Who benefits from the new agricultural laws of the Modi government, who is hurt?

Posted on 8th Dec 2020 by rohit kumar

Farmers are on the road. They are demanding the withdrawal of new agricultural laws. These laws have been made through Parliament, but agitating farmers say that their interests will be affected by these laws.

 

Today, on December 8, to put pressure on the Modi government, many farmer organizations have called 'Bharat Bandh'.

 

A total of 24 political parties have supported this Bharat Bandh of farmers, including the opposition Congress Party. Farmers' organizations say that if the Modi government does not withdraw the agricultural laws, then in the coming time they will get a quarter of the price of their products and the cost of farming will not be realized.

 

Along with this, farmers also fear that the minimum support price ie MSP guaranteed by the government will also end.

 

What is the last in these agricultural laws?

The new agricultural laws aim to change the produce coming in store and for sale in the market.

 

In June, this bill was brought through an ordinance. Later in the Monsoon Session of Parliament, it was passed by voice vote while the opposition parties were against it.

 

According to The Farmers Produce Trade and Commerce (Promotion and Facilitation), 2020 law, farmers can sell their produce outside the mandis notified by the APMC i.e. Agriculture Produce Market Committee without paying tax to other states.

 

The second law is - Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Service Act, 2020. According to this, farmers can do contract farming and market it directly.

 

The third law is - Essential Commodities (Amendment) Act, 2020. In this, apart from production, storage, sale of grains, pulses, edible oil, onions have been deregulated except in exceptional circumstances.

 

The government argues that with the new law, farmers will get more options and there will be good competition on the price.

 

Besides, private investment in agricultural markets, processing, and infrastructure will be encouraged.

 

Will farmers get minimum support price i.e. MSP?

The biggest fear that has emerged in the farmers' protests is that the MSP system will become irrelevant and they will be forced to sell their produce at a price less than the cost.

 

Under the MSP system, the central government fixes the minimum support price for purchasing the produce of farmers according to the agricultural cost.

 

The government decides the MSP for a total of 23 crops in each season of sowing of crops. However, the central government purchases large quantities of paddy, wheat, and some special pulses.

 

In the year 2015, according to the data of the National Sample Survey by Shanta Kumar Committee, only 6% of farmers can sell their produce at the rate of MSSP. The MSP is not directly affected by these three new laws of the central government.

 

However, most of the government buying centers notified by APMC are in Punjab, Haryana, and some other states.

 

Farmers fear that due to tax-free business outside the APMC mandi, government purchases will be affected and gradually this system will become irrelevant.

 

Farmers demand that the MSP be made compulsory from the government market to the private market so that all types of buyers - whether government or private, do not buy food below this rate.

 

Why is the minimum support price necessary in government purchases?

The largest part of the product that the government buys comes from Punjab and Haryana. If we look at the data of the last five years, the government, whether it is wheat or rice, has bought the most from Punjab and Haryana. On this, the Indian government spends billions of rupees.

 

It has been considered as one of the world's most expensive 'Government Food Buying Programs'.

 

After calculating the cost of cultivation, the State Government-run Agricultural Costs and Prices Commission (CACP) announces the Minimum Support Price (MSP) of more than 22 crops to set a benchmark.

 

Although the CACP announces the MSP for most crops every year, the state-run grain buying agencies and the Food Corporation of India (FCI) buy only rice and wheat at those prices, due to lack of storage and funding.

 

After purchasing rice and wheat from farmers on MSP, FCI can sell ration to the poor at concessional prices and the government compensates for the loss of FCI.

 

The 'Guaranteed Price' from FCI encourages farmers to produce rice and wheat in large quantities. But it also puts pressure on the overproduction FCI to buy additional supplies from farmers, resulting in frequent abundance of food grains in state warehouses. Also, the subsidy bill that is made on it often increases the budget deficit.

 

Despite the huge reserves of rice and wheat, exporting them has been a major challenge for FCI. In such a situation, the cost of storage and the increasing MSP every year makes the cost of wheat and rice more expensive for FCI, so that foreign sales do not remain profitable.

 

Sometimes, the Indian government keeps sending small amounts of rice and wheat to other countries through diplomatic deals. Nevertheless, FCI godowns remain full.

 

The 'price guarantee' provided to the farmers by the FCI model is the biggest benefit to the big farmers in Punjab and Haryana, while the small farmers of Bihar and other states are not able to get this benefit.

 

Punjab and Haryana, why most aggressive about these laws?

85 percent of wheat and rice in Punjab and about 75 percent of wheat and rice in Haryana are purchased on MSP. For this reason, the farmers of these states fear that their situation will deteriorate if the MSP system ends.

 

Farmers of these states also fear that the market price of their crops will fall without MSP.

 

Most investment has been done on the APMC system in these states and these mandis are the most developed in these states. They are fine network is built there. It is a systematic system through which farmers can sell their crops. But farmers fear that the new laws will affect them.

 

Every year, farmers in Punjab and Haryana can sell almost their entire production to the FCI at a minimum support price through a well-developed mandi system, whereas farmers in Bihar and other states are unable to do so because there is no such developed mandi system.

 

Also, unlike the poor farmers of Bihar - the rich and politically influential peasant communities of Punjab and Haryana ensure that the FCI continues to purchase the largest quantities of rice and wheat from their states.

 

As reported by the news agency Reuters, while Punjab and Haryana can sell almost their entire production (rice and wheat) to FCI, the total purchases by government agencies in Bihar is less than two percent. For this reason, most farmers of Bihar are forced to sell their produce at a discount of 20-30 percent.

 

Already deprived of 'assured income', the farmers of Bihar have not opposed the new laws. While farmers in Punjab and Haryana fear that their situation may not be the same as farmers in Bihar and other states, they want the FCI model to remain in place and the system of purchasing their produce at the minimum support price. Otherwise, if this system changes, then they too will be forced to face private buyers.

 

What are the other concerns?

 

State governments are worried about the possibility of a decline in market tax. Non-BJP ruled states have stated openly that they will incur tax losses with these laws. Mandi tax in various states of India ranges from 1 to 8.5 percent, which goes to the account of the state governments.

 

Some financial matters experts and activists say that Punjab and Rajasthan are also considering bringing the law related to it.

 

There are seven thousand APMC markets in India and most of the purchase of agricultural production takes place outside the mandis. Bihar, Kerala, and Manipur have not implemented the APMC system.

 

There is also a lot of concern about the permission of crop stock. It is believed that it will bring the necessary investment in agriculture, but small farmers will benefit from it, it is less likely because they will not be in a position to negotiate with big investors.