10 questions you always wanted to ask about the Farm Bills

Here is a primer of 10 key issues that the Farm Bill has raised and why it engendered protests.

December 11, 2020 8:17 IST | India Infoline News Service
Since 26 November, farmers have been protesting outside the borders of Delhi demanding repeal of the Farm Bills. What are the issues? Here is a primer of 10 key issues that the Farm Bill has raised and why it engendered protests.
  1. Can you give a quick summary of the 3 Farm bills that are being protested?
The Farm Bills were passed as an ordinance and while the ruling NDA had a majority in Lok Sabha, it was passed in Rajya Sabha by voice vote. Here are details of the 3 key bills.
  1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, allows farmers to sell their harvest outside notified APMC mandis without taxes.
  2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, facilitates contract farming and direct marketing.
  3. The Essential Commodities (Amendment) Bill, 2020, deregulates the production, storage, movement and sale of cereals, pulses, edible oils and onion.
  1. Why are farmers upset with the Farm Bills?
Farmers, from Punjab and Haryana, are protesting heavily against the Farm Bills 2020.
  • The Farm Bill  allows farmers to directly sell to private companies without relying on the APMC mandis. Farmers fear this could lead to scrapping of MSP.
  • Government has removed most agricultural products from Essential Commodities List. Farmers expect this to lead to price volatility and hoarding.
  • Effectively, the bills permit private sector investment into farm infrastructure. Farmers are sceptical that large corporates may squeeze out the traditional farmer.
  1. Why was the government in a hurry to pass the Farm Bills 2020?
Farm Bill allows farmers to sell their produce outside the APMC regulated markets. The APMCs and MSP were created during the Green Revolution in an era of food grain scarcity. However, APMC has become a state cartel that is deliberately fixing low prices for agri-products and forcing distress sale by farmers. India is now a surplus producer of food grains.
  1. Key question: Will farmers get MSP or not?
The farmer protest largely revolves around the need to protect Minimum Support Price (MSP). Currently, MSP is declared for 23 crops before the sowing season. However, government only purchases paddy, wheat and select pulses in large quantities, and only 6% of farmers actually sell their crops at MSP. Government was willing to give a written assurance but farmers are not for it.
  1. Why are farmers worried about tax-free deals outside the APMC?
Farmers fear that tax-free private trade in food grains will make these mandis unviable. If volumes shift out of the APMC mandis, government may lose interest in enforcing MSP. In Punjab and Haryana, most government procurement centres are located within the APMC mandis. Farmers want MSP to be made universal; both within mandis and outside mandis.
  1. Why are protests vociferous only from states like Punjab and Haryana?
More than 50% of all government procurement of wheat and paddy since 2015 happened in Punjab and Haryana. Nearly, 85% of wheat and paddy grown in Punjab, and 75% in Haryana is bought at MSP rates. Farmers in these States expect prices to fall without MSP. Punjab has invested in the mandi system and infrastructure. Large farmers in Punjab and Haryana double up as commission agents. So they earn the commission plus the interest on loans given to smaller farmers. These will cease to exist.
  1. Why are some state governments upset with the Farm Bill?
It is purely economical. For example, Punjab government charges 6% mandi tax (along with a 2.5% fee for handling central procurement). Punjab earns Rs.3,500 crore and Haryana Rs.1,600 crore from these mandi taxes. For other states, mandi tax is less than 1% of revenues while for Punjab and Haryana it is almost 9%. Also, agriculture is a state subject and state governments are not comfortable with the centre diluting their importance.
  1. Will the Farm Bill help bring private investments into agriculture?
With just 7000 APMC markets in India, agricultural marketing largely happens outside the mandi network. Bihar, Kerala and Manipur do not follow APMC system. The facilitation and storage of agri commodities is likely to attract large corporates in the agriculture space. They will invest in farm technology and robotics, apart from post-harvest infrastructure.
  1. Will the government still play a role in controlling prices?
The Essential Commodities (Amendment) Bill, 2020 removes food grains, potato, onions and other perishable food from the definition. The exceptions are war and famine. The new bill allows stocking up inventory with no limits unless the price of perishable goods doubles or non-perishable goods are up over 50%. It would be a relatively smaller role.
  1. Could there be hoarding of pulses and food grains under the New Farm Bill?
Technically yes; since supermarkets and corporates can stock up. This could reduce supply in the market and prop up prices. This could give corporates an opportunity to create temporary shortages and profit from the panic. It is likely that food might get more expensive and as a chain reaction inflation goes up. But the government has the right to intervene if prices move up too sharply.

FREE Benefits Worth 5,000



Open Demat Account
  • 0

    Per Order for ETF & Mutual Funds Brokerage

  • 20

    Per Order for Delivery, Intraday, F&O, Currency & Commodity