Dismantling the elite perspective on Farm Bills
By: Puneet Kakkar
Tags: Narendra Modi, Protestors, Protest, Gurcharan Das, Farm Bill

Gurcharan Das, a corporate veteran, author and the former CEO of P&G India recently wrote a widely shared opinion piece for the Times of India titled “Don’t kill 2nd green revolution: Rolling back farm reforms would privilege a small but vociferous group over the silent majority” , highlighting how the widespread protests against the recent farm bills are just a result of ‘lack of marketing efforts’ of our honorable PM and involve only few big stakeholders. So, I decided to dig a little deeper into the farm bills and the resulting protests to check if his point-of-view is really grounded in reality. But before presenting my thoughts and findings, I’d like to clear what these 3 ‘Historic’ farm bills essentially talks about.

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

This Bill allows the farmers to sell their produce outside the Agricultural Produce Market Committee (APMC) regulated markets. The APMCs are government-controlled marketing yards or mandis. So, the farmers clearly have more choice on who they want to sell.

The government’s logic, as articulated by Mr. Das is that the Agricultural Produce Marketing Committee (APMC) is an obsolete institution from an age of scarcity, meant to protect the farmer but has now become his oppressor, a monopoly cartel fixing low prices for the farmers’ produce, forcing distress sales.

2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020:

This Bill makes provisions for the setting up of a framework for contract farming and allows farmer to enter into forward agreements for their agricultural produce.

3. The Essential Commodities (Amendment) Bill, 2020

The amendment made in this bill aims to remove commodities like cereals, pulses, oil-seeds, onion and potatoes from the list of essential commodities. It will do away with the imposition of stock-holding limits on such items except under “extraordinary circumstances” like war.

The logic behind the amenment is that this provision will attract private sector/FDI into farm sector as it will remove fears of private investors of excessive regulatory interference in business operations and promote cold-storage infrastructure.

Some of the important facts and figures pertaining to Indian Agriculture:

Approximately 60 percent of the Indian population works in the industry, contributing about 18 percent to India’s GDP [Source: Statista] The proportion of landless laborers (among people engaged in this sector) has went up from 28% (27 Mn) in 1951 to 55% (144 Mn) in 2011 [Source: Indian Express] 86% of all landholdings in India are small (between 1 and 2 hectares) and marginal (less than 1 hectare — roughly half a football field). The average size among marginal holdings is just 0.37 ha [Source: Government Data] According to a 2015 study by Ramesh Chand, now a member of Niti Aayog, a plot smaller than 0.63 ha does not provide enough income to stay above the poverty line[Source: Indian Express] 40% of the 24 lakh households that operate on landholdings smaller than 0.01 ha are indebted. The average amount is Rs 31,000.[Source: Indian Express] MSPs are announced for around 23 crops, actual procurement happens for very few crops such as wheat and rice. Moreover, the percentage of procurement varies sharply across states [Source: Government Data]

Now that I’ve set the context right, let me try to dismantle the perspective of Mr. Das and why I feel that it is an elitist POV.

1. Mr. Das enunciated that the government is thinking in the long term whereas the farmers and opposition have a short-term vision, which I believe is exactly the opposite. Farmers are actually concerned about the long term impacts of giving an ‘option’ to sell directly to the private players. This may seem like a very good option on paper, however, I want to present a contrary point of view from a long term perspective. Consider a situation where a small farmer has an option to sell his yield to APMC at an assured price (MSP) or to a private player directly (private players would be happy to do so because of tax-saving). Now initially, there would be a competition between the APMC and private players and hence, private players are more likely to offer a better price to the farmers because of their deep-pockets. This will naturally result in the shutting down of APMC in a few years and hence resulting in a monopoly/oligopoly of the private players. Once this happens, it is natural to assume that a private player(s) can decide the price of yield arbitrarily for the cost benefits (without any legal framework in place to help farmers). This scenario that I just presented to you is not unfounded. In 2006, Bihar government decided to abolish APMC and it proved to be disastrous for the farmers in the state as reported by the Mint: “Bihar is among the leading producers of maize in India and the third-largest producer of fruits and vegetables after Uttar Pradesh and West Bengal. For maize, this year most farmers reported getting a price of ₹1,000–1,300 per quintal, as against the official minimum support price (MSP) of ₹1,850. For wheat too, farmers in Bihar reported receiving prices 10–15% lower than the MSP” [Source: https://www.livemint.com/opinion/columns/lessons-from-bihar-s-abolition-of-its-apmc-system-for-farmers-11600962615201.html]

This can be further understood from the example of Jio entering the telecom market and undercutting the competition aggressively (Including BSNL) using its deep-pocket. This resulted in an oligopoly in the market and now the prices are completely in the hands of these few players who are gradually increasing the prices over time.

2. To quote Mr. Das: “A third lesson is that a small, organised, and well-funded group in a democracy can hijack the nation’s interest when the majority is silent and unorganized. Behind the protests are arthiyas, buying agents in APMC mandis, who stand to lose Rs 1500 crore a year in commissions, plus rich farmers of Punjab”

No doubt that the protests include these stakeholders as their livelihood is directly linked with the ecosystem of AMPC (thousands of people work in APMCs including laborers, accountants and licensed middlemen). But I want to highlight that there are farmers of all sizes participating in the protests (covered in some media as well) to raise their valid concerns which Mr. Das conveniently left out to reinforce his biased opinion on the matter. This not only shows his elite perspective on the issue but also his lack of understanding of the ground reality.

3. Inter-state selling that the government is boasting about is a complete lie because it has always been there and farmers were never restricted under any law (however, licensed middlemen in the APMC were restricted) to sell their produce in another state. But they usually chose not to, because of high transportation and storage expenses as compared to the marginal profit they’ll get after selling it to other markets.

4. The Second farm Bill talks about encouraging farmers to strike deals with large corporates in terms of contract farming, but there are hundreds of cases where they have been exploited time and again by the corporates because of low bargaining power as a result of small landholdings (86% of Indian farmers have less than 2 hectares of land). Furthermore, the government has not talked about any legal framework to handle the resulting disputes (Only SDM as the dispute solving authority).

5. Third bill which talks about hoarding is providing the seemingly unlimited stocking option to the private players, which can obviously result in artificial price fluctuations and further exploitation of farmers.

6. The biggest argument in favor of farm bills, as per the government is that it will end the ‘Middlemen’ from the supply chain, which again is not grounded in reality. This can again be understood from the example of Bihar as well other countries with private market for agricultural produce. Instead of eliminating the middlemen completely, this system is likely to replace government licensed middlemen to private middlemen (which are less accountable) because Indian agricultural sector is flooded with small farmers with lower production capacity. It doesn’t make business sense for the companies to directly deal with these small farmers. Instead, they are more likely to employ a local aggregator who would buy the yield from various small farmers and further supply it to the companies while keeping a commission.

All these points are enough to prove that the bills are more favorable towards the companies and not legally empowering to the farmers. Mr. Das, being a corporate stalwart would naturally see this as a ‘Reform’ with his biased and elite POV inclined to favor the private players.