Prime Minister Narendra Modi’s cabinet had issued emergency executive orders in June to change the old rules that govern the vast agricultural sector, which contributes nearly 15% of the economy’s output of $ 2.9 trillion and employs around half. of the 1.3 billion people in India.
Opposition parties and farmers’ organizations have criticized the government for rushing to pass the legislation by issuing the emergency orders and accused the Modi administration of gaining parliamentary approval without proper debate, scrutiny and consultation.
WHAT IS THE MOST IMPORTANT AGRICULTURAL LAW AND THE KEY POINT OF CONTAINMENT?
According to the Agricultural Products Trade and Trade (Promotion and Facilitation) Bill 2020, one of the laws passed by parliament, producers can directly sell their products to institutional buyers, such as large traders and retailers.
Many farmers’ organizations oppose this, saying it will leave small farmers with little bargaining power.
Almost 85% of poor farmers in India own less than 2 hectares (5 acres) of land and find it difficult to negotiate directly with large buyers of agricultural products.
Farmer leaders have said that wholesale markets, which play a crucial role in ensuring timely payments to small farmers, would lose their relevance and even gradually disappear if large buyers were allowed to buy directly from farmers.
Without offering an alternative arrangement to small producers, such as private markets or direct purchase centers, the new rule does not make any sense, producers have said.
The Indian states of Punjab and neighboring Haryana also fear that if large institutions start buying directly from farmers, state governments will lose the tax that these buyers have to pay at wholesale markets.
BEFORE THE NEW LEGISLATION, WHAT IS FORBIDDEN FOR FARMERS TO SELL DIRECTLY TO LARGE BUYERS?
Under the Agricultural Products Marketing Committee (APMC) Act, a law dating back more than 55 years, it was mandatory for farmers to bring their products to more than 7,000 regulated wholesale markets where brokers or commission agents helped farmers sell your crops to the state food procurement agency or private merchants.
This was to protect farmers from being exploited by large institutional buyers.
However, the government now argues that wholesale market intermediaries form an additional layer in the supply chain and that their commission raises prices for consumers.
HOW DO WHOLESALE MARKETS FOR REGULATED FOODS WORK?
These markets are managed by local bodies that ensure that the price of agricultural products, including fruit and vegetables, is determined through auctions.
For rice and wheat, however, there is no auction, as the government buys at guaranteed prices.
Every year, the government increases the price at which the Food Corporation of India (FCI), the state grain accumulator and India’s main buyer, buys rice and wheat from producers. Most of the farmers in Punjab and Haryana sell their rice and wheat to the FCI.
Some growers believe that if wholesale markets start to lose relevance, private buyers could pressure farmers to sell at lower rates.
Commission agents help farmers sort, weigh, pack and sell their crops to buyers. They also guarantee punctual payments to farmers.
For millions of rice and wheat farmers, brokers are also often a source of credit in tough times after drought, poor harvests, or even a daughter’s wedding.
Many experts argue that agents, who form the backbone of wholesale markets, would lose their income if large buyers started buying directly from farmers.
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