Farm Reform Laws - Concerns

 Why in news?

• Thousands of farmers from Punjab, Haryana, Rajasthan and U.P have been marching toward Delhi in protest against the three central farm legislations.
• In this context, here is a look at the concerns regarding the three farm reforms laws.

Why are only some states protesting?

• The protests are perhaps the loudest in northern states, traditionally India’s wheat basket and rice bowl.
• The MSP system, in place since the mid-1960s, was part of the country’s drive to reduce dependence on food imports.
• The MSP was meant to protect farmers against price crashes that could (and do) occur with large harvests.
• It is in its role as a floor price that a credible MSP matters to farmers.
• In principle, in deficit states (where demand exceeds local supply), market prices should be higher than the MSP, obviating the need for supporting the market at the level of MSP.
• However, this differential could be dampened or even eliminated by the distribution of grains under the National Food Security Act (NFSA).
• Seen in this light, the MSP matters more in historically surplus states of Punjab and Haryana.
  • Here, the government purchases over 80% of wheat and rice output for NFSA supply.
  • In comparison, in Bihar, the government procures at most a quarter of rice output of the state and no wheat.
• Also, in practice there is wide variation in the implementation of the MSP, across crops, states and categories of farmers.

• A 2016 Niti Aayog report notes that all surveyed Punjab farmers reported selling at the MSP.
• While other states often saw only one-third of farmers reporting sales at the MSP, and some, none at all (with sales at the lower open market prices).
• The report also finds that large farmers are able to sell a greater share of their produce at the MSP as compared to smaller farmers.
• Small farmers often rely on aggregators to sell their output.

What are the concerns?

• Cooperative federalism - Agriculture and markets are State subjects – entry 14 and 28 respectively in List II.
• So the farm legislations are being seen as a direct encroachment upon the functions of the States.
• It is seen as being against the spirit of cooperative federalism enshrined in the Constitution.
• The Centre, however, argued that trade and commerce in food items is part of the concurrent list.
• End to MSP? - APMCs were set up with the objective of ensuring fair trade between buyers and sellers for effective price discovery.
• APMCs can -
  • regulate the trade of farmers’ produce by providing licences to buyers, commission agents, and private markets
  • levy market fees or any other charges on such trade
  • provide necessary infrastructure within their markets to facilitate the trade
• The Farmers' Produce Trade and Commerce Act aims at opening up agricultural sale and marketing outside the notified APMC mandis for farmers.
• Given this, dismantling of the monopoly of the APMCs is seen as a sign of ending the assured procurement of food grains at MSP.
• To the Centre’s ‘one nation, one market’ call, farmers have sought ‘one nation, one MSP’.
• Farmers call for addressing the gaps in the APMCs, instead of making these State mechanisms redundant altogether.
• No mechanism for price fixation - The Price Assurance Act offers protection to farmers against price exploitation.
• However, it does not prescribe the mechanism for price fixation.
• There is apprehension that the free hand given to private corporate houses could lead to farmer exploitation.
• Farmers are apprehensive about formal contractual obligations owing to the unorganised nature of the farm sector.
• There is also the lack of resources for a legal battle with private corporate entities.
• Food security – Easing of regulation of food commodities in the essential commodities list would lead to hoarding of farm produce during the harvest season when prices are generally lower.
• This could undermine food security since the States would have no information about the availability of stocks within the State.

What is the way forward?

• In all, the MSP has played a role in mitigating the downside risk for farmers.
• But its effectiveness depends on the interplay of -
  1. NFSA operations
  2. crop choices
  3. the degree of intermediation and competition (amongst buyers) in the market
  4. MSP implementation
• More market-driven outcomes will require investments in infrastructure.

• The MSP is not, and should not, be a substitute for technology-driven increases in farmer incomes.
• Farmers thus want the Union government to either withdraw the three legislations or guarantee them the MSP for their crops by introducing a new law.

 

Source: Economic Times, The Hindu