Whenever corporate presence grows, small and marginal farmers have a difficult time: Professor R Ramakumar
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
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:
Since Kerala never had an APMC Act, would the bill directly affect farmers in the state?
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.
So how has the free market turned out for the farmers in Kerala?
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.
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?
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.
Then where does this certitude come from? Why do you see certain people propagating that the private investment will automatically flow in?
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.
Let’s move on to the bill that talks about contract farming. What is the experience of farmers in Kerala that engage in it?
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.
How are disputes resolved in Kerala if farmers and corporations end up in an argument?
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.
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?
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.
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It is not strictly within the ambit of the powers of the Supreme Court to be passing orders staying legislations in aid of perception management. Hence, though the result may superficially seem correct, the process of reasoning, or lack thereof, behind the result, renders it anything but.