Farm Bill

The Formulation of Farm Bills

The rationale behind formulation of the recent Farm Bills is the need of the time outgrowing the APMC system of sale of agricultural produce. APMC, the Agricultural Produce Market Committee, is a system under the State Government. The mandatory system of APMC currently used in the distribution and sale of agricultural produce sets a chain of middlemen for transfer of the produce from farmers to the consumers in the market. Every State has their separate APMC and the State only divides the ‘mandis’ according to the area and each area has a specific ‘mandi’. Only those traders who have license for a particular ‘mandi’ can buy from them, who later supply them to the consumers. Even the farmer of a particular area can only sell their produce in the ‘mandi’ of their area. Auction is done by government to set prices for the produce in the market. Minimum Support Price (MSP) at which government buys agricultural produce are set for only 22 crops, the value for rest of the crop are decided throu price discovery (market demand and supply.  This model was prepared by Government of India back in 1938 and applied by the States during 1960s. The rationale behind introducing APMC ( and MSP was to safeguard the interest of the farmers against the exploitation by money lenders and zamindars. Also, since it was before the Green Revolution, it gave a great motivation to farmers to remain engaged in agriculture which was important at the time because self-sufficiency in food supply was yet to be achieved.

But in all these years, the current situation has outgrown this system and it is doing more harm than protection. It has monopolized the sale of agricultural produce and is resulting in explotation. During these stages, commission is charged at every stage, thereby increasing the price of the produce. So, the produce sold at Rs. 5-7 is sold to consumers at Rs.50-70 but the benefit does not reach the producers but rather the State in name of commission and taxes, given that we assume that there is no corruption at the bureaucratic level. Also, in cases, the traders form a cartel and decide to not buy produce at price more than MSP. Since MSP is set low so as to inculcate all taxes and keep the final price from inflating too much, this coerce the farmers to sell their produce of perishable nature at price far lower than they can get if they directly sell in the consumer market. Also, MSP is decided at country level inspite of the cost of produce being different at regional level. This leads to unequal profit for the same produce, which further leads to disparities between States.

During the 1991 reform, one of the critics has been that no heed was paid to the agricultural sector and the policies focused on secondary and tertiary sector. Through the recent farm bills, government is trying to reduce its control over farming and agricultural industry and allowing to access to free market so that farmers can take direct benefit from it.

One of the major causes of protest against farm bills by State governments has been the reduction in State revenues as the taxes and commission will be removed. The distress among farmers, particularly from areas like Punjab and Haryana, is because the farmers here produce mostly wheat and paddy, in huge surplus They expect the price to fall if MSP is removed. Also, only 6% of farmers actually sell their crops at MSP. If trade is allowed tax free outside ‘mandis’ the government support might be retracted and that will take away the stability from the few farmers actually using MSP.

The farm bills has surely cased a stretched unrest, has been one of the reasons of during the monsoon session of parliament. But it is not a rash decision neither is it first time implementation. Agriculture is a State List agenda and several States allow trade outside of APMC. These bills have the potential to help more percentage of the price paid by the final consumer to reach the farmers and financially and economically stabalise more farmers.

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