Annadata's Protest

"Many governments had come to power in the States and at the Centre over the decades in the name of farmers and workers, but what did they get—nothing; just a web of promises that neither the farmers understood nor the workers.” - PM Modi

"Congress in its 2019 manifesto had promised to rationalise the Mandi (APMC) Act, and create scope for farmers to sell their produce anywhere. We did the same thing…the opposition to the Bill is for the sake of politics" - Ravi Shankar Prasad (Union Law & Justice Minister)

"APMC is like a broken and leaking roof over the farmers' head, but the government is upto remove that too. No roof, no leakage." - Yogendra Yadav (Social and political activist)

"A private mandi will stand against the government mandi, one will be taxed and the other will not be. The first question is why it will not be taxed?" - Ravish Kumar (Journalist)

By now you might have guessed what this blog is all about. Since past few weeks, farmers in some states leading mass protests against the government's 3 farm bills. So let's move forward and understand what are these farm acts, what the government and the opposition has to say about it and why are the farmers protesting....

On 5 June 2020 the Union Government brought these acts as ordinances and later on passed them in the Monsoon Session of the Parliament, creating a lot of chaos in the Rajya Sabha.

So lets have a look at these bills which are now acts after the President's nod...

The first one is Essential Commodities (Ammendment) Act, 2020 which is an ammendment to Essential Commodities Act, 1955. According to this Act, the if the Centre finds that a certain essential commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period. Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.

But...but...but.....according to the new ammendment the stock limit will only be imposed in case of a war, emergency, famine or any other calamity. And the government has also excluded certain agriculture produce such as pulses, onion, potato and cereals, edible oils and oilseeds from the essential commodities list. So according to whatever economics I've studied, this is gonna be disasterous for the poor and the middle-income people. These are very basic and everyday use products. The ammendment will lead to huge stock-holdings of these commodities and less supply in the market, as a result of which prices will hike. Then these stockers will start clearing their warehouses and sell these products at a higher price. So who will benefit from it - the stockers, big companies, etc... And the one who will suffer is the ultimate consumer. And then the government too can't control this stocking as this is what's written inthe law. 

In short, this will lead to low supply of these commodities and will boost black marketing....

Let's get to the second one, i.e., Farmers' Produce Trade & Commerce (Promotion & Facilitation) Act, 2020.

Till now the farmers had to sold their produce only to Agricultural Produce Market Committee (APMC). APMC are state government regulated mandis (market yards) where the farmers realise the real price of their produce and sell them to the traders or middlemen through auction. The government announces a Minimum Support Price (MSP) for certain agricultural produce below which they cannot be purchased from a farmer. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price. But this system had many flaws like collective price fixing by the traders.

This is how all of this worked till now, but according to the new acts there will be some changes which the government calls "big reforms". 

Now according to the new act, farmers can make inter-state and intra-state trade of their produce beyond the APMCs, to the private players. It also allows electronic trading, facilitating direct and online buying and selling of such produce. 

If you ask me, till now it is a very good decision. But taxes spoil the whole game....

This act also says that the State Governments cannot impose any market fee or cess on trading farmers' produce outside the APMCs. This means that if one buys or sells the farmers' produce inside an APMC mandi, some taxes will be charged. Whereas if the same is done outside an APMC mandi, trading with a private guy, no taxes will be charged. 

Now what the farmers and the opposition point out is that this system will eventually end the APMCs and the MSPs. Let me tell you how...

At first the private guys will offer good prices for the farmers' produce and will try to lure them. Looking at the good prices and no taxes levid on trading with them, most of the farmers will move to sell their produce to these private ones. Gradually, after 4-5 years with maximum farmers trading outside the mandi, the State Governments may end the APMC system. Now the problem arises.... MSP is not like the MRP. MRP is a legal right, introduced in the Weights and Measurements Act, 1997 whereas MSP is not a legal right and is not a part of any act. Thus MSP is not a compulsion and the government can, at any time revoke it.

Even if the farmer trusts the State Governments that they will not end the MSPs or the APMC system sooner or later, then too a farmer can avail the advantage of MSP only when the trade is taking place within the APMC mandis and not while trading with the private players. This is because the act dosen't states whether MSP will be guranteed while trading outside the mandi or not. Thus, the private guys will have full advantage to spoil the farmers.



Now comes the last and the least controversial one, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.

This Act aims to bring contract farming system. Farmers can directly deal with private guys as provided by the previously act. Now they can also make agreements with the buyer even before the production or rearing of any farm produce. 

According to me, this is a good move.This has been done to ensure that the farmers can sell their produce even in unwanted circumstances (like the covid pandemic) by making an agreement with the buyer in advance. But the farmers fear that the agreements will be such that they will not have any bargaining power. The government should try to reach out to the farmers and make sure that they are convinced that the agreements will be fair. 
So I've made eerything clear about what these acts are and what good or bad they will do. So let's look at what do the ones who oppose these acts say.

Everyone including the farmers, opposition parties and the other poor and middle-income people are opposing the Essential Commodities (Ammendment) Act, 2020 because this will lead to huge hikes in the prices of the basic commodities.

Then, its the Farmers' Produce Trade & Commerce (Promotion & Facilitation) Act, 2020. This is the one which the farmers and the opposition are strongly against. They have just one demand that the government should make MSP a legal right for the farmers and make it applicable outside the APMC mandi too. The opposition adds to it one more thing saying why there is no option for court in case of any dispute. According to this act and the next one, in case of any dispute between the farmer and the private guys, there will be a three-level dispute settlement mechanism by the conciliation board, Sub-Divisional Magistrate and Appellate Authority. The farmers and the private guys cannot approach to the courts. This has been done because the private guys may extend the cases long and the farmers won't be able to tackle it. The orders given by the Sub-Divisional Magistrate or the Appellate Authority will be final. 

And now comes the last one, 

And now comes the last one, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020. According to me, there is nothing such which should be opposed. But when it's all about farmers, they say that the agreements might not be fair and they may loose any bargaining power. 

So should have been done by the Government? Well, they should have discussed it with the State Governments and the various Farmers' Unions. There should have been a thorough discussion and it should been voted in the parliament. The Government has a clear majority in the Lok Sabha, and in the Rajya Sabha many opposition parliamentarians were absent, so they passed the bill there too. But when it is such a controversial bill, it should have been sent to the Parliamentary Committee. 

But it's not too late. The government can make MSP a legal right by making a law, and can also apply it outside the mandi. The tax issue can also be solved if APMC mandis are also made tax-free or if the taxes are also imposed outside the mandi. 
The Essential Commodity Act problem can also be solved if the stock limit is eased a bit instead of making it totally free.

We live in a democracy, and this means that different people can have different opinions, there must be a fruitful discussion before implementing anything. Reforms just don't come up by imposition, they must be made by considering everyone and everything. Agriculture is such a thing which employs more than 50% of our population, contributes about 17-18% of the country's GDP, but the public sector investment in agriculture is just 0.3-0.4% of the GDP. This is why we see farmers and the agricultural sector in such a condition.