Thursday, September 24, 2020

Rich Farmers Resist Deshackling India's Farm Economy 

The Indian Government passed the Farm Bill 2020 in the month of September that permits farmers to sell their produce to any buyer at any place without paying commissions or cess to any mandi committee or municipal committee or state. Ease of business or freeing procurement in the farm sector was a long overdue reform, along with the introduction of contract farming.

I had written in various newspapers and magazines over the years on freeing the farm sector. Two chapters were dedicated to the subject in my book on the economic governance "India Emerging : From Policy Paralysis to Hyper Economics" published by Bloomsbury in April 2019. Chapter 11 Volatility in Food Prices : Can it be controlled h. and Chapter 12 : Indian Agriculture at Cross Roads : New Direction Needed highlighted the need of the Farm Reform Bill's that are now in place. 

Why were the Farm Bill's needed 

Chapter 11 showed the unfair buying practices at the APMC Mandis dominated by rich farmer-trader-politician where commission agents, dalals and athariyas rule the roost. I had also provided data on the big farmer, trader nexus at the Nasik and Lasalgaon Mandi that had created cartels in the vegetable Potato, Onion, Tomato POT markets causing acute food price volatility. This was followed by sharp rise in prices of spice and pulses. The prices of pulses doubled to Rs 200 per kg in a six month span during 2015. Following country wide raids to stop hoarding, a 2000 page Income Tax report titled Appraisal Report in the Case of Pulse Importers and Traders Group submitted to the Ministry of Finance in 2015 showed the existence of a three tier trading cartel backed by none other then the Anglo Swiss Commodity trader Glencore. 

Chapter 12 gave data  that clearly showed that minimum support price MSP did nothing to reduce farm distress. This because the Food Corporation of India that procured over 70 million tonnes of food grain every year did not buy from the small and marginal farmer with small land holdings of 2 to 4 acres. The volumes were so small that it would be unviable for the mammoth public sector buyer to buy from those small land holders in deep distress. Instead more than half the buying was done from the rich farmers of Punjab and Haryana where both the quality and quantity  was good. 

The Modi Govt had recommended the modification of the APMC Act to the Model Agriculture Produce and Livestock Marketing Act that would permit farmers to sell their produce to anyone in 2017 but none of the states including those ruled by the BJP modified the APMC Act. 
So the Government had no other option than introduce a new act that permits free trade and also contract farming and food processing without any restriction.

Why are farmers protesting against the  Farm Bills. 

Deshackling of the economy should be a welcome move. So why not the farm economy? Then why are laws to make farm procurement easier, being resisted?  Because two states of Punjab and Haryana where the FCI buys from the farmer's with large land holdings fear that Rs 80,000 crore of annual procurement of wheat and paddy at MSP by the Government could slow down if private procurement picks up. It is this monopolistic lobby that sells over 40 million tonnes of wheat and paddy to FCI at MSP of Rs 1925 and Rs 1835 per quintal respectively whose interest could be hurt. 

So should we support such monopolies. Should the taxpayer's money from the Central exchequer be used to support farmers in distress or the rich farmers who sells to FCI at MSP. This is the case which I made out in my book India Emerging and am thankful that the Govt has responded positively. But making laws is just half the job done. The more difficult part is implementing the law and bringing many more buyers to the retail markets seamlessly. That would take much more time and effort along with single minded dedication to keep  vested interests out of the supply chain. Let us hope that this far reaching farm reform delivers. 

# IndianEconomy # IndiaEmerging #Farmers #FarmEconomy #FarmBill2020 #MSP #FarmProtest 


  1. Excellent with a strong logic. As I had mentioned earlier the bigger task would be the correct mass scale implementation to pass on the benefit of the law to the larger section of the farmers.

  2. One tenth of the story...isn't it?