Context- Farmers from all over the country are protesting seeking the repeal of the new farm laws.
What is Farmers’ Produce Trade and Commerce [FPTC] Act, 2020?
- Break the monopoly- It allows intra-state and inter-state trade of farmers produce beyond the physical premises of Agricultural Produce and Livestock Market Committee (APMC) markets.
- State will be now prohibited from levying any market fees or cess outside APMC areas.
However, a large proportion of Indian harvest is sold outside mandis, only 29% and 44% of the harvest is sold in a mandi.
Farmer’s fears– This could corporatize agriculture, threaten the current mandi network and State revenues and dilute the system of government procurement at guaranteed prices.
What are the concerns of farmers?
- They are farmers are forced to sell their harvest outside the mandis due to
- India still doesn’t have enough mandis– Only 7,000 APMC markets operating across the country.
- Transport costs- Most small and marginal farmers, given their small marketable surplus, do not find it economical to bear the transport costs to take their harvests to mandis.
Therefore, the farmer ends up selling their harvest to a village/local trader even if at a lower price. Even if private markets replace mandis, small and marginal farmers will continue to sell to traders in the village itself.
- No assurance of receiving higher prices even if private market emerges.
- Adverse impact on rural investments- Mandi taxes are reinvested by APMCs to improve market infrastructure. A fall in mandi taxes would reduce the surplus available with APMCs for such investment.
What are the reasons for poor private investment in market?
- High transection cost- Private players have incurred considerable costs in opening collection centres and for salaries, grading, storage and transport.
- Corporate retail chains face additional costs in urban sales and storage, as well as the risk of perishability.
Therefore, corporate retail chains prefer purchasing bulk quantities from mandis rather than directly from farmers.
What is the farmer’s fear with regard to MSP?
Many policy signals point to a strategic design to weaken the MSPs
- MSPs are rising at a far slower rate over the past five to six years than in the past.
- The government has not yet agreed to fix MSPs at 50% above the C2 cost of production.
- Recommendation of CACP to stop open-ended procurement of food grains.
What Steps needs to be taken?
- India needs an increase in the density of mandis, expansion of investment in mandi infrastructure and a spread of the MSP system to more regions and crops.
- APMCs need internal reform to ease the entry of new players, reduce trader collusion and link them up with national e-trading platforms.
- The introduction of unified national licences for traders and a single point levy of market fees.
The Farm Acts were legislative measures that were passed without elaborate discussion with stakeholders. Thus, government has to take steps to address the genuine fears of farmers.