmers cannot be at the expense of rampant food inflation for the consumer.
    What can be the possible consequences if industries house own banks?
    • It will channel lending from that bank to its own business at the expense of better, more efficient fund allocation.
    • It will be much easier for regulators to track any lending to connected entities than it is for them to track the unofficial connectedness, which has led to the NPA problem.

    What is the way ahead?

    • Balance the interests of farmers and consumers.
    • Bring policy change as the farm reforms are already 10 years late.
    • Industry houses are the most obvious source of domestic capital to build such banks.
  • Why farm laws are enacted?

    Context: A minuscule minority of farmers is protesting against the farm laws. They don’t want an end to the system that has benefited them.

    Background
    • The creation of the Agricultural Produce Marketing Committee (APMC) came into existence almost 150 years ago to feed the colonial master’s raw cotton for their Manchester mills.
    • The farmers were forced to sell to the masters in a regulated market whose regulation was set by, the colonial masters.
    • The corrosive monopoly power held by the APMCs has been recognised by almost all political parties and farmer unions. For example, the Bharat Kisan Union took out a protest in 2008 arguing for the right of farmers to sell produce to corporates.
    • Till now, Farmers are forced to sell their marketable produce only through a mandi regulated by the government.
    • However, the new Farm bills allows the farmer to sell through the APMC, and to sell outside the APMC.
    Why the protest for farm bills is skeptical?
    • Only Fraction of Farmers rely on APMC: The government procures all of its food through APMCs but only about 6 per cent of the farmers in India sell through the APMCs to the government.
    • Serves the Interest of few states only: Those 6 per cent are all large farmers, primarily residing in the two states of Punjab and Haryana. These two states typically account for close to 60 per cent of wheat procurement and close to a third of rice procurement.
    • Leakages in distribution: The government procures from farmers in order to re-distribute the food via ration shops to the bottom two-thirds of the population. But there are leakages. For example, former Prime Minister Rajiv Gandhi in 1985 stated that only 15 per cent of the food procured by the government reached the poor.
    Why Farm Bills are needed?
    • Neither APMC, nor subsidies, has resulted in higher output growth in Punjab-Haryana, the pioneers of the Green Revolution.
    • Subsidised electricity to farmers has destroyed the water table, the extensive use of fertiliser has destroyed the environment.
    • None of the Developing and Developed countries prohibit an individual farmer from selling their produce in the market.
    • It does not serve the Interest of very small and small farmers in India.
    • Unlike the Industries which are freed from regulation agriculture was not freed or thereafter, until now.
  • Will Farm laws reduce Farmers income?

    Context: The present farm laws alter the bargaining landscape in favour of the corporate players to the detriment of the farmers.

    What is current issue with farm laws?

    • The three recently enacted farm laws assented have led to a showdown between the peasantry and the Union government.
    • No consultation undertaken by the central government at the time of promulgating the ordinances and then pushing the bills.
    • Despite repeated demands of the oppositions to refer the farm bills to the standing/select committee for reconsideration and necessary consultation with all stakeholders.
    • Present dispensation believes that its shock-and-awe methods are to be the main medium of governance.
    • The Union government has bypassed the federal structure by legislating on subjects that exclusively fall within the domain of the state government under the state list of the Seventh Schedule of the Constitution.

    What are the salient features of the bill?

    • Reducing role of MSP: The farm laws open the field to an alternate set of markets/private yards, where the buyer will have no statutory obligation to pay the minimum support price (MSP).
    • No fee: Markets/private yards will not be charged any market fee/levy. The agricultural sector will see the gradual shifting of trade from the APMC mandis to these private yards.
    • Reduce APMC role: The shifting of trade to avoid payment of any levy/market fee by private players and the Food Corporation of India (FCI) will eventually witness the redundancy of the APMC mandis, leaving the famers at the mercy of the corporate sharks.
    • Exclude the jurisdiction of the civil court: It will leave the farmers remediless and with no independent medium of dispute redressal mechanism. The farm laws empower the Sub-Divisional Authority (executive) to adjudicate on disputes between the farmers and traders.
    • Increased bureaucracy: The increased bureaucratic control over the adjudication of disputes between the farmers and corporate players will open the floodgates for corruption and rent-seeking.

    How the bills are anti-farmers?

    • There are several pro-corporate and perceived anti-farmer provisions in the farm laws.
    • The global experience across agricultural markets demonstrates that corporatisation of agriculture without a concomitant security net in the form of an assured payment guarantee to the farmers results in the exploitation of farmers at the hands of big business.
    • The primary cause for concern is the systematic dismantling of the APMC mandis which have stood the test of time and have provided farmers the remuneration to keep themselves afloat.

    What needs to be done?

    • The legality of laws should be expeditiously decided by the Supreme Court to halt the central government’s repeated encroachment on states’ rights.
    • There is need of robust system to annually re-calculate the MSP keeping in mind the rising input costs of diesel, fertilisers, etc to make farming a viable and lucrative vocation.
    • A statutory regulator in the field of agriculture akin to regulators in other fields would fill the gap to address information access and market distortions.

    The three legislative nails in the farmer’s aspirations might lead to a bitter harvest.

  • Government policies – harder to implement

    Context- The government’s dismissal of the concerns of farmers and workers with bold reforms is not only bad for democracy, it reduces quality of policies and also makes them harder to implement.

    What is the core problem in agriculture sector in India?

    Largest source of livelihood – there are too many people employed in agriculture.

    • The agriculture sector contributes 17 per cent of India’s GDP. As per estimate, about 57 per cent of the working population is engaged in agriculture.
    • 70 percent of its rural households still depend primarily on agriculture for their livelihood.
    Possible solution-
    • Increase productivity– India needs to shift from basic farming to more efficient, sustainable, productive farming.
    • More technology and automation will be required to improve productivity.
    • Reduce the number of employed– The agriculture sector should employ only 17 per cent of the workforce as to become more productive like other sectors.
    • India must figure out a way to provide meaningful employment to hundreds of millions of people outside agriculture.
    What are the issues with new farms and labour laws?
    1. Issues in new Farm reforms-
    2. Agriculture is a state subject and regulation of agri-markets is very much in the domain of the states. Yet states have not been consulted on changes in agriculture laws.
    3. Deregulation– The new farm laws that aim to double farmers’ income in two years by deregulating agricultural markets may further widen the inequalities in the sector,
    • The deregulation of Bihar’s APMC led to no significant changes.
    • These changes will affect the small farmers the most because their low output does not allow them any bargaining power.
    1. Issues in new Farm reforms-
    2. Worker’s right of association in unions– In the labour reforms underway, it is the dilution of this fundamental right of collective representation that bodes badly for India’s workers
    3. The rights of the trade union to go on a lightning strike is sought to be curtailed heavily.

    Therefore, new farm and labour reforms laws are the examples of diminishing democracy in India.

    What are the set of reforms required to make India’s growth more inclusive?
    1. Policymakers must listen to the institutions that represent small people — associations and unions of farmers, informal workers and small enterprises.
    2. Formation of cooperatives of producers and workers- By aggregating the small into larger-scale enterprises.
    • Government regulations must encourage the formation of strong cooperatives, and improve the ease of doing business.
    1. Indian agriculture marketing reforms should derive inspiration from Barbara Harriss-White, a scholar of India’s agricultural markets, who once observed, “deregulated imperfect markets may become more, not less, imperfect than regulated imperfect markets.
    Way forward-
    • Policymaker needs acknowledge public fears and reassure people, especially in periods of uncertainty.
    • The concept of democracy should not be reduced to elections and political parties. Democracy is also a process of listening to all stakeholders.
  • The state of farmers

    Context: While the farmers demand a repeal of the three new farm laws, the government insists the reforms are “farmer-friendly”.

    What is the aim and impact of the new farm laws?
    • Aim of farm laws: The farm laws seek to introduce the neoliberal notion of “choice” into the production and sale of agricultural produce through deregulation. It tries to give a push to private traders and agricultural corporations.
    • Impact on small farmers: Small and marginal farmers, a section that constitutes 85 per cent of farm landholdings are likely to be worst hit, with the lowest bargaining power and highest level of precarity.
    What are the problems faced by farmers?
    • The scale of land acquisition: It has increased exponentially since the nineties, with the estimate for all displaced people up from approximately 25-30 million by 1990 to 60 million by 2004.
    • Policy framework: A policy framework shaped by the needs of capital which needs land but not the people, creates a system that renders survival cultivators unnecessary or surplus to development initiatives of the state.
    • Survival cultivation: Where many small and marginal farmers engage in survival cultivation, sale of agricultural produce is limited to the need for cash or an assured surplus.
      • In 2018-19, the consumption of nitrogen, phosphorus and potassium fertiliser in Maharashtra, UP, Assam and Jharkhand was 125.95 kg/hectare (ha), 170.09 kg/ha, 73.69 kg/ha and 59.79 kg/ha respectively (Agricultural Statistics at a Glance, 2019).
    • The state-wise scale of indebtedness of agricultural households: The All-India Report on Agriculture Census 2010-11 shows the level of indebtedness toebtedness to be 57.3 per cent in Maharashtra , 43.8 per cent in UP , 17.5 per cent in Assam and 28.9 per cent in Jharkhand.
      • These figures are representative of the increased cash dependence of agriculture in commercially significant states as Maharashtra and UP, and a significantly lower level of debt in states like Jharkhand and Assam.
    • Land arrangements: Several informal land arrangements are being stripped away constantly, leaving subsistence peasants more dependent on cash for meeting everyday requirements of life and propelling them deeper into an unequal market that constantly reproduces their position at the margins.
    Mention a few state policies that seeks to establish powers of state over land?
    • The new Land Acquisition Law 2013: It has introduced significant changes from the colonial 1894 Law, it serves to firmly keep in place the principle of eminent domain by which the state retains excessive powers over land and, thereby, facilitates the process of land acquisition in the long run.
    • New strategy: The constant expansion of forest lands is itself the latest strategy to bypass mandated procedures for land acquisition under the new Right to Fair Compensation and Transparency in Land Acquisition and Rehabilitation and Resettlement Act 2013.
    • The latest Environmental Impact Assessment Draft Notification 2020: It seeks to facilitate ease of doing business by clearing “obstacles” for businesses such that permissions are simpler to get and grievances harder to file.
    Way forward

    For a healthy farm sector, the state must strengthen and protect the position of the cultivator.

  • Farmers could perish with new farm acts

    Context- Agricultural operations may flourish with new farm acts, but they threaten to lead to the marginalization of the farmers

    How farmer’s protest is unique?
    • Farmer’s group come together– 31 farmers’ organizations, which have different ideologies and leanings, are to fight collectively against these Bills.
    • Kept politician out of agitation– The unions came together and formally decided to keep politicians of all parties out of their “struggle”.
    • Even the traders and the arhtiyas, who have been staunch supporters of the Central government, have expressed their anguish against the new farm laws.
    Why is the anger so pronounced in Punjab?
    1. Food bowl of India– Punjab has contributed the largest amount of food grain in the central pool.
    2. Un-level field– The Punjab farmers are being asked to diversify their cropping patterns whereas other states like Madhya Pradesh and western Uttar Pradesh are encouraged to produce grains.
    • This resulted in
    1. The procurement system and MSP mechanism is strong in Punjab and Haryana
    • Only 6 per cent of the farmers in India are fully covered by the MSP, and 84 per cent are located in the states of Punjab and Haryana.

    Therefore, any disruption to the system, real or perceived, will cause a major upheaval

    What are the farmer’s concerns?

    • End of MSP- Their main worry is about a possible withdrawal of the MSP and a dismantling of the public procurement of grains.
    • Promote corporate control– The farmers contend the federal government is making ready to withdraw from the procurement of food grain and hand it over to the company gamers.
    • Small and marginal, would be left at the mercy of the corporates, with reduced collective bargaining capacity.
    What is government’s contention?
    • Farmers will get higher prices – These Acts are intended to empower the farmers and ensure doubling of their incomes.
    • The Acts will only increase options for farmers in the output markets, that the MSP-procurement system will continue, and that there is absolutely no plan to dismantle the system.
    What are the issues with the new farm Acts?
    • Free market does not have the solutions to improve the well-being of people living on the margins.
    • The assumption that the market shall protect and multiply farmers’ income is misleading.

    Way forward-

    1. Compensate farmers under WTO compatible blue box- The Centre could allocate subsidies for diversification to commercial crops for the farmers of Punjab.
    • Subsidy could be given for three consecutive years.
    1. To keep the mandi system functional, the APMC Act may be reformed
    • The state governments permitted to collect mandi fee and arhtiyas given handling charges.
  • Monoculture farming- depleting natural resources

    Context- In the ongoing farm debate in the country the green reality check seems to be missing.

    What is agro ecology?

    It is a concept where agriculture sector of a country expanded along with keeping environmental protection [agriculture with sustainable environmental practice].

    What is monoculture farming and is Impact?

    Monoculture is the agricultural practice of growing a single crop, plant, or livestock species, variety, or breed in a field or farming system at a time.

    • Modern agricultural practices emphasize maximizing crop yields, farm incomes and global competitiveness. The single-minded pursuit of such goals has remade land and farms into monocultures.

    Monoculture reduces diversity and leads to a host of other problems-

    1. Contributed significantly to climate emissions.
    2. Threatened farmer livelihoods and the natural resource base they depend upon-
    • Destroys soil nutrients– Single crop eliminates all soil nutrients and everything else is killed as pests or weeds.
    • Pollutes groundwater supplies sue to extensive use of fertilizers.
    • Adversely affects and alters the natural ecosystem.
    • Destroys the overall soil’s degradation and erosion.
    • Requires lots of water to irrigate- Monoculture results in the topsoil cover being harvested all at the same time, the topsoil loses elements that could help it retain moisture. Therefore, require vast amounts of water to irrigate the crops.
    1. Distorted food consumption patterns, replacing nutritious millets with polished rice and wheat and negatively affected our nutritional security.

    In attempting to offer a new deal to farmers, the new farm laws do not address any of these fundamental concerns. Such changes often affect the resilience of production systems and their role in biodiversity.

    How new farm laws and farmers demand promote monoculture farming?

    Both government and farmers have continued to ignore the broader ecological and social contexts in which agriculture is embedded.

    1. Corporatization of agriculture through contract farming, higher stocking limits and private marketplaces will accelerate the growth of long supply chains of monoculture commodities.
    2. Guaranteed procurement in the past has incentivized monoculture farming.

    What is the way forward?

    Government should make policies that go beyond the productivity trope and populist posturing-

    • Instead of a resource-based approach, the need is to develop a relationship-based approach towards the environment.
    • Any sound economic and techno-scientific model must have agro ecology and equity at the core and, must indeed, be guided by them.

    Government needs to promote less favoured crops like millets and pulses.

  • The many layers to agricultural discontent

    Context: The Farm Acts that are the focus of the farmers’ protest bear variously on the different strata of the farming community.

    How farming distress is shared in common by the different strata?

    • The powerful farmers’ movements that sprouted across India from the 1970s, led by such iconic leaders as M.D. Nanjundaswamy, Sharad Joshi, and Mahendra Singh Tikait, which claimed to speak not merely for farmers but to the rural segment as a whole.
    • They presented a platform for discussion and debate beyond their immediate concerns.
    • The organisations have undergone much change. In some parts of the country the class and caste divide are still sharp, in other places, farmers’ organisations have not shied away from critically engaging with class, caste and gender concerns.
    • The very fact that a social reality is widely accepted provides space for policy intervention. The Farm Bills have ignored that the rural is a vibrant space in India, with ‘elective affinities’ binding its vast expanse.
    • The rich farmers have also reinforced their position enormously in the rural areas over the years after the Green Revolution and farmers’ movements of the 1970s.
    • They have also invested their surplus in agri-business and clearly hold access to the wider economic and institutional domains.
    • The lower strata of the farming community are invariably beholden to the rich farmer not merely for employment but also to access resources and services.

    Why the Farm bills were introduced?

    • To double the income of India’s farmers by 2022.
    • To liberalise access to agricultural markets.
    • To remove existing barriers to storage of agricultural produce, and facilitating contract-farming.
    • The objective is to create ‘One Nation, One Market’, and promote ‘Ease of doing business’

    What is the immediate response?

    • Organised farmers’ bodies and Opposition in Parliament offered strong resistance to these Bills.
    • Some State governments even enacted their own Bills.
    • The Shiromani Akali Dal, walked out of the alliance with NDA in protest against these Bills.

    What are the key concerns?

    • Agrarian distress: piecemeal legislation and regulative processes have been put in place such as Pradhan Mantri yojanas but several key concerns of farmers have gone unattended.
    • States’ role: the issues affecting the farming community have a far greater bearing on the States relative to the Centre.
    • Lack of consensus building: The Centre extended little consideration to the sensitivity of the States.
    • Disparities: The three Acts bear differently on the different strata of the farming community and in different regions.
    • APMC as cushion: for instance, weakening the Agricultural Produce Market Committee (APMC) system and its resultant bearing on Minimum Support Price (MSP), particularly on crops such as rice and wheat is seen by the farmers as a threat to an assured sale of their produce at a price.
    • Procurement issues: Subjecting Procurement system to the vagaries of a competitive market, including storing and contracting of the produce, where he would eventually be beholden to the large players, including monopolies, are prospects that a farmer detests even though he is aware that the middleman is not a saint.
  • Protesting farmer concerns

    Context- Three Acts in Parliament and handed hurriedly, ignoring critical objections inside each Houses and the opposition outdoors.

    Why are these bills being opposed?

    1. End of MSP– The bills also lack any assurance about Minimum Support Price(MSP)
    • Dismantling of the monopoly of the APMCs as a sign of ending the assured procurement of food grains at minimum support prices (MSP).
    • After the abolition of mandis, farmers in Bihar on average received lower prices compared to the MSP for most crops.
    1. Promote corporate control– The farmers contend the federal government is making ready to withdraw from the procurement of food grain and hand it over to the company gamers.
    2. Weak grievances redress system– The dispute decision mechanism from the purview of courts and fingers it over to the SDM and the DC, who’re perceived as being below stress from their political masters.
    3. Hamper the rural growth– The Farmers’ Produce Trade and Commerce act prohibits State governments from collecting market fee, cess or levy for trade outside the APMC markets that are used for rural growth and market infrastructure.
    4. No mechanism for price fixation – The Price Assurance Act offers protection to farmers against price exploitation.
    5. Food security– Easing of regulation of food commodities in the essential commodities list would lead to hoarding of farm produce during the harvest season when prices are generally lower.
    • This could undermine food security since the States would have no information about the availability of stocks within the State.
    1. Against the Spirit of Cooperative federalism– Since agriculture and markets are State subjects, the ordinances are being seen as a direct encroachment upon the functions of the States

    However, the authorities argues that-

    • Farmers will get higher prices– The acts aim to increase the availability of buyers for farmers’ produce, by allowing them to trade freely without any license or stock limit, so that an increase in competition among them results in better prices for farmers.
    • Contract farming– This can present predetermined costs to farmers contracted upfront which will guarantee costs greater than the MSP.
    • This enables farmers to promote their produce anyplace within the nation and interact with personal corporations to promote their crops.

    What is the way forward?

    • The farmers’ unions want a complete withdrawal of the recently enacted Farm Acts, and an assurance that MSP and procurement by FCI will proceed.
    • The Farm Acts were legislative measures that were passed without elaborate discussion with stakeholders. Thus, government has to take steps to address the genuine fears of farmers.

     

     

    Link for our 7PM Editorial of similar article (Why Farmers are protesting and what is MSP system?)

  • Need for the procurement system

    Context- Dismantling the procurement system is neither in the interests of farmers nor the government.

    What are the concerns of farmers related to new farmer’s acts?

    Farmer’s concern- 

    • Their main worry is about a possible withdrawal of the Minimum Support Price (MSP) and a dismantling of the public procurement of grains.
    • This could corporatize agriculture; threaten the current mandi network and State revenues.

    However, the government claims that the farmer’s new laws will-

    • Break the monopoly- It allows intra-state and inter-state trade of farmers produce beyond the physical premises of Agricultural Produce and Livestock Market Committee (APMC) markets.
    • The MSP-procurement system will continue, and that there is absolutely no plan to dismantle the system.
    • Unshackle farmers– increase options for farmers in the output markets
    • Boost competition– The competition will increase and private investment will reach villages. Farming infrastructure will be built and new employment opportunities will be generated.

    Why farm protests have been highly intense in Punjab, Haryana?

    1. PDS is the lifeline – The procurement system and MSP mechanism is strong in Punjab and Haryana.
    • Nearly 88% of the paddy production and 70% of the wheat production in Punjab and Haryana (in 2017-18 and 2018-19) has been absorbed through public procurement.
    1. Other states are hardly benefitted from the MSP mechanism.

    Does government want this procurement system?

    The need for procurement of paddy and wheat to government is even more because-

    1. To support the needy one– There are nearly 80 crore NFSA (National Food Security Act) beneficiaries and an additional eight crore migrants who need to be supported under the PDS.
    2. To maintain the PDS –  The government needs an uninterrupted supply of grain, particularly from these two States.
    3. To overcome COVID-19 situation- Due to the onset of the novel coronavirus pandemic and the migrant crisis, government needs to procure a huge quantum of grains than in previous years as the government cannot afford to go to the open market.

    What improvements are required in new farmer’s Act?

    • Regulatory mechanism– Framework for supervision of all trade (irrespective of its being done on the electronic market or physical market) to ensure fair play by private players vis-à-vis farmers
    • Lack of transparency in trade area transactions are two of the major limitations that need to be addressed immediately.

    Instituting these safeguards will make the reforms foolproof.

    What is the way forward?

    • The government has to continue its procurement from Punjab and Haryana even after the COVID-19 situation improves and the migrant crisis abates, as the obligations under the NFSA will continue.
    • The government should reach out to the farmer groups and assures them of the indispensability of MSP-procurement system.
  • Farm Bills Concerns and evaluation

    Context: Agriculture in India needs state support to thrive.

    Background

    • Recently, President Ram Nath Kovind gave his assent to three contentious farm bills passed by Parliament.
    1. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act,2020 (FAPAFS).
    2. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC).
    • The Essential Commodities (Amendment) Act, 2020 (EC).
    • Indian farmers worry that these farm bills may clear the way for giant Indian companies.

    Why the Farm bills are touted as a watershed moment for Indian agriculture?

    • Elimination of middlemen: The reforms would remove the shackles from the agriculture sector and free farmers from the stranglehold of middlemen by creating one market.
    • Abolition of monopoly of APMC mandis: The bills will permit private buyers to hoard essential commodities for future sales, which only government-authorized agents could do earlier, along with changing the rules for contract farming.
    Why the farmers are concerned about farm bills?
    • Issue of withdrawing MSP: Since the Minimum Support Price (MSP) is not mentioned in the bills, they fear that they will lose the assured option of selling to the APMC mandis and that this will lead to corporate exploitation.
    • Corporatisation of agriculture: In the absence of regulation, as agribusiness firms might well be able to dictate both the market conditions (including prices) and the terms of contract farming as small farmers do not have the same bargaining power.
    • Loss of livelihood and employment: Farmers are suspicious that the entry of giant Indian companies in future such as Reliance and Adani who have already made investments in the agri-business infrastructure will wipe out their livelihood in farming. For instance, the management of the crop insurance scheme against natural disasters, introduced in 2017, was handed over to one of Anil Ambani’s companies, among others.
    How in most countries governments subsidise Agriculture sector?
    • In the US, the agriculture subsidies accounts for about 40 percent of the total farm income. sector ($46 billion in federal subsidies this year). – New York times.
    • Similarly, the European Union’s Common Agricultural Policy spending has averaged €54 billion annually since 2006.
    Why Agriculture sector needs state support in India?
    • Majority of the farmers are small in India: Smallholder and marginal farmers, those with less than two hectares of land account for 86.2 per cent of all cultivators – 10th Agriculture Census.
      • For them, it is unaffordable to carry their produce to other states or far-off places to sell. Without some support from the state, the smallest of Indian peasants would be even more vulnerable.
    • Lack of proper jobs: Also, the prospects of generating employment from other secondary and tertiary sector is not bright. For example, the share of the secondary sector in total employment has been stagnant at around 26 per cent (as against 41 per cent for agriculture) and its share in the GDP is declining.
    • Urban rural divide: There is a wide gap between urban and rural India in terms of per capita resources is widening.
    What is the way forward?
    • Need to increase public investment in agriculture in terms of Agri- infrastructure.
    • Promote Livelihood and Income Augmentation schemes like the Rythu Bandhu in Telangana or the Krushak in Odisha.
    • Need to ensure that no transaction can be done below the MSP, would help alleviate some rural distress.
    • For making farming sustainable, the government should draw inspiration from Andhra Pradesh’s community managed farming model which promotes agro-ecological principles with the use of locally produced, ecologically sustainable inputs, focusing on soil health, instead of depending on chemical fertilisers. This model is more resilient as well as more biodiverse in nature and provides a safety net to farmers.
  • Farmer’s protest

    Context – Massive communication failure on the part of the central government to explain to farmers what these laws are, and how they are intended to benefit them.

    What is the farmer’s and States concern with regard to new farm laws?

    1. Farmer’s fear- This could corporatize agriculture, threaten the current mandi network and State revenues and dilute the system of government procurement at guaranteed prices.
    2. States fear- Due to this bill, the revenue earned by the states in the form of market fees will drop drastically. About 13 per cent of the total revenue earned by the Punjab government comes from these mandis.

    What are the demands of the farmers?

    1. Repeal of new agriculture law-Punjab farmer leaders, including two major political parties, demand repeal of these laws.
    • However, repealing would mean bringing back mandi system, licence raj and the resultant rent-seeking.
    1. MSP to be legally binding– Farmers’ second demand is a written assurance in the form of a bill that the MSP and conventional food grain procurement system for the central pool will continue in future.
    • Farmers want a legal guarantee that no procurement will happen below MSP anywhere in the country.

    However, The Food Corporation of India is already overloaded with grain stocks that are more than 2.5 times the buffer stock norms.

    What are the policy options does government have?

    1. Use of Price Stabilization Scheme – To give a lift to market prices by pro-actively buying a part of the surplus whenever market prices crash, say more than 20 per cent below MSP.
    2. Decentralization of agriculture system – Decentralization the MSP, procurement, stocking, and public distribution system (PDS). Since agricultural marketing is a state subject.
    • The food subsidy can be allocated to states on the basis of their share in all-India poverty/proportion of vulnerable population, all-India wheat and rice production, all-India procurement of wheat and rice

    What is the way forward?

    • Farmers protest in India is an indication of larger complex issue. Pressure groups play a vital role in generating awareness and reaching a consensus and sustainable solutions to farmer’s problems.

    The Finance Commission can work out a formula for distribution funds amongst States, based on some tangible performance indicators and the Centre should get off from MSP, PDS, fertilizer subsidy, and MNREGA.

  • Dilli chalo farmer’s protest

    Context- Farmers from all over the country are protesting seeking the repeal of the new farm laws.

    What is Farmers’ Produce Trade and Commerce [FPTC] Act, 2020?

    • Break the monopoly- It allows intra-state and inter-state trade of farmers produce beyond the physical premises of Agricultural Produce and Livestock Market Committee (APMC) markets.
    • State will be now prohibited from levying any market fees or cess outside APMC areas.

    However, a large proportion of Indian harvest is sold outside mandis, only 29% and 44% of the harvest is sold in a mandi.

    Farmer’s fears– This could corporatize agriculture, threaten the current mandi network and State revenues and dilute the system of government procurement at guaranteed prices.

    What are the concerns of farmers?
    1. They are farmers are forced to sell their harvest outside the mandis due to
    • India still doesn’t have enough mandis– Only 7,000 APMC markets operating across the country.
    • Transport costs- Most small and marginal farmers, given their small marketable surplus, do not find it economical to bear the transport costs to take their harvests to mandis.

    Therefore, the farmer ends up selling their harvest to a village/local trader even if at a lower price. Even if private markets replace mandis, small and marginal farmers will continue to sell to traders in the village itself.

    1. No assurance of receiving higher prices even if private market emerges.
    2. Adverse impact on rural investments- Mandi taxes are reinvested by APMCs to improve market infrastructure. A fall in mandi taxes would reduce the surplus available with APMCs for such investment.
    What are the reasons for poor private investment in market?
    • High transection cost- Private players have incurred considerable costs in opening collection centres and for salaries, grading, storage and transport.
    • Corporate retail chains face additional costs in urban sales and storage, as well as the risk of perishability.

    Therefore, corporate retail chains prefer purchasing bulk quantities from mandis rather than directly from farmers.

    What is the farmer’s fear with regard to MSP?

    Many policy signals point to a strategic design to weaken the MSPs

    • MSPs are rising at a far slower rate over the past five to six years than in the past.
    • The government has not yet agreed to fix MSPs at 50% above the C2 cost of production.
    • Recommendation of CACP to stop open-ended procurement of food grains.
    What Steps needs to be taken?
    • India needs an increase in the density of mandis, expansion of investment in mandi infrastructure and a spread of the MSP system to more regions and crops.
    • APMCs need internal reform to ease the entry of new players, reduce trader collusion and link them up with national e-trading platforms.
    • The introduction of unified national licences for traders and a single point levy of market fees.
    Way forward-

    The Farm Acts were legislative measures that were passed without elaborate discussion with stakeholders. Thus, government has to take steps to address the genuine fears of farmers.

  • Why Farmers are protesting and what is MSP system?

    Farmer’s protests is not a new phenomenon in India, but in recent years, the frequency of protests has been increased. Major protests reported from states like Madhya Pradesh, Bihar, and UP.

    A look at the timeline of farmers’ protest over the last 10 years shows that the minimum support price (MSP) for various crops has been a major grouse.

    Another issue has been that of land acquisition, with farmers complaining that compensation for land acquired for industrial projects was not in tune with market rates.

    Most recent protests are against the 3 farm bill enacted recently by the government:

    1. Essential Commodities (Amendment) Bill, 2020: aims to provide government with the tool to regulate agri commodities.
    2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020: aimed to provide a legal contract for farmers to enter into written contracts with companies and produce for them.
    3. Farmers’ Produce Trade and Commerce (Promotion and Facilitation),(FPTC) bill 2020: aims toBreak the monopoly of government-regulated mandis and provide farmers and traders freedom of choice of sale and purchase of Agri-produce.

    The major bone of contention among the 3 bills is the FPTC bill that permits sale and purchase of farm produce outside the premises of APMC mandis. Such trades (including on electronic platforms) shall attract no market fee, cess, or levy “under any State APMC Act or any other State law.

    What are objections raised against FPTC bill?

    • Much of government procurement at minimum support prices (MSP) takes place in APMC mandis.
    • In a situation when more and more trading moves out of the APMCs, these regulated market yards will lose revenues.
    • FTPC Bill is not about delivering on the promise of freedom to farmers but the freedom to private capital to purchase agricultural produce at cheaper prices and without any regulation or oversight by the government.
    • APMCs though not abolished but the provisions will drive them dysfunctional gradually. It would pave the way for new capitalists based markets.
    • Due to this bill, the revenue earned by the states in the form of market fees will drop drastically. About 13 percent of the total revenue earned by the Punjab government comes from these mandis.
    • In India, 86 percent of farmers have a land of the size of less than two hectares, they don’t have the resources to carry their produce too far off places to sell. Thus provision allowing interstate trade of produce to farmers, is not well thought out.

    Farmers want a legal guarantee that no procurement will happen below MSP anywhere in the country.

    What are 2 private member Bills that can be instrumental in easing the ongoing farmer’s protest?

    Kisan Union protesting at present are demanding for the enactment of 2 Private member bills, introduced in 2018.  Bills were drafted by the members of the All India Kisan Sangharsh Coordination Committee (AIKSCC), the umbrella organisation of 500 farmers’ unions across the country.

    1. The Farmers’ Freedom from Indebtedness Bill 2018:
      1. obligates the govt. to waive all loans of all peasants, including landless peasants, agricultural workers, sharecroppers, fishermen which includes declaration of private loans as null and void and payment to the creditors by the govt. without any recovery from the debtors.
    2. The Farmers’ Right to Guaranteed Remunerative Minimum Support Price (MSP) for Agricultural Commodities Bill 2018:
      1. Bill obligates  to regulate and decrease the cost price of farm inputs including diesel, seeds, fertilizers, insecticides, machinery and equipment
      2. To ensure through public and private purchasing agencies that the farmers get a guaranteed MSP of C2 + 50%.

    Why farm protests have been highly intense in Punjab, Haryana?

    • The procurement system and MSP mechanism is strong in Punjab and Haryana.
    • Though the government announces MSPs for 23 crops, only wheat and rice are bought in sufficiently large quantities.
    • For wheat, MSP mechanism is helpful only in the northern and central states like Punjab, Haryana and Madhya Pradesh.
    • For rice, the benefit is accrued by the farmers from the states such as Andhra Pradesh, Chhattisgarh, Punjab and Haryana.
    • Other states are hardly benefitted from the MSP mechanism.
    • The 70th round of National Sample Survey for 2012–13 revealed that only 32.2% of paddy farmers and 39.2% of wheat growers in the country were aware of MSPs.

    How MSP is determined?

    The CACP determines the MSP, currently based on a formula that was prescribed by the Swaminathan Commission, a government-formed panel that had submitted several reports between December 2004 and October 2006 which set out suggestions for solving the problems faced by farmers.

    The formula requires the assessment of three categories of costs:

    1. A2: the actual expenses paid by farmers in cash and kind for seeds, fertilisers, pesticides, paid labour, irrigation, etc.
    2. A2+FL: the A2 cost along with an adjustment for the costs of unpaid family labour (given traditional Indian farming practices involve families).
    3. C2: A2+FL along with all other production costs, including loans, rentals, cost of land and other fixed capital assets, i.e. a comprehensive cost of production.

    The MSP is set at a particular level above the C2 for each crop, and applies across the country. In addition to the current C2 level, the CACP also takes into account demand and supply, domestic and international price trends, inter-crop price parity and the likely implications of MSP on consumers of the crop.

    How many crops are covered under MSP?

    At present, MSP is provided for 23 crops

    7 Cereals: paddy, wheat, maize, sorghum, pearl millet, barley and ragi

    5 Pulses: gram, tur, moong, urad, lentil

    7 Oilseeds: groundnut, rapeseed-mustard, soyabean, seasmum, sunflower, safflower, nigerseed

    4 Commercial Crops: copra, sugarcane, cotton and raw jute

    In case of sugarcane, MSP has been assigned a statutory status and as such the announced price is termed as statutory minimum price, rechristened as Fair Remunerative Price (FRP).

    On the other hand MSP system is not supported by any law i.e. doesn’t have a statutory status.

    How MSP benefits farmers?

    MSP help in rescuing farmers from low income trap in the following ways:

    1. Fixed Remunerations: The farmers are financially secured against the vagaries of price instability in the market.
    2. Diversification of crops: The MSP announced by the Government of India for the first time in 1966-67 for wheat has been extended to around 24 crops at the present. This will encourage the farmers to grow these diverse crops to maximise their income.
    3. Prevents Distress-Sale: Farmer rarely has surplus savings for buying inputs for the next cropping season. Access to credit (loans) is also difficult for small and marginal farmers. So, they are forced into distress-sale of produce at throw-away prices, and are not able to buy high quality seeds, fertilisers, pesticides & tractor-rent for next cropping season, which will further decrease their income from the next cycle. MSP prevents this phenomenon.
    4. Helps informed decision making: Government announces MSP before the sowing season for 23 crops including cereals, pulses, oilseeds & certain cash crops. This advance information helps the farmer to make an informed decision about which crop to sow for maximum economic benefit within the limitations of his farm size, climate and irrigation facilities.
    5. Acts as a benchmark for private buyers: MSP sends a price-signal to market that if merchants don’t offer higher than MSP prices the farmer may not sell them his produce. Thus it acts as an anchor or benchmark for agro-commodity market. While it doesn’t guarantee that market prices will also be higher than MSP, but atleast it ensures the market prices will not drastically lower than MSP.

    How to improve MSP system in India?  

    NITI aayog in its report provided with the following recommendations to improve the MSP system in India:

    • Awareness among the farmers needs to be increased and the information disseminated at the lowest level so that the knowledge would increase the bargaining power of the farmers.
    • Prompt payment: The delay in payment needs to be corrected and immediate payment should be ensured. For sustainability of farming prompt payment at remunerative rates should be made.
    • Timing of MSP announcement: MSP should be announced well in advance of the sowing season so as to enable the farmers to plan their cropping.
    • Transport and storage: More god owns should be set up and maintained properly for better storage and reduction of wastage. Transport facility (say, in the form of providing two wheelers) for Purchase Officers may be considered to help them effectively discharge their work.
    • Updated criterion for fixing MSP: The criteria for fixing MSP should be current data and based on more meaningful criteria rather than C3.
    • The small and marginal farmers can be provided with Procurement Centres in the village itself to avoid transportation costs.

    Conclusion

    it was found that the MSP has succeeded in providing floor rate for major food grains like paddy and wheat and other produces such as Gram (black & green), spices and oilseeds (groundnut, mustard, till), sugarcane, jute and cotton, and it did not allow market prices to fall below the MSP fixed for them.

    Thus MSP has been very helpful in keeping agriculture in our country alive and we have been able to become self-sufficient in food grains due to it. It becomes crucial for government to provide some solid assurance to farmers that it won’t be allowed to die down.

  • Farmers Agitation

    Context: Farmers Apprehensions about the new farm laws

    Background:

    • Parliament passed three Farm Acts in September to reform the Agriculture sector.
    • The reforms were aimed to make the agriculture sector more efficient and lucrative.
    • However, it had the effect of upsetting large sections of farmers leading to agitation by more than 500 farmers’ unions.
    • Most farmers fear that their precarity will increase as a result of the changes. Farmer leaders have pointed out that the Centre has refused to address their specific concerns regarding the new laws, which they are concerned will render them helpless in the face of exploitative market forces.
    • The Centre has aggravated the issue by rushing through these laws without wide consultation and political consensus.

    What were the apprehensions of Farmers regarding new farm bills?

    End of the MSP and guaranteed government procurement:

    • The new farm laws give farmers more choices in selling their produce and creates a national market for their produce.
    • This will lead to end of a monopoly market and it will lead to more efficiency.
    • But the farmers fear that the new laws may lead to a dismantling of the MSP and the mandi system, thereby the farmers will have little bargaining power during contracts with private buyers.

    End of subsidised electricity:

    • Farmers are also concerned about the proposed Electricity (Amendment) Bill 2020 which might end their access to subsidised electricity.

    Way forward

    • The Centre should be open to legislate a guarantee of procurement at MSP which can convince farmers to accept the new laws.
    • Agriculture sector In India must account for uneven environmental factors across different regions. It must balance the interest of the producers and consumers.

    Agriculture Reforms

  • Farm Bills and MSP

    Source: Indian Express

     

    Context: The recently enacted farm bills have triggered debate on the desirability of the MSP regime.

    More in news: The period from 2004 to 2012 was the period of high commodity prices, high government procurement and rapid reduction in rural poverty. This shows a causal link between the high prices and decrease in poverty

    What is the issue?

    •  The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) bill allow for free entry of agents (private individuals, producer collectives or cooperatives) to set up markets.
    •  This means that the Food Corporation of India (FCI) and other associated agencies can procure in the traditional mandis or in a new market established under this law or in their own backyard.
    •  Critics view that the dismantling of the monopoly of the APMCs as a sign of ending the assured procurement of food grains at minimum support prices (MSP).

    Are MSPs irrelevant for the welfare of the farmers?

    •  According to the supporters of the farm bills the MSPs are irrelevant for most of the farmers in the country as it benefits only a small fraction of farmers (Punjab and Haryana) and procurement has remained confined to only a few crops.
    • However, it has indirectly benefited all food grain producers in the country.
    • For example, the procurement through MSP significantly exceeds the PDS requirement, this creates additional demand in the food grain market, pushing up the prices especially when the international prices have remained low.
    • The RBI’s annual report of 2017-18 on the impact of MSP-based procurement on the food prices conclusively shows that MSP is a leading factor influencing the output prices of the farm produce in the entire country.
    • Also, for rain-fed agriculturists, the only state supports these farmers (primarily cotton and pulse producers) have is that of MSPs as they are deprived of irrigation and they don’t benefit from subsidies on electricity and fertiliser.
  • Farm laws and desirability of MSP

    Minimum support price (MSP) for Farm Bill

    Context: The recently enacted farm bills have triggered debate on the desirability of the MSP regime.

    More in news: The period from 2004 to 2012 was the period of high commodity prices, high government procurement and rapid reduction in rural poverty. This shows a causal link between the high prices and decrease in poverty

    What is the issue?

    •  The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) bill allow for free entry of agents (private individuals, producer collectives or cooperatives) to set up markets.
    •  This means that the Food Corporation of India (FCI) and other associated agencies can procure in the traditional mandis or in a new market established under this law or in their own backyard.
    •  Critics view that the dismantling of the monopoly of the APMCs as a sign of ending the assured procurement of food grains at minimum support prices (MSP).

    suggest read also :-current affairs for upsc

    Are MSPs irrelevant for the welfare of the farmers?

    •  According to the supporters of the farm bills the MSPs are irrelevant for most of the farmers in the country as it benefits only a small fraction of farmers (Punjab and Haryana) and procurement has remained confined to only a few crops.
    • However, it has indirectly benefited all food grain producers in the country.
    • For example, the procurement through MSP significantly exceeds the PDS requirement, this creates additional demand in the food grain market, pushing up the prices especially when the international prices have remained low.
    • The RBI’s annual report of 2017-18 on the impact of MSP-based procurement on the food prices conclusively shows that MSP is a leading factor influencing the output prices of the farm produce in the entire country.
    • Also, for rain-fed agriculturists, the only state supports these farmers (primarily cotton and pulse producers) have is that of MSPs as they are deprived of irrigation and they don’t benefit from subsidies on electricity and fertiliser.
  • About MSP (Minimum Support Price)

    News: Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 does not provide any safeguards for the continuance of the existing minimum support price (MSP)-based procurement regime.

    Facts:

    • MSP is the minimum price paid to the farmers for procuring food crops. It is announced by the Government at the beginning of the sowing season.
    • There are two objectives of the Minimum Support Price system (a)To prevent distress sale by the farmers in case of a bumper crop and (b)To procure the grains for public distribution by fair price shops.
    • They are recommended by the Commission for Agricultural Costs and Prices (CACP) and approved by the Cabinet Committee on Economic Affairs. Food Corporation of India (FCI) is the nodal agency for procurement along with State agencies.
    • The Centre currently fixes MSPs for 23 farm commodities — 7 cereals (paddy, wheat, maize, bajra, jowar, ragi and barley), 5 pulses (chana, arhar/tur, urad, moong and masur), 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and nigerseed) and 4 commercial crops (cotton, sugarcane, copra and raw jute)
    Additional Information:

    ·         Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

    o    Trade of farmers produce: It opens up agricultural marketing outside the notified Agricultural Produce Market Committee (APMC) for farmers and also removes barriers to inter-State trade.

    o    Electronic Trading: It seeks to permit the electronic trading of farmers produced in the specified trade area.

    ·         Commission for Agricultural Costs and Prices (CACP): it is an attached office of the Ministry of Agriculture and Farmers Welfare. It is not a statutory body set up through an Act of Parliament.

    • There is no law mandating their implementation. The only crop where MSP payment has some statutory element is sugarcane. Sugarcane pricing is governed by the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act.
  • Essential Commodities Amendment Bill, 2020

    Introduced: Lok Sabha (14th Sept 2020)

    Passed: Lok Sabha (15th Sept 2020)

    Passed: Rajya Sabha (22nd Sept 2020)

    Present status: Received assent on 26th Sept 2020 & converted to Act. But recently the government has repealed the Act.

    Ministry: Consumer Affairs and Food Distribution

    Objectives

    • Essential Commodities (Amendment) Bill, 2020 amends the Essential Commodities Act, 1955.
    • Aim: To increase competition in the agriculture sector and enhance farmers’ income. It also aims to remove fears of private investors of excessive regulatory interference in their business operations.

    Key Features of Essential Commodities (Amendment) Bill, 2020

    • Regulation on food items: Under the Essential Commodities Act, 1955, the Government regulates the production, supply and distribution of certain commodities it declares ‘essential’ in order to make them available to consumers at fair prices. The bill removes cereal, pulses, oilseed, edible oil, onion and potatoes from the list of essential commodities.
    • Stock Limit: It requires that imposition of any stock limit on agricultural produce must be based on price rise. A stock limit may be imposed only if there is: (i) a 100% increase in retail price of horticultural produce; and (ii) a 50% increase in the retail price of non-perishable agricultural food items.

    Issues with Essential Commodities (Amendment) Bill, 2020

    • Undermining Food security: Easing of regulation of food items would lead to exporters, processors and traders hoarding farm produce during the harvest season, when prices are generally lower, and releasing it later when prices increase. This could undermine food security since the States would have no information about the availability of stocks within the State.
    • Deregulation of food items– As the bill removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities, it will deregulate the production, storage, movement and distribution of these important food commodities.
  • Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

    Introduced: Lok Sabha

    Passed: Lok Sabha

    Passed: Rajya Sabha

    Present status: Received assent of the President on 24th Sept 2020 & converted to Act. But recently the government has repealed the Act.

    Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 is aimed to provide a legal contract for farmers to enter into written contracts with companies and produce for them.

    Key Features of Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020:

    • Farming agreement: It provides for a farming agreement between a farmers and buyers (processors, wholesalers, aggregators, wholesalers, large retailers, exporters etc.) before the production or rearing of any farm produce.
    • Pricing of farming produce: The agreement should mention the following:
      • The price of farming produce
      • For prices subjected to variation, a guaranteed price for the produce and a clear reference for any additional amount above the guaranteed price
      • process of price determination
    • Dispute Settlement: A farming agreement must provide for a conciliation board as well as a conciliation process for settlement of disputes.
    • Protection to farmers: Farmers have been provided adequate protection. Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery.

    Issues with Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020:

    • No mechanism for price fixation: The bill provides protection to farmers against price exploitation, but does not prescribe the mechanism for price fixation. There are concerns that the free hand given to the private sector could lead to corpotirization of agriculture and farmer exploitation.
    • Unorganised nature of the farm sector: Given the unorganised nature of the farm sector and farmers’ lack of resources for a legal battle with private corporate entities, there are concerns that formal contractual obligations will eventually be detrimental for poor farmers in the country.
    • Lack of assurance about MSP: The bill doesn’t provide any assurance about Minimum Support Price (MSP) in the contract-farming. Critics have opined that there will be no declaration of MSP for all crops, determined by Swaminathan formula of C2 costs plus 50 per cent.
    • Fear of intermediaries: Though the bill seeks to eliminate middlemen from the supply chain, the critics have raised concerns that middlemen will operate in the form of sponsors or farm service provider for contract-farming.
    • Deprivation of farmers from their land: The legislation provides for “farming agreements” “with insurance or credit instrument”. This will entail credit linkage with mortgaging of farmer’s land. There are concerns that in case the contract suffers a financial loss, a farmer might have to pay debt through their land.
    • Subjecting food security to world markets: There are concerns that MNC food giants and their Indian collaborators will integrate Indian agricultural production with world markets. This will reduce the freedom of farmers and undermine food security.
    • Threat to India’s food and political sovereignty: There are concerns that companies will promote banned and dangerous GM seeds, terminator seed technology. This will erode India’s seed sovereignty and threaten food and political sovereignty.
  • Farmers’ Produce Trade and Commerce (Promotion and Facilitation), bill 2020

    Introduced: Lok Sabha (14th Sept 2020)

    Passed: Lok Sabha (17th Sept 2020)

    Passed: Rajya Sabha (20th Sept 2020)

    Present status: Received assent of the President on 24th Sept 2020 & converted to Act. But recently the government has repealed the Act.

    About Farmers’ Produce Trade and Commerce (Promotion and Facilitation), bill 2020

    Ministry: Agriculture and Farmers Welfare

    Aim

    • Break the monopoly of government-regulated mandis and provide farmers and traders freedom of choice of sale and purchase of Agri-produce.

    Key provisions  

    1. Trade of farmers’ produce:
      1. It allows intrastate and inter-state trade of farmers’ produce outside the physical premises of markets notified under State Agricultural Produce Marketing legislation.
      2. In addition to mandis, freedom to do trading at farmgate, cold storage, warehouse, processing units etc.
    2. Electronic trading: It proposes electronic trading in transaction platform for ensuring a seamless trade electronically.
    3. Abolition of cess or levy for sale: The farmers will not be charged any market fee, cess or levy for sale of their produce and will not have to bear transport costs.

    Issues with Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020:

    • Lack of regulatory oversight and reporting: The bill provides for non-APMC markets but does not provide any mechanism for its regulation. There are concerns that the lack of regulation might lead to unregulated trade detrimental to the primary purpose of providing market access to farmers. Further, it does not provide proper grievance redressal mechanism.
    • Loss in revenue for states: The market fee, rural development fee, and arhatiya’s commission are big sources of revenue for some states. With states not permitted to levy market fee/cess outside APMC areas under the new legislation, Punjab and Haryana could lose an estimated Rs 3,500 crore and Rs 1,600 crore each year respectively.
    • Fear over MSP: According to critics, the dismantling of the monopoly of the APMCs is the sign of ending the assured procurement of food grains at minimum support prices (MSP).
    • Setting Price: APMC continues to set the reference price even for private players. In the absence of APMC, there will be no alternative for a large market that can actually set price signals. Global experience such as the French dairy producers and the dairy farmers’ co-operatives in the U.S suggest that buyer cartels will start fixing the market price.
  • Three Farm Acts and their constitutional debate.

    Source: The Hindu

    Syllabus: Gs3: Issues and Challenges Pertaining to the Federal Structure, Devolution of Powers

    Context: The passage of the three Farm Acts has raised a constitutional debate on Union’s powers to legislate on state subjects.

    What are the three contentious farm bills?

    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
    • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020,
    • The Essential Commodities (Amendment) Act, 2020.

    What is the controversy around Entry 33 in concurrent list?

    Following subjects are on the state list:
    Agriculture
    Trade and commerce within the State, production, supply and distribution of goods

    Markets and fairs are enumerated as states subject.

    • However, the trade and commerce within the State (Entry 26) & production, supply and distribution of goods (Entry 27) are subjected to the provisions of Entry 33 of concurrent list after the 3rd amendment act, 1954.
    • As per Article 369, the responsibility of agricultural trade and commerce within a State was temporarily entrusted to the Union government for a period of five years beginning from 1950.  However, the 1954 Amendment changed this into a permanent feature in the Constitution.
      Despite many opposed, stating that the Bill would lead to an expanding encroachment on the rights of the States the Bill was passed. Now the same Entry 33 was invoked to encroach the powers of the States.
    • What are the directives given by supreme court in I.T.C. Limited vs.

    Agricultural Produce Market Committee (APMC) case 2002?

    • The development of the tobacco industry was brought under the Centre through the Tobacco Board Act, 1975.
      However, Bihar’s APMC Act continued to list tobacco as an agricultural produce.
    • In this case, the question was if the APMC could charge a levy on ITC for the purchase of unprocessed tobacco leaves from growers.
      The then Constitution Bench upheld the validity of the State APMC Act, and provided some important directives :
      Market fees can be charged from ITC under the State APMC Act
      State laws become repugnant only if the State and Centre enact laws on the same subject matter under an Entry in List III.
    • In those cases, outside List III, one has to first examine if the subject matter was an exclusive entry under List I or List II, and only after determining this can one decide on the dominant legislation that would prevail.
    • How the directives of supreme court related to present Farm Acts of 2020?
      In the case of the Farm Acts of 2020, the applicable points are (a) and (c).
      With regard to (a), States could continue to charge mandi taxes from private markets anywhere in the notified area regardless of the Central Act.
      With regard to (c), the State legislation should prevail as agriculture is an exclusive subject matter under Entry 14 in List II.

    Why the recent Farm Acts are said to have poor legal validity?

    Centre to use Entry 33 in List III to push the Farm Bills weakens the spirit of cooperative federalism.

    • Second, agriculture is exclusively a State subject. Everything that is subsidiary to an exclusive subject in List II should also fall under the exclusive legislative purview of States.
    • Most importantly, Entry 28 in List II markets and fairs is not subject to Entry 33 in List III.
  • Significance and Issues associated with Farms laws

    Source: The Hindu

    Syllabus: GS3: Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices

    Context: Recently, the President has given his ascent on the three farm Bills.

    What are the issues with the bill?

    • No clarity on MSP:the Bill does not specify that the contract price should be above the Minimum Support Price (MSP) declared by the government.
    • Corporatization and private hoarding: Farmers may earn less and consumers may pay more due to private hoarding.
    • Loss of revenue: Governments will lose mandi tax, which is a major source of revenue. Bihar failed in 2006 when APMCs were dismantled, resulting in farmers facing challenges in selling their produce at a good price.
    • No security to farmers: according to the Bill, companies are not required to have a written contract with the farmer, making it difficult for farmers to prove terms.
    • Weak positions for farmers: as per bills, contracts need not be registered with the government.

    What are the significances of the bill?

    • Widens farmers’ choices: Sell anywhere to anyone at any price.
    • Promote agri-business: farmers and farmer collectives, agri-businesses and traders can manage post-harvest facilities without such interference by the government.
    • Socialistic reforms: Chakravarthi Rajagopalachari believed in maximum individual freedom and minimum interference by the state. These reforms are largely Gandhian.
    • Better prices: reforms will allow farmers to get good prices for their produce at the farm gate.
    • Improve farm practices: Farm advisories will create better crop planning and troubleshooting.
    • Reduce risk: Climate protected farming will reduce the business risk of agriculture. Reduced business risk will encourage the insurers to insure crops.

    What are the key dimensions to reform agriculture sector?

    • Ensure MSP:MSP should continue in its current form, till markets show that they can deliver results for the farmers, even without the MSP.
    • Reform APMCs: For APMCs to stay relevant, they should become more competitive and transparent. Start-ups like Ninjacart and Waycool are proving a win-win model by reaching tens of thousands of horticulture farmers.
    • Universal basic income through direct benefit transfer mode: The free-market may increase the market-risk for farmer families in the short-term. Therefore, the government should double DBT from the current level of ₹70,000 crore.
    • e-Nam to become a ‘Unified Payment Interface’ equivalent for agri markets: National Agricultural Market should take learnings from UPI and provide a seamless application programming interface (API) for innovators, generally agri start-ups and businesses.
    • Feedback loop:ensure that the reforms feed into a constructive feedback loop that actually benefits farmers.
    • Policy predictability:it is important to have predictability and consistency in this philosophy. If the government exercises arbitrary power in a coercive manner, the private sector will speak with their money by reducing the investments.
    • Farmer forum for dispute resolution: Contract farming will be a transaction between a weak party called a farmer and a strong party called the corporation. Farmers need a ‘consumer forum’ equivalent at a district or block level.

    India needs to combine the power of markets and technology as we have a unique opportunity to change the lives of India’s poor for the better.

  • Benefits of the farms laws

    Source- The Indian Express

    Syllabus- GS 3- Transport and marketing of agricultural produce and issues and related constraints

    Context- Many benefits are associated with farm laws that should be considered in the debates around them.

    How is the agriculture sector working on India’s Independence and till present?

    • 1947-Agriculture contributed 50 per cent to the national income and employed more than 70 per cent of the nation’s workforce.
    • 2019-Agriculture contributed 16.5 per cent to the national income while the sector still employs more than 42 per cent of the workforce.

    What are the challenges in the Indian Agriculture market and what are the methods to address these challenges?

    The Challenges-

    Therefore, this makes agriculture risky and inefficient with respect to both input and output management.

    The challenges need to be addressed by-

    What are the steps taken by the government?

    1.The government has taken various steps including the implementation of the Swaminathan committee’s recommendations, such as-

      1. Fixing MSP at least 50 per cent profits on the cost of production.
      2. Increasing the agri budget by more than 11 times in the past 10 years.
      3. The establishment of e-NAM mandis.
      4. An Agriculture Infrastructure Fund of Rs 1 lakh crore under the Atmanirbhar Bharat Package.
      5. The scheme for the formation of 10,000 FPOs.
      6. The removal of the mandi tax.
      7. The creation of a single market.
      8. Facilitating contract farming.

    2.Farm bills provides for-

      1. Alternative trading channel-It will create an ecosystem where farmers and traders enjoy the freedom of choice of sale and purchase of farming produce to facilitate remunerative prices to farmers through competitive alternative trading channels.
      2. Tax-free market-It will promote barrier-free inter-state and intra-state trade and commerce of farming produce outside the physical premises of markets notified under state agricultural produce marketing legislation. Thus, they will facilitate farmers with more buyers for their produce at their doorsteps.
      3. Transparency in the system–
      • This framework will facilitate greater certainty in quality and price, adoption of quality and grading standards, linkage of farming agreements with insurance and credit instruments to transfer the risk of market unpredictability from the farmer to the sponsor, and also enable the farmer to access modern technology and better inputs.

    What are the precautions which are taken by the government to secure the farmers from fraud?

    In order to ensure that our farmers are not short-changed or cheated by anyone, the bills have several safeguards such as-

    1. Protection of land- The prohibition of sale, lease, or mortgage of farmers’ land and farmers’ land is also protected against any recovery.
    2. Farming agreements-Cannot be entered into if they are in derogation of the rights of a sharecropper.
    3. Flexible prices-Farmers will have access to flexible prices subject to a guaranteed price in agreements.
    4. Sponsor’s active role-The sponsor has to ensure the timely acceptance of delivery and payment of produce to farmers and farmers’ liability is limited to only the advance received and cost of inputs provided by the sponsor.
    5. In case of any dispute-It will be resolved through a Conciliation Board, to be constituted by the sub-divisional magistrate (SDM), failing which an aggrieved party may approach the concerned SDM for the settlement of the dispute.
    6. Power of the SDM– SDM can order the recovery of the amount in dispute, impose penalties and also pass an order restraining the trader for the trade and commerce of scheduled farmers’ produce for such a period as deemed fit.

    Way Forward

    The people of India must not allow falsehood and political opportunism to overshadow the key measures and mechanisms enunciated through this landmark reform, which finally puts the farmers first. These farm bills will bring transformative changes in our agricultural sector and reduce wastage, increase efficiency, unlock value for our farmers and increase farmers’ incomes for the sustainable growth of the farming sector.

  • Reasons behind protest against farm laws

    Source- The Indian Express

    Syllabus- GS 3- Issues related to direct and indirect farm subsidies and minimum support price

    Context- There are many reasons behind the recently erupted protest against farm laws that should have been avoided by the government.

    What are the new Farm Bills?

    Three Farm Bills that are bond for contention-

    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020.
    • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020.
    • The Essential Commodities (Amendment) Bill, 2020.

    Why are these bills being opposed?

    1. Against the spirit of cooperative federalism-
    • Since agriculture and markets are State subjects – entry 14 and 28 respectively in List II – the ordinances are being seen as a direct encroachment upon the functions of the States.
    • The three ordinances passed by the Centre are viewed as against the spirit of cooperative federalism enshrined in the Constitution.
    1. Absence of any regulation in non-APMC-
    • According to farmers, the proposed bills give the preference for corporate interests at the cost of farmer’s interests.
    • In the absence of any regulation in non-APMC, the farmers may find it difficult to deal with corporates, as they solely operate on the motive of profit seeking.
    1. End of MSP [Minimum Support Price]– By allowing trade zones to come up outside the APMC area, as a sign of ending the assured procurement of food grains at minimum support price.
    • There is no mention whatsoever of the Minimum Support Price (MSP) regime, which is the lifeline of poor farmers and their key to survival, as also the survival of the nation’s agriculture sector.
    1. Lack of consultation– Farmers have argued that there is hastily attempt to pass the bills without proper consultation with any major stakeholders, farmer’s representatives or any state governments before bringing the ordinances.
    2. Non-Favourable Market Conditions- While retail prices have remained high; data from the Wholesale Price Index (WPI) suggest a deceleration in farm gate prices for most agricultural produce.
    • With rising input costs, farmers do not see the free market based framework providing them remunerative prices.
    • These fears gain strength with the experience of States such as Bihar which abolished APMCs in 2006. After the abolition of mandis, farmers in Bihar on average received lower prices compared to the MSP for most crops.
    1. Food security undermined-
    • Easing of regulation of food items would lead to exporters, processors and traders hoarding farm produceduring the harvest season, when prices are generally lower, and releasing it later when prices increase.
    • This could undermine food security since the States would have no information about the availability of stocks within the State.
    1. Deregulation of food items-
    • The Essential Commodities [Amendment] bill removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities, which deregulate the production, storage, movement and distribution of these food commodities.

    Way forward-

    Centre needs to prevent the farmers from falling into the clutches of the monopolistic big corporates and need to enlarge the market for agriculture produce while preserving the safety net principle through MSP and public procurement. Government must provide MSP not just on wheat and rice but all other crops so that farmers are encouraged to diversify.

  • Farm bills and opposition hypocrisy

    Source – The Indian Express

    Syllabus – GS 3- Major crops-cropping patterns in various parts of the country, – different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers.

    Context– The government claims that the new farm bills are a historic step taken in the interest of farmers, giving them the freedom to sell their produce anywhere in the country and to any one they want.

    What are the new Farm Bills?

    Three Farm Bills that are bond for contention-

    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020– The FPTC breaks the monopolistic powers of the APMC markets.
    • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020- FAPAFs allows contract faming.
    • The Essential Commodities (Amendment) Bill, 2020- ECA remove stocking limits on traders for a large number of commodities, with some caveats still in place.

    What are the pros of farm bills 2020?

    1. Increment in farmer’s income– According to the government, the bills would transform the agriculture sector which will raise the farmers’ income. It also promises to double farmers’ income by 2022 and the Centre said that the Bills will make the farmer independent of government-controlled markets and fetch them a better price for their produce.
    2. Creating healthy competition – These bills provide greater choice and freedom to farmers to sell their produce and to buyers to buy and store, thereby creating competition in agricultural marketing.
    • Opens up agriculture sale and marketing outside the notified APMC mandis for farmers.
    • Removes barriers to inter-state trade.
    1. Efficient value chain– This competition is expected to help build more efficient value chains in agriculture by reducing marketing costs, enabling better price discovery, improving price realization for farmers and, at the same time, reducing the price paid by consumers.
    2. Modernization-The farm bill 2020 aims to enable farmers to engage with agri-business companies, retailers, exporters for service, and sale of produce while giving the farmer access to modern technology.
    3. Promotes Farmer Production Organization (FPO)– These bills promote the creation of FPO on a large scale and will help in creating a farmer-friendly environment for contract farming where small players can benefit.

    Way forward-

    It is high time to get agriculture market right and these farm bills are steps in that direction. Centre need to create Farmer Producer Organizations (FPOs) and invest in marketing infrastructure. NABARD must get its act together, take professional advice and work with implementing agencies in the private sector, including various foundations already working with farmers.

  • Farmers protesting on Farm bills

    Source- The Indian Express

    Syllabus- GS 3-  Transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers

    Context- Farmer’s organisation across the country gave a call for a bandh on September 25th to protest the three bills passed by Parliament.

    What are the new Farm Bills?

    Three Farm Bills that are bond for contention-

    1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (FPTC).
    2. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 (FAPAFS).
    3. The Essential Commodities (Amendment) Bill, 2020.

    Why are these bills being protested?

    These bills have been protested by not only the farmers, even opposition and state legislatures are not supporting these bills due to-

    1. Unconstitutional Procedure-The manner in which the bills were thrust upon the farming community. Not only the farmers’ organisations, but even state governments and allies have not been consulted.
    2. Against the spirit of cooperative federalism –
    • All the earlier attempts at reforming agricultural marketing respected the constitutional separation of powers. While the Centre proposed the model acts, these were implemented by state governments.

    For instances– Out of 36 states and union territories-

      1. 18 states have already enacted reforms allowing for establishment of private market yards/private markets.
      2. 19 states have enacted reforms allowing for direct purchase of agricultural produce from agriculturists by processor/bulk buyer/bulk retailer/exporter.
      3. 20 states have enacted contract farming acts.
      4. Kerala and Bihar do not have APMC mandis and Tamil Nadu has a different system.
      5. Most states have exempted levy of taxes and fees on sale of fruits and vegetables.
    • The current reforms completely bypass the state governments and weaken their ability to regulate agricultural markets even though it is a state subject.
    1. Changing objectives of the government-unlike earlier reforms where the focus was on strengthening the functioning of APMC mandis while allowing for greater private market access and participation, the current FTPC bill bypasses the APMC altogether, creating a separate structure of trading.
    2. Creation of dual market structure-The absence of regulation and exemption from mandi fees creates a dual market structure which is not only inefficient but will also encourage unregulated trade detrimental to the primary purpose of providing market access to farmers for better price discovery and assured prices.
    3. Corporate Exploitation-FTPC Bill is not about delivering on the promise of freedom to farmers but freedom to private capital to purchase agricultural produce at cheaper prices and without any regulation or oversight by the government.
    4. Contract farming bill and amendments in the essential commodities act– Apart from the fact that the provisions of these bills are highly skewed in favour of private capital, with no limits on stockholding and restrictions of government interventions, there is limited recourse to any independent grievance redressal mechanism.
    5. Government actions-Agricultural terms of trade have moved against agriculture with rising input prices (with the government increasing diesel prices despite the collapse in international prices) and declining farm gate prices.

    Way Forward

    The government should re-consider all the farm bills with the states, famer’s organisations, and their representatives. So, that the farmers will gets the opportunity to give their opinions and address their issues regarding the farm bills. Also by this farmers will understand the agenda of the government’s view of the bills. This will bring harmony and peace among the protestors.

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