New farm laws: Punjab farmers, a spoiled lot, easily protest

By Prabhudatta Mishra and Banikinkar Pattanayak

Farmers in Punjab have taken their protests against the Center’s agricultural laws to the national capital, and not without reason.

For decades, a lethal combination of the Center’s distorted procurement system, the Punjab government’s outrageous electricity subsidies, and generous disbursement of credit from most public-sector banks has served mostly only to pamper the farmers of the country. been, often at the expense of their counterparts elsewhere.

Therefore, any movement that threatens to undermine this privilege, even remotely, will at least upset the elite in Punjab’s farming community, while its political dispensation would avoid antagonizing the mandi lobby because its networks enrich the state coffers, to through mandatory taxes collected from Center funds. grain supply agencies.

Now imagine this: Up to 26% of the Center’s grain purchases (wheat and rice) this marketing year comes from Punjab, even though it contributed only 13% to pan-Indian production. More than 90% of Punjab’s wheat and rice production in the 2019-20 crop season (July-June) was purchased by the Center at minimum support prices (MSP), while government purchases were much lower in all other states except Haryana. Only 44% of the rice produced in the country was purchased by government agencies in 2019-20, while the purchase of wheat in Uttar Pradesh, a major producing state, accounted for only 10% of its production. It goes without saying that mandi prices have remained below the MSP for most of the year.

Punjab’s electricity subsidy for farmers was up to 1.1% (Rs 5,670 crore) of its nominal state gross domestic product in fiscal year 19, while the country stood at just over 0.5% of GDP, excluding default interest. Since then, the state energy subsidy has increased by 13% year-on-year to Rs 6,402 crore in FY20 and is now estimated to touch Rs 7,180 crore in FY21.

The Punjab State Farmers and Farm Workers Commission, established by the current state government, also pointed out certain peculiarities in 2018. According to their report, while the total short-term credit required in Punjab, based on its approximately 10 million acres of cultivated land is estimated at 24 billion rupees per season, the outstanding agricultural loan from all state banks is around 60 billion rupees. The state has around 26 lakh farmers, while the banks together have issued over 40 lakhs of Kisan credit cards. Over a period of 11 years (2004-05 to 2015-16), the demand for credit has multiplied by about 8, while production has increased only 1.11 times.

While the report raised concerns about the quality and use of credit, and the inadequacy of a monitoring system, the data it presented unequivocally points to the wide access that farmers in the state have to formal credit channels.

Citing an analysis by Niti Aayog last year to push for stricter scrutiny of loans, a senior Finance Ministry official told FE that agricultural loans to Chandigarh accounted for 1,997% of the Union territory’s cost of production ( comprising the cost of agricultural inputs and hired labor) in fiscal year 2018, while those of Punjab were 159%. In contrast, Jharkhand received crop loans of only 11% of costs, West Bengal 17%, Maharashtra 32%, Bihar 33% and Uttar Pradesh 42%. At the aggregate level, crop loans amounted to 72% of costs. Of course, some other states and territories of the Union (Kerala, Himachal, Tamil Nadu and Delhi) also monopolized a large part of agricultural loans.

As for acquisitions in Punjab, it is still fully routed through APMC mandis. FE has already reported that the state collects an added tax of 8.5% from the MSP to which the FCI and other agencies purchase grain. This is in contrast to MSP’s 6% pan-Indian average. The state alone collected Rs 1,750 crore, out of the Rs 8,600 crore collected across India as mandi fees only, from the trade in all agricultural products in fiscal year 20.

Of course, since the procurement of wheat in Madhya Pradesh and rice in Chhattisgarh, Odisha, Andhra Pradesh and Telangana has increased in recent years, the relative share of Punjab has decreased somewhat, although in absolute volume terms, it is roughly at same level in the last four years.

Before the launch of the Goods and Services Tax (GST), various levies paid by the FCI amounted to up to 13% of the MSP paid to farmers across India. The levies ranged from a relatively modest 3.6% in Rajasthan to 11.5% in Haryana, 14.5% in Punjab and 13.5% in Andhra Pradesh, the main grain producers.

The agricultural marketing reforms through the two new bills passed by Parliament are expected to help the Center reduce the tax burden on it due to the Food Safety / PDS Act, if the FCI and other agencies begin to acquire at market rates bypassing the mandis.

Prime Minister Narendra Modi has already made it clear that the MSP system would continue. Stating that current laws tied the hands of farmers, he said the reforms would allow them to be self-sufficient with access to multiple buyers.

However, even as Modi assured farmers that the Center would continue to purchase from MSPs, the Punjab government has already passed three bills to reject the Center’s legislation.

(With input from Prasanta Sahu and Anupam Chatterjee)