Bombshell Boomerangs

Thousands of farmers, mostly from Punjab and Haryana, have been protesting in and around Delhi for more than a week. They are demanding the repeal of the three agriculture marketing laws passed by the parliament in September this year. Three rounds of talks between Central government and farmer unions have failed to break the ice. Farmers say that they will not go back until the laws are repealed. The government, however, is in no mood to do that. But why are farmers in Punjab and Haryana so angry with the three laws which bring about major reforms in agriculture marketing? Before answering that, let us very briefly understand what the laws propose.

The three laws, in a nutshell, give more choice to farmers to sell their produce and reduce government’s interference in agriculture. Farmers’ Produce Trade and Commerce [Protection and Facilitation] Act, 2020 allows farmers to sell their produce outside the government controlled Agriculture Produce Market Committee [APMC] markets.

The other law, Farmers [Empowerment and Protection] Agreement on Price Assurance and Farm Services Act, 2020, allows contract farming. It means a farmer can enter into an agreement on price and quality with a buyer, mostly a private company, even before the produce is ready.

The third law is Essential Commodities [Amendment] Act, 2020. It removes government’s regulations on the storage of several food items such as pulses, onion by traders. Earlier, they could not stock these food items beyond government’s sanctioned limits, even in case of bumper production.

Why the protest?

Despite the protesters’ claims, the current protest against the new laws is not nation-wide. Farmers across India are not angry with these laws. The centre of the protest is Punjab and Haryana, and there is a reason for that.

The Central government buys certain agricultural produce, primarily wheat and rice, at Minimum Support Price [MSP] to sell it through Public Distribution System. MSP of any agricultural produce is 50% higher than total production cost. When the buyer and price are fixed, it gives farmers surety of income.

Farmers in Punjab and Haryana are the biggest beneficiaries of government’s procurement at MSP. The government agency, Food Corporation of India, buys most of the wheat and rice from Punjab and Haryana. According to Agriculture Ministry’s data, 68.2% of the rice bought by the government at MSP this year is from Punjab alone. In the 2018-19 season, the government bought 89% of the total rice grown in Punjab, and 85% of that in Haryana. This is way more than other rice producing states. In UP, for example, only 18% of the rice produced was bought by government at MSP.

Procurement of rice at MSP in major producing states 2018-19

State	Procurement of rice (Million tonnes)	Procurement as % of production
Punjab	11.4	89.0
Andhra Pradesh	4.2	50.7
Telangana	4.1	62.0
Haryana	3.8	85.0
Odisha	3.8	49.0
Chhattisgarh	3.7	57.4
Uttar Pradesh	2.8	18.1
West Bengal	1.9	11.4
Madhya Pradesh	1.3	28.2
Others	3.2	9.5

Same is the case with wheat. In 2017-18, government bought 71.2% of the wheat produced in Punjab and 64.4% in Haryana. The trend continued in the successive years. Less than 20% of wheat produced in Uttar Pradesh was bought by the government at MSP, despite it being the largest wheat producing state.

Statewise procurement of wheat at MSP (million tonnes)

State	procurement in 2017-18	Procurement as % of production	Procurement in 2018-19	Procurement as % of production	Procurement in 2019-20	Procurement as % of production
Punjab	117.1	71.2	126.9	71.2	129.1	72.6
Haryana	74.3	64.4	87.8	81.6	93.2	80.0
Madhya Pradesh	67.3	37.5	73.1	46.0	67.3	38.8
Uttar Pradesh	37.0	12.3	52.9	16.6	36.4	11.3
Rajasthan	12.5	13.9	15.3	16.4	14.0	14.6
Bihar	0.0	0.0	0.2	0.3	0.0	0.0
Others	0.7	0.7	1.6	7.0	0.6	0.9
All India	308.2	31.1	358.0	35.8	340.6	33.7

This explains why farmers in Punjab and Haryana are concerned about MSP. They fear that after allowing farmers to sell their produce outside APMC, the next step would be discontinuing procurement at MSP.

Besides that, the other fear of the farmers is that big corporates will take over contract farming.

When a deal between farmers and traders happens in APMC, a market fee is charged. That market fee is a source of revenue for state governments. If farmers sell outside APMC, state governments will lose that source. That explains why opposition parties are criticising the laws.

Reforms needed

MSP is the policy of the past. The government will have to reduce, if not completely stop, buying food grains at MSP. It is simply not the government’s job to buy agricultural produce.

As far as APMCs are concerned, parliamentary committee has pointed out irregularities in these markets. To give an example, traders are supposed to pay the market fees. But it is collected from farmers, says the committee’s report. Also, in some states market fee is charged just for landing the produce in APMC, even if the farmer doesn’t sell it.

Nobody would deny that reforms are needed.

However, the government’s style of introducing reforms is problematic. When the country was in the midst of the worst public health crisis, the government suddenly announced that it is going to introduce these laws. No consultations happened with farmers or state governments. While transforming any system, practicalities and people’s apprehensions need to be addressed. Nothing of that sort was done. This lack of dialogue resulted in mistrust between farmers and government.

Worst, after the government announced the plan to introduce these laws in May, farmers in Punjab and Haryana started protests. But the government did not take them seriously. It started talking to farmers sincerely only in the last week when they camped on the Delhi border.

Dropping bombshells on people by suddenly announcing major decisions is the style of the NDA government, be it demonetization, revocation of Article 370, imposition of nationwide lockdown to contain the spread of coronavirus, or these farm laws. This time the bombshell has boomeranged.