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Agricultural reform? Small farmers will be more vulnerable, corporates to 'fix' price

By Dibyendu Chaudhuri*

Agriculture employs 42% of the total work force whereas it contributes only 16% to the country’s GDP. The average annual growth rate in agriculture has remained static to 2.9% since the last six years. This means that the post-green revolution conventional agriculture has reached its peak. Responsiveness of soil fertility to fertiliser application, an indicator of stagnancy in agriculture, shows declining trend since 1970. The worst sufferer has been the small and marginal farmers who constitute 86% of total farmers.
Post-green revolution agriculture, on one hand, has helped increase production of some crops, mostly cereals, but on the other hand, during this period, agriculture has gradually become more dependent on seed and pesticides/herbicides companies. The high yielding or hybrid seeds replaced the indigenous seeds, the chemical pesticides and herbicides replaced the traditional pest management and agronomic practices.
Farmers now follow the package of practice (PoP) written in the label of the seed or pesticides packet, or as prescribed by the dealers/agent or government extension workers. Eventually the context specific knowledge and practice which evolved during 100s of years got replaced by the knowledge written on the labels of the packets. Farmers stopped using their wisdom, skill and knowledge – a process called deskilling in agriculture.
But, deskilling could just be ignored as a romantic idea if the seed and pesticides companies driven chemical based agriculture practices had not created other serious issues. So far, the profit motive of companies has acted against the broader well-being of the society in terms of ecological damage. It adversely affected the soil fertility.
Toxic residue from chemical inputs entered the food chain. Focus on a limited number of crops resulted in loss of crop-diversity and hence malnutrition among small and marginal farmers. Further, the unpredictable nature of the technology – seeds or pesticides makes farmers more vulnerable as they can’t predict the production.
The situation is grave in the undulating hilly terrains of central India. It is difficult for the farmers here to produce enough to properly feed a five member family with an average landholding of 2 to 3 acre, let alone accessing quality education or health. For earning cash income villagers from these areas use to migrate to cities either seasonally or permanently as daily wage earners.

New bills

The three new bills – Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020; Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020; and Essential Commodities (Amendment) Bill, 2020 – have to be seen in the above context.
Let’s quickly see what these bills are proposing. The first bill, the Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, aims at opening up agricultural sale and marketing outside the notified Agricultural Produce Market Committee (APMC) mandis for farmers. Further, it proposes to remove any barriers to inter-State trade, provides a framework for electronic trading of agricultural produce and prohibits state governments from collecting market fee, cess or levy for trade outside the APMC markets.
The second bill is related to contract farming and is called Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020. This provides a framework on trade agreements between farmers and corporate houses for the sale and purchase of farm produce.
The third bill, Essential Commodities (Amendment) Ordinance, 2020, is related to food stocking by Agribusiness agents. It says that stock limits can only be imposed if retail prices increase by 50% above the average in the case of non-perishables and 100% in the case of perishables. It removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.

Probable effect on small and marginal farmers

Now let us look at these three bills together in the context described above. Will the three bills solve the issues that the small and marginal farmers are facing? Let’s build two opposite scenarios.
The first scenario is that the farmers who will not go for contract farming will be able to sell their products at a higher price as there will be many unregulated buyers and there will be competition among those buyers. Some surveys say that currently more than 90% farmers are net buyers, so Minimum Support Price (MSP) anyway does not have much to do with their life.
Further, the competition among buyers will be completely fair and farmers will be benefited from that. There will be no unnecessary stocking to increase the price for the consumers as in that case the farmers can sell their products directly to other buyers. The farmers who will go for contract farming will be able to negotiate price and terms with the corporates and thus will get fair return.
Contract farming is organised at a lower skill level. Crop choice, inputs, cultivation process and harvest is controlled by corporates
The production risk will be minimised in contract farming to a great extent as the corporate will invest with all modern technological support to ensure production. So, these reforms will be beneficial, not only for small and marginal farmers, but also for unemployed youth in the villages who can become intermediate traders of agricultural products—buying products at farm gates from farmers and selling it to the retailers.
The other scenario is opposite to the first scenario and has been built based on, by and large, the critique of the first scenario. Even now a significant portion of the net buyer farmers sell a part of their crops under the MSP scheme provided by the government. It’s not because they had surplus food. They sell it because they want cash. Then, they purchase grain from PDS at a much lower price.
PDS and MSP together have created a major safety net for small and marginal farmers. In fact, the Raman Singh’s BJP government at Chhattisgarh has been the most successful one in implementing this dual scheme which benefited a lot of small and marginal farmers for years even though they were net buyers. And this is absolutely fine. Because, as marginal producers the farmers took the benefit of MSP and as poor villagers they took the advantage of PDS.
After these three new bills, there will be less focus from the government to procure food grains from farmers. The unregulated buyers, who are more powerful and can easily build networks among themselves, can negotiate better than farmers and will be able to exploit them much easily. And if the big corporate houses enter into this business, it won’t be possible for the local unemployed youth to compete with them.
A significant number of farmers may see contract farming as a better option. They may think that it will at least assure them of some assured income. But, as in the bill there is no mechanism suggested for price fixation and negotiation, the farmers will be exploited by the corporates. At the same time contract framing will aggravate the current issues of declining soil fertility, increasing toxicity, declining groundwater and, above all, further deskilling of the farming community.
The entire contract farming agriculture is organised at a lower skill level, where farmers will be only applying their labour, whereas the crop choice, inputs, cultivation process and harvest will be at the control of the corporates. 
In this scenario the small and marginal farmers will become more vulnerable, as crop choices are something which provides them food for at least six to nine months in a year. Agriculture will be the only other labour work for the farmers. And there will be more movement towards the cities for daily wage earning.
We have to wait for some more time to see what exactly happens -- either of these two or something in between, or, maybe, something very different from all these. But, these bills are going to be another turning point in the economic history of India as it has the potential to change the structure of how agriculture is organised in this country. Let’s see.
--- 
*With the research and advocacy unit of the Professional Assistance for Development Action (PRADAN)

Comments

Saurabh Singh said…
Very thought provoking

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