The government of Punjab is presently involved in a seemingly unending confrontation with the Centre against the new central farm laws. The anti-Centre agitation is mainly engineered by the politicians of the ruling party, wooing the wheat and rice growers. The new law as passed in the state Assembly on October 20, 2020 has guaranteed the minimum support price (MSP) for them. In all the states, wheat and paddy growers started to get MSP protection since 2018 with the Central government’s historic decision in its Union budget of implementing MSP for the first time. It existed for 23 total crops as of now. A fear has been percolated through the minds of the common farmers that with the new central laws, the MSP will cease to exist.
The new laws, however, recommend for the scope of parallel private trading finishing the monopsony of the regulated Agricultural Produce Marketing Committee (APMC) trade only, remaining silent on MSP. The agitation which has spread to the neighbouring BJP-ruled Haryana prompted Chief Minister Manohar Lal Khattar to make a recent public statement that he would quit politics if the MSP is abolished.
Prime Minister Narendra Modi has also declared many times that both the regulated markets and the MSP are to stay in the new system. But all these declarations till now have failed in calming the ongoing unrest.
Passing of state farm law came as a sequel of the United Progressive Alliance (UPA) chairperson Sonia Gandhi declaring a political war on September 28, 2020 on the issue. She has asked the Congress-run state governments to explore the possibilities of article 254(2) of the Constitution to frame their own farm laws. A state can make changes to a Central legislation on a subject on the concurrent list, agriculture marketing being one except for cotton and raw jute. Using the same, Punjab Chief Minister Amarinder Singh even threatened to take the battle to the Supreme Court. He seems to anticipate that the decision would not fulfil the requirement of either obtaining a nod from the governor of the state or finally from the President of India. Similar bills were also tabled sooner by the two other Congress-ruled states, Rajasthan and Chhattisgarh. But the method of countering the Central laws has been questioned by Delhi Chief Minister Arvind Kejriwal, a prominent anti-BJP face. The concerted exercise of these state governments may just finally stop exhibiting a routine political opposition.
Even the state government effort goes in vain in Punjab; it would appease the powerful Sikh-Jat community constituting 21 per cent of its population. The community consists of large farmers who produce wheat and paddy to take advantage of the subsidy component of MSP, most ironically to the rationale of providing subsidy. The average landholding in Punjab is 3.62 hectares, much above the national average of 1.08 hectares, as per the 10th agricultural census of 2015-16. The marginal and small farmers constitute 86 per cent of the country’s farmer population with their meagre 1 and 2 hectares of landholding respectively as per the maximum ceiling. On the other hand, 66.9 per cent in Punjab fall under the categories of semi-medium (2-4 hectares), medium (4-10 hectares) and large (above 10 hectares) farmers who together hold 90.31 per cent of total area. As per the census, a huge rise could also be observed in the semi-medium and medium categories of farmers in the state compared to the previous of 2010-11. The corresponding crop area under them was also enhanced. The new state law does not guarantee MSP for any other crop except wheat and paddy although there is a long-standing demand from the other crop growers. Crops like maize and cotton, not backed by Food Corporation of India (FCI) procurement are sold much below the MSP.
MSP is long considered a panacea for the common farmers. It protects the farmers under all odds like a loss of crop because of adverse weather conditions or an abundant supply due to excess production. A debate already existed as regards the farmer population in the country being covered by MSP. Although the Shanta Kumar-headed High Level Committee on Restructuring of FCI estimates a maximum 6 per cent of farmers covered, there are opinions that it covers much more. The Committee in its report in January 2015 had noted 5.21 million of the total estimated 90.20 million agricultural households to avail MSP in 2012-13. But, in a recent column in The Indian Express, Harish Damodaran claimed that it covers 25 million-plus farmers across all crops, including pulses and oilseeds, which could be anywhere between 15 per cent and 25 per cent. But, the pre-existing debate is now heightened with larger accusations against the central government ever than before that MSP is not calculated according to the true spirit of the recommendation of the National Commission on Farmers of 2006.
The green revolution champion M.S. Swaminathan, in the fifth and final report of the said Commission on October 4, 2006, had given one formula to calculate the MSP. The Commission recommendation was incorporated in the first ever National Policy for Farmers announced in September, 2007 and put for discussion in the parliament in the next month. The UPA-I government headed by Manmohan Singh by whom the Commission was appointed endorsed the formula of 50 per cent profit loading to the cost of production. The Policy, however, remained conspicuously silent about the MSP calculation, only with a token acknowledgement of the government’s responsibility that “the farmers’ interests in receiving remunerative prices for their produce are adequately safeguarded”. The accusation of not fixing MSP on a comprehensive total cost of production as coded C2 was thus never explicit in any such official record. The UPA (even during its next five-year tenure of UPA-II) couldn’t execute the recommendation. The national democratic alliance (NDA) had the same among its poll promises, before being voted to power in 2014. But it took another four years for them to announce the decision which was by then about 12 years old. The debate as regards calculation of MSP was initiated after Swaminathan went on record in February 2018 that the commission had meant C2 as the cost of production.
If looked into the formula, C2 includes all necessary components of cost of production like A2 consisting of cost of inputs (seeds, fertilizers, pesticides, depreciation on farm implements and buildings, interest on working capital and hired labour), an imputed cost of family labour (FL), and finally the most controversial notional rent of owned land. Besides, at the final stage, interest on the value of owned capital assets other than land and rent paid for any leased-in land are also to be added to arrive at C2. Commission for Agricultural Costs and Prices (CACP), the body which fixes MSP does not consider anything beyond A2 and FL. It is argued that the rent of own land, included in C2, is not incurred by an estimated 88 per cent of the farmers. But the commission, which had seven other members, left in black and white “the weighted average cost of production” only as the base. As the weighted average calculation has altogether a different connotation because of cost of production varying from one state to the other normally, the CACP makes it a ground for all the listed crops.
Since the days of green revolution of the mid 1960s, Punjab is well-known for the wheat-paddy cycling in the same land. The Johal committee reports of 1986 and 2002 recommended that Punjab should switch over to pulses, oilseeds, fruits and vegetables for both ecological and economic sustainability. Paddy production consumes 5,377 litres of water to grow a kilogram, about 3.5 times compared to wheat’s 1,500 litres. From 1993-94 onwards with the introduction of a 60-day crop variety, named “Sathi”, the paddy farmers of the state started two cycles in one kharif season from April to October. This further aggravated the water table situation; as a result in 2009 Punjab had to enact a law banning the sowing of paddy before a stipulated date. The harvesting of paddy, the normal variety being a 120-day crop, usually takes place between the first week of October till October-end after which sowing of wheat normally starts from the first week of November continuing for over a month and a half. The state has presently about 14 lakh tube wells to take care of the cultivated area, two-thirds of which are used exclusively to grow wheat and paddy.
The wheat and rice yields in Punjab are significantly high among all Indian states. In 2017-18, the all India average yields for rice and wheat were 2,576 kg and 3,368 per hectare while it was 4,366 kg and 5,077 kg per hectare in Punjab. It ranks third both in paddy and wheat production in the country as per the last obtainable data for 2017 from the ministry of agriculture. With a total production of 11.59 million tons for the year ended 2017 in paddy the state was expected to surpass Uttar Pradesh in 2018 with a production of 13.38 million tons to remain just behind West Bengal. For wheat, too, with a production of 16.44 million tons for the year ended 2017, it was expected to surpass Madhya Pradesh in 2018 with a production of 17.85 million tons to remain just behind Uttar Pradesh. Punjab can be rightfully regarded as the food bowl of the country. Under both centralized and decentralized procurement of FCI and other state agencies Punjab remains among the highest in the country over the years.
The commencement of procurement of wheat this year started from April 15, delayed by a fortnight due to the imposition of lockdown. Maintaining the trend, however, Punjab has procured 12.65 million tons of wheat, being 99.5 per cent of the total market arrivals of 12.7 million tons for sale. A target is set to procure 11.3 million tons of rice from Punjab in the current kharif marketing season (KMS) having officially started on September 26, 2020 in the present troubled time of the state. In the immediate previous KMS, too, Punjab could procure 16.38 million tons of rice against a total state production of 15.2 million tons. Before passing of the new central law, the same was reportedly enabled by illegal transportation of paddy from Uttar Pradesh and Bihar for obtaining the guaranteed MSP.
Politicians, including the legislators in Punjab and Haryana. hold control of the APMC mandis which they consider as their earning arms. They are afraid of losing their source of earnings once the new farm laws come into practice. They are wooing the strong lobby of commission agents or arhatiyas that they would lose the 3 per cent commission on lost sale in future.
The Punjab state government will also eventually be a big loser if the new central laws come into being. Apart from the CACP warning the state government continued with high levies of 8.50 and 14.50 per cent on wheat and rice till 2019. The reason the state government charges 3 per cent each as market fee and as rural development cess in its regulated markets. From 2017 onwards the state also started collecting charges in the private markets after legalizing the trading in the state APMC Act.
Thus, in reality, there is no scope of trading at present in the state without paying something to the state government. But the new central law allows the traders to trade in the private markets even without a state license. The state government of Punjab is accused of patronizing the agitation of the state farmer unions. The ongoing agitation turning into a state-centre constitutional duel has brought in huge uncertainty in the current marketing season for the farmers who were yet to recover from the shock of pandemic and lockdowns.
Arindam Gupta is a professor of Commerce, Vidyasagar University and Treasurer, Indian Accounting Association
The opinions expressed in this article are those of the author’s and do not purport to reflect the opinions or views of THE WEEK.
