New legislation could see farmers in India at the mercy of private corporations and at risk of exploitation
Hundreds of thousands of Indian farmers, a majority from the states of Punjab and Haryana – commonly referred to as the ‘breadbaskets’ of India – have barricaded the streets of Delhi to protest a series of agricultural laws passed in September.
Enacted by the governing Bharatiya Janata Party (BJP), the policies aim to modernise the future of India’s agriculture sector. Anxious farmers are worried that these reforms will be akin to signing their death warrants.
What do these bills propose – how will they affect the farmers?
One of the changes is farmers can sell their produce by directly liaising with private players. These private players can be supermarket chains, agricultural businesses, and online grocers. This will give them more autonomy over the pricing and buyer of their crops.
In the current system, farmers sell their produce at government-regulated marketplaces (known as mandis) for a fixed price. The commission agents (arhatiyas) operate as middlemen between purchasing agencies and farmers.
Gopal Krishna Agarwal, BJP’s spokesperson for economic affairs, emphasises that the reforms are meant to specifically end the unfair monopoly of commission agents. As arhatiyas buy their farmer’s produce at a specified rate, India’s Prime Minister Narendra Modi believes that it is necessary to remove these intermediaries as they “loot the profit of the farmers” by selling to private companies for a significantly higher amount than they initially purchased the produce for.
The issue with the reforms
In principle, greater freedom to sell outside of the tightly-controlled mandi to private companies sounds ideal. However, there is a serious concern for how these reforms will play out in the future. Multan Singh Rana, a farmer in the northern state of Punjab, tells BBC: “First, farmers will feel attracted towards these private players, who will offer a better price for the produce. The government mandis will pack up meanwhile and after a few years, these players will start exploiting the farmers.”
The mandi system operates per regulations of the Agricultural Produce Market Committee (APMC), a system designed by state governments to protect farmers from exploitation by large retailers. The new legislation creates a national framework of trading outside of the mandi system. Private corporations will not be required to follow the APMC’s regulations under this new system.
Like Rana, farmers fear that companies could initially offer higher prices to buy produce. This would lead to the end of regulated mandis and the APMC. This would leave unregulated trading as the only source of income. There is a risk that leaving farmers in the hands of private companies will expose them to exploitation.
The new policies also aim to end the monopolies of arhatiyas. However, for many farmers, it is much easier and convenient to engage in business matters with arhatiyas (whom they know personally), than cooperate with private banks or companies with their unfamiliar procedures and often impersonal services. Arhatiyas generally maintain long-term relationships with their partnering farmers. They provide machinery to transport the produce. They also facilitate their partnered farmer’s payment and income by buying crops at the minimum support price. The uncertainty of whether this will be enforced outside of the mandi system is also a major cause of concern.
Dismantlement of the MSP
The minimum support price (MSP) is the minimum, assured price that farmers sell their produce at mandis for, determined by the government as a form of economic protection – if the open market offers a lesser price than the cost of crop production, the MSP ensures the farmer is safeguarded to a certain profit and income.
The fear that the new legislation will dismantle the MSP is one of the issues at the centre of the protests, especially for the farmers of Punjab and Haryana, where 65 per cent of wheat (2019) was purchased by the Food Corporation of India at the MSP. Direct trade with private companies outside of the mandi system is encouraged. However, the farmers are concerned that the MSP will no longer be enforced. This will leave companies to dictate their own prices.
Harvinder Singh Lakhowal, member of the Bhartiya Kisan Union (Indian Farmers’ Union), says “all assurances given by the government regarding the MSP have not been provided to farmers in writing.” The Minister of Agriculture and Farmers’ Welfare Narendra Singh Tomar verbally assures that the government was and is still committed to the MSP, rejecting demands to amend the bill by responding “MSP was not part of the law even earlier and MSP is not part of the law even today.”
Lessons (not) learned from Bihar
In 2006, Bihar was the first state in India to remove its APMC and mandi system in 2006. The state government argued that its abolition would stimulate growth in the economy by improving private investment in agriculture. However, the farmers have had to battle for survival.
Around 97 per cent of Bihar’s agricultural community consists of marginal farmers with already meagre profits. Selling to private companies, farmers have been forced to offload their produce at throwaway prices out of desperation. Economist D.M. Diwakar comments, “the Modi government says the new farm bills won’t adversely impact the farming community. Given the logic, the financial condition of 94 per cent of farmers in Bihar — who were not covered under minimum support price (MSP) — should have improved in the past 14 years. But their condition has deteriorated.”
As feared by farmers in the current protests, the National Council of Applied Economic Research’s 2019 on the impact of Bihar’s policies concludes “farmers are left to the mercy of traders who unscrupulously fix lower price for agricultural produce that they buy from farmers.” The aftermath was so devastating that farming in Bihar eventually became a non-viable profession. “Farmers from Bihar have now been working as labourers in Punjab and Haryana,” Diwakar adds.
Protests at Delhi
The farmers began marching to Delhi on tractors and cars, blocking railway tracks and motorways to demand the central government to repeal the laws. The protests were initially led by the Indian Farmers’ Union as a peaceful protest. During these protests, baton charges, tear gas, and water cannons were used by police and paramilitary personnel.
However, it is not easy to defeat the strength and determination of these farmers. Bringing enough supplies, food, and blankets to last for three months, “we are prepared to stay here for as long as it takes, even in the cold winter. The farmers of India have been betrayed,” says President of the Indian Farmers Association Ratam Mann Singh, determined to remain until the new legislation is revoked or amended in writing.