The Farmer’s Freedom to Sell

Context: The recent passing of the farm bills in both the Houses of Parliament has sparked a major controversy in the country. The bills that were passed:

1. The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (FPTC).
2. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 (FAPAFS).
3. The Essential Commodities (Amendment) Bill, 2020.

Significance of Recent Agricultural Reforms

• The FPTC Act:

• It breaks the monopolistic powers of the Agricultural Produce Market Committee (APMC) markets.
• It will lead to freedom to farmers and traders to buy and sell farm produce from anyone and anywhere, thereby creating competition in agriculture marketing.

• The FAPAFS Act: It allows for contract farming which will create efficient value chains, reduce marketing cost, enable better price discovery and improved price realization for farmer and consumer.
• The Amendment to Essential Commodities: It removes stock-holding limits on traders for a large number of commodities, with some restrictions still in place. 
• Promotion of Farmer Produce Organisations (FPOs): Programmes for the creation of 10,000 FPOs with relaxed norms have been initiated, which can act as a catalyst to reform.

• Agriculture Infrastructure Fund of INR 1 Lakh Crore to handle post-harvest, are anchored with FPOs and will be implemented by NABARD along with other agencies and state government.

Challenges in Agriculture:

• Low benefits of Minimum Support Price (MSP): According to the 70th round of NSSO on key indicators of Situational Agriculture Household, benefits of MSP were reaped by only 6% of farmers. 

• The rest of the farming community (94%) faces imperfect markets. 

• Issues with statutory backing of MSP: a demand for giving statutory backing to MSP and purchasing below it to be a criminal offense will discourage the private players.
• Farmers are implicitly taxed through restrictive trade and marketing policies: Many countries, including China and OECD countries, heavily subsidize agriculture.

• Producer Support Estimates (PSES) as a percent of gross farm receipts are less than (-) 5 % while the same is 15% for China and around 18% for OECD nations.

• Policy Implementation issue: Good laws fail because of bad implementation as seen in the case of the Tomato, Onion, and Potato (TOP) Scheme.

• Under the TOP scheme corpus of INR 500 crore was set aside to stabilize the prices of Tomato, Potato and Onion through storage and processing. 
• After three years of the scheme, only 5% of the fund has been utilized.
• Government has recently banned the export of onion due to the risk of the price spike in the domestic market, which is contrary to the reforms proposed under the act.

Way Ahead:

• Revamp NABARD: to include professional consultation and build robust linkages with other implementing agencies in the private sector and foundations already working in the sector.
• Compensate the states: Centre must compensate for any fall in revenue from mandi fees and cess to states from a fixed period of years.
• Enable APMC and Arhatias reforms to enable them to take new roles of aggregation for the private sector.

Conclusion: Farmer bills are a step in the right direction, and the pay-off will be high with Indian agriculture becoming globally competitive and beneficial to farmers and consumers alike.