Is everything perfect in the current system of Minimum Support Price (MSP), APMC (Agriculture Produce Markets Committee) etc. and in the farmers life? The clear answer is a big No. Are reforms required? A straight forward answer is a Yes. So, the reforms are here and the inevitable protests are there too.
Some major problems of farmers, and Indian agriculture in general, are that the yields are much lower than the global average, the economic condition of farmers is much worse and there is very little adoption of new technologies and the major reason for this is the non-availability of free and open market to farmers, since the average landholding size is less than 1 hectare (2.4 acres). So the farmers are reluctant to buy new machinery and adopt latest methods and continue with traditional farming requiring large human labour.
This is evident from the fact that there is a huge gap between the percentage of population engaged in agriculture and percentage of contribution of GDP by the agriculture sector.
So, reforms were really needed in this regard and let us see how.
Essential Commodities Act: This law aims to remove the caps on storage capacities, except in emergency situations. This will help increase the amount of cold storage facilities in the country. The farmers want their produce to be sold as much as possible, which was not a case till now as we have seen in earlier cases when storage capacities were full and farmers were unable to manage their produce.
It will prevent huge losses incurred by farmers and now they can pool their own resources to get the facility and store their produce, which will also help to eradicate the problem of black marketing practised by traders, and solve the farmers’ complaint of traders controlling the supply.
Farmers Agreement on Price Assurance and Services Act: In laymen terms, it is the contract farming act. This provides the facility to farmers to come in contract with the private firms. As we have seen, the very well-known case of the chips making companies coming in contract with the potato farmers. One thing this law will do is that it will increase the average land size under single cultivation. Hence, it will be easier to adopt modern machines and latest technologies like precision agriculture and this will result in increased employment for local youth.
It will also provide opportunities to rural households to look for alternate income sources as adoption of machinery will make them free from agricultural labour and provide them with assured income for their land. This will also address the problem of disguised unemployment.
Farmers’ Produce Trade and Commerce Act: This is the most contentious of the three farm laws. Farmers fear that once the private mandis are established the APMCs will be shut down and MSP will be done away with. Farmers fear that private traders will exploit them by not providing them their due.
Farmers know that the grains are in excess and the prices will fall as they will enter the market, so the problem is they don’t want to shift from these crops and if they do, the prices will automatically adjust according to the supply.
MSP foul play
This monotonous cycle of wheat and rice should anyway be broken as it is not sustainable. It is making our soil devoid of nutrients and also depleting the water table.
Moreover, MSP as a practice should be done away with as the Food Corporation of India (FCI) incurs huge losses on account of procurement and storage. Since MSP is only available in Punjab and Haryana, traders buy grains from Uttar Pradesh and Bihar at less than half the price and sell it to the government in Punjab and Haryana at MSP.
If you combine the total procurement and compare it to the land under cultivation, it comes out that the average yield per acre is much more than the actual yield possible. This foul play has been going on for years. There is a gap in prices of market and the MSP because the grains are in abundance, as soon as the amount of grains is reduced, the prices will automatically go up.
Talking of the current standoff, the government has bent as required and now the farmers should also come to the discussion table as the demand to repeal all the laws is not wise and they have gained what was initially required. This kind of protest was necessary to tell the current dispensation that their way of passing laws is not legitimate, which has been happening over the last few years.
If we see the origin of MSP, it came as an incentive to adopt new methods of green revolution. Now when the government wants farmers to shift to other crops, it should begin by giving incentives to the farmers for that.
Abhijeet Sharma is a student of Dept. of Agricultural and Food Engineering, IIT Kharagpur