Ever since the economic reforms started in 1991, India made considerable progress in most sectors of economy, but the agricultural sector remained ignored despite supporting 60% population. Therefore, the government recently passed three Farm Laws in the parliament, aiming to spur development and modernization of agricultural infrastructure in rural India and expanding farmer’s freedom in selling their produce. The dominant section of Indian farmers across the country appears in favor of the Bills but a section of highly influential farmers (mostly from Punjab and Haryana) came out to protest the historical Bills. Farmers protest has highlighted the need to relook into the MSP/APMC system that originated during the green revolution. It has clearly benefitted Punjab and Haryana farmers but across India 94% farmers still have to sell their produce in the open market. Together with commission agents, middlemen, the MSP has become a privilege of elite rich farmers with influence.
Protesting farmers must not ignore the interests of small farmers for whom the MSP has no relevance. They must help the government to tweak the laws so that they continue to get benefits of MSP while creating more selling options for the small farmers. They must understand that farmers of different States face different situations and the APMCs don’t exist in all States.
Farmers Protest
Farmers from Punjab and Haryana have been protesting for several weeks at the Delhi border demanding repeal of 3 historic farm laws passed by the parliament in September 2020. They feel that if farmers have the freedom to sell their produce to anyone anywhere in the country, the MSP/APMC system would weaken and over time it would collapse. In fact, they are the biggest beneficiaries of MSP so their demand appears justified at the face value. But what remains hidden and undiscussed is that only 6% farmers in the country get the MSP; the rest 94% have to sell to local traders and wholesalers at whatever price offered in cash.
Hidden Agenda: Tarnishing Image of PM Modi and the country globally
The jihadi and Khalistani agents hiding behind farmers want violence and deaths, so their global network can portray Narendra Modi as fascist and malign India’s image. It’s the same strategy that was adopted last year by Shaheen Bagh jihadis. Italian fascist lady, Antania Maino, owned Congress and leftist leaders appears to be the prime mastermind behind the conspiracy. Needless to say, they have full support of ISI and Pakistan’s jihadi PM.
If the protest were only about farmers issues it would have been wonderful. But what is totally unacceptable is the manner protest is organized. It clearly has a hidden agenda and those sitting on protests are mere paid or misguided puppets. The protest organizer’s primary intention is to malign Prime Minister Modi and the BJP government globally. They merely want some violent actions to fuel their global anti India and anti-Hindu propaganda. The ISI sponsored Khalistani agents, domestic Jihadi and leftist separatist elements and Antania Maino owned Congressis are local facilitators. Why else would there be posters in support of the dead ‘Khalistan’ movement, demand for release of anti-national Jihadi Muslims. Why else would the Congress clown and habitual liar Mr Raul Vinci be making his typical secret foreign trips. This deceptive creature has signed a secrete deal with China and sure has connections with several anti-India and anti-Hindu lobbies.
Why MSP is a Big Issue for Farmers of Punjab and Haryana
The agriculture economy of Punjab & Haryana is heavily dependent upon MSP. Although small farmers remain still marginalized, the big influential farmers and the middlemen have been the prime gainers.
Punjab and Haryana are even today the major producers of rice and wheat. These two crops are also the dominant farm produce in these two States. Consider the following statistics to understand why MSP is so important for their farmers.
Of the total produce in these two States, about 88% rice and 70% wheat are sold to the FCI at the MSP. It means the agricultural economy of these States is heavily dependent on the MSP. So these farmers feel threatened by the new farm laws that do not talk about MSP. Although the laws only facilitate alternate channels for the farmers to sell their produce, they fear that it paves the way for ultimately scrapping the MSP in the future.
Compare this statistics with rest of the India. At the all India level, the two States alone contribute about 35% rice, 62% wheat and 50% coarse grains. Therefore, Punjab & Haryana play vital role in providing national food security. In comparison, how much other States contribute towards food grain production can be seen from these numbers:
Of the total rice produced by the major rice producing States (AP, Telangana, Odisha and UP), average only 44% gets sold to FCI at MSP. It’s half in percentage terms compared with Punjab and Haryana. Of the total wheat produced by the major wheat producing States (UP and MP), average only 23% gets sold to FCI at MSP. It’s one-third in percentage terms compared with Punjab and Haryana.
Only 6% Farmers get MSP at National Level
Corrupt middlemen and big farmers alone have been benefitted from the MSP/APMC trading system.
Across India only about 6% farmers are able to take benefit of MSP, the bulk of it by big farmers in Punjab and Haryana. A nexus of FCI officials, middle men and elite farmers controls all purchases in the APMC mandis. The mandi operators force the ordinary farmers to sell their crops at sub-MSP prices and then resell it to the FCI at MSP. The difference gets into the pockets of corrupt FCI officials and the middlemen but is shown as ‘purchase at MSP’. Those sitting on protest primarily want this corrupt system to continue and do not allow small farmers any freedom to sell at other locations.
The protesters and their backers are worried that the new Farm Laws give farmers alternate trading channels and the freedom to sell their produce anywhere across India. In short, small farmer’s freedom is their loss! They are also apprehensive that ultimately, the APMC mandis will become redundant and the MSP concept would lose favor. It means end of their corrupt practices and loss of political influence.
Some state governments (for instance Punjab) are also opposing, citing loss of income that comes from cess and taxes from the APMC mandis. Punjab government collects around 8.5% or around 1700 crore tax from the mandis. This can be easily sorted out and the central government might offer some compensation similar to what was done with the introduction of GST. Moreover, there is another counter argument: if the state governments can forego revenues by offering subsidized or free water and electricity or by frequently waiving farmers loans, then why can’t they stop taxing APMC transactions in the first place.
The MSP/APMC System
When India got independence, farmers normally lived exploited by money lenders and rich traders. There was nothing to protect their interests and had to sell their produce at whatever price offered to them. Wide spread acute poverty and hunger were top national priorities. India had to import millions of tons of food grain every year.
Then national efforts brought in the green revolution in the early sixties. In order to encourage farmers to produce more the ‘minimum support price’ (MSP) system was introduced in 1965. This is when the Agriculture Price Commission was set up and the Food Corporation of India (FCI) was formed for facilitating the MSP system. Assurance of purchase of crops at the MSP did wonders. At that time Punjab and Haryana alone produced bulk of food grains for the entire country. It served brilliantly then, and the country soon became self-reliant in the food grain production. The MSP initially covered only rice and wheat, but slowly other crops were also brought under it — today 22 crops (including cereals and pulses) are under the MSP umbrella. However, over the years governments failed to develop proper procurement infrastructure, vested interests developed, corruption bred, and the Food Corporation of India (FCI) could not create sufficient quality storage facilities. As a result, small and middle rank farmers never really got the benefit of the MSP. Year by year they had to sell their crops to local buyers at whatever price paid in cash. Even today, MSP remains beyond their reach despite political rhetoric. It only benefits 6% farmers.
APMC Mandis
Despite all attempts by Central and State governments, sufficient number of Mandis across India could not be set up. One APMC mandi was supposed to exist within 5 km distance from the farmers. Thus, around 42,000 mandis were needed across India but in realty only 6500 APMC mandis exist today. State governments failed to provide proper procurement infrastructure, mostly citing fund shortage. States like Maharashtra and Karnataka allowed private madnis alongside the APMC mandis but a left run State like Kerala relied completely on private mandis! The middlemen in the mandis are generally politically connected. They exploited the system to make corrupt money but for most farmers across India the MSP always remained a distant mirage.
3 Farm Laws
The three Laws passed by the parliament in September 2020 are
1. The farmers Produce Trade and Commerce (Promotion and facilitation) Act, 2020
Aims to give farmers the freedom to sell their produce to anyone. It should weaken the stranglehold of the corrupt APMC mandi middlemen and operators. It is a move towards One nation; One Market national policy.
Hoping to create an ecosystem where farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce, it lifts the restriction of selling the produce only in the authorized local mandi. It allows the farmers the freedom to sell to any interested buyer across the State and Country. Opposition parties too have been in favor of this policy. But Modi government actually implemented it! So they are restless and inciting protesting farmers.
Practically all experts and farmers agree that farmers should have more options to sell their produce. This laws gives them the freedom.
Explore: e-NAM: National Agriculture Market
2. The Essential Commodities (Amendment) Act, 2020
Allows storage of commodities in larger quantities. It should help create proper storage infrastructure.
With this amendment, Modi government removed restrictions placed on storage and hoarding of essential commodities like pulses, oil seeds, edible oil, onion, potato etc, by removing them from the list of essential commodities. So, now all these commodities can be stored in large quantities by market players except in some exceptional situations like war, famine, natural disasters etc. Exporters and processors remain exempted.
The restrictions on storage and hoarding was needed in the past due to perennial shortage of these commodities so that profiteering and black marketing could not take place. But in today’s situation where these items are produced in sufficient quantities, lifting these restrictions makes sense.
3. Farmers (Empowerment and Protection) Agreement of Price Assurance & Farm Services Act, 2020
It facilitates Contract Farming, aiming to attract high technology and private investment in the farming sector.
It relates to contract farming and allows farmers to tie up with large buyers and exporters. Farmers can get into price agreement with any buyer even before sowing the crops. Buyer’s claim will be strictly restricted to crop alone — and never in any manner on farmers’ land.
This law should encourage private investment and high technology in agriculture and the buyer-farmer partnership means willing help from the buyer to ensure high quality seeds, pesticides and other modern inputs to the farmers. In most cases, transportation cost would be born by the buyers. Risk of crop failure due to any reason, largely rests with the buyer while ensuring bonus to farmers in case of better than expected realization of marker price by the buyer.
The leftist lobby is naturally scaring farmers by painting rich buyers as eternal devils who would ultimately rob farmers of everything. Farmers must keep such nasty elements away.
Protestors’ Fears; Government’s Arguments
Protestors Fear: They see ending the monopoly of APMC mandis as a sign of ending the MSP system. This, in their opinion, would ultimately leave the farmers at the mercy of market manipulators.
Government’s Argument: The MSP would not be scrapped and the APMCs would continue as usual. Only additional channels to sell farm produce are being created for farmers benefit.
Protestors Fear: Dispute resolution should not be left to the bureaucrats, who can be influenced by rich entities. But judiciary should be assigned this task.
Government’s Argument: It can be always relooked; it’s not a critical issue.
Protestors Fear: Farmers are among the poorest community. They live in perpetual debt and poverty; thus, they need government support. So they should not be left to the vagaries of exploitative market forces.
Government’s Argument: The agricultural sector needs massive investment and modern technology that can only be done by allowing private sector participation. As farmers also gain benefits of other government policies like Kisan Samman Nidhi, Fasal Beema Yojana, soil health card etc, they would be empowered. Thus, their situation would improve and they can better negotiate with market players.
Best Way Forward
Income support to small farmers, such as the Kisan Samman Nidhi, should be further expanded to make it a regular income support. Imagine the relief if all farm labors and small farmers receive a monthly income support. They must be also trained and encouraged to look for income beyond crop growing.
Why not India redesigns the economic development model for the country. Currently, it is totally GDP centric. This ‘GDP growth’ model leaves people exploited because GDP takes priority over people’s well being as explained below.
Fundamental Problem
Wrong ‘GDP Growth’ Economic Model
Agriculture Sector contributes only 15% to India’s GDP, but supports 60% work force. Therefore, policy makers are reluctant to assign more resources and money to the farmers.
Since the economic liberalization in the early 1990s and weakening of license Raj, industrial sector became prominent for the government. Today this sector contributes the most to GDP growth. The share of farming sector in country’s GDP has become smaller and get gets smaller with each passing year. Currently, the farming sector contributes only about 15 percent towards the GDP. Moreover, the farmers who kill themselves due to financial distress are among the poorest. Their contribution to GDP is only miniscule. They are also voiceless and choice less. Why would any policy maker care about them?
‘Trickle Down’ Development Model
The USA and the Western countries follow this ‘less-than-ideal’ development model. Given their rather smaller population bases and the elitist Malthusian thinking, this simplistic model has been guiding their national policies. In simple terms, it’s all about ‘GDP expansion’, by helping companies produce more than previous year — and keep doing it till eternity!! This is what the IMF and global funding agencies also impose on poor countries when they approach for loan.
This GDP focused development model makes ‘people’ and their human well-being secondary. At best people are seen as mere ‘human resource raw material’ — the cheaper the better — to fatten corporate bottom lines. Since company’s profit depends upon minimizing the input cost, it is a fashion to try solving all problem with technology and automation or employing the least number of people at lowest possible wages and duration. Thus, hiring and firing is the tradition; it leave people in perennial distress.
This model primarily serves the company owners, people with capital. Thus the richest people and companies get the maximum benefit — people employed gain only to the extent of wages paid to them. It breeds and strengthens inequality. It is rightly called the ‘trickle down‘ development model. People at the bottom are the last recipient of GDP growth, if and when something trickles down to them. Oxfam points out that today the richest 1% humanity owns more wealth than the rest of the 99%. This harsh reality is getting harsher year by year — and there is no mechanism to counter it. The current world order is dictated by financial interests of a few dozen largest corporate houses. As a result, the humanity and planets resources remain under constant exploitative pressure.
How Policy Makers See Farmers
In the US, only 1% population lives on agriculture. Therefore, our copy-cat policy makers want to reduce population in the agriculture sector.
Now with entire focus on GDP growth through industries and technology, the policy dialogue switched to shifting farm dependent population to the industrial and technology sector. It meant people shifting from rural India to urban India. Thus, the farmers and the tribals became the prime targets. They were forced to give up their traditional living style and migrate to cities to become cheap industrial labor for survival.
Hawks among the policymakers initially wanted to bring down the population under agricultural sector to 10% but now the goal is under 40% as soon as possible.
Useful Reading
Why mainly Punjab & Haryana Farmers are Protesting
Issues and Challenges in India 