Sow the Seeds of Trust

Context: Need to address farmers’ apprehension about the role of mandis and terms of procurement under the new farm laws.

Significance of the new farm laws:

• The Farmer Produce Trade and Commerce (Promotion and Facilitation) Act: allows anyone with a Permanent Account Number (PAN) to buy directly from farmer sellers outside the mandis.
  • The state government can’t impose any taxes: on such a transaction lowering the buying costs for buyers and that would mean higher prices for farmers.
• The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act: has defined the Farmer Producer Organisation (FPOs) to address the challenges in contract farming
  • Contract farming has been devoid of small and marginal farmers showing negligible performance.
  • Highly one-sided contracts, delayed payments, undue rejections and outright cheating were other problems.

Issues with the new farm laws:

• No assurance of higher-income of farmers: Buyers buying at a lower cost does not necessarily mean they would pass on the cost saved on procurement to selling farmers.
  • Anybody with a PAN card allowed to buy agricultural produce could mean a free-for-all situation, which is not desirable.
• Issues in contract farming law:
• Lack of FPOs: There is hardly any FPO in farm production, and it ignores farmers’ role as contract farming agencies.
• Does not provide remedies for the cancellation of contracts: There is no mechanism for counterparty risks; like no elections in APMC (it is a multi-member elected body)
• Provision of a premium or bonus linked to the APMC: This goes against the very concept of contract farming since the contract price should be left to the contracting parties to decide.

Issues with the MSP:

• Apprehensions of removal MSP: fuelled by previous policy documents like the Shanta Kumar committee report and the CACP reports suggesting an end to open-ended procurement.
  • Changes in the “social contract ” between the state’s farmers and the Union government that is the root cause of this apprehension.
  • MSP has limited to few crops, and in few states, farmers end up selling at below MSP.
  • CACP has recommended bringing a law based on ‘the right to sell at MSP’.
• Problems in legalising MSP:
  • Will discourage private sector: due to fear of imprisonment or fines.
  • Difficult to check the distress sale;
  • Prior experience: Maharashtra attempted this legality in 2018 in its APMC Act but had to reverse it after protests by traders.

Conclusion: To protect the interest of small and marginal farmers, they should be arranged into Farmer producer organisations (FPOs) so as to attract the private agencies for contract farming or direct purchase.