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Why are Punjab and Haryana Farmers Protesting Against the Centre's Farm Laws?

Editor, TRANSFIN.
Dec 1, 2020 1:44 PM 6 min read
Editorial

Farmer opposition against the recently-passed farm bills has intensified lately.

The situation aggravated over the past week in particular with more than 300,000 farmers marching towards New Delhi on tractors, motorcycles and foot to protest the laws. Having been stopped at the Delhi-Haryana border, where many are presently camped in makeshift tents, they have refused to retreat notwithstanding a crackdown from the authorities through water cannons, lathi charges, tear gas, and what not.

The protestors say they have enough rations to block the ways into the capital for as much as six months, and they seem adamant that their concerns be addressed. With the Home Minister saying the Government would meet with them to discuss “every problem and demand” but only if they shift to another protest site - which the farmers refuse to do - the prevailing situation is a tense and costly impasse.

What Law are the Farmers Protesting?

The three farm laws aim to overhaul agricultural markets and deregulate them in a major way.

But the farmers’ contentions mainly revolve around one of them i.e. The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC Act).

And the core of this law - and the protests - is the concept of Minimum Support Price (MSP).

FYI: The other laws deal with (1) abolishing the Government's powers to impose stockpiling limits except under "extraordinary conditions" and (2) setting the stage for contract farming in India. To read about the pros and cons of each of the farm laws, read this.

 

What is MSP?

Now, farmers usually sell their produce at designated marketplaces or mandis. There’s always a chance that middlemen - the “commission agents” or the “arhatiyas” - will try to dupe the farmer by quoting low rates. To give farmers an upper hand in such negotiations, the state gives the farmer the option to sell to the state itself at a guaranteed minimum price, which is the MSP.

Want to learn more about MSP and Indian agriculture?

Listen in to one of our earlier podcasts to know how the Indian agricultural value chain really works and how the Indian farmer is often caught between the devil and the deep blue sea.

Basically, the MSP is a mechanism wherein the Government announces (at the beginning of the sowing season) the minimum price at which it will buy a farmer’s harvest. Fixing MSPs makes it more difficult for middlemen to quote dirt-cheap rates, since the farmer can always sell to state procurement agencies like the Food Corporation of India (FCI) instead.

 

What does the FPTC Act Purport To Do? 

  • This law takes aim at middlemen at Agricultural Produce Market Committees (APMCs) and seeks to enable farmers to sell their produce outside these APMC-designated mandis.
  • How? It redefines “trade area”, dramatically expanding the places where farmer-buyer transactions can take place.
  • It also redefines “trader” aka the middleman. Earlier, only APMC-designated middlemen could purchase crops from farmers. Now, anyone with a PAN card can become a trader.
  • The law also stipulates that “no market fee or cess or levy” shall be levied on farmers or traders in trade areas.

 

Why are the Farmers Protesting?

The main fear of farmers is that the FPTC Act will dilute the age-old MSP system and lead to corporatisation of agriculture, leaving them at the mercy of big companies.

Of course, the law doesn’t ban mandis: the worry is that large corporates will offer higher prices in the short-term, driving traffic away from the local marketplaces and making them obsolete...and then trapping farmers with cheaper rates and increasing debt.

As one Panipat-based farmer told Indian Express:

[APMC mandis] will not be shut, but it would be like BSNL versus Jio. And if the Government stops buying, we will be left with only the big corporates to sell to.

Moreover, a 2015 NITI Aayog paper titled “Raising Agricultural Productivity and Making Farming Remunerative for Farmers” was the philosophical underpinning of the three farm laws. This paper called for a “reorientation of price policy... [which] cannot be achieved through procurement-backed MSP since it is neither feasible nor desirable for the Government to buy each commodity in each market in all regions”.

Farmers are also apprehensive that the FPTC will spark a domino effect of deregulation in agriculture. If the Government purchases and the MSP are done away with, things like free power, fertiliser subsidies etc., may have their days numbered.

And needless to say, the market dynamics are complicated. Should Government procurement decrease - even without a roll-back of MSP - the prices of crucial commodities like rice and wheat will fall - which the farmers obviously don’t want.

There are other concerns too. Such as the very legality of these laws (“agriculture” is a state subject but “inter-state trade and commerce” is a prerogative of the Union Government), plus the unrelated issue of fines on stubble burning.

 

What are the Government’s Arguments?

The Government contends that the farm reforms give farmers more autonomy and freedom of choice over who to sell their crops to by breaking unfair monopolies and removing the middlemen.

The Prime Minister said the reforms were necessary:

[The reforms] have not only broken the shackles of farmers but have also given new rights and opportunities to them.

By eliminating the market fee structures in different state APMCs, the Government argues that the cost of transactions will reduce and that this will benefit both the farmer and the trader.

As for the bone of extreme contention that is MSP, the Agriculture Minister has asserted that "MSP was, MSP is, and MSP will continue in the future". Other Government officials have asserted the same, but farmers demand that this guarantee be given in writing, in the form of a new law or an amendment to the recent reforms.

A point proponents of the farm laws bring up is that the MSP policy has led to excess production and excess procurement. As of September 2020, the FCI had 700.27 lakh tonnes of rice and wheat. That’s about 70% higher than the operational and strategic reserve requirement. And that’s even after the distribution of free rice and wheat on account of the coronavirus pandemic and lockdowns.

Opponents of the MSP system also say that Government-assured procurement has incentivised rice and wheat at the expense of other crops - even in semi-arid regions of North India. Here, growing such water-intensive crops has led to groundwater depletion, degradation of soil quality and the problem of leftover stubble...which, of course, causes stubble burning and contributes to the region’s dystopian air quality.

 

Why Punjab and Haryana in Particular?

This belt was the birthplace of the Green Revolution and thus agriculture is particularly crucial here, both economically and politically.

Over the decades, the way agricultural marketing evolved in these two states created two distinct trends that set them apart from the rest of the country - and might explain why the farm protests are particularly strong here:

  1. There are more medium- and large-scale farmers. They are more reliant on Government procurement and thus have more invested in the MSP regime.
  2. The arhatiya system is strong and entrenched here. Middlemen command considerable clout and political patronage.

Procurement data shows that more than 95% of paddy farmers in Punjab and about 70% farmers in Haryana are covered under MSP-based procurement operations. But in other major states, this number is considerably lower - including Uttar Pradesh (3.6%), West Bengal (7.3%) Odisha (20.6%) and Bihar (1.7%). This disparity is similar for wheat.

 

What Next?

The first step towards diffusing tensions would be achieved if the protestors and Government sat across the negotiating table to reach a deal.

For its part, the Government could impress its commitment to preserving MSP and perhaps even give the same in writing. Fears about agricultural corporatisation would also need to be addressed and alleviated.

It's important that the protestors’ concerns are pacified at the earliest. The blockading of entry points into the capital hurts an already battered economy + footage of police brutality against protestors does nothing to help India’s image on the world stage.

FIN.

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