CALGARY EDITION JUNE 2021

were not forced to sell at extremely low
rates. Vast market areas were created where
government-regulated agricultural
commerce could take place. Mandis, though
riddled with longstanding issues and in need
of serious reform, have been vital to
agricultural life. The new Farmers’ Produce
Trade and Commerce (Promotion and
Facilitation) Act takes a sledgehammer to
this system, promising privatisation of the
procurement regime and more remunerative
prices.
Much has been made about the entry of
private players into agricultural purchase,
but the truth is that several states had made
way for them well before the new central
law. What the central government is really
seeking to do is allow the unregulated entry
of private players into the agriculture sector.
As the case of Bihar has shown, this has
not exactly been a boon for farmers.
In 2017, Punjab had already passed an
amended Agriculture Produce Market
Committee Act that allowed private players
to purchase produce at existing mandis. The
contrast between Punjab’s amended act and
the law passed by the Modi government is
illustrative. Under the FPTC Act, all private
players can purchase crops anywhere they
want as long as they have a PAN card. There
are nearly no regulations constraining such
players, except that they make payments
within three working days, barring which
the matter must be resolved mutually or
taken up before the local sub-divisional
magistrate. Whether the buyers are fly-bynight
operators or big players, in the
absence of state regulation the farmer is
effectively left with no protection at all.
In contrast, the Punjab act only allows
those who are issued licences by the state.
They can procure at government mandis,
or at private mandis that have to follow
APMC norms, including the payment of
taxes which include a market fee for
maintaining the mandi, a commission for
brokers called arhtiyas, and a ruralinfrastructure
cess. Punjab imposes a total
tax of 8.5 percent, while Haryana imposes
6.5 percent.
The market fees maintain infrastructure
at the mandis, the rural cess is used to
maintain rural roads and infrastructure and
the arhtiyas’ commission is in return for
services such as cleaning, weighing and
sorting grain before it is procured. The
arhtiyas are vital to the functioning of the
mandis, and their reputation as predators
largely comes from their doubling up as
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moneylenders. Even this is a role for which
the central government is offering no better
substitute. Certainly, corporate buyers are
not inclined to issue cash advances in the
absence of collateral.
The new farm laws cut arhtiyas and the
rural cess out of the picture, and even
disallow any market-fee payment by the
Food Corporation of India. The FCI’s
godowns are now meant to count as private
mandis, where the cess and market fee do
not apply. This is where the strongest
apprehensions about the government’s
intentions surface. The existing mandi
infrastructure in Punjab, and to a lesser
extent in Haryana, functions well and
ensures that procurement is a smooth
process, with very few complaints by the
farmers. This is an infrastructure that is
sustained by the market fee. In the absence
of this fee from the FCI, and much of the
procurement moving out elsewhere, a large
amount of the revenue that sustains the state
mandi infrastructure will disappear.
There are a great number of practical
difficulties if the FCI is to acquire grain
directly at its godowns. These godowns are
nowhere near as numerous as the mandis,
which are present every eight to ten
kilometres. In any case, even if farmers
bring grain directly to the godowns,
increasing their transportation costs, the
need for unloading, cleaning and weighing
the grain will remain. Either the FCI passes
these costs on to the farmer or it bears them
itself, neither of which is an improvement
over the current arrangement.
The consequences of the kind of
breakdown of the APMC mandi system that
these new laws threaten are already seen in
Bihar, where the APMC Act was abolished
in 2006. In a piece in the Hindustan Times,
Sukhpal Singh of the Indian Institute of
Management, Ahmedabad, noted that while
the number of procurement centres in Bihar
declined drastically over the past five years”
from 9,035 in 2015-16 to 1,619 in 2019-20"
the number of these centres in Punjab,
Haryana, Uttar Pradesh and Madhya Pradesh
increased during the same period.
Clearly, the privatisation of procurement
will not necessarily improve infrastructure.
What, then, of the other great promise of
remunerative prices? The repeated claim
made on behalf of the government is that
the sums saved from the removal of the
mandi cess will be passed on to farmers.
Once again, Bihar provides a telling
example. “During 2016-17, the MSP for
wheat, paddy and maize was fixed as Rs
1,625, Rs 1,410 and Rs 1,365 but the
farmers could get Rs 1,299, Rs 1,113, and
Rs 1,140 a quintal, respectively,” Sukhpal
Singh writes. “During 2019-20, the farmers
got Rs 350-450 a quintal lower than the
MSP for all major crops.”
So, as far as the two major foodgrain
crops of the country wheat and rice are
concerned, the MSP combined with the
APMC procurement system was ensuring
prices of three hundred to four hundred
rupees more per quintal than in the
privatised procurement regime of Bihar.
The supposed saving was not being passed
on to customers in the state. Privatisation,
ostensibly meant to squeeze out middlemen,
only ended up fattening them in Bihar. What
the protesting farmers claim will happen
with the new laws has already come to pass
in Bihar procurement infrastructure has
collapsed, private traders have a monopoly
and purchase prices for farmers have
plummeted.
In the face of these facts, those who
advocate for the laws again invoke the
exceptional nature of those who benefit
under the old system.
Ashok Gulati, who is also on a Supreme
Court-appointed panel tasked with
preparing a report on the new laws, argues
that the old system has benefited only a
miniscule minority:
What is the reality about MSP? The
NSSO’s Situation Assessment Survey (70th
round) revealed that in 2012-13, only 6 per
cent of farmers sold their produce at MSP.
And of course, a majority of them were from
the Punjab-Haryana belt … And remember,
the MSP and APMC system primarily helps
those who have large surpluses, mainly the
large farmers … So, those who are arguing
for APMC mandis and MSP are basically
arguing for those 6 per cent of farmers or 6
per cent of the value of agri-produce.
Gulati’s use of these figures is a sleight
of hand, because they conceal far more than
they reveal. The NSSO data cited counts
all farmers in the country producing any
crop. To invoke the MSP regime in this
context makes no sense because there is no
purchase at MSP for the vast majority of
crops, and hence for the vast majority of
farmers. The absence of a system cannot
be used to argue against it. All this suggests
is that a great number of farmers already
experience the system the government is
now threatening to impose on everyone.
(Cont. on next issue)
Sikh Virsa, Calgary 94. June 2021