Part 1: Farmers needed instant relief, but govt handed them a new policy

The financial measures which Finance Minister Nirmala Sitharaman announced for farmers fail to provide relief for the losses a section of them suffered during the lockdown. Moreover, legal changes to usher in agricultural-marketing reforms, though ambitious, might falter if not diligently implemented and states are not taken into confidence.

The producers of cereals did not suffer much during the lockdown. Wheat procurement in Punjab, Haryana and Uttar Pradesh was done with a lag, but efficiently. Fruit and vegetable growers were most affected by the shock lockdown that became effective from 25 March with just four hours’ notice.

Grape growers suffered losses on exports when Western Europe shuttered. Prices also crashed domestically as markets and logistics got gummed up. Some grape growers diverted their crop to raisins and recouped a part of the cost. Banana growers did not have that option. Even vegetable farmers found no takers for their produce.

Although agricultural activities were excluded from the lockdown, Syed Javed Ismail of Beed in Maharashtra said he had to destroy the remaining tomato crop in his field in mid-May to make way for the next planting, as the price he was getting ─ Rs 1 or less a kg ─ was too low.

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“There is no immediate relief from losses,” said Vilas Shinde, founder and managing director of Nashik-based Sahyadri Farmers Producer Company, the largest exporter of grapes in the country. He had expected short-term loans to be converted into longer-term loans and a waiver of interest on past loans.

Nivrutti Khandrao Medhane, 47, a Nashik grape grower, has a loan of ₹2 cr. He was also expecting a loan waiver. It’s a need he had not felt before, he said.

The Finance Minister’s announcement of investment in agricultural infrastructure like cold storages was welcome but farmers needed a pause in loan and interest repayments, so that they do not default and banks continue to lend. This would have helped them get on with agricultural operations and repay their obligations from future earnings.

Just as the Karnataka and Delhi governments had made cash transfers to barbers, drivers and dhobis (washermen), the central government should have provided relief to specific sections of farmers depending on the pain they had suffered.

The longer-term measures, like the proposed amendments to the Essential Commodities Act and the Agricultural Produce Marketing Committee (APMC) Act are meant to help farmers secure better prices for their produce. These were on the agenda of a NITI Aayog Governing Council meeting held in June last year. Prime Minister Narendra Modi had set up a committee of chief ministers headed by the former Maharashtra chief minister, Devendra Fadnavis, to suggest how the changes could be implemented.

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The APMC Act governs regulated mandis. It has been perceived as restrictive as it prevents large buyers like exporters, organised retailers or food processors from buying directly from farmers without paying a mandi cess. The mandi commission agents, or arhatiyas, are regarded as exploitative.

Agricultural marketing is a state subject. The Atal Bihari Vajpayee government drafted a model APMC amendment in 2003 for the states to legislate. NITI Aayog member Ramesh Chand says no state except Arunachal Pradesh has enacted it in its entirety. All others have carved out exceptions.

In 2017, the government made another attempt. It drafted a model law to guide the states. This included livestock and is called the Agricultural Produce and Livestock Marketing Act. The purpose of these two model amendments was to bring in more competition among buyers.

The BJP-ruled states — Gujarat, Madhya Pradesh, Uttar Pradesh and Haryana — have enacted the 2017 model law through ordinances or bills.

Non-BJP states have not fallen in line so neatly. In January, Punjab amended its 1962 agricultural produce market rules. It permitted private markets of not less than 10 acres to be set up, but only for fruits, vegetables, wood and flowers. These could not be within a 5-km radius of a regulated mandi or its sub-yard. Rice, wheat, cotton, pulses and oilseeds were excluded.

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Sukhpal Singh of the Centre for Management in Agriculture at the Indian Institute of Management, Ahmedabad, says arhatiyas have political heft. In Punjab, he says, about a third of them are Jat Sikhs, traditionally a farming community. Wheat and rice have been excluded also because the state earns a huge amount through the mandi taxes it levies on their procurement. The arhatiyas earn handsomely from commission fees and are reluctant to let go. At 2.5%, they would have earned about ₹625 crore from the procurement of wheat in the current season.

Singh says state agencies like the Food Corporation of India (FCI) and Pungrain want to procure directly from the farmers but have to route their purchases through arhatiyas as they fund the elections.

In November 2018, the Maharashtra government withdrew a bill that would have ratified an ordinance which removed all agricultural produce from the purview of its APMC Act. The bill was passed in the lower house but was withdrawn from the upper house after traders at the big regulated mandis of the state went on strike.

Mekhala Krishnamurthy, who has studied the regulated mandis in Madhya Pradesh and Bihar, says the intermediaries cannot just be seen as vested interests; they have a role to play. They provide credit to farmers, whom banks don’t find credit-worthy. Krishnamurthy teaches economics and sociology at Ashoka University and is associated with a programme at the Centre for Policy Research on enhancing state regulatory capacity in the agricultural, industrial and social welfare sectors.

On the flip side, they can compel such borrowers to sell to them soon after harvest when prices are low, and settle their debt. So merely passing a law allowing large traders to buy directly from farmers will not help, if farmers are not free to borrow. It is important to delink credit and commodity markets.

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The regulated mandis also help in dispute settlement. When farmers sell in a regulated yard, the mandi committee enforces payment. Such comfort is not available when they bypass it.

Santosh Gorade, 38, an onion and grape grower of Nashik, welcomed the proposed amendments but said the traders who buy directly from farmers should be under the oversight of the local mandi committee or the district administration. He says a Delhi grape trader cheated him of ₹3.95 lakh in 2010. His uncle lost ₹2.5 lakh.

Such defaults are routine among grape growers, says Jaydutt Holkar, Director of the Lasalgaon and Vashi APMCs.

Can the Centre bypass the states and bring in a central legislation for agricultural trading?

Singh says agricultural markets being physical spaces are a state subject, but trading is in the concurrent list. So the Centre can legislate on trading outside the physical mandis, whether public or private. But what if the states say that the mandi cess will be payable not just on trades within a mandi but beyond it, in a notified area?

Even if they can, big corporate buyers like Cargill India or Pepsi may not want to buy directly from a large number of small farmers for logistical reasons. They may prefer to procure from traders. Their procurement may be seasonal and restricted to the commodities they are interested in. A regulated mandi is open round the year and deals in multiple commodities of various lot sizes.

Rather than displace the mandis and the arhatiyas, the central legislation should strive to increase competition among them. If states are bypassed and not taken into confidence they might create impediments.

(This story is part of a series on Farm Matters)

(The writer is a journalist and blogs on www.smartindianagriculture.com)