ISSUE:  There has been massive eruptions against the Farms acts across the country. This has become a cause of concern for both the government and among the Farmer welfare activists.

BACKGROUND: Government has recently introduced Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FTPC Act). Government argues that such steps will ensure freedom to farmers to sell to any individual. Thus, the Act will result in removal of the middleman and better realization of farmgate prices. However, farmers are apprehensive that such a step will result in closure of Mandis, corporatization of the Agri market and removal of the MSP, all these factors leading to lower realization of the prices for farms produce.

FLAWS IN FARM ACT: The present Farm Act by the government is based on incomplete understanding of the Farmers issue. It does not take into account the following issues of the farmers:

•  Farms act is based on the wrong assumption that Agricultural Produce Marketing Committees (APMC) monopolizes the rural Agri market. In realities, mandis does not cover the entire rural market.  Official data show that even for paddy and wheat, only 29% and 44% of the harvest is sold in mandis, while 49% and 36% is sold to either a local private trader or an input dealer.
• Small and marginal farmers avoid selling their produce to mandis not because of less Agri mandis but due to high transportation charges involved in taking their harvest to mandis because of small marketable. Even if private markets replace mandis, small farmers will continue to sell to traders in the village itself.
•  Some states have already allowed the farmers to sell outside APMC markets which is one of the aims of the present Farm act.  However, despite these legislative changes, no private investment has flowed into Private markets because of high transaction costs in collection and aggregation, such as for opening collection centers, salaries, storage and transport.
•  In absence of MSP protection, opening of the private market in reality may have a negative effect on price realized by the Farmers as the private sector will try to compensate the procurement cost by lowering prices paid to farmers for their produce.
• Mandis taxes are not evil, they are used for improving APMCs infrastructures and for rural development like for supplying drinking water.

WAY FORWARD

Farm Acts is never a panacea for addressing the problems of the Farmers, infact by weakening the APMCs it will give rise to dangers of monopolization of the market by the private sector. As argued by scholar Barbara Harriss-White, “imperfect markets may become, not less, imperfect than regulated imperfect markets.” Hence the need of the hours should be a holistic framework to deal to uplift the condition of farmers. The step which can be taken are:

• Open discussion between the Farmer and Government to remove any misunderstanding.
• Fixation of price at 50% above the C2 cost of production as recommended by Swaminathan Report.
• Removal of uncertainties by government over apprehension of farmers on Minimum Support Price and policy of Open-ended procurement.
• Expansion of the density and infrastructure of the Mandis to more areas so that more crops from all the areas of India can be procured at MSP.
• Universalization of the Public distribution system so that stocking issues of MSP procured grains can be addressed.
• Need of internal reforms in APMC like easing entry of new players, reducing traders’ collusions and linking APMC through national e-trading platform of e-NAM.
• Introduction of unified national license for traders and a single point levy of market fees can also be done.

Reference:

1.  https://www.thehindu.com/opinion/lead/the-perils-of-deregulated-imperfect-agrimarkets/article33216046.ece