(Liberation explains why the farm laws need to be opposed, and addresses the misinformation being spread by the Modi regime against the farmers’ movement).

What are the three farm laws?

The Modi Government promulgates three new Farm Laws in September 2020, which are as follows:

The Essential Commodities (Amendment) Ordinance 2020 lifts the restrictions on hoarding essential commodities like cereals, pulses, potatoes, onions, edible oilseeds, and oils.

The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance 2020 lifts the restrictions on trading farmers’ produce beyond the physical premises of APMC markets (mandis). It prohibits State governments from levying any market fee, cess or levy outside APMC areas.

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 introduces a framework for contract farming, based on contracts between farmers and corporations. It does not provide any mechanism for fixing prices of produce.

Why are farmers protesting these laws?

Farmers all over India are protesting these laws. Their grounds are that these laws:

• change the whole face of agriculture in India, putting farmers at the mercy of companies/corporations, and freeing the Government from responsibility towards agriculture. The laws amount to Company Raj in farming.
• that affect farmers in such drastic ways were passed hurriedly during Covid-19, without a physical vote in Parliament, and without any consultation with farmers’ organisations. The Government “found opportunity in calamity” as the PM said, and took advantage of Covid-19 to subvert democracy and impose anti-farmer laws on farmers
• dismantle the existing framework of Minimum Support Price and APMCs (mandis), and allow the companies to hoard essential commodities and thus monopolise and control markets. Farmers have been agitating to demand guaranteed MSP at one and a half times the input costs; government procurement of produce and expansion and improvement of the APMC system. Instead, the Government is abdicating responsibility for paying MSP and for procuring farmers’ produce, and paving the way for the demise of the mandis.
• weaken India’s federal structure, by preventing State Governments from protecting farmers
• will eventually end up evicting farmers from their land, and will make them virtual slaves of agri-business companies
• impose Company Raj in India, preventing any citizen from approaching courts against any wrongdoing done by any officer of the Central or State Governments under this law! This means that citizens cannot seek justice any government officer who is corrupt and favours corporate interests over the interests of farmers and citizens, because the offending officer can claim he was acting “in good faith” to implement the farm laws! This is basically an imposition of Emergency and a law to protect and promote the corrupt nexus between companies and government. (see box)

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But won’t the new laws give farmers freedom of choice and freedom from the APMC monopoly? Won’t the resulting competition bring better market prices for their crops?

The Government claims that thanks to the new laws, farmers can get a higher price than the MSP outside the regulated APMC markets; and if they don’t, they can choose to sell their produce at MSP inside the regulated APMC markets.

Facts belie this claim:

• Most crops which are not procured by the Government are already sold in the open market – and markets usually bring lower prices than the MSP.
• Only 36 per cent of farmers’ produce is sold in the mandis and the remaining is sold outside to private trade.
• The Government announced MSP for 23 crops but Government procurement at the fixed MSP inside the APMC markets mainly took place only for paddy and wheat (and some cotton, soyabean, pulses, mustard).
• The market prices of the 23 commodities are usually much lower than the MSP announces. So, in the case of produce which are not procured by the Government, the farmer has no choice but to sell at a lower price. For example, while the MSP for maize is Rs 1,850 per quintal, farmers have no choice but to sell at the market price, which is just between Rs 800 to Rs 1,000 per quintal.
• Nowhere in India were farmers demanding that they wanted freedom to sell outside the APMC mandis (they already had this freedom)! Markets failed the farmers, and that is why they were demanding state procurement of all crops at an MSP that is fixed at one and a half times the input costs (i.e 50% profit over C2 (Cost that includes land rent along with other costs). Instead, the Government is taking away even the existing MSP and APMC mandis!

Moreover, more than 80 per cent of India’s farmers own less than 2 hectares of land. These small farmers cannot afford infrastructure to store or transport the crops (unless the crops are procured by the government), so they are under pressure to sell it before it spoils. Only by selling immediately after harvest can they afford to pay off their debts, and buy inputs for the next crop. With such a tight deadline, they go to the nearest mandi to sell the crop. If there are no mandis and MSP, the farmers will be forced to make a distress sale to corporations who can buy from their doorstep.

So, far from giving farmers “freedom” to sell to corporations, the laws will put farmers at the mercy of the corporations.

Isn’t it true that only farmers of Punjab, Haryana and western Uttar Pradesh benefit from MSP?  

State-wise procurement data from the Food Corporation of India (FCI) and agricultural household data for 2012-13 from the National Sample Survey (NSS) show a very different picture. FCI data shows that under the Decentralized Procurement (DCP) Scheme, 25-35% of rice and wheat began to be procured from the DCP states, outside Punjab, Haryana and Western UP, by 2012-13.

A study by three economists and food security experts found that: “In the case of paddy, Chhattisgarh and Odisha have been the star performers. These States today contribute about 10% each to the total paddy procurement in the country. For wheat, decentralised procurement has taken off in Madhya Pradesh in a big way, accounting for approximately 20% of wheat procurement. In 2020-21, wheat procurement from Madhya Pradesh surpassed that from even Punjab. Among agricultural households which sell paddy under the procurement system, while 9% and 7% come from Punjab and Haryana, 11% are in Odisha and 33% are in Chhattisgarh. An overwhelming majority of agricultural households selling wheat to the procurement agencies come from Madhya Pradesh (33%) compared to 22% from Punjab and 18% from Haryana.” (Source: ‘MSP — the factoids versus the facts’, Prankur Gupta, Reetika Khera, Sudha Narayanan, The Hindu, December 19, 2020)

Have only large farmers benefited from MSP and procurement?

Gupta, Khera and Narayanan (ibid) answer this question:

“In fact, procurement has benefited the small and marginal farmers in much bigger numbers than medium and large farmers. At the all-India level, among those who sold paddy to the government, 1% were large farmers, owning over 10 hectares of land. Small and marginal farmers, with less than 2 hectares accounted for 70%. The rest (29%) were medium farmers (2-10 hectares).

“In the case of wheat, 3% of all wheat-selling farmers were large farmers. More than half (56%) were small and marginal farmers.

“In Punjab and Haryana, the share of small and marginal farmers is not insignificant (38% and 58%, respectively, among paddy sellers). In the non-traditional States that adopted the DCP scheme, the overwhelming majority of farmers who sell to State procurement agencies are small and marginal. In Chhattisgarh and Odisha, for example, small and marginal farmers comprise 70-80% of all sellers to government agencies. Similarly, in Madhya Pradesh, nearly half (45%) of those who sell wheat to government agencies are small or marginal farmers.”

Is it true that only a section of large farmers from Punjab and to some extent Haryana are protesting?

As we have seen above, the loss of MSP, APMC mandis and government procurement affects small and marginal farmers in large numbers, and also affects farmers in many other states. Moreover, a shift to corporate-led contract farming will put the vast majority of India’s farmers at a disadvantage. Small and marginal farmers are even less in a position to compete with corporations in an open market, than large farmers.

So we can see farmers from Haryana, UP, Rajasthan, Maharashtra, Madhya Pradesh, Gujarat, Tamil Nadu, and Bihar joining the farmers at the Delhi borders. It is absolutely untrue that farmers outside Punjab are welcoming the farm laws: farmers across India are united in opposing the farm laws.   

The Government claims that MSP and government procurement will continue – so what’s the fuss all about?

The Contract Act does not link prices for crops to MSP or the government procurement rate; Section 5 of the Contract Act only links it “to the prevailing prices in specified APMC yard or electronic trading and transaction platform or any other suitable benchmark prices”. In fact, the new laws make no provision for the farmers’ long-standing demand to guarantee MSP for all crops, determined by Swaminathan formula of C2 costs plus 50 per cent.

So the Government and PM are lying when they claim that MSP and government procurement will continue under the new laws.  

But abolition of the APMC Act has resulted in a higher overall growth rate and agricultural growth for Bihar, has it not?
In Bihar, the APMC Act was abolished in 2006.

According to neoliberal commentator Shekhar Gupta, after Bihar annulled its APMC Act in 2006, its agricultural growth rate increased, and even outpaced the agricultural growth rate of Punjab.  But this claim ignores some inconvenient facts.

• It is true that between 2006-07 and 2011-12, Bihar’s Gross State Value Added (GSVA) from agriculture grew at 4.8 per cent per year, while Punjab’s GSVA from agriculture grew at about 1 per cent. But, as R Ramakumar noted (see full article below), Gupta has been selective with facts. Between 2011-12 to 2019-20 “Bihar’s agriculture grew at (-)1 per cent per year, while Punjab’s agriculture grew at about (+)1 per cent per year (see Figure 1). In other words, Bihar’s agricultural GSVA shrank in absolute terms, while Punjab’s agricultural GSVA kept growing.”
• In any case, why has the so-called growth not resulted in growth in income for Bihar’s farmers? Why do Bihar’s farmers continue to be in the bottom rung when it comes to farm income? The farmer in Bihar, on an average, earns just Rs 42684 a year, which translates to Rs 3557 a month. (see image)
• Every year, there are reports of huge amounts (more than a million tonne) of paddy being illegally transported from Bihar to sell in Punjab’s APMC mandis. The reason for this cumbersome, risky, and even costly exercise? Because the market price in Bihar is so much lower than the MSP the same paddy fetches in Punjab. (‘Why are farmers from other states coming to Punjab to sell paddy in bulk?’, Indian Express, November 17, 2020)

The Bihar experience exposes all the tall claims of the Modi regime and its apologists regarding the new laws, as false.

A 2019 study of the National Council of Applied Economic Research (NCAER) titled ‘Study on Agricultural Diagnostics for the State of Bihar in India’ found:     

“Despite the abolition of the Agricultural Produce Market Committee (APMC) Act in 2006, private investment in the creation of new markets and strengthening of facilities in the existing ones did not take place in Bihar, leading to low market density. Further, the participation of government agencies in procurement and the scale of procurement of grains continue to be low. Thus, farmers are left to the mercy of traders who unscrupulously fix lower prices for agricultural produce that they buy from farmers. Inadequate market facilities and institutional arrangements are responsible for low price realisation and instability in prices.

“With respect to procurement of food grains in Bihar, Primary Agriculture Cooperative Societies (PACS) are entrusted with procurement of grains particularly paddy and wheat from the farmers at the government-announced minimum support price (MSP). The ground level evidence through discussion with farmers shows that procurement operation is limited to a certain amount and time. Farmers mentioned that non-availability of a fair price is the most important constraint in expanding agricultural output.” (emphasis ours)

In Bihar, 14 years after the APMC system was replaced with the PAC system, private investment in agricultural infrastructure and facilities is still a far cry, and non-availability of a fair price is still the biggest issue!  

The NCAER report found that in Bihar:

• There was increased volatility in food grain prices in Bihar since the abolition of APMC in 2006
• Farmers reported high storage costs at private warehouses.
• Over 90 per cent of the output of crops including paddy, wheat, maize, lentil, gram, mustard and banana are sold within the respective villages to traders and commission agents.
• Farmers reported, they do not get a fair price for their agricultural produce. Most farmers also reported that the need for immediate cash after harvest, compel them to sell at a lower price to traders. Further, government market facilities are not available near the village.
• Even if farmers take their produce to a distant market yard, they face the problem of paying extra (bribe) to commission agents. Farmers also cannot store produce at their household due to lack of space and the necessary storage conditions to avoid spoilage of grains.
• Farmers are forced to sell their produce at whatever the price the traders are willing to offer.

(NCAER findings summarised by Anish Thakur in ‘Dismantling of the APMC: The Bihar Experience’, December 15, 2020, Groundxero.in)

Dr Sukhpal Singh (Senior Economist, Agricultural Marketing and Former Head, Department of Economics and Sociology,Punjab Agricultural University, Ludhiana) warned in 2015 that “APMC markets are very important especially in States such as Bihar where small and marginal farmers comprise more than 90 per cent of the sector. These markets are important for small farmers who may not attract large buyers for direct purchase or contract farming. ...Therefore, there is no need to throw the baby with the bathwater in the rush to reform agricultural markets. It is easier to dismantle institutions than build them. The consequences could be very serious for the farm sector and the farming community.” (‘APMCs: The other side of the story’, February 8, 2015, The Hindu Business Line)

Won’t the new laws at least bring freedom from middlemen for farmers?

If small traders and middlemen (arhtiyas as they are called in Hindi) abuse the system, surely bigger corporations will do so even more?

Corporate farming will not get rid of middlemen. Big companies themselves are huge middlemen. Plus, big companies will need intermediaries to reach farmers – and they will employ the same arhtiyas who worked in the APMC markets!

The APMC system has many problems – and farmers have been demanding that the system be improved to ensure that all farmers can benefit. But the new laws are not doing this. They are destroying a system which works – and replacing it with a system that can benefit only big companies.

These new Acts actually create five new slots for middlemen, which will no doubt be filled by those who were middlemen before these laws:

• Section 2(g) of the Contract Act describes a Farm Agreement as a “written agreement entered into between a farmer and a Sponsor or a farmer, a sponsor and any third party”. This “third party” is a middleman.
• Section 3(1)(b) of the Contract Act states that the “responsibility for compliance of any legal requirement for providing such farm services shall be with the Sponsor or the farm service provider”. This “farm service provider” is a middleman.
• Section 4(4) says monitoring and certification of quality and “the process of cultivation or rearing, or at the time of delivery, by third party qualified assayer…”. This “third party qualified assayer” is yet another middleman.
• Section 10 provides for “an aggregator or farm service provider”, the “aggregator” being any person, “including a Farmer Producer Organisation”, who acts as an intermediary between a farmer or a group of farmers and a sponsor and “provides aggregation related services to both farmers and sponsors”. This middleman will have three roles — aggregating land of small owners for contracts, securing services from companies for farming and mobilising farm produce for sale to companies.
• Section 2(e) of Contract Act and Section 2(b) of the Mandi Bypass Act state that a “farmer” also includes “farmer producer organisation”. It is the rich farmer who is likely to organise the FPOs and act as an agency of the sponsor company. The original plan for FPOs was to be voluntary collectives of farmers to empower them to bargain with traders. These acts envisage a middleman role for them akin to the present-day moneylenders, brokers for banks, arhatiyas and commercial agents. There is no security clause in the Acts for the underprivileged.
• Section 5 (1) of the Mandi Bypass Act also provides for the FPO the role of establishing and operating “electronic trading and transaction platform… commerce of scheduled farmers’ produce in a trade area” – this implies ownership and management of private mandis.

So, far from ensuring freedom from middlemen, the Acts actually enmesh the farmers in an even tighter web of middlemen.

Won’t contract farming mean better prices for the farmer and cheaper costs for the consumer?

Far from it. The companies, with a free hand to hoard essential commodities, will create monopolies. They may initially pay higher prices to farmers, to corner the market and squeeze out the APMC and MSP system itself. Once the APMC and MSP systems are dead and gone, the corporations will no longer have any compulsion to compete with MSP. So they will buy cheap and sell dear – harming both farmers and the consumer.

Since there will be no market taxes/fees imposed by the government, won’t it benefit both farmers and companies?

Section 6 of the Mandi Bypass Act does bar “market fee or cess or levy”, but only under “any state APMC Act or any other state law”. And, Section 5(2) provides that the “the person establishing and operating an electronic trading and transaction platform shall prepare and implement the guidelines for fair trade practices such as mode of trading, fees, …”.

So there will indeed be mandi/market fees, but these will not be regulated by the Government!

Who, then, will benefit from the new laws?

Between May 2014 and 2018, that is, after Modi became PM, Modi’s closest corporate crony Gautam Adani set up 20 agri-business firms. Between 2005 and March 2014, Adani had set up just two such businesses. In 2019 alone, Adani set up nine new agri-business firms. (see table)

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It is quite clear that it is big companies like Adani who stand to benefit from the deregulation of agricultural markets.    

What if the Government agrees to write an MSP guarantee into the new laws, say through a fourth ordinance?

What if the Government were to make remunerative MSP a legal right, as demanded by the farmers even before the new laws were enacted?

The fact is that unless the new laws allowing hoarding of essential commodities and weakening APMCs are not rolled back, a legal entitlement to MSP will just remain on paper. Why?

• Labour laws and minimum wages for workers are legally guaranteed – but these laws are not enforced. In a climate where the Government pushes privatisation and contractualised jobs, labour laws remain only on paper. The same will be the fate of MSP also unless APMCs and Government procurement are not simultaneously strengthened.
• Companies can, with the help of Government, find many loophholes to undermine a law guaranteeing MSP, and arm twist farmers into selling at a lower price. For instance, companies can refuse to buy crop if it fails to meet an arbitrary standard. For instance, a South-African farmer told environmentalist activist Vandana Shiva that overnight they had to change the trees of the variety of the apple, because Walmart changed the size of the truck. Farmers in Gujarat have complained that PepsiCo has been known to reject their potato crop “if the potato size is smaller than the prescribed 40-45 mm diameter”. (Source: ‘PepsiCo offers to amicably settle potato row, but with riders; court stay on farmers remains for now’, The Hindu Business Line, April 26, 2019) A farmer whose produce could be rejected, would be desperate enough to sell at a far lower price.

Even if a fourth law guaranteeing MSP were to be enacted, it would just serve to sweeten the poisonous pill of the three new laws. Legalising MSP to ensure 50% profits over and above input costs is certainly needed – but scrapping the three new laws is just as necessary.   

The Government promises that the country’s food security and the ration system for the poor will not be affected.

The Essential Commodities Amendment Act allows companies to hoard food grains and other commodities. This means that there will be no regulation of food prices, and no limits on hoarding and black marketing. Corporations and MNCs will control the whole market chain. This means that subsidised food grains under the PDS will be replaced by a cash transfer scheme, forcing the PDS beneficiaries to buy in the open market.

This law further states that these changes shall not apply to orders under PDS and targeted PDS ‘for the time being in force’. The use of the phrase “time being”, for PDS, is very sinister.” It implies that the PDS system is temporary only.

The Government claims that fears of farmers losing their land to corporations is false.

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Protesting farmers say that they fear that thanks to the new laws, corporations will be able to grab their land. (“Farmers’ concern: ‘Will lose land to corporates because of the new laws’”, Indian Express, December 13, 2020)

But the Government claims that these fears are baseless.

But what happens if the farmers, thanks to a crop failure, is unable to honour the contract into which he has entered with a company?

Section 15 prohibits recovery “against the agricultural land of the farmer”. But Section 9 links “farming agreements” “with insurance or credit instrument under any scheme of the central government or the state government or any financial service provider to ensure risk mitigation and flow of credit to farmer or sponsor or both.” This means that credit could be linked to mortgaging of farmers’ land, and a failure to repay credit could result in losing the land.

Surely privatisation is needed for progress? Farmers already receive heavy subsidies. Is it not time for the Government to step back from farm subsidies and regulatory control?

Agriculture provides livelihood for the vast majority of Indians, and yet public investment in agriculture between 2011-12 and 2017-18, remained between 0.3 and 0.4 per cent of the GDP. In contrast, super-rich corporations receive 6 per cent of the GDP in tax waivers, write-offs and concessions alone – not counting the debt write-offs and dirt-cheap land, water, etc that they are given. Taxpayers should demand that their taxes go towards supporting farmers not companies.

Farm incomes are extremely low. Farmers even in the relatively more prosperous states earn just Rs 18000 per month – why should they be forced to face market competition, when tycoons like Adani and Ambani are protected from market competition and gifted juicy monopolies by the Government?

The Adanis and Ambanis secretly fund India’s ruling BJP through electoral bonds – and this is why the BJP regime insists on serving the interests of these companies rather than the interests of farmers and India’s poor who need rations.  

What immediate impact have the farm laws had?

The dangerous impact of the farm laws has become visible almost immediately. Paddy prices in mandis have crashed below MSP in many states, as a result of the looming prospect of scrapping of MSP. A significant proportion of the paddy crop was sold below MSP in mandis in Uttar Pradesh (47% crop sold below MSP), Gujarat (83%), Karnataka (63%), and Telangana (60%). In Chhattisgarh, which has emerged as a major producer in the past decade, no less than 4.4 lakh tonnes of paddy was sold below MSP.

Yet the government has put out data to show that this year’s kharif procurement is going on “smoothly” and that already, 22.5% more procurement has taken place compared with last year. How is that possible? The answer is that traders are buying grain at lower prices from farmers and selling it to government agencies like the Food Corporation of India (FCI) or other state-level procurement agencies, at the higher price which is the MSP. Only this can explain the fact that while a substantial share of farmers are getting lower-than-MSP prices, government procurement is still running smoothly and they are paying out MSP. (Source: ‘Paddy Prices Have Crashed Below MSP in Many States’, Newsclick, 13 December 2020)  

Bihar versus Punjab: Selective Use of Data Misinforms Policy

R. Ramakumar

A few days into the farmer’s agitation in India, a video episode of the programme “Cut the Clutter” hosted by journalist Shekhar Gupta was circulating in the social media. Those who criticised the farmer’s agitation were seen sharing the video episode to argue out the merits of the three Farm Acts passed by the central government in September 2020.  

This episode is an excellent example of selectively using data to push a partisan point. Gupta says that the arguments against the Farm Acts are “BS”. The key point hammered in by Gupta is that Bihar is a success story of Agricultural Produce Marketing Committee (APMC) reforms in India. For this purpose, he compares agricultural growth rates in Bihar and Punjab. According to him, after Bihar annulled its APMC Act in 2006, its agricultural growth rate increased, and even surpassed the agricultural growth rate of Punjab. He cites a paper authored by Ashok Gulati et al. from where he picks up these growth data between 2005-06 to 2014-15.

Such a startling claim led one to look at the data on agricultural growth rates. I first considered data for Gross State Value Added (GSVA) from agriculture at constant prices (base year 2004-05 = 100). It turns out that between 2006-07 and 2011-12, Bihar’s GSVA from agriculture grew at 4.8 per cent per year, while Punjab’s GSVA from agriculture grew at about 1 per cent. This is indeed accurate. However, this is an incomplete story. If Bihar’s APMC reforms indeed worked wonders for the State, we should see the same results replicated in longer time series also.

Thus, I considered the new series of GSVA from agriculture at constant prices (base year 2011-12 = 100) between 2011-12 to 2019-20. In this period, Bihar’s agriculture grew at (-)1 per cent per year, while Punjab’s agriculture grew at about (+)1 per cent per year (see Figure 1). In other words, Bihar’s agricultural GSVA shrank in absolute terms, while Punjab’s agricultural GSVA kept growing.

Why did Bihar’s agricultural GSVA shrink after 2011-12 if its APMC reforms were a success? Did the “Nitish Kumar magic”, to use Gupta’s words, disappear into thin air? And why did Punjab’s agricultural GSVA continue to rise at a positive rate in the same period?

In a national comparison also, Bihar fares poorly. I considered data on Value of Output (VOO) from all “crops” at 2011-12 prices between 2011-12 and 2017-18. In this period, the VOO of crops in Bihar grew at 0.9 per cent per year, while VOO of crops in India as a whole grew at 1.5 per cent per year.

While Gupta celebrates the first set of growth rates, he is silent on the second and third sets of growth rates cited above.

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In all these comparisons, we should remember the fact that Bihar’s numbers were far lower in levels compared to Punjab’s numbers. In 2012-13, the value of output per hectare was Rs 35,825 in Bihar and Rs 78,652 in Punjab. In the same year, the average monthly income from cultivation per agricultural household was Rs 1715 in Bihar and Rs 10,862 in Punjab. In other words, a short stretch of high growth is hardly adequate to punch Bihar ahead of Punjab in agricultural incomes. Further, a negative growth rate in Bihar after 2011-12, over a low base, is a sign of crisis, not promise.

The selective use of data to push neoliberal standpoints has been a mark of commentaries that have attacked the ongoing farmer’s agitation (see for example, another instance at “Per hectare farm income: Does Bihar really outshine Punjab?” by R. Ramakumar and Ashish Kamra, Financial Express, 25 November 2020. Poor empirical basis for policy changes can end up being disastrous for the recipients of the policy. That is exactly what has transpired with agricultural policy over the past 25-30 years. Gupta would do well to remember this. (Source: Foundation for Agrarian Studies)