Agriculture Reform Bill - Decluttering the noise

This Sunday, the Rajya Sabha passed two agriculture sector reform bills which were previously passed in the Lok Sabha on Friday amidst a lot of noise. The two bills, namely the Farmers and Produce Trade and Commerce (Promotion and Facilitation) Bill 2020 and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Family services bill, 2020 were passed by a voice vote. While members for the bill touted this as a significant reform towards liberalization, opposition leaders protested that these bills undermine the 3 pillars of the food security system namely, Minimum Support Price, Public procurement and Public Distribution system.

Let’s look at broadly what the bills propose:

1.     The first bill attempts to allow farmers to sell their produce at places outside APMC regulated mandis as well.

2.     The second bill allows the farmers to enter into contract farming arrangement

At a first glance, there seems to be a number of benefits in the first bill:

1.     The bill opens up farmers to newer markets in case they get a better deal than APMC regulated mandis.

2.     Nowhere in the bill does it talk about shutting down the mandis. It simply provides more choice to the farmers

3.     It attempts to curb the network of middle-man and clutches of monopoly that is frequently encountered in these mandis

4.     Since the farmers can still sell in Mandis, they are still guaranteed MSP for their produce

However, the potential demerits that could result from this bill as follows:

1.     In case APMC regulated mandis are weakened in case farmers increasingly choose private contract with corporate players, price competitiveness may force the mandis to lose sizable share thereby reducing their overall bargaining power

2.     The bill does not mention that the price in the private deal should be greater or equal to the MSP

3.     In some cases, private players may have significantly higher bargaining power. Without the need to sell in mandis, the private players may end up buying produce much lower than MSP

As for any reform, there are merits on both side of the argument. Whether the merits outweigh the de-merits is left to be seen as it would depend upon successful implementation of the same.