Thousands of farmers from Punjab, Haryana, Rajasthan and U.P have been marching toward Delhi in protest against the three central farm legislations.
In this context, here is a look at the concerns regarding the three farm reforms laws.
Why are only some states protesting?
The protests are perhaps the loudest in northern states, traditionally India’s wheat basket and rice bowl.
The MSP system, in place since the mid-1960s, was part of the country’s drive to reduce dependence on food imports.
The MSP was meant to protect farmers against price crashes that could (and do) occur with large harvests.
It is in its role as a floor price that a credible MSP matters to farmers.
In principle, in deficit states (where demand exceeds local supply), market prices should be higher than the MSP, obviating the need for supporting the market at the level of MSP.
However, this differential could be dampened or even eliminated by the distribution of grains under the National Food Security Act (NFSA).
Seen in this light, the MSP matters more in historically surplus states of Punjab and Haryana.
Here, the government purchases over 80% of wheat and rice output for NFSA supply.
In comparison, in Bihar, the government procures at most a quarter of rice output of the state and no wheat.
Also, in practice there is wide variation in the implementation of the MSP, across crops, states and categories of farmers.
A 2016 Niti Aayog report notes that all surveyed Punjab farmers reported selling at the MSP.
While other states often saw only one-third of farmers reporting sales at the MSP, and some, none at all (with sales at the lower open market prices).
The report also finds that large farmers are able to sell a greater share of their produce at the MSP as compared to smaller farmers.
Small farmers often rely on aggregators to sell their output.
What are the concerns?
Cooperative federalism -Agriculture and markets are State subjects – entry 14 and 28 respectively in List II.
So the farm legislations are being seen as a direct encroachment upon the functions of the States.
It is seen as being against the spirit of cooperative federalism enshrined in the Constitution.
The Centre, however, argued that trade and commerce in food items is part of the concurrent list.
End to MSP? -APMCs were set up with the objective of ensuring fair trade between buyers and sellers for effective price discovery.
APMCs can -
regulate the trade of farmers’ produce by providing licences to buyers, commission agents, and private markets
levy market fees or any other charges on such trade
provide necessary infrastructure within their markets to facilitate the trade
The Farmers' Produce Trade and Commerce Act aims at opening up agricultural sale and marketing outside the notified APMC mandis for farmers.
Given this, dismantling of the monopoly of the APMCs is seen as a sign of ending the assured procurement of food grains at MSP.
To the Centre’s ‘one nation, one market’ call, farmers have sought ‘one nation, one MSP’.
Farmers call for addressing the gaps in the APMCs, instead of making these State mechanisms redundant altogether.
No mechanism for price fixation - The Price Assurance Act offers protection to farmers against price exploitation.
However, it does not prescribe the mechanism for price fixation.
There is apprehension that the free hand given to private corporate houses could lead to farmer exploitation.
Farmers are apprehensive about formal contractual obligations owing to the unorganised nature of the farm sector.
There is also the lack of resources for a legal battle with private corporate entities.
Food security – Easing of regulation of food commodities in the essential commodities list would lead to hoarding of farm produce during the harvest season when prices are generally lower.
This could undermine food security since the States would have no information about the availability of stocks within the State.
What is the way forward?
In all, the MSP has played a role in mitigating the downside risk for farmers.
But its effectiveness depends on the interplay of -
NFSA operations
crop choices
the degree of intermediation and competition (amongst buyers) in the market
MSP implementation
More market-driven outcomes will require investments in infrastructure.
The MSP is not, and should not, be a substitute for technology-driven increases in farmer incomes.
Farmers thus want the Union government to either withdraw the three legislations or guarantee them the MSP for their crops by introducing a new law.
