The sweeping agricultural reforms initiated by the Centre have met with strident protests by farmers in the country's major grain procurement zones. This was only to be expected; vested interests, notably middlemen and activists, have fuelled suspicion of the Centre's motives. The latter must go all out to lay the farmers' fears to rest.
The reforms, contained in three ordinances, are aimed at liberating Indian agriculture from artificial curbs that have proved detrimental to farmers. Particularly important is the 'Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance', which allows sale of produce outside the APMC (Agricultural Produce Market Committee)-run mandis and removes curbs on intra- and inter-state commerce.
The 'Essential Commodities Ordinance' removes limits on stocks of agricultural produce and the 'Farmers' (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance' regulates contract farming. In other words, private players can stock all the grain they want and farmers can safely enter into agreements to sell their produce ahead of the harvest.
Why are farmers opposing a measure that frees them from burdensome cesses and the necessity of hauling their produce to the mandi and (potentially) allows them to realise the best possible returns for their crops? Why embrace the restrictive APMC regime? And why are farmers' organisations so sharply divided on the issue?
The vested interests at play - state governments, commission agents and left-leaning activists who reflexively oppose any attempt to promote free markets – have convinced farmers that the agricultural reforms are a precursor to the dismantling of the MSP (minimum support price) system, whereby the government procures grain from farmers at a price fixed by a commission every year.
The MSP was intended as a safety net, a failsafe in case prices of foodgrain went into free fall. It was not conceived as a default mechanism for sale of produce! Hiked every year to cover increasing input costs and inflation, the MSP effectively guarantees the farmer a return on investment. Farmers are risk-averse and don't want to be left to the mercies of the open market, with the result that the latter's growth has been stifled.
It must be pointed out that the bulk of farmers – 94 per cent – do not benefit from the MSP regime, but it is the remaining six per cent who are the most vocal. They are concentrated in the major procurement zones – mainly Punjab, Haryana, Madhya Pradesh, Andhra Pradesh and Telangana. Hence Punjab CM Capt Amarinder Singh's sharp opposition to the reforms.
For the licensed arhatiyas, the mandis represent easy money. The system inexorably brings farmers to the mandi, so their cut is assured. The licences are highly coveted and generally awarded to those who are politically well-connected. They also have farmers in their thrall, because they extend loans for agricultural inputs and other purposes, to be paid back after the harvest. As a result, they are a powerful lobby and state governments are wary of confronting them.
Adding to the turmoil are activists who have told farmers that the reforms will inevitably lead to corporatisation of agriculture; government-run mandis will be wound up and they will be forced to sell at private mandis to multi-national buccaneers at rock-bottom prices.
Alarmed and encouraged by interested parties, farmers have taken to the streets, demanding that the Centre roll back reforms that will potentially benefit all farmers and not just 6 per cent. The Centre should not back down. After all, farmers' organisations outside the procurement zones have supported the reforms, precisely because they are not dependent on the MSP mechanism.
The Centre should urgently adopt a triple 'C' strategy to allay farmers' fears: credit, crop insurance and complementary markets. The importance of arhatiyas, as stated earlier, is that they are an informal source of credit – yet again underlining the need to ensure institutional credit to all farmers. An audit of the existing credit mechanism is vital in this regard. Likewise, an audit of public crop insurance – PM Fasal Bima Yojana – is urgently needed, to plug the glaring gaps.
Most of all, the Centre must assure the states that the reforms are aimed at complementing, and not dismantling the MSP system. The farmers' fears are prima facie illogical, because the Centre has no option but to procure, in order to keep the Public Distribution System and its various welfare programmes running and to maintain a buffer stock. The quantum of procurement will vary, depending on demand.
The stimulus to open markets is likely to ease the burden on the Centre. Traders will be incentivised to procure outside the mandis and the Food Corporation of India's resale schemes, directly from farmers. The private sector, spurred by the removal of stock limits, can invest in post-harvest facilities and enter into contracts that will assure farmers a guaranteed return. Farmer Producer Organizations (FPOs) will play a critical role in protecting and promoting the interests of small and marginal farmers, particularly by leveraging the e-NAM (the national agricultural market). They deserve special support from the Centre.
Farmers are doubtful of the Centre's motives because of shoddy implementation of flagship schemes routed through state governments. Improved delivery of credit, crop insurance and subsidies and incentivisation of FPOs will go a long way in convincing farmers that agricultural reforms are the best way forward.
The writer is a senior journalist with 35 years of experience in working with major newspapers and magazines. She is now an independent writer and author.