How the farm reforms will destroy India’s farmers and food security?

A massive wave of farmers’ protest movements against the anti-farmer agriculture bills and amendment to the Essential Commodities Act, 1955, has stunned Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP), as it couldn’t believe that a mass upheaval is possible against its economic policies in northern India where Hindutva fascist propaganda has polarised the majority Hindu community.

Modi’s insistence on passing the two contentious bills––The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020––in the Parliament using the BJP’s brute majority backfired at the grassroots in northern India. India observed a farmers’ strike supported by workers on September 25th. It caused political ignominy for the BJP as the farmers in states ruled by it, like Haryana, Karnataka and Uttar Pradesh vehemently opposed the bills and the amendments to the Essential Commodities Act, 1955.

The participation of farmers, including a large section of feudal landlords and rich farmers, who fear losing their privileged position in the Agricultural Produce Market Committees (APMC) and their monopoly over the government’s minimum support price (MSP), in the protests, also weaned away the BJP’s support base.

This agitation by one section of the feudal classes, along with broad masses of middle, small and marginal farmers, has such serious political implications that the Shiromani Akali Dal (SAD), one of the oldest allies of the BJP, had to oppose the bills and its lone minister, Harsimrat Kaur, had to resign from Modi’s cabinet.

Even such a vehement opposition from an old ally like SAD didn’t stop Modi’s BJP from pushing forward the agriculture reform measures, which started with the promulgation of three anti-farmer ordinances on June 5th 2020.

In the following sections, we have discussed about the concept of contract farming, its implication in the Indian context, the MSP issue and also how the big corporates eye profiteering due to a relaxed Essential Commodities Act, 1955.

The issue of contract farming and the attack on Indian farmers

Contract farming is agreement-based cultivation of pre-determined crops of a certain quantity, quality, grade and variety, by a farmer or a group of farmers on behalf of a sponsor, who can be a trader, a corporate entity or any other organisation, at a price that’s fixed before sowing the crop. The payment terms are determined by the sponsor, and it’s dependent entirely on the yield. The farmer is bound to fulfil the contract’s obligation, while the sponsor is only liable to pay when the pre-determined quality, quantity and other factors are met.

Though India has seen the backdoor entry of corporate-controlled contract farming for years, especially in potato farming, poultry, etc, it’s the first time that the state’s rights are overridden by the Central Government with the forceful implementation of the corporate farming system. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 opens the gateway to contract farming in India. The BJP is propagating that contract farming will provide the farmers with a better price and economic prosperity. But that’s not the case.

As per a World Bank report, it’s only the large supermarket chains and agro-product processors or exporters who enter into contract farming with farmers. This makes the Indian farmers, disorganised and divided along class and caste lines, vulnerable. These farmers, especially the middle, small and marginal farmers, don’t form a strong bargaining block to negotiate a fair deal with the much organised and powerful corporates, who will be the one drafting the contracts. With no idea of market forces and forecasting of crop pricing, the farmers will have to agree to any price the corporates offer them as fixed price, variable price and bonus.

While the corporates––using artificial intelligence, statistical models and forecasting tools––will be aware of the probability of price rise or will create an artificial shortage to shoot-up prices, the farmers can’t do so to increase their income. Rather, the feudal landlords and the corporates will ensure the lowest amount is paid to the farmers. Even in case the price of crops increases during cultivation or after harvesting, the farmers won’t have the freedom to sell the crops at the market price due to the prevalent contract and the upfront amount they have received during sowing.

The corporates called sponsors, and their agents, called aggregators or service providers in section 10 of The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020, aren’t liable for the losses of the farmers. They will only pay for the crops that were agreed upon and unless there is an evoking of the force majeure clause, the farmers are bound to pay the actual losses to the sponsors or the service providers. Though section 15 prevents the corporates from seizing a farmer’s land to recover losses, there is no clause that prevents them from pressurising the farmer to sell the land and repay the dues.

As the quantity, grade and quality will be pre-determined, the farmers can neither take any independent initiative in the same piece of land nor can the farmer stock any crop for the rainy days. This will make the farmers, especially the middle, small and marginal farmers, dependent on the market for their own food. Eventually, this will intensify rural poverty and will turn such farmers into paupers.

Moreover, there will be more concentration of land in the hands of a few big feudal landlords, usurers and rich farmers, as the middle, small and marginal farmers will eventually have to sell-off land to meet their expenses or repay dues. As the corporates do not favour small landholdings, or to deal with multiple stakeholders, which is prevalent in states like West Bengal, they will prefer large tract of land, owned by a few big feudal landlords and rich farmers to sign an agreement. Such new needs will push an undoing of land reforms if done by a state. This will turn more small and marginal farmers into farm labourers.

The experience of previous contract farming in different states, especially potato farming in West Bengal by PepsiCo, shows that the farmers have been turned into labourers and their lands and crops remain under the strict control of the corporates. This will eventually become the norm for the country and farmers will be at a bigger loss, especially the vulnerable middle, small and marginal farmers. With crisis engulfing them, the classes dependent on them or at the bottom of the pyramid-like sharecroppers, landless peasantry, etc, will also suffer a lot. As record unemployment is ravaging the cities, it’s unlikely that they will absorb any surplus labour created by the villages. This will lead to larger wealth gap in rural India.

The MSP issue

The farmers’ protest movements are demanding secure MSP for all crops. The MSP is determined by the Central Government during the cultivation season. The government procures crops from the farmers at the APMC yards through the Food Corporation of India (FCI) for the public distribution system (PDS).

Over the years, the FCI has reduced procurements as the PDS has been weakened and the number of beneficiaries reduced to ensure more profit to the private sector food grain traders. According to the FCI, 21,869 procurement centres for wheat in the Rabi crop season of 2020-21 and 64,515 procurement centres for rice in Kharif crop season of 2019-20, had operated all over India.

Earlier we have shown, how, rather than following the model proposed by Dr Swaminathan to pay MSP on the basis of C2, the Modi regime has always calculated MSP on the basis of A2+FL, which, according to 2017-18 estimates, was 53.73% less in the case of wheat and 57.52% less in the case of lentils. The Modi regime has always denied to increase real MSP on C2 for the farmers and ignored the requests from the States on this.

The procurement data for rice in the kharif season of 2019-20 shows that Punjab, where the farmers’ protest movements against the anti-farmer agriculture bills have gained strength, had the maximum procurement, 108.76 LMTs. The procurements in other states have been approximately 50% less than Punjab.

The reason behind this is the total cultivation of paddy and the dominance of the big feudal landlords and rich farmers in the APMCs, who have monopolised MSP on crops. But as the FCI is reducing purchase, even these feudal landlords and rich farmers are worried, despite Modi’s assurance on continuing the MSP and even after the government increased the MSP for six rabi crops.

According to the “Evaluation Study On Efficacy of Minimum Support Prices (MSP) on Farmers”, published by the NITI Aayog in January 2016, only 10% farmers in India had prior knowledge regarding MSP of a crop at the sowing stage. In states like West Bengal, none of the surveyed farmers even sold their crop at MSP! This makes these feudal landlords and rich farmers from northern India, the sole beneficiaries of the MSP scheme.

When Modi is promising that the MSP system will survive, he is speaking the truth, but only partially. The MSP will continue to stay in the APMC yards but only the feudal landlords and rich farmers, ie, the very 10% who know about the MSP at the sowing stage and benefit from the FCI’s purchases, will continue to enjoy the benefit. The rest, especially the small and marginal farmers, will continue to be deprived of the MSP or even any price remotely close to it.

The threat to India’s food security

The major bone of contention over the anti-farmer agriculture bills is the amendment to the Essential Commodities Act, 1955. This amendment provisions insertion of subsection (1A) to section 3 of the principal Act, which says:

“(1A) Notwithstanding anything contained in sub-section (1),—

(a) the supply of such foodstuffs, including cereals, pulses, potato, onions, edible oilseeds and oils, as the Central Government may, by notification in the Official Gazette, specify, may be regulated only under extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of grave nature;

(b) any action on imposing stock limit shall be based on price rise and an order for regulating stock limit of any agricultural produce may be issued under this Act only if there is—

• (i) hundred per cent. increase in the retail price of horticultural produce; or
• (ii) fifty per cent. increase in the retail price of non-perishable agricultural foodstuffs, over the price prevailing immediately preceding twelve months, or average retail price of last five years, whichever is lower:

Provided that such order for regulating stock limit shall not apply to a processor or value chain participant of any agricultural produce, if the stock limit of such person does not exceed the overall ceiling of installed capacity of processing, or the demand for export in case of an exporter: (sic)”

This amendment, as given above, provides leeway to big corporates, especially the food processor, retail marketing chain, etc, purchasing products from the farmers either through the “traders” or through the contract farming model. They can now easily increase the prices up to 49% for non-perishable agricultural foodstuffs or 99% of horticultural produce. As they will control the lion’s share of the non-PDS supply, on which the majority of the masses are dependent due to the complications of the PDS, they can easily squeeze out money from the people.

Rather than strengthening the Essential Commodities Act, 1955, rather than strengthening the PDS to ensure cheap and free food for all, the BJP has been providing its corporate donors with the opportunity to profiteer from people’s hunger by citing India’s food sufficiency in terms of food production vis-à-vis the 1950s.

But the BJP’s propaganda hides India’s hunger predicament despite record food production. India had a “serious” hunger level in 2019, much before the COVID-19 pandemic started, the situation worsened with the pandemic outbreak. Now, with the corporates aggregating the food crisis, India, which ranks 102 among 117 countries in the Global Hunger Index, will suffer the worst.

But as one man’s loss is another man’s gain, the likes of Mukesh Ambani, the biggest sponsor of the BJP, are all set to profiteer from this scenario. Predicting an increase in the business volume of Ambani’s Reliance Retail Ventures Limited (RRVL), which will be a beneficiary of the act, big global finance capital is rushing to buy equity in it. Apart from RRVL, Ambani’s JioMart grocery platform also aims at increasing its market share in the retail grocery business by associating with Facebook-owned WhatsApp.

“Connecting with farmers and delivering their fresh produce directly to homes is a key part of our grocery strategy. This will significantly improve farmer income and incentivise higher productivity. The deep-rooted bond with tens of thousands of farmers has helped us source over 80 per cent of our fresh fruits and vegetables directly from farmers,” Ambani was quoted by The New Indian Express discussing the JioMart’s modus operandi.

Recently, the global investment firm KKR has decided to invest Rs 55.50 billion in the RRVL, buying 1.28% equity stakes in it and, thereby, valuing its pre-money equity value at Rs 4.21 trillion. The KKR earlier bought 2.32% equity stakes in Ambani’s controversial Jio Platforms, which helped him to become the sixth richest man in the world due to a surge of investments amid the COVID-19 pandemic.

While Ambani is the biggest player in the agriculture trade, monopolising his control over what and how much Indians should eat, the other foreign corporations are eyeing Indian agriculture sector as well, to ensure greater export from India by paying a cheap rate to the Indian farmers. An unbridled export of foodgrains from India will fuel a massive food crisis and the poor, the working class will suffer the most.

What must be done now?

There is an ardent need to educate the people about the threat posed by the amendment to the Essential Commodities Act, 1955, and how they will suffer due to imminent food inflation. The fact is, one’s party affiliation won’t save them from starvation. Hunger won’t discriminate between a lower-class BJP and a Congress worker. At a time when the people are rendered unemployed and without any income, then pushing them towards food inflation is a serious crime against humanity, which must be exposed before the very masses.

The farmers’ protest movements have forged a strong unity between the struggling farmers, sharecroppers, agricultural workers and the working class. There is a need to strengthen this bond and raise demands for universal social security for all workers and farmers. Moreover, the farmers must demand universal PDS for all, so that the corporate attempts to exploit Indian people can be thwarted. Apart from the PDS, only the state governments must fix region-wise MSP based on C2 input costs and force all buyers to strictly comply by the rates.

The major issue is of aggregating hunger, and the common people are at the receiving end. Rather than confining this movement within farmers, it’s important that the common people are mobilised to hit the streets all over India to protest the Modi regime selling India’s food security to big corporates. The farmers need new-age protections, better rights and benefits. The movements on the streets must fight for such demands now and ensure that the BJP is defeated.