New farm laws herald new era of market freedom: Economic Survey
Amid raging protests over new farm laws, the government's pre-Budget state of economy document on Friday went the extra mile to list benefits of the three contentious laws, saying that besides giving market freedom, they will help raise incomes of small and marginal farmers. The Economic Survey 2020-21, tabled in Parliament by Finance Minister Nirmala Sitharaman, had in two sections mentioned about the three bills, detailing their salient features as well as the benefits that they will bring.
Defending the three new farm laws strongly, the Survey said they herald a new era of market freedom which can go a long way in improving lives of small and marginal farmers in India.
These legislations were designed "primarily" for the benefit of "small and marginal farmers", which constitute around 85 per cent of the total number of farmers and are the biggest sufferer of the "regressive" APMC-regulated market regime, it added.
Thousands of farmers, mainly from Punjab, Haryana and Western Uttar Pradesh, are protesting at various borders of the national capital seeking repeal of these legislations. They have expressed concerns that the laws are pro-corporate and could weaken government-regulated mandis, also called Agriculture Produce Marketing Committees (APMCs).
Eleven rounds of talks between the government and around 40 unions have failed to break the deadlock.
"The reforms in the agricultural sector were more overdue than even the labour reforms as the existing laws kept the Indian farmer enslaved to the local mandi and their rent-seeking intermediaries. While every other category of producer in India had the freedom to decide where to sell his/ her produce, the Indian farmer did not," the document observed.
The local monopolists created by this legal infrastructure enabled the intermediaries to prosper at the cost of the farmer, especially the poor ones.
The survey highlighted that "agricultural reforms enable the farmer to sell where he gets the best deal and thereby enable competition that is sine qua non to create welfare for the small farmer".
Listing the benefits, the document said that reforms in agriculture markets will enable creation of 'One India one market' for agri-products, create innumerable opportunities for farmers to move up the value chain in food processing -- from farm to fork, create jobs and increase incomes.
Several Economic Surveys have expressed concern at the functioning of the APMCs and the fact that they sponsor monopolies. Specifically, Economic
Surveys for the years 2011-12, 2012-13, 2013-14, 2014-15, 2016-17, 2019-20 focused on the reforms required in this context.
Many committees have recommended agri-market reforms since 2001, including by the National Commission on Farmers chaired by M S Swaminathan and Taskforce on Employment Opportunities headed by Montek Singh Ahluwalia, as per the survey.
In September 2020, Parliament passed three farm laws -- The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and The Essential Commodities(Amendment) Act, 2020.
"The newly introduced farm laws herald a new era of market freedom which can go a long way in the improvement of farmer welfare in India," the survey said.
According to the survey, the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 will empower farmers in their engagement with processors, wholesalers, aggregators, large retailers, exporters and will provide a level playing field.
It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs. Farmers have been provided adequate protection as sale, lease or mortgage of farmers' land is totally prohibited and farmers' land is also protected against any recovery.
The farmers will have full power in the contract to fix a sale price of their choice for the produce. They will receive payment within a maximum of three days.
As part of this law, 10,000 Farmer Producer Organizations are being formed throughout the country. These FPOs will bring together small farmers and work to ensure remunerative pricing for farm produce.
After signing the contract, farmers will not have to seek out traders as the purchasing consumer will need to take the produce directly from the farm.
The Essential Commodities (Amendment) Act 2020 removes commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. This aims to remove fears in private investors from excessive regulatory interference in their business operations.
The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and will attract private sector/ foreign direct investment into the agriculture sector. The legislation will help drive up investment in cold storages and modernisation of the food supply chain, the survey said.
Pointing out farmers' plight, the report said that farmers have suffered from various restrictions in marketing their produce.
They were not allowed to sell outside the notified APMC market yards. The farmers were restricted to sell their produce only to registered licensees of the state governments.
Further, barriers existed in free flow of agriculture produce between various states owing to the prevalence of various APMC legislations enacted by the state governments.
The APMC regulations have indeed resulted in a number of "inefficiencies and consequent loss to the farmers".
"The presence of multiple intermediaries between the farmers and the final consumers has led to low realisation by farmers. Further, a large range of taxes and cesses levied by APMCs cuts into farmers' price realisation while only a small proportion is ploughed back into the development of mandi infrastructure. Poor infrastructure at the mandis compounds the problem of price realisation for the farmers," it said.
Long queues of farmers waiting, most often, in the hot sun to sell their produce with limited ability to take their produce elsewhere even if the price is higher in another mandi is a characteristic feature of APMC mandis, the survey said.
The delays result in large post-harvest losses to the tune of 4-6 per cent in cereals and pulses, 7-12 per cent in vegetables and 6-18 per cent in fruits.
Total post-harvest losses were estimated at Rs 44,000 crore at 2009 wholesale prices.
"Recognising the above limitations of existing market regulations, various committees had recommended several reforms in the marketing of agricultural commodities," the survey said.
