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The Real Beneficiaries of the New Agri Regime

This is an article I've written on the impending changes in legislation relating to India's agricultural sector. The government is allegedly making these amendments in favor of the farmers, but who really stands to gain? Amidst this pandemic, such changes must be scrutinised.

“It is imperative to swiftly undertake market reforms of our decades old and restricted Agriculture Produce and Marketing Committee (APMC) architecture,” - PM Modi, 2018.

Over the past few months, amidst the COVID-19 pandemic, the central government has initiated monumental changes in the agriculture sector. The BJP administration strongly maintains that these changes are being made in favor of farmers, and in the interest of overall economic stimulation and growth. A deeper look into the modifications being made might however bear out that significant safeguards need to be put in place for the government to achieve its objective. Where these safeguards are given a go-by, the modifications may actually be counterproductive.

Since 1960, the agriculture markets of India have been controlled by Agriculture Produce Market Committees. APMCs are the boards created by individual states, tasked with the duty of regulating respective agricultural markets. Their function is allegedly to protect the interests of farmers by establishing fair prices for produce. This is supposed to impede the underhanded practices of private vendors and those attempting to lower price levels for their own profit. Retailers are given licenses to function within the market, and an auction arrangement ensures fair and just pricing. But it’s not as seamless as it sounds.

The problem with this set-up, which the government now seeks to solve, lies in the middle - literally. Intermediaries and middle-men are using the existing monopsony to their advantage, taking sizeable commissions for their services, and thereby gaining from every transaction.

In an attempt to put an end to this, the government has plans to amend the Essential Commodities Act (ECA), 1955, and bring in a central legislation which will allow farmers to sell their produce independently to whoever they choose. Private buyers will no longer have to pay the APMC a fee either. This negates the need for the APMC regulators and all intermediate agents.

Almost simultaneously, the Karnataka state government has implemented the amended Land Reforms Act, 1961, which allows industries to purchase or lease land directly from farmers. This was a big decision on BS Yediyurappa’s part, and he said this move was necessary to renew the agricultural sector which had taken a serious hit amidst the lockdown.

What does the government hope to achieve by this?

Simply put, disassembling the controls of the ECA and APMC should pave the way for large sums of private investment in the agriculture sector. Competition amongst buyers would rise, resulting in a decrease of the middleman’s commission and an increase in the profit of the farmers.

Furthermore, with the advanced technology and infrastructure that private industries could bring to the table, the entire agricultural sector could benefit from all-round advancements. Development would extend to better technology for the purposes of farming, high quality storage and transportation facilities, food processing industries, an efficient supply chain, and so on.

During the crisis of the pandemic which hit daily wage earners especially hard, the central government decided to finally bring in the reforms which they have been trying to introduce for years now. By seizing this opportune moment, they are promising better prices and profits for farmers.

But who really stands to gain from this move?

There are many who believe that the reason the existing structure has lasted so long, is because it is effective. To weaken the current system will only further empower large scale retailers, dominant multinational companies, and big Indian corporates who create monopolies as part of their game plan. With the relaxation of regulations, what is to stop the large conglomerates from swooping in and buying or leasing all the farmlands that they can? These controls were originally put in place for this exact purpose.

In the process of development, the little man and his rights won’t even be taken into consideration. Many farmers who are already living a hand to mouth existence will be coerced to sell their produce or their lands to corporates for little or nothing. Those who attempt to hold out and stand alone will not be able to last long in the new competitive market, without the infrastructure to compete with that of the MNCs. There will no longer be any form of price regulation to rely on, and the farmers will be left helpless and exploited. All safeguards will be destroyed. As and by way of an illustration, where a large corporate leases thousands of acres in a particular agricultural belt, the remaining farmers will have no choice but to lease their land as well. No one else will be available to buy from them, given that the market and the infrastructure will be controlled by the one corporate.

“The APMCs have existed since 1963 and there is a good reason they have been around for such a long time. Reform is welcome but it cannot endanger an existing structure.” This quote in Livemint from an NCP leader captures the views of the opposition, and many other concerned parties.

As the government makes their decision regarding these reforms, the welfare of farmers must be the top priority. The disparities that are an inevitable consequence of this decision can not be ignored. A modification that is meant to aid a struggling group of society should not cause the widening of the income gap instead. Especially given the current economic climate, inconsistencies must be minimized rather than augmented.

What about the middlemen?

Although the role of the middleman is commonly vilified and the job seems to involve taking a cut of everybody else’s share, it is a job that has endured the test of time. Just like the APMC system itself, there is a good reason why intermediaries are still employed.

The ability to respond to the fluctuating needs of farmers, based on variations in produce, supply, and demand is what makes the middleman irreplaceable. A larger, corporatized structure would never be able to tackle the real limitations that farmers face on the ground everyday. There is no denying that middlemen abuse their power at times, but this does not negate their necessity. Eradication of intermediaries may seem advantageous, but this would be imprudent and perilous. The roles they perform must be given their due importance. Moreover, the current system may benefit the middleman, but in perspective, the middleman is still more disadvantaged than a multinational corporation. You could say he is the lesser of two evils and this is relevant because middlemen constitute a large percentage of society.

The current government strongly upholds the view that these changes are being made for the benefit of the farmers, and will lead to development and job creation in the agriculture sector. The amendment which Karnataka has recently decided to adopt has already been implemented in neighboring states, and therefore the state government believes it will be a success.

While the amendments being made to some of these legislations may be well intentioned, like demonetization or the lockdown of the Indian economy, the question is whether the government will follow through and ensure that the avowed purpose is fully served. The upcoming process of corporatization should secure the involvement of all sections of society who work in the agricultural industry. As our local ‘khirana shops’ proved during the lockdown, small scale producers and traders are essential to our economy. The livelihood of our farmer community should not end up being the collateral damage of progress and development. These reforms must not degenerate over time to favor large-scale retailers and corporations. The essence and variety of our agricultural markets must be acknowledged and both the farmers and traders must be taken into consideration and cared for.

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