How does a market work ?
Seller and buyer meet, buyer inspects the goods, both negotiate a price and conclude the transaction.
This is the most basic and common idea of how a transaction happens and this whole mechanism is broadly termed as market mechanism.
How does an Indian Agricultural Mandi work?
Seller and buyer meet, buyer inspects the goods, buyer decides the price and buyer concludes the transaction.
Unfair, right ?
But then, one might argue, that why does the seller sell? Why does he not go to some other buyer?
Well, it’s simple. All the buyers decide the rate before-hand and the seller is forced to choose one among the identicals. Law doesn’t permit him to sell elsewhere. Until now. (Okay, until three months ago, when the ordinances were issued).
Yesterday, two landmark bills were passed by the Rajya Sabha, namely – The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill and the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill (the Lok Sabha had already passed them earlier in the week) and now these bills are all set to become a law.
Yes, the bills were passed amid chaos and pandemonium.
Yes, proper procedures were not followed.
Yes, the bills could have been debated upon a fair bit more.
Yes, the nuances of the bills could have been a little bit more extensively researched.
But, overall, I still maintain that the bills were the need of the hour. Infact, these are the bills which should have been promulgated a lot earlier.
Now, you might ask, if the bills are all hunky dory and wonderful, then why are the farmers protesting?
Fair question, isn’t it ?
Again, the answer is simple but three fold.
Firstly, the farmers who are protesting are the big farmers from the northern States of Punjab and Haryana, where the Government Markets are very well organized and these bills aims to curb the unchecked power of these markets, which are wreaking havoc on farmers in the poorer states. (Remember when onions were sold at Rs. 2 per kg by the farmer but consumers paid Rs. 80).
Secondly, the farmers are generally unaware about the bills and since it is a matter of their livelihood, they can easily get influenced based on the facts being fed to them.
Thirdly, and majorly, it’s all about Politics. The government mandis are usually managed by ministers, MLAs, MPs. A check on these mandis means a check on these public servants.
And we all know, that it’s essentially the public, which is the servant in India – enough said.
What are the real benefits of these bills ?
Quite a lot, I must say.
The most important one being – Farmers have been freed from the mandis. This means that now, they can sell their crops to whomsoever they so desire. They won’t have to choose one among identicals, but rather, they will have the option to sell to the one who bids the highest. Also, they can sell their produce wherever they want to – intra-district, inter-district, intra-state, inter-state. All the boundaries have been erased. Government has also coined a slogan – One Nation, One Market.
Next, a concept of contract farming has been introduced. This is a total game changer. Farmers can get into contracts with the private players well before they’ve sown their seeds and lock a price. There is also a clause whereby, farmer will enjoy enhanced prices at the time of reaping, if the market prices are significantly higher at that point of time. Though, it should also be noted that benefit of this system will accrue to large farmers and co-operatives. Small farmers won’t be benefitted much and majority of Indian farmers are small farmers.
The role of middlemen will greatly reduce. These bills will surely dent their earnings but on the contrary, farmer’s incomes will increase and for an agrarian country like ours, that should be the primary aim and that is, in fact, the primary aim of these bills. Though, government should definitely think about alternatives for the middlemen as well, since they are also Indian citizens and have the equal right to life.
Lastly, consumers stand to benefit too. If the number of middlemen reduce, the prices also drop. So it’s a win-win situation for all, except the middlemen.
Most certainly, expect a lot of fireworks in the days to come.
The middlemen which I have been referring to in this entire write-up includes not just the traders but also, and not exclusively, big farmers, local politicians, ministers, state governments, etc.
These people, who have deep pockets and wield a lot of influence won’t sit idle as their clout fades. They will revolt. Not by themselves, but by stirring farmer agitations, bandhs and strikes, protest marches and so on.
What should the government do?
Majority of the farmers are being swayed by a few, who are peddling half truths like rollback of Minimum Support Price (MSP). It is interesting to note that MSP benefit is utilized by just 6% of farmers basis the volume produced, but nevertheless, it is a guarantee which a farmer holds very dearly. It is an assurance that if no one buys his crops, the government will procure it.
It may seem weird, but the government has already said that it won’t be rolling back the MSP. In fact, it has recently come out with the MSP for a variety of commodities. However, for some unknown reasons, it has been unable to write its own stance of not rolling it back in the new bills. This will certainly raise brows and it even should.
Next, the government should ensure that formation of buyer cartels doesn’t happen. If that happens, then all of this would be an exercise in futility.
Lastly, in my opinion, equal redressal opportunities should be given to both the parties. Currently, the benefits are well skewed towards the private players. For a bill (and soon to be law), such prejudices do more harm than good.
P.S. more research is required at my end as well. But here my intention was only to give a brief overview of what has happened, what is happening and what we can expect to happen.
More on it in the days to come. Cheers!