Bathinda: One of the reasons the Narendra Modi government has cited for introducing the three new agriculture laws is to free farmers from the ‘clutches’ of arhatiyas or commission agents.
Arhatiyas facilitate trade in Agricultural Produce Marketing Committee (APMC) mandis, and levy fees for the service, which comes out of the pockets of farmers and buyers. And since APMCs have a monopoly in the farm produce market, the farmers don’t get the benefit of competition, which would get them a better price. As a result, farmers end up producing paddy and wheat — the two commodities for which the government offers a minimum support price (MSP). This has led to a paddy-wheat monoculture that has brought agrarian crises to once-prosperous Punjab.
The total market charges for agricultural trade in Punjab are 9.5 per cent of the value of the produce — the charges consist of 3 per cent infrastructure cess on wheat-paddy, 2 per cent market fee, 2 per cent rural development fund, and 2.5 per cent arhatiya commission. The new farm laws remove all these extra charges from agricultural trade to attract more buyers for the farmers’ produce, creating competition and attracting better prices.
But the farmers aren’t convinced — their months-long protest has featured the demand to repeal the laws and keep the mandi–arhatiya system in place. The arhatiyas are supporting the farmers by halting agricultural trade through strikes in Punjab’s mandis.
Who are arhatiyas?
Arhatiyas are commission agents in mandis who facilitate the transaction of crops between farmers and actual buyers like processors, exporters and government agencies like the Food Corporation of India (FCI). There are 1,858 mandis in Punjab and 400 in Haryana, and more than 23,600 and 22,000 arhatiyas are registered in the states respectively.
Farmers bring their produce to an arhatiya’s shop inside the mandi, where it is cleaned, weighed and filled into sacks, and then sold through an open auction. For this, they charge farmers and buyers a fee.
Arhatiyas were the traditional moneylenders in what are now Punjab and Haryana, and came into agriculture when regulated markets came into the picture. The Green Revolution’s capital-intensive nature increased farmers’ financial needs through the greater use of machines, chemicals and other inputs. Arhatiyas provided easy credit, on a high interest rate, for purchasing seeds, fertilisers etc. during the sowing season, as also for domestic needs like weddings or vehicle purchases etc.
Arhatiyas still provide non-institutional credit to farmers, since institutional sources such as banks haven’t been able to meet their multiple credit requirements.
How arhatiyas ‘grip’ farmers
Under the APMC system, arhatiyas sell the produce, receive a payment plus a commission, and then forward farmers the earnings after deducting outstanding loans they’ve provided them.
They account for 66.74 per cent of loans provided in villages without a bank in Punjab, and 54.45 per cent in villages and areas with one or more banks.
The average rate of interest charged by arhatiyas is in the range of 15-24 per cent per annum, against 8 per cent charged by institutional sources of finance.
“But bank loans take time, collateral and paperwork,” Darshan Singh, a 10-acre farmer in Bhai Bakhtaur village in Bathinda, told ThePrint. “Arhatiyas give us loans at any time, even at night, for immediate fertiliser or pesticide spray.”
But these frequent, high-interest loans end up thrusting Punjab into a cycle of exploitation — they can never pay off their loans due to increasing agricultural and livelihood expenses along with falling incomes and reducing landholding.
Sucha Singh Gill, agricultural economist and senior professor at the Centre for Research in Rural and Industrial Development, said, over the decades, the characteristic of the arhatiya profession has also changed due to caste. He explained that earlier, arhatiyas were mostly baniyas, but now, large landowning Jat farmers who reaped the benefits of the Green Revolution, have started investing their profits into the arhatiya profession. This, he said, has made for stricter repayment policies, and mortgaging the land of indebted farmers.
“Earlier, arhatiyas were not landowners, so they were polite in their dealings with farmers. But with jats becoming arhatiyas, they take over a farmer’s land if he defaults,” Gill said.
This, in turn, has reduced landholding, and thus, farmers’ income, pushing them into debt and distress, he added.
However, Vijay Kalra, president of the Federation of Arhatiya Associations of Punjab in Makhu village, Ferozepur district, defended the profession by saying they are necessary service providers, not mere ‘middlemen’.
“Arhatiyas are not middlemen, as labelled by the government. We are a crucial service provider necessary for both farmers and buyers. Everyone sees the commission we take, but not our expenses — we engage at least 7-8 workers for processing crops, along with an accountant and various other staff for clerical purposes,” Kalra said.
“There are many miscellaneous costs that an arhatiya has to bear, such as electricity, electronic weighing scales and tarpaulin covers for unlifted grain. We even have to occasionally please officials to accept grain that may have moisture beyond the prescribed limits, so that our farmer doesn’t suffer losses,” he said, adding that in the end, an arhatiya only saves about half a per cent of the total amount, not the whole 2.5 per cent fee that is charged.
Why can’t farmers get out of their clutches?
The simple answer to this question is lack of access to formal credit. When facing a cash crunch, farmers take loans from arhatiyas, sometimes even for daily needs, and get it in the form of a ‘parchi’ or slip. This way, an arhatiya can force farmers to buy articles from their shops or those they have tie-ups with, rather than providing cash outright.
In a 2011 academic paper, Punjab Agricultural University professor Sukhpal Singh and Punjabi University (Patiala) professor Tejinder Dhaliwal wrote that about 24 per cent of them have a grocery business, while another 31 per cent belong to various types of professions. A majority of the commission agents are farmers, grocers, rice shellers, and owners of pesticide/fertiliser shops.
The parchi is deducted at crop procurement, making the farmer, in a sense, a bonded seller and a bonded buyer.
Praveen, an arhatiya in Maur mandi, Bathinda, explained just why the farmers can’t afford to go the formal credit route, by talking about “subsidised interest”.
The central government provides farmers the facility to avail concessional crop loans up to Rs 3 lakh at 7 per cent interest. It also provides additional lowered interest (subvention) of 3 per cent for prompt repayment within a period of one year. This helps farmers to avail crop loans at a rate of interest of only 4 per cent per annum.
“The loan from the bank is subsidised to a limited amount — up to Rs 3 lakh at Rs 70,000 per acre. However, we provide loans to them round the clock, throughout the year,” Praveen said.
“We take our cut when the farmer crop is sold, including labour and another processing costs at the mandi, apart from prior loans which the farmer has taken for crop spray, diesel, festival/education/ration and other daily needs.”
The Centre and the state of Punjab, in the past, have made efforts to free farmers from arhatiyas, through attempts such as trying to make procurement agencies pay the farmers directly, which would bring in transparency. This would let the farmer repay according to his or her capacity. But little has been achieved so far, because the capital-laden arhatiyas are a powerful lobby, and have opposed such moves, because they fear this will take the farmers, and thus their profits, away.
Sukhpal Singh and Tejinder Dhaliwal’s critique of the commission agent system in Punjab agriculture found that 44 per cent of farmers have been dealing with the same arhatiya for more than one generation, because of the unending cycle of debt, and because they have to take informal clearance from their old commission agents by repaying their dues before joining a new commission agent.
Vijay Kumar, another arhatiya in Maur mandi, Bathinda, told ThePrint: “My farmer cannot sell his crop to other agents unless I provide him with a clearance certificate. This is because farmers take frequent loans from us for livelihood expenses.”
Why are farmers opposing the change?
Farmers in Punjab fear that the creation of private mandis and the subsequent removal of assured procurement will affect their relationship with arhatiya. They fear this would delay credit for the next crop, livelihood expenses and profitability.
Mahinder Singh, a farmer in Bathinda, said: “Arhatiyas give us the money in advance because they know that the government will procure our paddy and wheat at MSP. This would ensure them a commission from both, and keep their business running. But the corporate sector will just pay us for crops but not for personal needs. What if we need the money urgently?”
Kulwinder Singh, a farmer from Bathinda’s Maiser Khana village attached to arhatiya Praveen mentioned above, added: “We are very happy with our arhatiya because he always provides us with the payment in cash instantly, so we don’t have to run to banks with cheques and all. All I have to do is to dump my crop here and do nothing more, rest is taken care of by him to the point of sale, after which I receive my payment.”
Bhoora Singh, another farmer from Bathinda’s Bhai Bakhtaur village who cultivates cotton and rice on five acres of land, said: “Arhatiyas loan us money even for resolving family issues or buying cattle, land or vehicles. Even if the output of our crops is not very promising, they still loan us money for next season for pesticides. They also arrange pest spray machines even if we face a shortage in supply.”
Arhatiyas fear that with the abolishment of mandis and the assured wheat-paddy procurement, they will be thrown out of work due to direct trade between private firms and farmers.
However, experts like Prof. Gill don’t agree. Gill said: “Arhatiyas have extensive capital and networking among farmers. Even if the private companies come to Punjab, they will hire arhatiyas to do their groundwork.”
This report has been updated to reflect the correct percentage of the total market charges for agricultural trade