The three new agriculture Bills signed into law on September 27 evoked protests by farmers in several parts of the country, but unevenly. The agitations were most intense in states whose farmers have over the years benefited from the Food Corporation of India’s procurement of wheat and rice at the minimum support price.
Though the government fixes the minimum support price or MSP for 22 crops, this programme has been effective only for wheat and rice – these grains are procured by the Food Corporation of India without a limit. In principle, whatever rice and wheat farmers offer within the stipulated procurement period conforming to a specified quality was procured by the FCI.
How much was procured in each state depended on the efficiency of the Agricultural Produce Market Committees in each state. APMCs were set up to regulate agricultural trade and to eliminate middle men and money lenders.
In states such as Punjab and Haryana, APMCs have functioned well because sufficient infrastructure has been developed to help farmers to bring their produce to nearby mandis to sell it. In other states, the lack of mandis in proximity to production areas, adequate transportation and roads prevented procurement from taking place efficiently. This resulted in states with efficient APMCs dominating the Food Corporation of India procurement.
Buying operations
For instance, of the total rice quantity produced in Punjab in 2019-’20, 91.98% was procured; in Telangana, it was 97.07% and in Haryana 89.19%.
In contrast, in Gujarat, only 0.72% of total rice production by the state’s farmers was procured. In Karnataka, it was 1.24% and Assam 3.56%.
Similarly, for wheat in 2019-’20, in Haryana 77.19% of the wheat it produced was procured; in Punjab, it was 70.9% and Madhya Pradesh 36.18%.
Bihar, on the other hand, procured only 0.04%, Gujarat 0.15% and Uttarakhand 4.19%. There was no wheat procurement in several states such as Assam, Chhattisgarh and Jharkhand.
The grain bought in the mandis by the FCI is sold at a subsidised price under the Targeted Public Distribution System and other food programmes. A part of the quantity acquired by the FCI is kept to maintain a buffer food stock.
With the new laws, farmers fear that Food Corporation of India procurement at the minimum support price will end. This is because of the manner in which “trade areas” – that is, spaces in which farm produce is traded – is defined. Though rules to the Farmers Produce Trade and Commerce (Promotion & Facilitation) Act have not yet been promulgated, its provisions do not mandate FCI procurement in mandis run by state Agricultural Produce Marketing Committees, the markets in which farmers are assured of getting the MSP.
In addition, the law provides the FCI the opportunity to procure grains from its own warehouses, exempt from APMC fees. As a consequence, state governments fear they will lose the mandi tax or fees they collect. This fear has prompted the Rajasthan government to attempt to nullify the definition of “trade areas” by declaring all warehouses under the FCI, Central warehousing corporation and state warehousing corporations as procurement centres under the APMC.
Even if Agricultural Produce Marketing Committees continue to exist and an MSP is declared, it would not be effective if the FCI begins to limit its procurement. This would result in a fall in demand for produce and so prices would drop. This fear is real because the FCI has come under criticism for overstocking wheat and rice.
The growing push by several committees including the High Level Committee on Restructuring of the Food Corporation in 2015 to reform FCI procurement adds to fears. With the FCI’s debt rising from Rs 91,409 crores in 2014 to 2.54 lakh crores in 2020, borrowed at a whopping 8.4%-8.8% per annum, and the opening up of farm trade to the private sector, it is not too far fetched that the FCI may similarly review its inefficient, costly procurement practices.
Rising costs
The FCI’s costs have risen because of the additional burden imposed through mandi fees. It incurs further costs transporting and storing grains for distribution to other states, even if they already have adequate stocks of wheat and rice. For example, in 2019-’20, Punjab produced 118.231 lakh tonnes of rice of which the FCI procured 108.76 lakh tons. In the same year, West Bengal produced 153.969 lakh tons of which only 16.31 lakh tons was procured. As a consequence, under the Public Distribution System, Punjab’s rice flooded an already rice-rich state.
The inequalities of the FCI’s procurement also causes environmental problems. The MSP for rice and wheat has incentivised farmers to produce these grains even in regions that are short of water, leading to groundwater depletion. Due to the water crisis, the states of Punjab and Haryana passed laws in 2009 to delay the sowing of rice. But this cut short the time available after harvest to sow the next crop. This resulted in crop stubble being burned to clear the fields quickly, setting off a new problem of air pollution. Because the harvest coincides with the onset of winter in the region, North India is shrouded thick smog during the winter.
Responding to growing criticism for incentivising paddy cultivation in the north, the FCI for the first time in 2019 requested the Punjab government to limit procurement of rice. Punjab promptly refused.
Though crops such as maize, bajra and jowar are more suited for cultivation in this region, MSP set by the government is not effective for these crops as the FCI procures them only in limited quantities. Unless a large buyer pays MSP on these grains, the state setting an MSP will not prevent purchase at a lower price.
With the new laws, farmers fear that a similar fate will befall wheat and rice, which have enjoyed state protection in a few regions. Even if the government continues to announce a minimum support price, prices would not be assured unless the FCI continues unlimited procurement at MSP. By being the largest buyer of wheat and rice, the government had made MSP effective for these crops.
These procurement practices, the moves to reform the practices of the Food Corporation and the well-founded fears of farmers explain the uneven pattern and intensity of farmers agitations.
Kaveri Haritas, Jindal School of Government & Public Policy, OP Jindal Global University.
