7 PM Editorial |Farm Sector Reforms and Associated Issues|21st September 2020

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Farm Sector Reforms and Associated Issues

Topic: GS-3, Economy

Sub-Topic – Issues and Challenges Pertaining to the Federal Structure, Mobilization of Resources

Overview – The concerns of the farmers because of the farm sector bills brought in by the government.

Introduction:

The Food Processing Industries Minister resigned after the introduction of Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020, and the Essential Commodities (Amendment) Bill, 2020. There have been dissenting voices from various mass organisations affiliated to the Rashtriya Swayamsevak Sangh suggesting that the opposition to the Bills may not be politically motivated; rather, it may be a reflection of the genuine concerns of farmers.

What does the bills entail?

The Bills aim to do away with government interference in agricultural trade by creating trading areas free of middlemen and government taxes outside the structure of Agricultural Produce Market Committees (APMCs) along with removing restrictions of private stock holding of agricultural produce. This has led to different concerns which has led to a situation of mistrust among different stakeholders.

APMC: The whole geographical area in the State is divided and declared as a market area wherein the markets are managed by the Market Committees constituted by the State Governments. Even otherwise, APMCs account for less than a fourth of total agricultural trade. But APMCs do play an important role in price discovery essential for agricultural trade and production choices.
What are the issues that different stakeholders identify with the bills?

The attempts to reform the APMC are not new and have been part of the agenda of successive governments for the last two decades. Most farmer organisations also agree that there is excessive political interference and there is need for reform as far as functioning of mandis are concerned. However, the stakeholders have still found different issues with the bills that include:

  1. The government has failed to have or hold any discussion with the various stakeholdersincluding farmers and middlemen.
  2. Even though the subject of trade and agriculture are part of subjects on the State list, they have not been consulted.
  3. The farmer organisations see these Bills as part of the larger agenda of corporatisation of agricultureand a withdrawal of government support.
  4. There may not be direct evidence of crony capitalism, but the entry, in a big way, of two of the biggest corporate groups (Adani and Reliance) in food and agricultural retail and the timing of the Bills have not gone unnoticed.
  5. Ad hoc interventions by the government such as raising import duties on masur and a ban on onion exports also raise suspicionabout the intent of the government to leave the price discovery mechanism on the market.

While the proposed Bills do not do away with the APMC mandis, the preference for corporate interests at the cost of farmers’ interests and a lack of regulation in these non-APMC mandis are cause for concern. The absence of any regulation in non-APMC mandis is being seen as a precursor to the withdrawal of the guarantee of MSP-based procurement. The dominant concern is being expressed by the farmers of Punjab and Haryana.

Why are the farmers of Haryana and Punjab more concerned?

The public procurement in these States is large. These fears gain strength with the experience of States such as Bihar which abolished APMCs in 2006. After the abolition of mandis, farmers in Bihar on average received lower prices compared to the MSP for most crops. For example, as against the MSP of ₹1,850 a quintal for maize, most farmers in Bihar reported selling their produce at less than ₹1,000 a quintal. So, despite the shortcomings and regional variations, farmers still see the APMC mandis as essential to ensuring the survival of the MSP regime.

Conclusion:

While retail prices have remained high, data from the Wholesale Price Index (WPI) suggest a deceleration in farm gate prices for most agricultural produce. This has happened despite increased procurement through the MSP-based regime for paddy and wheat. Decline in basmati rice prices by more than 30% and despite higher international prices suggests the limitation of market intervention in raising farm gate prices. For most crops where MSP-led procurement is non-existent, the decline has been sharper. Even cash crops such as cotton have seen a collapse in prices in the absence of government intervention. With rising input costs, farmers do not see the market providing them remunerative prices. The protests by farmers are essentially a reflection of the mistrust between farmers and the stated objective of these reforms.

Source: The Hindu

Mains Question:
  1. Do you agree that the Government reforms in the farm sector will help the farmers in realising higher prices? Suggest further reforms that are required.
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