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.