Sow the Seeds of Trust

The Indian Express     2nd December 2020     Save    
QEP Pocket Notes

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.

QEP Pocket Notes