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How is the Indian Agriculture Sector Managing with the Pandemic and the Farm Laws?

by Raagini Sharma - 13 August, 2021, 12:00 350 Views 0 Comment

Of late, the agriculture sector has been hugely impacted by the unprecedented conditions caused by the pandemic. Add to this, the twist given by the new farm laws, which have been enacted across the board, though being opposed vociferously by the farmers primarily from Punjab, Haryana and Uttar Pradesh, which they apprehend that it is a neoliberal move, which they think would lead to the loss of traditional wholesale markets and the corporatization of agriculture. Thus, the situation has become more complex and compounded. The production and the marketing of farm produce have been immensely affected by the labour and logistical constraints due to frequent and long lockdowns as dictated by policies of state and central governments taking into account the shocking situations on the ground caused by the pandemic. The pandemic looming large at one hand and the ongoing agitation by the farmers against the new farm laws at the other, has put the agriculture sector into a precarious position as the farm harvests have been reduced, the mandis (rural markets) operations jeopardised and the profits marginalised. While the administration continues to assert that these are the major reforms and would bring more prosperity, the matter remains in question, to whom it will bring wealth? Even though the government claims that these laws will offer better value income for farmers but there are the repeated assertions by farmers that the government should be devoted to procurement processes of Minimum Support Prices.

The High Level Expert Group (HLEG) on agricultural exports, created in 2019, in consultation with the 15th Finance Commission, states that the three Farm Laws are “very important” for the country’s trade policy and agriculture sector, which are: –

 

1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020
3. The Essential Commodities (Amendment) Act, 2020

 

These farm laws are in accordance with the wider vision of agri-business plan. These new laws have been widely acclaimed as path-breaking for agriculture as these address the key issues and replace the fragmented, patchy, and piecemeal reforms with a consolidated approach and plan. Farmers, consumers, and businesses will all benefit from the reforms made in the agriculture economy. The key provisions of the laws are to assist small and marginal farmers and allow them to sell their produce outside APMC (Agriculture Produce Market Committee) mandis to whomever they want and there will no tax on this trading system. This will however impinge upon the commission agents of the mandis as they will lose their commissions. The law on contract farming will allow farmers to enter contracts with the agri-firms on pre-arranged prices of their produce. This is likely to help the farmers as the risks associated will shift from farmers to the sponsors or agri-firms. Legislation passed on farm laws will generate competition within the agriculture sector, as well as the bringing in of private-sector productivity, jobs, and technological innovations and finally incorporating supply chain “from farm to the market”, eliminating the involvement of middlemen. Farmers, for the first time in history, who had their constraints on when, where, and to whom to sell, have found freedom as these constraints have been removed in 2020 with the enactment of new laws. Even after adjusting to the problem of inflation for the past two decades, the Indian agricultural income has failed to keep up with the cost of living and production and thus has impacted the small farmers the most.

It is believed that with the new farm laws, it will widen the inequalities with the implementation of deregulation of the agriculture market. Because of this legislation, the lowering of the government’s price system or the Minimum Support Price (MSP), opponents worry that such legislation may end up affecting small and poor farmers and mostly people living below the poverty line. They fear that the MSP system will get dismantled thus harming them. And over the years, the agri-firms and the corporate houses will dictate terms and farmers will get lesser value for their produce. Hence the farmers demand that these three laws be deregulated.

Agri-Business and Food Business

  • According to economists, with the new farm laws in the agriculture sector, big businesses are keen on opening up their ventures in farming. There are exciting opportunities for big Indian corporations like Reliance Industries Limited (RIL), North Atlantic corporations, and the Adani Agri Logistics (AAL) Group which are eyeing to expand their businesses in food processing, marketing and trading with the introduction of farm laws.
  • To grow into the agri-tech industry, Jio intends to join with Facebook and release the JioKrishi App.
  • The investments of Transnational Agribusiness Corporations would be manifested with conspicuousness in the food industry networks, where they would channel capital into crop production and sales economies in India.
  • Accordingly, to ensure food safety and quality, the Food Safety and Standards Authority of India (FSSAI) was established, with three licences being made available: central licences, state licences, and registration for small businesses. Several subsidy-based programmes, including PM Kisan Sampada Yojana (PM KSY), Pradhan Mantri Kisan Sampada Yojana and ISAM for Agricultural Marketing Infrastructure, have all been established to help the farmers of the nation.
  • These businesses will also establish supply chains including cold storages and refrigeration systems to rapidly transport agriculture products from farms to retail locations.
  • Growth may be expected to be further supported by the introduction of huge corporate businesses and with the introduction of modern technologies for farming.
  • The latest agricultural legislations are seen as noteworthy as they are seen as helpful in supporting the agriculture sector’s development.
  • There would be no requirement for any form of licence for merchants to acquire agricultural products of farmers in the trading region outside the APMC mandi, individuals carrying a PAN card or any other documentation recognised by the government can enter into the agriculture trading.

The intention behind the protests

  • The direct distribution of the farm products from farmers to corporate business might have a trickle-down effect on the prices which will have effects on the farmers as they won’t hold any leverage on the prices. The new legislation worries farmers, who believe that they would facilitate large corporate groupings’ entry into the agricultural products markets. This might give monopolies, allowing them to set prices at very low levels, which will harm farmers.
  • One of the drawbacks of the bill is that there are many ways to increase agricultural production, but marketing techniques such as providing farmers with an option of selling their goods to a Mandi or the private sector should be taken into consideration, this has largely impacted the small and marginal farmers. With the abolishment of the mandi system, no further purchases of agricultural products will be made on MSP.
  • A focus on commerce and infrastructure to labour rights, the funds which were earlier available through MANREGA should be given more attention by both the private sector and the government (both central and state), which will support the small landholder farmers.
  • Farmers are afraid that if this agreement, The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020, is passed, they would become “slaves” to the corporates.

Corporate companies have begun to search for profits and balance their capital which has been lost over these periods. In order to make this possible, they are moving their capital to the agricultural sector on a far grander scale as the farm produce are essential commodities. According to the new regulation’s farmers can sell their goods to private purchasers without the unnecessary bureaucracy and cartels. In January IMF Chief Economist Gita Gopinathan, in a press conference supported the laws levied by the government and conveyed that they will supplement to the increased income of farmers. The farmers have the opportunity to sell their goods in the open market as well as online, which is a significant move in the rapidly changing digital environment. The central government has an explicit vision of making an Agri stack – a dataset which would include profile information of farmers, their identifications, bank accounts, and welfare payments, as well as details on their farms and their locations – with the intent of creating a collaboration between the public and private sectors that will be used for financial returns and monetisation of these data. The government’s vision for the future of Indian agriculture and its well-publicised motto of Doubling Farmers’ Incomes (DFI) by 2022 puts a focus on information solutions.

There is only one beneficiary from all of this: the businesses. Many companies are getting closer to the farmer, not to improve the farmer’s circumstances, but for their own benefit. Costs are being slashed, employees are being laid off, and money is being reduced. Income taken by intermediates, such as merchants, transporters, wholesalers, and retailers, might actually be taken over by larger businesses. To put it another way, there are literally millions of small-scale private-sector farmers who might be easily ousted and replaced by major agricultural enterprises. Hence, India’s agriculture sector is tightly regulated and monitored by the government, and has now been opened for private players, which means that farmers will now be more flexible in their marketing.

Raagini Sharma
Raagini Sharma
Author works as a senior analyst at the Greek-based Research Institute for European and American Studies (RIEAS). She has a Master's degree in Conflict, Governance, and Development from the University of York, United Kingdom, as well as a Master's degree in Politics and International Relations from the Central University of Gujarat, India. She graduated from Delhi University with a Bachelor of Arts (Hons.) in Political Science.
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