One of the sections of people hit hardest by the lockdown have been farmers. There are daily news reports about how, due to the lockdown, farmers are not able to make a living. The truth, however, is that farmers have not been able to make a good living for a long time now. The onset of Coronavirus in India, in fact, has brought with it some long-overdue reforms in Indian agriculture.
Several policies and regulations were plaguing the lives of our farmers long before Coronavirus took over the world, mainly the APMC Act and the Essential Commodities Act (ECA) 1955.
Essential Commodities Act (ECA), 1955
Under the ECA, the government has the power to categorise some commodities as essential, and control and regulate their supply, production, distribution and price, among other things. There are some farm products on this list as well, like onions, edible oil, potatoes, sugar, rice etc. If the price of any of these commodities rises, this Act gives the government the power to bring it down forcefully, which creates an imbalance in demand and supply. The increase in price would ideally give the farmer a chance to earn more, produce more and thus restore the equilibrium. But due to govt control on price, that’s never possible.
Under this Act, the government can also impose stock limits, which refers to the amount of a good that a trader or dealer can store. They can conduct raids anytime, and if anyone is found storing more than the limit, their license can be revoked, they can be fined and in some cases also imprisoned. The idea behind this Act is that hoarding should not happen, but as a direct consequence of this, there is absolutely no incentive for anyone (wholesaler, retailer etc.) to improve the current storage and warehousing infrastructure; a much-needed innovation in the agriculture sector in India. Because there is so much govt regulation, the private sector is also wary of entering this space.
The Economic Survey of 2019-20 stated that “The ECA Act is anachronistic as it was passed in 1955 in an India worried about famines and shortages; it is irrelevant in today’s India and must be jettisoned.“
The second Act that has been eating away at the farmers’ profits is the APMC Act. APMC stands for Agricultural Produce Marketing Committee. You might remember them as huge wholesale markets (or mandis) where everything was cheaper. What you might not know is that those markets are the only place where farmers are allowed to sell their produce.
Back in the day, the British forced Indian farmers to grow indigo and cotton and sell it to them at a very less price through licensed traders of the British. The Berar Cotton and Grain Market Act of 1887 was enacted for the sole purpose of exploiting our farmers. The APMC Act we have adopted is a brainchild of this Act.
The sarkaar says that the intention behind the APMC Act is to protect farmers from exploitation by big retailers. For this, they have licensed traders who sit in these APMC mandis and farmers can only sell to them. By doing this, the govt has created a highly vertical, bureaucratic way of trading farm produce and where there’s bureaucracy, there’s also corruption. All the actors involved here have to pay various charges at all levels. Naturally, the farmer does too. It’s possible that in some cases, he might end up paying more than he has earned.
Moreover, there are only about 7000 of these regulated mandis for over nine crore farmers to sell their produce. The Act also prohibits inter-state trade, ultimately curbing the farmers’ freedom to sell their produce at their convenience. This sort of restriction doesn’t exist for any other industrial product in India.
This system has existed for quite a while, but the lockdown forced the government to relax the norms of these acts. Finance Minister Nirmala Sitharaman recently announced that the under the relaxed ECA, pulses, cereals, edible oil, oilseeds, onions and potatoes are out of the list of essential commodities. The stock limits listed under the Act will only apply in exceptional circumstances so we’re likely to see more investment in storage and warehousing in the future. The FM also announced that the mandate of selling farm produce at APMC mandis no longer applies and farmers are now free to sell their produce to whomever they want.
These amendments are immensely significant and will have a substantial positive impact on the livelihoods of our farmers. However, I would urge you to think about the circumstances of these landmark decisions. It truly saddens me to know that liberalisation for every other industry took place back in ’91, but our farmers continued to suffer for almost 30 more years.
Countless lives have been lost in these years due to heavy regulation of agriculture in India. No matter what the intentions of agri-policies in India have been so far, the outcome has only been a growing license raj and the consequently growing exploitation.
Hopefully, this marks an end of the license raj and exploitation and a new liberal world of possibilities of our farmers.
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The views expressed in this article are the author's own.