MSP security shield will be weakened, how is P. Chidambaram telling this


Crop * Local Private Shopper Mandis Processing Government Agency

Paddy 65.94 19.46 9.49 1.70

Wheat 58.42 34.78 6.79 0.27

Maize 69.21 29.66 0.56 0.28

Mustard 54.61 45.83 0.44 0.22

Gram 52.82 46.80 0.38 0.00

Soybean 52.15 46.72 1.36 0.11

Urad 73.96 25.45 0.80 0.00

Pigeon 50.78 47.88 0.22 0.00

Peanut 65.75 27.83 3.82 0.00

(* July-December 2012 or January-June 2013)

Most farmers sold their produce to local shopkeepers despite agricultural produce marketing committee (APMC) laws operating in various states for decades. Sixty percent of the farmers fall in this category in terms of paddy and wheat. Official figures show that only 1.24 crore paddy farmers (in 2019–20) and 43.35 lakh wheat (in 2020–2021) sold the produce at MSP (minimum support price).

APMC: Pros and Cons

The reasons are obvious. 85 percent of farmers have small holdings — less than a hectare — and have little surplus to sell. Distant APMC mandis are not an economically sound option. The cost of loading and transporting some sacks of grain, waiting in the mandi, paying fees, and receiving payment two days later, is all beyond the limits of small farmers. The local businessman is a trusted partner to buy produce directly from the farm and pay it at one time, even if it costs less than the MSP.

However, APMC mandis are important players in states like Punjab and Haryana, where the surplus is in large quantities to sell. In both these states, government agencies procure 75 percent of the paddy and wheat yield. Some scholars argue that the mandis in other states are not sufficient and they are far beyond the reach of farmers. For example, Tamil Nadu has 283 mandis in 36 districts, that is, eight on average per district, and their total turnover in 2019-20 was just Rs 129.76 crores. Maharashtra has 326 mandis and farmers have to travel an average of 25 km.

There is no doubt that the APMC Acts prohibit free trade of agricultural produce, but mandis act as a protective shield for them. Mandi duty collection in Punjab and Haryana contributes significantly to the revenue of the state, which is used in the development of agriculture and rural infrastructure. Nevertheless, I believe that the APMC Acts should, over time, help develop diverse and easily accessible markets equipped with free trade.

Congress manifesto vs BJP Bill

Look at what the Congress' 2019 manifesto had promised. It promised that 'farmer producing companies/organizations will be encouraged to enable farmers to access inputs, technology and markets' and' farmers markets with adequate infrastructure in large villages and small towns. So that farmers can bring their produce to such markets with complete independence. ' The spirit of Congress's promise was that thousands of markets could be established across the country. Such markets can be set up by the state government, local panchayat, co-operative society, or licensed private entity. They will be lightly controlled and regularized that every transaction in the market will not pay less than the MSP. The proposal to repeal the APMC Acts would naturally be the sequel towards the establishment of easily accessible diversified markets.

In contrast, the Modi government has weakened the security shield of the MSP and reduced public procurement. Farmers are agitating on the streets, as they fear that the MSP may be abolished. State governments are worried that this will disrupt public procurement and public distribution systems. If the three pillars of food security are weakened, the food security system established under the National Food Security Act, 2013 will collapse.

The Modi government's laws will not create thousands of alternative markets. Instead, they will promote contract farming and open doors for corporate entry and eventually cartel (vested selfish alliances) will enter. Small and medium farmers will not have the same power to negotiate or contract against such powerful buyers and defective dispute resolution mechanisms under the new laws will ruin the farmer.