Farmer's Feast 2020
This week we delved into the ongoing protests against the reformed agriculture bills. Check it out!
The recent announcement of Bharat Bandh on 8th December 2020 (today) and the Twitter feud between Diljit Dosanjh and Kangana Ranaut led me to delve into the ongoing protests in Delhi against the three controversial acts. Following is our analysis of the situation. Hope you enjoy the read ahead!
Context:
President Ram Nath Kovind on September 27 gave his nod to the three bills passed by the Parliament. This was followed by a consequential outburst including terming the amendments “Anti Farmer” and a wide outrage across the nation especially the states Punjab, Haryana, and Bihar. A lot has happened since this development and this article can act as your bird’s eye view of the situation.
The three acts:
What are the three new acts you ask? Well let’s start with their names:
Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020
Essential Commodities (Amendment) Act, 2020
With the names out of our way, we will now try to understand them briefly and then define the possible accomplishments and implications.
The Farmer’s Produce Trade and Commerce act allows the inter and intrastate trade of the farmer’s produce beyond APMC and other state markets. Before this act agricultural trade was limited to APMC mandis. This means that the farmers will now be able to sell their produce through different avenues and to different customers. The intent behind this act is to facilitate lucrative prices for farmers through alternative channels and to essentially open up the market which does sound logical. But if we deep dive into the act certain shortcomings come to mind, for instance, can the present supply chain accommodate this development? And if it can then who would be looking after quality assurance?
Moving towards the second act, the Farmers agreement on Price Assurance and Farm services act gives farmers the legal capacity and access to be able to draw contracts before the actual production of their produce. A major chunk of India’s produce is sold to private traders rather than mandis or cooperatives which in most cases is the ad-hoc sale of the produced crops. Given that 86% farmers of India operate at a small scale and usually need financing before sowing their crop for the season, these contracts can act as a great asset for them to be able to collect formal loans in place of informal loans which are infamous for exorbitantly high-interest rates.
The third act called the Essential Commodities Act was initially established (1955) to regulate the delivery of certain products that are essential for one’s daily routine or the lack of which can disrupt the average joe’s daily operation. These include food essentials, drugs, fuel, etc. The list of items under the umbrella of this act also includes fertilizers, drugs, and edible oils. The amendment of the act only limits the “stocking” of these items only under exceptional circumstances like war, famine, or a large change in the price of the commodity hence deregulating agricultural produce with an intent to facilitate better prices for farmers.
The Green Revolution:
Here we will briefly cover the Green Revolution, its importance in India’s development over the years, and its role in defining the agricultural future of the nation. India was desperately short of grains in the 1960s. In fact, India was on the brink of mass famine in 1961. India after the British colonial rule was a poor nation and was finding it difficult to feed its population and hence had to rely on imports to meet its shortage of grains which significantly reduced India’s forex reserves. Hence India started its grains from the US under the PL 480 scheme which was an initiative by the US to trade surplus commodities in exchange for the troubled nation’s currency (in our case rupees). More money was printed to cover these orders from the US which eventually led to high inflation and financial instability.
This trade also led to a reduced price of these commodities in the market, disincentivized the farmers to produce these crops, and hence created a vicious cycle for Indian agriculture. Then the Indian green revolution under the leadership of Indira Gandhi commenced in the year 1965. The Green Revolution leveraged agricultural research and technology to increase agricultural productivity in the developing world leading to an increase in food grain production, especially in Punjab, Haryana, and Uttar Pradesh. This was followed by the setting up of MSP and APMC to further strengthen the supply chain. The Government through this set up generated a revenue source for farmers and distributed the accumulated grains at cheap prices across the nation.
The major impact of the Green Revolution was limited to the states Punjab, Haryana, and UP which eventually led to a major income disparity across states amongst farmers. The following graph shows the average farming household income (monthly) for the year 2017.
APMC MSP and the Current Scenario:
An Agricultural Produce Market Committee (APMC) is a marketing board established by state governments in India. These boards are regulated by the states in their respective localities. Post Independence, a major concern of the Indian Government was to keep the price of certain commodities under check. As mentioned before, to ensure a fixed source of revenue for Indian farmers and to incentivize them to produce certain crops, MSP and APMC markets were set up.
Moving towards the present situation there are about 23 commodities for which MSPs are announced annually but in actual practice only wheat and rice substantial procurement at MSP by the government. Out of this procurement, Punjab is the biggest gainer as its 95-98 percent of market arrivals of wheat and paddy are procured at MSP by state agencies on behalf of the Food Corporation of India (FCI). This MSP system has made the states Punjab and Haryana heavily dependent on public procurement and hence can be reasoned for the lack of initiative and entrepreneurship from them. The stocked grains of the Food Corporation of India (FCI) touched 97 MMT in June this year against an expected buffer stock of 41.2 MMT (about 1.5 times the value) which depicts the gross inefficiency of the system.
The Protests:
After almost a month of protests against this development, a special session was held by the Punjab Assembly on Tuesday, October 22. This session rejected the three amendments and passed three influenced farm bills for the state of Punjab hence exempting it from the central laws. Even if Punjab gets exempted from the set of acts, the advent of inter-state trade and private players in the market would have greatly impacted the market dynamics due to which the protests continued.
Moving towards the present situation, hundreds of farmers have been protesting on different borders of the national capital since November 26. There is a major 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. The opposition which is known to appease the farmers of these states has been misleading the population of these states to protect their political interests which have led to a major disruption of the operation of the national capital. Multiple dialogues between the Union Government and the representative body of the protests have taken place but little progress has been made.
We believe that these amendments are forward-looking and with the right execution, can greatly benefit the farmers. The open market will also indirectly incentivize the farmers to improve the standard and ensure the quality of their produce. This concludes our analysis of the situation. Hope you liked the session! Don’t forget to like and share this article to help us reach a better audience and consider subscribing to the newsletter to find us directly in your inbox! Until then...