Free Market in Agriculture

Neeraj Jain

On 20 September, the Rajya Sabha (Upper House) passed two of the three farm bills that the Modi government had earlier got passed in the Lok Sabha. With the opposition announcing a boycott of the Rajya Sabha in protest against the undemocratic way in which the government has rammed the bills through Parliament, the government should have no problem in getting the upper house to pass the third farm bill too.

The three bills have long names. They are: the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill–it is commonly referred to as the APMC Bypass Bill; the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill–better known as contract farming bill; and the Essential Commodities (Amendment) Bill–it has been referred to as bill to promote hoarding and blackmarketeering.

While all three bills are equally important and together comprise an entire package of agrarian reforms that the government is seeking to implement, in the TV and media debates, the entire focus has been on the APMC bypass bill. So let us first discuss it.

This bill scraps the whole existing system of selling and buying agri-produce in India. The Agricultural Produce Market Committees (APMCs) are designated areas created by state governments where various agri-produce can be sold by farmers to licensed persons or commission agents. These markets are also nodes for government procurement of foodgrains, for distribution to the poor at subsidised rates through the public distribution system. This bill allows farmers to engage in trade of their agricultural produce outside the APMC market yards.

The government claims that the APMC bypass bill promotes free markets and will enable the farmer to sell anywhere in the country and get the best possible price for his produce.

In a country where 86% farmers have a landholding of less than 5 acres (2 hectares), expecting a small farmer from say Satara (in Maharashtra) to load his crop on a bullock cart and go all the way to Indore in Madhya Pradesh or Ludhiana in Punjab to sell his crop there is absurd. Small farmers are so keen to sell their produce at the earliest that they are generally not willing to go to faraway markets even in their own state, even if they get to know that they may get a better price there. Which is why, the National Commission on Farmers had recommended that mandis should be available to farmers within a radius of 5 km.

This is not the first time the Modi government has attempted to promote free markets in agriculture. In 2016, it had announced with much fanfare the launch of an online trading platform, called the National Agricultural Market or e-NAM. The Prime Minister himself chose to announce it, in a speech given on the historic occasion of the 125th birth anniversary of Dr Babasaheb Ambedkar. He claimed that the scheme will give farmers the freedom to sell their produce anywhere in the country, would enable a farmer in Bengal to sell to a farmer in Kerala, would enable agricultural incomes to rise, and would be a turning point for Indian agriculture.

Four years have since gone by. E-NAMs have been a complete failure. That is actually not surprising. They had to fail, in an agriculture that is dominated by small farmers and small traders. Most farmers are not technologically savvy to sell online; even more important, they want to sell their produce at the earliest and get their money so that they can repay the loans they have taken and prepare for the next crop, and obviously, they are not confident whether on selling online they will get their payment on time. At the same time, the small traders buying the crop online in faraway markets are not confident of the quality of the crop they have purchased, if the crop is graded about how good is the quality of grading, and whether the crop will be delivered to them on time. And so, most farmers and traders are more comfortable with physical trading rather than online trading.

Instead of agriculture becoming more prosperous, agricultural growth rate has actually fallen during these four years, average agricultural growth rate is less than that during the Congress-led UPA years, and the agricultural crisis has continued to worsen during the Modi regime.

What the Centre is attempting to do at the national level now has already been implemented in Bihar. In 2006, the state of Bihar repealed the APMC Act and abolished APMCs. It was claimed that this would eliminate middlemen, promote efficiency in the marketing system, enable farmers to get better price for their produce, and incentivise private investment in agriculture. Economists claimed that Bihar will turn out to be the harbinger of a new market-driven revolution in agriculture. Fourteen years have gone by, Bihar farmers are still waiting for the miracle to happen. In 2019, the National Council for Applied Economic Research conducted a study of the agricultural situation in Bihar. Its report says:

l    There has been an increased volatility in grain prices after 2006, which negatively affected the crop choices and decisions of farmers to adopt improved cultivation practices; this could be one of the reasons for the low growth of agriculture in the state.
l    Bihar's policy makers had expected an increased flow of private investments into the agriculture sector, but it did not take place.
l    Farmers are left to the mercy of traders who unscrupulously fix a lower price for agricultural produce that they buy from them.
Another report about Bihar published in the Hindu Business Line found that]:
l    Private mandis have come up all over the state, functioning on the roadside, without any infrastructure. There is hardly any facility other than the roadside space made available for the transaction of produce. There are generally only a few makeshift sheds from which the mandi operator works and monitors the functioning of the market.
l    In contrast to the assumptions of our urban economists that free markets will enable farmers to sell anywhere and get the best possible price for their produce, the report says that farmers in Bihar sell at the mandis nearest to their farms, as they cannot afford to go to faraway markets.
l    At these private mandis, farmers are forced to pay a market fee of 2%, which is not to be paid in the regulated APMC markets.
l    There is no auction, farmers have no option but to sell at the price being offered.
l    Also, if there is a malpractice, there is no one the farmers can approach.

Bihar is among the leading producers of maize in India. For maize, this year (2020) most farmers reported getting a price of Rs 1,000-1,300 per quintal, as against the official minimum support price (MSP) of Rs 1,850. For wheat too, farmers in Bihar reported receiving prices 10-15% lower than the MSP.

Devinder Sharma, the noted agricultural analyst, says that while giving farmers low prices, unscrupulous traders from Bihar illegally transport quite a sizeable quantity of wheat and paddy after every harvest to Punjab and Haryana to sell it there, as price realisation there is better because of the APMC network and government procurement.

Clearly, the free market reforms have completely failed in Bihar. This is also borne out by data provided by Agriculture Minister Narendra Singh Tomar in the Rajya Sabha last year. He stated that farmers in Bihar had the lowest income in the country. The average income per agricultural household in Bihar was just Rs 3,558 per month. Haryana recorded the highest farmer's monthly average income of Rs 14,434. Haryana is among the states with the best APMC mandi network in the country. This again only goes to prove the point we have been trying to make, that all this talk about free markets benefiting farmers is all bunkum.

That agriculture is in deep crisis in Bihar is also borne out by out-migration figures from Bihar. According to estimates made by Professor Kundu for 2020, Bihar accounts for around 14% of the total inter-state out-migration in the country, the second highest in the country after Uttar Pradesh. During the corona pandemic, Bihar recorded the largest number of migrants returning home. This only goes to show that the rural areas are in great distress in Bihar, with agriculture not being able to provide employment, because of which people are migrating to other states in search of work.

Free markets in agriculture have not worked anywhere in the world, even in the developed countries. In the USA and Europe, there are no MSPs, no APMCs, and there are no controls on stock holdings–there are absolutely free markets, the kind of markets the Modi government is seeking to usher in India through its three agricultural reform bills. And yet, agriculture in those countries is crisis ridden. In 2018, the then Chief Economist of US Department of Agriculture, Robert Johannson, had stated, "Real farm prices, when indexed for inflation, have fallen sharply since 1960." With median farm incomes being in the negative for several years, and with farm bankruptcy growing to $425 billion, US farmers are struggling to survive. Another report in the Guardian dated 11 December 2018 says that since 2013, net farm income for US farmers has declined 50%. Median farm income for 2017 is projected to be negative $1,325. Because of the growing agricultural crisis, the suicide rate among male farmers in the USA is 1.5 times higher than the general population, and even this figure is likely to be a huge underestimate as the data collected skipped several major agricultural states (data from a study by the Centers for Disease Control and Prevention).

Consequently, agriculture in the developed countries is only surviving due to massive agricultural subsidies provided by the government. In 2018, the OECD countries, a bloc of the world's richest 37 countries, provided agricultural subsidies to the tune of $246 billion to their farmers.

Despite this global experience, and Indian experience too, the Modi government is pushing for free markets in agriculture. Defending the APMC bypass bill and other bills, the PM himself declared in a speech on September 21 that 'powerful gangs' (takatvar giroh) had come to control our agriculture who were taking advantage of our farmers' helplessness, and so these agricultural bills have been introduced to give the farmer the freedom to sell his produce to anyone anywhere in the country, on his terms, and not just in the nearby APMC mandi.

An exact repeat of the PM's speech made on 14 April four years ago. The PM's speech writer seems to have done a cut and paste job. But it was enough to send the country's media and intellectuals into a hysterical campaign in support of the new bills, that they would give free market freedom to farmers, liberate him from the clutches of the mandis, and will revolutionise agriculture.

However, the strange truth is, the majority of farmers in India are already in free markets! The total number of APMC mandis in the country is just around 18% of the number required! As per norms of National Commission on Farmers, an APMC should be available to farmers within a radius of 5 km. This would require the country to have 42,000 APMCs, but only 7,700 exist. Assuming that farmers are distributed evenly across the country, this means that only around 20% of the Indian farmers sell their produce in APMC.

Clearly, the defense given by the Prime Minister that the three agricultural bills are intended to free farmers from the clutches of APMCs and usher in free markets–is an outright lie, as the farmers are already in the clutches of free markets. Then, what is the real intention behind the government's desperation to ram the three agricultural bills through the Parliament, throwing all democratic norms to the winds, despite massive protests by the Opposition parties as well by farmers across the country? The three agricultural bills are a part of the entire gamut of neoliberal, pro-corporate, economic policies that the Modi government has sought to implement ever since it came to power in 2014. The only new development is, it is now taking advantage of the fact that people cannot protest on the streets due to the pandemic, to implement these policies at an accelerated pace. During the past few months, it has announced large scale privatisation of public sector corporations, including the railways and oil and gas corporations; it is even privatising defence equipment and the space sectors! It is allowing private sector to usurp the country's mineral wealth, including even the coal sector. The financial sector corporations, including public sector banks and insurance companies, are also being privatised–endangering the safety of lifetime savings of crore of working people. It is pushing through changes in environmental laws–that put short-term profits of big business over the interests of future generations. Several projects which threaten the environment and our precious natural resources have been cleared during the lockdown, even in protected areas, trampling upon the Forest Rights Act, which will result in massive displacement of tribal communities. BJP ruled state governments are dismantling labour laws, won by the working people after decades of struggle, so that corporations can further squeeze workers, make them work long hours at rock bottom wages. And so on….

 (Courtesy: Janata Weekly)

Frontier
Vol. 53, No. 19, Nov 8 - 14, 2020