Articles by ecothrust at Technorati Headline Animator

Thursday, October 22, 2020

Punjab bypasses Farm Bill 2020 :

Rich farmer, poor farmer tussle starts.


In the third week of September the Union Government passed the Farmers Produce Trade and Commerce Bill 2020. The Bill did away with the Mandi monopolies and provided the farmers alternative platforms to sell their produce to any buyer at any place. This procurement could be not only at APMC Mandi’s but could be at the farm gate or the factory gate, it could be at a warehouse or at a food processing centre. Transactions in such areas would not be charged the APMC Market Fee or Cess. 



A month later the Punjab Government passed 3 bills to bypass the farm bill 2020 enacted by the Centre. Terming the Central bills as illegal the Punjab C.M. Capt. Amarinder Singh warned “If the laws are not revoked, angry youth may take to streets and join the protesting farmers, which would lead to chaos.” The matter of jurisdiction is already in the Supreme Court as Congress party parliamentarians have challenged the right of the Union Government to pass the bill claiming that it is a state subject. The 3 congress ruled states are expected to follow suit. 


 Rs 80,000 crore MSP bonanza for rich farmers of Punjab & Haryana 


  “ In 2019-20 alone, government agencies procured 201.14 lakh tonnes of wheat and 226.56 lakh tonnes of paddy from Punjab and Haryana. That, at their respective MSPs of Rs 1,925 and Rs 1,835 per quintal, would have been worth Rs 80,293.21 crore. And all these purchases were done in the mandis” wrote the Indian Express in an insightful article titled ‘Farm Bills 2020: Actual text vs perceptionAPMC Cess and Comission levied by Punjab and Haryana  at that point of time was 8.5% as per Financial Express. Of this 6% went to the coffers of the state while 2.5% went to the politically powerful Mandi Dalal or Arhtiyas as comission in the two states.


A quick math would show that the two states earned Rs 4800 crores from the FCI purchases annually while the 60,000 odd registered Arhtiyas in the two states earned Rs 2000 crores. The mandi Dalal or the Arathiyas of the APMC markets were already up in arms against the original farm bill 2020 ordinance. As early as June the Times of India  in an article “One nation, one market, what of comission agents, rural infra asks association” warned that the BKU, the INLD and traders would oppose it. “Terming it a dangerous move aimed to end the farmer-trader relationship”, Haryana Anaj Mandi Arhtiyas Association  president Ashok Gupta said “they would soon hold a meeting of all traders and would launch protests against it.” 

Does MSP help reduce farm distress 


 On September 23 the Hindu Business Line reported that following the new law the states of Punjab and Haryana slashed these high cess levied by the APMC committees  by half. This was done to appease the farmers and to tell them that it would be more profitable to side with the states instead of the Centre on this issue. Thereafter started the rail roko agitation which turned violent in several districts of Punjab. 

I have written about the ‘Mandi Politics and Monopoly’  of the APMC committees and how they are totally controlled by rich farmer-trader turned politicians in my book India Emerging From Policy Paralysis to Hyper Economics published by Bloomsbury in April 2019 ( pg 124 and 125 ). In Chapter 11  Volatility of Food Prices : Can it Be Controlled ?  we explain how the rich farmer-trader cartel corners the potato, onion and tomato trade, and also spikes the price of pulses to spices despite surplus production. 


In Chapter 12 of India Emerging I talk of the 3 myths of our farm economy and discuss Does MSP Help Reduce Farm Distress? During my research I find that FCI only procures wheat and rice from the rich farmers of the states who have around 20 acres or more land. No procurement is done by FCI from the marginal farmer with land holding of 2 to 5 acres. 


Why Punjab gains from MSP while Bihar loses out 


This procurement of rice and wheat under Minimum Support Price started five decades back and has sharply accentuated the rich farmer poor farmer divide. Most of the the tax payer’s money of over Rs 2 lakh crore that FCI uses to buy wheat and rice each year ends up in the coffers of the rich farmer. Because Punjab has the most of the  rich farmers in 2019-20 it sold 108.76 lakh metric tonne of rice and 129.12 lakh metric tonne of wheat to the FCI at MSP .   This one state accounted for 21% of the money spent on rice procurement and 37.8% of money spent on wheat procurement by the Union Government.


Rice and wheat bought from the states as per the FCI website updated on 19.10.20 shows that while Punjab is the undoubted winner, the poor states like U.P. Bihar and Bengal lose out due to this flawed procurement policy. The three  populous states combined accounted for not more than 10% of the rice and wheat procured by  central agency under Minimum Support Price scheme. Over 50% of rice under MSP was procured by FCI from the four prosperous states of Punjab, Telangana, Andhra, and Chattisgarh while 50% of the wheat under MSP was procured from Punjab and Haryana. All procurement was made from rich farmers and none from the poor and marginal farmers. This is the reason why the opposition to the farm bill is coming primarily from the richest  agricultural state with rich farmers. 

This is the second part to the story the first being published on 24 Sept 2020

The third part will be published next Thursday. 







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