Factsheet on farm realities Why the new farm laws are harmful

10, Mar 2021 | Prof Achin Vanaik

Here’s a ready reckoner of ground realities when it comes to agriculture in India, as compiled by Prof Achin Vanaik for the Radical Socialist (RS) Group.

 

Agricultural Land and Landowners

In 2015-16, by land size (all-India breakdown)

  • marginal (less than 1 hectare)
  • small (1-2 ha)
  • semi-medium (2-4 ha)     {All-India average is 1.08 ha}
  • medium (4-10 ha)
  • large (over 10 ha)

Small and Medium (S&M) farmers cultivate 42% of all operated land and are 85% of all landholders.

In Punjab, 33.1% are small & marginal farmers; 33.2% are semi-medium and medium farmers.

[Source: Agricultural Census 2015-16]

 

Agricultural Labour Force and Composition

54.6% of total workforce in agriculture and allied sectors, or approx. 255 million.

Share of farm labourers in total agricultural work force was 40.3% in 1991 rising to 54.9% in 2011.

Between 1951-2011 no. of farmers fell by 8.5 million but no. of farm labourers rose by 30.75 million.

In 1951 there were 22 million farm labourers; by 2019/20 there were 144 million.

[Sources: Economic Survey 2020-21, State of Rural and Agrarian India Report 2020]

 

Rural Job Losses

Between 2011/12 & 2017/18—30 million farm workers lost jobs in rural India.

In 2018/19—an estimated 9.1 million lost jobs in rural India.

Between 2004/5 & 2011/12— 34 million cultivators moved out of farming.

Inadequate absorption in secondary and tertiary sectors means rising unemployment and especially under-employment and low incomes.

[Sources: NSS Report 2019/20, Centre for Monitoring Indian Economy 2019/20]

 

Agricultural Earnings and Indebtedness

The 85% S&M farmers earn 9% of total agricultural income.

Remaining 15% farmers earn 91% of total agricultural income.

Large farmers earn on average 7.5 times more than S&M category, with semi-medium and medium category earning 2.5 times more.

A 2019 study showed that farmer product sale prices as a proportion of final retail sale prices varied in the range from 28% to 78%. The ratio is highest for oilseeds and spices. For potatoes average return is 28%, onions 33%, rice 49% because of MSP.

Consumption expenses plus input and market-related investments means more and more farmers are facing growing indebtedness. A 2018 survey showed 52% of farm households are in debt, especially S&M farmers. Average per capita debt was Rs. 74,000/-.

In 1970, three-fourths of a rural household’s income came from farming. In 2015, one-third of a rural household’s income came from farming. Rural households earn more from non-farming activities. But specifically farmer households still depend more on farm incomes with their farm to non-farm income ratios around 60:40.

[Sources: Agric. Census 2015/16, NSS Report 2019/20, CMIE Report 2018, RBI Study 2019]

 

Land and Climate

Land under cultivation has remained roughly the same between 1970/71 to 2011/12 but its composition has changed. some 10m hectares of agricultural land has been diverted for residential, industrial and non-farming purposes while approx. 11m hectares of more barren and uncultivated land has been taken in.

Rain-fed areas more affected by climate change but account for 60% of operational holdings as also for 60% of all farmers.

 

MSP, Government Procurement, Mandis

MSP

This is calculated by the Commission on Agricultural Costs and Prices (CACP). MSP has been announced by Central governments for 23 crops. This means Central governments give “promises” to buy if market prices fall below the MSP which in turn depends on how it is calculated. In any case, except for rice and wheat, governments and the FCI (Food Corporation of India) have not really bothered about such procurement for the rest of the crops. There are two costing formulas used—A2 +FL and C2.

(i) Cost of seed, labour (human, animal, machine), fertilisers, manure, insecticides, etc.—A2

(ii) Imputed cost of family labour (FL). So, total is now A2+FL.

(iii) When imputed rent and interest on owned land is added to A2+FL we get the new cost formula of C2. This is the minimum price a farmer can sell without suffering a loss. So to improve farmers’ incomes the 2006 Swaminathan Commission recommended for all 23 crops, 150% of C2 or C2+50%. This recommendation was accepted but no central government has  implemented it. There is no mention even of MSP in the three new farm laws!

Government Procurement

It is not only richer farmers who have benefitted from such procurement of rice and wheat though they provide a disproportionately higher volume of sales. Such procurement is even more vital for S&M farmers and not only in Punjab, Haryana and western UP. The state-wise Decentralised Procurement Scheme (DPS) was introduced in 1997/8 and took off after 2005. As a result some 15 states are involved in this Scheme with Chhattisgarh, Odisha and Madhya Pradesh being the stars accounting for most of the 25% to 35% shares of rice and wheat procurement that comes from outside the traditional three states.

In 2012/13 at the all-India level, the breakdown of government procurement of rice in terms of the ‘proportion of sellers according to land size’ (but not volume) was as follows:

For Rice—Large farmers 1%; Semi-medium and Medium 29%; Small and Marginal 70%.

For Wheat—Large farmers 3%; Semi-medium and Medium 41%; Small and Marginal 56%.

Mandis

Today nationally there are 2,477 mandis and 4,843 sub-mandis. 29% of rice and 44% of wheat is sold at mandis while of total farm produce only 17% passes through them. Because there are so few for the country as a whole, farmers who wish to access them cannot because transport costs are too high. A former National Commission of Agriculture had declared that there should be a mandi within a five kilometre radius for any farmer, i.e., that for the country as a whole there should be around 42,000 mandis. The new laws, far from expanding mandis, aims to diminish them by creating at an all-India level a ‘trade area’ for private, unregulated contract farming which bypasses existing mandis and state administrations with no concern for the real needs of close market access and assured decent prices for farmers.

[Source: P. Gupta, R. Khera, S. Narayan, “MSP–the factoids versus the facts” in The Hindu, 19/12/2020]

Summary Judgements on the Farm Acts

  1. The “Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act”, 2020 is basically an ‘APMC Bypass Act’.

APMCs will decline. There will be no fees for states which are substantially used for infrastructural investments. There will be no assured market for paddy and wheat for small producers. MSP will fade away in time. Richer farmers can carry out cross-state trade and do electronic trading.

  1. The “Farmers (Empowerment and protection) Agreement on Price Assurance and Farmers Services Act”, 2020 is a ‘Contract Farming Act’ for both outputs and for inputs/services to farmers.

Without APMCs to fix floor price, weaker farmers are at the mercy of corporates in bargaining contracts with respect to establishing price level and even this price falls if produce does not meet supposed quality standards designated in the contract. Online trading is possible for better-off farmers not for the poor and marginal.

  1. “Essential Commodities (Amendment) Act”, 2020.

Earlier no hoarding of essential commodities of various crops with very limited govt. regulations except in dire circumstances—war, famine, national calamity, extreme price rise. Now big private hoarders can and will lower farmer prices.

Some General Assessments

  1. Overall, small and marginal farmers will be squeezed out economically with their lands taken over by big farmers and agri-businesses.
  1. Earlier APMC middlemen would be a source of information, inputs, even credit at very high rates of interest. Now middlemen will be tied to the corporates and their interests.
  1. States will be denied revenue. Also, politically speaking, the regionalization of the Indian polity was strongly related to regional parties anchored on farmers able to generate large-scale voting loyalties. Now such parties’ strengths will diminish and a national party like BJP will benefit by this centralization. Regional parties in the bigger North Indian states were unlike the much smaller and weaker Northeastern states which were more dependent on the Centre. Now they too will become more subordinate to the dominant Centre party.
  1. will reduce stocks for PDS. It may well be that the PDS will diminish and be on its way out especially since current economic policies call for reduced government subsidies.
  1. Already agriculture export zones, contract farming set up in the Northwest, West and South where infrastructure is better and urban markets nearer—Punjab, Haryana, Gujarat, Maharashtra, Karnataka, Tamil Nadu.
  1. Progeny of farmers want to get out of agriculture. Very likely result will be substantial polarisation of landholdings. Dalits are increasingly becoming ‘de-agrarianised’ but it is unclear if theirs is a declining percentage share within the agriculture proletariat whose own percentage share in the total agricultural workforce is rising.

 

Related:

Why is a private member Bill of 2018 relevant to the farmers today?

Do the three 2020 farm laws meet the constitutionality test?

 

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