Amid an unprecedented agitation against the Centre’s farm laws by farmers across the country and particularly around the nation’s capital, 10 economists of various universities have written to Union Minister for Agriculture Narendra Singh Tomar, demanding that the laws be repealed.

“We do believe that improvements and changes are required in the agricultural marketing system for the benefit of millions of small farmers, but the reforms brought by these Acts do not serve that purpose. They are based on wrong assumptions and claims about why farmers are unable to get remunerative prices, about farmers not having freedom to sell wherever they like under the previously existing laws, and about regulated markets not being in the farmers’ interests. We are putting forward five crucial reasons as to why these three Acts, brought in as a package by the government, are fundamentally harmful in their implications for the small farmers of India,” said the letter (a copy available with The Indian Express).

They pointed out several reasons to repeal the laws. First, they said that making a central Act that overrides and undermines the role of state government in regulating agricultural markets is a flawed approach, both from the point of view of the Centre-State power balance and also from that of the farmers’ interests. State government machinery is much more accessible and accountable to farmers, right down to the village level, and hence state regulation of markets is more appropriate than bringing a large part of commodity sales and trade under the ambit of the central government Act, by establishing “trade areas”.

As per the Ministry of Agriculture in July 2019, more than 20 states had already amended their APMC Acts to allow for private mandis, e-trading, electronic payments, e-NAM, etc., with all of them functioning under regulation of the state government. For any such reforms or new mechanisms to succeed, there has to be a buy-in from all the stakeholders in the market including farmers, traders, commission agents, etc., and this process can be handled with more sensitivity and responsiveness to local realities by the state government, rather than through a drastic and blanket legislative change at the central level.

The second reason is that it will lead to two markets, two different sets of rules. A key problem with the Acts is the creation of a practically unregulated market in the “trade area” side by side with a regulated market in APMC market yards, subject to two different Acts, different regimes of market fees, and different sets of rules. This is already causing the traders to move out of regulated markets into unregulated space. If collusion and market manipulation are concerns inside the APMC markets, the same collusion and market manipulation are likely to continue in the unregulated market space. Within the regulated APMC markets, there exist mechanisms to address and prevent such market manipulation, whereas in the unregulated ‘trade areas’, the central Act contemplates no such mechanisms. Means of exploitation of farmers include price and non-price issues such as weighing, grading, moisture measurement, etc. mainly in remote areas which do not have access to structured markets, including tribal areas.

Thirdly, fragmented markets, monopolies and problems with price discovery take place. Even before these Acts came, a large percentage of the sale of agricultural commodities happened outside the APMC regulated market yards. However, the APMC market yards still set the benchmark prices through daily auctions and offered some reliable price signals to the farmers. Without these price signals, the fragmented markets could pave the way for local monopsonies. The experience in Bihar since the removal of its APMC Act in 2006 shows that farmers have less choice of buyers and less bargaining power, resulting in significantly lower prices compared to other states.

Fourthly, there will be unequal players in contract farming-small farmers and companies, which does not provide adequate protection to the interests of the farmers. The current scenario is likely to continue, where most of the contract farming happens through unwritten arrangements with no recourse for farmers, and most arrangements are made through aggregators or organizers to protect companies from any liability. The Act doesn’t have any provision to address this.

Finally, concern about domination by big agri-business: It is legitimate to understand that the three Acts together represent unshackling of agri-business companies from state-level regulation and licensing, constraints such as existing relationships between farmers, traders and market agents, and from limits on stocking, processing and marketing. This rightly raises concerns about consolidation of the market and the value chains in agricultural commodities in the hands of a few big players, as has happened in other countries such as the USA and Europe. It inevitably led to the “Get-Big-or-Get-Out” dynamic in those countries, pushing out the small farmers, small traders and local agri businesses.

Instead, what Indian farmers require is a system that enables better bargaining power and their expanded involvement in the value chain through storage, processing and marketing infrastructure in the hands of farmers and FPOs. That would be a path for enhancing farmer incomes, and some of the earlier policy initiatives of the government were expected to help in that direction.