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Why the new agri laws are not anti-farmer
Read more on - Polity | Economy | Schemes | S&T | Environment
- Protesting farmers: The new laws in farming have attracted strong farmer protests. The manner of passing the laws in the Parliament too was full of noise and commotion. A central minister resigned too.
- What Congress promised: The INC said it would repeal the APMC Acts, in its 2019 manifesto. Today, the new law has given farmers freedom to choose whom to sell. No more the compulsion to only sell in the APMC (Agri Produce Marketing Committee - 'mandis').
- Centre didn't exceed brief: Constitutional provisions allowed the GoI to enact these laws, and states' powers haven't been curtailed. MSP procurement won't end. New laws won't end the APMCs but restrict their area of operation to physical boundaries only. Rest is for private players from here on.
- Punjab and Haryana: Many there fear that flow of money to APMCs will reduce. Today, the market fees there is 4% to 6% (just 1-2% elsewhere) but mandi infra isn't great. Why were those APMCs allowed to collect cess on trade outside their APMC yards?
- A real fear: Government has said that it won't stop the MSP procurements. In fact, the Kharif paddy procurement target now is 49.5 MMT, 20% higher than in 2019. MSP too is higher. Even if APMCs shut down due to private competition, the MSP operations won't end, and govt. will do it via govt. procurement centres. Private trade outside mandis means no levy or tax, and hence farmers' bargaining power goes up.
- What about arhatiyas: The middlemen fear an end of the road situation. They charge 2.5% in APMCs of Punjab and Haryana, and must prove their worth now if they really are relevant. And APMCs' fear is that their money flows may stop and private markets (better built) will beat them. Mandi fees often end up with state governments.
- Scope for corrections: The laws can be improved, though.
- All private players in the free trade must be registered, and their produce weighment system and payment system must be checked.
- There must be a regulator for all trade (electronic or physical).
- Trade data utilisation for decision-making regarding exports and inflation control needs to be in place.
- Grievance redressal at the SDM level is impractical, given the potential workload.
- FPOs are clubbed with traders now, and payment on same day (or within 72 hrs) is unreasonable as FPOs' working capital cycle is longer.
- The numbers tell the full story
- More than 45% of rice and wheat procured in India by Governments was from Punjab and Haryana (on MSPs)
- Then came MP (10.4%)
- Of all that was grown in these two states, 75% was procured by governments
- Rice and wheat are the commodities most procured by governments
- In UP, production was very high (more than Punjab) but procurement too low
- In 2018-19, only in Punjab and Haryana, of the total farm output, more than 45% was only wheat and rice
- The taxes and levies would decrease sharply for the two states, reducing government incomes
- FINAL TEST OF GOOD OR BAD
- MARKET TRENDS FOR KHARIF – By October, the fresh kharif crops will arrive in mandis (and markets). If that drops in a large measure, it would mean farmers are opting for private traders (zero taxes and fees). Private traders are unregulated ones.
- WHOLESALE PRICES MOVEMENT – There is inflation based on CPI (retail) and WPI (wholesale – farm gate prices). Since 2020 production may be very high, drop in wholesale prices will make farmers angry. The PM’s promise of MSP will be tested fully.
- GOVT. PROCUREMENT IN TOP STATES – What will government do in Punjab and Haryana? Will it continue large-scale buying inside mandis, paying that 8% tax? Or will it stop buying? Or will it adopt a mix of mandi and private traders? Wait and watch.
- PRIVATE STOCKS AND FOOD INFLATION – Higher private stocking by traders and large corporates (liberalised Essential Commodities act) can push up retail food inflation. The current trend of high food inflation will worsen despite record harvests. Government must be transparent on who is maintaining what stocks.
- CORPORATE MOVES – Which corporate is doing what in agri markets needs to be studied now. Government claims that large scale investments in infrastructure will come from private sector. But if things are politically volatile, no one will invest immediately. Food firms may continue buying directly from farmers (via adhatiyas) etc.
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