By getting the three key ordinances – The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020; The Farmers (Empowerment and Protection) Agreement; and The Essential Commodities (Amendment) Ordinance, 2020 – cleared in the Parliament last month, the government has finally set the ball rolling for bringing in more market-driven mechanisms in the agri-business on a larger scale.

And the key promises made by these three pillars of the grand agri-reforms include: diluting the powers of the Agricultural Produce Marketing Committee (APMCs or registered mandis) and allowing private mandis to also operate, giving farmers the option to sell to multiple buyers anywhere, allowing contract farming on a larger scale, more space for private players to get into other components of the agriculture value chain like storage and allied services, etc. 

However, while some murmurs were heard after the announcement of the agri-liberalisation measures in June-August, raising doubts about the government’s intention to change Indian agriculture forever, the scene has dramatically changed since the ordinance was introduced in the Parliament, starting with the departure of Harsimrat Kaur Badal, who spearheaded the Food Processing Ministry for more than six years (she was serving her second term as Union cabinet minister) as Akali Dal representative in the government.

Badal’s exit, subsequently resulting in the Akali Dal breaking its alliance with the BJP, is broadly understood to be in response to the party’s fear of losing its constituency of farmers in Punjab, where the next state elections are expected in 2022. The protesting farmers’ lobbies, however, cite the lack of codified commitment from the Union government to make the Minimum Support Price (MSP) the binding pricing benchmark for 23 basic commodities for private buyers as their major concern. 

The commodities covered by the MSP regime include paddy, jowar, bajra, maize, ragi, arhar, moong, urad, groundnut-in-shell, soya bean, sunflower, sesamum, Niger seed, cotton, wheat, barley, gram, masur (lentil) and rapeseed/mustard seed while for sugarcane, fair and remunerative price (FRP) has been declared by the Department of Food & Public Distribution. According to Chaudhary Pushpendra Singh, president, Krishi Shakti Sangh (a farmers’ organisation, mainly active in western Uttar Pradesh), the crops covered by the government-backed pricing scheme comprise nearly one-third of the estimated Rs30 lakh crore of domestic agriculture business. “But the government’s total procurement is in the range of Rs2-2.25 lakh crore of commodities under the MSP programme. The rest is procured by private traders at a rate far below the MSP, which is a loss for the farmer. This is what we are demanding from the government; even private parties should be made to buy commodities under the MSP regime as per the fixed floor price,” says Singh, who cites an example from Bihar to explain the inherent distortion in the system. “The MSP fixed for maize is close to Rs1,800. But private traders are buying it at Rs1,000 or even below. Does this not mean farmers are selling their produce at a loss?” he asks.

Interestingly, in the past, the farmers’ lobby has not raised this issue of making the MSP price (for commodities in the list) mandatory for all buyers, including private traders. Point this out to Singh and he strongly claims it’s not a new demand. “We have raised it in the past too. But, this time, we are assertive on this, because the government is trying to bring an entirely new regime to conduct the agriculture business, which is radically different. If it is not incorporated now, it will become difficult to implement it later,” he adds.

Clashing interests 

The line of argument put forth by most farmer leaders, that expanding the scope of MSP would mean consistently augmenting the income of farmers, however, could be only one side of the story. There is no dearth of those strongly presenting counter arguments, saying that, in an era when the production shortage issue is almost non-existent, horticulture has overshadowed food grain production and there is a larger ambition to graduate from being an agriculture to food products powerhouse, an MSP regime has hardly any meaning.

“MSP has been a political tool, which helps the governments to demonstrate its commitment for Bharat. But it has resulted in the artificial jacking up of the price of certain basic commodities. You make it an encompassing provision, forcing private players to match your floor price diktats and your basic products will become over-priced with very little demand. You will have to give up your dream to compete globally in the food product segment,” says a former senior bureaucrat with the agriculture ministry. 

MSP, the guarantee of price increment for farmers of basic crops like wheat and rice, is also being held as the key force holding farmers back in several fertile pockets like Punjab and Haryana, from indulging in crop diversification. The rapid rise in horticulture in the last ten years (the output rising from sub-200 million tonnes in 2010 to over 310 million tonnes now, which eclipses total food grain production of about 300 million tonnes) is being viewed as the route farmers should be taking to enhance their income.

“We are over-producing a water-guzzling crop like rice probably just because of MSP guarantees in states like Punjab. This hardly makes any sense now,” commented Trilochan Mohapatra, Director General, Indian Council of Agricultural Research (ICAR), in an earlier conversation. 

Meanwhile, the dilution of powers of APMC is another key point of grievance for the protesting farmers in Punjab and Haryana. The idea of facilitating private mandis (even the existing warehouses of private operators in the leading hinterland production hubs can be converted into a mandi) has been pushed by the government to offer multiple selling options to producers. In a way, this is a move meant to set farmers free from the clutches of a specific mandi administration and the commission-earning middlemen, who traditionally have been an exploitative bunch of functionaries.

Point this out to Charuni and he responds strongly with a counterargument. “People in the government and experts only talk about the middlemen in the value chain. But there are a whole lot of people involved in agriculture business transactions at APMCs at the local level, in sortation, packaging, transportation, etc. What happens to them, if these traditional hubs are systematically weakened?” he asks. 

But other stakeholders in the agri-value chain have different stories to tell. “In the administration of these APMCs, you will often find relatives and friends of local politicians or those close to the ruling party surrounded by a group of people who act as middlemen. In the hinterland, they are more like hubs to control the local economy by a few and often end up becoming a centre of corrupt practices and vested interests,” points out Sanjay Agarwal, CMD, Devbhumi Cold Chain, a leading fruit trading firm in the country which operates the largest cold chain unit at Azadpur Mandi, Delhi. 

The Union government is clearly getting support from firms which are aligned with the larger agriculture play in some form or the other. “The move will break the monopoly of the traders, who were largely running the APMCs. It mitigates two of the biggest uncertainties a farmer is facing today – market and climate risk,” observes Sandip Malhotra, MD, IFFCO KISAN (a subsidiary of fertiliser major IFFCO, formed in association with telecom major Bharti Airtel, which runs one of the largest advisory services for farmers).  “Farmers can now enter into contracts with processors, exporters and large retailers at the time of sowing itself. The contracts will enable investors to be confident they can integrate modern technology in the agriculture business,” he adds. 

A better regime for contract farming is certainly being viewed as one of the major benefits which new agriculture laws will deliver. “The engagement between agriculture-centric companies and farmers will definitely be pushed to a new level. And this will be expressed more through companies joining hands with the local Farmer Producer Organisation (FPOs), which represent modest to large volume of farmers in many states,” points out Siraj Chaudhary, MD, National Collateral Management Services Limited & former chairman of the Indian subsidiary of Cargill, the global commodity giant. Farmer leaders like Charuni, however, present a totally different point of view. “The new laws will serve the interest of a few corporate houses who would like to dominate and control the agriculture business at a large scale, going ahead,” he says.

More action expected 

According to a senior office bearer of a leading industry association, the discordant voices, which are rising in decibel, have simply resulted from the fact that the government’s intention to allow alternative mandis has sent the message that it eventually wants to eliminate the MSP regime completely. “The agitation is more visible in states like Punjab and Haryana because it is farmers in these states which mostly benefit from MSP by producing bulk paddy and wheat. Plus, the state government in Punjab is also worried about the prospect of losing mandi fees, which are estimated to be over Rs3,000 crore, since they won’t able to charge them with private mandis,” says he. Haryana’s loss on this front is estimated to be in the range of Rs1,800 crore. 

Even as the Union government has remained unfazed at the rising protests, the decision to increase MSP on six crops, including wheat, announced on 21 September, probably points to its efforts to assuage aggrieved feelings. The announcement has been made for the upcoming rabi season, which is quite surprising, given the fact that, traditionally, the government has announced the floor price for the winter crop in October.

The move was meant to reinforce what Prime Minister Narendra Modi has been repeatedly saying since the protests began. “The system of MSP will remain. Government procurement will continue. We are here to serve our farmers. We will do everything possible to support them and ensure a better life for their coming generations,” he wrote in a recent tweet.

The protesting farmers’ lobby, however, is refusing to buy the assurances coming from government quarters. “What is holding them back from making this simple uniform MSP clause part of the bill, if they intend to continue with the mechanism?” asks Pushpendra Singh, who adds that the issue is unlikely to fade. However, he admits that the protests till September-end have been location-centric, fragmented and haven’t really become the leading national issue, which they should have done. 

According to Gurnam Singh, the local farmer organisations have planned to put pressure on Dushyant Chautala, deputy chief minister, Haryana & chief, Jannayak Janta Party (JJP), to snap his political alliance with the Manohar Lal Khattar-led BJP government. “Additionally, on 8 October, we have invited senior representatives of important farmers’ unions to draw up a long-haul strategy,” says he.

Prior to that, a lot of action is expected, especially in Punjab, with the three outfits – the ruling Congress Party, the Akali Dal and also AAP – backing different farmer outfits to intensify the stir. Congress leader Rahul Gandhi is also expected to address a series of farmers’ rallies in the state and, for the time being, most of the build-up is expected to unfold in Punjab. 

The moot question is: will the simmering tension eventually flare up in major trouble for the Modi government at the Centre? Or will it die down on its own, as the kharif sales season is around the corner, and farmers will be more concerned about selling their produce. There is no denying the fact that quintessential farmer issues (often built up with an emotive spin) have, in the past, shown the potential to unnerve governments in command.

Interestingly, former Himachal Pradesh chief minister Shanta Kumar (a veteran BJP leader, who had headed a committee to suggest measures for a farm sector facelift and is credited with having drafted the Modi government’s agriculture reforms agenda, including the PM-KISAN scheme for direct cash transfers and the three crucial farm bills), in a recent interview, maintained that MSP only helps 6 per cent of the elite farmers (mostly in Punjab and Haryana) and doesn’t have much meaning for the majority, who are smaller farmers.

The Modi government may just be looking at this factor as a major cushion in dealing with farmers’ protests this time, hoping the agitation remains selective and sporadic.