September 24, 2021

Biz Journal

Business perfection

The (food) grain of Punjab’s own farm Bills

Much was made of the government’s plan to reject the three central laws on agri markets and provide its own protection to famers, especially on prices for their produce. But, the two Bills presented in the state legislature on the trade and commerce and contract farming Acts of the Union government as amendments to nullify some provisions of those Acts and provide its own mechanisms of protection are mainly about paddy and wheat prices and markets and the state government protecting its own revenue. This would be the state’s own roadblock to any crop diversification and would perpetuate the paddy-wheat cropping cycle and monoculture if it stands the test of legal scrutiny by the courts.

The Farmers’ Produce Trade and Commerce amendment Bill assumes that the Union Act (APMC Mandi Bypass Act, 2020) would nullify the (MSP) mechanism and would expose to vagaries of market forces so far as their price realisation for agricultural produce and fruits and vegetables is concerned. It also proposes to ensure a level playing field for proper protection of farmer interest. However, when it comes to MSP, it only says “No sale or purchase of wheat or paddy shall be valid unless the price paid for such agricultural produce is equal to, or greater than, the announced by the Central Government for that crop”. Therefore, famers producing other crops like cotton or oilseeds, or even maize for which there is an MSP provision from the Union government can’t expect a protection under this Bill. This, despite the fact that cotton has been selling at below MSP in the state during current season. The state again chooses to depend on the Union government and FCI for its wherewithal and does not care for other crop who grow riskier and high value crops.

Even the contract farming Act amendment Bill states the same: ‘No sale or purchase of wheat or paddy shall be valid unless the price paid for such agricultural produce under a farming agreement is equal to, or greater than, the announced by the Central Government for that crop.’

The relevant questions to ask here are: Who expects any agency to undertake contract farming in these two crops in or anywhere in India unless it is basmati paddy or durum wheat? has some basmati contract farming but that may not be included under paddy and the state does not grow any durum wheat. It is sad that thinking of the state government does not go beyond these two crops, is short term in nature and misses the wood for the trees.

The MSP is declared for 23 crops. This means that other crop or those trying to diversify under contract farming would not have the MSP protection of the Bills. Of course, this is a bad proposal per se as contract price can’t be tied to any other price especially state declared prices as contract prices should be discovered by the two parties. This is so as contracting is also about benefits other than price which could be yield, cost or quality of crop. Haryana had made MSP as the minimum contract price for contracting agencies in 2005 under its APMC Act but it was for all crops where MSP was applicable. One should have learnt from neighbourhood.

On the enforcement of MSP for all buyers, both the Bills state mildly, ‘Notwithstanding anything contained in any other law for the time being in force, if any person or company or corporate house or any other association or body of persons, whether incorporated or not, compels or exerts pressure on a farmer or any person associated with or agro-produce to enter into a contract or sell agricultural produce in his possession, at a price below the Minimum Support Price (MSP), then such person shall be deemed to have committed an offence which shall be punishable with a term of imprisonment of not less than three years and fine’. But why would a buyer compel or exert pressure on seller farmer and how would that be established? It is more likely that a farmer would be more than willing to sell at below MSP as once the farmer brings produce to the market, it is difficult to take it back as it would be like taking a dead body back from the cremation ground.

The state government has also provisioned for protecting its own revenue from agricultural produce transactions as both the Bills state: “the State Government may, from time to time notify a fee, which shall be levied on a corporate trader and/or on the electronic trading and transaction platform for trade and commerce in a trade area outside the markets established and regulated under the Punjab Agricultural Produce Markets Act, 1961.-The fee leviable under sub-section (1) shall go towards the fund to be set up for the welfare of small and marginal farmers”. It is surprising that contract farming is not specifically mentioned for this in the relevant Bill.

In sum, the state government has asserted its federal rights with these Bills but in the specific context of state’s agricultural markets and its farm sector, the Bills are bereft of any tangible benefits to the state’s farmers and do not do any service to the long term sustainability of its farm sector, and livelihoods of its farmers and farm workers.

The author is professor at IIM-Ahmedabad.

Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.

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