NRI Perspective – Farmers Bills 2020

The recently passed triad of farmers bills- promotion & facilitation, empowerment & protection, and essential commodities amendment- are intended to empower the primary producers of agricultural products by cutting the middlemen and red tape that has existed for too long since India’s independence. If India were to envision “One nation one market”  in order to advance and be competitive on the world market, it must reform its obsolete and inefficient sytems and overcome its self-imposed import-export limitations, which is the very essence Liberalization Privatization and Globalization Model of 1991” propounded by the previous government to address the large and growing fiscal imbalances, inefficiencies in the use of resources, low foreign exchange reserves, high inflation rates, and low annual growth rates- to name a few. Is it not better for India to view the recent farmers bills in the light of the LPG model and realize that these agri bills are a continuum of the reforms being implemented by India since past two or so decades? Why is there such a wide spectrum of views ranging from “watershed moment” to “death warrant”? A healthy democracy should and must strive on open and thorough debates on either side of every issue that affects its citizen. This has been hallmark of America’s democracy since over 200 years and is now being seen more and more in India. The purpose of such debates should be to discuss openly the pros and cons of any issue or bill rather than to malign or misinform the public and resort to fearmongering.

There is no debate that since the inception of APMCs in 1965 and government’s administrative moves to fix MSPs on essential commodities, the system has not worked effectively and efficiently as intended, and has led to many unintended consequences and not served the primary producers well. All producers are mandated to go through APMCs and end up paying hefty commissions to secure their selling markets. While APMCs are more prominent in some states like Punjab and Haryana, majority of agri marketing happens outside of APMC mandi networks. There are only about 7000 APMCs across India. Only 6% farmers can sell at MSP rates while most farmers don’t realize the MSPs. MSPs are not legal or legislative elements; rather they are administrative measures by the government; they cannot be codified in the farmers bills. Moreover, MSPs can have unintended consequence of fixing the prices at their values rather than promoting higher and better prices.  In the spirit of the 1991 LPG model, perhaps, it is high time farmers are empowered to become traders of their goods in their own right!

Time and again, several commodities have been taken off APMC system when it was realized that the system was not working for such commodities. In 2012 fruits and vegetables came off APMC system. Despite that, the current system doesn’t promote innovation in the distribution networks as there are no incentives for efficiency and improved handling during transit. For example, nearly one third fruits and vegetables perish before reaching the food plate. Is it not ironical that on one hand India lets bulk of tomatoes rot under the current APMC system while imports tomato purees from China on the other hand? This reminds us of the Milk distribution revolution India witnessed five decades ago. In Gujarat, when middlemen were removed and innovation was brought in milk distribution, it was a win-win situation for producers and consumers. Today nearly 10 crore milk producers sell milk and dairy produce efficiently and effectively without APMCs. The current farmers bills are also geared to achieving similar efficiencies in the production and distribution of essential commodities by ensuring minimal wastage and better competition in the market. By encouraging technology companies to participate in the agri sector, one is sure to see innovations in distribution systems and better cold storage options for perishable commodities. Considering that nearly 30% of agriculture production happens under tenancy forming, the third bill is geared to ensuring a system of negotiations for contracts including penalties to traders. Moreover, the current APMC system is not being disbanded; it will continue to coexist with the alternative system of public-private partnership so there can be more competition, which is better for producers and consumers. The so called “corporatization of agri business” is not a real threat as some seem to propound.

In summary, since its inception in the 1960s, the APMC system has not worked well for producers and consumers and many perishable commodities have been taken off from it for betterment of both. The current farmers bills are a continuum of various initiatives implemented over the decades and are consistent with the LPG model of 1991. That current APMC system can continue to coexist with the new public-private partnered models of selling and distribution is reassuring and is a win-win for all. Even if corporatization happens in agri business, it will be in the good interest of producers and consumers and will benefit India by increasing its farm produce and perhaps bringing it on par with that of United States.