Why the farmer’s fears today could be the consumer’s tomorrow

Farmers can benefit under new laws only if they get prices higher than MSP in open market. While this would spike prices for the consumer, experts say the solution lies in streamlining procurement on remunerative prices for farmers for a win-win situation for all

Farm experts say though the farmers alone are fighting against the three new agrarian laws, it is consumers who are eventually going to be paying more for grains and other food items, courtesy the private entrants in the farm sector. Representational photo: iStock

Are tens of thousands of farmers knocking at the gates of Delhi just for the heck of it or in sheer desperation? Or, is the pell-mell brought by them to Delhi’s threshold going to flag some or at least a bit of ennui which may further go on to stir the conscience of Delhiites on the farmers plight? Sadly, such questions palpably lurk through the air of the country’s capital city now for no less than the past three weeks or so.

Yet, there are no signs of an early solution to the impasse that appears to be setting in to get only from bad to worse with each day. So much so that this has given rise to another and even more worrisome question. Simply put it is — Can Delhi keep the fate or rather prospects and future of its about 20 million people unscathed by keeping the agitating farmers out of the Capital’s confines endlessly?

Asked about this, Commerce Professor of Delhi School of Economics (DSE) and also a consumer rights authority, Sri Ram Khanna, shot back, “Today it is farmer who is on street, tomorrow this may well be the case with the city’s consumer.”

The reason behind his sounding such a warning is that the three new farm laws agitating the farmers were rammed through Parliament in an unseemly hurry on a Sunday (September 20) in September to turn two earlier ordinances into firm and durable legislations. Theoretically, the new laws may appear to be good or can be interpreted to be benign from the point of view of overall economy. But Professor Khanna believes that at the ground level, farmers are too precarious, or fiscally frail, to withstand the brunt where big private players are to be ushered in at their doorsteps with the backing of straitjacket laws and without a price guaranteed for the farm produce.


Khanna says the entry of the private sector in agribusiness is likely to dilute of Minimum Support Price (MSP) as “rightly and justifiably being feared” by farmers.

The role of MSP

For decades, the central government has been laying down MSPs for the bulk purchase of wheat and rice among other crops like those of oilseeds and lentils. The government stocks the produce after their direct procurement from farmers at numerous mandis that are spread across the country and are run by APMCs, or Agricultural Produce Market Committees.

The procured grains are stored in the warehouses of Food Corporation of India (FCI). These storage facilities are run and controlled by the Centre so as to meet any future contingency with regard to the availability of food, or mainly those cereals that are widely consumed and are always in demand.

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This is how wheat and paddy crops have so far got primacy over others. Their production through past several successive years has gone so well throughout the country’s most northern parts that their prices in the open market have been slimming down. This is how the MSP declared by the Centre has become necessary for the cultivators to cope with the rising costs of inputs like various farm implements, good quality seeds, fertilisers and other chemicals to ward off insects and pests, besides the rising energy costs paid for electricity and fuel, or diesel to be more precise.

Diversifying cultivation

Now exhortations are being made to farmers to diversify to crops other than wheat and paddy to attract private players where they may pay more than what the peasants generally get from the two traditional crops. But this system, as per farmers has not worked in the past on the ground.

In April this year, the Haryana government passed an order to procure only one-fourth of the total yield of mustard seed from the farmers in the state. The government’s decision about the reduced intake of mustard at mandis had led to deep resentment among farmers because procurement price set by the government for the oilseed was at ₹4,425 a quintal while in the open market it varied between ₹3,500 and ₹3,800 a quintal.

Captain Shamsher Singh Malik, a former army officer who took to farming after retirement had resorted to protest in the wake of the state government’s move. Despite the COVID-19 lockdown, he along with his wife stood in front of their house, holding placards that denounced the state’s step.

Today Captain Malik like other farmers has again taken to protests, both back home at Rohtak and Delhi’s westward Tikri borders with Haryana.

He says that though the farmers alone are fighting against the three new agrarian laws, it is consumers who are eventually going to be paying more for grains and other food items, courtesy the private entrants in the farm sector. The three laws allow private business houses into the trading of farm produce, its unlimited and unfettered storage and contractual farming without the possibility of judicial recourse for farmers in case of dispute. He reminds that the grievance redressal mechanism under the new law is going to be limited to only the level of executive magistrate.

New laws

The three laws passed by Parliament and signed by the President are Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, Farmers (Endowment and Protection) Agreement on Price Assurance Act and the Essential Supplies (Amendment) Act, 2020. The first is the one that aims to change the way sale and marketing of farm yields take place where the traders without being categorised as big or small are to become entitled to buy from outside the mandis, or APMC-run procurement marts, without bothering to follow the MSP set by the government for the crop.

Yet, for farmers MSP has been serving as crucial a function as MRP, or minimum retail price does in case of consumers buying packaged goods. And it is the correlation of the MSP and MRP in case of food grains that is going to change drastically after the new law. Farmers say that traders would like to buy grains at a price lower than MSP and sell at a substantially higher MRP to an average consumer at the stage of retail.

Consumers’ stake

In fact, this is already the case with companies that are currently marketing, say packed wheat flour, besides other commodities. The cost of a kilogram of the flour for companies like ITC that are already in the trade can at the most come to ₹20 a kilogram. Yet the wheat flour by the company is being sold in packets of five and 10 kilograms at the rate of ₹35 a kg.

This goes up to ₹53 a kilogram in case of multi-grain flour sold by the same company in cities like Delhi. For this kind of flour, wheat is the main component and most of the other grains, except for gram (whose proportion is small) put in the multi-grain flour are cheaper than wheat. The point is that the price of the flour cannot be so high in any case and can even be lowered by mixing cheaper grains with wheat flour to turn them into multi-grain flour. About this Professor Khanna says in cities only affluent people are buying packs of flour whose prices may further go up once agribusiness gets more liberalised under the new laws. So much so that food grains may become unaffordable for a lot many city dwellers.

He warns that the control of traders over prices can further become stronger with the third law (Essential Commodities Act) that allows unrestricted storage of farm produce whereas the supposition as per the government is that farmers would be able to store the grains produced by them for a longer period to get a better price.

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The second law allows for contract farming with pre-decided and mutually agreed price of the produce through an agreement for a period of up to 10 years. The contracting parties, or the farmer and the trader, can approach the local magistrate in case of a breach of agreement or a dispute arising between the parties.

Contract farming has already been in practice though for periods shorter than 10 years that the new law allows for. This has been the case with KBLR Limited, a company that deals in Basmati rice. The company gets it from dedicated farms for growing it and markets it under a popular brand-name like Dawat.

So the short point is that as for food stuff there has been no bar on its trading on private parties before the three new laws were promulgated. This has already been on in a few pockets of the country, though it could not improve the lot of farmers to the extent of serving an example for others to follow. To open this further can be good for farmers only if they are able to get prices higher than the MSP in the open market. But this in turn will take the cost of food grains further up for an average consumer.

What’s the way out

Asked about what could be the way out for not only both farmers and traders but also consumers, Professor Khanna said that the entire gamut of issues should be looked afresh with an open mind so as to rebuild trust. This could turn out to be a long process of dialogue between all the stakeholders, including consumers’ bodies or outfits, and the government.

He said that this is an issue related to political economy and so all the states and political parties, both national and regional, should come together to sort out the vexed issues in the light of feedback from the ground. The Centre should strengthen states to streamline procurement of grains on reasonably remunerative prices for farmers instead of passing laws related to this so quickly as has been the case recently.

True, agriculture remains a state subject and, thus, at best the Centre can partner with states instead of intruding upon what is otherwise the jurisdiction of the provinces. Yet, the Centre’s point seems to be getting strength from the fact that it pays for procurement of the farm produce under the MSP scheme. Ideally, this should bring Centre and states closer rather than distancing the two.

So a lot of efforts are called for to rebuild trust and win confidence on the part of both the Centre and states before the crisis gets out of hand and overwhelms the consumers of farm produce too.