Parth M.N. interviews Professor R. Ramakumar

Over the past two weeks, the National Capital of India has been raging with farmers’ protests against the three farm bills the Union government pushed through in September 2020. Farmers, mainly from Haryana and Punjab, have been sitting in Delhi, demanding that the Narendra Modi government withdraw the bills.

The most controversial of those bills is the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, which seeks to provide farmers with the trading areas outside of the Agriculture Produce Market Committees (APMC) that come under the regulation of the state government.

It is touted as a move that will liberalise farmers. The government and the supporters of the bill also claim that private investment will flow in once the APMCs are out of the way.

However, Kerala never had an APMC Act. In an interview, Professor R. Ramakumar, economist at the school of development studies at Tata Institute of Social Sciences, Mumbai, explains the lessons India could learn from Kerala.

The second bill, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, is also contentious, for critics say it would make it easy for big corporations to exploit small farmers. Kerala already has a significant amount of contract farming. Ramakumar, who serves as a non-ministerial member on the Kerala State Planning Board, spoke to Parth MN.

Edited excerpts follow:

Parth M.N.: Since Kerala never had an APMC Act, would the bill directly affect farmers in the state?

R. Ramakumar: Kerala never had an APMC Act primarily because for all the commodities it had a surplus in, there were markets run by the concerned commodity boards of the Central government. There is a tea board, coffee board, rubber board and so on. So when every other state passed the APMC Act, Kerala already had a regulated market for all of these commodities. That is why it never passed the APMC Act. It never felt the need for an APMC mandi. Therefore, it is already technically a free market. In that sense, the farmers trade and produce bill does not have a direct impact on Kerala.

PMN: So how has the free market turned out for the farmers in Kerala?

RR: Tea is largely bought by big companies so there is no small farmer cultivating tea in Kerala. Coffee, on the other hand, is a different scenario. The coffee board was procuring all the coffee from farmers until liberalisation. By the late 1990s, the coffee board withdrew from procurement. After 1998 or so, the market for coffee became fragmented, and unregulated traders came in. The farmers lost access to a stable market. Price fluctuations have risen. And farmers have no protections from global market volatility. In coffee, you used to have a good market earlier with the coffee board. But it doesn’t exist now.

PMN: After the coffee board withdrew from procurement, did private investment come in? Or for that matter, in the absence of an APMC act, have we seen an emergence of private markets in Kerala like some people are predicting would happen in India after this bill?

RR: What we saw with coffee in Kerala is the entry of many unregulated small traders in the form of private investment. Not big corporates.

In India, you are unlikely to see any significant private investment coming. I don’t think private players see this as a viable proposition. For private players, the transaction costs that are involved in procuring from thousands of small and marginal farmers is not a viable proposition.

Kerala’s cropping pattern is export-oriented with tea, coffee, rubber, spices etc. Their markets are outside Kerala and even India. Kerala’s agriculture exports on a monthly basis is about a thousand crore. Still the private markets have not come in. The state is setting up mandis to help its farmers, which means it has come down to the government to ensure assured markets for farmers.

Private markets will come up here and there for some crops in some regions. But I don’t think you will see the emergence of huge private investments to replace APMC. The point is if APMCs are weakened and private markets come in, then farmers will be denied a remunerative price. If APMCs are weakened and private markets don’t come in, there will be a Bihar-like situation with unscrupulous and unregulated traders ruling the market. This is exactly what happened in Kerala with coffee. And the farmers are suffering.

With rubber too, there is no market. Rubber is produced by small farmers, and sold to small-time traders in the villages. Somebody aggregates it and it goes to your rubber companies. There again no market has emerged. The state wasn’t involved with rubber the way it was with coffee. But in both cases, you don’t see private markets coming in. They will come if somebody does the dirty job of aggregating the produce.

PMN: Then where does this certitude come from? Why do you see certain people propagating that the private investment will automatically flow in?

RR: I don’t know. It is some abstract belief that they have. I don’t know where it comes from. It does not come from real life experiences. The whole idea that the market will automatically emerge is something like a sacred rule for them. But if you just walk through an APMC market for an hour, you will realise what kind of enormity it is. And to reproduce that kind of a market is simply impossible for a private firm wanting to make profits all the time. It will take an enormous amount of investment and effort. No wonder they don’t get into this business.

PMN: Let’s move on to the bill that talks about contract farming. What is the experience of farmers in Kerala that engage in it?

RR: Kerala already has some amount of contract farming. It is not well-known, but there is a substantial amount of contract farming, particularly in spices and so on. A lot of companies from Europe and the United States strike deals with Kerala farmers. They buy things like vanilla, spice extract, organic pepper, safed musli etc. But it needs regulation. The view has been that Kerala should basically pass the law of its own to regulate its own contract farming arrangements, given its specificities and so on. The bill is passed at an all India level when we need customised solutions for states.

PMN: How are disputes resolved in Kerala if farmers and corporations end up in an argument?

RR: There is no redressal mechanism for farmers in Kerala. The state government should have done it way before this bill came up. Kerala sometimes lives in denial.

But in March 2020, The Supreme Court of India passed an important judgement. It was a case from 2008. A one-acre farmer from Calicut in Kerala, Ambika Devi, entered into a contract with a Hyderabad based company Nandan Biomatrix. The company decided to procure safed musli from her at a predetermined price. But the company went back on its word and Ambika Devi approached the Kerala State Consumer Disputes Redressal Commission. The company went to court saying it is a commercial contract between two people and the consumer protection act, 1986 would not apply here. The Supreme Courtruled that Ambika Devi is a consumer and upheld her complaint. It was a significant judgement. But the farm bill passed by the centre has not included such stuff at all.

For people like Ambika Devi in Kerala, there was no regulation before the act came, either at centre or at state level.

Now this farm bill applies across India. It applies to Kerala too. And hence, from now on, the disputes would be settled on the basis of this act. And this act makes it almost impossible for farmers to have a redressal mechanism. You need regulation, and it has to come from the state.

PMN: With contract farming, farmers get an assured market. But at the same time, there is a risk that the companies can violate the terms. A lot of times, the finer print is in English. It isn’t difficult for big corporations to mislead farmers, right?

RR: Yes. The small and marginal farmers don’t have the bandwidth and resources to take on big corporates. Whenever corporate presence rises in agriculture, small and marginal farmers have a difficult time coping with that onslaught. That is precisely why we need good regulation. And that is why this Act is bad.

(Courtesy: Firstpost.)

❈ ❈ ❈

In another interview with Prof R. Ramkumar published by the CPI(M), he makes the following additional points (extract):

1) Could you give us an idea about how procurement of paddy is generally done in Kerala? Is it through private traders or are other systems in place?

Dr. R. Ramakumar: In the case of crops like paddy and vegetables which are outside the commodity board framework, Kerala never had a surplus at any point of time in history. Even today, Kerala produces only about 20-30% of its paddy and vegetable requirement. So the need for a wholesale market for these crops does not rise as there is no surplus.

One can confidently say that about 80-90% of the total paddy that is produced in Kerala is procured by the State government directly. The role of private trade is considerably limited. It may exist here and there but largely, it is the State government that is purchasing it at Rs. 2700 per quintal. One reason for this is because farmers would like to sell to the government because it is giving them a very good price. It is the highest MSP in the country.

So the state government, through its procurement department, has set up a very solid institutionalized procurement mechanism through, for instance, cooperative societies, which are very widespread in Kerala or through different rice mills. Such procurement reaches every remote village in Kerala. This makes it possible for the State government to procure 80-90% of the production, that too at the highest MSP in the country.

2) Let’s come to the question of cash crops. Could you take us through what are the key cash crops and whether farmers receive any protection or benefits on the lines of what paddy farmers receive?

Dr. R. Ramakumar: Historically, the cultivation and marketing of cash crops like tea, coffee rubber and cardamom were the prerogative of the Commodity Boards of the Central government. What has happened over the years due to neoliberal policies and defunding is that there has been a considerable withdrawal of these boards from marketing. Let us take the case of coffee. Over the years, policy changes have led to many changes to the modes of marketing. Before 1996, the Coffee Board was in charge of what is called pooled marketing of all the coffee produced in India. All the coffee produced was procured through the Coffee Board’s Pool Depots which was then processed and stored in licensed curing factories. But after 1996, complete de-pooling became the norm in the coffee sector. The coffee trade was opened up and the Coffee Board withdrew completely from marketing.

This has meant considerable distress to coffee farmers. In fact, if you see the most important coffee-producing district of Kerala – Wayanad – where it is largely produced by small growers, there were many farmer suicides after 1997. This is the year after the Coffee Board withdrew from marketing. These suicides continued till about 2006 when the LDF government, which came to power that year, took decisive steps to put an end to farmer suicides. It constituted the Farmers Debt Relief Commission which considered farmers’ applications for debt relief and took decisions to waive outstanding loans. This was for farmers in general but particularly coffee farmers. This ensured that by 2007- 2008, farmers’ suicides could be put an end to. This was an extraordinary achievement of the LDF government.

The withdrawal of the Coffee Board, Tea Board etc from management has also put considerable stress on State governments and their finances. There has to be some amount of compensatory activities which would fill the gap that is vacated by the Central government and its Ministry of Commerce, but the state governments are short of funds. They cannot push in enormous amounts of money into promotion and marketing of these crops. So there is considerable distress even now. The State government is trying to help farmers as much as possible but the Boards have to be funded as they used to be in the past. These boards have to intervene in the marketing of these crops to stabilize prices for farmers. That is the only way to rescue this sector from the current level of distress.

3) Coming back to the question of paddy, what price do farmers generally receive for their produce? Is there any kind of guaranteed price or an MSP?

Dr. R. Ramakumar: Kerala assists farmers using a cash transfer program during production, as well as during marketing. For paddy production in Kerala, the State government provides a direct cash assistance of Rs. 5,000 per hectare to every paddy farmer. In addition to that, the panchayats of Kerala, using their own funds, give another Rs. 15,000-17,000 per hectare as additional assistance to paddy farmers (25% of the plan funds in Kerala are given in an untied format to panchayats and they can spend it as they like.).

So if you add these two, you will see that Rs. 22,000 per hectare is given as cash to the farmers during the cultivation period itself.

From this year onwards, the Kerala government, as part of a programme to ensure that there is no fallow paddy land, will institute an additional payment of Rs. 2,000 per hectare. This is on the condition that the paddy land never be left fallow. Thus, Rs. 23,000-24,000 is received by a paddy farmer during the period of cultivation.

Secondly, after harvesting, when the farmer is ready to sell the crop, the State government provides one of the highest MSPs in India. The Central government’s MSP for paddy is about Rs. 1,900 per quintal. The State government tops it up with an additional bonus of Rs. 800 per quintal and purchases paddy from farmers at Rs. 2,700 per quintal or Rs. 27 per kilogram. So there is substantial cash assistance given to the farmers during the production process and there is a substantial MSP given to the farmers while procuring it from them.

Another important point is that the Commission for Agricultural Costs and Prices (CACP) of the Government of India has been consistently recommending that those States which pay a bonus on top of the MSP declared by the Central government should be penalized and procurement from these States should be stopped. If the government accepts the CACP’s recommendation, it will be a huge blow to the farmers of Kerala. The State government. will have to stop providing the Rs. 800 per quintal bonus to paddy farmers and it will have to procure at Rs. 1,900. This would be a huge loss of Rs. 800 for quintal for the farmers of Kerala. I hope the Central government does not accept this proposal. It has been on the table for many years now, along with the proposal to stop open-ended procurement of paddy and wheat in Punjab and Haryana. Otherwise, the farmers of Kerala will take a huge hit.

4) Moving on to vegetables, is there any MSP or a similar system that is in place for those who are cultivating vegetables?

Dr. R. Ramakumar: As vegetables are perishable, no other State had even sort of announced an MSP for vegetable cultivators. But Kerala’s State government has a major scheme to promote vegetable cultivation and become self-sufficient in vegetable production over the next five to eight years. That is the long-term objective of the LDF government. Already, between 2016 and 2019 and 2020, there has almost been a doubling of vegetable production in the State, according to data that is available from the Department of Agriculture. But this is not adequate. We still need to double once or even twice to ensure that Kerala is self-sufficient in vegetable production.

Towards this purpose, the State government has started two initiatives. One is Fallow-Free Villages. The aim is to ensure that there is no fallow land in any village in Kerala in the next three years or so. This means every inch of land that is cultivable should be brought into cultivation of paddy if it is a wetland, or crops like vegetables or even fruits if it is garden land or a homestead. Considerable assistance in the form of subsidies is also provided to farmers when they enter into vegetable cultivation.

Secondly, in a historic step, the Kerala government has announced base prices for about 15 vegetables. The State government is promising that if the price falls below this base amount, it will buy the produce through government outlets. The first harvest has not come yet and so it has not come into practice yet. But the announcement has been made by the Chief Minister and support prices have been announced.

5) And finally, are there any aspects you would like to mention in terms of the larger policy framework or other subsidies that the state government is offering to farmers?

Dr. R. Ramakumar: The Kerala government has given considerable fillip to agriculture production as a whole in the State through a program called Subhiksha Keralam. Historically, Kerala’s cropping pattern was dominated by cash crops and so the production of paddy or vegetables did not receive the kind of support that it should have. There have been some experiments, some of which were successful too, but they were never upscaled to a State level or even a district level. So the plan of the government now is to ensure that Subhiksha Keralam is instituted across the State and not just for one or two crops, but over a range of crops. In addition to initiatives for paddy and vegetables, there is also a fruit tree planting programme. In every village where there is fallow land, fruit trees will be planted. Seedlings have been supplied by the agriculture department for this purpose.

The government also launched the Coconut Mission. One of the major constraints to increasing coconut productivity in Kerala is that most palms in Kerala are more than 50-60 years old. There is a need for replanting. What the government has done is that in one year, in every panchayat ward in the State, 25-30 new palms will be planted. The old palms will be cut and new palms will be planted. Thus, over a period of 5-8 years, this will cover a considerable part of the State’s coconut cultivation area and this will lead to an increase in productivity.

There are also other schemes to ensure scientific cultivation practices. We are now thinking about schemes related to Precision Farming where you can use advanced methods like Drip Irrigation for coconuts which will reduce the use of water while at the same time maximizing the efficiency of its use. Subsidy schemes for drip irrigation are available for coconut farmers. One particular scheme aims at creating Model Demonstration Precision Farming plots of 50 acres in every district which will have these advanced cultivation practices, including water management practices. Farmers can learn from these models and adopt these practices.

Also, the overall budgetary funding for agriculture and also animal husbandry has increased tremendously over the past four years of the LDF government and the results are showing. However, unfortunately for Kerala, this period saw some terrible natural calamities. In 2018, Kerala experienced massive flooding, and there was flooding in 2019 as well. In both these years, the monsoon or kharif crop over large areas was destroyed. The activities of the Agriculture Department to revive the sector took a hit because of the floods which basically destroyed crops in whole whole districts. This was a major setback although it was not policy-induced. It was a stroke of bad luck.