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How Farmers Have Been Bluffed For So Long

By: Rohan Kalita* |

People, media personalities, and academicians alike, often speak of farmers suicide as a relatively new sociological phenomenon; however, I think it has always been there. Nobody bothered to hear about it, nobody cared about their plight until the farmers could bear no more; they decided to fight their own battle. The episode of farmers' exploitation runs deep into the rise of farmer suicides, to understand how farmers have been exploited for so long it is very imperative that we look into the brief history of the various government policies and their intended aims and their actual result so that we understand the kind of exploitation that they had to go through which has culminated into such a huge farmers' movement.

Pre-APMC and Post-APMC era

To understand the plight of the farmers we must understand the journey that a farmer has to go through to earn his livelihood. While the rich farmers with more than 1 hectare of farmland often trade directly with the buyer which can be a corporate, trader, market or sometimes even the consumers, there are other small farmers some of whom don’t even own their own land who have to go through the secondary markets or the Agricultural Produce Marketing Committee (APMC) mandis (wholesale market). This is known as agricultural marketing; before APMC was introduced, agricultural marketing took place in a rather informal and unregulated manner, without proper market forces and mechanism the farmers were extensively exploited. Whether it be in terms of getting a fair price or paying the agent in the form of the commission, the farmers were always left with the short end of the stick, cheating took place outrightly in the market. Often there were secret arrangements between the agent and the trader wherein the agent would be commissioned by the trader to buy the produce from the farmers at a price lower than the MSP, sometimes the middlemen expenses exceed the value of the produce sold, as a result of which farmers were denied much of their profit and were left with nothing in the end. APMC Act which was introduced in 2003 was brought in to regulate the market and eradicate the illegal trade practices associated with agricultural marketing. Under the act, there was supposed to be APMC mandis, set up in each state, which would provide the farmers with a market for procurement of their produce. The APMCs include a state government-appointed agent known as arhatiyas, who would set up the sellers with the traders or the prospective buyers, followed by an open auction system and open bidding where the prices quoted by the buyers would be known to everyone in the auction, including the sellers. This is unlike the earlier practice of concealed bidding, wherein one buyer was not aware of the price quoted by the other buyers, the APMC also set up local government appointed cooperatives, who break any effort of forming a cartel by the buyers. Perhaps the most important step taken was standardization and grading of all the agricultural products produced by the farmers, which ensured at least some uniformity in the agricultural products.

Although these sharp reforms were intended to empower the farmers and provide them with a level playing field, it hardly paid off as it gave rise to another new set of problems some of which were always inherent in the laws. What led to its downfall primarily was the lack of thickness in the market, as described by the Nobel prize winning economist Alvin Roth; markets should be as thick as possible i.e., it should always be able to attract a large number of participants and buyers so that the market demand and supply reaches a point of equilibrium where both the buyer, the trader and the seller i.e., the farmer arrive at the perfect price, at present our APMC markets are excessively fragmented which has led to the creation of more than 2500 principal regulated markets and 4000 sub-markets, which could be easily captured by cartels formed by the traders. Moreover the main issue with the APMC is also with the role played by the state government appointed middlemen (arhatiyas) and committee which is responsible for the entry of traders or buyers in the market, most of the times these committees comprises of government workers who have secret arrangements with the traders and hence allow only handful traders or buyers to enter into the market, as a result this leads less thickness in the market and the farmers end up being exploited.

Another reason why APMC was unsuccessful was because of the big difference between the prices that the producers or the farmers would get from the traders and the one which the traders got by selling it to market cooperatives, businessman, corporate houses etc., for example if a farmer sells his produce to a trader A for 1500 rupees, the trader A would further sell it to trader B at 5000 rupees and as a result trader a would be the one who would be benefitted the most. This is a result of the secretive arrangement that existed in the pre-APMC times or sometimes these are legal obstructions imposed on the farmers by the APMC law itself, one of the clauses of the APMC act criminalizes the selling of the agricultural produce outside the mandis i.e., in unregulated markets. In this way the APMC act is restricting the farmers opportunity to earn more by preventing open competition in the market, this in turn reiterates the failure of the APMC’s in promoting the best interests of the farmers as it fails to solve the issues which were prevalent in the pre-APMC era.

MSP and farmers illiteracy

MSP is something that is often in the news whenever we talk about farmers, farmers have been demanding MSP for a very long time. The reason being that the minimum support price as the name suggests is a minimum price at which the government guarantees to buy the agricultural produce by the farmers. Since the very start of the farmer's movement by farmers especially from Maharashtra and Rajasthan in 2018, there have been demands for legalizing MSP but the government turned a blind eye to their demands. Since 2015 there has been a steady increase in the number of farmer suicides, nearly 79% of which have been reported from Karnataka. As a result of this the Karnataka farmers led a protest in order to bring their conditions to the notice of the government but it also inevitably failed; according to the NCRB reports, the farmers' protests across the country has increased by a massive 700% since the arrival of the Modi government. This is mainly owing to the careless and arrogant attitude of the present government towards the farmers' protest, take the example of the six farmers who were shot dead during the protest by policemen in Madhya Pradesh. This led to the rise of many kisan morchas all over India to protest against the atrocities committed by the present government in 2017, the government further added salt to the wounds of the farmers by bringing in the farmers bills which were completely uncalled for. Today, the farmers' protests that are going on can best be termed as an outburst of all the exploited farmers of our country.

The fact that there were a lot of middlemen also adds to the cost of the farmers, sometimes the middlemen or the agents would buy the farm produce from the farmers at a very low price and then sell it in mandis of other states at a significantly higher rate. The farmers most of the times are easily fooled by the middlemen due to their illiteracy and lack of awareness regarding the functioning of the market. According to a UNESCO report, Indian adults comprise 37% of the whole illiterate population in the world, which is a staggering 287 million. Almost more than 50% of that number consist of rural adults, and less than 20% from the urban areas, interestingly rural areas in India mostly thrive on farming as their primary source of income and hence such a staggering number is surely worrisome not only for the farmers but also for the government.

Most of the farmers do not know how to read and write, hence they cannot form a contract with the basic middlemen or the trader let alone the big corporates. A contract is something which underlines the rights and liabilities of both the parties involved in it but most of the times the farmers are the ones who get exploited.

Moreover, most of the small and middle income farmers do not have their own land, modern equipment, technology, modern fertilizers etc. which when compared with that of farmers in the foreign countries is quite backward.

The drought in the regions of Marathwada, Latur and Vidarbha region of Maharashtra was caused by the simple human phenomenon and not by natural phenomenon, this is mainly because water is already very scarce in these regions and hence, they provide a good land for harvesting of crops like wheat, groundnut etc. But the farmers in these regions decided to grow sugarcane which requires a huge amount of water for harvesting. As a result, farmers used a large amount of water from irrigation canals which led to an acute shortage of water and as a result caused drought.

Moreover, the APMC act couldn’t solve the problems related to infrastructure, transportation and storage of the farmers produce, most of the farmers cannot afford to sell their produce in markets of other states because they don’t have the adequate infrastructure and transportation facilities which would ensure better inter-state trade of agricultural produce. Most of the small farmers in our country can’t afford to store their agricultural produce, hence they either have to pay the middlemen for storage of the produce or they have to depend on the government and sell their produce as per the MSP rates. However, if both mechanisms are absent, their produce gets wasted which comes as a huge shock for the farmer not only emotionally but also financially.

New farmers law has its own loopholes

Nevertheless, the new farm bills were praised and glorified by the politicians as something which would change the fortune of the farmers; however, 12 years have passed, different laws have been introduced but the farmer’s situation has barely improved. The new farm bills aim to create an ecosystem where farmers and traders enjoy the freedom to sell and purchase farm produce outside registered 'mandis' under state' APMCs. In order to achieve this goal, barrier-free inter-state trade and transport is very important but such trade would mean that the farmers have to incur extra costs on transportation, storage etc. which the small farmers would avoid as a result all they would be left with is APMC. Moreover, if APMC mandis are destabilized gradually, as has been speculated by the farmers and many experts, this law could end up doing more harm than good to the farmers.

Another issue pertaining to this bill is that it is silent on the aspects of price discovery as it states that the farmers can enter a contract with agribusiness firms, processors, wholesalers, exporters or large retailers for the sale of future farming produce at a pre-agreed price. Earlier under the APMCs price discovery was possible with both the market forces of buyers and sellers bargaining with each other in order to arrive at an equilibrium point i.e. a suitable price, but as most of the poor and small farmers are under debt obligation they are forced to sell their produce at a very low price in the mandis because if they are not sold on that particular day it would add on to their costs of storage and would affect them adversely.

In case of the APMC the middlemen and trader exploited the farmers and without the APMC there is a fear of big corporates exploiting them. Either way none of these government policies would ever be able to solve their problem until the fundamental problems are solved. Moreover, most of the rural small scale farmers depend on MSP in case of unfavorable market swings, the farmers are also most of the times unaware about the market nuances and the real price of their produce due to error in grading and standardization. Hence, measures should be taken to solve these basic problems first.

Fundamental Problems Needs To Be Solved

The problems which revolve around the farmers cannot be solved by mere legislative reforms but what is needed is social reforms at the grassroot level through which the farmer needs to be brought into a position of power where they are aware of their rights and the market nuances.

Debt trap – Big and rich farmers often do not hire middlemen for trading in the APMC market as they already can afford to incur all middleman costs on their own, but the small and middle-level farmer on the other hand have to go through the middlemen and also have to bear the transportation cost, storage cost and many other sundry expenses due to which their overall expenses increase drastically sometimes exceeding the price they get after selling their crops. As a result, they are forced to take loans from the moneylenders and middlemen which eventually leads to a situation of the debt trap.

Hence, the farmers always try to avoid such unnecessary increase in the storage costs by selling their crops at whatever price the trader or middleman quotes which leaves him no bargaining power whatsoever.

In order to change these ailing conditions, the farmers need to be provided loans from more secured sources like banks, co-operatives etc. most of the banks are not willing to grant loans to the farmers in fear of defaulters, this needs to be changed and the government needs to step in to facilitate efficient banking activities between the farmers and the banks. Government organs like NABARD already provide small loans to the farmers, sometimes in the form of insurance cover schemes like Kisan credit card etc. However, most of the crop insurance schemes under the KCC (kisan credit card), which were supposed to act as insurance if the farmer falls into any debt trap, fails to fulfil their debt-ridden main purpose mainly because of the premium that it charges from the poor farmers who are already debt ridden. This most of the times discourages a small and poor farmer to go for such insurance schemes.

Moreover, those who have taken such schemes are not able to claim the benefits because of unpaid dues on the loan, government needs to focus on solving such fundamental problems that ail the farmers, only then will the farmers be empowered in the real sense.

Educate the farmers about the market nuances and their bargaining rights and power- there needs to be a revamp in the way the farming industry functions especially how a farmer function. Most of the farmers in our country have not even completed their basic education, the fact that education is synonymous with power is true for the farmers as much as it is true for any other individual of our country. At present education is a privilege for a few in our country whereas the ones who really need it i.e., the food producers of our country are still lagging.

Changes shall be made at the grass-root level with a greater number of schools in rural areas. Another important change is the setting up of agricultural schools in each village especially in areas where agriculture is the main source of occupation for the people, currently, it is set up only in towns and cities and is mostly for higher education. However, the need of the hour is practical education about agriculture and the nuances attached to it like basic standardized price, contract farming, advanced technological studies etc.

The thickness of the market- as propounded by Alvin Roth in his theory of dynamism of market design said that more than good intent what a market needs is a large volume of buyers and sellers which would, in turn, increase the thickness of the market and would result in efficient price discovery according to the principles of standardization and grading. At present, the fragmented APMC units have a handful number of buyers and a large number of sellers so this eventually leads to cartelization and malpractices by the middlemen and the buyers this leads to the farmer getting a very low price for their produce.

This brings us to another important requirement of a market i.e. they need to overcome the congestion that thickness can bring, by giving market participants enough time—or the means to conduct transactions fast enough—to make satisfactory choices when faced with a variety of alternatives. To avoid the peculiar problem of fragmentation of APMC markets is to set up a national agricultural market at the national level where buyers and sellers can meet each other in a more efficient and transparent manner.

Setting up e-auction facilities can be another move in the right direction as it would reduce any instances of malpractices by the buyers and it would also drastically reduce the role of middlemen, which at present has a big role to play in the agricultural market.


* The author is a student at Gujarat National Law University, Gandhinagar.

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