In May of this year, the government announced major reforms in agricultural markets. These included the deregulation of agricultural foods from the Essential Products Act (ECA). Farmers were also allowed to sell their produce outside of markets regulated by the government or the Agricultural Products Market Committees (APMC). Another set of changes allowed farmers to enter contract farming. While the government claims that these reforms will help farmers get a better price for their produce, farmer groups have been mobilizing against these changes. Why are farmers opposed to policies designed to help them? There are three factors that could explain these protests.
Farmers don’t trust big capital and for good reason
The whole logic of abolishing the monopoly of CMPA is that they artificially depress prices for farmers; Enabling corporate players will guarantee better returns to farmers, the argument continues. It cannot be said today if this happens or not. But farmers have good reason to be wary of claims that the growing presence of companies is unequivocally beneficial to them. The markets for agricultural inputs, such as seeds, pesticides, etc. They have experienced large-scale corporatization in the last decade, but this has been accompanied by a sharp increase in the prices of intermediate inputs in agriculture. Data from the Ministry of Agriculture show that a rising cost of intermediate goods has been the main reason for the stagnation and eventual decline in the terms of trade for farmers. Given this experience, the suspicion that the growing footprint of big capital leads to a contraction in earnings cannot simply be dismissed as dogma. It is not very difficult to understand why this happens. Farmers are often resource-strapped to traders, and end up selling their produce when prices are lower. Replacing local merchants with big capital will only increase this gap in bargaining power.
Figure 1: Terms of trade for agriculture
Farmers Were Never Very Anti-CMPA to Begin
The claim that agricultural markets were completely chained prior to these reforms is objectively incorrect. A report by the National Statistical Office (NSO) based on a 2012-13 survey found that farmers have been selling much of their produce to private traders outside of CMPAs even earlier. For 31 crops sold between July 2012 and June 2013, local private traders were the largest buyers for 29 crops. Mandis, not all of which were under APMC, were the largest buyers in just two vintages; arhar in the season of kharif and gram in the season of rabi. Except for soybeans, the proportion of farmers selling their crops to mandis did not even exceed 25% for any crop. In fact, farmers want more government intervention than less. A study by the Reserve Bank of India based on a survey of farmers and traders in 2018 found that more than 50% of farmers found that the minimum price support for crops was the most beneficial scheme for farmers. This number was around a fifth for e-NAM, an all-India trade portal introduced by the Modi government. Even in the priority list of measures that can help in correct cultivation decisions / better realization of prices and abolition of intermediaries (which is what would be achieved with the elimination of the APMC monopoly) it ranked well below facilities like weather forecasts reliable and storage facilities.
Chart 2: What helps farmers
The Political Economy of Big Farmers’ Protests
There is merit in the criticism that the prevailing APMC model perpetuates some form of rent-seeking behavior, both public and private, especially in the areas of the so-called green revolution. APMCs charge a commission on products sold at their facilities. This is a source of income for both governments and licensed traders. States like Punjab and Haryana charge a higher commission than others. For example, Shanta Kumar’s committee on the restructuring of the Food Corporation of India noted that Punjab and Haryana were charging a commission of 14.5% and 11.5% on wheat, while in Rajasthan it was only 3, 6%. This commission is a valuable source of income for these governments. The local elite, who have diversified interests in both agriculture and commerce, also benefit from the process. Any move to suddenly eliminate these benefits, regardless of their merits or demerits, is bound to trigger a political backlash.
The resignation of Harsimrat Kaur Badal from the Shiromani Akali Dal (SAD) union cabinet is a good example. According to the CSDS-Lokniti National Elections Study, in the 2014 Lok Sabha elections, the SAD-BJP alliance had a 25 percentage point advantage over Congress among Jat-Sikhs in Punjab. The SAD-BJP had the most support among this community, which represents the landed elite in Punjab, and has also been the traditional supporter of SAD politics. By 2019, this massive advantage had turned into a four percentage point deficit with Congress. Additionally, in the 2019 elections, the SAD-BJP alliance garnered the most votes among Hindu upper castes, which are more of an urban demographic in the state. With the congressional government in Punjab attacking these reforms, the SAD clearly fears losing its support among its traditional loyalists, the Jat Sikhs.
See Graph 3: Participation of wise votes from the Punjab community
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