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The discussions on the recent farm bills need to move from big-bang design of market reform to addressing a larger set of ecosystem concerns. These include bridging the increasing trust deficit with state policies that the farming community experiences and pro-active measures towards strengthening farmer institutions as instruments that could enable translating the policy intent.
The Agricultural Big Deal
Riding on the only silver lining in the economy, a positive and growing agricultural sector post-covid, the Central government chose to pass three agri-reform bills in May 2020 during the lockdown that was hailed by some as the “1991 moment in agriculture” freeing farmers from the shackles of APMC (Agricultural Produce Market Committee) mandis.
The three pieces of legislation –popularly known as APMC bypass bill, the contract farming bill, and repealing the Essential Commodities Act finally became Acts in September 2020. Discussions on the Bills witnessed stormy parliamentary sessions and widespread farm protests especially in those regions where APMCs have been strong (states like Punjab have purchase centres for every 5-7 villages). The varied response to the Bills reflects the large diversity of Indian farm types and agricultural markets across different Indian states
Growing Trust Deficit and a stressed agricultural ecosystem
The bills, in principle, are supposed to liberalise the farm markets making them more efficient and profitable for the farmers. If so, how do we understand the widespread protests? There were procedural lapses in the manner in which the ordinances were hastily pushed and passed during the pandemic without satisfactory public consultation and buy-in from the states. However, there seems to be a more fundamental issue relating to the increasing trust deficit of the farming community with many policies and promises. There have been several schemes in recent times that were announced as revolutionary and pro-farmer but have failed to achieve desired results on the ground. Eight large states, including Gujarat, have opted out of the Prime Minister's Fasal Bima Yojana (PMFBY) to insure crops for instance. State Governments have found the premium costs exorbitant opting instead to start their own schemes. A more ambitious proposal, in March 2020, to upgrade and expand agricultural markets through 22,000 Grameen Haats across the country, surprisingly find little mention in ongoing debates even though these investments in market infrastructure could potentially expand choices for farmers. The recent bills need to be seen not in isolation but as part of a larger narrative of decreasing public investments in agriculture. The official denial of farm distress and insufficient understanding begs the question of who, if at all, have benefited from past schemes and why state governments feel excluded in policy design.
The complexity of agri-markets
Agricultural commodity markets are not just places for trade. They are also sites of dynamic interactions between elements (firms, social organisation, sites), relations (flow of commodities and money) and regulatory practices (state and non-state). Policies need to be informed through theoretically grounded in-depth field studies in order to avoid the traps of excessive faith in either state regulation or market logic. Policy interventions can be broadly be categorised into three groups– regulatory measures, market infrastructure and institutions and agricultural price policy. In terms of measures, the initial APMC act (2003) was enacted to create transparency and accountability in trade limiting exploitation by mercantile groups.
Market infrastructures and institutions have been dealt with poorly by the State and Central government and not kept pace with the growth of both production and market demand. Between 1991 to 2008, the number of regulated markets grew only by 22 per cent. In contrast, the volume of production increased by 70 per cent in the same period, putting the farmers at a disadvantage due to fewer choices to sell their produce.
Price policies and Minimum Support Price (MSP)
Following the Green Revolution in India, Price support mechanisms for farmers have been around a few crops - wheat and rice among food, and sugarcane and cotton amongst the cash crops. Over the years, public support has distorted crop growing patterns resulting in a less discussed aspect of Indian agriculture – its very high ecological footprint due to overmining of groundwater and depleted soils. The over-reliance over MSPs has been seen by some as ecologically and economically detrimental, even as there have been cases of how MSPs could encourage diverse cropping systems through expanding the MSPs to millets and through decentralised procurement (see Odisha Millet Mission).
Village market and Wholesale market (Photo credits: Sudha Narayanan)
The inability of the Centre to present a holistic picture of agricultural futures of which the Acts could only be a small part of much needed change in agriculture has left farmers worried. Institutional arrangements vary widely across states and commodities too. Bihar’s experiment in abolishing the APMC system in 2006 has not translated into any significant price realization by farmers or better private investment in agricultural markets,
Unaddressed small farmer concerns
The idea of smooth, no-holds barred sale of agricultural produce under the banner of “One Nation, One Market” sounds alluring. However, 85 per cent of Indian farmers have small or marginal landholdings, and neither have the capacity to store their harvest, transport their produce to distant places nor the financial stamina to speculate without trusted intermediaries. Even though APMC mandis are distant, they have, and continue to be, the primary source of reference price for farm produce. An overwhelming proportion of the trade already happens outside the APMCs through private traders. Corporates often operate through them lacking the reach and depth to access small farmer produce. Dismantling old structures should follow significant investment in newer institutions.
Can Farmer Producer Organisations (FPOs) bridge the gap?
Formation of FPOs by small farmers to aggregate and process primary produce is seen as a promising way in which the gap between wholesale and retail food prices can be bridged. However, creating and successfully managing FPOs requires significant investment in both capital, and capabilities in skilled and empowered manpower to negotiate on behalf of small farmers. A few FPO federations have welcomed the Bills as they see reduced transaction costs and ‘ease of doing business’ in engaging with markets. However, the Bills see FPOs as no different from traders in insisting that payments are made to their members in 2-3 days. Few FPOs have such working capital and in any case are member-owned and should ideally have been exempt from such a clause. These emerging institutions could potentially hold the key to bridging the gap and trust deficit between the government and the farming community. Even as the Centre announced ambitious plans of creating 10,000 FPOs in the next five years, research indicates that more than 46 per cent of the existing 7000 odd FPOs are defunct. Recent case studies show that the process of promoting and nurturing FPOs takes a minimum of 4-5 years to create assets and social ownership, as well as building market linkages.
One would have liked the Bills to be better integrated with calls for Atmanirbhar Bharat and the Prime Minister’s call for ‘vocal for local’. The pandemic has already exposed fault lines of industrialised sectors, and there is an urgent need to adopt sustainable farming practices and community-based innovative measures.
Policies based on strengthened local institutions stand a much better chance of being endorsed by the supposed beneficiaries and be inclusive in nature. The way ahead requires investing in institutions, building relationships, trust and an ecosystem of mutual support.