Neeraj Jain
The 3 agricultural ordinances will destroy our small farmers and arhtiyas!
They will lead to speculation in foodgrain prices, and endanger the country’s food security!!
On 5 June 2020 the Modi Government passed three ordinances that will have drastic consequences for Indian agriculture. Not only will they ruin small farmers and the small traders known as arhtiyas who buy the produce from the farmers at the mandis, these ordinances will enable big agribusiness corporations, including foreign agribusinesses, to acquire control over Indian agriculture, thereby threatening India’s food security. It is also a step towards dismantling of the public distribution system in the country.
The three ordinances to which the President gave his approval on 5 June are:
i) Changes in Essential Commodities Act (ECA):
This law, passed in 1955, empowered the government to lay limits to the amount of foodgrain stocks traders or companies could keep, as also cap the prices that could be asked for.
The ordinance makes this law toothless. It has modified this law to say that only in extraordinary circumstances like war, famine, natural calamity etc. can the government “regulate the supply of such foodstuffs, including cereals, pulses, potato, onions, edible oilseeds and oil”, and price caps will be triggered only when prices rise by 100% (for horticultural produce) and 50% for other non-perishable items.
This removal of stock and price restrictions will mean that big traders (or their cartels) can hoard a lot of stock and thus create scarcity, driving up prices and resulting in a windfall for monopoly traders and companies who speculate on prices. This is not a far-fetched scenario – it has happened repeatedly with onions even when the ECA was in force.
ii) Scrapping APMC Laws
The second ordinance issued on Friday night scraps the whole existing system of selling and buying agri-produce in India. The Agricultural Produce Market Committees (APMCs) are designated areas created by state governments where various agri-produce can be sold by farmers to licensed persons or commission agents. There were 2,477 principal markets and 4,843 sub-market yards throughout the country.
The purpose of this system was to ensure that greedy and powerful traders do not fleece farmers by paying them lower prices. These markets also became nodes for government procurement of foodgrains. It is true that over the years, traders and agents have formed cartels to drive down buying prices from farmers. But in the name of curbing this – the government has now allowed giant agribusiness corporations to directly buy from farmers.
iii) Contract Farming
The third ordinance allows any company, which may be a food processor a trading or agricultural corporations, to enter into contract farming arrangement with farmers.
Consequence of these ordinances
The three ordinances need to be seen as a package. The permission of contract farming and scrapping of APMC laws needs to be seen together with the modification of the ECA, that removes cap on stocks. This will enable big traders and corporations to monopolise agricultural trade.
Supporters of this reform will argue that since there are many corporations, competition amongst them will enable farmers to get better prices! That is the whole point – giant corporations do not compete with each other; since they are so big, and have enormous amount of funds, engaging with each other in price competition will be self-destructive for all of them. Therefore, they collaborate in the matter of prices; they actually form cartels and divide up the market among themselves.
To understand the impact of this on Indian agriculture, it needs to be kept in mind that agribusiness corporations, especially foreign corporations, are huge – bigger than we can imagine. Thus, for example, the total value of arrivals of agricultural products in all marketing committees of Maharashtra in 2017-18 was Rs 51,093 crore, while the total sales of just a single giant agricultural corporation, the Bayer-Monsanto group (now known as Bayer group) was 36,742 million Euros in 2018, which works out to Rs 2.97 lakh crore rupees. In other words, Bayer is so big that it can buy up all the agricultural produce in Maharashtra!
Therefore, these giant corporations will enter into contract with small farmers over entire regions, and initially offer better prices to farmers, as they have enormous funds at their disposal. Since stock limits have been removed, and the APMC Act has been dismantled, they will be able to buy and store huge quantites of crops from farmers. Therefore, in just a few years, the MNCs will gradually acquire monopoly over the buying of agricultural produce from farmers. Once they monopolise purchases from farmers, driving out all the small traders, they will then start lowering procurement prices from farmers. And the farmers will have no option but to sell to them.
This has been happening all across the developing countries. To give a few examples: a decade ago, third world coffee producers earned $10 billion from a global market of over $30 billion. Now they receive less than $6 billion out of a global market of $60 billion. African producers as a whole get only 9 percent of the retail price of an exported apple. Such examples can be multiplied.
In the long run, this will mean that small farmers will be squeezed and forced to abandon agriculture, and the agribusiness corporations will acquire control over their lands and set up huge farms, like has happened in the developed countries.
Secondly, this will also mean that lakhs of our small traders who presently buy produce from farmers in the mandis, called arhtiyas, will be driven out of business. Many would argue that the arhtiyas also form cartels, and thus cheat farmers; so there is no harm in this. But replacing arhtiyas with big corporations is a far more worse solution; shutting down APMCs to end corruption in the mandis is like throwing out the baby with the bathwater. Instead, steps need to be taken to democratise mandis, which can be taken in consultation with farmer organisations.
Thirdly, this is going to result in a huge increase in the country’s alarming ‘hunger and malnutrition crisis’. The mandis are the place where most government procurement takes place. So, by dismantling the mandis and allowing private traders to procure directly from farmers, the Modi government has taken another step towards implementing another of its pet schemes that it announced during its first term itself – ending governmeng procurement of foodgrains, gradually eliminating the Public Distribution System and replacing it by cash transfer to farmers. This will not only put an end to all hopes of farmers getting a fair price for their crops through government intervention, the destruction of the PDS will enable traders to indulge in speculation in foodgrain prices – this was one of the important reasons why the PDS had been introduced in the country. That would then require the government to increase its cash transfers to the poor, which it is obviously not going to do as its main aim of eliminating the PDS is to reduce its food subsidy. This is therefore going to spell absolute disaster for the crores of impoverished people in the country.
Finally and most importantly, this is also going to affect our food security and therefore our sovereignty.
Ever since India started opening up its market to foreign corporations with the beginning of globalisation in 1991, the giant agribusiness corporations have been scheming to take control over Indian agriculture. While allowing foreign corporations to enter into the rest of the economy, successive governments have resisted their entry into Indian agriculture. Now, taking advantage of the lockdown, the anti-national BJP government is allowing them to seize control of Indian agriculture.
Foreign agribusiness corporations want to seize control of India’s agriculture as India has some of the best agricultural lands in the world. Being a tropical country, a wide variety of crops are grown in India, including so many types of vegetables and fruits, as well as a huge variety of cereals, pulses and oil-crops. On the other hand, the cold temperate regions of the world, where most of the developed countries are located, can neither cannot grow such a range of crops, and nor can they grow them throughout the year. So, the agribusiness corporations of the USA and the European Union have been seeking to seize control of Indian agriculture, so that they can use our lands to produce the crops needed by the developed countries, and at the same time they have been pressing upon India to import foodgrains. On the face of it, this model appears to be beneficial for India, as we will be exporting high value crops like flowers and vegetables, and importing low value crops like foodgrains. But in reality, this is a myth, another of the neoliberal myths promoted by international capital. That is because the agribusiness corporations will be in control of this entire agricultural trade. When we export flowers, fruits and vegetables to Europe and America, since they will be controlling the exports and prices, we will get low prices for our exports. And when we import foodgrains from them, since again this trade will be controlled by them, we will have to pay through our nose for foodgrain imports. But that is not all. The most important problem with this deal is: since foodgrains are among the most fundamental of all necessities, while flowers and fruits are not, once we become dependent on the developed countries for our food supply, our very sovereignty will be at stake, they can impose any conditions that they desire on us.
We are not at all exaggerating. This has already happened in Africa – the reason for the periodic famines in sub-Saharan Africa is that these countries allowed Western corporations to reorient their agriculture towards growing non-food export crops instead of food grains.
Thus, by the passage of these three ordinances, the ‘nationalistic BJP government’ is not only creating conditions for foreign agribusiness corporations to seize control of Indian agriculture, it has also put the country on the path to increased hunger and even famines. And it has surreptitiously done this taking advantage of the pandemic lockdown.
It is very important for farmers’ organisations, together with the common people of the country, to oppose these three agriculture-related ordinances and demand that the government withdraw them forthwith. Instead, we need to mount pressure on the government to change its orientation from favouring entry of agribusiness corporations in agriculture towards supporting India’s small farming community. For this, it needs to: increase its investment in the agricultural sector; implement the Swaminathan Commission’s recommendations for agriculture; increase government investment in agricultural research and improve extension services to end the increasing control of agribusiness corporations over areas such as seeds, fertilisers and insecticides and pesticides; and strengthen the public distribution system and universalise it.
