Need ordinance to ensure farmers get MSP

The way these ordinances have been pushed through in haste, bypassing full deliberations in Parliament, when we are battling the pandemic and the economic slowdown, is disquieting. Instead of nudging the states through a model draft or consultations, the Centre has taken the ordinance route on the subject of agriculture, thus eroding the federal system of the country.

Fair play: Any person found purchasing agricultural produce at below the MSP should be made liable for criminal prosecution.

Bhupinder Singh Hooda

Former Haryana CM

The three ordinances promulgated by the Union government in June and touted as structural reforms for transforming the agricultural sector have triggered a maelstrom of protests by the farmers of Punjab, Haryana and other parts of the country. Myriad farmers’ organisations and unions have strongly opposed these ordinances, even though the purported aim of these reforms is to help the farmer get a more remunerative price for crops by unshackling the agricultural markets through barrier-free inter-state and intra-state agri-trade; by giving the farmers and the traders the freedom of choice in the sale and purchase of agricultural produce outside the market premises or mandis; and, by a more informed decision through the digital platform of e-markets and global markets.

The attractive package and media hype around these ordinances have failed to hide the insidious anti-farmer bias. The grim reality is that through these ordinances, the Union government has sought to facilitate the corporate sector — exporters, aggregators, processors, wholesalers, large retailers and suppliers in the value addition chain — all persons with deep pockets. A centralised ‘one nation, one market’ is sought to be created in the country, which will divest the farmer of a level playing field by eroding the safety net of MSP (minimum support price) and other checks and balances.

The common thread running through the Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, and the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance is that these two seek to deregulate the agricultural markets in the country by diluting the provisions of the Agricultural Produce Marketing Committees Act (APMCA), removing inter-state barriers on the sale of crops as also the intra-state stipulation of sale of crops within the marketing yards or mandis designated under the APMCA. Both ordinances exempt agricultural transactions in the trade area outside the purview of the APMCA from market fee, cess or any charge levied under this Act or any other state law.

The dispute redressal mechanism under the two ordinances provides for a conciliation process, the local SDM being the first port of call to resolve the dispute and revisional/appellate jurisdiction vesting with the senior officers of the government. It has been envisioned to do away with the system of intermediaries called arhtiyas or commission agents. This will pave the way for withering away of marketing yards or mandis set up under APMCA, as in traditional mandis; market fee and cess would continue to be charged whereas all transactions in the trade area under these ordinances would be exempt from market fee or cess, thus creating a huge asymmetry between the two. The traditional mandi system has stood the test of time, and its crumbling is likely to hurt states like Punjab and Haryana more, as these have a sound mandi/procurement network. In 2006, Bihar did away with the APMCA. Once the traditional marketing yards or mandis were out of the picture, unscrupulous traders started fleecing farmers by procuring crops at rates much below the MSP, wrongly charging the market fee from farmers and pocketing the same. This is also manifest in the rice millers’ scam in Haryana, where according to media reports, wrong stocks of paddy were shown, fake invoices were generated by rice millers, keeping the leeway for making good the short stocks by sourcing an equivalent produce from Bihar and other states at rates much below the MSP.

The arhtiya-kisan relationship is symbiotic, the former financing the latter for farm operations, family functions and other emergent needs. The commission agent makes logistics arrangements to act as a bridge between the farmer and the procuring agencies. Dismantling this institution without a better alternative is problematic. The dispute redressal mechanism provided for under the ordinances does not inspire confidence as it is silent on recourse to the courts of law. The latter of the two ordinances is an enabling legislation for facilitating contract farming. Surprisingly, benchmarking for price discovery under this ordinance has been linked to the APMCA prices, whereas the contract farmers supply seed to seed companies at rates higher than the MSP. The case of Pepsico suing contract farmers of Gujarat for compensation for hefty sums should be kept in mind in this context.

The Essential Commodities (Amendment) Ordinance amends Section 3 of the Essential Commodities Act in order to do away with the stock limits on cereals, pulses, potato, onions, edible oilseeds and oils except in situations of war, natural calamity or extraordinary price rise. In India, we have been witnessing a regularly recurring phenomenon of prices of agricultural produce dipping at the time of arrival of crops in the marketing yard and then shooting up in the off-season. As cereals, pulses, potato and onions will be stocked by exporters, processors and suppliers in the value addition chain without proper regulation, their rates are likely to fluctuate, hurting the poor consumer the most as these are part of staple diet.

The way these ordinances have been pushed through in haste, bypassing full deliberations in Parliament, when we are battling the Covid-19 pandemic and the economic slowdown, is disquieting. Instead of nudging the states through a model draft or consultations, the Centre has taken the ordinance route on the subject of agriculture, thus eroding the federal system of the country. These ordinances will weaken the state finances already challenged due to GST. The government should remove anomalies in these ordinances and bring in a fourth ordinance guaranteeing the farmer that the crop would be procured not below the MSP, calculated on the C-2 formula (covering labour, operational, capital, storage, transport and other incidental charges) in the Swaminathan Commission recommendations. Any person found purchasing the agricultural produce at below the MSP should be made liable for criminal prosecution in the proposed fourth ordinance.