On 20th September 2020, the government of India passed three new farm laws.
According to the government, these new laws will provide the farmers with a free market system that will be deregulated. The farmers will have more options to sell their crops, and they won’t have to depend on the Old APMC Mandi and MSP system.
Then what’s the problem?
Farmers are not happy with these laws. According to farmers, these laws will favour private companies and be death warrants for their future generations. They started conducting protests.
Let’s take a look at the previous laws made by the government for the farming sector.
During the 1960s and 1970s, almost every state government in India implemented the ‘Agricultural Produce Market Committee Act’ (APMC Act) to enable the farmers to bring their produce to the nearest government mandi and sell it at a good price. These ‘mandis’ are called ‘APMC Mandis.’
In the 1950s and 60s, the trader community was robust in the country. They hoarded food grains and manipulated prices, And the APMC Mandi system was introduced to protect the farmer from their exploitation.
How does APMC Mandis work?
Let’s assume a farmer has produced 40 quintals of wheat, and they took it to their nearest APMC mandi to sell. Then, the farmer unloads the produce in the Mandi, potential buyers or traders bid on this, and the highest bidder wins the auction. This process is called ‘Price Discovery.’ The produce is now bagged and sent to either the market as per the trader’s requirement.
This whole process is conducted and overseen by licensed APMC officials to keep a check on any malpractice. The marketing committee also applies some fees on every transaction in the Mandi premises.
In this system, anyone who buys from farmers has to get a license, and this license gives them access to the infrastructure like weighing facilities in the Mandi.
Problems with these Mandis
As per the Commission of Costs and Prices (CACP), a total of 41000 Mandis are required all over India, but there are only 6630 Mandis throughout India, with each Mandi serving roughly an area of 496 sq. km. Only 15% of the existing Mandis have cold storage facilities, and 49% have weighing facilities. As a result of this shortage, small farmers, who can’t afford to travel long distances to get to their Mandi, have to sell their produce to the middleman in the village.
As per National Sample Survey (2012-13), only 44% of wheat farmers and 29% of paddy farmers sold their produce in the Mandi, plus another major issue with the mandi system is corruption.
Minimum Support Price (MSP)
MSP is a legally fixed price paid by the government of India to farmers whenever they procure a particular crop.
But the current MSP system has its drawbacks. Since wheat and paddy are most procured on MSP, the farmers prefer growing them over other crops. As the farmers have been growing wheat and paddy in large quantities, the government also tries to procure more. This has turned into a vicious cycle- The farmer keeps growing only wheat and paddy because the government keeps procuring it and vice versa.
Food Corporation of India (FCI) has got so much wheat and paddy that they are running out of storage space for it, and in some cases, it is even found to go waste as a result of the same.
What will be the effects of new laws on farmers?
The new farm laws passed by the government aim to deregulate this entire system. Under ‘The Famers Produce Trade and Commerce Act,’ a farmer can now officially sell their products to any trader outside the Mandi, And traders buying outside the Mandi will not have to pay any tax either.
It is evident that if the trader has to pay the tax on transactions inside the Mandi but not outside the Mandi, the trader will obviously choose to buy the produce outside of Mandi, making the Mandis diminish, And it is happening.
If we look at the Mandis of Madhya Pradesh, in the last five months, 47 Mandis have closed down, and the turnover of roughly 190 Mandis has dropped drastically.
Farmers and agricultural experts believe that the corporate companies will initially give farmers relatively better rates than those they get in the Mandis, making farmers prefer selling directly to them outside the Mandis. But this will eventually cause the revenue of the APMC Mandis to drop, and because of this, they will ultimately be forced to close down, thereby ending any government oversight on the transactions taking place between traders and farmers.
This newly deregulated system will give more control to the private traders, and they will be free to do as they wish.
Other Problems
As per these new laws, if a conflict arises between the farmer and the private company, the farmers can only approach the Sub-District Magistrate for conciliation and not the Civil Court.
On top of that, the government has amended the ‘Essential Commodities Act,’ which allows any private company or trader to buy and hoard food grains and manipulate their prices. In a way, the government has left the farmers at the mercy of free-market forces.
A failed model
A similar model has been proven to fail in the case of America, and this is why America passes a new farm bill every five years where billions of dollars worth of subsidy support are provided to the farmers.
That is why Indian farmers don’t want the new farm laws, and they are demanding that the MSP be included in these new farm laws.
What could be the correct measures?
Without MSP and Mandis, farmers will be left with no safety net to fall back on. Most of the farmer’s livelihood depends upon the Mandis and MSP prices. Rather than giving all the power to private players, the government should try to partly regulate the system in a way that farmers can sell their produce directly to private companies, but if their crop did not get a fair price, they should have an option to sell it at a fixed price to the government.
